RNS Number:4438S
Chemetall PLC
16 April 2008
Chemetall PLC
Report and financial statements
31 December 2007
Company Registration No. 252864
Page 1
Officers and professional advisers 2
Chairman's report 3
Directors' report 4
Statement of directors' responsibilities 7
Independent auditors' report - group 8
Consolidated income statement 10
Consolidated statement of recognised income and expense 11
Consolidated balance sheet 12
Consolidated cash flow statement 14
Notes to the accounts 15
Independent auditors' report - company 48
Company balance sheet 49
Notes to the company accounts 50
Page 2
Officers and professional advisers
DIRECTORS
Kurt Wenzel (age 58)
Matthias Stoermer (age 43)
Per Vannerberg (age 46)
Rob Rydings (age 54)
Secretary
Rob Rydings
Registered Office
65 Denbigh Road
Bletchley
Milton Keynes MK1 1PB
Stockbrokers
Cazenove & Co.
12 Tokenhouse Yard
London EC2R 7AN
Principal Bankers
Barclays Bank PLC
Eagle Point
1 Capability Green
Luton LU1 3US
Registrars
Capita IRG
34 Beckenham Road
Beckenham
Kent BR3 4TU
Auditors
Deloitte & Touche LLP
Chartered Accountants
St Albans
Chemetall PLC
Page 3
Chairman's report
I am pleased to report another good year, with sales showing an increase of over
7.5% on the previous year.
This is an excellent result considering the continuing difficulties in the UK
manfacturing sector.
The increase comes mainly through increased sales from the small acquistion made
during the year.
We have though maintained sales in all traditional sectors with a combination of
new accounts and improved service to existing customers.
Results and dividends
During the year the Group generated a profit on ordinary activities before
taxation of �5.6 million
(2006: �3.2 million) with a turnover of �20.1 million (2006: �18.7 million).
The Group's loan assets, including any exchange movements and interest accrued
thereon, totalled
�89.9 million at 31 December 2007 (31 December 2006: �84.6 million).
Preference dividends continue to be paid on the normal due dates.
Board
There have been no changes to the Board.
Employees
On behalf of the board I would like to thank our employees for their continuing
commitment to our business. Chemetall PLC continues to invest in both internal
and external training and development of all employees. The company has
maintained its Investors in People registration.
Outlook
The volatile world market for raw materials continues to impact our
manufacturing costs, but we have taken and will continue to take steps to limit
the pressure on margins. We have set ambitious but realistic targets to increase
sales over the coming year, in all sectors. We also continue with our tight
control over all operating costs.
Kurt Wenzel
Chairman
Chemetall PLC
Page 4
Director's report
The directors present their annual report and the audited financial statements
for the year ended 31 December 2007.
Activities
The principal activities of the Group are the development, manufacture and
marketing of specialised industrial chemicals.
A review of the year's operations and significant financial aspects of the
year's trading, together with an indication of the Group's future prospects, are
included in the Chairman's report. The result for the year and the state of
affairs of the Group are shown in the accounts and related notes.
Dividends
No ordinary dividends were paid during the period (31 December 2006: �nil).
Preference dividends of �1,080,000 (31 December 2006: �1,080,000) were payable
in the period.
Key performance indicators
The Company observes key financial indicators such as sales, earnings before
interest tax depreciation and amortisation (EBITDA), and profit after tax. The
Company also uses non-financial indicators in monitoring its business, such as
customer satisfaction surveys, delivery on time, and first time pass rate.
Significant risks and uncertainties
The Company operates in a competitive market place where continuing growth is
achieved by increased business at existing customers, by developing new income
streams through offering new technologies, and by winning new clients. The
Company is confident that it can achieve these objectives and minimise the risk
of falling short of its targets by providing sector leading service quality to
its customers at competitive prices.
Acquisition of company's own preference shares
At the end of the year, the directors had the authority to purchase through the
market, by tender or by private treaty, at any time the preference shares of the
company. The price shall not exceed the average of the middle market quotation
during the period of ten business days immediately prior to the purchase, or at
the market price provided it is not more than 5% higher than the aforementioned
average price.
The distributable reserves of the company are sufficient to pay the preference
dividends.
Policy and practice on payment of creditors
The Group has adopted the Confederation of British Industry Code of Practice
regarding the payment of suppliers and has a clear and consistent policy to
ensure that it honours all its contractual payment terms to suppliers and
liaises with suppliers without delay when invoices, or parts of invoices are
contested so that a reasonable settlement can be negotiated. Details of the Code
of Practice and the Group's policy can be obtained from the Company Secretary at
the Company's registered office.
At the year end there were 49 days' (31 December 2006: 49 days') purchases in
trade creditors.
Chemetall PLC
Page 5
Director's report
Going concern
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason the directors continue to adopt a going
concern basis in preparing the financial statements.
Directors
The directors who held office during the year were as follows:
MW Stoermer Appointed 12 August 2004
K Wenzel Appointed 19 April 2005
PGM Vannerberg Appointed 2 January 2006
RS Rydings Appointed 2 January 2006
The directors of the Company are covered by Directors' and Officers' Liability
insurance.
Employees
It is the Group's policy not to discriminate against the disabled or racial
minorities in recruitment, career development and promotion.
There is close consultation between management and other employees on matters of
concern. The Group has, over a period of years, established various ways of
providing information to its people by the use of regular newsletters and the
provision of copies of the annual report and accounts.
Political and charitable contributions
The group made no political contributions during the period. Donations to UK
charities amounted to �505 (31 December 2006: �1,000).
ISO accreditation
Chemetall PLC has achieved accreditation to ISO 14001-2004 the world recognised
environmental management system, continuing the process started in 1996. During
2005 Chemetall PLC received their permit from the Environment Agency under IPPC
(integrated pollution, prevention, and control) regulation. In 2004 Chemetall
PLC was accredited to the new automotive industry standard TS16949.
Taxation
The Group's tax charge on profit is �1.6 million. Details of the tax charge are
given in note 11.
Chemetall PLC
Page 6
Directors' report
Treasury Policies
The Group's treasury policies, which are approved by the board, seek to
eliminate risk from currency movements affecting sales and purchases denominated
in foreign currencies. We use instruments such as forward currency sale or
purchase contracts where practical and cost effective.
Where appropriate, the Group's financial systems are able to transact business
denominated in foreign currencies.
No forward contracts were used in the year, and the year end exposure is nil.
Exemption from Corporate Governance disclosures
As the Group has only debt securities listed on the London Stock Exchange, it
has availed itself of an exemption from the financial services authority's
requirement to make corporate governance disclosures and from auditor review
thereof.
Disclosure of information to auditors
Each of the persons who is a director at the date of approval of this report
confirms that:
so far as the director is aware, there is no relevant audit information of which
the company's auditors are unaware; and
the director has taken all the steps that he/she ought to have taken as a
director in order to make himself/herself aware of any relevant audit
information and to establish that the company's auditors are aware of that
information.
This confirmation is given and should be interpreted in accordance with the
provisions of s234A of the Companies Act 1985.
Auditors
In accordance with Section 384 of the Companies Act 1985, a resolution for the
re-appointment of Deloitte & Touche LLP as auditors of the company is to be
proposed at the forthcoming Annual General Meeting.
Approved by the Board of Directors
and signed on behalf of the Board on 4 April 2008
Rob Rydings
Director
Chemetall PLC
Page 7
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. The directors are required by the IAS Regulation to prepare the
group financial statements under International Financial Reporting Standards
(IFRS's) as adopted by the European Union. The group financial statements are
also required by law to be properly prepared in accordance with the Companies
Act 1985 and Article 4 of the IAS Regulation.
International Accounting Standard 1 requires that IFRS financial statements
present fairly for each financial year the company's financial position,
financial performance and cash flows. This requires the faithful representation
of the effects of transactions, other events and conditions in accordance with
the definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board's 'Framework
for the preparation and presentation of financial statements'. In virtually all
circumstances, a fair presentation will be achieved by compliance with all
applicable IFRSs. However, directors are also required to:
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information; and
provide additional disclosures when compliance with the specific requirements in
IFRSs are insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial position and
financial performance.
The directors have elected to prepare the parent company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). The parent company financial
statements are required by law to give a true and fair view of the state of
affairs of the company. In preparing these financial statements, the directors
are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed;
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the parent company financial statements
comply with the Companies Act 1985. They are also responsible for safeguarding
the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Chemetall PLC
Page 8
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC
We have audited the group financial statements of Chemetall PLC for the year
ended 31 December 2007 which comprise the Group Income Statement, the Group
Balance Sheet, the Group Cash Flow Statement, the Group Statement of Recognised
Income and Expense and the related notes 1 to 33. These group financial
statements have been prepared under the accounting policies set out therein.
We have reported separately on the parent company financial statements of
Chemetall PLC for the year ended 31 December 2007.
This report is made solely to the company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the group
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union are set
out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the group financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the group financial statements give a
true and fair view, whether the group financial statements have been properly
prepared in accordance with the Companies Act 1985 and Article 4 of the IAS
Regulation. We also report to you whether in our opinion the information given
in the Directors' Report is consistent with the group financial statements.
In addition we report to you if, in our opinion, we have not received all the
information and explanations we require for our audit, or if information
specified by law regarding director's remuneration and other transactions is not
disclosed.
We read the other information contained in the Annual Report as described in the
contents section and consider whether it is consistent with the audited group
financial statements. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the group
financial statements. Our responsibilities do not extend to any further
information outside the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the group financial statements. It also includes an assessment of
the significant estimates and judgments made by the directors in the preparation
of the group financial statements, and of whether the accounting policies are
appropriate to the group's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the group financial
statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the group financial statements.
Chemetall PLC
Page 9
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC (continued)
Opinion
In our opinion:
the group financial statements give a true and fair view, in accordance with
IFRSs as adopted by the European Union, of the state of the group's affairs as
at 31 December 2007 and of its profit for the year then ended;
the group financial statements have been properly prepared in accordance with
the Companies Act 1985 and Article 4 of the IAS Regulation; and
the information given in the Directors' Report is consistent with the group
financial statements.
Separate opinion in relation to IFRSs
As explained in Note 1 to the group financial statements, the group in addition
to complying with its legal obligation to comply with IFRSs as adopted by the
European Union, has also complied with the IFRSs as issued by the International
Accounting Standards Board.
In our opinion the group financial statements give a true and fair view, in
accordance with IFRSs, of the state of the group's affairs as at 31 December
2007 and of its profit for the year then ended.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
St Albans, United Kingdom
9 April 2008
Chemetall PLC
Page 10
Consolidated income statement
Year ended 31 December 2007
Note Year ended 31 December 2007 Year ended 31 December 2006
�000 �000
Revenue 4 20,065 18,687
Cost of sales (12,310) (11,659)
Gross profit 7,755 7,028
Distribution
costs (4,219) (4,163)
Administrative
expenses (1,466) (1,710)
Other
operating
expenses (143) (84)
Profit from
operations 6 1,927 1,071
Investment
revenue 9 4,766 3,292
Finance costs 10 (1,080) (1,131)
Profit before
tax 5,613 3,232
Tax 11 (1,646) 105
Profit for the
year 3,967 3,337
The results for the current and preceding financial periods are derived from
continuing operations.
