Exhibit 1
LUXFER HOLDINGS PLC
Third Quarter Report &
Unaudited Condensed Financial
Statements
For the period
1 January 2002 to 30 September 2002
HIGH PERFORMANCE ENGINEERING MATERIALS WORLDWIDE
LUXFER GROUP Logo
LUXFER HOLDINGS PLC
CONTENTS
Trading statement for the third quarter 3
Group Profit and Loss Account for the nine months
ended 30 September 2002 5
Group Balance Sheet 6
Group Cash Flow Statement 7
Notes to the Condensed Financial Statements 8
Corporate details 10
TRADING STATEMENT FOR THE THIRD QUARTER ENDED 30 SEPTEMBER 2002
TURNOVER
Turnover from continuing operations for the third quarter, at (pound)53.2
million, was down (pound)3.0 million (or 5%) compared with the prior year. The
movement in the US dollar to sterling exchange rate accounted for (pound)1.9
million of this fall. Approximately 45% of the Group's production originates
from US operations. On a divisional basis, the fall was a result of lower sales
in our Gas Cylinder and Speciality Aluminium divisions, with their sales revenue
being down 9% and 24%, respectively.
The Gas Cylinder sales levels, at (pound)27.1 million, for the quarter were
(pound)2.6 million lower than in 2001 due to a fall in aluminium cylinder
volumes over the past year, combined with a (pound)1.2 million translation
impact on US sales. In this quarter aluminium cylinder volumes were 17% lower
than a year ago. This fall partly was offset by the continued increase in 2002
of composite cylinder volumes, which were up 18% in the third quarter of 2002
compared to the same quarter in 2001. The demand for aluminium cylinders in the
beverage, fire and medical markets has been depressed, which had put pressure on
margins. However, demand for the life support applications remained strong, and
this drove the growth on the composite cylinder volumes and revenues. The demand
for Superform products remained relatively buoyant, with sales revenues up 7%
compared to the prior third quarter.
Elektron divisional sales at (pound)22.7 million, were slightly ahead of the
(pound)22.0 million for the third quarter in 2001. Zirconium revenues were down
8%, partly through the translation effect of the weaker dollar on US sales,
partly through a weaker business mix, and partly through price pressures in
several market sectors.
Magnesium sales revenues for the third quarter were 12% ahead of the same
quarter in the prior year and accounted for the net increase in the divisional
sales when compared to 2001. This increase reflects the recovery in some of the
magnesium markets, with automotive die-casting revenues up 25% and magnesium
reprocessing up 20%. The division benefited from the ramp-up in production at
the new Czech Republic plant, which now services the bulk of the reprocessing
volumes. High performance alloy sales demand also remained relatively strong
during the period.
Speciality Aluminium sales levels, at (pound)3.4 million, compared to (pound)4.5
million for the prior third quarter, continued to be well behind prior year
levels. Demand remains subdued in the UK and Europe, with some new sales
initiatives taking time to realise a higher sales volume.
GROSS PROFIT
For the quarter, gross profit was 19.7% compared to 18.4% for the third quarter
of 2001. The improved margin was a result of the reduction in fixed production
costs achieved since last year as part of the rationalisation exercise
undertaken in late 2001 and early 2002. Average prices have been under pressure
throughout the last year, offsetting some of the operational gains that have
been achieved. Competitive pressures have remained particularly difficult in
some of our larger volume markets, such as automotive and medical.
NET OPERATING EXPENSES BEFORE GOODWILL AND EXCEPTIONAL ITEMS
At (pound)6.8 million, net operating expenses were (pound)2.2 million lower than
in the third quarter of 2001. The reduction reflects the cost savings now being
achieved in the Group, though higher costs, such as insurance, partly offset
these gains.
OPERATING PROFIT BEFORE GOODWILL AND EXCEPTIONAL ITEMS
A profit of (pound)3.7 million was made before charges of (pound)0.4 million for
goodwill and (pound)0.3 million of exceptional items. The profit was
significantly higher than the (pound)1.4 million made in the third quarter of
2001, despite a lower level of sales in 2002. This improvement reflects the
benefits of the rationalisation measures undertaken over the last year.
