Corus Group plc 2005 Preliminary Results
Highlights
• Full year profit after tax of £451m and earnings per share of 10.17
pence
• Group operating profit of £680m
• EBITDA* of £1,027m and underlying operating profit* of £720m
• Restoring Success programme has underpinned the financial result
• Net debt** reduced to £821m and gearing*** to 25%
• Proposed final dividend of 1 pence taking the full-year dividend to 1.5
pence
• Letter of intent signed for Aleris International Inc. to acquire Corus'
Aluminium rolled products and extrusions businesses for €826m (c.£570m).
Further information provided in separate stock exchange announcement.
Q4 2005 Q3 2005 Q4 2004 £ millions unless stated 2005 2004
--------- --------- --------- ---------------- --------- ---------
2,424 2,383 2,499 Turnover 10,140 9,332
--------- --------- --------- ---------------- --------- ---------
94 103 220 Group operating profit 680 662
--------- --------- --------- ---------------- --------- ---------
193 176 322 EBITDA* 1,027 934
--------- --------- --------- ---------------- --------- ---------
117 100 245 Underlying operating profit* 720 631
--------- --------- --------- ---------------- --------- ---------
65 80 184 Pre-tax profit 580 567
--------- --------- --------- ---------------- --------- ---------
64 50 166 Profit after tax 451 441
--------- --------- --------- ---------------- --------- ---------
1.51p 1.10p 3.85p Earnings per share (pence) 10.17 10.07
--------- --------- --------- ---------------- --------- ---------
(821) (961) (842) Net debt at end of period** (821) (842)
--------- --------- --------- ---------------- --------- ---------
* Before restructuring, impairment and disposals. Refer to supplementary
information note 10 for reconciliation to the Group's operating profit.
** Includes £268m increase due to the adoption of IAS 32 and 39 on 2 January
2005.
*** Gearing defined as net debt to net tangible worth
Outlook
• Growth in the global steel market remains strong
• Recovery in European demand continues and inventories are at or below
normal levels
• Energy costs in the UK, £20m higher in the first quarter of 2006
• Selling prices expected to increase from the second quarter
• Restoring Success remains on track to be completed by the end of 2006
From 2 January 2005, in line with all companies listed in the European Union,
Corus adopted International Financial Reporting Standards (IFRS) as adopted in
the EU having previously reported its financial results under UK Generally
Accepted Accounting Practice (GAAP). Further details of this change in
accounting policy are provided in Appendix 1 of the Interim Report for the six
months to 2 July 2005, which is available on the Corus website at
www.corusgroup.com.
Financial highlights
Corus generated a profit after tax of £64m during the fourth quarter of 2005 in
market conditions that remained challenging. This brought the profit after tax
for the full year to £451m and earnings per share to 10.17p, compared to £441m
and 10.07p per share in 2004.
The downward pressure on steel selling prices experienced during the third
quarter eased towards the end of the year leaving fourth quarter selling prices
broadly unchanged. Reduced steel production throughout Europe, combined with
lower imports, gradually restored the balance between supply and demand in the
second half of 2005. European inventory levels returned to normal and demand
began to improve towards the end of the year. In this environment the Group's
underlying operating profit for the fourth quarter of 2005 was £117m, before
restructuring and impairment costs and profit on disposals, an improvement of
£17m on the third quarter of 2005. This compared to £245m in the fourth quarter
of 2004 when market conditions were significantly more favourable.
For the full-year, Corus' financial performance showed further improvement over
2004. The Group operating profit increased to £680m, compared to £662m in 2004.
The underlying operating profit, excluding restructuring and impairment costs
and profit on disposals, increased by £89m to £720m, 14% higher than the
previous year. An overall increase of 16% in average steel selling prices
compared to 2004, combined with benefits from the Group's Restoring Success
programme, more than offset a 5% reduction in steel deliveries and the
progressive impact of significantly higher raw material and energy costs. As
market conditions deteriorated during the year, the Restoring Success programme
played an increasingly important role in underpinning the financial result and
is estimated to have generated incremental benefits of some £220m in 2005 when
compared to 2004.
Net debt at the end of the year was £821m, a reduction of £140m compared to 1
October 2005. The strong cash generation during the fourth quarter was
attributable to both the operating result and a reduction in working capital at
a time of significant capital investment. Compared to 2004, net debt reduced by
£289m. Adoption of IAS 32 and 39 from January 2005, resulted in the reported
reduction of £21m. Under these new accounting standards, the Group is required
to show drawings under its £275m debtor securitisation programme as net debt.
The Group's working capital management improved further with the ratio of
working capital to turnover at 16%.
Restoring Success
The Group's Restoring Success programme was launched in June 2003 and is
designed to deliver EBITDA benefits of £680m per annum by the end of 2006. At
the end of 2005, annualised exit rate benefits of £555m were secured and the
programme remains on track to deliver the full benefits of £680m by the end of
2006. Progress against the three initiatives contained within this programme is
outlined below:
Progress to date - Annualised Exit Rates (from June 2003)
Initiative End 2006 targets Progress to December 2005
Existing initiatives £210m £216m
UK restructuring £90m £19m
New initiatives £380m £320m
Gross target £680m £555m
•Existing initiatives - completed in June 2005, 6 months ahead of plan.
These initiatives have delivered EBITDA improvements of £216m on an
annualised basis.
•UK Restructuring - the commissioning phase of the capital expenditure
programme to improve the efficiency of the UK steelmaking assets has been
underway since the third quarter of 2005. Good progress continues to be
made at Port Talbot and steelmaking at this site is on track to achieve
planned output of 4.7mt by the end of 2006. At Engineering Steels the
complexity of the commissioning of the new assets at Rotherham, combined
with strong demand for high value products, has meant that certain products
will continue to be rolled at Stocksbridge. The total project benefits have
been revised accordingly and are now set to deliver £90m, previously £120m,
by the end of 2006. Annualised savings were restricted to £19m at the end
of 2005, reflecting high commissioning costs at Engineering Steels.
•New initiatives -These relate to the sharing and implementation of best
practice across the Group, combined with the enrichment of product and
customer mix towards premium end markets. To this end, the Group completed
some £100m of investments during 2005, related to specific opportunities in
premium end markets, including aerospace and wire rod, where the Group was
capacity constrained. Excellent progress continues to be made with new
initiatives and the target for these initiatives has been raised to £380m,
compensating for the shortfall from UK Restructuring. Benefits remain on
track to be delivered by the end of 2006 with £320m secured by the end of
2005.
Corus has used the EBITDA to sales ratio as a measure of the competitive gap
between its performance and that of the European operations of its peers. This
gap has reduced from 6% in 2003 to 4.5% in 2005, although it widened in the last
12 months when compared to 2004. While the drive to further improve performance
will continue, as part of the Corus Way the Group will also look to address
structural issues that impact on its performance.
The Corus Way
The Group's strategy remains focused on carbon steels, developing a strong and
sustainable competitive position in Western Europe and securing access to steel
making in lower cost, higher growth regions. The Corus Way defines the Group's
longer-term ambitions, differentiating its existing asset base by enriching the
sales mix and continuously benchmarking its performance against best in class,
combined with selective growth opportunities. In support of the Corus Way, the
Group announced two major investments during 2005:
• An investment of £130m at Scunthorpe to strengthen the Group's
competitive position in structural sections, rail and wire rod markets; and
• An investment of £153m at IJmuiden, Corus' lowest cost facility, to
expand the Group's product range capabilities for the automotive and
construction markets.
Both investments will enrich the sales mix by focusing on more value added
products and will also significantly improve operational efficiency. Corus will
target at least 60% of its deliveries to be value added, differentiated
products, by the end of 2008. This represents an increase of approximately
one-third compared to 2003 when Restoring Success was first launched. A Group
wide Continuous Improvement Programme has now been launched in support of the
Corus Way.
