RNS Number:1669V
Chemetall PLC
25 April 2007
Chemetall PLC
Report and financial statements
31 December 2006
Company Registration No. 252864
Chemetall PLC
Page 1
Report and financial statements 2006
Officers and professional advisers 2
Chairman's report 3
Director's report 4
Statement of directors's responsibility 7
Independent auditor's 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 auditor's report - company 40
Company balance sheet 41
Notes to the company accounts 42
Chemetall PLC
Page 2
Report and financial statements 2006
Officers and professional advisers
Kurt Wenzel (age 57)
Matthias Stoermer (age 42)
Per Vannerberg (age 45). Appointed on 2 January 2006.
Michael Watson (age 52). Resigned on 2 January 2006.
Rob Rydings (age 53). Appointed on 2 January 2006.
Secretary
Rob Rydings appointed on 19 April 2005
Registered Office
65 Denbigh Road
Bletchley
Milton Keynes MK1 1PB
Stockbrokers
Cazenove & Co.
12 Tokenhouse Yard
London EC2R 7AN
Principal Bankers
Barclays Bank PLC
Eagle Point
1 Capability Green
Luton LU1 3US
Registrars
Capita IRG
34 Beckenham Road
Beckenham
Kent BR3 4TU
Solicitors
Baker & McKenzie
100 New Bridge Street
London EC4V 6JA
Auditors
Deloitte & Touche LLP
Chartered Accountants
St Albans
Chemetall PLC
Page 3
Chairman's report
I am pleased to report another good year, with sales showing an increase of over
8% on the previous year. This is an excellent result considering the continuing
difficulties in the UK manfacturing sector. The increase comes mainly through
sales to aerospace and Middle East customers. We have though maintained sales in
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 #3.2 million (2005: #1.2 million) with a turnover of #18.7 million
(2005: #17.3 million).
The Group's loan assets, including any exchange movements and interest accrued
thereon, totalled #84.6 million at 31 December 2006 (31 December 2005: #40.9
million).
Preference dividends continue to be paid on the normal due dates.
Board
There have been no changes to the Board during the year except as outlined on
page 2.
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, particularly in the aerospace sector.
In February 2007 we acquired the chemical business of Wirral Fospray Ltd, and
this will increase our presence in the aluminium finishing sector.
During the year, the company lent #44.5 million in short term loans to fellow
group undertakings.
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 2006.
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 2005: #nil).
Preference dividends of #1,080,000 (31 December 2005: #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 2005: 48 days') purchases in
trade creditors.
Chemetall PLC
Page 5
Director's report
Directors and their interests
The directors who held office during the year were as follows:
MJ Watson Resigned 2 January 2006
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.
None of the directors who held office at the end of the financial year had any
disclosable interest in the shares and debentures of Group companies (31
December 2005: nil).
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 #1,000 (31 December 2005: #318).
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 acredited to the new automotive industry standard TS16949.
Taxation
The Group's tax credit on profit is #0.1 million. Details of the tax charge are
given in note 9. #2.4 million of tax credits associated with prior year's tax
losses continue not to be recognised as indicated in note 17.
Chemetall PLC
Page 6
Director's 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
Rob Rydings
Director
Chemetall PLC
Page 7
Statement of director's responsibilities
The directors are responsible for preparing the Annual Report and the financial
statements. The directors are required to prepare accounts for the group in
accordance with International Financial Reporting Standards (IFRSs) and have
chosen to prepare company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (UK GAAP).
In the case of UK GAAP accounts, the directors are required to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the company and of the profit or loss of the company for that
period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent; and
state whether applicable accounting standards have been followed; and
prepare financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
In the case of IFRS accounts, International Accounting Standard 1 requires that
financial statements present fairly for each financial year the company's
financial position, financial performance and cash flows. This requires the
faithful representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria for
assets, liabilities, income and expenses set out in the International Accounting
Standards Board's 'Framework for the preparation and Presentation of Financial
Statements'. In virtually all circumstances, a fair presentation will be
achieved by compliance with all applicable International Financial Reporting
Standards. Directors are also required to:
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in
International Financial Reporting Standards is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on
the entity's financial position and financial performance.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company, for safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities and for the
preparation of a directors' report which complies with the requirements of the
Companies Act 1985.
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 2006 which comprise consolidated income statement, the
consolidated statement of recognised income and expenses, the consolidated
balance sheet, the consolidated cash flow statement and the related notes 1 to
30. These group financial statements have been prepared under the accounting
policies set out therein.
