This excerpt taken from the ICI 6-K filed Mar 14, 2006.
Group operating performance
In the following review, references to as reported performance include the effects of currency translation, acquisitions and divestments. References to comparable performance exclude the effect of currency translation differences and the impact of acquisitions and divestments. Reconciliations between comparable and as reported performance and between operating profit and trading profit can be found on pages 26 and 27. A more detailed explanation of comparable performance appears on page 156. ICIs reporting segments are defined on page 157.
National Starch delivered 5% comparable sales growth for the year, Paints 6%, Quest 3% and Regional and Industrial 17%, but Uniqema was 1% below last year. There was strong growth of comparable sales for the International Businesses in both Asia of 11% and Latin America of 15%. Comparable sales in North America were up 3% and, in more difficult economic conditions, comparable sales in Europe were 1% ahead.
After special items of £34m, discussed below, Group operating profit was £584m (2004 £532m).
On a comparable basis, all businesses with the exception of Regional and Industrial delivered growth in trading profit, notably Quest, which was strongly ahead of 2004 (+28%). National Starch was 5% ahead, and both Paints and Uniqema were 6% up. Regional and Industrial was 2% lower.
Net finance expense
Profit before tax
Gains on special items in operating profit of £34m related to a £40m benefit associated with changes to the terms of the Noblesse pension and post-retirement healthcare schemes in the Netherlands, and £7m profit on disposal of fixed assets, partly offset by £13m of costs associated with restructuring programmes. Delivery of cost savings from the restructuring initiatives first announced in 2003 remained on track, and at the half year, it was announced that the full benefit delivery was expected with cash expenditure of £11m less than previously indicated. Consequently, the £11m will be used to extend the restructuring programme further, to deliver total expected benefits of £140m in 2007, £13m higher than for the original programme.
The cumulative charge to the income statement for the programme to the end of 2005 was £222m; further charges of £9m are expected in 2006. The cumulative cash expenditure on the programme at the end of 2005 was £142m. The remaining cash spend is also expected to be incurred primarily in 2006. The extended programme delivered £106m of cost benefit in 2005; headcount across the Group was around 2,100 lower than at the start of the programme.
The £20m profit on sale of operations for the year included gains arising on the disposal of the Zweihorn wood finish business in Germany and the Vinamul Polymers business and a loss on the disposal of 51% of the Regional and Industrial rubber chemicals business in India. Other items related to divested businesses, including increases in provisions relating to environmental and pension administration costs, the release
of provisions following a land transaction in the north of England and changes to post-retirement healthcare plans in the US.
In 2004, the profit on sale of operations (£175m) related mainly to the gain on the sale of the Quest Food Ingredients business.
Earnings per share
Dividend and dividend policy
The Board continues to believe that this approach is appropriate, and therefore confirms that, following the introduction of IFRS, ICIs continued intent will be to grow dividends at about the same rate as the growth in net profit before special items attributable to equity holders of the parent. Consequently, the Board has declared a second interim dividend per £1 Ordinary Share of 3.95p (2004 3.90p), to bring the total dividend for 2005 to 7.70p (2004 7.30p), reflecting the 5% growth in net profit before special items attributable to the equity holders of the parent.
After a relatively poor start to the year, working capital management improved in the second half and a significant element of the cash inflow was delivered through improved inventory management and effective control of debtors and creditors.
Cash outflows in relation to special items of £53m were £28m lower than in 2004 as elements of the restructuring programme reached completion. Despite higher cash outflows in relation to tax and dividend payments, net cash from operating activities for the year was an inflow of £359m, £32m higher than last year.
Cash flow before acquisitions and divestments
Movement in net debt