Beyond organic developments, the Group will look outside of Western Europe to
secure access to steelmaking in lower cost regions, in order to support the cost
competitiveness of its European assets going forward and pursue exposure to
higher growth markets. Corus continues to evaluate opportunities in these areas
to ensure that it can build on the momentum created by Restoring Success and
deliver further value for shareholders.
Disposals
The Group has continued its programme to dispose of non-core businesses and
surplus land and has realised proceeds of £81m during 2005, generating a net
profit of £30m. The Group will continue to pursue a more selective business
portfolio as part of the Corus Way.
Corus has today announced that it has signed a letter of intent for Aleris
International Inc. to acquire its Aluminium Rolled Products and Extrusions
businesses for a gross consideration of €826m (£570m). Further information on
this proposed transaction is provided in a separate announcement released to the
Stock Exchange today.
Triennial valuation of the British Steel Pension Scheme (BSPS)
The BSPS triennial valuation for the 3 years to 31 March 2005 has been completed
and revised assumptions, particularly longevity, have been fully reflected in
the Group's balance sheet as at 31 December 2005. On an IAS 19 basis the scheme
continued to have a net surplus of £67m at the end of 2005. In February 2006,
Corus announced that agreement had been reached with its Trade Unions in the UK,
for a new BSPS contribution and benefits framework that will reduce the
underlying cost of the scheme to the Company by c.20%. The Company will
recommence cash contributions to the main section of the BSPS from April 2006 at
a rate of 10%, equivalent to £50m per annum. As a consequence of this agreement,
there will also be a one-off accounting credit to the operating result of some
£90m in the first quarter of 2006.
Financing
On 3 March 2006, Corus redeemed its £150m 11.5% debenture due 2016. The
redemption was made to improve the efficiency of Corus' balance sheet and the
Group estimates that this will result in a reduction in future net finance costs
of £7m per annum. The total cost of the early redemption was £237m and the
premium paid of £87m will be expensed as a non-recurring finance cost in the
Income Statement during the first quarter of 2006.
In March 2006, the Group has also successfully renegotiated the terms of its
existing €800m bank facility, put in place in February 2005 and secured a
reduction of up to 50% in commitment fees and margin. The facility continues to
remain undrawn.
Dividend
The Board recommenced dividend payments in 2005 with an interim dividend of 0.5
pence, paid in October 2005. The Directors will recommend at the Company's
Annual General Meeting, a final dividend of 1 penny per share to be paid on 19
May 2006 to shareholders on the register at 21 April 2006. For American
Depository Receipt Holders, the dividend would be payable in US dollars on 29
May 2006, by the Depository, The Bank of New York, to the ADR holders of record
on 21 April 2006.
Commenting on the result, Philippe Varin, Chief Executive said;
'Corus has again delivered a strong financial result in 2005. As the year
progressed and market conditions became more challenging, our performance
clearly demonstrated the strong foundations laid by the Restoring Success
programme. The performance improvements, continued disposal of non-core assets
and strengthened balance sheet provide a strong platform from which we can enter
the next phase of our development.
The proposed sale of the downstream aluminium operations to Aleris secures a
strong future for these businesses, represents good value for Corus and is an
important step in the Group's strategy.'
Outlook
Demand recovered towards the end of 2005 and selling prices stabilised in the
fourth quarter as both European and North American inventory levels returned to
normal. Selling prices have remained broadly unchanged in the first quarter of
2006. Energy costs in the UK market however, increased significantly towards
the end of 2005 compared to those in mainland Europe. The Group's energy costs
in the first quarter of 2006 are expected to be some £20m higher, particularly
in the Long Products Division.
Beyond the first quarter of 2006 it is expected that global growth in steel
demand, underpinned by China, will remain strong. In Europe, a recovery in
underlying demand, combined with inventory levels at or below trend, provide the
basis for improved selling prices from the second quarter.
The Restoring Success programme remains on track to be successfully completed by
the end of 2006.
________________________________________________________________________________
Corus Group Plc (LSE/AEX: CS; NYSE: CGA) is one of the world's largest metal
producers with annual turnover of over £10 billion and major operating
facilities in the U.K., the Netherlands, Germany, France, Norway and Belgium.
Corus' four divisions comprising Strip Products, Long Products, Distribution &
Building Systems and Aluminium provide innovative solutions to the construction,
automotive, rail, general engineering and packaging markets worldwide. Corus has
47,300 employees in over 40 countries and sales offices and service centres
worldwide. Combining international expertise with local customer service, the
Corus brand represents quality and strength.
________________________________________________________________________________
The full Preliminary report is attached to this press release. Copies of today's
announcement are available on the Corus website: www.corusgroup.com
Contacts: Investor Relations: Tel. +44 (0) 20 7717 4514/4501/4504
Fax. +44 (0) 20 7717 4604
e-mail: investor@corusgroup.com
Corporate Relations: Tel. +44 (0) 20 7717 4532/4597
Fax. +44 (0) 20 7717 4316
Mailing address: 30 Millbank, London, SW1P 4WY, United Kingdom
Corus Group plc
Preliminary report for the year ended 31 December 2005
Contents
Review of the period
Consolidated income statement
Consolidated balance sheet
Statement of recognised income and expense
Reconciliation of movements in equity
Consolidated cash flow statement
Reconciliation of net cash flow to movement in net debt
Analysis of net debt
Supplementary information
Appendix
The consolidated income statement, consolidated balance sheet, statement of
total recognised income and expense and the consolidated cash flow statement
shown in respect of the year ended 31 December 2005 are extracted from the
audited accounts for that year which were approved by the Board of Directors
on 16 March 2006 and will be filed with the Registrar of Companies. The
financial information contained in this preliminary report does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The report of the auditors on these accounts is unqualified and does not
contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
The 2005 Annual Report and Accounts will be mailed to shareholders in April at
which time copies will be available from the Secretary's Office, Corus, 30
Millbank, London, SW1P 4WY, or by telephoning 0800 484113.
Review of the period
Income statement
Fourth quarter of 2005
Corus generated a profit after tax of £64m and earnings per share of 1.51p
during the last quarter of 2005 in market conditions that remained challenging.
Group turnover of £2,424m remained largely unchanged when compared to the
previous year (2004: £2,499m). Total deliveries were 5.2mt (2004: 5.3mt). The
downward pressure on steel selling prices experienced during the third quarter
eased towards the end of the year leaving fourth quarter selling prices broadly
unchanged. Reduced steel production throughout Europe, combined with lower
imports, gradually restored the balance between supply and demand. European
inventory levels returned to normal and demand began to improve towards the end
of the year with steel deliveries at 5mt, some 4% higher than the third quarter
of 2005.
Operating costs in the fourth quarter, excluding restructuring and impairment
costs and profit on disposals, of £2,307m were broadly unchanged when compared
to the third quarter of 2005. Compared to the fourth quarter of 2004, operating
costs were 2% higher and reflected the impact of increased input costs,
particularly iron ore, coking coal and energy, offset by savings from the
Group's Restoring Success programme. Including restructuring and impairment
costs of £35m, primarily related to the impairment of the fixed asset value of
the Group's Aluminium smelter operations and net profit on disposals of £12m,
operating costs were £2,330m (2004: £2,279m).
Net finance costs were £30m in the quarter and included a £4m charge in relation
to the fair value of the equity option within the Group's convertible bonds.
This compared to £43m in the fourth quarter of 2004 that included non-recurring
charges related to the early redemption of the €400m bonds due 2006.
The net tax charge was £1m for the fourth quarter (2004: £18m) and included a
deferred tax credit relating to a decrease in the rate of corporation tax in the
Netherlands.
Full-year 2005
Group turnover for the year, at £10,140m, was 9% higher than 2004. Despite the
more challenging market conditions as the year progressed, average selling
prices remained 15% higher than the previous year which more than offset a 5%
fall in deliveries to 20mt.
