FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the period 26 July 2005
Cookson Group plc
265 Strand, London, WC2R 1BD
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F]
Form 20-F X Form 40-F
[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
[If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-]
Exhibit Index
Exhibit No.1 Form 20-F Submitted to UKLA dated 6 June 2005
Exhibit No.2 Director Shareholding dated 8 June 2005
Exhibit No.3 Holding(s) in Company dated 20 June 2005
Exhibit No.4 Holding(s) in Company dated 21 June 2005
Exhibit No.5 Blocklisting Interim Review dated 01 July 2005
Exhibit No.6 Holding(s) in Company dated 15 July 2005
Exhibit No.7 Holding(s) in Company dated 21 July 2005
Exhibit No.8 Restatement of IFRS announcement dated 22 July 2005
Exhibit No.9 Interim Results announcement dated 26 July 2005
Exhibit No.1
6 June 2005
Cookson Group plc - Form 20-F for the fiscal year ended 31 December 2004
Cookson Group plc confirms that two copies of the above document have been
submitted to the UK Listing Authority, and will shortly be available for
inspection at the UK Listing Authority's Document Viewing Facility, which is
situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Exhibit No.2
SCHEDULE 11
NOTIFICATION OF INTERESTS OF DIRECTORS AND CONNECTED PERSONS
1) Name of company
COOKSON GROUP PLC
2) Name of director
JEFFREY LINDSAY HEWITT
3) Please state whether notification indicates that it is in respect of holding
of the shareholder named in 2 above or in respect of a non-beneficial interest
or in the case of an individual holder if it is a holding of that person's
spouse or children under the age of 18 or in respect of a non-beneficial
interest
DIRECTOR NAMED IN 2 ABOVE
4) Name of the registered holder(s) and, if more than one holder, the
number of shares held by each of them (if notified)
JEFFREY L HEWITT
5) Please state whether notification relates to a person(s) connected
with the Director named in 2 above and identify the connected person(s)
N/A
6) Please state the nature of the transaction. For PEP transactions
please indicate whether general/single co PEP and if discretionary/non
discretionary
PURCHASE OF ORDINARY SHARES OF 10 PENCE EACH IN COOKSON GROUP PLC
7) Number of shares/amount of
stock acquired
2,500
8) Percentage of issued class
LESS THAN 0.01%
9) Number of shares/amount
of stock disposed
N/A
10) Percentage of issued class
N/A
11) Class of security
ORDINARY SHARES OF 10 PENCE EACH
12) Price per share
325.50 PENCE PER SHARE
13) Date of transaction
6 JUNE 2005
14) Date company informed
7 JUNE 2005
15) Total holding following this notification
2,500 ORDINARY 10p SHARES
16) Total percentage holding of issued class following this notification
LESS THAN 0.01%
If a director has been granted options by the company please complete the
following boxes
17) Date of grant
18) Period during which or date on which exercisable
19) Total amount paid (if any) for grant of the option
20) Description of shares or debentures involved: class, number
21) Exercise price (if fixed at time of grant) or indication that price
is to be fixed at time of exercise
22) Total number of shares or debentures over which options held
following this notification
23) Any additional information
24) Name of contact and telephone number for queries
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC-020 7061 6565
25) Name and signature of authorised company official responsible for
making this notification
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC
Date of Notification.................................. 8 JUNE 2005
Exhibit No. 3
SCHEDULE 10
NOTIFICATION OF MAJOR INTERESTS IN SHARES
1) Name of company
COOKSON GROUP PLC
2) Name of shareholder having a major interest
STANDARD LIFE GROUP
3) Please state whether notification indicates that it is in respect of
holding of the shareholder named in 2 above or in respect of a
non-beneficial interest or in the case of an individual holder if it is a
holding of that person's spouse or children under the age of 18
AS ABOVE
4) Name of the registered holder(s) and, if more than one holder, the
number of shares held by each of them
VIDACOS NOMINEES
5) Number of shares/amount of stock acquired
220,138
6) Percentage of issued class
0.116%
7) Number of shares/amount of stock disposed
N/A
8) Percentage of issued class
N/A
9) Class of security
ORDINARY SHARES OF 10 PENCE EACH
10) Date of transaction
17 JUNE 2005
11) Date company informed
20 JUNE 2005
12) Total holding following this notification
18,997,141 SHARES
13) Total percentage holding of issued class following this notification
10.015%
14) Any additional information
N/A
15) Name of contact and telephone number for queries
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC -
TEL: 020 7061 6565
16) Name and signature of authorised company official responsible for
making this notification
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC
Date of notification: 20 JUNE 2005
Exhibit No.4
SCHEDULE 10
NOTIFICATION OF MAJOR INTERESTS IN SHARES
1) Name of company
COOKSON GROUP PLC
2) Name of shareholder having a major interest
STANDARD LIFE GROUP
3) Please state whether notification indicates that it is in respect of
holding of the shareholder named in 2 above or in respect of a
non-beneficial interest or in the case of an individual holder if it is a
holding of that person's spouse or children under the age of 18
AS ABOVE
4) Name of the registered holder(s) and, if more than one holder, the
number of shares held by each of them
VIDACOS NOMINEES
5) Number of shares/amount of stock acquired
N/A
6) Percentage of issued class
N/A
7) Number of shares/amount of stock disposed
151,379
8) Percentage of issued class
0.08%
9) Class of security
ORDINARY SHARES OF 10 PENCE EACH
10) Date of transaction
17 JUNE 2005
11) Date company informed
21 JUNE 2005
12) Total holding following this notification
18,845,762 SHARES
13) Total percentage holding of issued class following this notification
9.94%
14) Any additional information
N/A
15) Name of contact and telephone number for queries
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC -
TEL: 020 7061 6565
16) Name and signature of authorised company official responsible for
making this notification
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC
Date of notification: 21 JUNE 2005
Exhibit No.5
SCHEDULE 5
BLOCKLISTING SIX MONTHLY RETURN
1. Name of company
Cookson Group plc
2. Name of scheme
Cookson Group Executive Share Option Schemes
3. Period of return:
From :
01/01/2005
to
30/06/2005
4. Number and class of shares(s)
(amount of stock/debt security)
not issued under scheme
3,060,986 Ordinary 1p shares
5. Number of shares issued/allotted
under scheme during period
1,203,203 Ordinary 1p shares
6. Balance under scheme not yet issued/allotted
at end of period:
before share consolidation
1,857,783 Ordinary 1p shares
after share consolidation
185,778 Ordinary 10p shares
7. Number and class of share(s)
(amount of stock/debt securities)
originally listed and the date of admission
3,500,000 Ordinary 1p shares(March 1998) Ref RA/Cookson Group plc/00001-0002
2,500,000 Ordinary 1p shares(January 2005)
185,778 Ordinary 10p shares(May 2005)
Please confirm total number of shares in issue at the end of the period
in order for us to update our records
189,682,839 Ordinary 10p shares
Contact for queries:
Address:
265 Strand
London
WC2R 1DB
Name:
Rachel Benjamin
Telephone:
020 7061 6565
SCHEDULE 5
BLOCKLISTING SIX MONTHLY RETURN
1. Name of company
Cookson Group plc
2. Name of scheme
Cookson Employee Share Savings Scheme
3. Period of return:
From :
01/01/2005
to
30/06/2005
4. Number and class of shares(s)
(amount of stock/debt security)
not issued under scheme
3,064,370 Ordinary 1p shares
5. Number of shares issued/allotted
under scheme during period
158,255 Ordinary 1p shares
Balance under scheme not yet issued/allotted
at end of period:
before share consolidation
2,906,115 Ordinary 1p shares
after share consolidation
290,612 Ordinary 10p shares
Number and class of share(s)
(amount of stock/debt securities)
originally listed and the date of admission
1,500,000 Ordinary 1p shares(February 1996) Ref A/367/1996
2,500,000 Ordinary 1p shares(January 2005)
290,612 Ordinary 10p shares (May 2005)
Please confirm total number of shares in issue at the end of the period
in order for us to update our records
189,682,839 Ordinary 10p shares
Contact for queries:
Address:
265 Strand
London
WC2R 1DB
Name:
Rachel Benjamin
Telephone:
020 7061 6565
SCHEDULE 5
BLOCKLISTING SIX MONTHLY RETURN
1. Name of company
Cookson Group plc
2. Name of scheme
Cookson Group US Stock Purchase Plan
3. Period of return:
From :
01/01/2005
to
30/06/2005
4. Number and class of shares(s)
(amount of stock/debt security)
not issued under scheme
4,486,759 Ordinary 1p shares
5. Number of shares issued/allotted
under scheme during period
2,964 Ordinary 1p shares
6. Balance under scheme not yet issued/allotted
at end of period:
before share consolidation
4,483,795 Ordinary 1p shares
after share consolidation
448,379 Ordinary 10p shares
7. Number and class of share(s)
(amount of stock/debt securities)
originally listed and the date of admission
2,500,000 Ordinary 1p shares(January 2004) Ref 3-185-261 (GB0031852618)
2,500,000 Ordinary 1p shares(January 2005)
448,379 Ordinary 10p shares(May 2005)
Please confirm total number of shares in issue at the end of the period
in order for us to update our records
189,682,839 Ordinary 10p shares
Contact for queries:
Address:
265 Strand
London
WC2R 1DB
Name:
Rachel Benjamin
Telephone:
020 7061 6565
Exhibit No.6
SCHEDULE 10
NOTIFICATION OF MAJOR INTERESTS IN SHARES
1) Name of company
COOKSON GROUP PLC
2) Name of shareholder having a major interest
STANDARD LIFE GROUP
3) Please state whether notification indicates that it is in respect of
holding of the shareholder named in 2 above or in respect of a
non-beneficial interest or in the case of an individual holder if it is a
holding of that person's spouse or children under the age of 18
AS ABOVE
4) Name of the registered holder(s) and, if more than one holder, the
number of shares held by each of them
VIDACOS NOMINEES
5) Number of shares/amount of stock acquired
400,000
6) Percentage of issued class
0.21%
7) Number of shares/amount of stock disposed
N/A
8) Percentage of issued class
N/A
9) Class of security
ORDINARY SHARES OF 10 PENCE EACH
10) Date of transaction
14 JULY 2005
11) Date company informed
15 JULY 2005
12) Total holding following this notification
19,133,811 SHARES
13) Total percentage holding of issued class following this notification
10.09%
14) Any additional information
N/A
15) Name of contact and telephone number for queries
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC -
TEL: 020 7061 6565
16) Name and signature of authorised company official responsible for
making this notification
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC
Date of notification: 15 JULY 2005
Exhibit No.7
SCHEDULE 10
NOTIFICATION OF MAJOR INTERESTS IN SHARES
1) Name of company
COOKSON GROUP PLC
2) Name of shareholder having a major interest
FMR Corp. & FIDELITY INTERNATIONAL LIMITED
3) Please state whether notification indicates that it is in respect of
holding of the shareholder named in 2 above or in respect of a
non-beneficial interest or in the case of an individual holder if it is a
holding of that person's spouse or children under the age of 18
NON-BENEFICIAL INTEREST
4) Name of the registered holder(s) and, if more than one holder, the
number of shares held by each of them
REGISTERED NAME MANAGEMENT COMPANY NUMBER OF SHARES
BROWN BROS HARRIMN LTD LUX FIDELITY INTERNATIONAL LIMITED 6,032,000
NORTHERN TRUST LONDON FIDELITY INTERNATIONAL LIMITED 28,000
JP MORGAN, BOURNEMOUTH FIDELITY INVESTMENT SERVICES LIMITED 787,949
JPMORGAN CHASE BANK FMR CORP 3,000
JP MORGAN, BOURNEMOUTH FIDELITY PENSION MANAGEMENT 431,000
NORTHERN TRUST LONDON FIDELITY PENSION MANAGEMENT 24,000
5) Number of shares/amount of stock acquired
N/A
6) Percentage of issued class
N/A
7) Number of shares/amount of stock disposed
NOT DISCLOSED
8) Percentage of issued class
NOT DISCLOSED
9) Class of security
ORDINARY SHARES OF 10 PENCE EACH
10) Date of transaction
NOT DISCLOSED
11) Date company informed
21 JULY 2005
12) Total holding following this notification
7,305,949 SHARES
13) Total percentage holding of issued class following this notification
3.85%
14) Any additional information
4
15) Name of contact and telephone number for queries
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC -
TEL: 020 7061 6565
16) Name and signature of authorised company official responsible for
making this notification
RACHEL BENJAMIN, COMPANY SECRETARIAL ASSISTANT, COOKSON GROUP PLC
Date of notification: 21 JULY 2005
Exhibit No.8
22 July 2005
COOKSON RELEASES 2004 FINANCIAL STATEMENT INFORMATION RESTATED UNDER IFRS
Cookson Group plc, a leading materials science company, today provides an
unaudited summary of the restatement of its 2004 financial statements under
International Financial Reporting Standards ("IFRS"). This summary is being
provided in advance of the announcement on 26 July of Cookson's interim results
for the six months ended 30 June 2005.
As set out in the 18 January 2005 strategy presentation, the main changes from
UK GAAP to IFRS that affect Group profit before tax are:
- discontinuation of the amortisation of goodwill;
- accounting for the costs of employee share options;
- reversal of deferred income on the close-out of interest rate swaps in
prior periods;
- accounting for profits from joint ventures on the net equity basis.
The only significant Group balance sheet impacts, apart from re-classifications,
are the accounting for defined benefit pension and other post-retirement schemes
and for amortisation of goodwill and the consequent impact on shareholders'
equity.
Cookson Group plc will continue to produce its company-only accounts under UK
GAAP and therefore none of the IFRS adjustments in this announcement impact on
its distributable reserves at 31 December 2004, which were GBP97.1m.
There are no IFRS adjustments to Group cash flows, only re-classifications of
items within the cash flow statement.
As noted in the trading update announced on 6 May 2005, Cookson considered the
early-adoption of IAS 39 and IAS 32, which relate to the accounting and
disclosure of financial instruments, but subsequently elected not to do so.
These standards are therefore, adopted as from their effective date of 1 January
2005.
The Group's results for the first half of 2004 and for the full year on an IFRS
and a comparative UK GAAP basis are summarised in the table below.
Reconciliations for each item in the table are provided in the notes attached.
Detailed reconciliations are provided in the appendix attached.
