BRUNNER MOND GROUP PLC
RESULTS FOR THE QUARTER ENDED
31 MARCH 2001
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS: Page
Consolidated Profit and Loss Account for the three 3
months ended March 31, 2000 (unaudited) and March 31,
2001 (unaudited)
Consolidated Profit and Loss Account for the nine 4
months ended March 31, 2000 (unaudited) and March 31,
2001 (unaudited)
Consolidated Balance Sheets at June 30, 2000 5
(audited) and March 31, 2001 (unaudited)
Consolidated Statement of Cash Flows for the three 6
months ended March 31, 2000 (unaudited) and March 31,
2001 (unaudited)
Consolidated Statement of Cash Flows for the nine 7
months ended March 31, 2000 (unaudited) and March 31,
2001 (unaudited)
Notes to unaudited Consolidated Financial Statements 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 24
CONDITION AND RESULTS OF OPERATIONS
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 31
RISK
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
ITEM 5 OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Page 2
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED PROFIT & LOSS ACCOUNT
(AMOUNTS IN MILLIONS)
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
NOTE (POUND)M (POUND)M
SALES 36.0 39.5
Cost of sales (28.0) (29.6)
------- -------
GROSS PROFIT 8.0 9.9
Other operating expenses (net) (6.6) (6.7)
------- -------
OPERATING PROFIT BEFORE AMORTIZATION OF 1.4 3.2
GOODWILL
Amortization of goodwill (0.7) (0.7)
------- -------
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS 0.7 2.5
Exceptional items 2 -- (63.0)
------- -------
OPERATING PROFIT(LOSS) 0.7 (60.5)
Interest payable, exchange movement on
dollar debt and exceptional refinancing
costs 3 (4.9) (11.2)
------- -------
LOSS BEFORE TAX (4.2) (71.7)
Tax -- (0.2)
------- -------
RETAINED LOSS FOR THE PERIOD (4.2) (71.9)
------- -------
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
Loss for the period (4.2) (71.9)
Currency translation differences 0.4 1.0
------- ------
Total recognized gains and losses relating to (3.8) (70.9)
the period ------- ------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED PROFIT & LOSS ACCOUNT
(AMOUNTS IN MILLIONS)
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
NOTE (POUND)M (POUND)M
SALES 110.1 116.3
Cost of sales (84.3) (85.3)
------- -------
GROSS PROFIT 25.8 31.0
Other operating expenses (net) (19.8) (20.4)
------- -------
OPERATING PROFIT BEFORE AMORTIZATION OF
GOODWILL 6.0 10.6
Amortization of goodwill (2.2) (2.2)
------- -------
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS 3.8 8.4
Exceptional items 2 -- (64.2)
------- -------
OPERATING PROFIT(LOSS) 3.8 (55.8)
Interest payable, exchange movement on
dollar debt and exceptional refinancing
costs 3 (15.0) (18.9)
------- -------
LOSS BEFORE TAX (11.2) (74.7)
Tax (0.3) 1.0
------- -------
RETAINED LOSS FOR THE PERIOD (11.5) (73.7)
------- -------
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
Loss for the period (11.5) (73.7)
Currency translation differences 0.5 0.9
------- -------
Total recognized gains and losses relating to (11.0) (72.8)
the period ------- -------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(AMOUNTS IN MILLIONS)
AS AT AS AT
JUNE 30 MARCH 31
2000 2001
(AUDITED) (UNAUDITED)
NOTE (POUND)M (POUND)M
FIXED ASSETS
Intangible assets - goodwill 52.3 --
Tangible assets 107.9 106.7
------- ------
160.2 106.7
CURRENT ASSETS
Stocks 4 11.3 11.1
Debtors 23.5 24.5
Cash at bank and in hand 7.2 10.4
------- ------
42.0 46.0
CREDITORS: Amounts falling due within one year (48.4) (43.5)
------- ------
NET CURRENT (LIABILITIES)ASSETS (6.4) 2.5
------- ------
TOTAL ASSETS LESS CURRENT LIABILITIES 153.8 109.2
CREDITORS: Amounts falling due after more than (143.7) (170.9)
one year
PROVISIONS FOR LIABILITIES AND CHARGES (6.6) (7.6)
------- ------
NET ASSETS(LIABILITIES) 3.5 (69.3)
------- ------
CAPITAL AND RESERVES
Called-up share capital 0.1 0.1
Share premium account 12.9 12.9
Other reserves 18.0 18.0
Foreign currency translation reserve (2.0) (1.1)
Profit and loss account (25.5) (99.2)
------- ------
EQUITY SHAREHOLDERS' FUNDS(DEFICIT) 3.5 (69.3)
------- ------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
(AMOUNTS IN MILLIONS)
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
NOTE (POUND)M (POUND)M
NET CASH INFLOW FROM OPERATING ACTIVITIES 6 2.0 2.4
------ ------
RETURN ON INVESTMENTS AND SERVICING OF
FINANCE
Interest paid (net) (8.8) (8.4)
Cost of restructuring the balance sheet -- (1.2)
------ ------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (8.8) (9.6)
------ ------
TAXATION
UK Corporation tax paid -- (0.1)
------ ------
TAX PAID -- (0.1)
------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (2.3) (1.8)
Income from sale of fixed assets 0.2 --
------ ------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (2.1) (1.8)
-- ------
NET CASH OUTFLOW BEFORE FINANCING (8.9) (9.1)
------ ------
FINANCING
Expenses paid in connection with raising debt (0.2) --
Income received from Grants 0.3 1.1
New bank loans 12.9 9.8
Guaranteed loan notes (7.1) --
Repayment of debt (0.5) (1.0)
------ ------
NET CASH INFLOW FROM FINANCING 5.4 9.9
------ ------
(DECREASE)INCREASE IN CASH (3.5) 0.8
------ ------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 6
NINE NINE
MONTHS ENDED MONTHS ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
NOTE (POUND)M (POUND)M
NET CASH INFLOW FROM OPERATING ACTIVITIES 6 10.9 8.4
------ ------
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Interest paid (18.0) (18.1)
Sale of hedge -- 8.2
Cost of restructuring the balance sheet -- (1.2)
------ ------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (18.0) (11.1)
------ ------
TAXATION
UK Corporation tax paid (0.3) (0.1)
Overseas tax paid (0.7) --
------ ------
TAX PAID (1.0) (0.1)
------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (6.5) (12.6)
Income from sale of fixed assets 0.5 0.1
------ ------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT (6.0) (12.5)
------ ------
NET CASH OUTFLOW BEFORE FINANCING (14.1) (15.3)
------ ------
FINANCING
Expenses paid in connection with raising debt (0.2) --
Income received from Grants 0.3 4.7
New bank loans 16.4 18.4
Guaranteed loan notes repaid (7.1) --
Repayment of debt (1.0) (4.3)
Finance leases -- (0.4)
------ ------
NET CASH INFLOW FROM FINANCING 8.4 18.4
------ ------
(DECREASE)INCREASE IN CASH (5.7) 3.1
------ ------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 7
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 1 BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Brunner Mond Group PLC and its subsidiaries. The financial statements do not
include certain footnotes required by generally accepted accounting principles.
However, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) which are necessary for a fair presentation of the
financial position and results for the interim period have been included.
The results of operations for the nine months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the entire fiscal year,
which ends on June 30, 2001.
