RNS Number:1103C
Chemetall PLC
27 April 2006
Chemetall PLC
Report and financial statements
31 December 2005
Company Registration No. 252864
Chemetall PLC
Report and financial statements page 1
Officers and professional advisers 2
Chairman's report 3
Directors' report 4
Statement of directors' responsibilities 7
Independent auditors' report - group 8
Consolidated income statement 10
Consolidated statement of recognised income and expense 11
Consolidated balance sheet 12
Consolidated cash flow statement 14
Notes to the accounts 15
Independent auditors' report - company 45
Company balance sheet 46
Notes to the company accounts 47
Chemetall PLC
Report and financial statements 2005
Officers and professional advisers page 2
Directors
Alec Daly CBE non-executive (age 68) became Chairman in 1996. He was appointed a
Director of the Company on 1 March 1993. He resigned on 19 April 2005.
Kurt Wenzel (age 56) was appointed as Chairman on 19 April 2005
Matthias Stoermer (age 41). Appointed on 12 August 2004.
Bill Jessup (age 53) He was appointed on 8 March 1994 and became a non-executive
director on 1 October 2000. He resigned on 19 April 2005.
Per Vannerberg (age 44). Appointed on 2 January 2006.
Michael Watson (age 51). Appointed on 1 January 2004. He resigned on 2 January
2006.
Rob Rydings (age 52). Appointed on 2 January 2006.
Secretary
Bill Jessup resigned on 19 April 2005
Rob Rydings appointed on 19 April 2005
Registered Office
65 Denbigh Road
Bletchley
Milton Keynes MK1 1PB
Stockbrokers
Cazenove & Co.
12 Tokenhouse Yard
London EC2R 7AN
Principal Bankers
Barclays Bank PLC
Eagle Point
1 Capability Green
Luton LU1 3US
Registrars
Capita IRG
34 Beckenham Road
Beckenham
Kent BR3 4TU
Solicitors
Baker & McKenzie
100 New Bridge Street
London EC4V 6JA
Auditors
Deloitte & Touche LLP
Chartered Accountants
St Albans
Chemetall PLC
Chairman's report page 3
Despite the continued challenging trading conditions in the UK manufacturing
sector, Chemetall PLC was able to grow its third party sales during 2005.
Particularly pleasing was the growth in aerospace business and also the coil
business. The Middle East markets achieved their ambitious sales plan and new
business in the export sector gives cause for optimism.
Results and dividends
During the year the Group generated a profit on ordinary activities before
taxation of #1.2 million (2004: #1.0 million) with a turnover of #17.3 million
(2004: #13.9 million).
The Group's loan assets, including any exchange movements and interest accrued
thereon, totalled #40.9 million at 31 December 2005 (31 December 2004: #82.8
million).
Preference dividends continue to be paid on the normal due dates.
Board
There have been a few changes in the board during the year. Alec Daly and Bill
Jessup after many years with the group decided it was time to resign and I was
appointed Chairman in April 2005. Due to reorganisation within the parent group,
Chemetall GmbH, Mike Watson was promoted in January 2006 and therefore resigned
as a director of Chemetall PLC and Per Vannerberg was appointed as Managing
Director . Rob Rydings replaced Bill Jessup as Secretary in April 2005 and was
appointed to the board in January 2006. I would like to thank Alec Daly, Bill
Jessup and Mike Watson for their strong input over the years.
Employees
On behalf of the board I would like to thank our employees for their continuing
commitment to our business. Chemetall PLC continues to invest in both internal
and external training and development of all employees. The company has
maintained its Investors in People registration.
Outlook
We are confident that the third party sales growth trend will continue through
to 2006 with significant new business opportunities, particularly in the
automotive and aerospace sectors. Price increases will be necessary to maintain
profit margins that have come under pressure as the company suffers the impact
of significant key raw material price increases.
Kurt Wenzel
Chairman
Chemetall PLC
Directors' report page 4
The directors present their annual report and the audited financial statements
for the year ended 31 December 2005.
Activities
The principal activities of the Group are the development, manufacture and
marketing of specialised industrial chemicals. A review of the year's operations
and significant financial aspects of the year's trading, together with an
indication of the Group's future prospects, are included in the Chairman's
report.
The result for the year and the state of affairs of the Group are shown in the
accounts and related notes.
Dividends
No ordinary dividends were paid during the period (31 December 2004: #nil).
Preference dividends of #1,080,000 (31 December 2004: #1,080,000) were payable
in the period.
Acquisition of company's own preference shares
At the end of the year, the directors had the authority to purchase through the
market, by tender or by private treaty, at any time the preference shares of the
company. The price shall not exceed the average of the middle market quotation
during the period of ten business days immediately prior to the purchase, or at
the market price provided it is not more than 5% higher than the aforementioned
average price.
The distributable reserves of the company are sufficient to pay the preference
dividends.
Policy and practice on payment of creditors
The Group has adopted the Confederation of British Industry Code of Practice
regarding the payment of suppliers and has a clear and consistent policy to
ensure that it honours all its contractual payment terms to suppliers and
liaises with suppliers without delay when invoices, or parts of invoices are
contested so that a reasonable settlement can be negotiated. Details of the Code
of Practice and the Group's policy can be obtained from the Company Secretary at
the Company's registered office.
At the year end there were 48 days' (31 December 2004: 40 days') purchases in
trade creditors.
Directors and their interests
The directors who held office during the year were as follows:
A Daly CBE Resigned 19 April 2005
W Jessup Resigned 19 April 2005
MJ Watson Appointed 1 January 2004
MW Stoermer Appointed 12 August 2004
K Wenzel Appointed 19 April 2005
The directors of the Company are covered by Directors' and Officers' Liability
insurance.
None of the directors who held office at the end of the financial year had any
disclosable interest in the shares and debentures of Group companies (31
December 2004: nil).
Chemetall PLC
Directors' report page 5
Employees
It is the Group's policy not to discriminate against the disabled or racial
minorities in recruitment, career development and promotion.
There is close consultation between management and other employees on matters of
concern. The Group has, over a period of years, established various ways of
providing information to its people by the use of regular newsletters and the
provision of copies of the annual report and accounts.
Political and charitable contributions
The Group made no political contributions during the period. Donations to UK
charities amounted to #318 (31 December 2004: #470).
ISO accreditation
Chemetall PLC has achieved accreditation to ISO 14001-2004 the world recognised
environmental management system, continuing the process started in 1996. During
2005 Chemetall PLC received their permit from the Environment Agency under IPPC
(integrated Pollution, Prevention and Control) regulation. In 2004 Chemetall PLC
was accredited to the new automotive industry standard TS16949.
Taxation
The Group's tax charge on profit is #0.7 million, representing an effective rate
of 57.3%. The effective rate is higher than the UK corporation tax rate of 30%
mainly due to adjustments and deductions relating to prior years. Details of the
tax charge are given in note 9. #6.3 million of tax credits associated with
prior year's tax losses continue not to be recognised as indicated in note 17.
Treasury Policies
The Group's treasury policies, which are approved by the board, seek to
eliminate risk from currency movements affecting sales and purchases denominated
in foreign currencies. We use instruments such as forward currency sale or
purchase contracts where practical and cost effective.
Where appropriate, the Group's financial systems are able to transact business
denominated in foreign currencies.
No forward contracts were used in the year, and the year end exposure is nil.
Accounting changes
The Group has adopted International Financial Reporting Standards (IFRS) for the
year ended 31 December 2005.
The restated financial information for the year ended 31 December 2004 and the
financial information for the year ended 31 December 2005 have been prepared in
accordance with International Financial Reporting Standards (IFRS), adopted for
use in the European Union.
Exemption from Corporate Governance disclosures
As the Group has only debt securities listed on the London Stock Exchange, it
has availed itself of an exemption from the financial services authority's
requirement to make corporate governance disclosures and from auditor review
thereof.
Chemetall PLC
Directors' report page 6
Auditors
Deloitte & Touche LLP have expressed their willingness to continue in office as
auditors and a resolution to reappoint them will be proposed at the forthcoming
Annual General Meeting.
Approved by the Board of Directors
and signed on behalf of the Board
Rob Rydings
Director
26.04.2006
Chemetall PLC
Statement of directors' responsibilities page 7
The directors are responsible for preparing the Annual Report and the financial
statements. The directors are required to prepare accounts for the group in
accordance with International Financial Reporting Standards (IFRSs) and have
chosen to prepare company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (UK GAAP).
In the case of UK GAAP accounts, the directors are required to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the company and of the profit or loss of the company for that
period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent; and
state whether applicable accounting standards have been followed.
In the case of IFRS accounts, International Accounting Standard 1 requires that
financial statements present fairly for each financial year the company's
financial position, financial performance and cash flows. This requires the
faithful representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria for
assets, liabilities, income and expenses set out in the International Accounting
Standards Board's 'Framework for the Preparation and Presentation of Financial
Statements'. In virtually all circumstances, a fair presentation will be
achieved by compliance with all applicable International Financial Reporting
Standards. Directors are also required to:
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information; and
provide additional disclosures when compliance with the specific requirements in
International Financial Reporting Standards is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on
the entity's financial position and financial performance.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company, for safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities and for the
preparation of a directors' report which complies with the requirements of the
Companies Act 1985.
The directors are responsible for the maintenance and integrity of the company
website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements differs from legislation in other
jurisdictions.
Page 8
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC
We have audited the group financial statements of Chemetall PLC for the year
ended 31 December 2005 which comprise consolidated income statement, the
consolidated statement of recognised income and expenses, the consolidated
balance sheet, the consolidated cash flow statement and the related notes 1 to
30. These group financial statements have been prepared under the accounting
policies set out therein.
We have reported separately on the individual company financial statements of
Chemetall PLC for the year ended 31 December 2005.
This report is made solely to the company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' 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 and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the annual report and the group
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted for use in the European Union
are set out in the statement of directors' responsibilities.
Our responsibility is to audit the group financial statements in accordance with
relevant United Kingdom legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the group financial statements give a
true and fair view in accordance with the relevant financial reporting framework
and whether the group financial statements have been properly prepared in
accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We
report to you if, in our opinion, the directors' report is not consistent with
the group financial statements. We also report to you if we have not received
all the information and explanations we require for our audit, or if information
specified by law regarding directors' transactions with the company and other
members of the group is not disclosed.