Year - 2004 First Half - 2004
Notes IFRS UK GAAP IFRS UK GAAP
Revenue (GBPm) 1. 1,652.5 1,698.2 816.7 841.5
Trading profit (GBPm) 2. 114.9 119.6 51.9 55.1
Profit before tax (GBPm)
- Headline 3. 85.0 93.1 37.2 42.0
- Reported 4. 12.6 (18.7) 24.1 8.0
Earnings per share (pence)
- Headline 5. 30.1 33.4 12.4 14.3
- Reported 6. (11.2) (26.6) 4.4 (3.7)
Free cash flow (GBPm) - 51.6 51.6 (21.2) (21.2)
Net debt (GBPm) 7. 321.8 306.9 402.0 385.8
Employee Benefits Liability (GBPm) 8. 189.9 29.8 188.8 37.6
Shareholders' Equity (GBPm) 9. 431.4 559.4 458.4 591.6
Trading profit is defined in note 1 of the attached appendix
Under IFRS, companies are required to reflect the profits of each reporting
segment before Group corporate costs. The table below sets out the relevant
information in respect of trading profit, as defined, and takes into account the
above IFRS adjustments.
Year - 2004 First Half - 2004
IFRS UK GAAP IFRS UK GAAP
Trading profit (GBPm)
- Ceramics 60.0 56.8 27.7 26.0
- Electronics 52.8 49.5 24.5 23.2
Assembly Materials 24.2 22.2 11.0 10.5
Chemistry 27.8 27.2 12.8 12.1
Laminates 0.8 0.1 0.7 0.6
- Precious Metals 11.0 9.3 3.8 3.3
- Joint Ventures - 4.0 - 2.6
- Group corporate costs (8.9) n/a (4.1) n/a
Group 114.9 119.6 51.9 55.1
Shareholder / analyst enquiries: Cookson Group plc
Dennis Millard, Group Finance Director Tel: 020 7061 6500
Isabel Vilela, Investor Relations Manager
About Cookson Group Cookson Group is a leading materials science company which
provides materials, processes and services to customers worldwide. The Group's
operations are formed into three divisions - Ceramics, Electronics and Precious
Metals. The Ceramics division is the world leader in the supply of advanced flow
control and refractory products and systems to the iron and steel industry and
is also a leading supplier of refractory lining materials for iron and
steelmaking and other industrial processes. The Electronics division is a
leading manufacturer and supplier of materials and services to the electronics
industry, primarily serving fabricators and assemblers of printed circuit
boards, assemblers of semiconductor packaging and the electrical and industrial
markets. The Precious Metals division is a leading supplier to the jewellery
industry of fabricated precious metals products.
Headquartered in London, Cookson employs some 16,000 people in more than 35
countries and sells its products in over 100 countries.
Cookson Group plc, 265 Strand, London WC2R 1DB
Tel: 020 7061 6500 Fax: 020 7061 6600
www.cooksongroup.co.uk
Notes to IFRS Restatement Announcement
2004 2004
Year First-half
GBPm GBPm
(1) Revenue
Turnover as reported under UK GAAP 1,698.2 841.5
- Revenue of Joint Ventures (45.2) (24.4)
- Adjustment of sales to prior period (0.5) (0.4)
Revenue, under IFRS 1,652.5 816.7
(2) Trading Profit
Operating profit before goodwill amortisation 5.1
and exceptional items as reported under UK GAAP 119.6 5
- Profit of JVs before interest and tax (4.0) (2.6)
- Pension costs, holiday pay accruals, share option costs, other (0.7) (0.6)
Trading Profit, under IFRS 114.9 51.9
(3) Profit before tax - Headline
Profit before tax before goodwill amortisation and exceptional items as 93.1 42.0
reported under UK GAAP
- Pension costs, holiday pay accruals, share option costs, other (0.7) (0.6)
- Share of JVs tax charge (1.7) (1.3)
- Reversal of deferred income release from swap closeout (5.4) (2.7)
- Interest on reclassified finance leases (0.3) (0.2)
Headline profit before tax, under IFRS 85.0 37.2
(4) Profit / (loss) before tax - Reported
Profit / (loss) before tax, as reported (18.7) 8.0
- Pension costs, holiday pay accruals, share option costs, other (0.7) (0.6)
- Share of JVs tax charge (1.7) (1.3)
- Goodwill amortisation reversed 31.7 15.9
- Goodwill on business disposals 2.3 2.3
- Interest on reclassified finance leases (0.3) (0.2)
Profit before tax, under IFRS 12.6 24.1
2004 2004
Year First-half
pence pence
(5) Earnings per share - Headline
Earnings per share before amortisation of goodwill and intangibles under UK 14.3
GAAP; restated for 1 for 10 share consolidation in May 2005 33.4
After tax effect of:
- Deferred income on swap close-out (2.9) (1.5)
- All other items (0.4) (0.4)
Headline earnings per share, under IFRS 30.1 12.4
(6) Earnings per share - Reported
Earnings per share under UK GAAP; restated for 1 for 10 share consolidation (26.7) (3.7)
in May 2005
- Goodwill amortisation written-back 18.0 9.6
- All other items (2.5) (1.5)
Earnings per share, under IFRS (11.2) 4.4
2004 2004
Year First-half
GBPm GBPm
(7) Net debt
Per UK GAAP, as reported 306.9 385.8
- Reclassification of asset securitisation financing 10.7 11.7
- Additional finance leases recognised 4.2 4.5
As restated under IFRS 321.8 402.0
(8) Employee benefits liability
Net accruals per UK GAAP, as reported 29.8 37.6
- Reclassification of pension asset 6.4 6.8
- Reversal of UK GAAP net accruals (36.2) (44.4)
- Defined benefit pension scheme and other post- retirement benefit 189.9 188.8
arrangement deficits
As restated under IFRS 189.9 188.8
(9) Shareholders' equity
Per UK GAAP, as reported 559.4 591.6
- Pension and other post-retirement benefits (153.7) (144.4)
- Goodwill amortisation 31.7 15.9
- Others, including tax on IFRS adjustments (6.0) (4.7)
As restated under IFRS 431.4 458.4
Appendix: Summary reconciliation of the Group's UK GAAP 2004 Financial
Statements to IFRS
1 Basis of preparation
Cookson Group plc ("Cookson" or "the Company") will report its annual
consolidated financial statements for 2005 in accordance with International
Financial Reporting Standards ("IFRS"). This appendix presents and explains,
notably in section 2.8, the unaudited conversion of the consolidated results of
Cookson from UK Generally Accepted Accounting Practice ("UK GAAP") onto an IFRS
basis for the six months ended 30 June 2004 and the year ended 31 December 2004
and similarly the Group's financial position as at that date and also 30 June
2004 and at the date of the transition of the Company's consolidated financial
statements to IFRS, being 1 January 2004.
The financial information in this appendix has been prepared on the assumption
that all IFRSs, including interpretations issued by the International Financial
Reporting Interpretations Committee and by the International Accounting
Standards Board effective for year end 2005 reporting, will be endorsed by the
European Commission, notably the amendments made to IAS 19, "Employee Benefits".
Endorsement of all such pronouncements has not occurred as at the date of the
publication of this announcement. The failure of the European Commission to
endorse all of these standards in time for Cookson's year-end financial
reporting in 2005 could result in the need to change the basis of accounting or
the presentation of certain financial information from that presented in this
appendix. It is possible, therefore, that further changes will be required to
this information before it is published as comparative information for the full
year 2005.
The financial information, in the form of the primary statements contained in
this appendix, is presented in accordance with International Accounting Standard
("IAS") 1, "Presentation of Financial Statements". Where no definitive guidance
exists in IAS 1, a UK GAAP approach has been adopted in order to maintain
consistency with prior years. This format and presentation may require
modification in the event that further guidance is issued, but otherwise the
Company believes that the basis on which this financial information has been
prepared will be sufficient to enable it to comply fully with IFRS in its annual
financial statements for the year ended 31 December 2005 without further
significant modification to either the format and presentation or the
comparative financial information contained in the primary financial statements
herein.
The comparative figures for the financial year ended 31 December 2004 are not
the Company's statutory accounts for that financial year. Those accounts, which
were prepared under UK GAAP, 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.
At the Company's Annual General Meeting held on 26 May 2005, shareholders
approved a share consolidation. The share consolidation took effect following
the close of business on 26 May 2005, with shareholders receiving one New
Ordinary Share of 10p each for every 10 existing ordinary shares of 1p each held
at the close of business on 26 May 2005. Trading in the New Ordinary Shares of
10p commenced on 27 May 2005. The information in this appendix relating to
earnings per share has been restated to take into account the impact of this
share consolidation.
Disclosure of significant items
IAS 1 provides no definitive guidance as to the format of the income statement,
but states key lines which should be disclosed. It also encourages additional
line items to be added and the re-ordering of items presented on the face of the
income statement when appropriate for a proper understanding of the entity's
financial performance. In keeping with the spirit of this aspect of IAS 1,
Cookson has adopted a policy of disclosing separately on the face of its income
statement the effect of any components of financial performance considered by
management to be significant and/or for which separate disclosure would assist
both in a better understanding of the financial performance achieved and in
making projections of future results. Materiality and/or the nature and function
of the components of income and expense are considered in deciding upon such
presentation. Such items may include, inter alia, the financial effect of any
profit or loss arising on business disposals, major rationalisation and/or
restructuring activity, profits and losses on sale or impairment of fixed
assets, amortisation of intangibles and other items, including the taxation
impact of the afore-mentioned items, which have a significant impact on the
Group's results of operations either due to their size or nature.
On the face of the income statement, Cookson separately discloses "trading
profit", being profit from operations before the costs of rationalisation of
operations, the profit or loss relating to fixed assets and the amortisation and
impairment of intangibles.
2 Restatement of Financial Statement Comparatives from UK GAAP to IFRS
2.1 Income statement, balance sheet and cash flow reclassifications from
UK GAAP to IFRS
The adoption of IFRS requires certain changes to be made to the format and
presentation of income statement, balance sheet and cash flow information
previously disclosed under UK GAAP. In the income statement and balance sheet
shown in sections 2.3 and 2.4 and in the statement of cash flows, the following
principal changes have been made to the statements previously disclosed under UK
GAAP prior to presenting them in section 2.3 and 2.4:
i. Under UK GAAP, profits and losses arising on the disposal or write-down
of fixed assets were shown separately below operating profit. Under IFRS,
such profits and losses are shown as a component of profit from operations.
ii. Long-term debtors previously included within current assets under UK
GAAP of GBP37.5m at 31 December 2004 (1 January 2004: GBP28.3m; 30 June
2004: GBP27.1m) are included within non-current assets under IFRS.
iii. Under IFRS, deferred tax assets and liabilities are required to be
shown as separate line items on the balance sheet. This has resulted in a
reclassification of deferred tax assets previously included within debtors
under UK GAAP of GBP35.3m at 31 December 2004 (1 January 2004: GBP53.5m; 30
June 2004: GBP49.5m); and deferred tax liabilities previously included
within provisions under UK GAAP of GBP8.6m at 31 December 2004 (1 January
2004: GBP11.5m; 30 June 2004: GBP11.5m).
iv. Under IFRS, income taxes recoverable and payable are required to be
shown as separate line items on the balance sheet. This has resulted in a
reclassification of income tax recoverable previously included within
debtors under UK GAAP of GBP3.1m at 31 December 2004 (1 January 2004:
GBP3.0m; 30 June 2004: GBP2.2m); and income tax payable previously included
within creditors under UK GAAP of GBP11.6m at 31 December 2004 (1 January
2004: GBP15.5m; 30 June 2004: GBP15.9m).
v. IFRS requires amounts received under debtor securitisation arrangements
to be shown as liabilities and not as a deduction against the associated
debtor balances, as under UK GAAP. This has resulted in a reclassification
of these receipts at 31 December 2004 of GBP10.7m (1 January 2004:
GBP11.2m; 30 June 2004: GBP11.7m) from debtors to "interest-bearing loans
and borrowings".
vi. IFRS requires provisions expected to be settled within one year of the
balance sheet date to be shown as current liabilities. This has resulted in
a reclassification at 31 December 2004 of GBP15.1m (1 January 2004:
GBP13.4m; 30 June 2004: GBP17.5m) from non-current liabilities to current
liabilities.
vii. Certain US assets held in Rabbi trusts to meet pension obligations are
not classified by IAS 19 as pension assets. This has resulted in a
reclassification of these assets at 31 December 2004 of GBP6.4m (1 January
2004: GBP6.9m; 30 June 2004 GBP6.8m) from prepayments to "other
investments".
viii. IFRS requires certain overdrafts to be included within the balances
disclosed as "cash and cash equivalents", whereas overdrafts were included
within borrowings under UK GAAP. This has resulted in a reclassification at
31 December 2004 of GBP3.4m (1 January 2004: GBP4.0m; 30 June 2004:
GBP6.7m) from current liabilities to current assets.
ix. In addition to the change in presentation brought about by item viii
above, the Group statement of cash flows under IFRS must comply with the
format and headings prescribed in IAS 7. With the exception of the
reclassification described in viii above, no other IFRS transitional
adjustments impacted on the restated net cash flow from operating,
investing or financing activities.