The consolidated financial statements of the Group have been prepared in pounds
sterling and in accordance with generally accepted accounting principles in the
U.K. ("U.K. GAAP"). The accounting principles differ in certain significant
respects from accounting principles generally accepted in the United States of
America ("U.S. GAAP").
These unaudited consolidated financial statements should be read in conjunction
with the financial statements and notes thereto for the year ended June 30, 2000
included in the Group's 20-F.
NOTE 2 EXCEPTIONAL ITEMS
The provision for exceptional items comprises the following:
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
Impairment of goodwill -- 50.1
Impairment of fixed assets -- 9.9
Provision for demolition of power stations
and other redundant buildings 3.0
------- ------
-- 63.0
------- ------
Page 8
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
Impairment of goodwill -- 50.1
Impairment of fixed assets -- 9.9
Provision for demolition of power stations
and other redundant buildings -- 3.0
Provision for redundancies -- 1.2
------- ------
-- 64.2
The (pound)60.0 million provision for the impairment of goodwill and fixed
assets relating to Brunner Mond Limited, recognises that the value of the
business has been adversely affected by the reduction in soda ash prices
experienced since the Group was acquired by Brunner Mond Group plc in 1998.
The provision for the demolition of power stations and other redundant
buildings, increases the existing provision for the demolition of the power
stations to (pound)4.5 million and creates a provision of (pound)0.1 million for
the demolition of other redundant buildings. The three power stations were
closed when the new Powergen co-generation plant was commissioned in August
2000. The actual cost of demolition will depend upon value of scrap materials
recovered when the buildings are demolished.
The provision for redundancies relates to the settlements paid and payable to 24
employees on their being made redundant. 8 of these employees had left the Group
by the March 31, 2001 and the remainder is expected to leave by the end of 2001.
Page 9
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 3 INTEREST PAYABLE, EXCHANGE MOVEMENT ON DOLLAR DEBT AND REFINANCING
COSTS
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
Interest payable (net) 4.9 5.3
Exchange movement on dollar debt -- 4.7
Exceptional refinancing costs -- 1.2
------ ------
4.9 11.2
------ ------
NINE NINE
MONTHS MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
Interest payable (net) 15.0 15.6
Exchange movement on dollar debt -- 2.1
Exceptional refinancing costs -- 1.2
------ ------
15.0 18.9
------ ------
FINANCING COSTS (NET)
Net financing costs for the three months to March 31, 2001 increased by
(pound)6.3 million to (pound)11.2 million and for the nine months to March 31,
2001 increased by (pound)3.9 million to (pound)18.9 million respectively
compared to the equivalent periods ended March 31, 2000. The increase mainly
relates to the exchange loss that arose on revaluing the Dollar Notes to March
31, 2001 exchange rates and (pound)1.2 million that has been incurred in
connection with restructuring the Group balance sheet. The interest charges
within these figures increased by (pound)0.4 million and (pound)0.6 million
respectively to (pound)5.3 million and (pound)15.6 million for the quarter and
nine months ended March 31, 2001 compared to (pound)4.9 million and (pound)15.0
million in the equivalent period in 2000. There was no gain or loss on the
Page 10
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
Dollar Notes in the comparative period because the exchange exposure on this
debt was hedged until September 18, 2000.
The exceptional refinancing costs are the expenses relating to the restructuring
of the balance sheet.
During the nine months the Company unwound the part of the currency swap
relating to exposure to movements in the US dollar/sterling exchange rates on
the principal of $125 million US dollar denominated Senior Subordinated Notes
(the "Dollar Notes"). This resulted in a receipt of (pound)8.2 million and loss
due to a revaluation of the debt at March 31, 2001 of (pound)10.3 million from
(pound)78.1 million to (pound)88.4 million. The net effect in the nine months to
March 31, 2001 of realising the (pound)8.2 million gain on unwinding the hedge
and on recognising the (pound)10.3 million increase in the sterling equivalent
of the Dollar Notes is a loss of (pound)2.1 million.
On 28 March 2001, the Company cancelled all of the hedges against foreign
exchange exposure to movements in the US Dollar against Sterling in relation to
US Dollar interest payments on the US Dollar Denominated Notes. This (pound)0.2
million cancellation cost is included in interest expense.
NOTE 4 ANALYSIS OF STOCKS
AS AT AS AT
JUNE 30 MARCH 31
2000 2001
(AUDITED) (UNAUDITED)
(POUND)M (POUND)M
Raw materials and consumables 5.1 5.9
Finished goods and goods for resale 5.9 4.8
Work in progress 0.3 0.4
------ ------
11.3 11.1
------ ------
Page 11
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 5 ANALYSIS OF NET DEBT
AS AT AS AT
JUNE 30 MARCH 31
2000 2001
(AUDITED) (UNAUDITED)
(POUND)M (POUND)M
Falling due within one year:
Guaranteed Loan Notes (floating rate, LIBOR
less 0.5%) 5.0 4.7
Other (floating rate, LIBOR plus 3.0%) 1.1 1.1
Obligations under finance leases 0.1 0.2
------- -------
6.2 6.0
------- -------
Falling due after one year:
Senior debt (floating rate, LIBOR plus 2.0%)
- - Banks 18.8 32.3
Senior debt (floating rate, LIBOR plus 2.0%,
and fixed rate at 15%) - Shareholders 4.6 6.5
$125.0 million 11% Senior Subordinated Notes
2008 78.1 88.4
(pound)50 million 12 1/2
Senior Subordinated Notes 2008 50.0 50.0
Other (floating rate, LIBOR plus 3.0%) 2.2 1.3
Obligations under finance lease -- 1.5
Debt issuance costs (10.0) (9.1)
------- --------
143.7 170.9
Total debt 149.9 176.9
------- --------
The Guaranteed Unsecured Loan Notes ("GULS") were offered by the Company in lieu
of cash as part of the offer to the former shareholders of Brunner Mond Limited.
These notes are guaranteed by the syndicate of banks led by Chase Manhattan (the
"Syndicate"), for which the Group pays a 2% guarantee fee. The notes are
redeemable for cash at six monthly intervals at the Noteholders' option.
Redemptions will be financed by drawing on an unutilized but committed element
of the senior term loan facility. The GULS are repayable in full by June 30,
2003.
In July 1998, the Company raised $125.0 million in principal aggregate amount of
11% Senior Subordinated Notes 2008 ("the Dollar Notes") as part of the financing
raised to acquire Brunner Mond Limited and its subsidiaries. The exchange
exposure on this debt was hedged by entering into a five year swap agreement
under which the principal and interest was swapped at an effective exchange rate
of (pound)1=$1.60 and the interest was swapped at a rate of 12.28%. On September
18, 2000, the part of this swap that covered the principal was unwound to
realize (pound)8.2 million. In October 2000, (pound)3.1 million of the
(pound)8.2 million was used to make a prepayment on the term loan tranche of the
Page 12
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
Senior Facility, and the remaining (pound)5.1 million has been used to repay
part of the revolving tranche (Tranche D), of the Senior Facility. The
availability under Tranche D has not been reduced as a result of this repayment.
The Senior Debt is drawn on a (pound)105 million term loan and revolving credit
facility provided by the Syndicate. The availability under this facility reduced
to (pound)50 million in July 1998 when the Dollar Notes and the (pound)50
million 12.5% Senior Subordinated Notes 2008 ("the Sterling Notes") were issued.