The Group operating profit increased to £680m, compared to £662m in 2004. The
underlying operating profit, excluding restructuring and impairment costs and
profit on disposals, increased by £89m to £720m, 14% higher than the previous
year. The increase in average steel selling prices, combined with benefits from
the Group's Restoring Success programme, more than offset lower deliveries and
the 9% increase in total operating costs attributable to the progressive impact
of significantly higher raw material and energy costs. As the year progressed
and market conditions deteriorated, the Restoring Success programme played an
increasingly important role in underpinning the financial result.
In 2005, net restructuring and impairment costs were £70m (2004: £47m) and
primarily related to the impairment of the Aluminium smelter outlined above and
job losses related to the new investment in the Long Products division announced
during the first half of 2005, that will transfer UK rail production to
Scunthorpe. Operating profit also included profit on the sale of fixed assets
and group undertakings of £30m (2004: £78m), particularly the sale of non-core
assets and surplus land.
Net finance costs for the full-year were £101m. This compared to £116m in 2004,
that included charges related to the early redemption of the €400m bonds due
2006. Average net debt, excluding the impact of IAS 32 and 39, explained in
further detail below, decreased in the period, but the beneficial effect of this
was offset by generally higher interest rates in 2005.
The Group's net tax charge was £129m for the full year (2004: £126m), primarily
related to the Group's overseas operations.
Cash flow and net debt
Fourth quarter of 2005
There was a net cash inflow from operating activities of £273m during the fourth
quarter of 2005. In addition to the operating profit of £94m and depreciation
and amortisation of £105m, working capital requirements reduced by £123m.
Interest payments in the quarter of £28m included the normal semi-annual payment
of interest on the 7.5% 2011 bond, issued in the third quarter of 2004. Taxation
paid in the quarter was a net credit of £10m (2004: charge of £24m), which
included the benefit of a tax refund in the Group's overseas operations.
The outflow on investing activities was £100m reflecting capital expenditure of
£154m as the Group continued its investment programme, partially offset by
disposal proceeds received during the quarter. After a cash outflow on financing
activities of £30m in the quarter, which included the payment of the interim
dividend of £22m in October 2005, cash and cash equivalents increased by £145m.
Full-year 2005
For the full-year, there was a net cash inflow from operating activities of
£657m (2004: £363m). Cash generated from operations was £939m driven by the
improved operating profit of £680m and depreciation and amortisation of £343m,
offset by other provision movements, including cash restructuring costs. Working
capital requirements within this, in 2005 increased by £65m and included the
build of slab inventory ahead of the 2006 blast furnace reline at IJmuiden,
offset by lower receivables that decreased in line with selling prices as the
year progressed. This compared to an outflow on working capital of £344m in
2004, when selling prices in the final quarter of the year were significantly
higher. Interest paid increased to £115m (2004: £104m) and reflected higher
average interest rates in 2005.
The outflow on investing activities for the full-year was £354m, primarily
related to capital expenditure of £423m, as the Group continued its investment
programme, partially offset by disposal proceeds received during the year. After
a cash outflow on financing activities of £33m, cash and cash equivalents
increased by £270m in the full-year to £825m (2004: £557m).
Net debt
At the end of the period, net debt was £821m, including the £268m impact arising
from the first time adoption of IAS 32 and 39 from January 2005 (2004: £842m).
These standards require drawings under the Group's debtor securitisation
programme to be treated as debt, where previously the programme was shown as a
reduction in receivables on the face of the balance sheet.
Balance sheet
Net assets at the year-end increased to £3,378m (2004: £3,058m), reflecting the
Group's improved profitability. At the end of the period, the balance sheet
reflected a net retirement liability of £284m, including other post retirement
benefits of £21m and pension liabilities of £263m. The triennial valuation of
the Group's main UK scheme, the British Steel Pension Fund, for the 3 years to
31 March 2005 has been completed and revised assumptions, particularly
longevity, have been reflected in the Group's balance sheet as at 31 December
2005. The scheme continued to have a net surplus of £67m at the end of 2005
(2004: £208m).
Carbon steel market
Economic climate
The global economy remained resilient in 2005 despite the significant increase
in oil prices driven by a combination of strong demand and uncertainty of
supply. China and the USA continued to lead the expansion in the global economy,
although overall growth slowed from 3.8% in 2004 to 3.3% in 2005.
In Corus' core EU markets growth was subdued. UK economic growth slowed from
3.2% in 2004 to 1.7% in 2005. The Euro-zone's economic performance was similarly
disappointing, with economic growth in the first half of 2005 of 1.2% increasing
to 1.7% in the second half of the year. Towards the end of 2005 however,
business and consumer confidence in the region began to improve, particularly in
Germany following the election of a new Government.
Steel market
Global steel demand increased 4% in 2005 to reach 1 billion tonnes. Growth
remained strong by historical standards, albeit lower than 2004 and continued to
be heavily influenced by China. Chinese steel demand grew 18% in 2005 and
accounted for around 32% of global demand. In Western Europe, demand declined by
5% in 2005 compared to growth of around 5% in 2004, with a significant slowdown
in the first half of the year, due to a combination of excess inventories
through the supply chain and weak underlying consumption.
In 2005, the growth in world crude steel production slowed to 6% (1.1billion
tonnes), compared to 10% growth in 2004. Chinese steel production continued to
grow strongly at 25% and accounted for 31% of global production. In contrast,
European (EU15) production declined by some 3%, as producers including Corus,
reduced output to align production with demand, particularly during the second
and third quarters of 2005.
Average selling prices in 2005, particularly in Europe and Asia, remained higher
than in 2004 as producers sought to recover the impact of the significant
increases in raw material and energy costs. Downward pressure on prices
intensified during the third quarter of 2005, following the build-up of excess
inventory in the supply chain, weak demand and higher European imports in the
first half of the year. Reduced steel production in Europe and the USA gradually
restored the balance between supply and demand in the second half of the year.
Prices stabilised in the fourth quarter as inventory levels returned to normal
and demand began to improve.
Estimated UK demand for the Group's main carbon steel products reduced by some
17% in 2005 at 9.1mt, due to a combination of the inventory correction outlined
above and the slowdown in the UK economy. UK construction output is estimated to
have fallen by 1% however steel consumption was relatively stable. In the
automotive sector UK car production was some 3% lower including the impact of
the closure of MG Rover. Corus carbon steel deliveries to the UK market in 2005
were 5.5mt (2004: 6.3mt). The Group's estimated UK market share in 2005 for main
carbon steel products was 52% (2004: 51%), improving from 51% to 53% in the
second half of the year as import levels reduced.
In continental Europe, finished steel demand reduced by 4% as high supply chain
inventories reduced during the year. Underlying growth in steel demand was
relatively unchanged. The performance of EU steel using industries was mixed,
with activity levels generally improving as the year progressed, after a weak
start to 2005. As in the UK, European inventory levels reduced significantly
towards the end of the year and returned to normal levels.
Divisional performance
The Group structure comprises four main operating divisions - Strip Products,
Long Products, Distribution and Building Systems and Aluminium. The main
components of these divisions are noted in Appendix 1 of this release
Strip Products Division
Q4 2005 Q3 2005 Q4 2004 £ millions unless stated 2005 2004
--------- --------- --------- ----------------------- --------- ---------
1,221 1,195 1,304 Turnover 5,140 4,724
--------- --------- --------- ----------------------- --------- ---------
2,699 2,715 3,002 Deliveries (kt) 11,140 12,060
--------- --------- --------- ----------------------- --------- ---------
105 93 135 Operating profit 605 417
--------- --------- --------- ----------------------- --------- ---------
91 97 153 Operating profit 598 411
(before restructuring,
--------- --------- --------- impairment and disposals) --------- ---------
-----------------------
Fourth quarter of 2005
Gross turnover at £1,221m was 2% higher than in the third quarter of 2005 as
average selling prices increased slightly whilst deliveries remained largely
unchanged at 2.7mt. Excluding sales to other divisions of Corus (intra-group
turnover), the average external selling price in the quarter was broadly
unchanged. Gross turnover was, however, 6% lower than the same period in 2004
when market conditions were significantly more favourable.