2.2 Accounting adjustments made on transition from UK GAAP to IFRS
As required by IFRS 1, Cookson has prepared reconciliation statements which
present the adjustments made in order to transition the Group's UK GAAP primary
statements for 2004 onto an IFRS basis. Reconciliations are provided in respect
of the adjustments made to the Group's financial position at the date of
transition to IFRS, 1 January 2004, and also at 30 June 2004 and 31 December
2004. With regard to the Group's reported financial performance, reconciliations
are provided for the six months ended 30 June 2004 and for the full year ended
31 December 2004. The reconciliations in this appendix are located as follows:
- Income Statement reconciliation from UK GAAP to IFRS Section 2.3
- Balance Sheet reconciliation from UK GAAP to IFRS Section 2.4
- Group statement of Recognised Income and Expense reconciliation from UK GAAP
to IFRS Section 2.5
- Group reconciliation of Equity from UK GAAP to IFRS Section 2.6
- Details of adjustments made on transition from UK GAAP to IFRS Section 2.7
- Summary description of significant IFRS adjustments Section 2.8
2.3 Income Statement reconciliation from UK GAAP to IFRS
Half year Full year
2004 2004
As Effect of Reported in As Effect of Reported in
Reported transition compliance Reported Transition compliance
under UK to IFRS with IFRS under UK to IFRS with IFRS
GAAP GAAP
Note (note (note
2.7 2.1) 2.1)
ref GBPm GBPm GBPm GBPm GBPm GBPm
Revenue (a) 817.1 (0.4) 816.7 1,653.0 (0.5) 1,652.5
Manufacturing costs - raw materials (b) (364.6) 0.3 (364.3) (756.2) 0.4 (755.8)
- other (226.2) - (226.2) (447.1) - (447.1)
Administration, selling and distribution
costs (c) (173.8) (0.5) (174.3) (334.1) (0.6) (334.7)
Trading profit 52.5 (0.6) 51.9 115.6 (0.7) 114.9
Rationalisation of operating activities (11.0) - (11.0) (22.7) - (22.7)
Amortisation and impairment of intangibles (d) (16.3) 15.9 (0.4) (32.5) 31.7 (0.8)
Profit / (loss) relating to fixed assets 1.1 - 1.1 (16.8) - (16.8)
Profit from operations 26.3 15.3 41.6 43.6 31.0 74.6
Finance income
Ongoing activities 2.2 - 2.2 0.9 - 0.9
Income from swap close-out 2.7 - 2.7 5.4 - 5.4
Finance costs
Ongoing activities (e) (18.0) (0.2) (18.2) (32.8) (0.3) (33.1)
Share of post-tax profit from joint ventures 1.3 - 1.3 2.3 - 2.3
Loss on disposal of operations (f) (7.8) 2.3 (5.5) (39.8) 2.3 (37.5)
Profit before tax 6.7 17.4 24.1 (20.4) 33.0 12.6
Income tax:
Ongoing activities (g) (11.3) - (11.3) (24.5) 0.2 (24.3)
Deferred tax charge on goodwill (g) - (2.1) (2.1) - (4.1) (4.1)
Other net credits / (charges) 0.1 - 0.1 (1.2) - (1.2)
Profit / (loss) for the period (4.5) 15.3 10.8 (46.1) 29.1 (17.0)
Profit attributable to minority interests (2.5) - (2.5) (4.1) - (4.1)
Profit / (loss) attributable to equity
holders (7.0) 15.3 8.3 (50.2) 29.1 (21.1)
Basic earnings per share (3.7)p 8.1p 4.4p (26.7)p 15.5p (11.2)p
Diluted earnings per share (3.6)p 7.9p 4.3p (26.7)p 15.5p (11.2)p
Headline profit before taxation and earnings
per share:
Trading profit 52.5 (0.6) 51.9 115.6 (0.7) 114.9
Share of post-tax profit from joint ventures 1.3 - 1.3 2.3 - 2.3
Finance costs for ongoing activities, net (15.8) (0.2) (16.0) (31.9) (0.3) (32.2)
Headline profit before tax 38.0 (0.8) 37.2 86.0 (1.0) 85.0
Income tax on ongoing activities (11.3) - (11.3) (24.5) 0.2 (24.3)
Profit attributable to minority interests (2.5) - (2.5) (4.1) - (4.1)
Headline profit attributable to equity
holders 24.2 (0.8) 23.4 57.4 (0.8) 56.6
Headline basic earnings per share 12.8p (0.4)p 12.4p 30.5p (0.4)p 30.1p
2.4 Balance Sheet reconciliation from UK GAAP to IFRS
1 January 30 June 31 December
2004 2004 2004
As Effect Reported As Effect Reported As Effect Reported
Note Aeported of in Aeported of in Aeported of on
2.7 under UK Transi- compliance under UK Transi- Compliance under UK Transi- Compliance
ref GAAP tion with GAAP tion with GAAP tion with IFRS
(note to IFRS (note to IFRS (note to
(2.1) IFRS 2.1) IFRS 2.1) IFRS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Assets
Property, plant and
equipment (h) 350.7 4.1 354.8 332.0 3.7 335.7 319.6 3.3 322.9
Intangible assets (i) 514.0 - 514.0 487.6 15.9 503.5 453.5 31.7 485.2
Investments in joint
ventures 18.8 - 18.8 14.5 - 14.5 14.7 - 14.7
Other Investments 37.2 - 37.2 36.0 - 36.0 16.7 - 16.7
Income tax recoverable - - - 2.2 - 2.2 2.2 - 2.2
Deferred tax assets (j) 53.5 (0.6) 52.9 49.5 (2.6) 46.9 35.3 (4.1) 31.2
Other assets 8.2 - 8.2 10.1 - 10.1 10.6 - 10.6
Total non-current assets 982.4 3.5 985.9 931.9 17.0 948.9 852.6 30.9 883.5
Cash and cash equivalents 52.8 - 52.8 31.5 - 31.5 44.0 - 44.0
Inventories (k) 172.9 (0.3) 172.6 193.8 0.1 193.9 174.0 0.1 174.1
Trade and other
receivables (l) 316.9 0.4 317.3 324.9 (0.1) 324.8 303.5 (0.1) 303.4
Income tax recoverable 3.0 - 3.0 - - - 0.9 - 0.9
Total current assets 545.6 0.1 545.7 550.2 - 550.2 522.4 - 522.4
Total assets 1,528.0 3.6 1,531.6 1,482.1 17.0 1,499.1 1,375.0 30.9 1,405.9
Equity
Issued capital 375.4 - 375.4 375.4 - 375.4 375.5 - 375.5
Share premium 642.6 - 642.6 643.4 - 643.4 643.4 - 643.4
Retained earnings (m) (608.8) (128.0) (736.8) (633.1) (133.2) (766.3) (665.4) (128.0) (793.4)
Other reserves 205.9 - 205.9 205.9 - 205.9 205.9 - 205.9
Total shareholders' equity 615.1 (128.0) 487.1 591.6 (133.2) 458.4 559.4 (128.0) 431.4
Minority interests 11.8 - 11.8 11.7 - 11.7 11.7 - 11.7
Total equity 626.9 (128.0) 498.9 603.3 (133.2) 470.1 571.1 (128.0) 443.1
Liabilities
Interest-bearing loans
and borrowings 320.3 - 320.3 334.0 - 334.0 326.1 - 326.1
Employee benefits (n) 47.1 126.1 173.2 44.4 144.4 188.8 36.2 153.7 189.9
Trade and other payables 69.3 - 69.3 97.9 - 97.9 58.3 - 58.3
Provisions 20.7 - 20.7 16.8 - 16.8 10.3 - 10.3
Deferred tax liabilities 11.5 - 11.5 11.5 - 11.5 8.6 - 8.6
Total non-current liabilities 468.9 126.1 595.0 504.6 144.4 649.0 439.5 153.7 593.2
Interest-bearing loans
and borrowings (o) 102.2 4.8 107.0 95.0 4.5 99.5 35.5 4.2 39.7
Trade and other payables (p) 301.1 0.8 301.9 245.8 1.4 247.2 302.2 1.0 303.2
Income tax payable (q) 15.5 (0.1) 15.4 15.9 (0.1) 15.8 11.6 - 11.6
Provisions 13.4 - 13.4 17.5 - 17.5 15.1 - 15.1
Total current liabilities 432.2 5.5 437.7 374.2 5.8 380.0 364.4 5.2 369.6
Total liabilities 901.1 131.6 1,032.7 878.8 150.2 1,029.0 803.9 158.9 962.8
Total equity and liabilities 1,528.0 3.6 1,531.6 1,482.1 17.0 1,499.1 1,375.0 30.9 1,405.9
2.5 Group Statement of Recognised Income and Expense reconciliation from
UK GAAP to IFRS
Half year Full year
2004 2004
As Effect Reported As Effect of Reported in
Reported of in Reported Transition compliance
under UK transition Compliance under UK to IFRS with IFRS
GAAP to IFRS with IFRS GAAP GAAP GBPm
GBPm GBPm GBPm GBPm GBPm GBPm
Foreign exchange translation differences (20.1) (3.4) (23.5) (9.8) (2.2) (12.0)
Actuarial loss on employee benefit schemes - (15.9) (15.9) - (26.8) (26.8)
Income and expenses recognised directly in equity (20.1) (19.3) (39.4) (9.8) (29.0) (38.8)
Profit/(loss) for the period (4.5) 15.3 10.8 (46.1) 29.1 (17.0)
(24.6) (4.0) (28.6) (55.9) 0.1 (55.8)
Profit attributable to minority interests (2.5) - (2.5) (4.1) - (4.1)
Foreign exchange translation differences attributable
to minority interests 0.5 - 0.5 1.1 - 1.1
(2.0) - (2.0) (3.0) - (3.0)
Total recognised income and expenses attributable to
equity holders (26.6) (4.0) (30.6) (58.9) 0.1 (58.8)
2.6 Group reconciliation of Equity from UK GAAP to IFRS
Issued Share Retained Other Total Minority Total
Cpital premium earnings Reserves equity interest equity
attributable
to equity
holders
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total equity as at 1 January 2004
As previously stated under UK GAAP 375.4 642.6 (608.8) 205.9 615.1 11.8 626.9
Effect of transition to IFRS (note 2.7(m)) - - (128.0) - (128.0) - (128.0)
Total equity as at 1 January 2004 (as restated under
IFRS) 375.4 642.6 (736.8) 205.9 487.1 11.8 498.9
Movements for the period as reported under UK GAAP:
Total net recognised losses relating to the period - - (26.6) - (26.6) 2.0 (24.6)
New share capital issued - 0.8 - - 0.8 - 0.8
Dividends paid to minority interest - - - - - (2.1) (2.1)
Goodwill transferred to the income statement on the
sale of operations - - 2.3 - 2.3 - 2.3
- 0.8 (24.3) - (23.5) (0.1) (23.6)
Movements for the period (effect of transition to
IFRS):
Total effect of IFRS adoption on net recognised
losses relating to the period - - (4.0) - (4.0) - (4.0)
Share-based payments (note 2.7(c)) - - 1.1 - 1.1 - 1.1
Reversal of goodwill transferred to the income
statement on the sale of operations (note 2.7(f)) - - (2.3) - (2.3) - (2.3)
- - (5.2) - (5.2) - (5.2)
Total equity as at 30 June 2004 375.4 643.4 (766.3) 205.9 458.4 11.7 470.1
Total equity as at 1 January 2004 (as restated under
IFRS) 375.4 642.6 (736.8) 205.9 487.1 11.8 498.9
Movements for the period as reported under UK GAAP:
Total net recognised losses relating to the period - - (58.9) - (58.9) 3.0 (55.9)
New share capital issued 0.1 0.8 - - 0.9 - 0.9
Dividends paid to minority interest - - - - - (3.1) (3.1)
Goodwill transferred to the income statement on the
sale of operations - - 2.3 - 2.3 - 2.3
0.1 0.8 (56.6) - (55.7) (0.1) (55.8)
Movements for the period (effect of transition to
IFRS):
Total effect of IFRS adoption on net recognised
losses relating to the period - - 0.1 - 0.1 - 0.1
Share-based payments (note 2.7(c)) - - 2.2 - 2.2 - 2.2
Reversal of goodwill transferred to the income
statement on the sale of operations (note 2.7(f)) - - (2.3) - (2.3) - (2.3)
- - - - - - -
Total equity as at 31 December 2004 375.5 643.4 (793.4) 205.9 431.4 11.7 443.1
2.7 Details of adjustments made on transition from UK GAAP to IFRS
Half year Full year
2004 2004
GBPm GBPm
(a) Revenue
Adjustment of sales to prior period (0.4) (0.5)
(b) Manufacturing costs - raw materials
Adjustment of sales to prior period 0.3 0.4
(c) Administration, selling and distribution costs
Long-term employee benefits (note 2.8(a)) 1.1 1.6
Holiday pay accruals(note 2.8(b)) (0.6) (0.1)
Share-based payments (note 2.8(c)) (1.1) (2.2)
Reclassify operating leases to finance leases (note 2.8(g)) 0.2 0.3
Depreciation charge on mothballed assets (0.1) (0.2)
(0.5) (0.6)
(d) Amortisation of intangibles
Reversal of goodwill amortisation charged under UK GAAP (note 2.8(f)) 15.9 31.7
(e) Finance costs
Reclassify operating leases to finance leases (note 2.8(g)) (0.2) (0.3)
(f) Profit/(loss) on disposal of operations
Reversal of goodwill amortisation charged under UK GAAP (note 2.8(f)) 2.3 2.3
(a) Income tax
Deferred tax on IFRS adjustments - holiday pay accruals, long-term employee benefits and
for: share- based payments - 0.2
- goodwill (note 2.8(h)) (2.1) (4.1)
(2.1) (3.9)
1 January 30 June 31 December
2004 2004 2004
GBPm GBPm GBPm
(b) Property, plant and equipment
Reclassify operating leases to finance leases (note 2.8(g)) 4.5 4.2 3.9
Accumulated depreciation charge on mothballed assets (0.4) (0.5) (0.6)
4.1 3.7 3.3
(c) Intangible assets
Reversal of goodwill amortisation charged under UK GAAP (note 2.8(f)) - 15.9 31.7
2.7 Details of adjustments made on transition from UK GAAP to IFRS, continued
1 January 30 June 31 December
2004 2004 2004
GBPm GBPm GBPm
(d) Deferred tax assets
Deferred tax on IFRS adjustments - holiday pay accruals, long-term
for: employee benefits and share-based
payments 1.6 1.6 1.9
- goodwill (note 2.8(h)) (2.2) (4.2) (6.0)
(0.6) (2.6) (4.1)
(e) Inventories
Adjustment of sales to prior period (0.3) 0.1 0.1
(f) Trade and other receivables
Adjustment of sales to prior period 0.4 (0.1) (0.1)
(g) Retained earnings
Holiday pay accruals (note 2.8(b)) (0.8) (1.4) (1.0)
Reclassify operating leases to finance leases (note 2.8(g)) (0.3) (0.3) (0.3)
Recognition of actuarial gains and losses on defined benefit pension and
other post-retirement obligations(note 2.8(a)) (126.1) (144.4) (153.7)
Adjustment of sales to prior periods 0.1 - -
Reversal of goodwill amortisation charged under UK GAAP(note 2.8(f)) - 15.9 31.7
Accumulated depreciation charge on mothballed assets (0.4) (0.5) (0.6)
(127.5) (130.7) (123.9)
Tax effect of all IFRS restatement adjustments (0.5) (2.5) (4.1)
(128.0) (133.2) (128.0)
(h) Employee benefits
Recognition of actuarial gains and losses on defined benefit pension schemes
and other post-retirement benefits (note 2.8(a)) 126.1 144.4 153.7
(i) Interest-bearing loans and borrowings
Reclassify operating leases to finance leases (note 2.8(g)) 4.8 4.5 4.2
(j) Current trade and other payables
Holiday pay accruals (note 2.8(b)) 0.8 1.4 1.0
(k) Income tax payable
Income taxes on long-term employee benefit deficit (0.1) (0.1) -
2.8 Summary description of significant IFRS adjustments
A summary of the principal adjustments made in order to transition the Group's
UK GAAP financial statements to IFRS are noted below.