We have reported separately on the individual company financial statements of
Chemetall PLC for the year ended 31 December 2006.
This report is made solely to the company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the annual report and the group
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted for use in the European Union
are set out in the statement of directors' responsibilities.
Our responsibility is to audit the group financial statements in accordance with
relevant United Kingdom legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the group financial statements give a
true and fair view in accordance with the relevant financial reporting framework
and whether the group financial statements have been properly prepared in
accordance with the Companies Act 1985 and Article 4 of the IAS Regulation.
We report to you if, in our opinion, the directors' report is consistent with
the group financial statements. We also report to you if we have not received
all the information and explanations we require for our audit, or if information
specified by law regarding directors' transactions with the company and other
members of the group is not disclosed.
We read the directors' report and the other information contained in the annual
report for the above year as described in the contents section and we consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the group financial statements.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the group financial statements. It also includes an assessment of
the significant estimates and judgements made by the directors in the
preparation of the group financial statements, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the group financial
statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the group financial statements.
Page 9
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC (continued)
Opinion
In our opinion:
the group financial statements give a true and fair view, in accordance with
IFRSs as adopted for use in the European Union, of the state of the group's
affairs as at 31 December 2006 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;
As explained in Note 1 of the group financial statements, the group, in addition
to complying with its legal obligation to comply with IFRSs as adopted for use
in the European Union, has also complied with the IFRSs as issued by the
International Accounting Standards Board. Accordingly, in our opinion the
financial statements give a true and fair view, in accordance with IFRSs, of the
state of the group's affairs as at 31 December 2006 and of its profit for the
year then ended; and
the information given in the Directors' Report is consistent with the group
financial statements.
Deloitte & Touche LLP
Chemetall PLC
Page 10
Consolidated income statement
Year ended 31 December 2006
Year ended Year ended
Note 31 December 2006 31 December 2005
#000 #000
Revenue 3 18,687 17,299
Cost of sales (11,659) (11,079)
Gross profit 7,028 6,220
Distribution
costs (4,163) (4,220)
Administrative
expenses (1,710) (2,601)
Other
operating
expenses (84) -
Profit/(loss)
from
operations 5 1,071 (601)
Investment
revenue 7 3,292 3,062
Finance costs 8 (1,131) (1,292)
Profit before
tax 3,232 1,169
Tax 9 105 (670)
Profit for the
year 3,337 499
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 2006
Year ended Year ended
31 December 2006 31 December 2005
#000 #000
Exchange
differences on
translation of
foreign operations (779) (1,103)
Actuarial gains on
defined benefit
pension schemes 1,318 335
Tax on items taken
directly to equity (395) (100)
Net gain/(loss)
recognised
directly in equity 144 (868)
Profit for the
year 3,337 499
Total recognised
income and expense
for the year 3,481 (369)
Chemetall PLC
Page 12
Consolidated balance sheet
31 December 2006
Note 31 December 2006 31 December 2005
#000 #000
Non-current assets
Goodwill 11 2,475 2,475
Other intangible assets 12 261 413
Property, plant and equipment 13 1,196 1,250
Deferred tax assets 17 4,654 4,051
8,586 8,189
Current assets
Inventories 14 1,443 1,346
Trade and other receivables 15 88,292 44,319
Cash and cash equivalents 2,157 43,201
Tax receivable - 17
91,892 88,883
Total assets 100,478 97,072
Current liabilities
Trade and other payables 19 (5,815) (5,718)
Tax liabilities (1,879) (570)
Provisions 20 (197) (241)
(7,891) (6,529)
Net current assets 84,001 82,354
Chemetall PLC
Page 13
Consolidated balance sheet (continued)
31 December 2006
Note 31 December 2006 31 December 2005
#000 #000
Non-current liabilities
Interest bearing loans and
borrowings 18 (12,000) (12,000)
Retirement benefit obligation 27 (7,312) (8,709)
Long-term provisions 20 (1,102) (1,142)
(20,414) (21,851)
Net assets 72,173 68,692
Equity
Share capital 21 6,889 6,889
Share premium account 22 29,757 29,757
Translation reserve 24 (1,835) (1,056)
Retained earnings 23 37,362 33,102
Total equity 72,173 68,692
The financial statements were approved by the board of directors and authorised
for issue on 23 April 2007.