Reduced steel production throughout Europe, combined with lower imports,
gradually restored the balance between supply and demand towards the end of
2005. Spot prices for strip products, which reached their lowest point at the
end of the third quarter, stabilised during the final quarter of the year, both
in the UK and Northern Europe. There was however, a marginal recovery in
Southern European selling prices that had undergone a more significant decline
in the third quarter of 2005, although prices still remained below Northern
European levels. Improved demand, combined with the build-up of slab inventory
ahead of the reline of the IJmuiden Blast Furnace, enabled the division to
return to normal production levels during the final quarter of 2005. The
increase in steel production from Port Talbot as part of the UK Restructuring
programme also began during the fourth quarter of 2005 and the planned output of
4.7mtpa is on track to be achieved by the end of 2006.
The fourth quarter operating profit was £105m. Excluding restructuring and
impairment costs and disposal profits, the operating profit of £91m was £6m
lower than the previous quarter, though the third quarter included a credit from
the settlement of a long-standing legal claim (£16m). The fourth quarter
benefited from increased deliveries, which offset higher raw material costs and
progressively increasing energy costs towards the end of the year. This compared
to a quarterly operating profit of £135m in 2004.
Full-year 2005
For the full-year, gross turnover was £5,140m (2004: £4,724m) of which £1,013m
(2004: £841m) was intra-group. The average selling price per tonne was 18%
higher than 2004 although this was offset by an 8% reduction in deliveries to
11.1mt (2004: 12.1mt) as a result of production restraints in line with reduced
market demand. External market sales were 8.6mt (2004: 9.6mt) and intra-group
deliveries were 2.6mt (2004: 2.5mt).
UK demand for strip products is estimated to have fallen by 16% to 4.6mt in 2005
(2004: 5.7mt). The reduction is primarily due to the inventory correction and
decline in UK manufacturing output outlined above. The division's UK market
share for its main products has however improved significantly to 52% during
2005, compared to 49% in 2004 and reflected better customer service,
particularly improved delivery performance, a key performance target within the
Restoring Success programme. Underlying demand in Europe also remained quite
weak throughout 2005, although there was some improvement in Southern European
markets towards the end of the year.
Operating costs for the period of £4,535m were 5% higher than 2004, before and
after restructuring and impairment costs and disposal profits. The increase in
Chinese steel demand led to significantly higher raw material prices,
particularly iron ore and coal but also downstream coatings, including zinc, tin
and nickel. These increases were partly offset by improved manufacturing
efficiencies achieved through the Group's Restoring Success programme. The
division also became less dependent on imported coke during 2005 as the
refurbishment of the Morfa coke ovens at Port Talbot was completed.
The global increase in oil prices led to significantly higher energy costs in
the latter part of 2005. Increased gas and electricity prices also led to an
increase in the cost of supplies that are heavily dependent on energy as part of
their production process, including lime and oxygen.
The operating profit for 2005 increased by £188m to £605m (2004: £417m).
Excluding restructuring and impairment costs of £7m and profit on disposals of
£14m, the underlying result increased to £598m (2004: £411m). The higher average
selling prices for the full-year, combined with benefits from the Group's
Restoring Success programme, more than offset the progressive impact of
significantly higher raw material and energy costs and lower sales volume.
Profit on disposal of fixed assets of £14m related to the ongoing UK
restructuring programme that involved the sale of surplus land at the Llanwern
site, Ebbw Vale and Shotton.
Long Products Division
Q4 2005 Q3 2005 Q4 2004 £ millions unless stated 2005 2004
--------- --------- --------- ---------------------- --------- ---------
638 597 717 Turnover 2,679 2,605
--------- --------- --------- ---------------------- --------- ---------
1,736 1,659 2,170 Deliveries (kt) 7,123 8,172
--------- --------- --------- ---------------------- --------- ---------
(7) 5 137 Operating (loss)/profit 89 248
--------- --------- --------- ---------------------- --------- ---------
(2) 3 90 Operating (loss)/profit 106 162
(before restructuring,
--------- --------- --------- impairment and disposals) --------- ---------
----------------------
Fourth quarter of 2005
Gross turnover for Long Products in the fourth quarter was £638m, 7% higher than
the third quarter of 2005. Total deliveries of 1.7mt increased by 5% compared to
the third quarter of 2005 and the average selling price per tonne improved
slightly by around 2%. However, external turnover, excluding intra-group sales
of £186m, decreased 4%, entirely attributable to lower average selling prices,
as market conditions remained challenging. Compared to 2004, gross turnover was
some 11% lower, as the division continued to restrict output until the middle of
the fourth quarter in response to weak demand.
Scrap prices declined in the fourth quarter of the year which was reflected in
lower selling prices, leading to weaker margins for sections and commodity grade
rod manufactured via the Division's integrated process route. Margins for higher
value added products however, a key growth area for the Division, remained
stable or slightly improved. Higher gas and electricity costs, particularly for
the electric arc production route at Engineering Steels, contributed to a small
operating loss of £(7)m being incurred in the final quarter of 2005.
The complexity of the order book that is being transferred to Engineering Steels
in Rotherham, as part of the UK Restructuring Programme, has extended the
commissioning period for the new assets. Combined with strong demand for high
value products, this has resulted in the continued rolling of certain products
at Stocksbridge and led to further commissioning costs in the quarter.
Full-year 2005
For the full-year, gross turnover was £2,679m (2004: £2,605m) of which £714m
(2004: £750m) was intra-group. The average selling price per tonne increased
18%, partially offset by a 13% reduction in deliveries that arose from a
combination of restricted output and the disposal of Tuscaloosa in 2004. The
improvement in selling prices was in part driven by sales mix improvement
initiatives that were part of the Restoring Success programme, which saw an
increase in the proportion of higher added value sales.
High supply chain inventories in some sectors, particularly construction related
products in UK and EU markets, led to a slowdown in demand during the first half
of the year. The Division constrained output across a number of long products
sectors from the second quarter of 2005 to align production with demand.
However, demand for rail in the domestic markets and for higher value added
products, including aerospace, special profiles, higher grade plate and rod for
tyre cord, remained strong throughout the year, resulting in an improved sales
mix. Overall UK demand for long products, including the inventory correction
outlined above, is estimated to have declined by 18% year on year. The
Division's UK market share for its main products is estimated at 52% in 2005
(2004: 53%).
Operating costs for the year of £2,590m were 10% higher than 2004 and 5% higher
before restructuring and impairment costs and profit on disposals. Raw material
costs increased significantly during 2005, as the increase in Chinese steel
demand led to significantly higher prices, particularly for iron ore, coal and
alloys. In addition, the global increase in oil prices led to higher energy
costs, with gas and electricity prices accelerating sharply during the latter
part of the year. Operating costs were also impacted by a significant increase
in ship unloading charges due to congestion at unloading ports at the beginning
of 2005.
The operating profit for 2005 was £89m. This compared to £248m in 2004 that
included the profit on the sale of Tuscaloosa and the reversal of an existing
impairment provision in respect of the Teesside fixed assets following the
completion of a ten-year slab off-take agreement with an international
consortium. The operating profit in 2005 included restructuring and impairment
costs of £15m (2004: £38m) related to redundancy provisions following the
announcement of new investment at Scunthorpe, the closure of the Workington site
and the closure of the bloom caster at Teesside. The operating profit also
included a net loss on disposals of £(2)m (2004: £48m profit) with profits
arising from the continued sale of surplus land offset by a loss arising on the
disposal of the non-core Mannstaedt special profiles operations in December
2005.