(a) Long-term employee benefits
Under UK GAAP, the Group accounted for pension and other post-retirement benefit
obligations in accordance with SSAP 24, "Accounting for Pension Costs".
Additional disclosures were given in compliance with FRS 17, "Retirement
Benefits". Under IFRS, the Group accounts for pension and other post-retirement
benefit obligations in accordance with IAS 19, "Employee Benefits"(as amended),
which is similar to FRS 17 in many respects, particularly in that it requires
the net deficit of the Group's defined benefit pension and other post-retirement
benefit arrangements to be brought onto the Group balance sheet. As permitted by
IFRS 1, all cumulative actuarial gains and losses relating to the Group's
pension and other post-retirement benefit obligations have been recognised in
equity at the transition date.
When valuing pension and other post-retirement benefit obligations under IAS 19,
two methods of recognising actuarial gains and losses through Group reserves are
acceptable: one whereby all gains and losses are recognised in reserves as they
arise, through the Statement of Recognised Income and Expense (the "SORIE"
approach); the other providing a "smoothing" methodology which would recognise
periodic changes in gains and losses only to the extent that they fall outside a
"corridor" represented by 10% of scheme assets or liabilities. Cookson has
adopted the SORIE approach, which is intended to provide greater stability in
the pension charge made in the income statement from one period to the next.
Under IAS 19, the fair value of pension scheme assets is determined using the
bid price, as opposed to mid-market price used under UK GAAP. With regard to
other post-retirement obligations, adoption of IAS 19 leads to the recognition
of certain long-term benefit obligations, including leaving and termination
obligations, which were not previously recognised under UK GAAP.
Under UK GAAP, the Group recognised net accruals for pension and other
post-retirement obligations at 31 December 2004 of GBP29.8m (1 January 2004:
GBP40.2m; 30 June 2004: GBP37.6m). Under IFRS, these balances are reversed to
reserves and replaced in total with an actuarially-determined value of the net
deficit arising on the Group's defined benefit pension schemes and other
post-retirement benefit arrangements.
The actuarial valuation of the Group's combined defined benefit pension schemes
and other post-retirement benefit arrangements at 31 December 2004 produced a
combined net deficit of GBP189.9m (1 January 2004: GBP173.2m; 30 June 2004:
GBP188.8m), these sums being recognised in the Group balance sheet as "Employee
benefits". The comparative combined net deficit valuation of the Group's
employee benefit obligations under FRS 17 at 31 December 2004 was GBP175.3m.
Under UK GAAP, the regular charge to the profit and loss account in respect of
defined benefit pension and other post-retirement obligations was GBP17.1m in
2004. The equivalent charge to the income statement under IAS 19 for 2004 was
GBP13.7m.
As a result of the transition from UK GAAP to IFRS, the net impact on Group
reserves in respect of the Group's employee benefit arrangements was a reduction
of GBP153.7m at 31 December 2004 (1 January 2004: GBP126.1m; 30 June 2004:
GBP144.4m).
(b) Short-term employee benefits (holiday pay accruals)
Under IAS 19, "Employee benefits", Cookson accrues for the cost of all
short-term accumulating compensated absences, such as holiday entitlement earned
but not taken at the balance sheet date. Under UK GAAP, Cookson companies
accrued for holiday pay only where this was required under local accounting
requirements.
The impact of IAS 19 on Cookson's transition to IFRS is to increase the holiday
pay accrual by GBP1.0m as at 31 December 2004 (1 January 2004: GBP0.8m; 30 June
2004: GBP1.4m). The incremental charge to the income statement was GBP0.6m for
the half-year to June 2004 and GBP0.1m for the full year. Due to the timing of
employees' holidays, the accruals for holiday pay earned but not taken made in
the first half of the year are expected substantially to reverse in the second
half as holidays are taken.
(c) Share-based payments
Cookson has a number of share-based incentive option arrangements. Under IFRS 2,
"Share-based Payments", Cookson has to fair value the cost of all share options
at the date of the options being granted and that cost has to be recognised over
the relevant vesting periods.
Historically, the Cookson shares used to satisfy the exercise of those options
granted under the Group's share-based incentive arrangements which are
equity-settled have been newly-issued shares, or shares held through the Group's
Employee Share Ownership Plan. Accordingly, no profit and loss account charge
has needed to be recognised in prior periods under UK GAAP.
Cookson has adopted the exemption given by IFRS 1 to apply IFRS 2 only to awards
made after 7 November 2002. As a result of the adoption of IFRS 2, an income
statement charge of GBP2.2m was made for the full year 2004 (half year 2004:
GBP1.1m).
(d) Joint ventures
Under UK GAAP, Cookson included its share of the results of joint ventures in
its consolidated financial statements under the net equity method, which
resulted in the inclusion of the Group's proportionate share of turnover,
operating profit, interest and tax charges of the joint venture entity in the
appropriate Group income statement line item.
Under IAS 31, "Interests in Joint Ventures", the results of joint ventures can
either be shown using the net equity method or by using proportionate
consolidation. Cookson has chosen to retain the net equity method of
recognition, but under IFRS this now requires disclosure of the Group's share of
the after-tax profit of its joint venture investments on one line within the
Group income statement.
(e) Discontinued operations
Under IFRS 5, "Non-current Assets Held for Sale and Discontinued Operations",
the trading results of discontinued operations are presented separate from
continuing operations. "Discontinued operations" comprise all or substantially
all of a separate major line of business or geographical area of operation that
can be distinguished operationally and for financial reporting purposes. None of
the business disposals made in 2004 qualified as "discontinued operations" in
this financial information.
(f) Business combinations and Goodwill
Under IFRS 3, "Business combinations", the purchase cost of all business
acquisitions is required to be applied against the fair value of all identified
tangible, separable intangible assets and liabilities of the acquired business
in the determination of any goodwill arising on acquisition. IFRS 3 further
requires that any such separable intangible fixed assets are amortised over
their useful lives and that goodwill must then be carried at cost with annual
impairment reviews. Cookson has taken advantage of the exemption under IFRS 1
not to restate all business combinations prior to 1 January 2004 in line with
the requirements of IFRS 3.
As a result of the adoption of IFRS 3, goodwill amounting to GBP317.8m as at 1
January 2004 which had arisen on acquisitions made before 1998 and which had
previously been written-off to Group reserves remains so written-off and will no
longer be recycled through the income statement on any subsequent disposal of
the businesses to which it originally related. In addition, goodwill of
GBP505.6m recognised on the Group balance sheet under UK GAAP as at 1 January
2004 is carried unamortised, but is now subject to annual review for impairment.
The goodwill amortisation charge for the full year 2004 of GBP31.7m (half-year
2004: GBP15.9m) under UK GAAP has been reversed and the loss arising on business
disposals has been restated to take account of the impact of IFRS 3 on the
goodwill previously associated with these disposals.
(g) Leases
Under IAS 17, "Leases", the distinction between finance leases and operating
leases is similar to, but not exactly the same as, that under UK GAAP. Following
a review of the operating lease arrangements throughout the Group, certain of
these leases have been determined to qualify as finance leases under IFRS.
Accordingly, the impact of the adoption of IAS 17 is to increase property, plant
and equipment by GBP3.9m as at 31 December 2004 (1 January 2004: GBP4.5m; 30
June 2004: GBP4.2m). Interest-bearing loans and borrowings (short- and
long-term) are accordingly increased by GBP4.2m at 31 December 2004 (1 January
2004: GBP4.8m; 30 June 2004: GBP4.5m). The impact on the income statement is to
increase trading profit by GBP0.3m for the full year 2004 (half-year 2004:
GBP0.2m) and to increase finance expenses by GBP0.3m for the full year 2004
(half-year 2004: GBP0.2m).
(h) Deferred tax
Under IFRS, deferred tax is recognised on all temporary differences that have
originated but not reversed at the balance sheet date, with certain exceptions.
The principal exceptions relate to temporary differences arising from Group
investments where Cookson is able to control the reversal of those temporary
differences and those differences are not expected to reverse in the foreseeable
future. In addition, deferred tax assets are recognised only to the extent it is
more likely than not that they will be realised within the foreseeable future.
On transition to IFRS, the main areas in which changes to deferred tax assets
and liabilities have been identified are in respect of rolled-over taxable
gains, pensions, holiday pay accruals, share-based payments and on tax
deductible goodwill. In the case of the latter, since goodwill arising on
consolidation is now frozen in value under IFRS, subject to any impairment
charges required, but goodwill amortisation is still allowed as a deduction for
tax purposes in many jurisdictions, this has the effect of generating a deferred
tax liability which will continue to grow in future periods until such time as
the goodwill amortisation deductions cease or the goodwill asset is written-off
on disposal of the underlying businesses or as a result of impairment charges.
The net tax impact of the adjustments made on adoption of IFRS by Cookson
resulted in a reduction of deferred tax assets of GBP4.1m at 31 December 2004 (1
January 2004: GBP0.6m; 30 June 2004: GBP2.6m), including a liability of GBP6.0m
at 31 December 2004 (1 January 2004: GBP2.2m; 30 June 2004: GBP4.2m) associated
with the Group's goodwill balance.
(i) Financial instruments
Cookson has elected to adopt IAS 32, "Financial Instruments: Disclosure and
Presentation", and IAS 39, "Financial Instruments: Recognition and Measurement"
with effect from 1 January 2005 and has taken the exemption in IFRS 1 not to
restate comparatives for IAS 32 and IAS 39.
As a consequence of not early adopting IAS 32 and IAS 39, the income statement
for 2004 includes finance income which will, under IFRS, not recur in 2005,
being GBP5.4m (half-year: GBP2.7m) in respect of deferred income relating to
interest rate swaps closed-out in prior years. The total profit arising on the
close-out of these swaps was, under UK GAAP, being brought into income over the
term of the underlying loan arrangements to which the swaps had related. The
total deferred income as yet unrecognised through income as at 31 December 2004
was GBP22.3m. On adoption of IAS 32 and IAS 39 with effect from 1 January 2005,
such credit balance will be taken directly to Group reserves, net of a related
tax charge.
(j) Cumulative currency translation differences
Under UK GAAP, translation differences arising on the consolidation of the
results of and investment in foreign operations do not have to be separately
identified and accounted for in subsequent disposals of those foreign
operations. Under IAS 21, "The Effects of Changes in Foreign Exchange Rates",
such translation differences must be separately reported in equity, net of the
result on any related hedging instruments; and on disposal of a foreign
operation, any associated cumulative translation differences are transferred to
the income statement as part of the gain or loss on disposal.
Cookson has adopted the exemption allowed under IFRS 1 not to separately
recognise cumulative translation differences arising prior to the transition
date. As a result, all cumulative translation differences at 1 January 2004 are
deemed to be zero and all subsequent disposals will exclude any translation
differences arising prior to the date of transition.
Exhibit No.9
COOKSON GROUP PLC INTERIM REPORT TO SHAREHOLDERS
26 July 2005
First Half Year
2005 2004 2004
Revenue (GBPm) 795 817 -3% 1,652
Trading profit* (GBPm) 54.4 51.9 +5% 114.9
Return on sales 6.8% 6.4% +0.4% pts 7.0%
Profit before tax (GBPm)
- Headline* 39.9 37.2 +7% 85.0
- Basic 33.3 24.1 +38% 12.6
Earnings per share (pence)
- Headline* 13.9 12.4 +12% 30.1
- Basic 8.5 4.4 (11.2)
Free cash flow (GBPm) (22.8) (21.2) -GBP1.6m 51.6
Net debt (GBPm) 362.8 402.0 GBP39m lower 321.8
The above information is at reported exchange rates
*Refer to the income statement attached for definitions
- Trading profit up 5%
- Return on sales increases 0.4 % points
- 7% rise in headline profit before tax
- Headline EPS up 12%
- Net debt GBP39 million lower than June 2004
- Progress on strategy implementation
- Disposals to date raise GBP13 million
Commenting on the results, Nick Salmon, Chief Executive, said:
"The results for the first half of 2005 were in line with the guidance provided
in May. The Group's performance benefited from a more profitable second quarter
when compared to the first quarter.
Over the first six months of 2005, we have also made good progress in
implementing our strategy to improve the operational performance of our core
businesses and to dispose of non-core businesses and surplus properties. The
Ceramics division has recorded excellent results on the back of continued strong
growth in global steel production. The Electronics division has experienced
mixed market conditions globally, with strong growth in the Asia Pacific region
offset by more challenging conditions in NAFTA and Europe. Its Laminates sector
continues to face difficult markets and has made a loss in the first half,
necessitating further restructuring in Europe and USA. The Precious Metals
division has had to cope with continued weakness in retail markets but, despite
very low volumes, has remained profitable.
The outlook for our markets remains unclear but we are confident that we are
taking the necessary steps to reduce our cost base and implement the strategy we
set out in January. Given the market conditions we are currently experiencing,
we would expect overall performance for the full year to be slightly better than
that achieved in 2004."
IFRS
The results for the Group for the first half of 2005 and comparative periods
have been restated in accordance with International Financing Reporting
Standards (IFRS).
The impact on the Group's 2004 financial statements of its transition to IFRS
was communicated to shareholders on 22 July 2005 by way of a press and RNS
announcement and is available on the Company's website www.cooksongroup.co.uk.
STRATEGY - PROGRESS
As announced in January 2005 and as described in our 2004 Annual Report, our
strategy focuses on performance enhancement, debt reduction and the disposal of
non-core activities.
Our objectives include improving profitability, with targeted return on sales by
2007 of 10% in both the Ceramics and Electronics divisions and a return on net
sales (i.e. excluding the precious metals content) of 15% for the Precious
Metals division. We also plan to reduce total debt significantly over the next
2-3 years. This will be achieved through a combination of strong operational
cash flow - from improved profitability and working capital management - and a
disposal programme which aims to raise over GBP100 million from the sale of a
number of non-core activities and assets by the end of 2006. In addition, we
intend to resume a sustainable dividend payment as soon as possible with
dividends funded from free cash flow.