It was subsequently increased to (pound)60.0 million in April 2000, and then
reduced to (pound)53.0 million in October 2000, when a (pound)7 million facility
which had been made available by the Investor Group, lapsed. The facility was
reduced by a further (pound)3.1 million to (pound)49.9 million in October 2000
when (pound)3.1 million of the (pound)8.2 million proceeds of the sale of
currency swap was used to make a prepayment of the term loan. The (pound)49.9
million facility comprises (i) A revolving credit facility of (pound)20.0
million, under which (pound)19.9 million was drawn at March 31, 2001 and is
repayable in full in July 2005, (ii) a term loan facility of (pound)12.2 million
using Dutch Guilder/Sterling exchange Rates at the date the facility was
created, (as at March 31, 2001 this figure was (pound)11.7 million), under which
(pound)7.1 million was drawn at March 31, 2001 and is to be repaid in
instalments with the first repayment to be made in October 2001 and thereafter
in six monthly instalments in April 2002 and ending in July 2005; (iii) a
(pound)10.0 million Capital Expenditure facility under which (pound)4.3 million
was drawn March 31, 2001 (drawings under the capital expenditure facility will
be repayable in full in July 2005), (iv) a term loan facility of NLG 15.9
million ((pound)4.7 million equivalent using the Exchange Rates at draw down and
(pound)4.5 million equivalent as at March 31, 2001) provided by shareholders
which is repayable in full in July 2005 and (v) a (pound)3.0 million revolving
facility provided by shareholders which is repayable in full in July 2005 and
which was fully drawn at March 31, 2001. Amendments to the Senior Facility which
were agreed in April 2000 made (pound)3.0 million of the Capital Expenditure
facility available on a revolving basis for general corporate purposes. Of the
(pound)4.3 million drawn on the Capital Expenditure facility at March 31, 2001,
(pound)2.0 million was drawn on the (pound)3.0 million made available on a
revolving basis.
In February 1999, in response to the deteriorating global soda ash market,
amendments to the Company's Senior Facility Agreement were implemented. Under
these amendments the shareholders (the 'Investor Group') of Starnhurst PLC,
Brunner Mond Group PLC's ultimate parent, joined the syndicate of banks to make
a new (pound)5 million loan (the 'New Loan') to the Company. The New Loan did
not increase the total indebtedness of the Company, but was used to pre-pay the
repayments of the Senior Facility due in 1999, 2000 and in January, 2001. The
Company also agreed not to draw upon the (pound)10 million Capital Expenditure
Facility without the unanimous consent of the bank syndicate. In addition, the
amendments relaxed the banking covenants which applied during calendar year
2000, and introduced a requirement that each quarter the Company would certify
that its forecasts confirm that the Company would be in compliance with its
banking covenants during the period to December 2000.
Page 13
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
The further reduction in soda ash prices in late 1999 adversely affected
expectations for calendar year 2000 and as a result the Company did not expect
to be able to meet the covenants which had been set for calendar years 2000 and
2001. Following discussions with its Senior Lenders it was agreed that the
borrowing covenants should again be relaxed and accordingly the Company's Senior
Facility Agreement was amended in April 2000. Under these amendments the
Investor Group made a new (pound)10.0 million loan facility (the "Investor
Facility") available to the Company. (pound)3.0 million of Investor Facility can
be used for general corporate purposes and the other (pounD)7.0 million was
available until October 31, 2000 for refinancing other borrowings, subject to
receiving the approval of the Investor Group. This (pound)7.0 million facility
lapsed on October 31, 2000. These amendments also extended the requirement that
each quarter the Company would certify that its forecasts confirm that the
Company's existing facilities will be adequate during the following twelve
months. In addition, the Senior Lenders also agreed to make (pound)3.0 million
of the (pound)10.0 million Capital Expenditure Facility available for general
corporate purposes.
The covenants set in April 2000 for 2001 and 2002, the size of the additional
facility provided by the Investor Group and the amount of the existing capital
expenditure facility made available by the Senior Lenders for general corporate
purposes were based upon projections that assumed an improvement in the soda ash
market during those periods and further improvements in the Company's cost base.
The Company experienced difficult trading conditions during 2000 attributable to
continued weak pricing, and difficulties with Powergen's co-generation plant.
Although the Company did secure improvements in its contracted soda ash prices
for calendar year 2001, it remained concerned about its ability to continue to
meet its banking covenants throughout 2001.
The Company has engaged financial and legal advisers to help with a review of
the alternatives for restructuring certain of its debt obligations with a view
to strengthening the Company's capital base. This review concluded that the
preferred alternative is likely to include a proposal that the Dollar and
Sterling Notes should be restructured and the Note Holders were therefore
invited to form an Ad Hoc Committee to enter into negotiations with the Company.
These negotiations are covered by confidentiality undertakings. Negotiations are
continuing. The Ad Hoc Committee, comprises representatives of Aberdeen Asset
Managers Limited, Barclays Bank PLC, CFSC Wayland Advisers Inc., Chase Manhattan
International Limited, Citibank International plc, and Westdeutsche Landesbank
Girozentrale.
Page 14
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
The Company does not expect to be able to meet all of its banking covenants on
May 30, 2001. The Syndicate is fully aware of the situation and supports the
current restructuring discussions. The success of these negotiations is
essential to the ability of the Company to continue to trade.
NOTE 6 ANALYSIS OF NET CASH FLOW FROM OPERATING ACTIVITIES
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
OPERATING PROFIT BEFORE EXCEPTIONAL 0.7 2.5
ITEMS
Depreciation 2.2 2.2
Amortization of goodwill 0.7 0.7
------- ------
EBITDA * 3.6 5.4
Movement in working capital (1.3) (2.5)
Exceptional items (0.2) (0.5)
Profit on sale of assets (0.1) --
------- ------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 2.0 2.4
------- ------
* Earnings before interest, tax, depreciation and amortization
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 2001
(UNAUDITED) (UNAUDITED)
(POUND)M (POUND)M
OPERATING PROFIT BEFORE EXCEPTIONAL
ITEMS 3.8 8.4
Depreciation 6.7 6.6
Amortization of goodwill 2.2 2.2
------ -------
EBITDA* 12.7 17.2
Movement in working capital -- (7.0)
Exceptional items (1.5) (1.7)
Profit on sale of assets (0.3) (0.1)
------ -------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 10.9 8.4
------ -------
Page 15
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION
The following supplemental financial statements, prepared in accordance with
U.K. GAAP, reflect the combined historical financial position, profit and loss
account and cash flows of Brunner Mond Group PLC, subsidiaries of the Group who
are or will be guarantors of the Group's senior subordinated indebtedness and
non-guarantor subsidiaries. The non-guarantor subsidiaries consist of the
African operating subsidiaries of the Group.