Excluding restructuring and impairment costs and profit on disposals, the
underlying operating result was £106m (2004: £162m). The operating result
reflected a combination of restricted output, the sale of the Tuscaloosa
business and most significantly the sale of slab from Teesside Cast Products at
cost instead of market price, since the start of 2005 in accordance with the new
off-take agreement.
Distribution & Building Systems Division
Q4 2005 Q3 2005 Q4 2004 £ millions unless stated 2005 2004
--------- --------- --------- ---------------------- --------- ---------
740 696 701 Turnover 3,021 2,606
--------- --------- --------- ---------------------- --------- ---------
1,680 1,600 1,555 Deliveries (kt) 6,617 6,348
--------- --------- --------- ---------------------- --------- ---------
14 6 22 Operating profit 48 66
--------- --------- --------- ---------------------- --------- ---------
13 1 32 Operating profit 44 79
(before restructuring,
--------- --------- --------- impairment and disposals) --------- ---------
----------------------
Fourth quarter of 2005
In the fourth quarter of 2005, gross turnover for the Distribution and Building
Systems division increased to £740m, 6% higher than the previous quarter,
entirely attributable to increased deliveries, as average selling prices
remained broadly unchanged. Compared to the fourth quarter of 2004, average
selling prices were some 2% lower, although this has been more than offset by an
8% increase in deliveries. Higher deliveries in the International business have
continued to compensate for lower deliveries in the distribution businesses, as
market conditions remained challenging.
Fourth quarter operating profit improved to £14m. Excluding restructuring and
impairment costs and profits on the disposal of fixed assets, the underlying
operating result was £13m, compared to £32m in the fourth quarter of 2004 when
the result positively benefited from price changes on inventory.
Full-year 2005
For the full year, turnover of £3,021m was 16% higher than 2004. Deliveries
increased by 4% reflecting the successful growth strategy of Corus
International, the Group's trading and projects business, which more than offset
lower deliveries in the distribution business as a result of the less favourable
market conditions in Western Europe. In the UK, market demand for core products
processed and distributed by the division weakened in 2005 for both strip and
long products. A similar trend was experienced in mainland European markets.
Demand for the building products sector remained flat when compared to 2004.
The operating profit of £48m compared to £66m in 2004. Excluding restructuring
and impairment costs and disposal profits, the operating profit of £44m compared
to £79m in 2004, reflecting price changes on inventory and lower sales volume
and margins in the distribution businesses.
Aluminium Division
Q4 2005 Q3 2005 Q4 2004 £ millions unless stated 2005 2004
--------- --------- --------- ----------------------- --------- ---------
257 289 277 Turnover 1,110 1,092
--------- --------- --------- ----------------------- --------- ---------
147 156 170 Deliveries (kt) 633 656
--------- --------- --------- ----------------------- --------- ---------
(31) 5 (25) Operating (loss)/profit (14) 11
--------- --------- --------- ----------------------- --------- ---------
3 5 15 Operating profit 25 53
(before restructuring,
--------- --------- --------- impairment and disposals) --------- ---------
-----------------------
Fourth quarter of 2005
Gross turnover for the Aluminium division of £257m was 11% lower than the third
quarter of 2005. Deliveries were 6% lower and average revenue per tonne also
decreased by 6%, reflecting a weaker sales mix. Compared to the fourth quarter
of 2004, turnover was 7% lower, attributable to lower deliveries as demand
weakened in 2005 that more than offset a 7% increase in average revenue per
tonne driven by higher metal prices.
In the fourth quarter, the division incurred an operating loss of £(31)m
compared to an operating loss of £(25)m in 2004. The result included a charge in
respect of impairment and restructuring costs of £34m, primarily related to the
impairment of the fixed assets associated with the division's smelting
operations in Europe, following substantial increases in energy costs. The
underlying operating profit for the fourth quarter was £3m, significantly lower
than 2004, as a result of higher energy and raw material costs that continued to
adversely affect the smelter operations, whilst demand and pricing for the
extrusions business remained weak.
Full-year 2005
Gross turnover in 2005 increased by 2% to £1,110m (2004: £1,092m) of which £45m
(2004: £40m) was intra-group. Average revenue per tonne increased 5%, partially
offset by a 4% reduction in total deliveries. Demand growth for rolled and
extruded products in Europe was 0.2% in 2005, compared to 2.7% in the previous
year although the aerospace market remained strong. Overall prices of rolled and
extruded products increased during the year, however these increases were not
enough to recover the increase in metal prices, which resulted in lower margins.
The division incurred an operating loss of £(14)m in 2005 (2004: £11m profit),
including restructuring, impairment and disposal costs of £39m (2004: £42m)
primarily related to the impairment charge for the division's smelting
operations described above. The extrusions operation at Bonn is also being
restructured in response to weak market conditions.
Excluding restructuring and impairment costs and disposal profits, the
underlying operating result was £25m, compared to £53m in 2004. In the first
half of the year, the downstream rolled products businesses were impacted by
operational problems at the two main rolling mills, following a fire at Duffel
and a gearbox failure at Koblenz. The higher metal price during 2005 has also
led to a margin squeeze in some of the downstream operations. For the smelting
operations, the benefit of increased aluminium metal prices was more than offset
by higher energy and raw material costs. A new energy contract for the Voerde
smelter was completed in the fourth quarter of 2005 that will help to improve
its competitive position. Negotiations to secure a similar contract for the
Aldel smelter are underway.
Central and other
Certain other costs are not allocated to divisions, including stewardship,
corporate governance and country holdings, and group consolidation entries. In
the fourth quarter of 2005, central items reflected a net credit of £12m due to
positive foreign exchange rate changes and a credit arising on the elimination
of profit in inventory on transfers between divisions.
For the full-year, net central costs were £48m, £32m lower than 2004. The latter
included non-recurring charges of £32m consisting of a provision against the
transfer of Avesta Polarit employees from the British Steel Pension Scheme,
advisors fees for the Teesside transaction and insurance costs related to former
employees.
Accounting policies
The financial statements to 31 December 2005 are the first to be prepared on the
basis of International Financial Reporting Standards as adopted in the EU
(IFRS). Corus has amended its accounting policies to comply with standards
issued by the International Accounting Standards Board (IASB) and
interpretations of the International Financial Reporting Interpretations
Committee (IFRIC) that have been issued and are effective, or issued and early
adopted, as at the time of preparing these statements. In particular, Corus has
applied the amended approach to IAS 19 'Employee Benefits', which allows
actuarial gains and losses on retirement benefit plans to be recognised in
retained earnings and presented in the statement of recognised income and
expense.
There were a number of international standards and interpretations that,
although issued, were not yet effective or applied by Corus. These were IFRS 6
'Exploration for and Evaluation of Mineral Resources', IFRS 7 'Financial
Instruments: Disclosures' and the related amendments to IAS 1 'Presentation of
Financial Statements' on capital disclosures, IFRIC 4 'Determining whether an
Arrangement contains a Lease', IFRIC 5 'Right to Interests arising from
Decommissioning, Restoration and Environmental Rehabilitation Funds', 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 Hyperinflationary Economies' and IFRIC 8 'Scope of
IFRS 2' and IFRIC 9 'Reassessment of Embedded Derivatives'.
Most of the changes arising from the adoption of these standards and
interpretations in future periods are not expected to have a material impact on
the financial statements of the Group. However, the assessment of the adoption
of IFRIC 4 (which provides further guidance on those agreements to be treated as
leases) from 1 January 2006 is still subject to completion and external review,
and may lead to the recognition of a significant level of additional finance
leases from that date.
Corus Group financial statements were previously prepared under UK Generally
Accepted Accounting Practice (UK GAAP), which differs in some areas from IFRS.