Gas Cylinders profitability, at (pound)2.5 million, was (pound)1.5 million ahead
of the same quarter in 2001. The division benefited from an improvement in sales
mix with a higher volume of value-added composite cylinders, as well as from the
closure of one of our UK plants in 2001, and the integration of SM Gerzat. In
the quarter, there have been some further redundancies made within the division
in response to the fall in aluminium cylinder revenues, in order to protect
operational efficiencies.
Elektron has also shown benefits from the rationalisation process with profits
of (pound)1.7 million being nearly double the (pound)0.9 million achieved a year
earlier on similar levels of sales. The Speciality Aluminium division had made
some cost savings, but these have been offset by the loss of sales volumes,
resulting in a loss of (pound)0.5 million in the quarter, which was the same as
in the previous year.
EXCEPTIONAL ITEMS
In the quarter, (pound)0.3 million of redundancy costs were incurred due to
further rationalisation measures having been undertaken in addition to those in
relation to the charges taken in 2001.
NET INTEREST PAYABLE
Net interest payable was (pound)3.4 million in the quarter compared to
(pound)3.8 million in the prior third quarter. The lower cost reflected the
reduced net level of Senior Notes in issue compared to the prior period.
TAXATION
A charge of (pound)0.4 million was made for taxation in the quarter. This
related to taxable profits in overseas operations which could not be offset
against the loss after interest incurred in the UK.
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION
The Group made a (pound)0.8 million net loss in the quarter after taxation,
which was significantly better than the (pound)3.3 million loss incurred in the
same quarter in 2001.
DIVIDENDS
The dividend charge of (pound)1.2 million for both 2002 and 2001 related, as in
previous quarters, to our 5% cumulative preference shares. The dividend is not
payable until the maturity of the shares in 2009 and is credited back in
reserves to the non-equity share of shareholders' funds.
CAPITAL AND LIQUID RESOURCES
Cash flow
Operating cash flows remained strong in the quarter, with (pound)8.9 million of
net cash inflows being generated, taking operating cash flow to (pound)21.2
million for the first nine months of the year. This compares favourably to a
(pound)1.0 million outflow in the third quarter of 2001, the cumulative
operating cash inflow of (pound)2.3 million for the first nine months of 2001,
and the (pound)11.8 million for the full year to 31 December 2001.
Net debt
With cash balances at 30 September 2002 of (pound)18.6 million, net debt stood
at (pound)110.5 million, compared to net debt of (pound)118.1 million at the
same point in 2001. The Group's (pound)20 million short term borrowing lines
remained undrawn during the quarter. At the end of the third quarter, rolling
EBITDA for continuing operations was (pound)23.1 million and the net debt to
EBITDA ratio fell to 4.8x, from the 5.6x reported at the half year.
UPDATE ON THE YEAR TO DATE - AFTER THE FIRST NINE MONTHS OF 2002
Turnover
Group turnover from continuing operations for the third quarter, at (pound)53.2
million, was down on the previous two quarters of 2002. The third quarter
traditionally has a lower level of activity due to plant shut downs in the
summer months at our own operations and also at some of our customers. Revenues
were (pound)173.7 million for the first nine months of 2002 compared to
(pound)179.8 million for the same period in 2001. Of the (pound)6.1 million
difference, (pound)2.3 million is a translation difference arising primarily
from the reduced sterling value of US dollar revenues as a result of the
currency weakening in value. This impact is net of some gains in revenue values
from euro denominated sales.
Gas Cylinders remained ahead of the prior year at (pound)90.4 million for the
nine months to 30 September 2002 compared to (pound)87.0 million for the same
period in 2001. Composite cylinder revenues are now 12% ahead of the prior year,
offset by a 10% fall in aluminium cylinder revenues once the impact of the
acquisition of SM Gerzat is removed. SM Gerzat added an additional (pound)5.6
million to revenues in the first nine months of 2002 compared to the same period
in 2001.