Under Section 230(A) of the Companies Act 1985 the company is exempt from the
requirement to present its own income statement.
Chemetall PLC
Page 11
Consolidated statement of recognised income and expense
Year ended 31 December 2007
Year ended 31 December 2007 Year ended 31 December 2006
�000 �000
Exchange
gain/(loss) on
translation of
foreign operations 3,734 (779)
Actuarial gains on
defined benefit
pension schemes 3,488 1,318
Tax on items taken
directly to equity (977) (395)
Net gain
recognised
directly in equity 6,245 144
Profit for the
year 3,967 3,337
Total recognised
income and expense
for the year 10,212 3,481
Chemetall PLC
Page 12
Consolidated balance sheet
31 December 2007
Note 31 December 2007 31 December 2006
�000 �000
Non-current assets
Goodwill 13 2,475 2,475
Other intangible assets 14 1,238 261
Property, plant and equipment 15 1,304 1,196
Trade and other receivables 17 29,695 -
Deferred tax assets 19 3,550 4,654
38,262 8,586
Current assets
Inventories 16 1,442 1,443
Trade and other receivables 17 64,380 88,292
Cash and cash equivalents 3,236 2,157
69,058 91,892
Total assets 107,320 100,478
Current liabilities
Trade and other payables 21 (6,284) (5,815)
Tax liabilities (1,566) (1,879)
Provisions 22 (154) (197)
Interest bearing loans and
borrowings 20 (12,000) -
(20,004) (7,891)
Net current assets 49,054 84,001
Chemetall PLC
Page 13
Consolidated balance sheet (continued)
31 December 2007
Note 31 December 2007 31 December 2006
�000 �000
Non-current liabilities
Interest bearing loans and
borrowings 20 - (12,000)
Retirement benefit obligation 29 (3,567) (7,312)
Long-term provisions 22 (1,364) (1,102)
(4,931) (20,414)
Net assets 82,385 72,173
Equity
Share capital 23 6,889 6,889
Share premium account 24 29,757 29,757
Translation reserve 26 1,899 (1,835)
Retained earnings 25 43,840 37,362
Total equity 82,385 72,173
The financial statements were approved by the board of directors and authorised
for issue on 4 April 2008
They were signed on its behalf by:
Rob Rydings
Director
Chemetall PLC
Page 14
Consolidated cash flow statement
Year ended 31 December 2007
Note Year ended 31 December Year ended 31 December
2007 2006
�000 �000
Net cash from
operating
activities 27 1,485 825
Investing activities
Interest
received 4,766 3,292
Amounts loaned
to group
undertakings (2,593) (43,900)
Purchases of
property,
plant and
equipment (308) (130)
Acquisition of
trade and
assets (1,191) -
Net cash used
in investing
activities 674 (40,738)
Financing activities
Interest paid - (51)
Preference
dividend paid (1,080) (1,080)
Net cash from
financing
activities (1,080) (1,131)
Net
increase/(decr
ease) in cash
and cash
equivalents 1,079 (41,044)
Cash and cash
equivalents at
beginning of
year 2,157 43,201
Cash and cash
equivalents at
end of year 3,236 2,157
The 2006 comparative figures have been restated as follows, the additional loans
made to group undertakings and the interest received have been reclassified from
Financing Activities to Investing Activities.
Chemetall PLC
Page 15
Notes to the accounts
Year ended 31 December 2007
1.General information
Chemetall PLC is a company incorporated in the United Kingdom under the
Companies Act 1985. The address of the registered office is given on page 2. The
nature of the group's operations and its principal activities are set out in
note 4 and in the directors' report.
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the group operates.
Foreign operations are included in accordance with the policies set out in note
2.
At the date of authorisation of these financial statements, the following
Standards, amendments to standards and Interpretations, which have not been
applied in these financial statements, were in issue but not yet effective for
the year ended 31 December 2007:
IFRS 8 Operating Segments
IAS 23 (Revised) Borrowing Costs
IFRIC 11 IFRS 2 Group and Treasury Share Transactions
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes
IFRIC 14 IAS 19 The limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction.
The directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the financial
statements of the company except for additional disclosures on capital and
financial instruments and the additional requirement of IFRS 8, when the
relevant standards come into effect for periods commencing on or after 1 January
2008.
2.Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs), adopted for use in the European Union.
The financial statements have been prepared on the historical cost basis, except
for the revaluation of certain financial instruments. The principal accounting
policies adopted are set out below.
Chemetall PLC
Page 16
Notes to the accounts
Year ended 31 December 2007
2.Significant accounting policies (continued)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to profit and loss in the period of
acquisition.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
A list of the significant investments in subsidiaries, including the name,
country of incorporation and proportion of ownership interest is given in note 7
to the company's separate financial statements.
Goodwill
Goodwill is recognised as an asset and reviewed for impairment at least
annually. Any impairment is recognised immediately in profit or loss and is not
subsequently reversed.
Goodwill arising on acquisitions before the date of transition to IFRSs has been
retained at the previous UK GAAP amounts subject to being tested for impairment
at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has
not been reinstated and is not included in determining any subsequent profit or
loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales-related
taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Leasing
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating
lease are also spread on a straight line basis over the lease term.
Chemetall PLC
Page 17
2. Significant accounting policies (continued)
Financial income and expenses
Financial income comprises interest receivable on cash balances, deposits and
loans to group undertakings as well as foreign currency gains. Interest income
is recognised as it accrues, using the effective interest rate method.
Financial expenses comprise interest payable on bank loans, unwinding of the
discount on provisions, financial costs of post-retirement benefit plans and
foreign currency losses. Interest payable is recognised on an accruals basis,
based on effective interest rate method.
Foreign currency gains and losses are reported on a net basis.
Foreign currencies
The individual financial statements of each group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purposes of the consolidated financial statements,
the results and financial position of each group company are expressed in pounds
sterling, which is the functional currency of the Company and the presentation
currency for the consolidated financial statements.
Transactions in currencies other than pounds sterling are recorded at the rates
of exchange prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in foreign currencies
are retranslated at the rates prevailing on the balance sheet date. Non-monetary
assets and liabilities carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair
value was determined. Gains and losses arising on retranslation are included in
net profit or loss for the period, except for exchange differences arising on
non-monetary assets and liabilities where the changes in fair value are
recognised directly in equity. Non monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
On consolidation, the assets and liabilities of the group's overseas operations
are translated at exchange rates prevailing on the balance sheet date. Income
and expense items are translated at the average exchange rates for the period
unless exchange rates fluctuate significantly. Exchange differences arising, if
any, are classified as equity and transferred to the group's translation
reserve. Such translation differences are recognised as income or as expenses in
the period in which the operation is disposed of.
Borrowing costs
Borrowing costs are recognised in profit or loss in the period in which they are
incurred.
Post-retirement benefits
The Group accounts for pensions and post-retirement benefits under IAS 19
Employee benefits.
For defined benefit plans, obligations are measured at present value, while plan
assets are recorded at fair value. The operating and financing costs of such
plans are recognised in the income statement. Current service costs are spread
systematically over the lives of employees and financing costs are recognised in
the periods in which they arise. Actuarial gains and losses are recognised in
the period in which they arise in the statement of recognised income and
expense.
Inventories
Inventory and work in progress is valued at the lower of cost, including
appropriate overheads, and net realisable value. Provisions are made against
excess and obsolete inventories.
Chemetall PLC
Page 18
Notes to the accounts
Year ended 31 December 2007
2.Significant accounting policies (continued)
Intangible assets
Patents are initially recognised at cost and then amortised in line with the
stated life of the patents, between 1 and 20 years.
Customer contracts are amortised over the length of the contract.
All other intangible assets are amortised over their estimated useful life, not
exceeding 20 years, starting in the year after acquisition.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any provision for impairments in value.
Depreciation is provided to write off cost less the estimated residual value of
property, plant and equipment by equal instalments over their estimated useful
economic lives as follows:
Leasehold Improvements-life of the lease
Plant and machinery-10-33% per annum
Fixtures and equipment-20% per annum
The directors regularly consider the carrying value of property, plant and
equipment for impairment. Any reduction in value arising from the impairment of
the property, plant and equipment is charged to the income statement for the
year.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any).
The recoverable amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised as
income immediately, unless the relevant asset is carried at the revalued amount,
in which case the reversal of the impairment loss is treated as a revaluation
increase.
Financial instruments
Trade receivables - Trade receivables are recognised initially at fair value,
thereafter measured at amortised cost using the effective interest rate method.
A provision for impairment of trade receivables is established when there is
objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables.
Trade payables - Trade payables are recognised initially at fair value,
thereafter measured at amortised cost using the effective interest rate method.
Trade payables are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
Chemetall PLC
Page 19
Notes to the accounts
Year ended 31 December 2007
2.Significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Share capital
Preference share capital is classified as a liability as dividend payments are
not discretionary.
Dividends on the preference shares are disclosed as interest charges and are
accounted for on an accrual basis.
Other dividends are recognised as a liability only in the period in which they
are declared.
Interest
Interest receivable is recognised in the income statement using the effective
interest method as defined in IAS 39 Financial instruments: recognition and
measurement.
Taxation
The tax expense represents the sum of tax currently payable and deferred tax.
Provision for taxation is made at the current rate and for deferred taxation at
the tax rate expected to apply on all temporary differences between the
treatment of certain items for taxation and for accounting purposes.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the group is able to control the reversal of the
temporary difference and it is probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited to equity, in which case the deferred tax is also dealt with
in equity.
Provisions
A provision is created and recognised as a liability when the Group has a
present obligation (legal or constructive) as a result of a past event and it is
expected that a transfer of economic benefits will be required to settle that
obligation and a reliable estimate of the amount of the transfer can be made.
Vacant leasehold properties
A provision is maintained in respect of vacant leasehold properties to take
account of the lease commitments over the remaining term of the lease. In
determining the net present value, cash flows have been discounted using an
appropriate nominal, risk-free, pre-tax rate of return.
Chemetall PLC
Page 20
Notes to the accounts
Year ended 31 December 2007
2.Significant accounting policies (continued)
Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the company's accounting policies, which are
described in Note 2, management has made the following judgements that have the
most significant effect on the amounts recognised in the financial statements.
Stock and Bad debt provisions
The group policy for provisions is noted above.
3.Financial risk management
Overview
Non-derivative financial instruments comprise trade and other receivables, cash
and cash equivalents, trade and other payables and loans, borrowings and debt
instruments.
Accounting for finance income and expense is discussed in note 2.
The Group has exposure to the following risks from its use of financial
instruments:
credit risk
liquidity risk
market risk
currency risk
This note presents information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and managing
risk, and the Group's management of capital. Further quantitative disclosures
are included throughout these consolidated financial statements.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The primary method by which
risks are monitored and managed by the Group is through the monthly Executive
Committee. Prior to each monthly meeting the attendees will review the risk
matrices and update them. At the meeting, any significant new risks or change in
status to existing risks will be discussed and actions taken as appropriate.