FOR THE 3 MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
SALES -- 32.0 4.0 -- 36.0
Cost of Sales -- (26.7) (1.3) -- (28.0)
------- ------ ------ ------- -------
GROSS PROFIT -- 5.3 2.7 -- 8.0
Other operating expenses (net) -- (3.8) (2.8) -- (6.6)
Amortization of goodwill -- -- -- (0.7) (0.7)
------- ------ ------ ------- -------
OPERATING PROFIT(LOSS) -- 1.5 (0.1) (0.7) 0.7
Net interest payable (4.8) (0.1) -- -- (4.9)
------- ------ ------ ------- -------
(LOSS)PROFIT BEFORE TAX (4.8) 1.4 (0.1) (0.7) (4.2)
Tax -- -- -- -- --
Dividend 5.0 (5.0) -- -- --
------- ------ ------ ------- -------
RETAINED PROFIT(LOSS) 0.2 (3.6) (0.1) (0.7) (4.2)
------- ------ ------ ------- -------
Page 16
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
FOR THE 3 MONTHS ENDED MARCH 31, 2001 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
SALES -- 34.3 5.2 -- 39.5
Cost of Sales -- (27.8) (1.8) -- (29.6)
------- ------ ------ ------- -------
GROSS PROFIT -- 6.5 3.4 -- 9.9
Other operating expenses (net) -- (3.7) (3.0) -- (6.7)
Amortization of goodwill -- -- -- (0.7) (0.7)
------- ------ ------ ------- -------
OPERATING PROFIT(LOSS) BEFORE
EXCEPTIONAL ITEMS -- 2.8 0.4 (0.7) 2.5
Exceptional items (60.0) (12.9) 9.9 (63.0)
------- ------ ------ ------- -------
OPERATING (LOSS)PROFIT (60.0) (10.1) 0.4 9.2 (60.5)
Net interest payable (9.8) (1.3) (0.1) -- (11.2)
------- ------ ------ ------- -------
(LOSS)PROFIT BEFORE TAX (69.8) (11.4) 0.3 9.2 (71.7)
Tax -- -- (0.2) -- (0.2)
Dividend -- -- -- -- --
------- ------ ------ ------- -------
RETAINED (LOSS)PROFIT (69.8) (11.4) 0.1 9.2 (71.9)
------- ------ ------ ------- -------
Page 17
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION (CONTINUED)
FOR THE 9 MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
SALES -- 98.0 12.1 -- 110.1
Cost of Sales -- (80.5) (3.8) -- (84.3)
------- ------ ------ ------- -------
GROSS PROFIT -- 17.5 8.3 -- 25.8
Other operating expenses (net) -- (12.2) (7.6) -- (19.8)
Amortization of goodwill -- -- -- (2.2) (2.2)
------- ------ ------ ------- -------
OPERATING PROFIT(LOSS) -- 5.3 0.7 (2.2) 3.8
Net interest payable (14.5) (0.3) (0.2) (15.0)
------- ------ ------ ------- -------
(LOSS)PROFIT BEFORE TAX (14.5) 5.0 0.5 (2.2) (11.2)
Tax -- -- (0.3) -- (0.3)
Dividend 5.0 (5.0) -- -- --
------- ------ ------ ------- -------
RETAINED (LOSS)PROFIT (9.5) -- 0.2 (2.2) (11.5)
------- ------ ------ ------- -------
FOR THE 9 MONTHS ENDED MARCH 31, 2001 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
SALES -- 99.1 17.2 -- 116.3
Cost of Sales -- (79.5) (5.8) -- (85.3)
------- ------ ------ ------- -------
GROSS PROFIT -- 19.6 11.4 -- 31.0
Other operating expenses (net) -- (10.7) (9.7) -- (20.4)
Amortization of goodwill -- -- -- (2.2) (2.2)
------- ------ ------ ------- -------
OPERATING PROFIT BEFORE
EXCEPTIONAL ITEMS -- 8.9 1.7 (2.2) 8.4
Exceptional items (60.0) (14.1) -- 9.9 (64.2)
------- ------ ------ ------- -------
OPERATING (LOSS)PROFIT (60.0) (5.2) 1.7 7.7 (55.8)
Net interest payable (17.2) (1.4) (0.3) -- (18.9)
------- ------ ------ ------- -------
(LOSS)PROFIT BEFORE TAX (77.2) (6.6) 1.4 7.7 (74.7)
Tax -- 1.4 (0.4) -- 1.0
Dividend -- -- -- -- --
------- ------ ------ ------- -------
RETAINED (LOSS)PROFIT (77.2) (5.2) 1.0 7.7 (73.7)
------- ------ ------ ------- -------
Page 18
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION (CONTINUED)
JUNE 30, 2000 (AUDITED)
NON
PARENT GUARANTOR GUARANTOR
COMPANY MEMBERS MEMBERS ELIMINATION COMBINED
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
FIXED ASSETS
Tangible Assets - Goodwill -- -- -- 52.3 52.3
Tangible assets
- -Cost -- 148.5 18.5 (41.6) 125.4
- -Accumulated depreciation -- (52.9) (6.2) 41.6 (17.5)
------- -------- ------ ------- ------
- -Net book value -- 95.6 12.3 -- 107.9
- -Investments 148.6 -- 4.6 (153.2) --
------- -------- ------ ------- ------
148.6 95.6 16.9 (100.9) 160.2
CURRENT ASSETS
Stock
- -Raw materials -- 4.2 0.9 -- 5.1
- -Work in progress -- 0.2 0.1 -- 0.3
- -Finished goods -- 4.8 1.1 5.9
------- -------- ------ ------- ------
-- 9.2 2.1 -- 11.3
Debtors
- -Trade debtors -- 16.4 4.7 -- 21.1
- -Other debtors and prepayments 16.2 75.2 3.5 (92.5) 2.4
------- -------- ------ ------- ------
16.2 91.6 8.2 (92.5) 23.5
Cash at bank and in hand 5.5 1.7 7.2
------- -------- ------ ------- ------
16.2 106.3 12.0 (92.5) 42.0
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR
- -Trade creditors -- (23.6) (1.6) -- (25.2)
- -Other current liabilities (21.5) (41.7) (10.0) 50.0 (23.2)
------- -------- ------ ------- ------
NET CURRENT (LIABILITIES)ASSETS (5.3) 41.0 0.4 (42.5) (6.4)
------- -------- ------ ------- ------
TOTAL ASSETS LESS CURRENT
LIABILITIES 143.3 136.6 17.3 (143.4) 153.8
CREDITORS: Amounts falling due
after more than one year
- -Long term debt (141.4) (40.9) (3.9) 42.5 (143.7)
PROVISIONS FOR LIABILITIES AND
CHARGES -- (6.3) (0.3) -- (6.6)
------- -------- ------ ------- ------
NET ASSETS 1.9 89.4 13.1 (100.9) 3.5
======= ======== ====== ======= ======
CAPITAL AND RESERVES
Called-up share capital 0.1 7.6 -- (7.6) 0.1
Share premium account 12.9 3.0 0.3 (3.3) 12.9
Goodwill reserve -- -- 1.9 (1.9) --
Other reserves 18.0 14.2 -- (14.2) 18.0
Foreign currency translation
reserve 0.1 0.4 2.3 (4.8) (2.0)
Profit and loss account (29.2) 64.2 8.6 (69.1) (25.5)
------- -------- ------ ------- ------
SHAREHOLDERS' FUNDS 1.9 89.4 13.1 (100.9) 3.5
======= ======== ====== ======= ======
Page 19
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION (CONTINUED)
MARCH 31, 2001 (UNAUDITED)
PARENT GUARANTOR NON- ELIMINATIONS COMBINED
COMPANY MEMBERS GUARANTOR
MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
FIXED ASSETS
Tangible assets - goodwill -- -- -- -- --
Tangible assets
- - Cost -- 161.1 20.9 (41.6) 140.4
- - Accumulated depreciation -- (67.6) (7.7) 41.6 (33.7)
------- ------- ------- ------- -------
- - Net book value -- 93.5 13.2 -- 106.7
- - Investments 88.6 -- 4.6 (93.2) --
------- ------- ------- ------- -------
88.6 93.5 17.8 (93.2) 106.7
CURRENT ASSETS
Stock
- - Raw materials -- 4.9 1.5 -- 6.4
- - Work in progress -- 0.3 -- -- 0.3
- - Finished goods -- 4.2 0.2 -- 4.4
------- ------- ------- ------- -------
-- 9.4 1.7 -- 11.1
DEBTORS
- - Trade debtors -- 18.1 4.3 -- 22.4
- - Other debtors and prepayments 16.2 72.0 3.4 (89.5) 2.1
------- ------- ------- ------- -------
16.2 90.1 7.7 (89.5) 24.5
Cash at bank and in hand -- 8.2 2.2 -- 10.4
------- ------- ------- ------- -------
16.2 107.7 11.6 (89.5) 46.0
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR
- - Trade creditors -- (17.1) (2.2) -- (19.3)
- - Other current liabilities (11.9) (48.1) (11.1) 46.9 (24.2)
------- ------- ------- ------- -------
NET CURRENT ASSETS(LIABILITIES) 4.3 42.5 (1.7) (42.6) 2.5
TOTAL ASSETS LESS CURRENT LIABILITIES 92.9 136.0 16.1 (135.8) 109.2
CREDITORS: AMOUNTS FALLING
DUE AFTER MORE THAN ONE YEAR
- - Long term debt (168.1) (44.6) (0.8) 42.6 (170.9)