We read the directors' report and the other information contained in the annual
report for the above year as described in the contents section and we consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the group financial statements.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the group financial statements. It also includes an assessment of
the significant estimates and judgements made by the directors in the
preparation of the group financial statements, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the group financial
statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the group financial statements.
Page 9
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC (continued)
Opinion
In our opinion:
the group financial statements give a true and fair view, in accordance with
IFRSs as adopted for use in the European Union, of the state of the group's
affairs as at 31 December 2005 and of its profit for the year then ended;
the group financial statements have been properly prepared in accordance with
the Companies Act 1985 and Article 4 of the IAS Regulation; and
As explained in Note 1 of the group financial statements, the group, in addition
to complying with its legal obligation to comply with IFRSs as adopted for use
in the European Union, has also complied with the IFRSs as issued by the
International Accounting Standards Board. Accordingly, in our opinion the
financial statements give a true and fair view, in accordance with IFRSs, of the
state of the group's affairs as at 31 December 2005 and of its profit for the
year then ended.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
St Albans, United Kingdom
26.04.06
Notes: An audit does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial statements since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of
financial statements differs from legislation in other jurisdictions.
Chemetall PLC
Consolidated income statement
Year ended 31 December 2005 page 10
Note Year ended Year ended
31 December 2005 31 December 2004
#000 #000
Revenue 3 17,299 13,885
Cost of sales (11,079) (7,710)
Gross profit 6,220 6,175
Other operating income - 108
Distribution costs (4,220) (5,397)
Administrative expenses (2,601) (1,605)
Loss from operations 5 (601) (719)
Investment revenue 7 3,062 2,958
Finance costs 8 (1,292) (1,261)
Profit before tax 1,169 978
Tax 9 (670) (430)
Profit for the year 499 548
The results for the current and preceeding financial period are derived from
continuing operations.
Under section 230(A) of the Companies Act 1985 the company is exempt from the
requirement to present its own income statement.
Chemetall PLC
Consolidated statement of recognised income and expense
Year ended 31 December 2005 page 11
Year ended Year ended
31 December 2005 31 December 2004
#000 #000
Exchange differences on
translation of foreign operations (1,103) 47
Actuarial gains/(losses) on
defined benefit pension schemes 335 (2,350)
Tax on items taken directly to
equity (100) 712
Net loss recognised directly in
equity (868) (1,591)
Profit for the year 499 548
Total recognised income and
expense for the year (369) (1,043)
Chemetall PLC
Consolidated balance sheet
31 December 2005 page12
Note 31 December 2005 31 December 2004
#000 #000
Non-current assets
Goodwill 11 2,475 2,475
Other intangible assets 12 413 565
Property, plant and equipment 13 1,250 1,297
Deferred tax assets 17 4,051 3,936
8,189 8,273
Current assets
Inventories 14 1,346 1,124
Trade and other receivables 15 44,319 85,515
Cash and cash equivalents 43,201 300
Tax receivable 17 -
88,883 86,939
Total assets 97,072 95,212
Current liabilities
Trade and other payables 19 (5,718) (4,466)
Tax liabilities (570) (151)
Provisions 20 (241) (286)
(6,529) (4,903)
Net current assets 82,354 82,036
Chemetall PLC
Consolidated balance sheet (continued)
31 December 2005 page 13
Note 31 December 2005 31 December 2004
#000 #000
Non-current liabilities
Interest bearing loans and borrowings 18 (12,000) (12,000)
Retirement benefit obligation 27 (8,709) (8,904)
Long-term provisions 20 (1,142) (344)
(21,851) (21,248)
Net assets 68,692 69,061
Equity
Share capital 21 6,889 6,889
Share premium account 22 29,757 29,757
Translation reserve 24 (1,056) 47
Retained earnings 23 33,102 32,368
Total equity 68,692 69,061
The financial statements were approved by the board of directors and authorised
for issue on 26.04.06.
They were signed on its behalf by:
Rob Rydings
Director
Chemetall PLC
Consolidated cash flow statement
Year ended 31 December 2005 page 14
Note Year ended 31 December Year ended 31 December
2005 2004
#000 #000
Net cash from operating activities 25 (409) (160)
Investing activities
Purchases of property, plant and equipment (172) (164)
Net cash used in investing activities (172) (164)
Financing activities
Interest paid (4) (2)
Interest received 3,062 1,503
Amounts due from group undertakings 41,504 -
Preference dividend paid (1,080) (1,080)
Net cash from financing activities 43,482 421
Net increase in cash and cash equivalents 42,901 97
Cash and cash equivalents at beginning of year 300 203
Cash and cash equivalents at end of year 43,201 300
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 15
1.General information
Chemetall PLC is a company incorporated in the United Kingdom under the
Companies Act 1985. The address of the registered office is given on page 2. The
nature of the group's operations and its principal activities are set out in
note 4 and in the directors' report.
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the group operates.
Foreign operations are included in accordance with the policies set out in note
2.
At the date of authorisation of these financial statements, the following
Standards and Interpretations, which have not been applied in these financial
statements, were in issue but not yet effective:
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures and the related amendments to IAS 1
on capital disclosures
IFRIC 4 Determining whether an Arrangement contains a Lease
IFRIC 5 Right to Interest Arising from Decommissioning, Restoration and
Environmental RehabilitationFunds
IFRIC 6 Liabilities Arising from Participating in a specific market - Waste
electrical and electronic equipment
IFRIC 7 Applying the Restatement approach under IAS 29 Financial Reporting in
Hyper inflationary economies
IFRIC 8 Scope of IFRS 2
IFRIC 9 Reassessment of embedded derivatives
The directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the financial
statements of the company except for additional disclosures on capital and
financial instruments when the relevant standards come into effect for periods
commencing on or after 1 January 2007.
2.Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs), adopted for use in the European Union,
for the first time. The disclosures required by IFRS 1 concerning the transition
from UK GAAP to IFRSs are given in note 30.
The financial statements have been prepared on the historical cost basis, except
for the revaluation of certain financial instruments. The principal accounting
policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 16
2.Significant accounting policies (continued)
the fair values of the identifiable net assets acquired (i.e. discount on
acquisition) is credited to profit and loss in the period of acquisition.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Goodwill
Goodwill is recognised as an asset and reviewed for impairment at least
annually. Any impairment is recognised immediately in profit or loss and is not
subsequently reversed.
Goodwill arising on acquisitions before the date of transition to IFRSs has been
retained at the previous UK GAAP amounts subject to being tested for impairment
at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has
not been reinstated and is not included in determining any subsequent profit or
loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales-related
taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Leasing
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight line basis over the lease term.
Foreign currencies
The individual financial statements of each group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purposes of the consolidated financial statements,
the results and financial position of each group company are expressed in pounds
sterling, which is the functional currency of the Company and the presentation
currency for the consolidated financial statements.
Transactions in currencies other than pounds sterling are recorded at the rates
of exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign currencies
are retranslated at the rates prevailing on the balance sheet date. Non-monetary
assets and liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair
value was determined. Gains and losses arising on retranslation are included in
net profit or loss for the period, except for exchange differences arising on
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 17
2.Significant accounting policies (continued)
non-monetary assets and liabilities where the changes in fair value are
recognised directly in equity. Non monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
On consolidation, the assets and liabilities of the group's overseas operations
are translated at exchange rates prevailing on the balance sheet date. Income
and expense items are translated at the average exchange rates for the period
unless exchange rates fluctuate significantly. Exchange differences arising, if
any, are classified as equity and transferred to the group's translation
reserve. Such translation differences are recognised as income or as expenses in
the period in which the operation is disposed of.
Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they are
incurred.
Post-retirement benefits
The Group accounts for pensions and post-retirement benefits under IAS 19
Employee benefits.
For defined benefit plans, obligations are measured at present value, while plan
assets are recorded at fair value. The operating and financing costs of such
plans are recognised in the income statement. Current service costs are spread
systematically over the lives of employees and financing costs are recognised in
the periods in which they arise. Actuarial gains and losses are recognised in
the period in which they arise in the statement of recognised income and
expense.
Inventories
Inventory and work in progress is valued at the lower of cost, including
appropriate overheads, and net realisable value. Provisions are made against
excess and obsolete inventories.
Intangible assets - patents and trademarks and customer contracts
Patents are initially recognised at cost and then amortised in line with the
stated life of the patents, between 1 and 20 years.
Customer contracts are amortised over 2 years.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any provision for impairments in value.
Depreciation is provided to write off cost less the estimated residual value of
property, plant and equipment by equal instalments over their estimated useful
economic lives as follows:
Short leasehold property - life of the lease
Plant, machinery and equipment - 10-33% per annum
Fixtures and fittings - 20% per annum
The directors regularly consider the carrying value of property, plant and
equipment for impairment. Any reduction in value arising from the impairment of
the property, plant and equipment is charged to the income statement for the
year.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any).
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 18
2.Significant accounting policies (continued)
The recoverable amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised as
income immediately, unless the relevant asset is carried at the revalued amount,
in which case the reversal of the impairment loss is treated as a revaluation
increase.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Share capital
Preference share capital is classified as a liability as dividend payments are
not discretionary.
Dividends on the preference shares are disclosed as interest charges and are
accounted for on an accrual basis.
Other dividends are recognised as a liability only in the period in which they
are declared.
Interest
Interest receivable is recognised in the income statement using the effective
interest method as defined in IAS 39 Financial instruments: recognition and
measurement.
Taxation
The tax expense represents the sum of tax currently payable and deferred tax.
Provision for taxation is made at the current rate and for deferred taxation at
the tax rate expected to apply on all temporary differences between the
treatment of certain items for taxation and for accounting purposes.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the group is able to control the reversal of the
temporary difference and it is probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 19
2.Significant accounting policies (continued)
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited to equity, in which case the deferred tax is also dealt with
in equity.
Provisions
A provision is created and recognised as a liability when the Group has a
present obligation (legal or constructive) as a result of a past event and it is
expected that a transfer of economic benefits will be required to settle that
obligation and a reliable estimate of the amount of the transfer can be made.
