Financial results for the first half of 2004 GOOD TRADING PERFORMANCE IN FIRST HALF OF 2004 SALES OF € 846 MILLION, A LIKE-FOR-LIKE INCREASE OF 8.5% OPERATING INCOME UP 20.8% ON A LIKE-FOR-LIKE BASIS, TO € 107 MILLION GROUP SHARE OF NET CURRENT PROFIT € 58 MILLION (€ 0.64 PER SHARE), UP 88% INCLUDING POSITIVE IMPACT OF REALISED AND UNREALISED EXCHANGE GAINS COMPARED WITH 2003
SUMMARY CONSOLIDATED ACCOUNTS
COMMENTS Profit and loss account
SUMMARY PROFIT AND LOSS ACCOUNT (€ million)
First half 2004
Turnover 846 Operating result 107 % of turnover 12.6% Financial result: (18) Interest charges (24) Other Financial Income/(Charges) 6 Goodwill amortisation (18) Extraordinary result (2) Taxes (29) Profit from equity interests 0 Net profit 40 attributable to : - Minority interests 1 - Group 39
First half 2003 820 89 10.9% (34) (30) (4) (18) (1) (24) 0 12 1 11
Inc Full year /(Dec) 2003 26 18 16 6 10
1.612 179 11.1% (59) (53)
28
(6) (37) (2) (37) 1 45
28
2 43
(1) (5)
The Group's turnover in the first six months of 2004 was € 846 million, an overall increase of 3.2% compared to the first half of 2003. At constant exchange rates and excluding the effect of changes in the consolidation scope, the increase in sales was 8.5%. Changes in the scope of consolidation reduced turnover by 3.6%, principally through the absence of any sales contribution from businesses sold in 2003, offset by the consolidation from 1 January 2004 of the German subsidiary Wefa Plastics (a manufacturer of products for hot & cold water supply). Adverse exchange rate movements further reduced turnover by 1.7% in total, with the Canadian dollar weaker by 2.5% and the US dollar weaker by 11%, partially compensated by a 3% strengthening of sterling and stronger Australian and New Zealand dollars. The operating result was € 107 million, an increase of 19.7% compared with the first half of 2003. At constant exchange rates and excluding the effect of changes in the consolidation scope, the increase in the operating result was 20.8%, with changes in the scope of consolidation reducing the increase by 0.9% and adverse exchange rate movements further reducing the increase by 0.2%. The main driver of growth during the first half of 2004 was North America, where business activity levels were strong and sales increased by over 15% on a like-for-like basis compared with the same period of 2003, and at higher margins despite the continuing unfavourable trend in the Canadian / US dollar exchange rate. Activity in the Group's European markets also improved, although the improvement was more variable, with good growth in Central & Eastern Europe and the Benelux countries but a more moderate growth rate in some Western European markets such as the UK, France, Spain and Italy. Overall, profit margins in Europe were maintained, although there was some pressure on margins in building products in the face of rising raw material prices. Trading in Australasia, South Africa and Asia also improved markedly during the period. The financial result in the period was a charge of € 18 million (2003: € 34 million), including interest charges of € 23 million (2003: € 26 million) and the amortisation of arrangement fees of € 1 million (2003: € 4 million). The remaining financial income of € 6 million (2003:
Net current profit, Group share Net current cash flow, Group share
58
31
27
80
92
66
26
148
€ per share, Group share Net current profit Net current cash flow
charge of € 4 million) largely represents realised and unrealised exchange gains and losses arising on assets and liabilities held in local currencies. The goodwill amortisation charge for the period was € 18 million, the same as for the first half of 2003. The extraordinary result, a charge of € 2 million (2003: charge of € 1 million) largely reflects a net loss on the disposal of a non-core business activity in Switzerland during the period.
0.64 1.01
0.34 0.72
88.2% 40.3%
0.89 1.63
Taxes amounted to a charge of € 29 million (2003: € 24 million), representing an effective tax rate of 33% (2003: 44%). The effective tax rate for the whole of 2003 was 31%, which more accurately reflects the tax impact on the Group in a full year. The Group share of net profit for the period was € 39 million (2003: € 11 million). The Group share of net current profit and net current cash flow was € 58 million (2003: € 31 million), representing € 0.64 per share (2003: €
SUMMARY BALANCE SHEET (€ million)
June 2004
Dec. 2003
0.34 per share) and € 92 million (2003: € 66 million), representing € 1.01 per share (2003: € 0.72 per share) respectively.
Intangible Fixed Assets Goodwill Tangible Fixed Assets Financial Fixed Assets Total Fixed Assets Non-Cash Working Capital
12 506 504 42 1,064 428
12 524 505 46 1,087 313
Balance sheet
TOTAL
1,492
1,400
581
546
570 11 137 774
536 10 134 720
1,492
1,400
Capital and Reserves attributable to: - Group - Minority Interests Provisions and deferred taxation Net debt TOTAL
Goodwill decreased by € 18 million during the first half of 2004 as a result of the amortisation charge for the period of the same amount. Tangible fixed assets decreased by € 1 million compared with 31 December 2003. This small decrease was mainly due to the level of capital expenditure during the six-month period (€ 27 million) being lower than the depreciation charge (€ 34 million), offset by the impact of exchange rate movements. Non-Cash Working Capital increased by € 115 million compared with 31 December 2003. At constant exchange rates, and excluding the effect of changes in consolidation scope, the increase was € 110 million, and reflects the normal seasonal pattern of trading which results in a high level of trade receivables at the end of the second quarter of each year. In comparison with 30 June 2003, the level of working capital was lower by € 45 million (9.5%) despite the higher level of sales in the first half of 2004. The Group share of Capital and Reserves increased by € 34 million during the six-month period, representing the Group share of net profit for the period (€ 39 million), reduced by € 5 million of translation differences. Net debt at 30 June 2004 was € 774 million compared with € 720 million at 31 December 2003. The increase in net debt results principally from the seasonal increase in working capital and capital expenditure during the period, offset by cash generated from operations.
The unaudited consolidated accounts for the first half of the year 2004 were presented to the Board of Directors at its meeting held on 22 September 2004.
PROSPECTS FOR THE SECOND HALF OF 2004 No major changes in the economic environment in the Group's key markets are expected in the second half of 2004, although trading conditi-
Contact: Yv e s M e r t e n s ( G ro u p F i n a n c e D i re c t o r ) Don Bailey (Group Corporate Development Manager) Te l . 3 2 - 2 - 7 7 5 5 0 5 0 - F a x . 3 2 - 2 - 7 7 5 5 0 5 1 aliaxis@aliaxis.com
ons in North America are likely to stabilise after the strong first half. The majority of European markets are expected to continue their slow improvement. Despite the challenge posed by higher raw material prices and their potential impact on margins, trading in the second half should continue to be satisfactory although not as good as in the first half. The Group's focus will continue to be on internal cash generation through margin enhancement and control of working capital.