PROVISIONS FOR LIABILITIES AND CHARGES -- (7.3) (0.3) -- (7.6)
------- ------- ------- ------- -------
NET ASSETS (75.2) 84.1 15.0 (93.2) (69.3)
======= ======= ======= ======= =======
CAPITAL AND RESERVES
Called-up share capital 0.1 7.6 -- (7.6) 0.1
Share premium account 12.9 3.0 0.3 (3.3) 12.9
Goodwill reserve -- -- 1.9 (1.9) --
Other reserves 18.2 14.4 3.3 (19.0) 16.9
Profit and loss account (106.4) 59.1 9.5 (61.4) (99.2)
------- ------- ------- ------- -------
SHAREHOLDERS' FUNDS (75.2) 84.1 15.0 (93.2) (69.3)
======= ======= ======= ======= =======
Page 20
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION (CONTINUED)
FOR THE 3 MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M
NET CASH INFLOW(OUTFLOW) FROM OPERATING
ACTIVITIES -- 1.5 0.5 2.0
------ ------ ------ ------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (net) (8.8) -- -- (8.8)
------ ------ ------ ------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (8.8) -- -- (8.8)
------ ------ ------ ------
TAXATION
UK taxation paid -- -- -- --
------ ------ ------ ------
TAX PAID -- -- -- --
------ ------ ------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets -- (1.6) (0.7) (2.3)
Income from Grants -- 0.3 -- 0.3
Income from sale of fixed assets -- 0.1 0.1 0.2
------ ------ ------ ------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT -- (1.2) (0.6) (1.8)
------ ------ ------ ------
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING (8.8) 0.3 (0.1) (8.6)
------ ------ ------ ------
FINANCING
Expenses paid in connection with raising debt (0.2) -- -- (0.2)
Repayment of debt (7.1) -- (0.5) (7.6)
New bank loans 12.9 -- -- 12.9
Loans paid by Group companies 1.5 (1.5) -- --
------ ------ ------ ------
NET CASH INFLOW (OUTFLOW) FROM FINANCING 7.1 (1.5) (0.5) 5.1
------ ------ ------ ------
DECREASE IN CASH (1.7) (1.2) (0.6) (3.5)
====== ====== ====== ======
Page 21
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION (CONTINUED)
FOR THE 3 MONTHS ENDED MARCH 31, 2001 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M
NET CASH INFLOW(OUTFLOW) FROM OPERATING
ACTIVITIES -- 1.6 0.8 2.4
------ ------ ------ ------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (net) (8.4) -- -- (8.4)
Cost of restructuring the balance sheet (1.2) -- -- (1.2)
------ ------ ------ ------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (9.6) -- -- (9.6)
------ ------ ------ ------
TAXATION
UK taxation paid -- (0.1) -- (0.1)
------ ------ ------ ------
TAX PAID -- (0.1) -- (0.1)
------ ------ ------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets -- (1.6) (0.2) (1.8)
------ ------ ------ ------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT -- (1.6) (0.2) (1.8)
------ ------ ------ ------
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING (9.6) (0.1) 0.6 (9.1)
------ ------ ------ ------
FINANCING
Grant receipts -- 1.1 -- 1.1
Repayment of debt (0.5) -- (0.5) (1.0)
New bank loans 9.8 -- -- 9.8
Loans paid by Group companies 0.3 (0.3) -- --
------ ------ ------ ------
NET CASH INFLOW (OUTFLOW) FROM FINANCING 9.6 0.8 (0.5) 9.9
------ ------ ------ ------
(DECREASE)INCREASE IN CASH -- 0.7 0.1 0.8
====== ====== ====== ======
Page 22
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION (CONTINUED)
FOR THE 9 MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M
NET CASH INFLOW FROM OPERATING ACTIVITIES -- 9.9 1.0 10.9
------ ------ ------ ------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (net) (17.5) (0.2) (0.3) (18.0)
------ ------ ------ ------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (17.5) (0.2) (0.3) (18.0)
------ ------ ------ ------
TAXATION
Overseas tax paid -- -- (0.7) (0.7)
UK taxation paid -- (0.3) -- (0.3)
------ ------ ------ ------
TAX PAID -- (0.3) (0.7) (1.0)
------ ------ ------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets -- (4.3) (2.2) (6.5)
Income from Grants -- 0.3 -- 0.3
Income from sale of fixed assets -- 0.2 0.3 0.5
------ ------ ------ ------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT -- (3.8) (1.9) (5.7)
------ ------ ------ ------
NET CASH (OUTFLOW)INFLOW BEFORE FINANCING (17.5) 5.6 (1.9) (13.8)
------ ------ ------ ------
FINANCING
Expenses in connection with raising debt (0.2) -- -- (0.2)
New bank loans 16.4 -- -- 16.4
Repayment of debt (7.1) -- (1.0) (8.1)
Loans paid by Group companies 6.6 (6.6) -- --
------ ------ ------ ------
NET CASH INFLOW (OUTFLOW) FROM FINANCING 15.7 (6.6) (1.0) 8.1
------ ------ ------ ------
DECREASE IN CASH (1.8) (1.0) (2.9) (5.7)
====== ====== ====== ======
Page 23
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS)
NOTE 7 SUPPLEMENTARY INFORMATION (CONTINUED)
FOR THE 9 MONTHS ENDED MARCH 31, 2001 (UNAUDITED)
PARENT GUARANTOR NON-GUARANTOR COMBINED
COMPANY MEMBERS MEMBERS
(POUND)M (POUND)M (POUND)M (POUND)M
NET CASH INFLOW FROM OPERATING ACTIVITIES -- 5.1 3.3 8.4
------ ------ ------ ------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (net) (17.6) (0.1) (0.4) (18.1)
Sale of hedge 8.2 -- -- 8.2
Cost of restructuring the balance sheet (1.2) -- -- (1.2)
------ ------ ------ ------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (10.6) (0.1) (0.4) (11.1)
------ ------ ------ ------
TAXATION
UK taxation paid -- (0.1) -- (0.1)
------ ------ ------ ------
TAX PAID -- (0.1) -- (0.1)
------ ------ ------ ------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets -- (11.4) (1.2) (12.6)
Income from sale of fixed assets -- 0.1 -- 0.1
------ ------ ------ ------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT -- (11.3) (1.2) (12.5)
------ ------ ------ ------
NET CASH (OUTFLOW)INFLOW BEFORE FINANCING (10.6) (6.4) 1.7 (15.3)
------ ------ ------ ------
FINANCING
Grant received -- 4.7 -- 4.7
New bank loans 18.4 -- -- 18.4
Repayment of debt (3.1) -- (1.2) (4.3)
Finance leases -- (0.4) -- (0.4)
Loans paid by Group companies (5.9) 5.9 -- --
------ ------ ------ ------
NET CASH INFLOW (OUTFLOW) FROM FINANCING 9.4 10.2 (1.2) 18.4
------ ------ ------ ------
DECREASE IN CASH (1.2) 3.8 0.5 3.1
====== ====== ====== ======
Page 24
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Some of the information presented in the following discussion constitutes
forward-looking comments within the meaning of the Private Litigation Reform Act
of 1995. Although Brunner Mond Group PLC (the "Company") believes its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors which could
cause actual results to differ from expectations include, without limitation,
currency rate fluctuations operations across international boarders, the timing
of orders received from customers, the gain or loss of significant customers,
competition from other manufacturers and changes in the demand for and the
pricing of the Company's products. In addition, increases in the cost of
product, changes in the market in general and significant changes in new product
introduction could result in actual results varying from expectations.