Vacant leasehold properties
A provision is maintained in respect of vacant leasehold properties to take
account of the net present value of the residual lease commitments over the
remaining term of the lease. In determining the net present value, cash flows
have been discounted using an appropriate nominal, risk free, pre-tax rate of
return.
Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the company's accounting policies, which are
described in Note 2, management has made the following judgements that have the
most significant effect on the amounts recognised in the financial statements.
Stock and Bad debt provisions
The group policy for provisions is noted above.
IFRS transitional arrangements
When preparing the Group's IFRS balance sheet at 1 January 2004, the date of
transition, the following optional exemptions, provided by IFRS 1 First-time
adoption of International Financial Reporting Standards from full retrospective
application of IFRS accounting policies, have been adopted:
Business combinations - the provisions of IFRS 3 have been applied from 1
January 2004. The net carrying value of goodwill at 31 December 2003 under the
previous accounting policies has been deemed to be the cost at 1 January 2004;
Foreign exchange transactions - IAS 21 requires that cumulative translation
differences arising on consolidation of subsidiaries should be held in a
separate reserve. This reserve has been deemed to be nil at 1 January 2004 and
the IAS 21 requirement has been applied prospectively from 1 January 2004.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 20
3.Analysis of revenue
All activities are derived from the development, manufacture and marketing of
specialised industrial chemicals. All revenue recorded represents sale of goods.
4.Business and geographical segments
The primary reporting format is deemed to be business segments. All activities
are derived from the development, manufacture and marketing of specialised
industrial chemicals. As such, the directors deem that there is only one
reportable segment. The secondary reporting format is therefore deemed by the
directors to be geographical segments. No separate geographical segment consists
of more than 10% of total revenue or total assets, therefore no further analysis
of geographical segments is presented.
5.Loss from operations
Loss from operations has been arrived at after charging:
2005 2004
#000 #000
Depreciation of property, plant and equipment 218 310
Amortisation of intangible assets 152 116
Staff costs (see note 6) 4,832 4,898
Auditors' remuneration for audit services 34 -
The audit fee in the prior year was borne by another group company.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 21
6.Staff costs
The average monthly number of employees (including executive directors) analysed
by category was:
2005 2004
Number Number
Specialised industrial chemicals 94 96
#000 #000
Their aggregate remuneration comprised:
Wages and salaries 3,624 3,106
Social security costs 367 341
Other pension costs 841 1,451
4,832 4,898
Remuneration of directors
Year ended 31 Year ended 31
December 2005 December 2004
#000 #000
Wages and salaries 122 126
Social security costs 13 10
Other pension costs 22 20
157 156
Retirement benefits are accruing to one director (31 December 2004:none).
7.Investment Revenue
2005 2004
#000 #000
Interest on loans to group undertakings 1,653 2,957
Interest on cash balances 1,409 1
3,062 2,958
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 22
8.Financial costs
2005 2004
#000 #000
Interest on bank overdrafts 4 10
Dividends on preference shares 1,080 1,080
Retirement benefit net interest cost 208 171
1,292 1,261
9.Tax
2005 2004
#000 #000
Current tax:
UK corporation tax 910 631
Adjustments related to earlier years (24) (204)
886 427
Deferred tax (note 17):
Current year (216) 3
(216) 3
670 430
Corporation tax is calculated at 30% (2004:30%) of the estimated assessable
profit for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The charge for the year can be reconciled to the profit per the income statement
as follows:
2005 2005 2004 2004
#000 % #000 %
Profit before tax 1,169 n/a 978 n/a
Tax at the UK corporation tax rate of
30% (2004: 30%) 351 30 293 30
Tax effect of expenses that are not
deductible in determining taxable profit
(mainly dividend on preference shares) 615 52 346 33
Tax effect of utilisation of items
previously disallowed for tax (272) (23) (24) (2)
Adjustments related to earlier years (24) (1) (185) (20)
Tax expense and effective tax rate for
the year 670 58 430 41
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 23
10.Dividends
The dividend distributed to the equity holders is nil (2004: nil).
The dividend paid at interim to the holders of 9% redeemable preference shares
was #540,000 (2004: #540,000). The final dividend proposed is #540,000(2004:
#540,000). Dividends on the 9% redeemable preference shares are presented as
financial costs in the income statement in accordance with IAS 32 "Presentation
of financial instruments".
11.Goodwill
#000
Cost
At 1 January 2004, 1 January 2005 and 31 December 2005 2,475
No impairment losses have been recognised on the above goodwill balance. The
cost at 1 January 2004 represents the carrying value of goodwill under UK GAAP
which was brought onto the IFRS balance sheet at 1 January 2004 as allowed by
IFRS1 "First time adoption of IFRS" (see note 30). All of the goodwill shown
above relates to a single CGU.
The group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill might be impaired.
The recoverable amounts from the CGU are determined from value in use
calculations. The key assumptions for the value in use calculations are those
regarding the discount rates, growth rates and expected changes to selling
prices and direct costs during the period. Management estimates discount rates
using pre tax rates that reflect current market assessments of the time value of
money and the risks specific to the CGU. The growth rates are based on industry
growth forecasts. Changes in selling process and direct costs are based on past
practices and expectations of future changes in the market.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 24
12. Other intangible assets Customer Patents Total
contracts and
trademarks
#000 #000 #000
Cost
At 1 January 2004 - 1,108 1,108
Additions 250 - 250
At 1 January 2005 250 1,108 1,358
At 31 December 2005 250 1,108 1,358
Amortisation
At 1 January 2004 - 677 677
Charge for the year 10 106 116
At 1 January 2005 10 783 793
Charge for the year 120 32 152
At 31 December 2005 130 815 945
Carrying amount
At 31 December 2005 120 293 413
At 31 December 2004 240 325 565
The amortisation period for customer contracts is 2 years.
Patents and trademarks are amortised over their estimated useful lives, until
expiry of legal rights.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 25
13.Property, plant and equipment
Leasehold Plant and Fixtures Total
improvements machinery and
equipment
#000 #000 #000 #000
Cost
At 1 January 2004 2,357 2,168 770 5,295
Additions 99 56 9 164
At 1 January 2005 2,456 2,224 779 5,459
Additions 25 146 - 171
At 31 December 2005 2,481 2,370 779 5,630
Accumulated depreciation and
impairment
At 1 January 2004 (1,264) (1,872) (716) (3,852)
Charge for the year (153) (109) (48) (310)
At 1 January 2005 (1,417) (1,981) (764) (4,162)
Charge for the year (145) (66) (7) (218)
At 31 December 2005 (1,562) (2,047) (771) (4,380)
Carrying amount
At 31 December 2005 919 323 8 1,250
At 31 December 2004 1,039 243 15 1,297
14.Inventories
31 December 31 December
2005 2004
#000 #000
Raw materials and consumables 355 348
Work in progress 13 32
Finished goods and goods for resale 978 744
1,346 1,124
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 26
15.Trade and other receivables
31 December 31 December
2005 2004
#000 #000
Trade receivable 3,183 2,557
Amounts due from group undertakings 40,857 82,733
Prepayments and accrued income 279 185
44,319 85,515
Amounts due from group undertakings are due on or before 31 December 2006 (2004:
31 December 2005) unless those parties agree to extend the terms.
An allowance has been made for estimated irrecoverable amounts from the sale of
goods of #159,000 (2004: #138,000). This allowance has been determined by
reference to past default experience.
The average credit period taken on sales of goods/services is 60 days (2004: 58
days).
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
16.Other financial assets
Bank balances and cash
Bank balances and cash comprise cash held by the group and short-term bank
deposits with an original maturity of three months or less. The carrying amount
of these assets approximates their fair value.
Credit risk
The group's principal financial assets are bank balances and cash and trade and
other receivables, which represent the group's maximum exposure to credit risk
in relation to financial assets.
The group's credit risk is primarily attributable to its trade and amounts from
group undertakings receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables, estimated by the group's management
based on prior experience and their assessment of the current economic
environment.
The group has no significant concentration of credit risk, with exposure spread
over a large number of customers. Any new customers are subject to credit checks
(in many cases through Dun & Bradstreet credit reports).
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 27
17.Deferred tax
The following are the major deferred tax assets recognised by the group and the
company during the current and prior reporting period.
Accelerated Short term Retirement Tax Total
capital timing benefit losses
allowance differences obligations
#000 #000 #000 #000 #000
Cost or valuation
At 1 January 2004 124 208 1,945 951 3,228
Credit/(charge) to income (9) (15) 21 - (3)
Credit/(charge) to equity - 6 705 - 711
At 1 January 2005 115 199 2,671 951 3,936
Credit/(charge) to income (53) 226 43 - 216
Credit/(charge) to equity - - (101) - (101)
At 31 December 2005 62 425 2,613 951 4,051
At balance sheet date, the group has unused tax losses of #9,447,000 (2004:
#10,353,000) available for offset against future profits. A deferred tax asset
has been recognised in respect of #3,171,000 (2004: #3,171,000) of such losses.
No deferred tax has been recognised in respect of the remaining #6,276,000
(2004: #7,183,000) due to unpredictability of future profit streams.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 28
18.Interest bearing loans and borrowings
31 December 2005 31 December 2004
No. #000 No. #000
Authorised
Non-equity: 9% redeemable preference shares of #1 15,000,000 15,000 15,000,000 15,000
each
Allotted, called up and fully paid
Non equity: 9% redeemable preference shares of #1 12,000,000 12,000 12,000,000 12,000
each
The Company issued 12,000,000 9% redeemable preference shares of #1 each. These
preference shares entitle their holders to a fixed cumulative preference
dividend at a rate of 9% per annum, per share. On a winding up the preference
shareholders are entitled to a sum equal to the nominal capital paid up or
credited as paid up, on the preference shares held by them, together with all
arrears (if any) of the preference dividend. They carry the right to receive
notice of, or attend, or vote at General Meetings only in special circumstances
such as when the preference dividend is six months or more in arrears or if
redemption has not been made on the due date, or in such cases as a winding up
of the Company or a reduction in its share capital. The preference shares have
to be redeemed at par on 3 July 2008. The 9% redeemable preference shares are
presented as non-current liabilities in the balance sheet and the associated
dividend payable as interest expense in the income statement in order to comply
with IAS 32 "Presentation of financial instruments".