Elektron remains behind the prior year with sales in 2002 of (pound)71.8 million
compared to (pound)77.2 million at the same point in 2001. The shortfall was
primarily due to the reduction in zirconium chemical sales of around 15%
year-on-year due to reduced demand and pricing pressures in most business
sectors.
Speciality Aluminium saw a significant fall in sales with only (pound)11.5
million of sales achieved to date in 2002 compared to (pound)15.6 million for
the first nine months of 2001. A new sales initiative is now underway to try to
reverse this trend in future periods.
Operating profit before goodwill and exceptional items
The Group's profitability was (pound)11.7 million for the first nine months of
2002 compared to (pound)12.5 million for the same period in 2001. However, the
rolling twelve-month EBITDA increased 13% to (pound)23.1 million for the twelve
months to 30 September 2002 compared to the (pound)20.5 million as at the half
year in 2002. This highlights the improving trend in profits over recent
quarters.
The continued driver for improved profits remains the benefits from the
rationalisation of our operations in late 2001 and early 2002. We have continued
to take further measures in the third quarter of 2002, with an additional
(pound)0.3 million of redundancy costs being incurred.
Profitability remains challenged by the economic environment, with the Group
being exposed to the continued slump in the US industrial economy, which
accounts for over 40% of the Group's sales and 45% of its production base.
UNAUDITED GROUP PROFIT AND LOSS ACCOUNT FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2002
Three Three Nine Nine Full
months to months to months to months to year to
30 September 30 September 30 September 30 September 31 December
2002 2001 2002 2001 2001
(pound)M (pound)M (pound)M (pound)M (pound)M
- ------------------------------------ ----------------------------- ----------------------------- -------------
Turnover by division:
Gas Cylinders 27.1 29.7 90.4 87.0 114.3
Elektron 22.7 22.0 71.8 77.2 97.7
Speciality Aluminium 3.4 4.5 11.5 15.6 19.3
- ------------------------------------ ----------------------------- ----------------------------- -------------
Continuing operations 53.2 56.2 173.7 179.8 231.3
Discontinued operations 0.2 0.4 0.5 10.6 10.7
Inter-segment sales - - - (1.5) (1.5)
- ------------------------------------ ----------------------------- ----------------------------- -------------
TURNOVER 53.4 56.6 174.2 188.9 240.5
Cost of sales (42.9) (46.2) (140.7) (151.0) (199.1)
- ------------------------------------ ----------------------------- ----------------------------- -------------
Gross profit 10.5 10.4 33.5 37.9 41.4
Net operating expenses before
goodwill and exceptional items (6.8) (9.0) (21.8) (25.4) (30.8)
- ------------------------------------ ----------------------------- ----------------------------- -------------
OPERATING PROFIT BEFORE
GOODWILL & EXCEPTIONAL ITEMS 3.7 1.4 11.7 12.5 10.6
Operating profit by division:
Gas Cylinders 2.5 1.0 7.8 5.0 6.3
Elektron 1.7 0.9 5.4 8.0 8.6
Speciality Aluminium (0.5) (0.5) (1.5) (0.5) (1.0)
- ------------------------------------ ----------------------------- ----------------------------- -------------
Continuing operations 3.7 1.4 11.7 12.5 13.9
Discontinued operations - - - - (3.3)
- ------------------------------------ ----------------------------- ----------------------------- -------------
3.7 1.4 11.7 12.5 10.6
Goodwill amortisation (0.4) (0.5) (1.3) (1.3) (1.8)
Exceptional items (0.3) - (0.3) (1.8) (4.7)
- ------------------------------------ ----------------------------- ----------------------------- -------------
OPERATING PROFIT 3.0 0.9 10.1 9.4 4.1
- ------------------------------------ ----------------------------- ----------------------------- -------------
Disposal of fixed assets - - - - (0.6)
Profit on sale of operations - - - 1.8 1.8
- ------------------------------------ ----------------------------- ----------------------------- -------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE INTEREST 3.0 0.9 10.1 11.2 5.3
Interest receivable & similar income 0.1 0.3 0.3 1.6 1.7