1. ENERGY SUPPLY INTERRUPTION
On August 18, 2000 Powergen CHP started commercial operation of the new
(pound)140 million Combined Heat and Power plant that supplies co-generated
steam and electricity to the Group's two manufacturing sites in Northwich.
In early November Powergen CHP announced that unusually high levels of rainfall
had caused the operation of the water treatment plant to be very difficult.
Powergen continued to experience problems with its plant in December and in
January 2001. Part of the power plant suffered damage and as a result the normal
supply of steam to the Group's plants in Northwich could not be maintained.
Powergen CHP declared Force Majeure with effect from November 2, 2000 and lifted
it on January 22, 2001.
In response, Powergen CHP installed temporary additional water treatment
equipment in November and gradually increased steam supplies during the month.
Powergen CHP has committed to installing permanent additional water treatment
equipment and expects it to be commissioned later in 2001.
Since the end of January the reliability of steam supplies has been good, with
no interruptions.
The reduction of steam supplies has had an adverse impact on the Group's UK
production and as a direct consequence it was necessary for Brunner Mond itself
to declare Force Majeure and sell soda ash and sodium bicarbonate on an
allocated basis. The allocation was introduced on November 6, 2000 and steadily
increased during November to a level of 100% on December 6, 2000.
The Company has received payments from Powergen in respect of various
interruptions of steam supply since the start of commercial operation.
Page 25
2. RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 2001 COMPARED WITH THE THREE AND NINE MONTHS ENDED
MARCH 31, 2000
SALES
Sales for the three months ended March 31, 2001 increased by (pound)3.5 million,
or 9.7%, to (pound)39.5 million compared to the quarter ended March 31, 2000,
wherEAS sales for the nine months to ended March 31, 2001 increased by
(pound)6.2 million, or 5.6%, to (pound)116.3 million compared to the equivalent
period in 2000. The sales of the European businesses increased in the quarter to
March 31, 2001 by (pound)2.3 million (7.2%) as a result of improved volumes and
prices in the UK and in Continental Europe. The sales for the nine months to
March 31, 2001 increased by (pound)1.1 million (1.1%) as a result of an increase
in sales volumes that more than offset the reduction in the average soda prices
for the nine months.
Sales from the African business increased by (pound)1.2 million or 30.0% to
(pound)5.2 million and by (pound)5.1 million, or 42.1% to (pound)17.2 million
for the quarter and nine months to March 31, 2001, respectively. The improvement
in the quarter and the nine months was attributable to an improvement in
volumes, to improved prices and to more favourable exchange rates.
GROSS PROFIT
Gross profit in the three and nine months ended March 31, 2001 increased by
(pound)1.9 million, or 23.8%, to (pound)9.9 million and by (pound)5.2 million,
or 20.2% to (pound)31.0 million respectively. The improvement in the quarter and
nine months was mainly attributable to volume increases principally in the UK
and from Kenya, and from a further reduction in the Group's cost base. The
improvement in the nine months was also helped by the receipt of non-recurring
income including a one-time technology licence fee, rates rebates, insurance
recoveries and the release of certain accruals following the normal half-year
review. This non-recurring income added (pound)2.3 million to gross profit in
The nine months, The improvement in the UK volumes would have been more
significant were it not for the sales lost as a consequence of Force Majeure.
The contribution lost and resulting inefficiencies were partially made up by
compensation received from Powergen CHP.
Page 26
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The reduction in costs and the compensation received explain the increase in
gross profit percentage to 26.7% in the nine months ended March 31, 2001
compared to 23.4% in the equivalent period in 2000.
OTHER OPERATING EXPENSES (EXCLUDING EXCEPTIONAL ITEMS)
Operating expenses increased by (pound)0.1 million, or 1.5%, to (pound)6.7
million for the quarter, and by (pound)0.6 million, or 3.0%, to (pound)20.4
million in THe nine months to March 31, 2001.
The increase for the nine months was mainly attributable to the effect on
distribution costs of the significant increase in volumes sold by the African
businesses.
OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS
Operating profit for the quarter and nine months ended March 31, 2001 increased
by (pound)1.8 million, or 257% to (pound)2.5 million, and by (pound)4.6 million,
or 121% to (pound)8.4 million respectively. The factors behind the improvement
In gross profit for the quarter and nine months ended March 31, 2001 were also
responsible for the improvement in operating profit.
EXCEPTIONAL ITEMS
Redundancy
The (pound)1.2 million exceptional charges in the nine months to
March 2001, relates to the cost associated with making 24 employees in the UK
redundant. During the quarter payments of (pound)0.3 million were made with
respect to this provision and a further (pound)0.3 million was paid in relation
to settlements provided for in the year ended June 30, 1999.
Demolition Provision
The provision for the demolition of power stations and other redundant
buildings, increases the existing provision for the demolition of the power
stations by (pound)2.9 million to (pound)4.5 million and creates a provision Of
(pound)0.1 million for the demolition of other redundant buildings. The three
power stations were decommissioned when the new Powergen co-generation plant was
commissioned in August 2000. The actual cost of demolition will depend upon
value of scrap materials recovered when the buildings are demolished.
Impairment Provision
The (pound)60.0 million provision for the impairment of goodwill and fixed
assets relating to Brunner Mond Limited, recognises that the value of the
business has been adversely affected by the reduction in soda ash prices
experienced since the Group was acquired by Brunner Mond Group PLC in 1998.
Page 27
OPERATING (LOSS)PROFIT
The Company produced an operating loss of (pound)60.5 million and (pound)55.8
million for the quarter and nine months ended March 31, 2001 compared to an
operating profit of (pound)0.7 million and (pound)3.8 million generated in
equivalent periods in 2000. These operating losses are principally the result of
the exceptional charges described above.