19.Other financial liabilities
Trade and other payables
31 December 31 December
2005 2004
#000 #000
Trade creditors 1,181 1,082
Amounts owed to group undertakings 1,977 1,820
Social security - 66
Accruals and deferred income 2,020 958
Preference dividend payable 540 540
5,718 4,466
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
Policy and practice on the payment of creditors is disclosed in the directors
report.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 29
20.Provisions
Vacant Other Total
property provision
provision
#000 #000 #000
Cost
At 1 January 2005 412 218 630
Additional provision 900 - 900
Provision utilised (68) (79) (147)
At 31 December 2005 1,244 139 1,383
31 December 31 December
2005 2004
Included in current
liabilities 241 286
Included in non current
liabilities 1,142 344
1,383 630
The vacant property provision represents management's best estimate of the
Group's liability to take account of the residual lease commitments over the
remaining term of the lease.
21.Share Capital
31 December 2005 31 December 2004
No. #000 No. #000
Authorised
Equity: Ordinary shares of 10p each 91,948,000 9,195 91,948,000 9,195
Issued and fully paid
Equity: Ordinary shares of 10p each 68,888,817 6,889 68,888,817 6,889
The company has one class of ordinary shares which carry no right to fixed
income.
22.Share Premium account
Share premium
#000
29,757
Balance at 1 January 2004, 31 December 2004 and 31 December 2005
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 30
23. Retained Earnings
#000
Balance at 1 January 2004 33,458
Actuarial (loss) on defined benefit pension scheme (1,638)
Net profit for the year 548
Balance at 1 January 2005 32,368
Actuarial gain on defined benefit pension scheme 235
Net profit for the year 499
Balance at 31 December 2005 33,102
24.Translation reserve
#000
Balance at 1 January 2005 47
Exchange difference on translation of overseas operations (1,103)
Balance at 31 December 2005 (1,056)
25.Notes to the cash flow statement
31 31
December December
2005 2004
#000 #000
Profit before taxation 1,169 978
Adjustments for:
Depreciation of property, plant
and equipment 218 310
Amortisation of intangible assets 152 116
Movement in provisions 754 -
Interest income (3,062) (2,958)
Interest expense 1,084 1,090
Operating cash flows before
movements in working capital 315 (464)
Movement in inventories (222) (42)
Movement in receivables (1,813) 579
Movement in payables 1,795 377
Cash generated by operations 75 450
Income taxes paid (484) (610)
Net cash from operating
activities (409) (160)
Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash at bank.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 31
26.Commitments
31 December 31 December
2005 2005
Land and
Buildings Other
#000 #000
Minimum lease payments under operating leases 234 325
recognised in income for the year
At the balance sheet date, the group had outstanding commitments for future
minimum lease payments under non cancellable operating leases, which fall due as
follows:
Within one year 456 262
In the second to fifth years inclusive 1,813 236
After five years 2,795 -
5,064 498
27. Retirement benefit schemes
The Group operates two funded defined benefit schemes which provide for their
liabilities through trustee operated funds.
In July 2004, the remaining active members of the Metallgesellschaft Group
Pension Scheme were transferred to the Chemetall UK Pension Scheme, which
provides benefits based on final pensionable pay, at a cost of #800,000. The
Process Ink Scheme is a closed scheme. The assets of both schemes are held
separately from those of the Group in a trustee administered fund. The trustees
comprise senior group employees and the assets are managed by Legal & General
Assurance (Pensions Management ) Limited. Contributions to the scheme are
charged to the income statement so as to spread the costs of pensions over
employees working lives within the Group.
The Group does not have any health and medical plans providing post-retirement
benefits. The pension costs relating to the Chemetall UK and Process Ink schemes
are assessed in accordance with the advice of Aon Limited, the independent
actuaries, using, in the case of the Chemetall UK scheme, the projected unit
method.
Scheme Last Assumed Average Total Funding
actuarial Investment salary market level value
valuation Return per increase value of of assets as
annum per annum assets percentage of
at latest liabilities*
valuation
dates
Chemetall UK Pension scheme 1 January 2003 6% 4% #14.9m(3) 92%
Process Ink Company Limited
Pension and Death Benefits Plan 1 January 2002 9%(1) 4%(2) #2.9m 102%
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 32
27.Retirement benefit schemes (continued)
(1) The rate of return is assumed to reduce to 8% per annum from each member's
normal retirement age.
(2) This is the assumed rate of revaluation of deferred pensions up to normal
retirement date.
(3) The market value of the assets includes additional voluntary contributions.
The pension increases were assumed to be equal to those specified in the rules
of the schemes. Pension increases in payment in line with retail prices but
capped at 5% were assumed to be 3% per annum (31/2% for the Process Ink Scheme)
and pensions increasing in line with retail prices without a cap were assumed to
be 3% per annum (4% for the Process Ink Scheme).
*For the Chemetall UK scheme, this gives an indication of the extent to which
the actuarial value of the assets secure the benefits that have been accrued to
members allowing for expected future statutory revaluations to deferred
pensions.
The most recent actuarial valuation of plan assets and the present value of the
defined benefit obligation were carried out at 31 December 2004 and updated to
31 December 2005 by AON Consulting.
The estimated amount of contributions expected to be paid to the scheme during
the current financial year is #701,000.
31 December 31 December 31 December 30 September
2005 2004 2003 2002
#000 #000 #000 #000
Rate of increase in salaries
Rate of increase in pensions in 4.5% 4.5% 4.25% 3.75%
payment
- Ex Brent members pre '97 Nil Nil Nil Nil
- Ex Winnets members pre '97 3.0% 3.0% 3.0% 3.0%
- Process directors 8.5% 8.5% 8.5% 8.5%
- All post '97 3.0% 3.0% 2.75% 2.25%
Discount rate 4.75% 5.25% 5.75% 5.75%
Inflation 3.0% 3.0% 2.75% 2.25%
The rates used have been chosen from a range of possible amounts determined
using actuarial assumptions which due to the timescale covered may not
necessarily be borne out in practice.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 33
27.Retirement benefit schemes (continued)
Scheme assets
The fair value of the assets in the schemes (which are not intended to be
realised in the short term and may be subject to significant change) and the
present value of the schemes liabilities (which are derived from cash flow
projections over long periods and thus inherently uncertain) were:
Value at 31 Value at 31 Value at 31
December 2005 December 2004 December 2003
Chemetall Process Chemetall Process Chemetall Process
Ink Ink Ink
#000 #000 #000 #000 #000 #000
Market value of assets 22,014 3,020 19,016 2,777 15,604 2,543
Present value of scheme
liabilities (29,737) (4,006) (27,156) (3,541) (21,520) (3,110)
Deficit in the scheme (7,723) (986) (8,140) (764) (5,916) (567)
Related deferred tax asset 2,317 296 2,442 229 1,775 170
Net pension liability (5,406) (690) (5,698) (535) (4,141) (397)
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 34
27.Retirement benefit schemes (continued)
Operating results and other disclosures
Chemetall Process 31
UK Ink December
Pension Scheme 2005
Scheme Total
#000 #000 #000
Analysis of the amount charged to operating loss
Service cost (567) (10) (577)
Past service cost - - -
Total operating charge (567) (10) (577)
Analysis of the net return:
Expected return on the pension scheme assets 1,231 168 1,399
Interest on pension scheme liabilities (1,420) (187) (1,607)
Net charge (189) (19) (208)
Actuarial gain recognised in the statement
recognised income and expense 540 (205) 335
Changes in the present value of the defined
benefit obligation are as follows:
Opening defined benefit obligation 27,156 3,541 30,697
Service Cost 567 10 577
Interest Cost 1,420 187 1,607
Contributions by members 108 2 110
Actuarial (gains) and losses 1,231 391 1,622
Benefits paid (745) (125) (870)
Closing defined benefit obligation 29,737 4,006 33,743
Changes in the fair value of Scheme assets are as
follows:
Opening fair value of Scheme assets 19,016 2,777 21,793
Expected return 1,231 164 1,395
Actuarial gains and (losses) 1,771 192 1,963
Contributions by employer 633 10 643
Contributions by members 108 2 110
Benefits paid (745) (125) (870)
Closing fair value of Scheme assets 22,014 3,020 25,034
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 35
27.Retirement Pension Schemes (continued)
Operating results and other disclosures
Chemetall Process 31
UK Ink December
Pension Scheme 2004
Scheme Total
#000 #000 #000
Analysis of the amount charged to operating loss:
Service cost (419) (9) (428)
Past service cost - - -
Total operating charge (419) (9) (428)
Analysis of the net return:
Expected return on the pension scheme
assets 1,127 156 1,283
Interest on pension scheme liabilities (1,278) (176) (1,454)
Net charge (151) (20) (171)
Analysis of amount recognised in the statement of
recognised income and expense
Actual return less expected return on assets 1,042 189 1,231
Experience gains and losses on liabilities (168) (36) (204)
Acquisitions (193) - (193)
Changes in assumptions (2,856) (328) (3,184)
Actuarial gain recognised in the statement
of recognised income and expense (2,175) (175) (2,350)
Changes in the present value of the defined
benefit obligation are as follows:
Opening defined benefit obligation 21,520 3,110 24,630
Service Cost 419 9 428
Interest Cost 1,278 176 1,454
Contributions by members 89 2 91
Actuarial (gains) and losses 4,571 364 4,935
Benefits paid (721) (120) (841)
Closing defined benefit obligation 27,156 3,541 30,697
Changes in the fair value of Scheme assets are as
follows:
Opening fair value of Scheme assets 15,604 2,543 18,147
Expected return 1,127 156 1,283
Actuarial gains and (losses) 2,396 189 2,585
Contributions by employer 89 7 96
Contributions by members 521 2 523
Benefits paid (721) (120) (841)
Closing fair value of Scheme assets 19,016 2,777 21,793
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 36
27.Retirement benefit schemes (continued)
Details of experience gain and losses in the 31 31 31
period: December December December
2005 2004 2003
#'000 #'000 #'000
Difference between the expected and actual
return on assets 1,042 189 1,231
Percentage of Assets 5% 7% 7%
Experience gains and losses on liabilities (168) (36) (204)
Percentage of present value of liabilities (1)% (1)% (1)%
Total amount recognised in statement of
recognised income and expense (1,982) (175) (2,157)
Until July 2004 the Group participated in a defined benefit scheme operated by
its parent company the Metallgesellschaft Group Pension Scheme (MGPS). From July
2004 the remaining active group members were transferred to the Chemetall UK
pension scheme. The Group charge for the period to the MGPS was #nil (31
December 2004: #49,918).