There are four main components to advancing this strategy and progress is being
made in all of them:
- Products and Markets
We continue to focus on higher margin products with higher technology content,
maintaining our investments in R&D and exiting commodity activities such as
rigid laminates and certain types of ceramic bricks. Examples of new products
where we are seeing encouraging sales growth in 2005 include thin slab caster
nozzles and solar crucibles in the Ceramics division, lead-free products,
GETEK(TM) laminates and copper damascene in the Electronics division and our
newly-launched tarnish resistant silver alloy Argentium (R) in the Precious
Metals division.
- Investment and Restructuring
We continue to balance production facilities and customer markets
geographically, progressively investing in emerging economies while
restructuring as necessary in the more mature markets. Examples from the first
half of 2005 include:
Ceramics
- NAFTA: modernisation and rationalisation of plants in the USA and Mexico
(completed).
- South Africa: rationalisation of two plants into one (launched).
- China, Brazil, Poland: additional production capacity for flow control
products (nearing completion).
- China: increasing Cookson's shareholding in its joint venture with Wuhan
Steel from 25% to 50% plus capacity expansion (completed).
Electronics
- Germany and Sweden: reduction of laminates capacity in Germany and
streamlining production in Sweden (underway).
- Europe: rationalisation of certain Chemistry sector activities and reduction
of overheads (underway).
- NAFTA: Chemistry capacity expansion in Mexico and closure of a factory in
California and related overhead reductions (nearing completion).
- China: additional laminates production capacity (complete, further phase now
planned); new R&D technology centres in Shanghai and Shenzhen (completed).
- Singapore: Semiconductor packaging workforce reduction (completed).
Precious Metals
- USA: 8% reduction in workforce and consolidation onto one main site
(completed).
- Europe: restructuring of operations in France, exiting manufacturing and
relocating the sales force (nearing completion).
- Cost reduction
By simplifying our structure and processes we can take out substantial overhead
costs. Progress has been made in many areas, particularly in the Group and
Electronics division headquarters. In common with a number of other UK
companies, we are now examining the required steps to de-register as a foreign
private issuer with the U.S. Securities and Exchange Commission, which would
save significant administrative and audit costs.
We also continue to focus on improving our materials purchasing efficiency to
control our raw material costs via centralised global procurement initiatives
and sourcing from lower cost countries.
- Disposals:
To date, the following disposals of non-core activities and surplus properties
have been completed and cash proceeds received:
Proceeds Date Closed Revenue Trading
2004 Profit 2004
Fraternity Rings GBP3.0m Dec 2004 GBP2.5m GBP0.3m
Technical Ceramics GBP4.7m June 2005 GBP4.6m GBP1.0m
Conference Centre GBP1.3m June 2005
Redundant Properties GBP4.4m June 2005
Total GBP13.4m
The disposal programme is at an early stage and we remain confident that we will
achieve the target of raising GBP100 million from disposals by the end of 2006.
Conclusion
We are satisfied with the progress in implementing our strategy achieved over
the last six months. We expect to maintain progress in all four of the above
areas and to announce new related developments through the second half of 2005.
CURRENT OUTLOOK
The strong growth in global steel production, which benefited our Ceramics
division in the first half, is expected to moderate in the third quarter as
global inventories correct. While we have limited visibility beyond this point,
we expect growth to resume in the fourth quarter.
In our Electronics division's global markets there are mixed signals of
continued growth in Asia-Pacific balanced by further slowdowns in NAFTA and EU
markets.
The Precious Metals division has experienced weak retail market conditions in
the USA and Europe. Whilst it is clearly too early to be specific on trends for
the rest of the year, the level of activity in the second half should improve on
that of the first given the influence on jewellery sales of the normal holiday
period and Christmas season.
The outlook for our markets remains unclear but we are confident that we are
taking the necessary steps to reduce our cost base and implement the strategy we
set out in January. Given the market conditions we are currently experiencing,
we would expect overall performance for the full year to be slightly better than
that achieved in 2004.
DIRECTORATE
Mike Butterworth was appointed to the Board on 15 June 2005 and will replace
Dennis Millard as Finance Director when Mr. Millard leaves the Company, as
previously announced, at the end of July.
Jeff Hewitt joined the Board on 1 June 2005 and was appointed Chairman of the
Audit Committee on that date. Mr Hewitt replaces Kent Atkinson who resigned from
the Company in April 2005.
Gian Carlo Cozzani, executive Director and Chief Executive of the Ceramics
Division is to step down from the Board on reaching retirement age on 6 October
2005. His designated replacement as Chief Executive of the Ceramics Division,
Francois Wanecq, joined the Group last month thereby ensuring a smooth
transition.
REVIEW OF OPERATIONS
Note: The data provided in the tables on pages 5 to 14 are at reported exchange
rates.
Group
First Half Year
2005 2004 2004
Revenue (GBPm) 795 817 1,652
Trading profit (GBPm) 54.4 51.9 114.9
Return on sales 6.8% 6.4% 7.0%
Group revenue in the first half of 2005 was 3% lower than the same period last
year at both reported and constant exchange rates. Revenue for the Ceramics
division was up 3% over the previous half year and the Electronics division
revenue was virtually unchanged, whereas that of the Precious Metals division
was down 22%. Revenue for the Group's operations in the Asia-Pacific region
continued to grow strongly, now representing over 20% of Group revenue, whereas
for operations in NAFTA and Europe, revenue was down on 2004.
Despite the decrease in revenue, trading profit of GBP54.4m in the first half of
2005 was 5% higher than the same period in 2004 at both reported and constant
exchange rates. The GBP2.5 million increase in trading profit in the first half
of 2005 arose from: a GBP6.7 million increase by the Ceramics division; Group
Corporate costs being GBP0.5 million lower than in the previous year, partly
offset by decreases in trading profits of GBP3.6 million and GBP1.1 million by
the Electronics and Precious Metals divisions respectively.
Revenue of GBP408 million in the second quarter was 4% down year-on-year though
trading profit of GBP32.7 million was GBP3.5 million (12%) higher, more than
offsetting the GBP1.1 million shortfall in the first quarter.
Ceramics division
First Half Year
2005 2004 2004
Revenue (GBPm) 368 358 740
Trading profit (GBPm) 34.4 27.7 60.0
Return on sales 9.3% 7.7% 8.1%
Revenue for the Ceramics division in the first half of 2005 was 3% higher than
the same period last year and up 2% at constant exchange rates. Excluding the
revenue of the brick-making businesses that were sold in December 2004, revenue
for the division for the first half of 2005 was up 8% at reported exchange
rates.
Trading profit of GBP34.4 million was 24% higher than the first half of 2004 and
rose by 22% at constant exchange rates. Trading profit in the second quarter of
GBP20.2 million was up 30% at constant exchange rates over the same period last
year. This reflects the continuing improvement in profitability by the division
and, as a consequence, the division's return on sales improved further, rising
from 7.7% in the first half of 2004 to 9.3% in the period under review.
Iron and Steel
The Iron and Steel sector supplies flow control products that control and
protect the stream of molten metal as it passes through the continuous cast
steelmaking process; bricks and monolithic linings to contain molten steel; and
construction and installation services. The sector is the division's largest,
accounting for over 70% of the division's revenue.
Global steel production, to which the majority of this sector's sales are
directly linked, rose by 8% to record levels in the first half of 2005. In the
sector's two largest markets, the enlarged European Union and NAFTA, which
account for some 45% and 30% of the sector's revenue, steel production was down
some 2% year-on-year. In the fast growing Asia-Pacific region, which accounts
for some 15% of the sector's total revenue, steel production continued to grow
strongly, mainly due to a 28% rise in steel production in China and a 12% rise
in India, both key markets for the sector.
Revenue for the Iron and Steel sector rose by 7% to GBP262 million at constant
exchange rates in the first half, boosted by strong underlying volume growth as
well as price increases, and by more construction and installation projects. In
the second quarter, consistent with the slowdown in the year-on-year growth
rates in steel production in the regions in which the sector operates, revenue
growth moderated and was up 6% at constant exchange rates in comparison with the
second quarter of the previous year.
Overall, gross margins were maintained despite increases in raw material and
energy costs and an increase in relatively lower-margin construction and
installation activity. In addition, a reduced level of overhead costs was
achieved, mainly as a result of the rationalisation programmes initiated in
operations in the USA in the second half of last year and from the increase in
capacity in Mexico. As a result, trading profit for the sector in the first half
improved over the previous year.
In the first quarter, a programme to rationalise the sector's activities in
South Africa commenced, which includes the relocation of activities onto a
single site. The one-off rationalisation costs for this initiative, and for the
completion of the above-mentioned ones in the USA, amounted to GBP1.1 million in
the first half.
Foundry and Industrial Processes
These sectors produce heat containment and flow control products and other
speciality ceramics products for a wide variety of industries and applications.
Activities in Europe and NAFTA account for some 50% and 40% respectively of the
sector total.
Revenue for these sectors of GBP72 million was up 1% at constant exchange rates
over the first half of 2004. This was generally in line with activity levels in
the end markets in which they operate in their main geographic regions. As with
the Iron and Steel sector, profits rose on the back of improved gross margins
and a lower cost base.
Glass
The sector produces flow control and brick/lining products for the glass
industry as well as crucibles for making solar energy products. In the first
half, revenue of GBP34 million was down on the previous year but, excluding the
revenue of the European brick businesses sold in 2004, revenue was 22% higher
than the previous year at constant exchange rates. As a result, profitability
rose strongly, boosted by an excellent performance by the sector's operations in
Eastern Europe and China.
In the second quarter, the sector's US technical ceramics business, McDanel, was
sold. This business had revenue of GBP2.1 million in the six month period to the
date of sale (GBP4.6 million for the full year in 2004) and contributed some
GBP0.3 million of the sector's trading profit in the first half.
Electronics division
First Half Year
2005 2004 2004
Revenue (GBPm) 309 308 625
Trading profit (GBPm) 20.9 24.5 52.8
Return on sales 6.8% 8.0% 8.4%
Revenue for the division was virtually unchanged over the first half of last
year at both reported and constant exchange rates. This broadly reflected market
conditions in the global electronics industry, where activity levels reached a
plateau in the first half of 2005 following a period of strong growth in 2004.
In the second quarter, underlying global activity levels in the electronics
industry slowed, resulting in a 2% year-on-year decrease in revenue. Conditions
were challenging in the NAFTA and European operations, each accounting for some
30% of the division's revenue; accordingly, revenue was down on the previous
year. For the Asia-Pacific region, which accounts for some 40% of the division's
revenue, strong growth in market demand continued, and revenue grew robustly,
though the year-on-year rate of growth moderated in the second quarter.
Trading profit of GBP20.9 million for the first half of 2005 was down GBP3.6
million (14%) on the previous year at both reported and constant exchange rates,
with the majority of the shortfall (GBP2.9 million) arising in the Laminates
sector. As a consequence, return on sales decreased from 8.0% to 6.8%.
Profits in the second quarter of 2005 of GBP12.5 million were GBP1.1 million
lower than the second quarter last year due to losses in the Laminates sector.
A number of cost-saving initiatives were put in place in the first half for
which rationalisation charges of GBP6.0 million were recognised in the period as
detailed under each sector below.
Assembly Materials
First Half Year
2005 2004 2004
Revenue (GBPm) 139 135 280
Trading profit (GBPm) 11.2 11.0 24.2
Return on sales 8.1% 8.1% 8.6%
Some 70% of the products of the Assembly Materials sector are sold into the PCB
assembly and semi-conductor packaging markets of the electronics industry, with
the balance for industrial and medical applications. Revenue for the sector was
up 3% and by 4% at constant exchange rates over the previous year. However, most
of this increase related to higher tin prices being passed onto customers,
reducing the underlying rate of increase to approximately 1% at constant
exchange rates. The average price of tin in the first half was c. 7.5% higher in
sterling terms than the same period last year though, by the end of the first
half of 2005, the tin price was similar to that at the end of the first half of
2004. Tin is the primary raw material used in the manufacture of the majority of
the sector's products and the cost of tin in the first half of 2005 was
equivalent to some 35% of the sector's revenue. Revenue for the core solder
products range grew strongly in the Asia-Pacific region (some 45% of the total),
but decreased in the NAFTA and European operations, and revenue of
semi-conductor packaging products for the Asia-Pacific market was down on the
previous year.
Trading profit for the sector of GBP11.2 million was up 2% versus the previous
year at reported and constant exchange rates. Improvements in profits in the
core solder products and speciality coating operations were achieved, however,
this was held back by lower profits from the semi-conductor packaging products
business.
A one-off rationalisation charge of GBP0.6 million has been taken to cover the
costs of reducing the workforce of semi-conductor packaging activity in Asia and
for the completion of similar programmes initiated in Europe last year.
Chemistry
First Half Year
2005 2004 2004
Revenue (GBPm) 105 107 213
Trading profit (GBPm) 11.9 12.8 27.8
Return on sales 11.3% 12.0% 13.1%
The Chemistry sector's products are primarily plating chemicals for PCB
fabrication and the general electronics industry and, in equal measure, for
other industrial and automotive applications. Revenue for the sector was 2%
lower than the first half of 2004 at reported and constant exchange rates. In
the NAFTA operations, which account for some 30% of the total, revenue was well
down on the previous year, mainly due to weak demand for PCB related products
and temporary de-stocking in the first quarter by the sole distributor of high
margin copper damascene products for the semi-conductor market. This followed a
build up in inventory of this product in the fourth quarter of 2004. The
underlying demand for copper damascene, however, remains healthy and the
over-stocking in the first quarter was cleared by the end of the second quarter.
Revenue in the European operations, which account for some 50% of the total, was
up on last year with growth in products for the automotive market a feature. In
the Asia-Pacific region, revenue was unchanged, mainly due to a decrease in
sales of lower margin industrial products offsetting growth in those directed at
the PCB market.
The fall in revenue in the high margin copper damascene products and the
generally weak performance in the NAFTA operations resulted in profits in that
region being well down on last year, offsetting strong increases in profits in
the European and Asia-Pacific operations. As a result, trading profit for the
sector of GBP11.9 million in the first half was 7% down on 2004 at reported
exchange rates but only 4% down at constant exchange rates. Cost savings
initiatives in Europe and the USA, as outlined in the strategy update above,
resulted in a one-off rationalisation charge of GBP1.5 million.