The Group's risk management policies are established to identify and analyse the
risks faced by the Group, to set appropriate risk limits and controls, and to
monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.
The Executive Committee oversees how management monitors compliance with the
Group's risk management policies and procedures and reviews the adequacy of the
risk management framework in relation to the risks faced by the Group.
Chemetall PLC
Page 21
Notes to the accounts
Year ended 31 December 2007
3.Financial risk management (continued)
Credit risk
Credit risk is the risk of financial loss to the Group if a customer fails to
meet its contractual obligations.
The group's principal financial assets are bank balances and cash and trade and
other receivables, which represent the group's maximum exposure to credit risk
in relation to financial assets.
The group's credit risk is primarily attributable to its trade and amounts from
group undertakings receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables, estimated by the group's management
based on prior experience and their assessment of the current economic
environment.
The group has no significant concentration of credit risk, with exposure spread
over a large number of customers. Any new customers are subject to credit checks
(in many cases through Dun & Bradstreet credit reports).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial
obligations as they fall due. The Group's approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to
meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group's
reputation.
Typically the Group ensures that it has sufficient cash on demand to meet
expected operational expenses for a period of 28 days, this excludes the
potential impact of extreme circumstances that cannot reasonably be predicted,
such as natural disasters.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange
and interest rates will affect the Group's income. The objective of market risk
management is to manage and control market risk exposures within acceptable
parameters, while optimising the return on risk.
Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that
are denominated in a currency other than the respective functional currencies of
Group entities, primarily the Pound Sterling (GBP), but also the Euro. The
currencies in which these transactions primarily are denominated are GBP and
Euro.
Interest on borrowings is denominated in currencies that match the cash flows
generated by the underlying operations of the Group, primarily GBP. This
provides an economic hedge and no derivatives are entered into.
100 percent of the Group's sales are denominated in sterling.
Capital management
The Board's policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development of
the business. The Board monitors the spread of shareholders, as well as the
return on capital, and the level of dividends to ordinary shareholders.
There were no changes in the Groups' approach to capital management during the
year.
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements.
Chemetall PLC
Page 22
Notes to the accounts
Year ended 31 December 2007
4.Analysis of revenue
All activities are derived from the development, manufacture and marketing of
specialised industrial chemicals. All revenue recorded represents sale of goods.
5.Business and geographical segments
The primary reporting format is deemed to be business segments. All activities
are derived from the development, manufacture and marketing of specialised
industrial chemicals. As such, the directors deem that there is only one
reportable segment. The secondary reporting format is therefore deemed by the
directors to be geographical segments. No separate geographical segment consists
of more than 10% of total revenue or total assets; therefore no further analysis
of geographical segments is presented.
6.Profit from operations
Profit from operations has been arrived at after charging:
2007 2006
�000 �000
Depreciation of property, plant and equipment 200 184
Amortisation of intangible assets 29 152
Staff costs (see note 8) 4,331 4,302
Auditors' remuneration and other audit services - statutory
audit 42 31
Total non-audit fees were �nil (2006:�nil).
Chemetall PLC
Page 23
Notes to the accounts
Year ended 31 December 2007
7.Acquisitions
On 19 February 2007 Chemetall PLC acquired the trade and assets of the chemical
division business of Wirral Fospray Limited for a consideration of �1,191,000.
The acquired business was integrated into the operations of Chemetall PLC.
All intangible assets were recognised at their respective fair values. Stock was
valued at its carrying value plus a fair value adjustment of �20,000 as detailed
below:
Carrying value Fair value Fair Value
pre-acquisition adjustments
�000 �000 �000
Non-current
assets
Intellectual
property - 300 300
Non-compete
agreement - 50 50
Customer
relationships - 656 656
- 1,006 1,006
Current assets
Inventory
including step
up 180 20 200
Other
receivables 35 - 35
215 20 235
Current
liabilities (50) - (50)
Fair value of
net assets
acquired 165 1,026 1,191
---
Consideration 1,191
No goodwill arose on this acquisition.
Chemetall PLC
Page 24
Notes to the accounts
Year ended 31 December 2007
8.Staff costs
The average monthly number of employees (including executive directors) analysed
by category was:
2007 2006
Number Number
Specialised industrial chemicals 91 93
�000 �000
Their aggregate remuneration comprised:
Wages and salaries 3,242 3,242
Social security costs 362 373
Other pension costs 727 687
4,331 4,302
Remuneration of directors
Year ended 31 December 2007 Year ended 31 December 2006
�000 �000
Wages and salaries 104 110
Social security
costs 13 14
Other pension
costs 18 17
135 141
Retirement benefits are accruing to one director (31 December 2006: one).
9.Investment revenue
2007 2006
�000 �000
Interest on loans to group undertakings 4,720 918
Interest on cash and other balances 21 2,374
Retirement Benefit net finance income 25 -
4,766 3,292
Chemetall PLC
Page 25
Notes to the accounts
Year ended 31 December 2007
10.Financial costs
2007 2006
�000 �000
Dividends on preference shares 1,080 1,080
Retirement benefit net interest cost - 51
1,080 1,131
11.Tax
2007 2006
�000 �000
Current tax:
UK corporation tax 1,413 978
Adjustments related to earlier years 106 (85)
1,519 893
Deferred tax (note 19):
Current year 227 (998)
Adjustments related to earlier years (100) -
127 (998)
1,646 (105)
Corporation tax is calculated at 30 % (2006: 30 %) of the estimated assessable
profit for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The charge for the year can be reconciled to the profit per the income statement
as follows:
2007 2007 2006 2006
�000 % �000 %
Profit before tax 5,613 n/a 3,232 n/a
Tax at the UK corporation tax rate of 1,684 30 970 30
30%
(2006: 30%)
Tax effect of expenses that are not
deductible 33 1 64 2
in determining taxable profit
Tax effect of utilisation of items
previously - - (388) (12)
disallowed for tax
Adjustments related to earlier years 6 - (85) (3)
Preference dividend 324 6 324 10
Increased recognition of losses (725) (13) (990) (30)
Rate Change 324 5
Tax expense and effective tax rate for 1,646 29 (105) (3)
the year
======== ======== ======== ========
Chemetall PLC
Page 26
Notes to the accounts
Year ended 31 December 2007
12.Dividends
The dividend distributed to the equity holders is nil (2006: nil).
The dividend paid at interim to the holders of 9% redeemable preference shares
was �540,000 (2006: �540,000). The final dividend proposed is �540,000 (2006:
�540,000). Dividends on the 9% redeemable preference shares are presented as
financial costs in the income statement in accordance with IAS 32 "Presentation
of financial instruments".
13.Goodwill
�000
Cost
At 1 January 2006, 1 January 2007 and 31 December 2007 2,475
No impairment losses have been recognised on the above goodwill balance. All of
the goodwill shown above relates to a single Cash Generating Unit ('CGU').
The group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill might be impaired.
The recoverable amounts from the CGU are determined from value in use
calculations. The key assumptions for the value in use calculations are those
regarding the discount rates, growth rates and expected changes to selling
prices and direct costs during the period. Management estimates discount rates
using pre tax rates that reflect current market assessments of the time value of
money and the risks specific to the CGU. The growth rates are based on industry
growth forecasts. Changes in selling prices and direct costs are based on past
practices and expectations of future changes in the market.
Chemetall PLC
Page 27
Notes to the accounts
Year ended 31 December 2007
14.Other intangible assets
Customer Patents Customer Intellectual Non-compete Total
contracts
�000 and relationships Property Agreement �000
trademarks �000 �000 �000
�000
Cost
At 1 January
2006 and 1
January 2007 250 1,108 - - - 1,358
Additions in
the year - - 656 300 50 1,006
At 31
December 250 1,108 656 300 50 2,364
2007
Amortisation
At 1 January
2006 130 815 - - - 945
Charge for
the 120 32 - - - 152
year
At 1 January
2007 250 847 - - - 1,097
Charge for
the - 29 - - - 29
year
At 31
December 250 876 - - - 1,126
2007
Carrying
amount
At 31
December - 232 656 300 50 1,238
2007
At 31
December - 261 - - - 261
2006
The amortisation period for customer contracts is 2 years.
Patents and trademarks are amortised over their estimated useful lives, until
expiry of legal rights.
Other intangible assets are amortised over their estimated useful life, not
exceeding 20 years, starting in the year after acquisition.
Chemetall PLC
Page 28
Notes to the accounts
Year ended 31 December 2007
15.Property, plant and equipment
Leasehold Plant and Fixtures Total
improvements machinery and
�000 �000 equipment �000
�000
Cost
At 1 January
2006 2,481 2,370 779 5,630
Additions 87 43 - 130
At 1 January
2007 2,568 2,413 779 5,760
Additions 42 266 - 308
Disposals (2) - - (2)
At 31 December
2007 2,608 2,679 779 6,066
Accumulated depreciation and
impairment
At 1 January
2006 (1,562) (2,047) (771) (4,380)
Charge for the
year (130) (49) (5) (184)
At 1 January
2007 (1,692) (2,096) (776) (4,564)
Charge for the
year (145) (52) (3) (200)
Disposals 2 - - 2
At 31 December
2007 (1,835) (2,148) (779) (4,762)
Carrying amount
At 31 December
2007 773 531 - 1,304
At 31 December
2006 876 317 3 1,196
16.Inventories
31 December 2007 31 December 2006
�000 �000
Raw materials and consumables 380 403
Work in progress 24 20
Finished goods and goods for resale 1,038 1,020
1,442 1,443
Chemetall PLC
Page 29
Notes to the accounts
Year ended 31 December 2007
17.Trade and other receivables
31 December 2007 31 December 2006
�000 �000
Trade receivables 3,428 2,995
Amounts due from group undertakings 90,426 85,140
Prepayments and accrued income 221 157
94,075 88,292
Of the amounts due from group undertakings, �60,731,000 is due on or before 31
December 2008 (2006: �85,140,000 due on or before 31 December 2007) unless those
parties agree to extend the terms. �29,695,000 is due after 31 December 2008
(2006: �nil due after 31 December 2007).
An allowance has been made for estimated irrecoverable amounts from the sale of
goods of �200,000 (2006: �244,000). This allowance has been determined by
reference to past default experience.
The average credit period taken on sales of goods/services is 61 days (2006: 59
days).
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
The Group's exposure to credit and currency risks and impairment losses related
to trade and other receivables are disclosed in note 31.
18.Other financial assets
Bank balances and cash
Bank balances and cash comprise cash held by the group and short-term bank
deposits with an original maturity of three months or less. The carrying amount
of these assets approximates their fair value.
Chemetall PLC
Page 30
Notes to the accounts
Year ended 31 December 2007
19.Deferred tax
The following are the major deferred tax assets recognised by the group during
the current and prior reporting period.