The analysis of the scheme assets and expected return at the balance sheet date
were as follows:
Chemetall UK Pension Scheme
Return at 31 Value at 31 Return at 31 Value at 31 Return at 31 Value at 31
December 2005 December 2005 December 2004 December 2004 December 2003 December 2003
#000 #000 #000
Equities 7.95% 9,446 7.75% 9,463 8.00% 8,327
Corporate bonds 4.75% 7,496 5.25% 5,716 5.75% 4,205
Government bonds 4.10% 3,225 4.50% 2,451 5.00% 1,797
Property 7.95% 1,704 7.75% 1,220 8.00% 1,107
Cash 4.10% 143 4.50% 166 5.00% 168
Overall rate of 6.25% 22,014 6.50% 19,016 7.00% 15,604
return
Process Ink Scheme
Return at 31 Value at 31 Return at 31 Value at 31 Return at 31 Value at 31
December 2005 December 2005 December 2004 December 2004 December 2003 December 2003
#000 #000 #000
Equities 7.95% 1,322 7.75% 1,188 8.00% 1,024
Corporate bonds 4.75% - 5.25% - 5.75% -
Government bonds 4.10% 1,684 4.50% 1,622 5.00% 1,505
Property 7.95% - 7.75% - 8.00% -
Cash 4.10% 14 4.50% (33) 5.00% 14
Overall rate of 5.75% 3,020 6.00% 2,777 6.25% 2,543
return
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 37
27.Retirement benefit schemes (continued)
Overall expected return on assets
The overall expected return on assets is calculated as the weighted average of
the expected returns on each individual asset class.
Gilts 4.1% pa
This is equal to the Gross Redemption Yield on Government Bonds at the end of
2005 at the duration relevant for the liabilities.
Bonds 4.75% pa
This is equal to the Gross Redemption Yield on AA rated bonds at the end of 2005
at the duration relevant for the liabilities.
Cash 4.1% pa
This is equal to the long-term return on Gilts which is, in theory, an
accumulation of short-term interest rates.
Equities 7.95% pa
Aon have assumed the long-term return on UK equities by considering the income
and capital appreciation elements of total return separately. At 31 December
2005, the net dividend yield on the FTSE all-share index was 2.95%. This
provides the estimate of the income element. Aon have estimated the capital
appreciation by assuming that UK equity prices will rise 2% pa faster than price
inflation (which we assumed to be 3% pa). This reflects the fact that UK equity
prices tend to increase in line with GDP growth over the long-term and this has
historically been some 2%-2.5% pa in excess of price inflation. This leads to an
overall assumption of 7.95% pa.
Overseas equities and property 7.95% pa
This reflects the fact that these assets are usually held to provide some
diversification from holding exclusively UK equities. In fact, the expectations
of return (in sterling terms) might be slightly higher in some markets (e.g.
emerging markets) but due to the fact that the scheme doesn't hold a significant
amount in such assets we have assumed the same return for overseas equities as
for UK equities.
28.Related party transactions
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the group and other related parties are disclosed
below.
Trading transactions
During the year, group companies entered into the following transactions with
related parties who are not members of this group:
Sale of goods Purchase of goods Amounts owed by Amounts owed to
related parties related parties
2005 2004 2005 2004 2005 2004 2005 2004
#000 #000 #000 #000 #000 #000 #000 #000
Fellow subsidiary 701 770 3,070 904 495 412 1,977 1,820
undertakings
Sales and purchases of goods to related parties were made at the parent group's
usual list prices. The amounts outstanding are unsecured and will be settled in
cash. No guarantees have been given or received. No provisions have been made
for doubtful debts in respect of the amounts owed by related parties.
During the year, other services such as licences, IT services and insurance were
purchased from Chemetall GmbH in the amount of #387,000 (31 December 2004:
#287,000).
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 38
28.Related party transactions (continued)
Non-trading transactions
The group has lent money to the following fellow subsidiaries undertakings. The
outstanding loan balances and the interest charged on these loan balances are
presented in the table below:
Loans to Interest charged to
2005 2004 2005 2004
#000 #000 #000 #000
Fellow subsidiary undertakings 40,362 82,361 1,653 2,957
Remuneration of key management personnel
The remuneration of the directors who are the key management personnel of the
group in Note 6
29.Ultimate parent company and parent undertaking of larger group
The Company is controlled by Chemetall GmbH, the immediate parent Company
incorporated in Germany. The ultimate parent undertaking and controlling party
is Rockwood Holding Inc, incorporated in USA.
The largest group in which the results of the Group are consolidated is that
headed by the ultimate parent undertaking. The smallest group in which they are
consolidated is that headed by Chemetall GmbH. The consolidated accounts of
Chemetall GmbH are available to the public and may be obtained from Bockenheimer
Landstrasse 73-77, 60325 Frankfurt am Main. The consolidated accounts of
Rockwood Holding Inc are available to the public and may be obtained from 100
Overlook Centre, Princeton, New Jersey, 08450, USA.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 39
30.Explanation of transition to IFRSs
The reconciliations of equity at 1 January 2004 (date of transition to IFRS) and
at 31 December 2004 (date of last UK GAAP financial statements) and the
reconciliation of profit for 2004, as required by IFRS 1, including the
significant accounting policies, have been included below to enable a comparison
of the 2005 figures with those published in the corresponding period of the
previous financial year.
Reconciliation of equity at 1 January 2004
UK GAAP Effect of IFRSs
transition to
IFRSs
#000 #000 #000
Property, plant and equipment 1,443 - 1,443
Goodwill 2,475 - 2,475
Intangible assets 431 - 431
Deferred tax assets 1,289 1,945 3,234
Total non-current assets 5,638 1,945 7,583
Trade and other receivables 84,211 - 84,211
Inventories 1,082 - 1,082
Cash and cash equivalents 203 - 203
Total current assets 85,496 - 85,496
Total assets 91,134 1,945 93,079
Interest-bearing loans - (12,000) (12,000)
Trade and other payables (3,485) - (3,485)
Employee benefits - (6,470) (6,470)
Provisions (667) - (667)
Current tax liability (353) - (353)
Total liabilities (4,505) (18,470) (22,975)
Total assets less total
liabilities 86,629 (16,525) 70,104
Issued capital 18,889 (12,000) 6,889
Share premium 29,757 29,757
Retained earnings 37,983 (4,525) 33,458
Translation reserve - - -
Total equity 86,629 (16,525) 70,104
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 40
30.Explanation of transition to IFRSs (continued)
Reconciliation of equity at 31 December 2004
UK GAAP Effect of IFRSs
transition to
IFRSs
#000 #000 #000
Property, plant and equipment 1,297 - 1,297
Goodwill 2,325 150 2,475
Intangible assets 565 - 565
Deferred tax assets 1,285 2,651 3,936
Total non-current assets 5,472 2,801 8,273
Trade and other receivables 85,515 - 85,515
Inventories 1,124 - 1,124
Cash and cash equivalents 300 - 300
Total current assets 86,939 - 86,939
Total assets 92,411 2,801 95,212
Interest-bearing loans - (12,000) (12,000)
Trade and other payables (4,466) - (4,466)
Employee benefits (69) (8,835) (8,904)
Provisions (630) - (630)
Current tax liability (151) - (151)
Total liabilities (5,316) (20,835) (26,151)
Total assets less total
liabilities 87,095 (18,034) 69,061
Issued capital 18,889 (12,000) 6,889
Share premium 29,757 - 29,757
Retained earnings 38,449 (6,081) 32,368
Translation reserve - 47 47
Total equity 87,095 (18,034) 69,061
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 41
30.Explanation of transition to IFRSs (continued)
Reconciliation of profit for the year ended 31 December 2004
UK GAAP Effect of IFRSs
transition
to IFRSs
#000 #000 #000
Revenue 13,885 - 13,885
Cost of sales (7,710) - (7,710)
Gross profit 6,175 - 6,175
Other operating income 108 - 108
Distribution costs (5,397) - (5,397)
Administrative expenses (1,905) 300 (1,605)
Investment revenue 2,948 10 2,958
Finance costs - (1,261) (1,261)
Profit before tax 1,929 (951) 978
Tax expense (430) - (430)
Net profit 1,499 (951) 548
Dividends (1,080) 1,080 -
Retained profit 419 129 548
Pensions and other post-retirement benefits
UK GAAP: Pension costs were accounted for under SSAP 24 'Accounting for pension
costs', whereby the costs of providing pensions were charged to the profit and
loss account based on a percentage of employees' pay, with any variations in
regular costs, interest and changes to actuarial gains and losses amortised over
the expected average remaining service lives of current employees. Any
differences between the amounts charged to the profit and loss account and cash
payments made to the pension schemes were recognised in the balance sheet.
IFRS (as required by IAS 19 revised, but closely in line with the disclosures
already made in the notes to the accounts under FRS 17): Current and past
service costs of the Group's pension schemes, the expected return on the
scheme's assets and any interest costs relating to the present value of the
scheme's liabilities are charged to the income statement, with any actuarial
gains and losses being recognised through the statement of recognised income and
expense (SORIE). Any surplus in the fair value of the pension scheme assets over
the present value of the liabilities is recorded as an asset in the balance
sheet, and any deficit as a liability.
The change in the accounting treatment of the Group's pension arrangements will
have no impact on their funding. The EU has not yet endorsed the revisions to
IAS 19 which allows actuarial gains or losses to be recognised through the
SORIE.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 42
30.Explanation of transition to IFRS (continued)
Amortisation of purchased goodwill
UK GAAP: Goodwill was amortised over a period of 20 years and was subject to
testing for impairment when circumstances indicated that the carrying value may
not be recoverable.