FINANCING COSTS (NET)
Net financing costs for the three months to March 31, 2001 increased by
(pound)6.3 million to (pound)11.2 million and for the nine months to March 31,
2001 increased by (pound)3.9 million to (pound)18.9 million respectively
compared to the equivalent periods ended March 31, 2000. The increase mainly
relates to the exchange loss that arose on revaluing the Dollar Notes to March
31, 2001 exchange rates and (pound)1.2 million that has been incurred in
connection with restructuring the Group balance sheet. The interest charges
within these figures increased by (pound)0.4 million and (pound)0.6 million
respectively To (pound)5.3 million and (pound)15.6 million for the quarter and
nine months ended March 31, 2001 compared to (pound)4.9 million and (pound)15.0
million in the equivalent period in 2000. There was no gain or loss on the
Dollar Notes in the comparative period because the exchange exposure on this
debt was hedged until September 18, 2000.
The exceptional refinancing costs are the expenses relating to the restructuring
of the balance sheet.
During the nine months the Company unwound the part of the currency swap
relating to exposure to movements in the US dollar/sterling exchange rates on
the principal of $125 million US dollar denominated Senior Subordinated Notes
(the "Dollar Notes"). This resulted in a receipt of (pound)8.2 million and loss
due to a revaluation of the debt at March 31, 2001 of (pound)10.3 million from
(pound)78.1 million to (pound)88.4 million. The net effect in the nine months to
March 31, 2001 of realising the (pound)8.2 million gain on unwinding the hedge
and on recognising the (pound)10.3 million increase in the sterling equivalent
of the Dollar Notes is a loss of (pound)2.1 million.
On 28 March 2001, the Company cancelled all of the hedges against foreign
exchange exposure to movements in the US Dollar against Sterling in relation to
US Dollar interest payments on the US Dollar Denominated Notes. This (pound)0.2
million cancellation cost is included in interest expense.
TAX
The tax charge for the quarter of (pound)0.2 million compared to a charge of
(pound)nil in the equivalent period in 2000, this was due to profits in the
African businesses being higher than in the equivalent period in 2000. The tax
credit for the nine months was (pound)1.0 million compared to (pound)0.3 million
charge in 2000. This was mainly the result of releasing deferred tax in the nine
months, following further tax losses.
Page 28
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
RETAINED PROFIT/LOSS
The retained loss for the quarter of (pound)71.9 million compared to a loss of
(pound)4.2 million in the equivalent period in 2000. The retained loss for the
nine months was (pound)73.7 million compared to (pound)11.5 million.
3. LIQUIDITY AND CAPITAL RESOURCES
The net cash from operating activities increased by (pound)0.4 million (20%) to
(pound)2.4 million for the quarter and decreased by (pound)2.5 million (23%) to
(pound)8.4 million for the nine months ended March 31, 2001. Cash flows in the
quarter and nine months were favourably affected by the (pound)1.8 million and
(pound)4.5 Million respective improvement in earnings before interest, tax,
depreciation and amortization (EBITDA). The factors that were responsible for
the improved gross and operating profit in the quarter and nine months ended
March 31, 2001 were also responsible for the improvement in EBITDA. The
improvement in EBITDA was more than offset by an increase in working capital of
(pound)1.2 million for the quarter and (pound)7.0 million the nine months ended
March 31, 2001. The increase in working capital was in part caused by paying
capital creditors, in part linked to making redundancy payments which were
provided in previous periods, and in part associated with a reduction in trade
creditors.
CAPITAL EXPENDITURE PROJECTS
Capital expenditures decreased by (pound)0.5 million to (pound)1.8 million in
the quarter compared to the equivalent quarter in 2000 but increased by
(pound)8.0 million to (pound)14.5 million (or (pound)12.6 million before
financing leases) in the nine months ended March 31, 2001 compared to the
capital invested in the nine months ended March 31, 2000. The increase was
attributable to the major investment being made in the new rapid discharge
system and new rail wagons, which were commissioned during January 2001 and are
delivering limestone to Brunner Mond's sites in Northwich. The total investment
in this project was (pound)9.0 million of which (pound)6.1 million is being
funded by a Freight Facilities Grant awarded by the UK Government. (pound)1.9
million of the investment has been financed by a lease that was provided by
Barclays Mercantile.
SENIOR FACILITY AGREEMENTS
The Guaranteed Unsecured Loan Notes ("GULS") were offered by the Company in lieu
of cash as part of the offer to the former shareholders of Brunner Mond Limited.
These notes are guaranteed by the syndicate of banks led by Chase Manhattan (the
"Syndicate"), for which the Group pays a 2% guarantee fee. The notes are
redeemable for cash at six monthly intervals at the Noteholders' option.
Redemptions will be financed by drawing on an unutilized but committed element
of the senior term loan facility. The GULS are repayable in full by June 30,
2003.
Page 29
In July 1998, the Company raised $125.0 million in principal aggregate amount of
11% Senior Subordinated Notes 2008 ("the Dollar Notes") as part of the financing
raised to acquire Brunner Mond Limited and its subsidiaries. The exchange
exposure on this debt was hedged by entering into a five year swap agreement
under which the principal and interest was swapped at an effective exchange rate
of (pound)1=$1.60 and the interest was swapped at a rate of 12.28%. On September
18, 2000, the part of this swap that covered the principal was unwound to
realize (pound)8.2 million. In October 2000, (pound)3.1 million of the
(pound)8.2 million was used to make a prepayment on the term loan tranche of the
Senior Facility, and the remaining (pound)5.1 million has been used to repay
part of the revolving tranche (Tranche D), of the Senior Facility. The
availability under Tranche D has not been reduced as a result of this repayment.
The Senior Debt is drawn on a (pound)105 million term loan and revolving credit
facility provided by the Syndicate. The availability under this facility reduced
to (pound)50 million in July 1998 when the Dollar Notes and the (pound)50
million 12.5% Senior Subordinated Notes 2008 ("the Sterling Notes") were issued.
It was subsequently increased to (pound)60.0 million in April 2000, and then
reduced to (pound)53.0 million in October 2000, when a (pound)7 million facility
which had been made available by the Investor Group, lapsed. The facility was
reduced by a further (pound)3.1 million to (pound)49.9 million in October 2000
when (pound)3.1 million of the (pound)8.2 million proceeds of the sale of
currency swap was used to make a prepayment of the term loan. The (pound)49.9
million facility comprises (i) A revolving credit facility of (pound)20.0
million, under which (pound)19.9 million was drawn at March 31, 2001 and is
repayable in full in July 2005, (ii) a term loan facility of (pound)12.2 million
using Dutch Guilder/Sterling exchange rates at the date the facility was
created, (as at March 31, 2001 this figure is (pound)11.7 million), under which
(pound)7.1 million was drawn at March 31, 2001 and is to be repaid in
instalments with the first repayment to be made in October 2001 and thereafter
in six monthly instalments in April 2002 and ending in July 2005; (iii) a
(pound)10.0 million Capital Expenditure facility under which (pound)4.3 million
was drawn March 31, 2001 (drawings under the Capital Expenditure
facility will be repayable in full in July 2005), (iv) a term loan facility of
NLG 15.9 million ((pound)4.7 million equivalent using the Exchange Rates at draw
down and (pound)4.5 million equivalent as at March 31, 2001) provided by
shareholders which is repayable in full in July 2005 and (v) a (pound)3.0
million revolving facility provided by shareholders which is repayable in full
in July 2005 and which was fully drawn at March 31, 2001. Amendments to the
Senior Facility which were agreed in April 2000 made (pound)3.0 million of the
Capital Expenditure facility available on a revolving basis for general
corporate purposes. Of the (pound)4.3 million drawn on the Capital Expenditure
facility at March 31, 2001, (pound)2.0 million was drawn on the (pound)3.0
million made available on a revolving basis.