Accelerated Short term Retirement Tax Total
capital timing benefit losses
allowance differences obligations
�000 �000 �000 �000 �000
Cost or
valuation
At 1
January 62 425 2,613 951 4,051
2006
Credit/
(charge) 65 (33) (24) 990 998
to
income
Credit/
(charge) - - (395) - (395)
to
equity
At 1
January 127 392 2,194 1,941 4,654
2007
Credit/
(charge)to
income
and effect 58 50 (218) (17) (127)
of
change in
tax
rate
Credit/
(charge) - - (977) - (977)
to
equity
At 31
December 185 442 999 1,924 3,550
2007
At the balance sheet date, the group has unused tax losses of �6,872,000 (2006:
9,133,000) available for offset against profits. A deferred tax asset has been
recognised in respect of �6,872,000 (2006: �6,470,000) of such losses. In 2006
no deferred tax was recognised in respect of an amount of �2,415,000 due to
unpredictability of future profit streams. The tax losses can be carried forward
indefinitely.
Chemetall PLC
Page 31
Notes to the accounts
Year ended 31 December 2007
20.Interest bearing loans and borrowings
31 December 2007 31 December 2006
No. �000 No. �000
Authorised
Non-equity: 9% redeemable
preference shares of �1 each 15,000,000 15,000 15,000,000 15,000
Allotted, called up and fully
paid
Non equity: 9% redeemable
preference shares of �1 each 12,000,000 12,000 12,000,000 12,000
The Company issued 12,000,000 9% redeemable preference shares of �1 each. These
preference shares entitle their holders to a fixed cumulative preference
dividend at a rate of 9% per annum, per share. On a winding up the preference
shareholders are entitled to a sum equal to the nominal capital paid up or
credited as paid up, on the preference shares held by them, together with all
arrears (if any) of the preference dividend. They carry the right to receive
notice of, or attend, or vote at General Meetings only in special circumstances
such as when the preference dividend is six months or more in arrears or if
redemption has not been made on the due date, or in such cases as a winding up
of the Company or a reduction in its share capital. The preference shares have
to be redeemed at par on 3 July 2008. The 9% redeemable preference shares are
presented as current liabilities in the balance sheet and the associated
dividend payable as interest expense in the income statement in order to comply
with IAS 32 "Presentation of financial instruments".
21.Other financial liabilities
Trade and other payables
31 December 2007 31 December 2006
�000 �000
Trade creditors 1,476 1,619
Amounts owed to group undertakings 2,202 1,908
Accruals and deferred income 2,066 1,748
Preference dividend payable 540 540
6,284 5,815
The directors consider that the carrying amount of trade and other payables
approximates to their fair value.
Policy and practice on the payment of creditors is disclosed in the directors'
report.
Chemetall PLC
Page 32
Notes to the accounts
Year ended 31 December 2007
22.Provisions
Vacant property provision Other provision Total
�000 �000 �000
Cost
At 1 January 2007 1,211 88 1,299
Additional provision 376 - 376
Provision utilised (109) (48) (157)
At 31 December 2007 1,478 40 1,518
31 December 31 December
2007 2006
Included in current
liabilities 154 197
Included in non current
liabilities 1,364 1,102
1,518 1,299
The vacant property provision represents management's best estimate of the
Group's liability to take account of the residual lease commitments over the
remaining term of the lease.
23.Share capital
31 December 2007 31 December 2006
No. �000 No. �000
Authorised
Equity: Ordinary shares of 10p 91,948,000 9,195 91,948,000 9,195
each
Issued and fully paid
Equity: Ordinary shares of 10p 68,888,817 6,889 68,888,817 6,889
each
The company has one class of ordinary shares which carry no right to fixed
income.
24.Share premium account
Share premium
�000
Balance at 1 January 2006, 1 January 2007 and 31 December
2007 29,757
Chemetall PLC
Page 33
Notes to the accounts
Year ended 31 December 2007
25.Retained earnings
�000
Balance at 1 January 2006 33,102
Actuarial gain on defined benefit pension scheme (net of tax) 923
Net profit for the year 3,337
Balance at 1 January 2007 37,362
Actuarial gain on defined benefit pension scheme (net of tax) 2,511
Net profit for the year 3,967
Balance at 31 December 2007 43,840
26.Translation reserve
�000
Balance at 1 January 2006 (1,056)
Exchange difference on translation of overseas operations (779)
Balance at 1 January 2007 (1,835)
Exchange difference on translation of overseas operations 3,734
Balance at 31 December 2007 1,899
27.Notes to the cash flow statement
31 December 31December
2007 2006
�000 �000
Profit before taxation 5,613 3,232
Adjustments for:
Depreciation of property, plant and equipment 200 184
Amortisation of intangible assets 29 152
Movement in provisions 219 (84)
Interest income (4,766) (3,292)
Interest expense 1,080 1,131
Operating cash flows before movements in working
capital 2,375 1,323
Movement in inventories 201 (97)
Movement in receivables 637 (853)
Movement in payables 161 19
Cash generated by operations 3,374 392
Income taxes (paid)/received (1,889) 433
Net cash from operating activities 1,485 825
Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash at bank.
Chemetall PLC
Page 34
Notes to the accounts
Year ended 31 December 2007
28.Commitments
31 December 31 December 31 December 31 December
2007 2007 2006 2006
Land and Other Land and Other
Buildings �000 Buildings �000
�000 �000
Minimum lease payments
under operating leases
recognised in the
income statement for
the year 457 260 456 262
At the balance sheet date, the group had outstanding commitments for future
minimum lease payments under non cancellable operating leases, which fall due
as follows:
Within one year 457 217 456 185
In the second to fifth
years inclusive 1,788 260 1,799 173
After five years 1,913 - 2,353 -
4,158 477 4,608 358
29.Retirement benefit schemes
The Group operates two funded defined benefit schemes which provide for their
liabilities through trustee operated funds. The Chemetall UK Pension Scheme,
provides benefits based on final pensionable pay. The Process Ink Scheme is a
closed scheme. The assets of both schemes are held separately from those of the
Group in a trustee administered fund. The trustees comprise senior group
employees and retired members.
The Group does not have any health and medical plans providing post-retirement
benefits. The pension costs relating to the Chemetall UK and Process Ink schemes
are assessed in accordance with the advice of Aon Limited, the independent
actuaries, using, in the case of the Chemetall UK scheme, the projected unit
method.
Scheme Last Assumed Average Total Funding level value
actuarial Investment salary market of assets as
valuation Return per increase per value of percentage of
annum annum assets liabilities
at latest
valuation
dates
Chemetall
UK 1 January 7.4%(1) 4.4% �19.5m(4) 85%
Pension 2005
scheme
Process
Ink
Company
Limited
Pension
and 1 January 7.9%(2) 2.9%(3) �2.8m 82%
Death 2005
Benefits
Plan
Chemetall PLC
Page 35
Notes to the accounts
Year ended 31 December 2007
29.Retirement benefit schemes (continued)
(1) The rate of return is assumed to reduce to between 5.1% and 5.5% per annum
from each member's normal retirement age.
(2) The rate of return is assumed to reduce to between 4.6% and 5% per annum
from each member' normal retirement age.
(3) This is the assumed rate of revaluation of deferred pensions up to normal
retirement date
(4) The market value of the assets includes additional voluntary contributions.
The pension increases were assumed to be equal to those specified in the rules
of the schemes. Increases in pensions in payment, in line with retail prices but
capped at 5% were assumed to be 2.9% per annum.
The most recent actuarial valuation of plan assets and the present value of the
defined benefit obligation were carried out at 1 January 2005 and updated to 31
Decemer 2007 by Aon Consulting.
The estimated amount of contributions expected to be paid to the scheme during
the current financial year is �728,000.
31 31 31 31
December December December December
2007 2006 2005 2004
�000 �000 �000 �000
Rate of increase in
salaries 4.4% 4.7% 4.5% 4.5%
Rate of increase in pensions in
payment
- Ex Brent members pre '97 Nil Nil Nil Nil
- Ex Winnets members
pre '97 3.0% 3.0% 3.0% 3.0%
- Process directors 8.5% 8.5% 8.5% 8.5%
- All post '97 pre '06 3.4% 3.0% 3.0% 3.0%
- Post '06 2.04% 2.0% N/a N/a
Discount rate 5.8% 5.1% 4.75% 5.25%
Inflation 3.4% 3.2% 3.0% 3.0%
The rates used have been chosen from a range of possible amounts determined
using actuarial assumptions which due to the timescale covered may not
necessarily be borne out in practice.