Interest payable & similar charges (3.5) (4.1) (10.5) (13.2) (16.4)
- ------------------------------------ ----------------------------- ----------------------------- -------------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (0.4) (2.9) (0.1) (0.4) (9.4)
Taxation (0.4) (0.4) (1.4) (1.7) (0.1)
- ------------------------------------ ----------------------------- ----------------------------- -------------
LOSS FOR THE FINANCIAL PERIOD (0.8) (3.3) (1.5) (2.1) (9.5)
Dividends - non-equity (1.2) (1.2) (3.7) (3.5) (4.7)
- ------------------------------------ ----------------------------- ----------------------------- -------------
NET LOSS FOR THE PERIOD (2.0) (4.5) (5.2) (5.6) (14.2)
- ------------------------------------ ----------------------------- ----------------------------- -------------
EBITDA before exceptional items (1):
- - Continuing operations 6.3 3.7 19.3 19.5 23.3
- - Total Group 6.3 3.7 19.3 19.7 20.2
Return on sales (2):
- - Continuing operations 7.0% 2.5% 6.7% 7.0% 6.0%
- - Total Group 6.9% 2.5% 6.7% 6.6% 4.4%
- ------------------------------------ ----------------------------- ----------------------------- -------------
Notes: (1) EBITDA before exceptional items consists of operating profit before
exceptional items, and the non-cash items of depreciation and goodwill
amortisation. (2) Return on sales is the percentage ratio of operating profit
before exceptional items and goodwill amortisation divided by turnover.
UNAUDITED GROUP BALANCE SHEET AT 30 SEPTEMBER 2002
30 September 30 September 31 December
2002 2001 2001
(pound)M (pound)M (pound)M
- ------------------------------------------- -------------- -------------- -------------
FIXED ASSETS
Intangible assets 26.0 28.5 27.3
Tangible assets 76.1 78.1 80.0
Investments 2.9 2.9 2.9
- ------------------------------------------- -------------- -------------- -------------
105.0 109.5 110.2
CURRENT ASSETS
Stocks 31.7 36.3 32.9
Debtors 37.3 43.2 37.8
Cash at bank and in hand 18.6 11.0 13.3
- ------------------------------------------- -------------- -------------- -------------
87.6 90.5 84.0
CREDITORS: amounts falling due within
one year (44.0) (40.2) (40.4)
- ------------------------------------------- -------------- -------------- -------------
NET CURRENT ASSETS 43.6 50.3 43.6
- ------------------------------------------- -------------- -------------- -------------
TOTAL ASSETS LESS CURRENT LIABILITIES 148.6 159.8 153.8
CREDITORS: amounts falling due after more
than one year
Senior Notes due 2009 (128.5) (128.1) (128.2)
Other loan finance (0.3) (0.7) (0.6)
Accruals and deferred income (0.3) (1.4) (1.2)
- ------------------------------------------- -------------- -------------- -------------
(129.1) (130.2) (130.0)
PROVISIONS FOR LIABILITIES AND CHARGES (9.9) (10.0) (12.7)
- ------------------------------------------- -------------- -------------- -------------
9.6 19.6 11.1
- ------------------------------------------- -------------- -------------- -------------
CAPITAL AND RESERVES
Called up share capital 87.0 87.0 87.0
Merger reserve (207.5) (207.5) (207.5)
Profit and loss account 129.1 139.1 130.6
- ------------------------------------------- -------------- -------------- -------------
SHAREHOLDERS' FUNDS 8.6 18.6 10.1
- ------------------------------------------- -------------- -------------- -------------
Shareholders' funds/(deficit) - equity (93.5) (78.6) (88.3)
- non-equity 102.1 97.2 98.4
- ------------------------------------------- -------------- -------------- -------------
8.6 18.6 10.1
- ------------------------------------------- -------------- -------------- -------------
Minority interest - equity 1.0 1.0 1.0
- ------------------------------------------- -------------- -------------- -------------
9.6 19.6 11.1
- ------------------------------------------- -------------- -------------- -------------
UNAUDITED GROUP CASH FLOW STATEMENT FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2002
Nine months to Nine months to Full year to
30 September 30 September 31 December
2002 2001 2001
(pound)M (pound)M (pound)M
- ----------------------------------------------------- ---------------- ---------------- --------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 21.2 2.3 11.8