Page 30
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
In February 1999, in response to the deteriorating global soda ash market,
amendments to the Company's Senior Facility Agreement were implemented. Under
these amendments the shareholders (the 'Investor Group') of Starnhurst PLC,
Brunner Mond Group PLC's ultimate parent, joined the syndicate of banks to make
a new (pound)5 million loan (the 'New Loan') to the Company. The New Loan did
not increase the total indebtedness of the Company, but was used to pre-pay the
repayments of the Senior Facility due in 1999, 2000 and in January, 2001. The
Company also agreed not to draw upon the (pound)10 million Capital Expenditure
Facility without the unanimous consent of the bank syndicate. In addition, the
amendments relaxed the banking covenants which applied during calendar year
2000, and introduced a requirement that each quarter the Company would certify
that its forecasts confirm that the Company would be in compliance with its
banking covenants during the period to December 2000.
The further reduction in soda ash prices in late 1999 adversely affected
expectations for calendar year 2000 and as a result the Company did not expect
to be able to meet the covenants which had been set for calendar years 2000 and
2001. Following discussions with its Senior Lenders it was agreed that the
borrowing covenants should again be relaxed and accordingly the Company's Senior
Facility Agreement was amended in April 2000. Under these amendments the
Investor Group made a new (pound)10.0 million loan facility (the "Investor
Facility") available to the Company. (pound)3.0 million of Investor Facility can
be used for general corporate purposes and the other (pound)7.0 million was
available until October 31, 2000 for refinancing other borrowings,
subject to receiving the approval of the Investor Group. This (pound)7.0 million
facility lapsed on October 31, 2000. These amendments also extended the
requirement that each quarter the Company would certify that its forecasts
confirm that the Company's existing facilities will be adequate during the
following twelve months. In addition, the Senior Lenders have agreed to make
(pound)3.0 million of the (pound)10.0 million Capital Expenditure Facility
available for general corporate purposes.
The covenants set in April 2000 for 2001 and 2002, the size of the additional
facility provided by the Investor Group and the amount of the existing capital
expenditure facility made available by the Senior Lenders for general corporate
purposes were based upon projections that assumed an improvement in the soda ash
market during those periods and further improvements in the Company's cost base.
The Company experienced difficult trading conditions during 2000 attributable to
continued weak pricing, and difficulties with Powergen's co-generation plant.
Although the Company did secure improvements in its contracted soda ash prices
for calendar year 2001, it remained concerned about its ability to continue to
meet its banking covenants throughout 2001.
The Company has engaged financial and legal advisers to help with a review of
the alternatives for restructuring certain of its debt obligations with a view
to strengthening
Page 31
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
the Company's capital base. This review concluded that the preferred alternative
is likely to include a proposal that the Dollar and Sterling Notes should be
restructured and the Note Holders were therefore invited to form an Ad Hoc
Committee to enter into negotiations with the Company. These negotiations are
covered by confidentiality undertakings. Negotiations are continuing. The Ad Hoc
Committee, comprises representatives of Aberdeen Asset Managers Limited,
Barclays Bank PLC, CFSC Wayland Advisers Inc., Chase Manhattan International
Limited, Citibank International plc, and Westdeutsche Landesbank Girozentrale.
The Company does not expect to be able to meet all of its banking covenants on
May 30, 2001. The Syndicate is fully aware of the situation and supports the
current restructuring discussions. The success of these negotiations is
essential to the ability of the Company to continue to trade.
Page 32
BRUNNER MOND GROUP PLC
PART 1 - FINANCIAL INFORMATION
ITEM 3 - QUANTATIVE AND QUALATITIVE DISCLOSURES
ABOUT MARKET RISK
The company is exposed to market risk from changes in the prices of its raw
materials, foreign exchange and interest rates. There have been no material
changes in market risk since the results for the last fiscal year were
announced.
In July 1998, Brunner Mond Group PLC entered into a cross-currency swap with
Chase Manhattan Bank and BHF-Bank to hedge exposure to potential adverse
movements in the STG/USD Exchange Rate in relation to the US Dollar denominated
Senior Subordinated Notes. This currency swap ensured a fixed exchange rate of
STG/USD 1.60 and applied to 100% of the exposures until July 2003, when the swap
terminates in its entirety. On September 18, 2000, the part of the swap which
hedged the US$125 million principal of the US Dollar Subordinated Notes was,
with Senior Lender consent, unwound to realize (pound)8.2 million. A condition
of the partial sale of the swap required the Company to hedge foreign exchange
exposure arising from US Dollar interest payments on the Bonds due in 2004 and
in 2005. A hedge was entered into during the quarter to cover the exposure to
exchange rate movements on the US Dollar interest payments on the Bonds due in
2004 and in 2005. On 28 March 2001, the Company cancelled all of the hedges
against foreign exchange exposure to movements in the US Dollar against Sterling
in relation to US Dollar interest payments on the US Dollar Denominated Notes.
This cancellation cost (pound)0.2 million, which cost is included in interest
expense. Therefore, the Company is currently exposed to accounting translation
risk (except for the purposes of banking covenant calculations) from adverse
movements in the STG/USD exchange rate when retranslating the US Dollar
Denominated Bonds and interest thereon into Sterling when preparing financial
reports, and also to potential transaction risk in relation to the principal
value of these Bonds and interest thereon.
There have been no other material changes in market risk since the results for
the last fiscal year were announced.
Page 33
BRUNNER MOND GROUP PLC
PART II - OTHER INFORMATION
ITEM
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
NONE
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5 OTHER INFORMATION
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Page 34
BRUNNER MOND GROUP PLC
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Location of
Item Document in
No: Sequential
Numbering
System +
3.1 Memorandum and Articles of Association of Soda Ash
Investments plc (1)
3.2 Certificate of Incorporation on Change of Name of
Brunner Mond Group plc (1)
3.3 Memorandum and Articles of Association of Brunner
Mond (UK) Limited (1)
3.4 Memorandum and Articles of Association of Brunner
Mond Limited (1)
3.5 Memorandum and Articles of Association of Brunner
Mond Soda Holdings Limited (1)
3.6 Memorandum and Articles of Association of
Pampascrown Limited (1)
4.1 Sterling Indenture dated as of July 24, 1998
between the Issuer and IBJ SCHRODER BANK & TRUST
COMPANY, as trustee (1)
4.2 Dollar Indenture dated as of July 24, 1998 between
the Issuer and IBJ SCHRODER BANK & TRUST COMPANY,
as trustee (1)
4.3 Form of 11% Senior Subordinated Notes (1)
4.4 Form of 12 1/2% Senior Subordinated Notes (1)
4.5 Exchange and Registration Rights Agreement dated as
of July 15, 1998 among the Issuer, CHASE MANHATTAN
INTERNATIONAL LIMITED and CHASE SECURITIES INC (1)
4.6 Purchase Agreement dated as of July 15, 1998 among
the Issuer, CHASE MANHATTAN INTERNATIONAL LIMITED
and CHASE SECURITIES INC (1)
4.7 Sterling Note Depositary Agreement dated as of July
24, 1998 between the Issuer and IBJ SCHRODER BANK &
TRUST COMPANY (1)
4.8 Dollar Note Depositary Agreement dated as of July
24, 1998 between the Issuer and IBJ SCHRODER BANK &
TRUST COMPANY (1)
10.1 Barclays Mercantile(pound)1.78 million lease commitment Attached
(1) Incorporated by reference to the respective exhibit
to the Group's Form F-4 Registration Statement No.
333-9464.