They were signed on its behalf by:
Rob Rydings
Director
Chemetall PLC
Page 14
Consolidated cash flow statement
Year ended 31 December 2006
Note Year ended Year ended
31 December 2006 31 December 2005
#000 #000
Net cash from
operating
activities 25 825 (409)
Investing activities
Purchases of
property,
plant and
equipment (130) (172)
Net cash used
in investing
activities (130) (172)
Financing activities
Interest paid (51) (4)
Interest
received 3,292 3,062
Amounts (paid
to)/received
from group
undertakings (43,900) 41,504
Preference
dividend paid (1,080) (1,080)
Net cash from
financing
activities (41,739) 43,482
Net
(decrease)/inc
rease in cash
and cash
equivalents (41,044) 42,901
Cash and cash
equivalents at
beginning of
year 43,201 300
Cash and cash
equivalents at
end of year 2,157 43,201
Chemetall PLC
Page 15
Notes to the accounts
Year ended 31 December 2006
1.General information
Chemetall PLC is a company incorporated in the United Kingdom under the
Companies Act 1985. The address of the registered office is given on page 2. The
nature of the group's operations and its principal activities are set out in
note 4 and in the directors' report.
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the group operates.
Foreign operations are included in accordance with the policies set out in note
2.
At the date of authorisation of these financial statements, the following
Standards and Interpretations, which have not been applied in these financial
statements, were in issue but not yet effective:
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures and the related amendments to IAS 1 on
capital disclosures
IFRS 8 Operating segments
IFRIC 4 Determining whether an Arrangement contains a Lease
IFRIC 5 Right to Interest Arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds
IFRIC 6 Liabilities Arising from Participating in a specific market - Waste
electrical and electronic equipment
IFRIC 7 Applying the Restatement approach under IAS 29 Financial Reporting in
Hyper inflationary economies
IFRIC 8 Scope of IFRS 2
IFRIC 9 Reassessment of embedded derivatives
IFRIC 10 Interim Financial reporting and impairment
IFRIC 11 IFRS 2 Group treasury share transactions
IFRIC 12 Service Concession Arrangements
The directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the financial
statements of the company except for additional disclosures on capital and
financial instruments when the relevant standards come into effect for periods
commencing on or after 1 January 2007.
2.Significant accounting policies
Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs), adopted for use in the European Union.
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 2006
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 6
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
Notes to the accounts
Year ended 31 December 2006
2.Significant accounting policies (continued)
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.
Intangible assets - patents and trademarks and customer contracts
Patents are initially recognised at cost and then amortised in line with the
stated life of the patents, between 1 and 20 years.
Customer contracts are amortised over 2 years.
Chemetall PLC
Page 18
Notes to the accounts
Year ended 31 December 2006
2.Significant accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any provision for impairments in value.
Depreciation is provided to write off cost less the estimated residual value of
property, plant and equipment by equal instalments over their estimated useful
economic lives as follows:
Short leasehold property - life of the lease
Plant, machinery and equipment - 10-33% per annum
Fixtures and fittings - 20% per annum
The directors regularly consider the carrying value of property, plant and
equipment for impairment. Any reduction in value arising from the impairment of
the property, plant and equipment is charged to the income statement for the
year.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any).
Chemetall PLC
Page 19
Notes to the accounts
Year ended 31 December 2006
2.Significant accounting policies (continued)
The recoverable amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised as
income immediately, unless the relevant asset is carried at the revalued amount,
in which case the reversal of the impairment loss is treated as a revaluation
increase.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Share capital
Preference share capital is classified as a liability as dividend payments are
not discretionary.
Dividends on the preference shares are disclosed as interest charges and are
accounted for on an accrual basis.
Other dividends are recognised as a liability only in the period in which they
are declared.
Interest
Interest receivable is recognised in the income statement using the effective
interest method as defined in IAS 39 Financial instruments: recognition and
measurement.
Taxation
The tax expense represents the sum of tax currently payable and deferred tax.
Provision for taxation is made at the current rate and for deferred taxation at
the tax rate expected to apply on all temporary differences between the
treatment of certain items for taxation and for accounting purposes.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the group is able to control the reversal of the
temporary difference and it is probable that sufficient taxable profits will be
available to alow all or part of the asset to be recovered.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Chemetall PLC
Page 20
Notes to the accounts
Year ended 31 December 2006
2. Significant accounting policies (continued)
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited to equity, in which case the deferred tax is also dealt with
in equity.