Chemetall PLC
Page 36
Notes to the accounts
Year ended 31 December 2007
29.Retirement benefit schemes (continued)
Scheme assets
The fair value of the assets in the schemes (which are not intended to be
realised in the short term and may be subject to significant change) and the
present value of the schemes liabilities (which are derived from cash flow
projections over long periods and thus are inherently uncertain) were:
Value at 31 December Value at 31 December Value at 31 December
2007 2006 2005
Chemetall Process Ink Chemetall Process Ink Chemetall Process Ink
�000 �000 �000 �000 �000 �000
Market
value 22,866 3,249 22,765 3,148 22,014 3,020
of assets
Present
value
of scheme (26,334) (3,348) (29,389) (3,836) (29,737) (4,006)
liabilities
Deficit in
the (3,468) (99) (6,624) (688) (7,723) (986)
scheme
Related
deferred
tax 971 28 1,987 206 2,317 296
asset
Net pension
liability (2,497) (71) (4,637) (482) (5,406) (690)
Chemetall PLC
Page 37
29.Retirement benefit schemes (continued)
Operating results and other disclosures
31 December 2007
Chemetall Process Ink Total
UK Scheme
Pension
Scheme
�000 �000 �000
Analysis of the amount charged to operating
loss
Service cost (496) - (496)
Past service cost - - -
Total operating charge (496) - (496)
Analysis of the net return:
Expected return on the pension
scheme assets 1,517 190 1,707
Interest on pension scheme
liabilities (1,490) (192) (1,682)
Net credit 27 (2) 25
Actuarial gain recognised in the
statement recognised income and
expense 2,986 502 3,488
Changes in the present value of the defined
benefit obligation are as follows:
Opening defined benefit obligation 29,389 3,836 33,225
Service Cost 496 - 496
Interest Cost 1,490 192 1,682
Contributions by members 162 - 162
Actuarial (gains) and losses (4,235) (528) (4,763)
Benefits paid (968) (152) (1,120)
Closing defined benefit obligation 26,334 3,348 29,682
Changes in the fair value of Scheme assets are
as follows:
Opening fair value of Scheme
assets 22,765 3,148 25,913
Expected return 1,517 190 1,707
Actuarial gains and (losses) (1,249) (26) (1,275)
Contributions by employer 639 89 728
Contributions by members 162 - 162
Benefits paid (968) (152) (1,120)
Closing fair value of Scheme
assets 22,866 3,249 26,115
Chemetall PLC
Page 38
Notes to the accounts
Year ended 31 December 2007
29. Retirement benefit schemes (continued)
Operating results and other disclosures
31 December 2006
Chemetall Process Ink Total
UK Scheme
Pension
Scheme
�000 �000 �000
Analysis of the amount charged to operating
loss
Service cost (567) - (567)
Past service cost - - -
Total operating charge (567) - (567)
Analysis of the net return:
Expected return on the pension
scheme assets 1,370 173 1,543
Interest on pension scheme
liabilities (1,407) (187) (1,594)
Net charge (37) (14) (51)
Actuarial gain recognised in the
statement recognised income and
expense 1,095 223 1,318
Changes in the present value of the defined
benefit obligation are as follows:
Opening defined benefit obligation 29,737 4,006 33,743
Service Cost 567 - 567
Interest Cost 1,407 187 1,594
Contributions by members 104 - 104
Actuarial (gains) and losses (1,188) (178) (1,366)
Benefits paid (1,238) (179) (1,417)
Closing defined benefit obligation 29,389 3,836 33,225
Changes in the fair value of Scheme assets are
as follows:
Opening fair value of Scheme
assets 22,014 3,020 25,034
Expected return 1,370 173 1,543
Actuarial gains and (losses) (93) 45 (48)
Contributions by employer 608 89 697
Contributions by members 104 - 104
Benefits paid (1,238) (179) (1,417)
Closing fair value of Scheme
assets 22,765 3,148 25,913
Chemetall PLC
Page 39
Notes to the accounts
Year ended 31 December 2007
29.Retirement benefit schemes (continued)
Operating results and other disclosures
31 December 2005
Chemetall Process Ink Total
UK Scheme
Pension
Scheme
�000 �000 �000
Analysis of the amount charged to operating
loss
Service cost (567) (10) (577)
Past service cost - - -
Total operating charge (567) (10) (577)
Analysis of the net return:
Expected return on the pension
scheme assets 1,231 168 1,399
Interest on pension scheme
liabilities (1,420) (187) (1,607)
Net charge (189) (19) (208)
Actuarial gain recognised in the
statement recognised income and
expense 540 (205) 335
Changes in the present value of the defined
benefit obligation are as follows:
Opening defined benefit obligation 27,156 3,541 30,697
Service Cost 567 10 577
Interest Cost 1,420 187 1,607
Contributions by members 108 2 110
Actuarial (gains) and losses 1,231 391 1,622
Benefits paid (745) (125) (870)
Closing defined benefit obligation 29,737 4,006 33,743
Changes in the fair value of Scheme assets are
as follows:
Opening fair value of Scheme
assets 19,016 2,777 21,793
Expected return 1,231 164 1,395
Actuarial gains and (losses) 1,771 192 1,963
Contributions by employer 633 10 643
Contributions by members 108 2 110
Benefits paid (745) (125) (870)
Closing fair value of Scheme
assets 22,014 3,020 25,034
Chemetall PLC
Page 40
Notes to the accounts
Year ended 31 December 2007
29.Retirement benefit schemes (continued)
Actuarial gains and losses in 31 31 31 31 31
the period: December December December December December
2007 2006 2005 2004 2003
�'000 �'000 �'000 �'000 �'000
Difference
between the
expected and
actual return
on assets (1,275) 104 2,105 1,231 424
Percentage of
Assets 6% 0% 10% 7% 2%
Experience
gains and
losses on
liabilities (69) (363) 1,348 (204) 402
Percentage of
present value
of liabilities 0% (1)% 4% (1)% 2%
Total amount
recognised in
statement of
recognised
income and
expense 3,488 1,318 335 (2,350) 173
The analysis of the scheme assets and expected return at the balance sheet date
were as follows:
Chemetall UK Pension Scheme
Return at Value at 31 Return at Value at 31 Return at 31 Value at 31
31 December 31 December December December
December 2007 December 2006 2005 2005
2007 2006
�000 �000 �000
Equities 8.40% 10,741 8.10% 8,582 7.95% 9,446
Corporate 5.80% 7,140 5.10% 7,298 4.75% 7,496
bonds
Government
bonds 4.50% 3,118 4.60% 3,128 4.10% 3,225
Property 8.40% 1,746 8.10% 3,665 7.95% 1,704
Cash 4.50% 121 4.60% 92 4.10% 143
Overall
rate 7.04% 22,866 6.70% 22,765 6.25% 22,014
of return
Process Ink Scheme
Return at Value at 31 Return at Value at 31 Return at 31 Value at 31
31 December 31 December December December
December 2007 December 2006 2005 2005
2007 2006
�000 �000 �000
Equities 8.40% 1,429 8.10% 1,398 7.95% 1,322
Corporate 5.80% - 5.10% - 4.75% -
bonds
Government
bonds 4.50% 1,795 4.60% 1,741 4.10% 1,684
Property 8.40% - 8.10% - 7.95% -
Cash 4.50% 25 4.60% 9 4.10% 14
Overall
rate 6.22% 3,249 6.10% 3,148 5.75% 3,020
of return
Chemetall PLC
Page 41
Notes to the accounts
Year ended 31 December 2007
29.Retirement benefit schemes (continued)
Overall expected return on assets
The overall expected return on assets is calculated as the weighted average of
the expected returns on each individual asset class.
Gilts 4.5% pa
This is equal to the Gross Redemption Yield on Government Bonds at the end of
2007 at the duration relevant for the liabilities.
Bonds 5.8% pa
This is equal to the Gross Redemption Yield on AA rated bonds at the end of 2007
at the duration relevant for the liabilities.
Cash 4.5% pa
This is equal to the long-term return on Gilts which is, in theory, an
accumulation of short-term interest rates.
Equities 8.4% pa
The long-term return on UK equities has been derived by considering the income
and capital appreciation elements of total return separately. At 31 December
2007, the net dividend yield on the FTSE all-share index was 3.0%. This provides
the estimate of the income element. The capital appreciation has been derived by
assuming that UK equity prices will rise 2% pa faster than price inflation
(which was assumed to be 3.4% pa). This reflects the fact that UK equity prices
tend to increase in line with GDP growth over the long-term and this has
historically been some 2%-2.5% pa in excess of price inflation. This leads to an
overall assumption of 8.4% pa.
Overseas equities and property 8.4% pa
This reflects the fact that these assets are usually held to provide some
diversification from holding exclusively UK equities. In fact, the expectations
of return (in sterling terms) might be slightly higher in some markets (e.g.
emerging markets) but due to the fact that the scheme doesn't hold a significant
amount in such assets we have assumed that the same return for overseas equities
as for UK equities.
30.Related party transactions
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the group and other related parties are disclosed
below.
Trading transactions
During the year, group companies entered into the following transactions with
related parties who are not members of this group:
Sale of goods Purchase of goods Amounts owed by Amounts owed to
related parties related parties
2007 2006 2007 2006 2007 2006 2007 2006
�000 �000 �000 �000 �000 �000 �000 �000
Fellow
subsidiary
undertakings 515 529 2,850 2,844 522 80 2,202 1,516
Sales and purchases of goods to related parties were made at the parent group's
usual list prices. The amounts outstanding are unsecured and will be settled in
cash. No guarantees have been given or received. No provisions have been made
for doubtful debts in respect of the amounts owed by related parties.
During the year, other services such as licences, IT services and insurance were
purchased from Chemetall GmbH in the amount of �741,000 (31 December 2006:
�413,000).
Chemetall PLC
Page 42
Notes to the accounts
Year ended 31 December 2007
Related party transactions (continued)
Non-trading transactions
The group has lent money to fellow subsidiaries undertakings. The outstanding
loan balances and the interest charged on these loan balances are presented in
the table below:
Loans to Interest charged to
2007 2006 2007 2006
�000 �000 �000 �000
Fellow subsidiary undertakings 89,905 84,626 4,720 918
Remuneration of key management personnel
The remuneration of the directors who are the key management personnel of the
group are given in Note 8.
31.Financial instruments
Credit risk
The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting date was:
Note Year ended 31 December 2007 Year ended 31 December 2006
�000 �000
Trade and
other
receivables 17 94,075 88,292
Cash and cash
equivalents 3,236 2,157
97,311 90,449
The primary reporting format is deemed to be business segments. All the trade
receivables arise from activities within only one operating business segment.
The secondary business segment is deemed by directors to be geographical
segments. No separate geographical segment consists of more than 10% of total
revenue or total assets. As such, no further analysis of the maximum exposure to
credit risk for trade receivables at the reporting date is presented.
The Group's most significant customer, a United Kingdom manufacturer, accounts
for �424,000 of the trade receivables carrying amount at 31 December 2007 (2006:
�558,000)
Chemetall PLC
Page 43
Notes to the accounts
Year ended 31 December 2007
31.Financial instruments (continued)
Impairment losses
The ageing of trade receivables at the reporting date was as follows:
Year ended Year ended
31 December 2007 31 December 2006
Gross Impairment Gross Impairment
�000 �000 �000 �000
Not past due 2,569 - 2,286 -
Past due 0 - 30 days 568 - 312 -
Past due 30 - 60 days 149 - 349 -
Past due 60 - 90 days 119 - 28 -
Past due older 223 (200) 264 (244)
Total 3,628 (200) 3,239 (244)
Based on historic default rates, the Group believes that no impairment allowance
is necessary in respect of trade receivables not past due or past due by up to
90 days. 93.8% of the balance, which includes the amount owed by the Group's
most significant customer, relates to customers that have a good trade record
with the Group.
The movement in the allowance for impairment in respect of trade receivables
during the year was as follows:
Year ended Year ended
31 December 2007 31 December 2006
�000 �000
At 1 January 244 159
Provided during the year 2 112
Utilised during the year (46) (27)
At 31 December 200 244
The allowance accounts in respect of trade receivables are used to record
impairment losses, unless the Group is satisfied that no recovery of the amount
owing is possible; at that point the amounts considered irrecoverable are
written off against the financial asset directly.
Chemetall PLC
Page 44
Notes to the accounts
Year ended 31 December 2007
31.Financial instruments (continued)
Liquidity risk
The Group has not entered into any derivative transactions in either year.