IFRS (as required by IFRS 3 and also by concession under IFRS1 ):Goodwill is not
amortised but is tested annually for impairment. This applies to all goodwill
arising on acquisitions after 1 January 2004. IFRS 1 'First time adoption' of
IFRS, permits goodwill on acquisitions made before this date to be brought on to
the balance sheet at 1 January 2004 at its carrying value under UK GAAP.
Accounting impact in 2004:
Income statement: Profit before tax increased by #150,000 in 2004, being the
amount amortised in 2004 under UK GAAP.
Balance sheet: An increase to shareholders' funds of #150,000 as purchased
goodwill remains at its 1 January 2004 carrying value.
Preference shares
UK GAAP: Preference shares were treated as capital and associated servicing
charges were treated as dividends.
IFRS (as required by IAS 32): Preference shares with an obligation to transfer
economic benefit are treated as financial liabilities (debt) and not as capital.
The costs of servicing preference shares are disclosed as interest.
Accounting impact in 2004:
Income statement: A decrease to reported profit before tax of #1,080,000. At a
retained profit level, there is no change.
Balance sheet: Net assets and equity decrease by #12,000,000 and net debt
increases by the same amount.
Deferred tax
UK GAAP: Deferred tax was provided on timing differences between accounting and
tax profits. No provision for the tax effect on the potential disposal of
revalued properties was accounted for.
IFRS (as required by IAS 12): Deferred tax is provided on all temporary
differences between accounting and tax book values, including the requirement to
account for the tax effect of any future property disposals. In addition there
have been deferred tax adjustments to account for the tax effect of other IFRS
changes, including product development, pensions and share-based payments.
Accounting impact in 2004:
Income statement: No impact.
Balance sheet: Net assets and equity increase by #2,651,000 which is mainly
attributable to the creation of a deferred tax asset on the IAS 19 pension
liability.
Other adjustments
Smaller adjustments have also been made to reflect IFRS reclassifications,
including reclassification of income tax payable and deferred tax from creditors
and debtors, respectively in order to be separately shown on the face of the
balance sheet.
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 43
30.Explanation of transition to IFRSs (continued)
Summarised reconciliations from UK GAAP to IFRS
2004 income statement
#000
Retained profit under UK GAAP 419
Pensions (21)
Goodwill - amortisation 150
Profit after tax under IFRS 548
2004 net assets
#000
Net assets under UK GAAP 87,095
Pensions and post-retirement benefits (net of (6,184)
deferred tax)
Goodwill - amortisation 150
Preference shares (12,000)
Net assets under IFRS 69,061
2003 net assets (at 1 January 2004)
#000
Net assets under UK GAAP 86,629
Pensions and post-retirement benefits (net of (4,525)
deferred tax)
Preference shares (12,000)
Net assets under IFRS 70,104
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 44
30.Explanation of transition to IFRSs (continued)
Transitional arrangements
The rules for first time adoption of IFRS are set out in IFRS 1. In general a
company is required to determine its IFRS accounting policies and apply these
retrospectively to determine its opening balance sheet under IFRS. IFRS 1 allows
a number of exceptions to this general requirement. The accounting for goodwill,
share-based payments and property at market value has already been noted above.
In addition, the Group has adopted the exemption that IAS 32 and IAS 39, both
relating to financial instruments, need not be applied to the comparative
periods. Under IAS 21 The effects of changes in foreign exchange rates,
cumulative translation differences arising on consolidation of subsidiaries
should be held in a separate reserve, rather than included in the profit and
loss reserve; the Group has applied the exemption not to adopt this
retrospectively and the reserve has been deemed to be #nil on 1 January 2004.
Presentation of financial statements
The Group's financial statements have been presented in accordance with IAS 1
Presentation of financial statements. Except for the reclassification of
preference dividends as interest, there is no impact on reported profit before
tax as a consequence of IAS 1. Where IAS 1 does not provide definitive guidance
on presentation, for example in relation to aspects of the income statement, the
Group has adopted a format consistent with UK GAAP requirements. This assists
with comparing results with prior years. The format of the balance sheet has
been amended to include items required by IAS 1 to be presented on the face of
the balance sheet, including the requirement to analyse all assets and
liabilities, including provisions, between current and non-current, and present
deferred tax assets separately from deferred tax liabilities, rather than as a
single net amount.
Explanation of material adjustments to the cash flow statement for the year
ended 31 December 2004
There are no material adjustments to the cash flow statement for the year ended
31 December 2004. All adjustments made are for presentation only.
page 45
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC
We have audited the individual company financial statements of Chemetall PLC for
the year ended 31 December 2005 which comprise the balance sheet and the related
notes 1 to 16. These individual company financial statements have been prepared
under the accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' 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 and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the annual report and the
individual company financial statements in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in the statement of directors'
responsibilities.
Our responsibility is to audit the individual company financial statements in
accordance with relevant United Kingdom legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the individual company financial
statements give a true and fair view in accordance with the relevant financial
reporting framework and whether the individual company financial statements have
been properly prepared in accordance with the Companies Act 1985. We report to
you if, in our opinion, the directors' report is not consistent with the
individual company financial statements. We also report to you if the company
has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information
specified by law regarding directors' remuneration and other transactions is not
disclosed.
We read the directors' report and the other information contained in the annual
report for the above year as described in the contents section and consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the individual company financial statements.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the individual company financial statements. It also includes an
assessment of the significant estimates and judgements made by the directors in
the preparation of the individual company financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the individual company
financial statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the individual
company financial statements.
Opinion
In our opinion:
the individual company financial statements give a true and fair view, in
accordance with United Kingdom Generally Accepted Accounting Practice, of the
state of the company's affairs as at 31 December 2005; and
the individual company financial statements have been properly prepared in
accordance with the Companies Act 1985.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
St Albans, United Kingdom
Date
Chemetall PLC
Company balance sheet
Year ended 31 December 2005 page 46
Note 31 December 2005 31 December 2004
(restated)
#000 #000 #000 #000
Fixed assets
Intangible assets 4 2,588 2,890
Tangible assets 5 1,250 1,297
Investments 6 33,022 33,022
36,860 37,209
Current assets
Stocks 7 1,346 1,124
Debtors 8 5,717 43,373
Cash at bank and in
hand 43,194 293
50,257 44,790
Creditors: amounts
falling due 9 (6,841) (4,923)
within one year
Net current assets 43,416 39,867
Total assets less
current liabilities 80,276 77,076
Creditors: amounts
falling due 10 (12,000) (12,000)
after one year
Provisions for
liabilities and charges 11 (1,383) (629)
Retirement benefit
obligation 16 (5,640) (6,233)
Net assets 61,253 58,214
Capital and reserves
Called up share capital 12 6,889 6,889
Share premium account 13 29,757 29,757
Revaluation reserve 13 28,582 28,582
Profit and loss account 13 (3,975) (7,014)
Shareholders' funds 14 61,253 58,214
These financial statements were approved by the Board of Directors on
26.04.2006.
Signed on behalf of the Board of Directors
Rob Rydings
Director
Chemetall PLC
Notes to the company accounts
Year ended 31 December 2005 page 47
1.Accounting policies
The financial statements are prepared under the historical cost convention and
in accordance with applicable United Kingdom accounting standards. The
particular accounting policies adopted are described below.
The company balance sheet at 31 December 2004 has been restated following the
implementation of the following:
FRS 17 Retirement Benefits, which requires the pension deficit to be recognised
on the balance sheet; and
FRS 25 Financial Instruments: Disclosure And Presentation, which requires the
preference shares to be reclassified as financial liabilities.
Turnover
Turnover comprises the amounts receivable for the supply during the year of
speciality chemicals and ancillary equipment, excluding value added tax and
overseas sales taxes.
Foreign Currencies
Transactions denominated in foreign currencies are translated at the rate of
exchange on the day the transaction occurs or at the contracted rate if the
transaction is covered by a forward exchange rate contract. Assets and
liabilities denominated in a foreign currency are translated at the exchange
rate ruling on the balance sheet date or if appropriate at a forward contract
rate. Exchange differences are included in the profit and loss account except
that, where foreign currency borrowings have been used to finance equity
investments in foreign currencies, exchange differences arising on the
borrowings are dealt with through reserves to the extent that they are covered
by exchange differences arising on the net assets represented by the equity
investments.
The accounts of overseas subsidiary and associated undertakings are translated
into sterling in the consolidated accounts on the following basis:
Profit and loss account items are translated at the average rate of exchange for
the financial year. Assets and liabilities are translated at the rate of
exchange ruling on the balance sheet date.
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 48
1.Accounting policies (continued)
Leases
Operating lease rentals are charged to the profit and loss account on a straight
line basis over the period of the lease.
Provisions
A provision is created and recognised as a liability only when the Company has a
present obligation (legal or constructive) as a result of a past event and it is
expected that a transfer of economic benefit will be required to settle that
obligation and a reliable estimate of the amount of that transfer can be made.
Vacant leasehold properties
A provision is maintained in respect of vacant leasehold properties to take
account of the net present value of the residual lease commitments over the long
term planning period of five years or, if earlier, the period until which the
Directors expect the properties to be sub-let. In determining the net present
value, cash flows have been discounted using an appropriate nominal, risk-free,
pre-tax rate of return (UK gilt for a 5 year period).
Capitalisation of software
Purchased software costs are capitalised and included within fixtures, fittings
and equipment and depreciated in equal instalments over their estimated useful
lives.
Tangible fixed assets and depreciation
Depreciation is provided to write off the cost less the estimated residual value
of tangible fixed assets by equal instalments over their estimated useful
economic lives as follows:
Short leasehold property - Life of the lease
Plant, machinery and equipment - 10-33% per annum
Fixtures and fittings - 20% per annum
No depreciation is provided on freehold land.
Intangible fixed assets - patents and concessions
Patent costs are amortised in line with the stated life of the patents, between
1 and 20 years.