Provisions
A provision is created and recognised as a liability when the Group has a
present obligation (legal or constructive) as a result of a past event and it is
expected that a transfer of economic benefits will be required to settle that
obligation and a reliable estimate of the amount of the transfer can be made.
Vacant leasehold properties
A provision is maintained in respect of vacant leasehold properties to take
account of the net present value of the residual lease commitments over the
remaining term of the lease. In determining the net present value, cash flows
have been discounted using an appropriate nominal, risk free, pre-tax rate of
return.
Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the company's accounting policies, which are
described in Note 2, management has made the following judgements that have the
most significant effect on the amounts recognised in the financial statements.
Stock and Bad debt provisions
The group policy for provisions is noted above.
3. Analysis of revenue
All activities are derived from the development, manufacture and marketing of
specialised industrial chemicals. All revenue recorded represents sale of goods.
4. Business and geographical segments
The primary reporting format is deemed to be business segments. All activities
are derived from the development, manufacture and marketing of specialised
industrial chemicals. As such, the directors deem that there is only one
reportable segment. The secondary reporting format is therefore deemed by the
directors to be geographical segments. No separate geographical segment consists
of more than 10% of total revenue or total assets, therefore no further analysis
of geographical segments is presented.
5. Profit/(loss) from operations
Profit/(loss) from operations has been arrived at after charging:
2006 2005
#000 #000
Depreciation of property, plant and equipment 184 218
Amortisation of intangible assets 152 152
Staff costs (see note 6) 4,302 4,832
Auditors' remuneration and other audit services - statutory
audit 31 34
Total non-audit fees were #nil (2005:#nil).
Chemetall PLC
Page 21
Notes to the accounts
Year ended 31 December 2006
6. Staff costs
The average monthly number of employees (including executive directors) analysed
by category was:
2006 2005
Number Number
Specialised industrial chemicals 93 94
#000 #000
Their aggregate remuneration comprised:
Wages and salaries 3,242 3,624
Social security costs 373 367
Other pension costs 687 841
4,302 4,832
Remuneration of directors
Year ended Year ended
31 December 2006 31 December 2005
#000 #000
Wages and salaries 110 122
Social security
costs 14 13
Other pension
costs 17 22
141 157
Retirement benefits are accruing to one director (31 December 2005: one).
7. Investment revenue
2006 2005
#000 #000
Interest on loans to group undertakings 918 1,653
Interest on cash and other balances 2,374 1,409
3,292 3,062
Chemetall PLC
Page 22
Notes to the accounts
Year ended 31 December 2006
8. Financial costs
2006 2005
#000 #000
Interest on bank overdrafts - 4
Dividends on preference shares 1,080 1,080
Retirement benefit net interest cost 51 208
1,131 1,292
9. Tax
2006 2005
#000 #000
Current tax:
UK corporation tax 978 910
Adjustments related to earlier years (85) (24)
893 886
Deferred tax (note 17):
Current year (998) (216)
(998) (216)
(105) 670
Corporation tax is calculated at 30 % (2005: 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:
2006 2006 2005 2005
#000 % #000 %
Profit before tax 3,232 n/a 1,169 n/a
Tax at the UK corporation tax rate of 30% 970 30 351 30
(2005: 30%)
Tax effect of expenses that are not deductible
in determining taxable profit (64) (2) 615 52
Tax effect of utilisation of items previously
disallowed for tax (388) (12) (272) (23)
Adjustments related to earlier years (85) (3) (24) (1)
Preference dividend 324 10 - -
Increased recognition of losses (990) (30) - -
Tax expense and effective tax rate for the (105) (3) 670 58
year
Chemetall PLC
Page 23
Notes to the accounts
Year ended 31 December 2006
10. Dividends
The dividend distributed to the equity holders is nil (2005: nil).
The dividend paid at interim to the holders of 9% redeemable preference shares
was #540,000 (2005: #540,000). The final dividend proposed is #540,000 (2005:
#540,000). Dividends on the 9% redeemable preference shares are presented as
financial costs in the income statement in accordance with IAS 32 "Presentation
of financial instruments".
11. Goodwill
#000
Cost
At 1 January 2005, 1 January 2006 and 31 December 2,475
2006
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 process and direct costs are based on past
practices and expectations of future changes in the market.