31 December 2007
Carrying Contractual cash 6 months or 6-12 1-2
amount flows less months years
�000 �000 �000 �000 �000
Redeemable
preference
shares 12,000 (13,080) (540) (12,540) -
Trade and
other
payables* 5,744 (5,744) (5,744) - -
*Excludes preference dividend payable
31 December 2006
Carrying Contractual cash 6 months or 6-12 1-2 years
amount flows less months
�000 �000 �000 �000 �000
Redeemable
preference
shares 12,000 (14,160) (540) (540) (13,080)
Trade and
other
payables* 5,275 (5,275) (5,275) - -
*Excludes preference dividend payable
Chemetall PLC
Page45
Notes to the accounts
Year ended 31 December 2007
30.Financial instruments (continued)
Currency risk
Exposure to currency risk
The Group's exposure to foreign currency risk was as follows:
31 December 2007 31 December 2006
GBP Euro Dirham GBP Euro Dirham
�000 �000 �000 �000 �000 �000
Trade Receivables 2,460 492 296 2,276 505 214
Amounts due from group
undertakings 47,015 43,411 - 44,414 40,726 -
Other Receivables 221 - - 157 - -
Cash and cash 1,920 1,316 - 2,153 4 -
equivalents
Trade Payables (1,476) - - (1,619) - -
Amounts owed to group
undertakings (2,202) - - (1,908) - -
Other payables (3,483) (689) - (3,454) (714) -
Gross Balance sheet
exposure 44,455 44,530 296 42,019 40,521 214
Estimated forecast 21,300 - - 22,000 - -
sales
Estimated Forecast
purchases (13,350) - - (13,300) - -
Gross Exposure 7,950 - - 8,700 - -
Net Exposure 52,405 44,530 296 50,719 40,521 214
The following significant exchange rates applied during the year:
Average Rate Spot rate at reporting date
2007 2006 2007 2006
Euro 1.4611 1.4668 1.3605 1.4841
Chemetall PLC
Page 46
Notes to the accounts
Year ended 31 December 2007
31.Financial instruments (continued)
Sensitivity analysis
A 10 percent strengthening of the pound sterling against the euro at 31 December
would have increased (decreased) equity and profit or loss by the amounts shown
below. This analysis assumes that all other variables, in particular interest
rates, remain constant. The analysis is performed on the same basis for 2006.
31 December 2007 31 December 2006
Equity Profit or loss Equity Profit or loss
�000 �000 �000 �000
Euro 4,101 135 3,627 80
A 10 percent weakening of the pound sterling against the euro at 31 December
would have had the equal but opposite effect to the amounts shown above, on the
basis that all variables remain constant.
Interest rate risk
The Group has exposures to interest rate risk on its cash balances. At 31
December 2007 the Group had total cash of �3,236,000 (2006: �2,157,000).
At the reporting date the interest rate profile of the Group's interest-bearing
financial instruments was:
Carrying amount
2007 2006
�000 �000
Financial Assets 89,905 84,626
Financial Liabilities (540) (540)
89,365 84,086
Sensitivity analysis
A 1% movement in interest rates as compared to the interest rate at 31st
December would increase or reduce the profit after tax by �336,000.
A change of 100 basis points in interest rates would have no effect on equity in
either year.
Fair values
The fair values of all financial instruments are the same as their carrying
values disclosed in the notes to the financial statements.
Chemetall PLC
Page 47
Notes to the accounts
Year ended 31 December 2007
32. Post balance sheet events
On 1st April 2008 the company acquired the intellectual property and certain of
the assets of the Non Destructive Testing Products business of Ely Chemical
Company Limited. At the date of signing it was not possible to estimate the cost
of the acquisition, nor of the value of assets and liabilities acquired due to
the timing of the acquisition.
33.Ultimate parent company and parent undertaking of larger group
The Company is controlled by Chemetall GmbH, the immediate parent Company
incorporated in Germany. The ultimate parent undertaking and controlling party
is Rockwood Holdings Inc., incorporated in USA.
The largest group in which the results of the Group are consolidated is that
headed by the ultimate parent undertaking. The smallest group in which they are
consolidated is headed by Rockwood Specialties Group Germany GmbH, Frankfurt
a.M., Germany. The consolidated accounts of Rockwood Specialties Group Germany
GmbH are available to the public and may be obtained from Koenigsberger Strasse
1, 60487 Frankfurt a.M. The consolidated accounts of Rockwood Holdings Inc. are
available to the public and may be obtained from 100 Overlook Center, Princeton,
New Jersey, 08450, USA.
Chemetall PLC
Page 48
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC
We have audited the parent company financial statements of Chemetall PLC for the
year ended 31 December 2007 which comprise the balance sheet and the related
notes 1 to 20. These parent company financial statements have been prepared
under the accounting policies set out therein.
We have reported separately on the group financial statements of Chemetall PLC
for the year ended 31 December 2007.
This report is made solely to the company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the parent
company financial statements in accordance with applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice) are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the parent company financial statements in
accordance with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the parent company financial
statements give a true and fair view and whether the parent company financial
statements have been properly prepared in accordance with the Companies Act
1985. We also report to you whether in our opinion the Directors' Report is
consistent with the parent company financial statements. In addition we report
to you if, in our opinion, the company has not kept proper accounting records,
if we have not received all the information and explanations we require for our
audit, or if information specified by law regarding directors' remuneration and
other transactions is not disclosed.
We read the other information contained in the Annual Report as described in the
contents section and consider whether it is consistent with the audited parent
company financial statements. We consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the
parent company financial statements. Our responsibilities do not extend to any
further information outside the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the parent company financial statements. It also includes an
assessment of the significant estimates and judgments made by the directors in
the preparation of the parent company financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the parent company
financial statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the parent company
financial statements.
Opinion
In our opinion:
the parent company financial statements give a true and fair view, in accordance
with United Kingdom Generally Accepted Accounting Practice, of the state of the
company's affairs as at 31 December 2007;
the parent company financial statements have been properly prepared in
accordance with the Companies Act 1985; and
the information given in the Directors' Report is consistent with the parent
company financial statements.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
St Albans, United Kingdom
9 April 2008
Chemetall PLC
Page 49
Company balance sheet
31 December 2007
Note 31 December 2007 31 December 2006
�000 �000 �000 �000
Fixed assets
Intangible assets 5 3,113 2,286
Tangible assets 6 1,304 1,196
Investments 7 33,022 33,022
37,439 36,504
Current assets
Stocks 8 1,442 1,443
Debtors 9 53,210 50,140
Cash at bank and in hand 1,899 2,132
56,551 53,715
Creditors: amounts falling due 10 (21,024) (7,768)
within one year
Net current assets 35,527 45,947
Total assets less current
liabilities 72,966 82,451
Creditors: amounts falling due 11 - (12,000)
after one year
Provisions for liabilities and
charges 12 (1,518) (1,299)
Retirement benefit obligation 17 (2,141) (4,669)
Net assets 69,307 64,483
Capital and reserves
Called up share capital 13 6,889 6,889
Share premium account 14 29,757 29,757
Revaluation reserve 14 28,582 28,582
Profit and loss account 14 4,079 (745)
Shareholders' funds 15 69,307 64,483
These financial statements were approved by the Board of Directors on 4 April
2008
Signed on behalf of the Board of Directors
Rob Rydings
Director
Chemetall PLC
Page 50
Notes to the accounts
Year ended 31 December 2007
1.Accounting policies
The financial statements are prepared under the historical cost convention and
in accordance with applicable United Kingdom accounting standards. The
particular accounting policies adopted are described below.
Turnover
Turnover comprises the amounts receivable for the supply during the year of
speciality chemicals and ancillary equipment, excluding value added tax and
overseas sales taxes.
Foreign Currencies
Transactions denominated in foreign currencies are translated at the rate of
exchange on the day the transaction occurs or at the contracted rate if the
transaction is covered by a forward exchange rate contract. Assets and
liabilities denominated in a foreign currency are translated at the exchange
rate ruling on the balance sheet date or if appropriate at a forward contract
rate. Exchange differences are included in the profit and loss account except
that, where foreign currency borrowings have been used to finance equity
investments in foreign currencies, exchange differences arising on the
borrowings are dealt with through reserves to the extent that they are covered
by exchange differences arising on the net assets represented by the equity
investments.
The accounts of overseas subsidiary and associated undertakings are translated
into sterling in the consolidated accounts on the following basis:
Profit and loss account items are translated at the average rate of exchange for
the financial year. Assets and liabilities are translated at the rate of
exchange ruling on the balance sheet date.
Leases
Operating lease rentals are charged to the profit and loss account on a straight
line basis over the period of the lease.
Provisions
A provision is created and recognised as a liability only when the Company has a
present obligation (legal or constructive) as a result of a past event and it is
expected that a transfer of economic benefit will be required to settle that
obligation and a reliable estimate of the amount of that transfer can be made.
Vacant leasehold properties
A provision is maintained in respect of vacant leasehold properties to take
account of the residual lease commitments over the remaining term of the lease.
In determining the net present value, cash flows have been discounted using an
appropriate nominal, risk free, pre-tax rate of return.
Capitalisation of software
Purchased software costs are capitalised and included within fixtures, fittings
and equipment and depreciated in equal instalments over their estimated useful
lives.
Tangible fixed assets and depreciation
Depreciation is provided to write off the cost less the estimated residual value
of tangible fixed assets by equal instalments over their estimated useful
economic lives as follows:
Leasehold land and buildings-Life of the lease
Plant and machinery-10-33% per annum
Fixtures, fittings, tools and equipment-20% per annum
Chemetall PLC
Page 51
Notes to the accounts
Year ended 31 December 2007
1.Accounting policies (continued)
Intangible fixed assets
Patent costs are amortised in line with the stated life of the patents, between
1 and 20 years.
Customer contracts are amortised over the length of the contract.
All other intangible assets are amortised over their estimated useful life, not
exceeding 20 years, starting in the year after acquisition.
Goodwill
On acquisition, the fair value of net assets is assessed and adjustments are
made to bring the accounting policies of businesses acquired into alignment with
those of the Company. The difference between the price paid for new interests
and the fair value of identifiable net assets acquired is capitalised and
amortised over its useful economic life, depending on the nature of the
acquisition for a period not exceeding twenty years, starting in the year after
acquistion. Any costs of integrating the acquired business are taken to the
profit and loss account.
Goodwill relating to acquisitions prior to 5 April 1998, the date that Financial
Reporting Standard No 10: Goodwill and Intangible Assets (FRS 10) became
applicable to the company, has been written off to reserves. Goodwill previously
eliminated against reserves is charged to the profit and loss account in so far
as it relates to disposals in the year.
Shares in subsidiary undertakings and fixed asset investments
Shares in subsidiary undertakings are included in the Company's balance sheet at
directors' valuation.
Chemetall PLC
Page 52
Notes to the accounts
Year ended 31 December 2007
1.Accounting policies (continued)
Impairment of fixed assets and goodwill
Fixed assets and goodwill are reviewed for impairment if events or changes in
circumstances indicate that the carrying value of the fixed assets or goodwill
may not be recoverable. The carrying amount is compared to the recoverable
amount, defined as the higher of net realisable value and value in use. If the
carrying amount exceeds the recoverable amount, the asset is written down
accordingly.
Pension
The company operates pension schemes providing benefits based on final
pensionable pay. The assets of the scheme are held separately from those of the
company. FRS 17 Retirement Benefits has been adopted during the year and as a
result the defined benefit pension liability is now recognised on the balance
sheet.
Research and development expenditure
Expenditure on research and development is written off to the profit and loss
account in the year in which it is incurred.
Stocks
Stocks are stated at the lower of cost and net realisable value. For work in
progress and finished goods, cost is taken as production cost, which includes an
appropriate proportion of attributable overheads. Work in progress is stated
after deduction of any progress payments received.
Deferred taxation
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements.
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered. Deferred tax assets and liabilities
are not discounted.