In preparing the 2005 financial statements it has been necessary to amend
certain presentation, accounting, valuation and consolidation methods previously
applied under UK GAAP, in order to comply with IFRS. The comparative figures in
respect of 2004 have been restated to reflect these changes, except for the
adoption of IAS 32 and 39, which only applied from 2 January 2005.
Consolidated income statement
Unaudited Unaudited Unaudited Note Audited Audited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
2,424 2,383 2,499 Group turnover 1 10,140 9,332
(2,330) (2,280) (2,279) Total operating 3 (9,460) (8,670)
-------- -------- -------- costs --------- ---------
94 103 220 Group operating 5 680 662
profit
(37) (32) (49) Finance costs 6 (132) (129)
7 10 6 Finance income 6 31 13
1 (1) 7 Share of post-tax 1 21
profits of joint
ventures and
associates
-------- -------- -------- --------- ---------
65 80 184 Profit before 580 567
taxation
(1) (30) (18) Taxation 7 (129) (126)
-------- -------- -------- --------- ---------
64 50 166 Profit after 451 441
taxation
======== ======== ======== ========= =========
Attributable to:
67 50 171 Equity holders of 452 447
the parent
(3) - (5) Minority (1) (6)
interests
-------- -------- -------- --------- ---------
64 50 166 451 441
======== ======== ======== ========= =========
Earnings per
share
1.51p 1.10p 3.85p Basic earnings 10.17p 10.07p
======== ======== ======== per ordinary ========= =========
share
1.68p 1.06p 3.54p Diluted earnings 9.74p 9.43p
======== ======== ======== per ordinary ========= =========
share
Consolidated balance sheet
Unaudited
1 October
2005 2005 2004
Note £m £m £m
Non-current assets
Goodwill 83 82 85
Other intangible assets 56 47 39
Property, plant and equipment 2,820 2,781 2,793
Equity accounted investments 95 99 109
Other financial investments 113 118 66
Retirement benefit assets 157 284 311
Deferred tax assets 172 177 174
---------- ---------- ----------
3,496 3,588 3,577
---------- ---------- ----------
Current assets
Inventories 1,954 1,903 1,732
Trade and other receivables 1,512 1,621 1,363
Current tax assets 21 4 19
Other financial assets 85 78 -
Short term investments - - 11
Cash and short term deposits 871 917 589
Assets held for sale 3 - -
---------- ---------- ----------
4,446 4,523 3,714
---------- ---------- ----------
---------- ---------- ----------
TOTAL ASSETS 7,942 8,111 7,291
---------- ---------- ----------
Current liabilities
Short term borrowings (384) (555) (379)
Trade and other payables (1,844) (1,735) (1,742)
Current tax liabilities (79) (44) (117)
Other financial liabilities (38) (13) -
Retirement benefit obligations (5) (5) (18)
Short term provisions and other
liabilities (117) (130) (141)
---------- ---------- ----------
(2,467) (2,482) (2,397)
---------- ---------- ----------
Non-current liabilities
Long term borrowings (1,308) (1,323) (1,063)
Deferred tax liabilities (126) (154) (137)
Retirement benefit obligations (436) (503) (455)
Provisions for liabilities and charges (116) (119) (122)
Other non-current liabilities (46) (29) (26)
Deferred income (65) (66) (33)
---------- ---------- ----------
(2,097) (2,194) (1,836)
---------- ---------- ----------
TOTAL LIABILITIES (4,564) (4,676) (4,233)
---------- ---------- ----------
NET ASSETS 3,378 3,435 3,058
========== ========== ==========
Equity
Called up share capital 1,697 1,697 1,696
Share premium account 173 172 168
Statutory reserve 12 - - 2,338
Other reserves 283 255 201
Consolidated reserves 1,199 1,283 (1,378)
---------- ---------- ----------
Equity attributable to equity holders
of parent 3,352 3,407 3,025
Minority interests 26 28 33
---------- ---------- ----------
TOTAL EQUITY 3,378 3,435 3,058
========== ========== ==========
Statement of recognised income and expense
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
(93) 87 (35) Actuarial gains/(losses) (156) (64)
on defined benefit
plans
(43) - - Net movement on fair (6) -
values of cash flow
hedges
1 4 - Revaluation of available 7 -
for sale investments
15 (23) 21 Deferred tax on items 24 19
taken directly to
reserves
1 - 1 Revaluation of goodwill (2) -
due to exchange
14 12 21 Exchange movements on (12) (2)
currency net
investments
-------- -------- -------- -------- --------
(105) 80 8 Net (expense)/income (145) (47)
recognised directly in
equity
64 50 166 Profit after taxation 451 441
-------- -------- -------- -------- --------
(41) 130 174 Total recognised 306 394
(expense)/income for the
period
- - - Adoption of IAS 32 and 16 -
IAS 39
-------- -------- -------- -------- --------
(41) 130 174 322 394
======== ======== ======== ======== ========
Total recognised
(expense)/income for the
period attributable to:
(38) 130 179 Equity holders of the 307 400
parent
(3) - (5) Minority interests (1) (6)
-------- -------- -------- -------- --------
(41) 130 174 306 394
======== ======== ======== ======== ========
Adoption of IAS 32 and
IAS 39 attributable to:
- - - Equity holders of the 24 -
parent
- - - Minority interests (8) -
-------- -------- -------- -------- --------
- - - 16 -
======== ======== ======== ======== ========
Reconciliation of movements in equity
Unaudited
2005 1 October 2005 2004
£m £m £m
Total equity at beginning of period 3,058 3,058 2,658
Adoption of IAS 32 and IAS 39 16 16 -
---------- ---------- ----------
Total equity at beginning of period - 3,074 3,074 2,658
restated
Total recognised income and expense
attributable to equity holders of the 307 345 400
parent
Issue of conditional share awards 12 8 4
New shares issued 6 5 1
Dividends paid (22) - -
Minority interests 1 3 (5)
---------- ---------- ----------
Total equity at end of period 3,378 3,435 3,058
========== ========== ==========
Consolidated cash flow statement
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m Note £m £m
Operating
activities
291 348 351 Cash generated 8 939 578
from operations
(28) (16) (5) Interest paid (115) (104)
- - 8 Premium received - 8
on issue of new
loans
- - (9) Premium paid on - (9)
redemption of
Eurobond
- - (3) Issue costs of - (15)
new loans
- - - Interest element (1) (2)
of finance lease
rental payments
- - - UK corporation 4 -
tax received
10 (67) (24) Taxation paid (170) (93)
-------- -------- -------- -------- ---------
273 265 318 Net cash flow 657 363
-------- -------- -------- from operating -------- ---------
activities
Investing
activities
(154) (88) (88) Purchase of (423) (310)
property, plant
and equipment
2 - - Development 2 -
grants received
33 7 7 Sale of property, 49 37
plant and
equipment
(11) (4) (8) Purchase of other (29) (12)
intangible
assets
7 (10) - Purchase of other (35) (12)
fixed asset
investments
- - (5) Investments in - (5)
joint ventures
and associates
- - - Loans to joint - (1)
ventures and
associates
- - - Repayment of - 6
loans by joint
ventures and
associates
- - (11) Purchase of - (11)
subsidiary
undertakings and
businesses, net
of cash
acquired
8 2 - Sale of 29 95
subsidiary
undertakings and
businesses
3 - 2 Sale of joint 3 2
ventures and
associates
10 8 5 Interest 30 12
received
2 - 1 Dividends from 9 4
joint ventures
and associates
- 1 (10) Sale/(purchase) 11 (5)
-------- -------- -------- of short term -------- ---------
investments
(100) (84) (107) Net cash flow (354) (200)
-------- -------- -------- from investing -------- ---------
activities
Financing
activities
1 1 1 Issue of new 6 1
shares
- 1 131 Proceeds from 3 558
borrowings
(9) (2) (386) Repayment of (19) (503)
borrowings
- - - Capital element (1) (1)
of finance lease
rental payments
(22) - - Dividends paid (22) -
-------- -------- -------- -------- ---------
(30) - (254) Net cash flow (33) 55
-------- -------- -------- from financing -------- ---------
activities
143 181 (43) Net movement in 270 218
cash and cash
equivalents
680 499 597 Cash and cash 557 340
equivalents at
beginning of
period
2 - 3 Effect of foreign (2) (1)
-------- -------- -------- exchange rate -------- ---------
changes
825 680 557 Cash and cash 825 557
======== ======== ======== equivalents at ======== =========
end of period
Cash and cash equivalents
comprise:
871 917 589 Cash and short term 871 589
deposits
(46) (237) (32) Bank overdrafts (46) (32)
-------- -------- -------- -------- ---------
825 680 557 825 557
======== ======== ======== ======== =========
Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
143 181 (43) Movement in cash and 270 218
cash equivalents