Goodwill
On acquisition, the fair value of net assets is assessed and adjustments are
made to bring the accounting policies of businesses acquired into alignment with
those of the Company. The difference between the price paid for new interests
and the fair value of identifiable net assets acquired is capitalised and
amortised over its useful economic life, depending on the nature of the
acquisition for a period not exceeding twenty years. Any costs of integrating
the acquired business are taken to the profit and loss account.
Goodwill relating to acquisitions prior to 5 April 1998, the date that Financial
Reporting Standard No 10: Goodwill and Intangible Assets (FRS 10) became
applicable to the company, has been written off to reserves. Goodwill previously
eliminated against reserves is charged to the profit and loss account in so far
as it relates to disposals in the year.
Shares in subsidiary undertakings and fixed asset investments
Shares in subsidiary undertakings are included in the Company's balance sheet at
directors' valuation.
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 49
1.Accounting policies (continued)
Impairment of fixed assets and goodwill
Fixed assets and goodwill are reviewed for impairment if events or changes in
circumstances indicate that the carrying value of the fixed assets or goodwill
may not be recoverable. The carrying amount is compared to the recoverable
amount, defined as the higher of net realisable value and value in use. If the
carrying amount exceeds the recoverable amount, the asset is written down
accordingly.
Pension
The company operates pension schemes providing benefits based on final
pensionable pay. The assets of the scheme are held separately from those of the
company. FRS 17 Retirement Benefits has been adopted during the year and as a
result the defined benefit pension liability is now recognised on the balance
sheet.
Research and development expenditure
Expenditure on research and development is written off to the profit and loss
account in the year in which it is incurred.
Stocks
Stocks are stated at the lower of cost and net realisable value. For work in
progress and finished goods, cost is taken as production cost, which includes an
appropriate proportion of attributable overheads. Work in progress is stated
after deduction of any progress payments received.
Deferred taxation
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements.
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered. Deferred tax assets and liabilities
are not discounted.
2.Profit of the company
The company has taken advantage of Section 230 of the Companies Act 1985 and
consequently the profit and loss account of the parent company is not presented
as part of these financial statements. The profit of the parent company for the
financial year amounted to #2,317,000 (2004: loss #421,000).
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 50
3.Staff numbers and costs
The average number of persons employed by the company (including directors)
during the period, analysed by category, was as follows:
Number of employees
Year ended 31 Year ended 31
December 2005 December 2004
94 96
Specialised Industrial Chemicals
The aggregate payroll costs of these persons were as follows:
Year ended 31 Year ended 31
December 2005 December 2004
#000 #000
Wages and salaries 3,624 3,106
Social security costs 367 341
Other pension costs 801 1,451
4,792 4,898
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 51
4.Intangible fixed assets
Customer Patents and Goodwill Total
contracts concessions
#000 #000 #000 #000
Cost
At 1 January 2005 and 31 December 2005 250 1,108 3,000 4,358
Amortisation
At 1 January 2005 (10) (783) (675) (1,468)
Charged in year (120) (32) (150) (302)
At 31 December 2005 (130) (815) (825) (1,770)
Net book value
at 31 December 2005 120 293 2,175 2,588
Net book value
at 31 December 2004 240 325 2,565 2,890
Patents and trademarks are amortised over their estimated useful lives, until
expiry of legal rights.
Historically, #10,597,000 of goodwill has been written off directly to the
profit and loss reserve as a matter of accounting policy.
5. Tangible fixed assets
Leasehold Plant and Fixtures, Total
land and fittings,
buildings machinery tools and
equipment
#000 #000 #000 #000
Cost
At 1 January 2005 2,456 2,224 779 5,459
Additions 25 146 - 171
At 31 December 2005 2,481 2,370 779 5,630
Depreciation
At 1 January 2005 (1,417) (1,981) (764) (4,162)
Charge for the year (145) (66) (7) (218)
At 31 December 2005 (1,562) (2,047) (771) (4,380)
Net book value
At 31 December 2005 919 323 8 1,250
At 31 December 2004 1,039 243 15 1,297
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 52
6.Fixed asset investments
Shares in
Group
Undertaking
#000
Company
Cost or valuation and net book value
At beginning and end of year 33,022
Investments are carried at directors' valuation. The original cost of the
investments was #4,440,000 with the revaluation surplus of #28,582,000 being
taken to the revaluation reserve.
The undertakings in which the Company's interest at the period end is more than
20% are as follows:
Country of Principal Class and percentage
incorporation activity of shares held
Company
Subsidiary undertakings
AM Craig Ltd England Holding 100%
company ordinary
Brent International BV The Investment 100%
Netherlands company ordinary
7.Stocks
31 31
December December
2005 2004
#000 #000
Raw materials and consumables 355 348
Work in progress 13 32
Finished goods and goods for resale 978 744
1,346 1,124
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 53
8.Debtors
31 31
December December
2005 2004
#000 #000
Amounts falling due within one year:
Trade debtors 3,183 2,566
Amounts due from group undertakings 822 39,342
Prepayments and accrued income 274 180
Deferred tax (see below) 1,438 1,285
5,717 43,373
Amounts due from group undertakings are due on or before 31 December 2006 (2004:
31 December 2005), unless those parties agree to extend the terms.
Deferred taxation
The amounts provided for deferred taxation and the amounts not provided are set
out below:
31 December 2005 31 December 2004
Recognised Unrecognised Recognised Unrecognised
#000 #000 #000 #000
Accelerated capital allowances 62 - 115 -
Short-term timing differences 425 - 219 -
Tax losses carried forward 951 2,155 951 2,155
1,438 2,155 1,285 2,155
Retirement benefit obligations * 2,418 - 2,671 -
Deferred tax asset 3,856 2,155 3,956 2,155
*The deferred tax asset in respect of retirement benefit obligations has been
offset against liability.
9.Creditors: amounts falling due within one year
31 31
December December
2005 2004
#000 #000
Trade creditors 1,181 1,082
Amounts owed to group undertakings 2,764 2,202
Taxation 343 12
Social security - 66
Accruals and deferred income 2,013 1,021
Preference dividend 540 540
6,841 4,923
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 54
10. Creditors: amounts falling due after one year
31 December 2005 31 December 2004
No. #000 No. #000
Authorised
Non-equity: 9% redeemable
preference shares of #1 each 15,000,000 15,000 15,000,000 15,000
Allotted, called up and fully paid
Non equity: 9% redeemable
preference shares of #1 each 12,000,000 12,000 12,000,000 12,000
The Company issued 12,000,000 9% redeemable preference shares of #1 each. These
preference shares entitle their holders to a fixed cumulative preference
dividend at a rate of 9% per annum, per share. On a winding up the preference
shareholders are entitled to a sum equal to the nominal capital paid up or
credited as paid up, on the preference shares held by them, together with all
arrears (if any) of the preference dividend. They carry the right to receive
notice of, or attend, or vote at General Meetings only in special circumstances
such as when the preference dividend is six months or more in arrears or if
redemption has not been made on the due date, or in such cases as a winding up
of the Company or a reduction in its share capital. The preference shares have
to be redeemed at par on 3 July 2008. The 9% redeemable preference shares are
presented as "Creditors: amounts falling due after one year" in the balance
sheet to comply with FRS 25 "Financial Instruments: Disclosure And
Presentation".
11.Provision for liabilities and charges
Vacant Other Total
property provision
provision
#000 #000 #000
At 1 January 2005 412 217 629
Charge for the year 900 - 900
Utilisation in the year (68) (78) (146)
At 31 December 2005 1,244 139 1,383
12. Called up share capital
31 December 2005 31 December 2004
No. #000 No. #000
Authorised
Equity: Ordinary shares of 10p each 91,948,000 9,195 91,948,000 9,195
Allotted, called up and fully paid
Equity: Ordinary shares of 10p each 68,888,817 6,889 68,888,817 6,889
The 9% redeemable preference shares are presented as "Creditors: amounts falling
due after one year" in the balance sheet to comply with FRS 25 "Financial
Instruments: Disclosure And Presentation".
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 55
13.Share premium and reserves
Revaluation Share Profit
reserve premium and loss
account account
#000 #000 #000
At 1 January 2005 28,582 29,757 (7,014)
Retained profit for the year - - 2,317
Retirement benefit obligations - - 722
At 31 December 2005 28,582 29,757 (3,975)
Cumulative goodwill resulting from acquisitions made prior to 31 December 1998
of #10,597,000 has been written off to the profit and loss account reserve of
the Company as at 31 December 2004 and 31 December 2003. At 31 December 2005,
the realised distributable reserves of the company amounted to #1,510,000 (2004:
#4,694,000).
14.Reconciliation of movements in shareholder funds
31 31
December December
2005 2004
(restated)
#000 #000
At 1 January (as previously stated) 76,447 76,868
Reclassification of preference shares as a
financial liability (12,000) (12,000)
Retirement benefit obligations (6,233) (4,538)
At 1 January (as restated) 58,214 60,330
Profit for the year 2,317 41
Retirement benefit obligations 722 (2,157)
At 31 December 2005 61,253 58,214
15.Commitments
Annual commitments under non-cancellable operating leases are as follows
31 31 31 31
December December December December
2005 2005 2004 2004
Land and Land and
Buildings Other Buildings Other
#000 #000 #000 #000
Operating leases which expire:
Within one year 4 263 - 226
In the second to fifth years
inclusive 35 236 20 330
Over five years 441 - 453 -
480 499 473 556
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 56
16.Pension scheme
The company operated two funded defined benefit schemes which provide for their
liabilities through trustee operated funds.
In July 2004, the remaining active members of the Metallgesellschaft Group
Pension Scheme were transferred to the Chemetall UK Pension Scheme, which
provides benefits based on final pensionable pay, at a cost of #800,000. The
assets of the scheme are held separately from those of the company in a trustee
administered fund. The trustees comprise senior group employees and the assets
are managed by Legal & General Assurance (Pensions Management ) Limited.
Contributions to the scheme are charged to the profit and loss account so as to
spread the costs of pensions over employees working lives within the company.
The company does not have any health and medical plans providing post-retirement
benefits. The pension costs relating to the Chemetall UK and Process Ink schemes
are assessed in accordance with the advice of Aon Limited, the independent
actuaries, using, in the case of the Chemetall UK scheme, the projected unit
method.