2.Profit of the company
The company has taken advantage of Section 230 of the Companies Act 1985 and
consequently the profit and loss account of the parent company is not presented
as part of these financial statements. The profit of the parent company for the
financial year amounted to �2,372,000 (2006: profit �2,352,000).
Chemetall PLC
Page 53
Notes to the accounts
Year ended 31 December 2007
3.Acquisitions
On 19 February 2007 Chemetall PLC acquired the trade and assets of the chemical
division business of Wirral Fospray Limited for a consideration of �1,191,000.
The acquired business was integrated into the operations of Chemetall PLC.
All intangible assets were recognised at their respective fair values. Stock was
valued at its carrying value plus a fair value adjustment of �20,000 as detailed
below:
Carrying value Fair value Fair
pre-acquisition adjustments Value
�000 �000 �000
Non-current assets
Intellectual
property - 300 300
Non-compete
agreement - 50 50
Customer
relationships - 656 656
- 1,006 1,006
Current assets
Inventory
including step
up 180 20 200
Other
receivables 35 - 35
215 20 235
Current
liabilities (50) - (50)
Fair value of
net assets
acquired 165 1,026 1,191
Consideration 1,191
No goodwill arose on this
acquisition.
Chemetall PLC
Page 54
Notes to the accounts
Year ended 31 December 2007
4.Staff numbers and costs
The average number of persons employed by the company (including directors)
during the period, analysed by category, was as follows:
Number of employees
Year ended 31 December 2007 Year ended 31 December 2006
Specialised
Industrial
Chemicals 91 93
The aggregate payroll costs of these persons were as follows:
Year ended 31 December 2007 Year ended 31 December 2006
�000 �000
Wages and salaries 3,242 3,242
Social security
costs 362 373
Other pension
costs 727 657
4,331 4,272
Chemetall PLC
Page 55
Notes to the accounts
Year ended 31 December 2007
5.Intangible fixed assets
Customer Patents and Customer Intellectual Non-compete Goodwill Total
contracts concessions
relationships Property Agreement
�000 �000 �000 �000 �000 �000 �000
Cost
At 1 January
2007 250 1,108 - - - 3,000 4,358
Additions in
the year - - 656 300 50 - 1,006
At 31
December 250 1,108 656 300 50 3,000 5,364
2007
Amortisation
At 1 January
2007 (250) (847) - - - (975) (2,072)
Charged in - (29) - - - (150) (179)
year
At 31
December (250) (876) - - - (1,125) (2,251)
2007
Net book
value
at 31 - 232 656 300 50 1,875 3,113
December
2007
Net book
value
at 31 - 261 - - - 2,025 2,286
December
2006
Patents and trademarks are amortised over their estimated useful lives, until
expiry of legal rights.
Customer contracts are amortised over the length of the contract.
All other intangible assets are amortised over their estimated useful life,
starting in the year after acquisition.
Historically, �10,597,000 of goodwill has been written off directly to the
profit and loss reserve as a matter of accounting policy.
6.Tangible fixed assets
Leasehold land and Plant and Fixtures, fittings, tools Total
buildings and equipment
machinery
�000 �000 �000 �000
Cost
At 1 January
2007 2,568 2,413 779 5,760
Additions 42 266 - 308
Disposals (2) - - (2)
At 31
December 2,608 2,679 779 6,066
2007
Depreciation
At 1 January
2007 (1,692) (2,096) (776) (4,564)
Charge for
the (145) (52) (3) (200)
year
Disposals 2 - - 2
At 31
December (1,835) (2,148) (779) (4,762)
2007
Net book
value
At 31
December 773 531 - 1,304
2007
At 31
December 876 317 3 1,196
2006
Chemetall PLC
Page 56
Notes to the accounts
Year ended 31 December 2007
7.Fixed asset investments
Shares in
Group
Undertaking
�000
Company
Cost or valuation and net book value
At beginning and end of year 33,022
Investments are carried at directors' valuation. The original cost of the
investments was �4,440,000 with the revaluation surplus of �28,582,000 being
taken to the revaluation reserve.
The undertakings in which the Company's interest at the period end is more than
20% are as follows:
Country of Principal Voting Class and percentage of
incorporation activity shares held
power
held Company
Subsidiary
undertakings
AM Craig Ltd England Holding 100% 100%
company ordinary
Brent
International
BV The Netherlands Investment 100% 100%
company ordinary
8.Stocks
31 December 2007 31 December 2006
�000 �000
Raw materials and consumables 380 403
Work in progress 24 20
Finished goods and goods for resale 1,038 1,020
1,442 1,443
Chemetall PLC
Page 57
Notes to the accounts
Year ended 31 December 2007
9.Debtors
31 December 2007 31 December 2006
�000 �000
Amounts falling due within one year:
Trade debtors 3,428 2,995
Amounts due from group undertakings 47,015 44,533
Prepayments and accrued income 216 151
Deferred tax (see below) 2,551 2,461
53,210 50,140
Amounts due from group undertakings are due on or before 31 December 2008 (2006:
31 December 2007), unless those parties agree to extend the terms.
Deferred taxation
The amounts provided for deferred taxation and the amounts not provided are set
out below:
31 December 2007 31 December 2006
Recognised Unrecognised Recognised Unrecognised
�000 �000 �000 �000
Accelerated capital
allowances 185 - 127 -
Short-term timing
differences 442 - 393 -
Tax losses carried
forward 1,924 - 1,941 725
2,551 - 2,461 725
Retirement benefit
obligations * 832 2,000 -
Deferred tax asset 3,383 - 4,461 725
The deferred tax asset in respect of retirement benefit obligations has been
offset against the liability.
10.Creditors: amounts falling due within one year
31 December 2007 31 December 2006
�000 �000
Trade creditors 1,476 1,619
Amounts owed to group undertakings 4,062 2,693
Taxation 885 1,172
Accruals and deferred income 2,061 1,744
Preference dividend 540 540
Interest bearing loans and borrowing 12,000 -
21,024 7,768
Chemetall PLC
Page 58
Notes to the accounts
Year ended 31 December 2007
31 December 2007 31 December 2006
No. �000 No. �000
Authorised
Non-equity: 9% redeemable preference
shares of �1 each 15,000,000 15,000 - -
Allotted, called up and fully paid
Non equity: 9% redeemable preference
shares of �1 each 12,000,000 12,000 - -
The Company issued 12,000,000 9% redeemable preference shares of �1 each. These
preference shares entitle their holders to a fixed cumulative preference
dividend at a rate of 9% per annum, per share. On a winding up the preference
shareholders are entitled to a sum equal to the nominal capital paid up or
credited as paid up, on the preference shares held by them, together with all
arrears (if any) of the preference dividend. They carry the right to receive
notice of, or attend, or vote at General Meetings only in special circumstances
such as when the preference dividend is six months or more in arrears or if
redemption has not been made on the due date, or in such cases as a winding up
of the Company or a reduction in its share capital. The preference shares have
to be redeemed at par on 3 July 2008. The 9% redeemable preference shares are
presented as "Creditors: amounts falling due within one year" in the balance
sheet to comply with FRS 25 "Financial Instruments: Disclosure And
Presentation".
11.Creditors: amounts falling due after one year
31 December 2007 31 December 2006
No. �000 No. �000
Authorised
Non-equity: 9% redeemable preference
shares of �1 each - - 15,000,000 15,000
Allotted, called up and fully paid
Non equity: 9% redeemable preference
shares of �1 each - - 12,000,000 12,000
12.Provisions for liabilities and charges
Vacant property provision Other provision Total
�000 �000 �000
At 1 January 2007 1,211 88 1,299
Additions 376 - 376
Utilisation in the year (109) (48) (157)
At 31 December 2007 1,478 40 1,518
The vacant property provision represents management's best estimate of the
Group's liability to take account of the residual lease commitments over the
remaining term of the lease.
Chemetall PLC
Page 59
Notes to the accounts
Year ended 31 December 2007
13.Called up share capital
31 December 2007 31 December 2006
No. �000 No. �000
Authorised
Equity: Ordinary shares of 10p 91,948,000 9,195 91,948,000 9,195
each
Allotted, called up and fully paid
Equity: Ordinary shares of 10p 68,888,817 6,889 68,888,817 6,889
each
At 31 December 2007 the 9% redeemable preference shares are presented as
"Creditors: amounts falling due within one year" (31 December 2006: "Creditors:
amounts falling due after more than one year" in the balance sheet to comply
with FRS 25 "Financial Instruments: Disclosure And Presentation". The preference
shares have to be redeemed 3 July 2008.
14.Share premium and reserves
Revaluation Share Profit
reserve premium and loss
�000 account account
�000 �000
At 1 January 2007 28,582 29,757 (745)
Retained profit for the year - - 2,372
Retirement benefit obligations - - 2,452
At 31 December 2007 28,582 29,757 4,079
Cumulative goodwill resulting from acquisitions made prior to 31 December 1998
of �10,597,000 has been written off to the profit and loss account reserve of
the Company as at 31 December 2004 and 31 December 2003. At 31 December 2007,
the realised distributable reserves of the company amounted to �8,506,000 (2006:
�4,210,000).
15.Reconciliation of movements in shareholders funds
31 31 December
December 2006
2007 �000
�000
At 1 January 64,483 61,253
Profit for the year 2,372 2,352
Retirement benefit obligations 2,452 878
At 31 December 69,307 64,483
Chemetall PLC
Page 60
Notes to the accounts
Year ended 31 December 2007
16.Commitments
Annual commitments under non-cancellable operating leases are as follows:
31 December 31 December 31 December 31 December
2007 2007 2006 2006
Land and Other Land and Other
Buildings �000 Buildings �000
�000 �000
Operating leases which expire:
Within one year - 23 - 55
In the second to fifth
years inclusive 14 126 14 99
Over five years 297 - 442 -
311 149 456 154
17.Pension scheme
The company operated two funded defined benefit schemes which provide for their
liabilities through trustee operated funds.
The Chemetall UK Pension Scheme, provides benefits based on final pensionable
pay. The assets of the scheme are held separately from those of the company in a
trustee administered fund. The trustees comprise senior group employees and
retired members.
The company does not have any health and medical plans providing post-retirement
benefits. The pension costs relating to the Chemetall UK and Process Ink schemes
are assessed in accordance with the advice of Aon Limited, the independent
actuaries, using, in the case of the Chemetall UK scheme, the projected unit
method.
Chemetall PLC
Page 61
Notes to the accounts
Year ended 31 December 2007
17.Pension scheme (continued)
Scheme Last Assumed Average Total Funding level value
actuarial Investment salary market of assets as
valuation Return per increase per value of percentage of
annum annum assets liabilities
at latest
valuation
dates
Chemetall
UK 1 January 7.4%(1) 4.4% �19.5m(4) 85%
Pension 2005
scheme
Process
Ink
Company
Limited
Pension
and 1 January 7.9%(2) 2.9%(3) �2.8m 82%
Death 2005
Benefits
Plan
(1) The rate of return is assumed to reduce to between 5.1% and 5.5% per annum
from each member's normal retirement age.