- (1) 10 Movement in short term (11) 5
investments
9 1 255 Movement in debt 17 (54)
- - (8) Premium received on - (8)
issue of new loans
- - 3 Issue costs of new - 15
-------- -------- -------- loans -------- ---------
152 181 217 Change in net debt 276 176
resulting from cash
flows in period
- - 3 Debt and liquid - 3
resources acquired
(6) (10) (16) Exchange rate 27 (9)
movements
(6) (1) (12) Other non-cash changes (14) (11)
-------- -------- -------- -------- ---------
140 170 192 Movement in net debt 289 159
during the period
(961) (1,131) (1,034) Net debt at beginning of (842) (1,001)
the period
- - - Adoption of IAS 32 and (268) -
IAS 39
-------- -------- -------- -------- ---------
(821) (961) (842) Net debt at end of the (821) (842)
======== ======== ======== period ======== =========
The adoption of IAS 32 and IAS 39 may be further analysed as follows: 2005
£m
Reclassification of non-returnable proceeds from the securitisation
programme (275)
Reclassification of equity element of convertible debt and accretion
of interest thereon 15
Reclassification of minority preference shares (8)
--------
(268)
========
Analysis of net debt
Unaudited
2005 1 October 2004
£m 2005 £m
£m
Cash and short term deposits(excluding bank
overdrafts) 871 917 589
Bank overdrafts (46) (237) (32)
Short term investments - - 11
Long term borrowings (1,275) (1,294) (1,035)
Other loans (336) (316) (346)
Obligations under finance leases (35) (31) (29)
-------- -------- ---------
(821) (961) (842)
======== ======== =========
Following the conversion to IFRS, the Group's two convertible bonds are now
disclosed within other loans as short term borrowings. The bonds mature in 2007,
however bond holders do have the right to convert at any time in the intervening
period.
Supplementary information
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
1.a Turnover by
division
1,221 1,195 1,304 Strip Products 5,140 4,724
638 597 717 Long Products 2,679 2,605
740 696 701 Distribution & 3,021 2,606
Building Systems
257 289 277 Aluminium 1,110 1,092
21 22 20 Central & other 77 67
-------- -------- -------- --------- --------
2,877 2,799 3,019 Gross turnover 12,027 11,094
(453) (416) (520) Less: intra-group (1,887) (1,762)
-------- -------- -------- turnover --------- --------
2,424 2,383 2,499 Group turnover 10,140 9,332
======== ======== ======== ========= ========
comprising:
992 946 1,075 Strip Products 4,127 3,883
452 470 470 Long Products 1,965 1,855
733 690 687 Distribution & 2,971 2,534
Building Systems
247 276 265 Aluminium 1,065 1,052
- 1 2 Central & other 12 8
-------- -------- -------- --------- --------
2,424 2,383 2,499 Group turnover 10,140 9,332
======== ======== ======== ========= ========
1.b Group turnover
by destination
585 649 656 UK 2,706 2,614
1,327 1,242 1,390 Europe (excluding 5,418 4,983
UK)
203 221 206 North America 870 923
309 271 247 Other areas 1,146 812
-------- -------- -------- --------- --------
2,424 2,383 2,499 10,140 9,332
======== ======== ======== ========= ========
Unaudited Unaudited Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
Kt Kt Kt Kt Kt
2.a Sales volume by
division
2,699 2,715 3,002 Strip Products 11,140 12,060
1,736 1,659 2,170 Long Products 7,123 8,172
1,680 1,600 1,555 Distribution & 6,617 6,348
Building Systems
147 156 170 Aluminium 633 656
- - - Central & other - -
-------- -------- -------- -------- --------
6,262 6,130 6,897 Gross sales volume 25,513 27,236
(1,107) (1,175) (1,610) Less: intra-group (5,096) (5,713)
-------- -------- -------- -------- --------
5,155 4,955 5,287 Group sales volume 20,417 21,523
======== ======== ======== ======== ========
comprising:
2,134 2,019 2,413 Strip Products 8,588 9,574
1,214 1,206 1,189 Long Products 4,753 5,110
1,661 1,577 1,522 Distribution & 6,454 6,195
Building systems
146 153 163 Aluminium 622 644
- - - Central & other - -
-------- -------- -------- -------- --------
5,155 4,955 5,287 Group sales volume 20,417 21,523
======== ======== ======== ======== ========
2.b Group sales
volume by
destination
1,367 1,300 1,505 UK 5,536 6,336
2,589 2,445 2,834 Europe (excluding 10,454 10,989
UK)
453 374 334 North America 1,622 1,958
746 836 614 Other areas 2,805 2,240
-------- -------- -------- -------- --------
5,155 4,955 5,287 20,417 21,523
======== ======== ======== ======== ========
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
3. Total operating
costs
1,150 1,043 1,105 Raw materials & 4,584 4,178
consumables
170 228 226 Maintenance costs 804 808
(excluding own labour)
408 358 332 Other external charges 1,528 1,343
447 437 488 Employment costs 1,844 1,789
105 76 89 Depreciation & 343 306
amortisation (net of
grants released)
146 102 128 Other operating costs 557 556
(78) 53 (77) Changes in inventory (144) (213)
(6) (8) (7) Own work capitalised (26) (19)
(27) (9) (5) Profit on disposal of (44) (34)
property, plant and
equipment
15 - - Loss/(profit) on 14 (44)
-------- -------- -------- disposal of group -------- --------
undertakings
2,330 2,280 2,279 9,460 8,670
======== ======== ======== ======== ========
4. Restructuring,
impairment and
disposals
As included in total
operating costs:
4 6 11 Redundancy and related 27 26
costs
31 - (10) Impairment losses 38 (19)
related to property,
plant and equipment
(2) - - Accelerated release of (2) -
grants
- - 22 Impairment losses - 22
related to intangible
assets
- - 4 Other asset 1 13
write-downs
2 - 3 Other rationalisation 6 5
-------- -------- -------- costs -------- --------
35 6 30 70 47
(27) (9) (5) Profit on disposal of (44) (34)
property, plant and
equipment
15 - - Loss/(profit) on 14 (44)
-------- -------- -------- disposal of group -------- --------
undertakings
23 (3) 25 Net restructuring, 40 (31)
======== ======== ======== impairment and disposals ======== ========
charge/(credit)
comprising:
(14) 4 18 Strip Products (7) (6)
5 (2) (47) Long Products 17 (86)
(1) (5) 10 Distribution & Building (4) 13
Systems
34 - 40 Aluminium 39 42
(1) - 4 Central & other (5) 6
-------- -------- -------- -------- --------
23 (3) 25 40 (31)
======== ======== ======== ======== ========
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
5. Group operating
result
After restructuring,
impairment and
disposals:
105 93 135 Strip Products 605 417
(7) 5 137 Long Products 89 248
14 6 22 Distribution & Building 48 66
Systems
(31) 5 (25) Aluminium (14) 11
13 (6) (49) Central & other (48) (80)
-------- -------- -------- -------- --------
94 103 220 680 662
======== ======== ======== ======== ========
Before restructuring,
impairment and
disposals:
91 97 153 Strip Products 598 411
(2) 3 90 Long Products 106 162
13 1 32 Distribution & Building 44 79
Systems
3 5 15 Aluminium 25 53
12 (6) (45) Central & other (53) (74)
-------- -------- -------- -------- --------
117 100 245 720 631
======== ======== ======== ======== ========
6. Financing items
Interest expense:
(32) (30) (38) - Bank and other (120) (117)
borrowings
(1) (2) - - Accretion of (7) -
convertible bonds
- - - - Finance leases (1) (1)
- - (11) Charges arising on - (11)
redemption of bond
(4) - - Fair value losses - (4) -
-------- -------- -------- convertible bond equity -------- --------
options
(37) (32) (49) Finance costs (132) (129)
-------- -------- -------- -------- --------
10 10 6 Interest income 31 13
(3) - - Fair value gains - - -
-------- -------- -------- convertible bond equity -------- --------
options
7 10 6 Finance income 31 13
-------- -------- -------- -------- --------
(30) (22) (43) (101) (116)
======== ======== ======== ======== ========
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
7. Taxation
- - - UK corporation - -
tax
(2) - - UK prior year (2) -
credit
3 1 (2) Overseas prior (3) (1)
year charge /
(credit)
9 39 21 Overseas taxes 137 106
-------- -------- -------- -------- --------
10 40 19 Current tax 132 105
15 - 4 UK deferred 15 13
tax
(24) (10) (5) Overseas (18) 8
-------- -------- -------- deferred tax -------- --------
1 30 18 129 126
======== ======== ======== ======== ========
Deferred tax assets amounting to £172m have been recognised at 31 December 2005
(2004: £174m). The deferred tax assets in respect of tax losses are recoverable
against future forecast taxable profits within a time horizon that the directors
consider to be more likely than not to occur. Deferred tax assets have not been
recognised in respect of losses with a value of £1,471m (2004: £1,706m) of which
£1,063m (2004: £1,218m) are UK losses.