Laminates
First Half Year
2005 2004 2004
Revenue (GBPm) 65 66 132
Trading profit (GBPm) (2.2) 0.7 0.8
Return on sales (3.4)% 1.1% 0.6%
Following an increase in revenue in the first quarter of 2005 over the previous
year, revenue in the second quarter plateaued and, as a result, was down 8% on
the strong volumes experienced in the second quarter of last year. This, in
turn, resulted in revenue for the first half at reported exchange rates being 2%
lower than that of the first half of 2004, though unchanged at constant rates.
Revenue in the US and European operations, which collectively account for some
50% of the total, was well down on the previous year, offsetting strong growth
in the Asia-Pacific operations. This fall in revenue arose despite some
increases in prices to cover higher raw material costs. Volumes of the higher
margin products, such as GETEK(TM) and other high temperature/reliability
laminates, held up well. As a consequence of the fall in revenue, the sector
recorded an operating loss of GBP2.2 million in the first half in comparison
with a profit of GBP0.7 million in the same period last year. The US operations
recorded an unchanged loss versus that of the previous year, Asia-Pacific
remained profitable whereas the European operations moved from break-even into
heavy loss.
As outlined previously, a number of initiatives are underway to improve the
sector's profitability. These include a programme to increase the level of sales
of higher margin products, to increase capacity further in the fast growing
Asia-Pacific region and to rationalise activities in Germany and Sweden. With
regard to the latter, this programme is well underway and a charge of GBP3.9
million for this and the completion of initiatives in the USA has been
recognised in the first half. Precious Metals division
First Half Year
2005 2004 2004
Revenue (GBPm) 118 151 288
Net Sales Value (GBPm) 47 60 116
Trading profit (GBPm) 2.7 3.8 11.0
Return on net sales value 5.7% 6.3% 9.5%
Trading conditions for the Precious Metals division remained difficult in the
first half due to unprecedented falls in demand for jewellery products in the UK
and Continental Europe, which collectively account for some 45% of the
division's activities, together with weak consumer confidence in these regions
and in the USA. As a result, revenue for the division was down 22% in the first
half at reported and 21% at constant exchange rates and, after excluding the
precious metals content, net sales value was also down 21% at constant exchange
rates. Demand for the division's higher margin gold-based products remained
weak, especially in the UK where hallmarking of gold jewellery items has fallen
by 16% in the first half, though volumes of relatively lower margin silver
products was less affected. Trading profit for the division of GBP2.7 million
was well down on last year at both reported and constant exchange rates, though
the decrease in profits was partially mitigated by the benefits of the recently
completed restructuring of the European operations that commenced in 2004. As a
result, the return on net sales value was down only 0.6%. As previously
reported, in response to the weak market conditions in the USA and to Tiffany
increasing its level of in-house manufacturing, a programme was initiated in the
second quarter to reduce the US workforce by 8% and to consolidate most
activities in the region onto a single site. As a result, a one-off charge of
GBP0.6 million has been raised in the first half.
Group Corporate
The Group's corporate costs, being the costs directly related to managing the
Group holding company, were GBP3.6 million in the first half which was GBP0.5
million lower than 2004. Costs for the full year 2004 amounted to GBP8.9 million
and, following a programme to streamline activities, the expectation is for a
further year-on-year decrease in costs in the second half.
GROUP FINANCIAL REVIEW
First Half Year
2005 2004 2004
Profit Before Tax (GBPm)
- headline 39.9 37.2 85.0
- basic 33.3 24.1 12.6
Earnings per share (pence)
- headline 13.9 12.4 30.1
- basic 8.5 4.4 (11.2)
Free cash flow (GBPm) (22.8) (21.2) 51.6
Net debt (GBPm) 363 402 322
Profit before tax
Headline profit before tax was GBP39.9 million for the first half of 2005, which
was GBP2.7 million higher than the same period in 2004. The increase arose as
follows:
- GBP2.6 million increase in trading profit at constant exchange rates for Group
operations, as analysed in the Review of Operations above
- GBP0.1 million negative trading profit exchange rate translation variance
- GBP1.1 million lower charge for net interest payable for ongoing activities
mainly due to a decrease of some GBP35 million in the average level of
borrowings (average rates on gross borrowings were 7.0% in the first half)
partly offset by:
- GBP0.9 million decrease in income from joint ventures from GBP1.3 million to
GBP0.4 million, primarily in the Chemistry sector's Japanese joint venture;
this shortfall was anticipated following an exceptionally high level of
profitability in the first quarter of 2004.
A net charge for the following items not related to trading profit amounting to
GBP6.6 million was incurred in the first half of 2005 (2004: GBP9.9 million).
This consisted of the following:
- one-off rationalisation costs of GBP7.7 million (2004: GBP11.0 million), of
which GBP4.0 million related to a non-cash write down of assets.
- amortisation of intangibles of GBP0.4 million
- profit on disposal of surplus properties of GBP1.6 million (2004:
GBP1.1 million).
- GBP1.2 million write-off of prior period debt refinancing costs.
- GBP1.1 million profit on disposal of operations
Group profit before tax and after the above items amounted to GBP33.3 million in
the first half of 2005. This compares with GBP24.1 million in the same period
last year.
Taxation
The tax charge and effective tax rate for ongoing activities was GBP11.9 million
and 30% respectively (2004: 30%). A tax charge of GBP3.5 million arose for
exceptional items.
Earnings per share
Headline earnings per share amounted to 13.9 pence per share which was 12%
higher than the 12.4 pence per share in 2004.
Basic earnings per share amounted to 8.5 pence per share, compared with 4.4
pence per share in 2004.
The calculation of earnings per share is based on 188 million shares in issue in
both periods and takes into account the 1 for 10 share capital consolidation
that was approved by shareholders and effected in May 2005.
Dividends
While no dividends have been declared for the first half of 2005, it is the
Board's intention to return to the dividend list as soon as possible, with
dividends paid on a sustainable basis from free cash flow.
Cash flow
Net cash from operating activities
In the first half of 2005, the Group's net cash outflow from operating
activities was GBP16.8 million, GBP7.0 million higher than in the first half of
2004, with the net increase made up as follows:
- GBP2.6 million higher cash outlay for rationalisation of activities
- GBP0.4 million increase in tax payments, and
- GBP17.9 million net outlay for other operating provisions and other items,
including GBP2.5 million higher payments to "top-up" the UK and US defined
benefits pension funds and GBP6.0m additional incentive payments to employees
throughout the Group, with the remainder arising from movements on other
non-trading debtors and creditors partly offset by:
- GBP2.6 million higher profit from operations after the add-back of non-cash
items
- GBP10.8 million lower cash outflow for trade working capital.
- GBP0.5 million less net interest paid.
Cash outflow for rationalisation was GBP8.1 million of which GBP3.0 million
related to programmes that were initiated in 2005 and the balance from prior
period initiatives, with the largest being the restructuring of the European
Precious Metals activities and the Laminates operations in Germany.
Trade working capital rose by GBP42.8 million in the first half, a consistent
seasonal trend to that of the prior year (up GBP53.6 million) and in years prior
to that. The ratio of average working capital to sales was marginally higher
than the same period last year at 21.4%.
Net cash from investing activities
Capital expenditure. Payments to acquire property, plant and equipment in the
first half of 2005 were GBP13.8 million which represented 58% of depreciation
(2004: 61%). Proceeds from the sale of redundant properties, in the USA and
France, were GBP5.7 million (2004: GBP2.9 million).
Dividends from joint ventures. Dividends of GBP4.7 million were received in the
first half (2004: GBP2.2 million) from the Chemistry division's Japanese joint
venture.
Acquisitions and disposals.
Net cash outflow for acquisitions and disposals in the first half of 2005 was
GBP4.5 million which included the following:
- an increase in the Ceramics division's joint venture interest with Wuhan
Steel Corp in China from 25% to 50% for GBP2.3 million
- deferred consideration for prior period acquisitions of GBP1.6 million
- trailing costs and purchase price adjustments for prior period disposals of
GBP3.7 million
- proceeds from the disposal of businesses, net of cash, of GBP2.4 million
Free cash flow
Free cash flow is defined as net cash flow from operating activities after net
outlays for acquisitions and disposals of fixed assets, dividends from joint
ventures and dividends paid to minority shareholders.
Free cash outflow for the first half of 2005 was GBP22.8 million which was
GBP1.6 million higher than the GBP21.2 million outflow in the first half of
2004.
The Group traditionally experiences free cash outflows in the first half of the
year. This is then followed by inflows in the second half, mainly due to the
seasonality of trade working capital cash flows and generally higher trading
profits in the second half. The annualised free cash inflow for the year ended
June 2005, was GBP50.0 million. This compares with the GBP51.6 million cash
inflow in the year ended December 2004.
Net cash flow before financing and net debt
Net cash outflow before financing for the first half of 2005 was GBP24.7 million
and, together with a GBP3.1 million outflow for financing activities, net cash
outflow for the first half was GBP27.8 million. This, together with a negative
translation exchange rate effect of GBP13.2 million, mainly due to the decrease
in the value of sterling from $1.92 to $1.83 over the six month period, resulted
in net debt rising from GBP321.8 million at 31 December 2004 (restated to IFRS)
to GBP362.8 million in the first half of 2005. However, net debt is GBP39
million lower than in June 2004.
As at 30 June 2005, the Group had gross borrowings of GBP394 million which were
drawn on available medium to long-term committed facilities of c. GBP500
million. The Group's net debt comprises the following:
30 June 31 December 30 June
2005 2004 2004
GBPm GBPm GBPm
US Private Placement loan notes 298 297 312
7% Convertible Bonds - - 80
Committed bank facility 68 40 10
Other loans 14 16 17
Asset securitisation and lease financing 15 13 15
Gross borrowings 395 366 434
Cash (32) (44) (32)
Net Debt 363 322 402
The US Private Placement loan notes ($570 million) are repayable at various
dates between 2007 and 2012. $25 million of notes were repaid on maturity in May
2005.
A new unsecured committed bank facility for GBP200 million was arranged in March
2005 on improved pricing and terms. The facility matures in March 2008, with
options to extend by a further 2 years. Only GBP68 million was drawn on this
facility at June 2005.
PENSION FUND AND OTHER POST-RETIREMENT OBLIGATIONS
At 30 June 2005, a liability of GBP213.6 million is recognised in respect of
employee benefits; an increase of GBP23.7 million over the GBP189.9 million as
at 31 December 2004. This increase results from an interim actuarial valuation
of the Group's defined benefit pension and other post-retirement obligations as
at 30 June 2005. Of the total liability, GBP166.8 million relates to the
combined deficits on the Group's principal defined pension schemes in the UK and
the USA, GBP12.7 million to pension arrangements in the Rest of the World, and
GBP34.1 million to unfunded post-retirement benefit arrangements, being mainly
healthcare benefit arrangements in the USA.
The valuations represent a "roll-forward" from the last full individual scheme
valuations which, in the case of the UK pension scheme, was 31 December 2003,
and for the US pension schemes was 31 December 2004. For the UK and US pension
schemes, the principal component of the increase in the combined valuation
deficit in the first half of 2005 resulted from a change in actuarial
assumptions, namely a reduction in discount rates. For valuation purposes, the
discount rates used were 5.0% for the UK (December 2004: 5.25%) and 5.25% for
the USA (December 2004: 5.75%).
The total charge to the income statement for the first half of 2005 in respect
of the Group's defined benefit pension and other post-retirement obligations was
GBP7.9 million (2004: half year GBP8.0 million; full year GBP15.6 million).
Shareholder/analyst enquiries:
Nick Salmon, Chief Executive Cookson Group plc
Dennis Millard, Group Finance Director Tel: + 44 (0)20 7061 6500
Isabel Vilela, Investor Relations Manager
Press enquiries:
John Olsen Hogarth Partnership
Tel: +44 (0)20 7357 9477
Cookson management will make a presentation to analysts on 26 July at 9:30 am
(UK time). This will be broadcast live on Cookson's website,
www.cooksongroup.co.uk. An archive version of the presentation will be available
on the website later that day.
Forward Looking Statements
This report contains certain forward looking statements regarding 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 document that are not historical facts are hereby identified
as "forward looking statements" for the purpose of the safe harbour provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward looking statements, including, without limitation, those relating to the
future business prospects, revenues, working capital, liquidity, capital needs,
interest costs and income, in each case relating to Cookson, wherever they occur
in this document, 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 and US regulators 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 report might not
occur.
Cookson Group plc
265 Strand, London WC2R 1DB, United Kingdom
Tel: +44 (0) 20 7061 6500 Fax: +44 (0) 20 7061 6600 www.cooksongroup.co.uk
Registered in England & Wales No. 251977
Independent review report to Cookson Group plc
Introduction
We have been engaged by the company to review the financial information set out
on pages 17 to 25 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.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual financial statements except where any changes, and the reasons
for them, are disclosed.
As disclosed in note 1 to the financial information, the next annual financial
statements of the group will be prepared in accordance with IFRSs adopted for
use in the European Union.
The accounting policies that have been adopted in preparing the financial
information are consistent with those that the directors currently intend to use
in the next annual financial statements. There is, however, a possibility that
the directors may determine that some changes to these policies are necessary
when preparing the full annual financial statements for the first time in
accordance with those IFRSs adopted for use by the European Union. This is
because, as disclosed in note 1, the directors have anticipated that certain
standards, which have yet to be formally adopted for use in the EU, will be so
adopted in time to be applicable to the next annual financial statements.
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
for use in the United Kingdom. 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 2005.