(2) The rate of return is assumed to reduce to between 4.6% and 5% per annum
from each member' normal retirement age.
(3) This is the assumed rate of revaluation of deferred pensions up to normal
retirement date
(4) The market value of the assets includes additional voluntary contributions.
The pension increases were assumed to be equal to those specified in the rules
of the schemes. Pension increases in payment in line with retail prices but
capped at 5% were assumed to be 2.9% per annum.
The most recent actuarial valuation of plan assets and the present value of the
defined benefit obligation were carried out at 1 January 2005 and updated to 31
December 2007 by Aon Consulting.
The estimated amount of contributions expected to be paid to the scheme during
the current financial year is �728,000
Chemetall PLC
Page 62
Notes to the accounts
Year ended 31 December 2007
17.Pension scheme (continued)
Included in the balance sheet at 31 December 2007 is a pension accrual of �nil
(31 December 2006: �nil) in respect of a deferred pensioner who, under the terms
of the severance agreement, had the option to retire before the normal
retirement dates on enhanced benefits.
The major assumptions used in the FRS 17 valuation, for both schemes were:
31 31 31 December
December December 2005
2007 2006 �000
�000 �000
Rate of increase in salaries 4.4% 4.7% 4.5%
Rate of increase in pensions in payment
- Ex Brent members pre '97 Nil Nil Nil
- Ex Winnets members pre '97 3.0% 3.0% 3.0%
- Process directors 8.5% 8.5% 8.5%
- All post '97 pre '06 3.4% 3.0% 3.0%
- Post '06 2.04% 2.0% Nil
Discount rate 5.8% 5.1% 4.75%
Inflation assumptions 3.4% 3.2% 3.0%
The rates used have been chosen from a range of possible amounts determined
using actuarial assumptions which due to the timescale covered may not
necessarily be borne out in practice.
Scheme assets
The fair value of the assets in the schemes (which are not intended to be
realised in the short term and may be subject to significant change) and the
present value of the schemes liabilities (which are derived from cash flow
projections over long periods and thus inherently uncertain) were:
Value at 31 December Value at 31 December Value at 31 December
2007 2006 2005
Chemetall Process Ink Chemetall Process Ink Chemetall Process Ink
�000 �000 �000 �000 �000 �000
Market
value 22,866 3,249 22,765 3,148 22,014 3,020
of assets
Present
value
of scheme (25,740) (3,348) (28,746) (3,836) (29,086) (4,006)
liabilities
Deficit in
the (2,874) (99) (5,981) (688) (7,072) (986)
scheme
Related
deferred
tax 805 27 1,794 206 2,122 296
asset
Net pension
liability (2,069) (72) (4,187) (482) (4,950) (690)
Chemetall PLC
Page 63
Notes to the accounts
Year ended 31 December 2007
17.Pension scheme (continued)
Operating results and other disclosures
Chemetall Process Ink 31
UK Scheme December
2007
Pension �000 Total
Scheme
�000 �000
Analysis of the amount charged to operating
profit:
Service cost (496) - (496)
Past service cost - - -
Total operating charge (496) - (496)
Analysis of the net return:
Expected return on the
pension scheme assets 1,517 190 1,707
Interest on pension
scheme liabilities (1,457) (192) (1,649)
Net credit 60 (2) 58
Analysis of amount recognised in the statement
of total recognised gains and losses:
Actual return less
expected return on
assets (1,249) (26) (1,275)
Experience gains and
losses on liabilities (69) - (69)
Changes in assumptions 4,222 528 4,750
Actuarial loss
recognised in the
statement of total
recognised gains and
losses 2,904 502 3,406
Movement in deficit during the period:
Deficit at 31 December 2006
Movement in the period: (5,981) (688) (6,669)
Current service cost (496) - (496)
Contributions 639 89 728
Net return on
assets/(interest cost) 60 (2) 58
Actuarial gain 2,904 502 3,406
Deficit at 31 December
2007 (2,874) (99) (2,973)
Details of experience gain and losses in the
period:
Difference between the
expected and actual
return on assets (1,249) (26) (1,275)
Percentage of Assets (5)% (1)% (6)%
Experience gains and
losses on liabilities (69) 0 (69)
Percentage of present
value of liabilities 0% 0% 0%
Total amount recognised
in statement of total
recognised gains and
losses 2,904 502 3,406
Percentage of present
value of liabilities 11% 15% 13%
Chemetall PLC
Page 64
Notes to the accounts
Year ended 31 December 2007
17.Pension scheme (continued)
Operating results and other disclosures
Chemetall Process Ink 31
UK Scheme December
2006
Pension �000 Total
Scheme
�000 �000
Analysis of the amount charged to operating
profit:
Service cost (567) - (567)
Past service cost - - -
Total operating charge (567) - (567)
Analysis of the net return:
Expected return on the
pension scheme assets 1,370 173 1,543
Interest on pension
scheme liabilities (1,407) (187) (1,594)
Net charge (37) (14) (51)
Analysis of amount recognised in the statement
of total recognised gains and losses:
Actual return less
expected return on
assets 59 45 104
Experience gains and
losses on liabilities (315) (48) (363)
Changes in assumptions 1,288 226 1,514
Actuarial loss
recognised in the
statement of total
recognised gains and
losses 1,032 223 1,255
Movement in deficit during the period:
Deficit at 31 December
2005 (7,072) (986) (8,058)
Movement in the period:
Current service cost (553) - (553)
Contributions 608 89 697
Net interest cost 4 (14) (10)
Actuarial gain 1,032 223 1,255
Deficit at 31 December
2006 (5,981) (688) (6,669)
Details of experience gain and losses in the
period:
Difference between the
expected and actual
return on assets 59 45 104
Percentage of Assets 0% 1% 0%
Experience gains and
losses on liabilities (315) (48) (363)
Percentage of present
value of liabilities (1)% (1)% (0)%
Total amount recognised
in statement of total
recognised gains and
losses 1,032 223 1,255
Percentage of present
value of liabilities 4% 6% 4%
Chemetall PLC
Page 65
Notes to the accounts
Year ended 31 December 2007
17.Pension scheme (continued)
Operating results and other disclosures
Chemetall Process Ink 31
UK Scheme December
2005
Pension �000 Total
Scheme
�000 �000
Analysis of the amount charged to operating
loss:
Service cost (554) (10) (564)
Past service cost - - -
Total operating charge (554) (10) (564)
Analysis of the net return:
Expected return on the
pension scheme assets 1,231 164 1,395
Interest on pension
scheme liabilities (1,420) (183) (1,603)
Net charge (189) (19) (208)
Analysis of amount recognised in the statement
of total recognised gains and losses:
Actual return less
expected return on
assets 1,913 192 2,105
Experience gains and
losses on liabilities 1,405 (57) 1,348
Changes in assumptions (2,140) (338) (2,478)
Actuarial gain/(loss)
recognised in the
statement of total
recognised gains and
losses 1,178 (203) 975
Movement in deficit during the period:
Deficit at 31 December
2004 (8,140) (764) (8,904)
Movement in the period:
Current service cost (554) (10) (564)
Contributions 633 10 643
Net interest cost 189 19 208
Actuarial gain/(loss) 1,178 (203) 975
Deficit at 31 December
2005 (7,072) (986) (8,058)
Details of experience gain and losses in the
period:
Difference between the
expected and actual
return on assets 1,913 192 2,105
Percentage of Assets 9% 6% 10%
Experience gains and
losses on liabilities 1,405 (57) 1,348
Percentage of present
value of liabilities 5% (1)% 4%
Total amount recognised
in statement of total
recognised gains and
losses 1,178 (203) 975
Percentage of present
value of liabilities 4% (5)% 3%
Chemetall PLC
Page 66
Notes to the accounts
Year ended 31 December 2007
17.Pension scheme (continued)
Details of experience gain and 31 31 31 31 31
losses in the period: for both December December December December December
schemes 2007 2006 2005 2004 2003
�'000 �'000 �'000 �'000 �'000
Difference
between the
expected and
actual return
on assets (1,275) 104 2,105 1,231 424
Percentage of
Assets 6% 0% 10% 7% 2%
Experience
gains and
losses on
liabilities (69) (363) 1,348 (204) 402
Percentage of
present value
of liabilities 0% (1)% 4% (1)% 2%
Total amount
recognised in
statement of
total
recognised
gains and
losses 3,406 1,255 975 (2,157) 173
The analysis of the scheme assets and expected return at the balance sheet date
were as follows:
Chemetall UK Pension Scheme
Return at Value at Return at Value at Return at Value at
31 December 31 31 December 31 31 December 31
2007 December 2006 December 2005 December
2007 2006 2005
�000 �000 �000
Equities 8.4% 10,741 8.1% 8,582 7.95% 9,446
Corporate 5.8% 7,140 5.1% 7,298 4.75% 7,496
bonds
Government
bonds 4.5% 3,118 4.6% 3,128 4.10% 3,225
Property 8.4% 1,746 8.1% 3,665 7.95% 1,704
Cash 4.5% 121 4.6% 92 4.10% 143
Overall
rate 7.0% 22,866 6.7% 22,765 6.25% 22,014
of return
Process Ink Scheme
Return at Value at Return at Value at Return at Value at
31 December 31 31 December 31 31 December 31
2007 December 2006 December 2005 December
2007 2006 2005
�000 �000 �000
Equities 8.4% 1,429 8.1% 1,398 7.95% 1,322
Corporate 5.8% - 5.1% - 4.75% -
bonds
Government
bonds 4.5% 1,795 4.6% 1,741 4.10% 1,684
Property 8.4% - 8.1% - 7.95% -
Cash 4.5% 25 4.6% 9 4.10% 14
Overall
rate 6.2% 3,249 6.1% 3,148 5.75% 3,020
of return
Chemetall PLC
Page 67
Notes to the accounts
Year ended 31 December 2007
18.Ultimate parent company
The Company is controlled by Chemetall GmbH, the immediate parent Company
incorporated in Germany. The ultimate parent undertaking and controlling party
is Rockwood Holdings Inc., incorporated in USA.
The largest group in which the results of the Group are consolidated is that
headed by the ultimate parent undertaking. The smallest group in which they are
consolidated is headed by Rockwood Specialties Group Germany GmbH, Frankfurt
a.M., Germany. The consolidated accounts of Rockwood Specialties Group Germany
GmbH are available to the public and may be obtained from Koenigsberger Strasse
1, 60487 Frankfurt a.M. The consolidated accounts of Rockwood Holdings Inc. are
available to the public and may be obtained from 100 Overlook Center, Princeton,
New Jersey, 08450, USA.
19.Related party transactions
The company has taken the exemption in FRS 8 "Related party transactions" and
therefore no transaction with group undertakings has been disclosed.
20. Post balance sheet event
On 1st April 2008 the company acquired the intellectual property and certain of
the assets of the Non Destructive Testing Products business of Ely Chemical
Company Limited. At the date of signing it was not possible to estimate the cost
of the acquisition, nor the value of assets and liabilities acquired due to the
timing of the acquisition.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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