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Interest received
Interest paid 0.3 1.6 1.7
Payment of loan issue costs on re-financing (6.9) (8.7) (15.2)
Dividends paid to minority interests - (0.1) (0.1)
- (3.1) (3.1)
- ----------------------------------------------------- ---------------- ---------------- --------------
(6.6) (10.3) (16.7)
TAXATION
Corporation tax received 1.9 - -
Overseas tax paid (1.1) (4.9) (4.8)
- ----------------------------------------------------- ---------------- ---------------- --------------
0.8 (4.9) (4.8)
CAPITAL EXPENDITURE & FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (5.4) (11.4) (14.4)
Receipts from sale of tangible fixed assets 0.3 0.1 0.1
ESOP purchase of shares - (0.7) (0.7)
- ----------------------------------------------------- ---------------- ---------------- --------------
(5.1) (12.0) (15.0)
ACQUISITIONS AND DISPOSALS
Purchase of new businesses (including costs) - (6.7) (6.6)
Cash acquired with new businesses - 2.8 2.8
Purchase of minority interest shares - (0.1) (0.1)
Payments for acquisitions made in earlier periods (0.8) (1.3) (1.3)
Disposal of businesses (net of costs) - 8.3 12.2
Costs paid in relation to disposals in prior periods (0.3) - (5.4)
- ----------------------------------------------------- ---------------- ---------------- --------------
(1.1) 3.0 1.6
EQUITY DIVIDEND PAID - - -
- ----------------------------------------------------- ---------------- ---------------- --------------
NET CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID
RESOURCES AND FINANCING 9.2 (21.9) (23.1)
MANAGEMENT OF LIQUID RESOURCES
Movement in fixed term cash deposits (4.8) 43.0 46.9
FINANCING
Repayments of finance leases (0.3) (0.3) (0.4)
Repayment of debt acquired with new business - (5.4) (5.4)
Draw down of short term bank loan - - 3.0
Repayment of short term bank loan (3.0) - -
Purchase of Senior Notes due 2009 - (22.9) (22.9)
- ----------------------------------------------------- ---------------- ---------------- --------------
(3.3) (28.6) (25.7)
- ----------------------------------------------------- ---------------- ---------------- --------------
INCREASE/(DECREASE) IN CASH 1.1 (7.5) (1.9)
- ----------------------------------------------------- ---------------- -------------- --------------
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The accompanying unaudited condensed financial statements are consolidated
accounts for Luxfer Holdings PLC and its subsidiary undertakings. They have been
prepared in accordance with United Kingdom generally accepted accounting
principles for interim financial statements. Accordingly, they do not include
all of the information and notes required by United Kingdom generally accepted
accounting principles for full financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine months ended 30 September 2002 are not necessarily indicative of the
results that may be expected for the year ending 31 December 2002.
These unaudited condensed financial statements have been prepared using the
accounting policies set out in Luxfer Holdings PLC financial statements for the
year ended 31 December 2001. The statutory accounts of Luxfer Holdings PLC for
2001 were signed by the directors on 28 March 2002 and have been delivered to
the registrar of companies for England and Wales with the auditors' report
thereon being unqualified.
2. EXCEPTIONAL ITEMS
Operating costs of (pound)0.3 million have been charged in the third quarter of
2002 in relation to further rationalisation measures, on top of the
rationalisation exercise provided for in 2001.
For the year ended 31 December 2001, an operating exceptional charge of
(pound)4.7 million was incurred in relation to rationalisation and redundancy
costs. Of this amount, (pound)2.9 million was charged at the end of the fourth
quarter of 2001 for redundancy, while the remaining (pound)1.8 million charge
was made in the second quarter of 2001 in connection with the closure of one of
our Gas Cylinder plants in the UK and the transfer of its production to our two
remaining European cylinder plants in France and the UK.