8.
Reconciliation
of cash
generated from
operations
64 50 166 Profit after 451 441
taxation
Adjustments for:
1 30 18 Tax 129 126
105 76 89 Depreciation & 343 306
amortisation
(net of grant
released)
(12) (9) (5) Profit on (30) (78)
disposals
(7) (10) (6) Interest (31) (13)
income
37 32 49 Interest 132 129
expense
(1) 1 (7) Share of results (1) (21)
of joint
ventures and
associates
4 3 2 Other non-cash 12 4
items
4 6 18 Restructuring 32 44
costs (excluding
impairment
losses related
to property,
plant and
equipment)
(24) (13) (14) Utilisation of (63) (49)
rationalisation
provisions
(61) 79 (112) Movement in (262) (357)
inventories
74 190 37 Movement in 72 (277)
receivables
110 (88) 99 Movement in 125 290
payables
3 3 - Unamortised 37 -
element of
contract
advances
(6) (2) 17 Other movements (7) 33
-------- -------- -------- (net) -------- --------
291 348 351 Net cash flow 939 578
======== ======== ======== generated from ======== ========
operations
Unaudited Unaudited Unaudited
Q4 2005 Q3 2005 Q4 2004 2005 2004
£m £m £m £m £m
9. Capital expenditure
154 88 88 Purchase of property, 423 310
plant and equipment
9 5 42 Movement in capital - 65
creditors
-------- -------- -------- -------- --------
163 93 130 423 375
======== ======== ======== ======== ========
10. Reconciliation of
Group operating profit
to EBITDA before
restructuring,
impairment and
disposals
94 103 220 Group operating profit 680 662
35 6 30 Restructuring costs 70 47
(12) (9) (5) Profit on disposals (30) (78)
-------- -------- -------- -------- --------
117 100 245 Underlying operating 720 631
profit
76 76 77 Depreciation & 307 303
-------- -------- -------- amortisation (net of -------- --------
grants released and
excluding impairment
losses related to
property, plant and
equipment and intangible
assets)
193 176 322 EBITDA before 1,027 934
======== ======== ======== restructuring, ======== ========
impairment and
disposals
comprising:
138 139 191 Strip Products 777 583
13 19 106 Long Products 170 225
18 6 41 Distribution & Building 64 104
Systems
11 15 23 Aluminium 62 91
13 (3) (39) Central & other (46) (69)
-------- -------- -------- EBITDA before -------- --------
193 176 322 restructuring, 1,027 934
======== ======== ======== impairment and ======== ========
disposals
Unaudited Unaudited Unaudited
2005 1 October 2005 2004
11. Employees (to the nearest '000) Number Number Number
Average weekly numbers employed:
UK 24,300 24,300 24,500
Netherlands 11,300 11,300 11,300
Germany 5,700 5,700 5,900
Other countries 6,900 6,900 6,900
---------- ---------- ----------
48,200 48,200 48,600
========== ========== ==========
Numbers employed at end of period:
UK 24,000 24,200 24,400
Netherlands 11,400 11,400 11,200
Germany 4,900 5,700 5,800
Other countries 7,000 7,000 6,900
---------- ---------- ----------
47,300 48,300 48,300
========== ========== ==========
Comprising:
Strip Products 22,500 22,600 22,600
Long Products 11,800 12,800 12,900
Distribution & Building Systems 5,700 5,700 5,800
Aluminium 5,700 5,700 5,700
Central & other 1,600 1,500 1,300
---------- ---------- ----------
47,300 48,300 48,300
========== ========== ==========
12. Statutory Reserve
The statutory reserve of £2,338m disclosed in the balance sheet as at 1 January
2005 arose in Corus UK Limited under section 7(1) of the British Steel Act 1988.
Of the total balance £381m was originally set aside as available for
distribution, with the balance of £1,957m, a restricted reserve which could only
be applied in paying up unissued shares to be allotted to its parent Company as
fully paid bonus shares. On 17 June 2005, after issuing these bonus shares,
Corus UK Limited made a court application for a capital reduction to effectively
cancel the statutory reserve to the extent of any cumulative profit and loss
deficit arising in that company. This application was successful and became
effective as from 15 July 2005.
Principal divisional activities Appendix 1
--------------------------------------------------------------------------------
Strip Products Division
Corus Strip Products Corus Tubes Corus Special Strip
IJmuiden and Corus Steel tubes, hollow Plated precision strip
Strip Products UK sections, line pipe and products with
Hot rolled steel strip pipeline project specialist finishes
and cold rolled management
and metallic coated
steel
Corus Packaging Plus Corus Colors Cogent Power
Light gauge coated Pre-finished steels Electrical steels,
steel for packaging transformer cores,
and non-packaging generator and motor
applications laminations
--------------------------------------------------------------------------------
Long Products Division
Corus Construction & Corus Rail Downstream businesses
Industrial
Railway products, design Custom designed hot
Plate, sections, wire and consultancy, rail rolled special steel
rod and semi- infrastructure profiles, hot cold
finished steel contracting narrow strip
Corus Engineering Steels Teesside Cast Products
Slab and bloom
Engineering billet,
rolled and bright bar
--------------------------------------------------------------------------------
Distribution and
Building Systems Division
Corus Distribution Corus International Corus Consulting
and Building Systems
Service centres, further Tailored product and Consultancy,
material processing and service solutions for technology,training
building systems international projects and operational
and international trade assistance to the
steel and aluminium
industries
--------------------------------------------------------------------------------
Aluminium Division
Corus Primary Aluminium Corus Aluminium Rolled Corus Aluminium
Products Extrusions
Extrusion billets, slabs Rolled plate, sheet and Soft and hard extruded
and ingots coil profiles, rod and bars