KPMG Audit Plc
Chartered Accountants
26 July 2005, London
Group Income Statement
For the six months ended 30 June 2005
Half year Full
Half year 2004 Year 2004
Note 2005 GBPm GBPm GBPm
Revenue 2 794.7 816.7 1,652.5
Manufacturing costs- raw materials (359.5) (364.3) (755.8)
- other (218.3) (226.2) (447.1)
Administration, selling and distribution costs (162.5) (174.3) (334.7)
Trading profit 1,2 54.4 51.9 114.9
Rationalisation of operating activities 3 (7.7) (11.0) (22.7)
Amortisation and impairment of intangibles (0.4) (0.4) (0.8)
Profit/(loss) relating to fixed assets 1.6 1.1 (16.8)
Profit from operations 2 47.9 41.6 74.6
Finance income: 4
Ongoing activities 1.4 1.7 3.4
Income from swap close-out - 2.7 5.4
Finance costs: 4
Ongoing activities (16.3) (17.7) (35.6)
Write-off of prepaid debt-raising fees (1.2) - -
Share of post-tax profit from joint ventures 0.4 1.3 2.3
Profit/(loss) on disposal of operations 5 1.1 (5.5) (37.5)
Profit before tax 33.3 24.1 12.6
Income tax costs: 6
Ongoing activities (11.9) (11.3) (24.3)
Other income tax costs (3.5) (2.0) (5.3)
Profit/(loss) for the period 17.9 10.8 (17.0)
Profit attributable to minority interests (1.8) (2.5) (4.1)
Profit/(loss) attributable to parent company equity holders 16.1 8.3 (21.1)
Basic earnings per share 7 8.5p 4.4p (11.2)p
Diluted earnings per share 7 8.3p 4.3p (11.2)p
Headline profit before tax and earnings per share
Trading profit 54.4 51.9 114.9
Share of post-tax profit from joint ventures 0.4 1.3 2.3
Finance costs of ordinary activities, net (14.9) (16.0) (32.2)
Headline profit before tax 39.9 37.2 85.0
Income tax on ordinary activities (11.9) (11.3) (24.3)
Profit attributable to minority interests (1.8) (2.5) (4.1)
Headline profit attributable to parent company equity holders 26.2 23.4 56.6
Headline basic earnings per share 7 13.9p 12.4p 30.1p
Group Statement of Cash Flows
For the six months ended 30 June 2005
Half year Half year Full year
2005 2004 2004
Note GBPm GBPm GBPm
Cash flows from operating activities
Profit from operations 47.9 41.6 74.6
Add/(deduct):
Rationalisation of operating activities 7.7 11.0 22.7
(Profit)/loss relating to fixed assets (1.6) (1.1) 16.8
Amortisation of intangibles 0.4 0.4 0.8
Depreciation 23.9 23.8 46.9
Net increase in trade working capital (42.8) (53.6) (16.9)
Outflows related to rationalisation of operating activities 3 (8.1) (5.5) (14.2)
Other items (20.4) (2.5) 14.8
Cash generated from operations 7.0 14.1 145.5
Interest paid (16.6) (17.8) (35.9)
Interest received 1.8 2.5 4.4
Income taxes paid (9.0) (8.6) (20.7)
Net cash (outflow)/inflow from operating activities (16.8) (9.8) 93.3
Cash flows from investing activities
Acquisition of property, plant and equipment (13.8) (14.4) (42.3)
Proceeds from sale of property, plant and equipment 5.7 2.9 1.4
Acquisition of subsidiaries, net of cash acquired (3.9) (4.5) (12.0)
Disposal of subsidiaries, net of cash disposed of 2.4 (2.4) 1.4
Dividends received from joint ventures 4.7 2.2 2.3
Other, including additional costs for prior years' disposals (3.0) (5.1) (10.0)
Net cash outflow from investing activities (7.9) (21.3) (59.2)
Net cash (outflow)/inflow before financing activities (24.7) (31.1) 34.1
Cash flows from financing activities
Increase in/(repayment of) borrowings 15.1 12.3 (39.7)
Proceeds from the issue of share capital 0.1 0.8 0.9
Payment of transaction costs (0.6) (1.1) (1.1)
Dividends paid to minority shareholders (2.6) (2.1) (3.1)
Net cash inflow/(outflow) from financing activities 12.0 9.9 (43.0)
Net decrease in cash and cash equivalents (12.7) (21.2) (8.9)
Cash and cash equivalents at 1 January 44.0 52.8 52.8
Effect of exchange rate fluctuations on cash held 0.2 (0.1) 0.1
Cash and cash equivalents at end of period 31.5 31.5 44.0
Free cash flow
Net cash (outflow)/inflow from operating activities (16.8) (9.8) 93.3
Acquisition of property, plant and equipment (13.8) (14.4) (42.3)
Proceeds from sale of property, plant and equipment 5.7 2.9 1.4
Dividends received from joint ventures 4.7 2.2 2.3
Dividends paid to minority shareholders (2.6) (2.1) (3.1)
Free cash flow (22.8) (21.2) 51.6
Group Balance Sheet
As at 30 June 2005
30 June 31 Dec 30 June
2005 2004 2004
Note GBPm GBPm GBPm
Assets
Property, plant and equipment 312.8 322.9 335.7
Intangible assets 8 497.0 485.2 503.5
Investments in joint ventures 12.9 14.7 14.5
Other investments 9 13.8 16.7 36.0
Income tax recoverable 2.2 2.2 2.2
Deferred tax assets 27.3 31.2 46.9
Other assets 7.4 10.6 10.1
Total non-current assets 873.4 883.5 948.9
Cash and cash equivalents 31.5 44.0 31.5
Inventories 186.1 174.1 193.9
Trade and other receivables 330.0 303.4 324.8
Income tax recoverable 0.7 0.9 -
Other financial assets 10 13.4 - -
Total current assets 561.7 522.4 550.2
Total assets 1,435.1 1,405.9 1,499.1
Equity
Issued share capital 11 375.5 375.5 375.4
Share premium 643.8 643.4 643.4
Reserves (563.1) (587.5) (560.4)
Total parent company shareholders' equity 456.2 431.4 458.4
Minority interests 11.3 11.7 11.7
Total equity 467.5 443.1 470.1
Liabilities
Interest-bearing loans and borrowings 370.3 326.1 334.0
Employee benefits 12 213.6 189.9 188.8
Trade and other payables 24.4 58.3 97.9
Provisions 9.4 10.3 16.8
Deferred tax liabilities 15.3 8.6 11.5
Total non-current liabilities 633.0 593.2 649.0
Interest-bearing loans and borrowings 24.0 39.7 99.5
Trade and other payables 283.8 303.2 247.2
Income tax payable 13.4 11.6 15.8
Provisions 13.2 15.1 17.5
Other financial liabilities 0.2 - -
Total current liabilities 334.6 369.6 380.0
Total liabilities 967.6 962.8 1,029.0
Total equity and liabilities 1,435.1 1,405.9 1,499.1
Net debt
Interest-bearing loans and
borrowings - non current 370.3 326.1 334.0
- current 24.0 39.7 99.5
Cash and cash equivalents (31.5) (44.0) (31.5)
Net debt 362.8 321.8 402.0
Group Statement of Recognised Income and Expenses
For the six months ended 30 June 2005
Half year Half year Full year
2005 GBPm 2004 GBPm 2004 GBPm
Opening Group reserves adjustment (note 1) 19.2 - -
Foreign exchange translation differences 8.1 (23.5) (12.0)
Actuarial loss on employee benefit schemes (21.8) (15.9) (26.8)
Changes in fair value of equity securities available for sale 1.9 - -
Income/(expenses) recognised directly in equity 7.4 (39.4) (38.8)
Profit/(loss) for the period 17.9 10.8 (17.0)
25.3 (28.6) (55.8)
Profit attributable to minority interests (1.8) (2.5) (4.1)
Foreign exchange translation differences attributable to minority interests (0.4) 0.5 1.1
(2.2) (2.0) (3.0)
>
Total recognised income and expenses attributable to parent company equity shareholders 23.1 (30.6) (58.8)
Group Reconciliation of Movements in Equity
For the six months ended 30 June 2005
Total equity
attributable
Issued to parent
share Share company Minority Total
capital premium Reserves equity holders interest equity
GBPm GBPm GBPm GBPm GBPm GBPm
Total equity as at 1 January 2004 375.4 642.6 (530.9) 487.1 11.8 498.9
Movements for the period:
Total net recognised losses relating to the
period - - (30.6) (30.6) 2.0 (28.6)
New share capital issued - 0.8 - 0.8 - 0.8
Share-based payments - - 1.1 1.1 - 1.1
Dividends paid to minority interests - - - - (2.1) (2.1)
- 0.8 (29.5) (28.7) (0.1) (28.8)
Total equity as at 30 June 2004 375.4 643.4 (560.4) 458.4 11.7 470.1
Total equity as at 1 January 2004 375.4 642.6 (530.9) 487.1 11.8 498.9
Movements for the period:
Total net recognised losses relating to the
period - - (58.8) (58.8) 3.0 (55.8)
New share capital issued 0.1 0.8 - 0.9 - 0.9
Share-based payments - - 2.2 2.2 - 2.2
Dividends paid to minority interests - - - - (3.1) (3.1)
0.1 0.8 (56.6) (55.7) (0.1) (55.8)
Total equity as at 31 December 2004 375.5 643.4 (587.5) 431.4 11.7 443.1
Total equity as at 1 January 2005 375.5 643.4 (587.5) 431.4 11.7 443.1
Movements for the period:
Total net recognised gains relating to the
period - - 23.1 23.1 2.2 25.3
New share capital issued - 0.4 - 0.4 - 0.4
Share-based payments - - 1.3 1.3 - 1.3
Dividends paid to minority interests - - - - (2.6) (2.6)
- 0.4 24.4 24.8 (0.4) 24.4
Total equity as at 30 June 2005 375.5 643.8 (563.1) 456.2 11.3 467.5
Notes to the Accounts
1 Basis of preparation
The consolidated financial statements of Cookson Group plc in respect of the
current period have been prepared on the assumption that all International
Financial Reporting Standards ("IFRSs"), including interpretations issued by the
International Financial Reporting Interpretations Committee and by the
International Accounting Standards Board effective for 2005 reporting, will be
endorsed by the European Commission, notably the amendments made to IAS 19,
"Employee Benefits". Endorsement of all such pronouncements has not occurred as
at the date of the publication of this document. The failure of the European
Commission to endorse all of these standards in time for Cookson's year-end
financial reporting in 2005 could result in the need to change the basis of
accounting or the presentation of certain financial information from that
presented in this document. It is possible, therefore, that further changes will
be required to this information before it is published as comparative
information for the full year 2005.
These financial statements are presented in accordance with International
Accounting Standard ("IAS") 1, "Presentation of Financial Statements". Where no
definitive guidance exists in IAS 1, a UK Generally Accepted Accounting Practice
("UK GAAP") approach has been adopted in order to maintain consistency with
prior years. This format and presentation may require modification in the event
that further guidance is issued, but otherwise the Company believes that the
basis on which these financial statements have been prepared will be sufficient
to enable it to be able to comply fully with IFRS in its annual financial
statements for the year ended 31 December 2005 without further significant
modification to either the format and presentation or the comparative financial
information contained herein.
A comprehensive analysis and explanation of the adjustments made by the Company
to its comparative consolidated financial statements on transition of its
accounting policies to IFRS from UK GAAP, as disclosed in the Company's
statutory annual consolidated accounts for 2004, was announced to the London
Stock Exchange on 22 July 2005. A copy of this announcement can be found on the
Company's website and is obtainable from the Group Secretary at the Company's
registered address.
The financial information presented in this document is unaudited, but has been
reviewed by the Company's auditor.
Opening Group reserves adjustment
A net adjustment to opening Group reserves of GBP19.2m has been made in the
period, the major components being explained below.
As part of its transition to IFRS, the Company has adopted for the purpose of
its consolidated Group accounts, with effect from 1 January 2005: IAS 32,
"Financial Instruments: Disclosure and Presentation"; and IAS 39, "Financial
Instruments: Recognition and Measurement". Comparative figures have not been
amended in connection with these changes of accounting policy, as permitted by
IFRS 1. As a consequence of the adoption of IAS 32 and IAS 39, the Group
accounts must recognise certain financial instruments used in its operations at
fair value. The use of financial instruments to any significant extent is
restricted mainly to the Group's central treasury operations, which uses forward
foreign exchange contracts to convert the currency denomination of debt
instruments; and interest rate swaps to switch debt instruments between fixed
and floating rates of interest. In addition, certain of the Group's
manufacturing operations use commodity forward purchase and sale contracts and
forward foreign exchange contracts to hedge the impact on their trading results
of underlying movements in commodity prices and foreign currency rates.
In accordance with the requirements of IAS 39, the fair value of certain
financial investments at the end of the reporting period is reflected on the
Group balance sheet as either a "financial asset" or "financial liability", with
the corresponding charge or credit being recognised either in the income
statement or through the Group reserves. As the adoption of these standards
represents a change in accounting policy, the impact of the adoption of IAS 39
as at 1 January 2005 has been accounted for as an adjustment to the opening
Group balance sheet. There was no impact to opening Group reserves as a result
of the adoption of these standards, with interest-bearing loans and borrowings
being decreased by GBP1.1m, inventory reduced by GBP1.2m and trade and other
receivables reduced by GBP0.2m.
As a further consequence resulting from the adoption of IAS 32 and IAS 39,
deferred income of GBP22.3m as at 1 January 2005, which was being carried on the
Group balance sheet in respect of the close-out of interest rate swaps in prior
periods, has been credited to opening Group reserves, net of an associated tax
charge. Under UK GAAP this deferred income was being credited to the income
statement over the term of the underlying loan arrangements to which the swaps
had related.
As a consequence of adopting IAS 39, the Group has included within "other
investments" as at 1 January 2005 two equity trade investments at market value
and, accordingly, an opening credit to Group reserves was recognised at 1
January 2005 of GBP2.5m to reflect this change.
Disclosure of significant items
IAS 1 provides no definitive guidance as to the format of the income statement,
but states key lines which should be disclosed. It also encourages additional
line items and the re-ordering of items presented on the face of the income
statement when appropriate for a proper understanding of the entity's financial
performance. In keeping with the spirit of this aspect of IAS 1, Cookson has
adopted a policy of disclosing separately on the face of its income statement
the effect of any components of financial performance considered by management
to be significant and/or for which separate disclosure would assist both in a
better understanding of the financial performance achieved and in making
projections of future results. Materiality and/or the nature and function of the
components of income and expense are considered in deciding upon such
presentation. Such items may include, inter alia, the financial effect of any
profit or loss arising on business disposals, major rationalisation and/or
restructuring activity, profits and losses on sale or impairment of fixed
assets, amortisation and impairment of intangible and other non-current assets
and other items, including the taxation impact of the afore-mentioned items,
which have a significant impact on the Group's results of operations either due
to their size or nature.
On the face of the income statement, "trading profit" is separately disclosed as
a non-GAAP measure, being defined as profit from operations before the costs of
rationalisation of operations, the profit or loss relating to fixed assets and
the amortisation and impairment of intangibles. Management believes that trading
profit is an important measure of the underlying trading performance of the
Group.