A (pound)0.6 million non-operating charge was made in 2001 for asset disposals
made as part of the rationalisation of production within our Gas Cylinders
operations.
During 2001 the Group also made an exceptional gain of (pound)1.8 million from
the sale of British Aluminium Speciality Extrusions. The business was based at
Workington in England and was sold to the French based aluminium group,
Pechiney, at the end of the first quarter of 2001.
3. NOTES TO GROUP CASH FLOW STATEMENT
(a) Reconciliation of operating profit to net cash inflow from operating
activities
Nine months to Nine months to Full year to
30 September 30 September 31 December
2002 2001 2001
(pound)M (pound)M (pound)M
- ------------------------------------------------------- ---------------- ---------------- --------------
Operating profit 10.1 9.4 4.1
Depreciation 7.6 7.2 9.6
Profit on disposal of tangible fixed assets (0.1) - -
Amortisation of goodwill 1.3 1.3 1.8
Decrease /(increase) in stocks 0.1 (1.9) 1.6
(Increase)/decrease in debtors (1.2) (4.5) 3.0
Increase/(decrease) in creditors and provisions 3.5 (8.1) (7.0)
- ------------------------------------------------------- ---------------- ---------------- --------------
21.3 3.4 13.1
Non-operating exceptional items (0.1) (1.1) (1.3)
- ------------------------------------------------------- ---------------- ---------------- --------------
Net cash inflow from operating activities 21.2 2.3 11.8
- ------------------------------------------------------- ---------------- ---------------- --------------
3. NOTES TO GROUP CASH FLOW STATEMENT (CONTINUED)
(b) Reconciliation of net cash flow to movement in net debt
Nine months to Nine months to Full year to
30 September 30 September 31 December
2002 2001 2001
(pound)M (pound)M (pound)M
- ------------------------------------------------------- ---------------- ---------------- --------------
Increase/(decrease) in net cash for the period 1.1 (7.5) (1.9)
Cash outflow from repayment of debt and finance leases 3.3 5.7 5.8
Cash outflow from purchase of Senior Notes due 2009 - 22.9 22.9
Cash inflow from new debt facilities - - (3.0)
Cash outflow from payment of loan issue costs - 0.1 0.1
Cash outflow/(inflow) from increase/(decrease) in
fixed term cash deposits 4.8 (43.0) (46.9)
- ------------------------------------------------------- ---------------- ---------------- --------------
Change in net debt resulting from cash flows 9.2 (21.8) (23.0)
Debt acquired on acquisition of business - (5.4) (5.4)
Loss on purchase of Senior Notes due 2009 - (0.8) (0.8)
Translation differences (0.6) (1.5) (0.9)
Amortisation of loan issue costs (0.3) (1.0) (1.1)
- ------------------------------------------------------- ---------------- ---------------- --------------
Movement in net debt in the period 8.3 (30.5) (31.2)
Net debt at the beginning of the period (118.8) (87.6) (87.6)
- ------------------------------------------------------- ---------------- ---------------- --------------
Net debt at the end of the period (110.5) (118.1) (118.8)
- ------------------------------------------------------- ---------------- ---------------- --------------
CORPORATE DETAILS
ADDITIONAL INFORMATION
Further information regarding the unaudited condensed financial statements:
Steve Williams
Group Finance Director
General enquiries on the Luxfer Group:
Robert Bailey
Corporate Development Director
REGISTERED OFFICE SOLICITORS
The Victoria, Harbour City Dickson Minto W.S.
Salford Quays Royal London House
Manchester M5 2SP 22/25 Finsbury Square
London EC2A 1DS
COMPANY SECRETARY
Linda F Seddon HammondSuddardsEdge
Trinity Court
AUDITORS 16 John Dalton Street
Ernst & Young LLP Manchester M60 8HS
100 Barbirolli Square
Manchester M2 3EY
BANKERS
Bank of Scotland PLC
Broad Street House
55 Old Broad Street
London EC2P 2HL
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Corporate Banking Office
PO BOX 450
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London EC3P 3HX