The table below illustrates that, under the Minimum Funding Requirement (MFR),
the Process Ink Scheme (which is a paid-up scheme from 30 June 1999, with the
exception of one member who is in receipt of ill health benefits and as a result
continues to accrue pension benefits) has deficits in relation to current
accrued benefits. This deficit is being funded by monthly contributions (up to
19 November 2012) of #300.
The Chemetall UK scheme was sufficiently funded under the MFR.
Scheme Last Assumed Average Total Funding
actuarial Investment salary market level value
valuation Return per increase value of of assets as
annum per annum assets percentage
of
at latest liabilities*
valuation
dates
Chemetall UK Pension scheme 1 January 6% 4% #14.9m(3) 92%
2003
Process Ink Company Limited
Pension and Death Benefits
Plan 1 January 9%(1) 4%(2) #2.9m 102%
2002
(1) The rate of return is assumed to reduce to 8% per annum from each member's
normal retirement age.
(2) This is the assumed rate of revaluation of deferred pensions up to normal
retirement date.
(3) The market value of the assets includes additional voluntary contributions.
The pension increases were assumed to be equal to those specified in the rules
of the schemes. Pension increases in payment in line with retail prices but
capped at 5% were assumed to be 3% per annum (31/2% for the Process Ink Scheme)
and pensions increasing in line with retail prices without a cap were assumed to
be 3% per annum (4% for the Process Ink Scheme).
*For the Chemetall UK scheme, this gives an indication of the extent to which
the actuarial value of the assets secure the benefits that have been accrued to
members allowing for expected future statutory revaluations to deferred
pensions.
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 57
16.Pension scheme (continued)
Included in the balance sheet at 31 December 2005 is a pension accrual of #nil
(31 December 2004: #69,000).
Included in the balance sheet at 31 December 2005 is a pension accrual of
#126,000 (31 December 2004: #137,000) in respect of a deferred pensioner who,
under the terms of the severance agreement, has the option to retire before the
normal retirement dates on enhanced benefits.
The major assumptions used in the FRS 17 valuation were:
31 31 31
December December December
2005 2004 2003
#000 #000 #000
Rate of increase in salaries 4.5% 4.5% 4.25%
Rate of increase in pensions in payment
- Ex Brent members pre '97 Nil Nil Nil
- Ex Winnets members pre '97 3.0% 3.0% 3.0%
- Process directors 8.5% 8.5% 8.5%
- All post '97 3.0% 3.0% 2.75%
Discount rate 4.75% 5.25% 5.75%
Inflation assumptions 3.0% 3.0% 2.75%
The rates used have been chosen from a range of possible amounts determined
using actuarial assumptions which due to the timescale covered may not
necessarily be borne out in practice.
Scheme assets
The fair value of the assets in the schemes (which are not intended to be
realised in the short term and may be subject to significant change) and the
present value of the schemes liabilities (which are derived from cash flow
projections over long periods and thus inherently uncertain) were:
Value at 31 Value at 31 Value at 31
December 2005 December 2004 December 2003
Chemetall Process Chemetall Process Chemetall Process
Ink Ink Ink
#000 #000 #000 #000 #000 #000
Market value of assets 22,014 3,020 19,016 2,777 15,604 2,543
Present value of
scheme liabilities (29,086) (4,006) (27,156) (3,541) (21,520) (3,110)
Deficit in the scheme (7,072) (986) (8,140) (764) (5,916) (567)
Related deferred tax
asset 2,122 296 2,442 229 1,775 170
Net pension liability (4,950) (690) (5,698) (535) (4,141) (397)
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 58
16.Pension scheme (continued)
Operating results and other disclosures
Chemetall Process 31
UK Ink December
Pension Scheme 2005
Scheme Total
#000 #000 #000
Analysis of the amount charged to operating loss:
Service cost (554) (10) (564)
Past service cost - - -
Total operating charge (554) (10) (564)
Analysis of the net return:
Expected return on the pension scheme assets 1,231 164 1,395
Interest on pension scheme liabilities (1,420) (183) (1,603)
Net charge (189) (19) (208)
Analysis of amount recognised in the statement of
total recognised gains and losses:
Actual return less expected return on assets 1,913 192 2,105
Experience gains and losses on liabilities 1,405 (57) 1,348
Changes in assumptions (2,140) (338) (2,478)
Actuarial gain/(loss) recognised in the
statement of total recognised gains and losses 1,178 (203) 975
Movement in deficit during the period:
Deficit at 31 December 2004 (8,140) (764) (8,904)
Movement in the period:
Current service cost (554) (10) (564)
Contributions 633 10 643
Net interest cost 189 19 208
Acquisitions - - -
Actuarial gain/(loss) 1,178 (203) 975
Deficit at 31 December 2005 (7,072) (986) (8,058)
Details of experience gain and losses in the
period:
Difference between the expected and actual
return on assets 1,913 192 2,105
Percentage of Assets 9% 6% 10%
Experience gains and losses on liabilities 1,405 (57) 1,348
Percentage of present value of liabilities 5% (1)% 4%
Total amount recognised in statement of total
recognised gains and losses 1,178 (203) 975
Percentage of present value of liabilities 4% (5)% 3%
Chemetall PLC
Notes to the accounts
Year ended 31 December 2005 page 59
16.Pension scheme (continued)
Operating results and other disclosures
Chemetall Process 31
UK Ink December
Pension Scheme 2004
Scheme Total
#000 #000 #000
Analysis of the amount charged to operating
profit:
Service cost (419) (9) (428)
Past service cost - - -
Total operating charge (419) (9) (428)
Analysis of the net return:
Expected return on the pension scheme assets 1,127 156 1,283
Interest on pension scheme liabilities (1,278) (176) (1,454)
Net charge (151) (20) (171)
Analysis of amount recognised in the statement of
total recognised gains and losses:
Actual return less expected return on assets 1,042 189 1,231
Experience gains and losses on liabilities (168) (36) (204)
Changes in assumptions (2,856) (328) (3,184)
Actuarial loss recognised in the statement
of total recognised gains and losses (1,982) (175) (2,157)
Movement in deficit during the period:
Deficit at 31 December 2003 (5,916) (567) (6,483)
Movement in the period:
Current service cost (419) (9) (428)
Contributions 521 7 528
Net interest cost (151) (20) (171)
Acquisitions (193) - (193)
Actuarial loss (1,982) (178) (2,157)
Deficit at 31 December 2004 (8,140) (764) (8,904)
Details of experience gain and losses in the
period:
Difference between the expected and actual return
on assets 1,042 189 1,231
Percentage of Assets 5% 7% 7%
Experience gains and losses on liabilities (168) (36) (204)
Percentage of present value of liabilities (1)% (1)% (1)%
Total amount recognised in statement of
total recognised gains and losses (1,982) (175) (2,157)
Percentage of present value of liabilities (7)% (5)% (7)%
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 60
16.Pension scheme (continued)
Chemetall Process 31
UK Ink December
Pension Scheme 2003
Scheme Total
#000 #000 #000
Analysis of the amount charged to operating
profit:
Service cost (434) (11) (445)
Past service cost - - -
Total operating charge (434) (11) (445)
Analysis of the net return:
Expected return on the pension scheme
assets 1,073 165 1,238
Interest on pension scheme liabilities (1,413) (246) (1,659)
Net charge (340) (81) (421)
Analysis of amount recognised in the statement of
total recognised gains and losses:
Actual return less expected return on
assets 417 7 424
Experience gains and losses on liabilities 290 112 402
Changes in assumptions (955) 302 (653)
Actuarial (loss)/gain recognised in the statement
of total recognised gains and losses (248) 421 173
Movement in deficit during the period:
Deficit at 31 December 2002 (5,371) (907) (6,278)
Movement in the period:
Current service cost (434) (11) (445)
Contributions 477 11 488
Net interest cost (340) (81) (421)
Actuarial (loss)/gain (248) 421 173
Deficit at 31 December 2003 (5,916) (567) (6,483)
Details of experience gain and losses in the
period:
Difference between the expected and actual return
on assets 417 7 424
Percentage of Assets 3% 0% 2%
Experience gains and losses on liabilities 290 112 402
Percentage of present value of liabilities 1% 4% 2%
Total amount recognised in statement of
total recognised gains and losses (248) 421 173
Percentage of present value of liabilities (1)% 14% 1%
Chemetall PLC
Notes to the accounts (continued)
Year ended 31 December 2005 page 61
16.Pension scheme (continued)
Until July 2004 the Group participated in a defined benefit scheme operated by
its parent company the Metallgesellschaft Group Pension Scheme (MGPS). From July
2004 the remaining active group members were transferred to the Chemetall UK
pension scheme. The Group charge for the period to the MGPS was #nil (31
December 2004: #49,918).
Chemetall UK Pension Scheme
Return at 31 Value at 31 Return at 31 Value at 31 Return at 31 Value at 31
December 2005 December 2005 December 2004 December 2004 December 2003 December 2003
#000 #000
Equities 7.95% 9,446 7.75% 9,643 8.00% 8,327
Corporate bonds 4.75% 7,496 5.25% 5,716 5.75% 4,205
Government bonds 4.10% 3,225 4.50% 2,451 5.00% 1,797
Property 7.95% 1,704 7.75% 1,220 8.00% 1,107
Cash 4.10% 143 4.50% 166 5.00% 168
Overall rate of 6.25% 22,014 6.50% 19,016 7.00% 15,604
return
Process Ink Scheme
Return at 31 Value at 31 Return at 31 Value at 31 Return at 31 Value at 31
December 2005 December 2005 December 2004 December 2004 December 2003 December 2003
#000 #000 #000
Equities 7.95% 1,322 7.75% 1,188 8.00% 1,024
Corporate bonds 4.75% - 5.25% - 5.75% -
Government bonds 4.10% 1,684 4.50% 1,622 5.00% 1,505
Property 7.95% - 7.75% - 8.00% -
Cash 4.10% 14 4.50% (33) 5.00% 14
Overall rate of 5.75% 3,020 6.00% 2,777 6.25% 2,543
return
This information is provided by RNS
The company news service from the London Stock Exchange
END
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