2 Segment reporting
As required by IAS 14, the segment analysis of the Group's results by
division/sector separately includes central corporate costs, representing the
central costs of operating as a "plc" which are not directly attributable to
individual segments. Where the Group's central costs are directly attributable
to segment operations, they have been allocated primarily according to the
relative sales contribution of each continuing operating segment to the total.
Inter-segment sales are not material in relation to total Group revenue, whether
analysed by division/sector or by geographic location of operations. The
contribution from acquisitions to revenue and profit from operations in 2005 and
2004 was not material.
Half year Half year Full year
2005 2004 2004
Revenue Profit Revenue Profit Revenue Profit
GBPm from from from
operations operations operations
By Division/sector GBPm GBPm GBPm GBPm GBPm GBPm
Ceramics 367.6 34.4 358.0 27.7 739.5 60.0
Electronics 309.3 20.9 307.8 24.5 625.2 52.8
Assembly Materials 139.0 11.2 134.8 11.0 280.2 24.2
Chemistry 105.1 11.9 106.8 12.8 213.2 27.8
Laminates 65.2 (2.2) 66.2 0.7 131.8 0.8
Precious Metals 117.8 2.7 150.9 3.8 287.8 11.0
Group corporate costs (3.6) (4.1) (8.9)
Trading profit 54.4 51.9 114.9
Rationalisation of operating activities (7.7) (11.0) (22.7)
Amortisation and impairment of intangibles (0.4) (0.4) (0.8)
Profit/(loss) relating to fixed assets 1.6 1.1 (16.8)
Total Group 794.7 47.9 816.7 41.6 1,652.5 74.6
Of the total cost of the rationalisation of operating activities of GBP7.7m
(2004: half year GBP11.0m; full year GBP22.7m), GBP1.1m related to Ceramics
(2004: half year GBP0.3m; full year GBP2.9m), GBP6.0m to Electronics (2004: half
year nil; full year GBP9.9m) and GBP0.6m to Precious Metals (2004: half year
GBP10.7m; full year GBP9.9m). Of the Electronics costs of GBP6.0m, GBP0.6m
related to Assembly Materials (2004: half year nil; full year GBP0.2m), GBP1.5m
to Chemistry (2004: half year nil; full year GBP0.8m) and GBP3.9m to Laminates
(2004: half year nil; full year GBP8.9m).
The total amortisation and impairment of intangibles costs of GBP0.4m (2004:
half year GBP0.4m; full year GBP0.8m), related to the Laminates sector within
Electronics.
Of the total profit relating to fixed assets of GBP1.6m (2004: half year GBP1.1m
profit; full year GBP16.8m loss), nil related to Ceramics (2004: half year nil;
full year nil) GBP2.2m profit to Electronics (2004: half year GBP1.1m; full year
GBP1.1m) nil to Precious Metals (2004: half year nil; full year nil) and GBP0.6m
loss related to Group corporate operations (2004: half year nil; full year
GBP17.9m loss). Of the Electronics profit of GBP2.2m, GBP0.3m related to
Assembly Materials (2004: half year nil; full year nil), nil to Chemistry (half
year GBP1.1m; full year GBP1.1m), and GBP1.9m to Laminates (2004: half year nil;
full year nil).
Half year Half year Full year
2005 2004 2004
By By By
By location of Customer By location of Customer By location of Customer
Group operations location Group operations location Group operations location
Profit Profit Profit
from from from
Revenue operations Revenue Revenue operations Revenue Revenue operations Revenue
Geographical GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Europe 305.4 18.1 277.0 327.7 14.9 305.9 643.1 37.3 595.5
NAFTA 290.1 8.6 280.7 310.3 10.5 298.6 623.9 21.5 599.9
Asia-Pacific 163.6 24.6 186.5 148.0 23.8 167.9 315.9 49.8 366.0
Rest of the World 35.6 3.1 50.5 30.7 2.7 44.3 69.6 6.3 91.1
Trading profit 54.4 51.9 114.9
Rationalisation of operating
activities (7.7) (11.0) (22.7)
Amortisation and impairment
of intangibles (0.4) (0.4) (0.8)
Profit/(loss) relating to
fixed assets 1.6 1.1 (16.8)
Total Group 794.7 47.9 794.7 816.7 41.6 816.7 1,652.5 74.6 1,652.5
Of the total cost of the rationalisation of operating activities of GBP7.7m
(2004: half year GBP11.0m; full year GBP22.7m), GBP5.3m was in Europe (2004:
half year GBP10.7m; full year GBP16.7m), GBP1.9m in NAFTA (2004: half year
GBP0.3m; full year GBP5.7m), nil in Asia-Pacific (2004: half year nil; full year
GBP0.3m) and GBP0.5m in the Rest of the World (2004: half year nil; full year
nil).
The total amortisation and impairment of intangibles costs of GBP0.4m (2004:
half year GBP0.4m; full year GBP0.8m) was within NAFTA.
Of the total profit relating to fixed assets of GBP1.6m (2004: half year
GBP1.1m; full year GBP16.8m loss), GBP1.4m was in Europe (2004: half year nil;
full year nil), GBP0.2m in NAFTA (2004: half year nil; full year GBP17.9m loss),
and nil in Asia-Pacific (2004: half year GBP1.1m; full year GBP1.1m profit).
3 Rationalisation of operating activities
The rationalisation of operating activities charge of GBP7.7m in the first half
of 2005 represents the cost of a number of initiatives throughout the Group
aimed at reducing the Group's cost base and re-aligning its manufacturing
capacity. Cash costs of GBP8.1m were incurred in the first half of 2005 in
respect of the rationalisation and redundancy initiatives commenced both this
year and in prior periods.
Of the GBP11.0m charge incurred in the first half of 2004, GBP10.7m related to a
programme to rationalise the Precious Metals division's French activities. Under
a Social Plan, the programme encompasses the closure of 5 manufacturing and
distribution sites, a headcount reduction of 150 and the realignment of the
division's manufacturing capacity in Europe.
4 Finance income and costs
Disclosed separately on the face of the income statement as financial income for
the half year 2004 is GBP2.7m (2004: full year GBP5.4m) in respect of deferred
income relating to interest rate swaps close-out in prior years. As stated in
note 1, on adoption of IAS 39 with effect from 1 January 2005, the remaining
such deferred income on the Group balance sheet was credited to opening Group
reserves.
Disclosed separately on the face of the income statement as financial costs is
GBP1.2m (2004: nil for half year and full year) relating to the write-off of
unamortised fees associated with the Company's GBP148m multicurrency revolving
credit facility, which was replaced by a new GBP200m facility as announced on 1
March 2005.
5 Profit/(loss) on disposal of operations
The net profit on disposal of operations of GBP1.1m in the first half of 2005
related mainly to the disposal of the Group's Technical Ceramics business,
formerly a part of the Ceramics division. The net loss in the first half of 2004
was GBP5.5m, of which GBP5.3m related to the winding-up of the Laminates
sector's joint venture with Fukuda. The net loss for the full year 2004 of
GBP37.5m also included the sale of the Ceramics division's loss-making European
silica-zinc brick business at a loss of GBP33.2m.
6 Income tax
The total charge for income tax of GBP15.4m for the first half of 2005 (2004:
half year GBP13.3m; full year GBP29.6m) includes "other income tax costs" which
comprises a charge of GBP1.6m in respect of the profit arising on disposal of
operations (2004: half year nil; full year GBP2.6m credit) and a charge relating
to deferred tax on goodwill of GBP1.9m (2004: half year GBP2.1m; full year
GBP4.1m), representing a charge arising from the fact that goodwill for Group
accounts purposes is no longer amortised, although amortisation charges are
still allowed as a deduction for tax purposes in certain jurisdictions in which
Cookson operates. The comparative figures for the full year 2004 also include as
"other income tax costs" a charge in respect of the net write-off of tax assets
and provisions of GBP4.8m (2004: half year nil) and a credit related to
rationalisation costs of GBP1.0m (2004: half year GBP0.1m).
7 Earnings per share
Basic earnings per share are calculated using a weighted average of 188.5m
ordinary shares in issue during the period (2004: half year 188.4m; full year
188.3m). The ordinary shares held by the Group's Employee Share Ownership Plan
("ESOP") have been excluded from the weighted average number of shares, as these
shares are held within retained earnings. The ESOP held 1.2m ordinary shares as
at 30 June 2005 (2004: half year 1.2m; full year 1.2m). Diluted earnings per
share are calculated assuming conversion of outstanding dilutive share options.
These adjustments give rise to an increase in average ordinary shares of 4.3m
(2004: half year: 5.7m; full year 5.8m). The number of ordinary shares in issue
as at 30 June 2005 was 189.7m (2004: half year 189.5m; full year 189.5m).
On the face of the Group income statement, both earnings per share and headline
earnings per share are shown, together with the calculation of the latter
measure. The Directors believe that the non-GAAP measure of headline earnings
per share, gives the most appropriate measure of the underlying earning capacity
of the Group.
8 Intangible assets
As at 30 June 2005, total intangible assets of GBP497.0m (2004: 30 June
GBP503.5m; 31 December GBP485.2m) comprises goodwill of GBP490.1m (2004: 30 June
GBP495.8m; 31 December GBP478.3m) and other intangible assets of GBP6.9m (2004:
30 June GBP7.7m; 31 December GBP6.9m). Goodwill is carried unamortised, but is
subject to annual review for impairment. No impairment charge was made in either
the current or comparative periods. The other intangible assets balance relates
to a perpetual licensing agreement in the USA which is being amortised over its
estimated 10 year useful life.
9 Other investments
Other investments of GBP13.8m as at 30 June 2005 comprise mainly equity
securities available for sale of GBP5.7m (2004: 30 June nil; 31 December nil)
and GBP3.3m (2004: 30 June GBP21.4m; 31 December GBP3.1m) in respect of a
20-year revenue-sharing arrangement with Electric Lightwave, Inc. related to a
fibre optic cable network in the USA, for which an impairment write-down of
GBP17.9m was recognised at 31 December 2004. Other investments at 30 June 2004
included GBP6.8m (2004: 31 December: GBP6.4m) in respect of monies held in Rabbi
Trusts in the USA which are held to fund certain of the Group's US pension
liabilities. These assets are not recognised by IAS 19 as being pension assets.
On 1 January 2005, the Group adopted IAS 32 and IAS 39, and as such GBP7.5m in
respect of monies held in Rabbi Trusts have been disclosed within other
financial assets as at 30 June 2005 and held at fair value.
10 Other financial assets
As described in note 9 above, with the adoption of IAS 32 and IAS 39 in the
current period GBP7.5m in respect of monies held in Rabbi Trusts have been
disclosed within other financial assets as at 30 June 2005. In addition, GBP5.9m
of derivative financial instruments yet to mature as at the end of the reporting
period are reflected on the Group balance sheet as financial assets in
accordance with the requirements of IAS 39.
11 Issued capital
At the Company's Annual General Meeting held on 26 May 2005, shareholders
approved a share consolidation. The share consolidation took effect following
the close of business on 26 May 2005, with shareholders receiving one new
ordinary share of 10p each for every 10 existing ordinary shares of 1p each held
at the close of business on 26 May 2005. Trading in the new ordinary shares of
10p commenced on 27 May 2005.
12 Employee benefits
The balance of GBP213.6m in respect of "Employee benefits" as at 30 June 2005
results from an interim actuarial valuation of the Group's defined benefit
pension and other post-retirement obligations as at that date (2004: 30 June
GBP188.8m; 31 December GBP189.9m). Of the total as at 30 June 2005, GBP166.8m
relates to the combined deficits of the Group's principal defined pension
schemes in the UK and the USA (2004: 30 June GBP144.1m; 31 December GBP146.2m).
Of the balance of the total as at 30 June 2005, GBP12.7m relates to pension
arrangements in the rest of the world and GBP34.1m relates to
unfunded post-retirement benefit arrangements, being mainly healthcare
benefit arrangements in the USA.
The valuation at 30 June 2005 represents a "roll-forward" from the date of the
last full individual scheme valuations, which was 31 December 2003 in the case
of the UK pension scheme and 31 December 2004 for the US pension schemes. For
the UK and US pension schemes, the principal component of the increase in the
combined valuation deficit from 31 December 2004 to 30 June 2005 of GBP20.6m
resulted from a change in actuarial assumptions, namely a reduction in discount
rates, which alone represented a GBP20.8m addition to the combined scheme
liabilities. For valuation purposes, the discount rates used were 5.0% for the
UK (December 2004: 5.25%) and 5.25% for the USA (December 2004: 5.75%).
The total charge to the income statement for the first half of 2005 in respect
of the Group's defined benefit pension and other post-retirement obligations was
GBP7.9m (2004: half year GBP8.0m; full year GBP15.6m). 13 Exchange rates
The principal exchange rates used for the period were as follows:
At 30 June At 30 June At 31 Dec
2005 2004 2004
Average rate GBPm GBPm GBPm
US dollar ($ per GBP) 1.87 1.82 1.83
Euro (EUR per GBP) 1.46 1.48 1.48
Singapore dollar (S$ per GBP) 3.09 3.10 3.09
Hong Kong dollar (HK$ per GBP) 14.61 14.19 14.25
Japanese yen (YEN per GBP) 199 197 198
Chinese Renminbi (RMB per GBP) 15.51 15.07 15.08
Period end rate
US dollar ($ per GBP) 1.83 1.83 1.92
Euro (EUR per GBP) 1.50 1.50 1.41
Singapore dollar (S$ per GBP) 3.06 3.13 3.15
Hong Kong dollar (HK$ per GBP) 14.19 14.26 14.94
Japanese yen (YEN per GBP) 200 197 198
Chinese Renminbi (RMB per GBP) 15.11 15.14 15.90
14 Financial information
The interim financial statements have been prepared on the basis of the
accounting policies adopted in the Group's audited statutory accounts for 2004
except as stated in note 1. The interim accounts were approved by the Board of
Directors on 26 July 2005. The financial information for the six month periods
ended 30 June 2005 and 30 June 2004 is unaudited but has been reviewed by the
Company's auditor. The comparative figures for the financial year ended 31
December 2004 are not the Company's statutory accounts for that financial year.
Those accounts, which were prepared under UK GAAP, 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.
SIGNATURE
Cookson Group plc
By:________________
Rachel Fell
Assistant Company Secretary
Date: 26 July 2005