Chemetall PLC
Page 24
Notes to the accounts
Year ended 31 December 2006
12. Other intangible assets
Patents
Customer and
contracts trademarks Total
#000 #000 #000
Cost
At 1 January 2005, 1 January 2006 and
31 December 2006 250 1,108 1,358
Amortisation
At 1 January 2005 10 783 793
Charge for the year 120 32 152
At 1 January 2006 130 815 945
Charge for the year 120 32 152
At 31 December 2006 250 847 1,097
Carrying amount
At 31 December 2006 - 261 261
At 31 December 2005 120 293 413
The amortisation period for customer contracts is 2 years.
Patents and trademarks are amortised over their estimated useful lives, until
expiry of legal rights.
Chemetall PLC
Page 25
Notes to the accounts
Year ended 31 December 2006
13. Property, plant and equipment
Leasehold Plant and Fixtures Total
improvements machinery and
#000 #000 equipment #000
#000
Cost
At 1 January
2005 2,456 2,224 779 5,459
Additions 25 146 - 171
At 1 January
2006 2,481 2,370 779 5,630
Additions 87 43 - 130
At 31 December
2006 2,568 2,413 779 5,760
Accumulated depreciation and
impairment
At 1 January
2005 (1,417) (1,981) (764) (4,162)
Charge for the
year (145) (66) (7) (218)
At 1 January
2006 (1,562) (2,047) (771) (4,380)
Charge for the
year (130) (49) (5) (184)
At 31 December
2006 (1,692) (2,096) (776) 4,564
Carrying amount
At 31 December
2006 876 317 3 1,196
At 31 December
2005 919 323 8 1,250
14. Inventories
31 December 2006 31 December 2005
#000 #000
Raw materials and consumables 403 355
Work in progress 20 13
Finished goods and goods for resale 1,020 978
1,443 1,346
Chemetall PLC
Page 26
Notes to the accounts
Year ended 31 December 2006
15. Trade and other receivables
31 December 2006 31 December 2005
#000 #000
Trade receivables 2,995 3,183
Amounts due from group undertakings 85,140 40,857
Prepayments and accrued income 157 279
88,292 44,319
Amounts due from group undertakings are due on or before 31 December 2007 (2005:
31 December 2006) unless those parties agree to extend the terms.
An allowance has been made for estimated irrecoverable amounts from the sale of
goods of #244,000 (2005: #159,000). This allowance has been determined by
reference to past default experience.
The average credit period taken on sales of goods/services is 59 days (2005: 60
days).
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value.
16. Other financial assets
Bank balances and cash
Bank balances and cash comprise cash held by the group and short-term bank
deposits with an original maturity of three months or less. The carrying amount
of these assets approximates their fair value.
Credit risk
The group's principal financial assets are bank balances and cash and trade and
other receivables, which represent the group's maximum exposure to credit risk
in relation to financial assets.
The group's credit risk is primarily attributable to its trade and amounts from
group undertakings receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables, estimated by the group's management
based on prior experience and their assessment of the current economic
environment.
The group has no significant concentration of credit risk, with exposure spread
over a large number of customers. Any new customers are subject to credit checks
(in many cases through Dun & Bradstreet credit reports).
Chemetall PLC
Page 27
Notes to the accounts
Year ended 31 December 2006
17. 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 115 199 2,671 951 3,936
2005
Credit/
(charge) (53) 226 43 - 216
to
income
Credit/
(charge) - - (101) - (101)
to
equity
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 31
December 127 392 2,194 1,941 4,654
2006
At balance sheet date, the group has unused tax losses of #8,885,000 (2005:
#9,447,000) available for offset against future profits. A deferred tax asset
has been recognised in respect of #6,470,000 (2005: #3,171,000) of such losses.
No deferred tax has been recognised in respect of the remaining #2,415,000
(2005: #6,276,000) due to unpredictability of future profit streams. The tax
losses can be carried forward indefinitely.
Chemetall PLC
Page 28
Notes to the accounts
Year ended 31 December 2006
18. Interest bearing loans and borrowings
31 December 2006 31 December 2005
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 non-current liabilities in the balance sheet and the associated
dividend payable as interest expense in the income statement in order to comply
with IAS 32 "Presentation of financial instruments".
19. Other financial liabilities
Trade and other payables
31 December 2006 31 December 2005
#000 #000
Trade creditors 1,619 1,181
Amounts owed to group undertakings 1,908 1,977
Accruals and deferred income 1,748 2,020
Preference dividend payable 540 540
5,815 5,718
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 29
Notes to the accounts
Year ended 31 December 2006
20. Provisions Vacant property Other
provision provision Total
#000 #000 #000
Cost
At 1 January 2006 1,244 139 1,383
Additional provision
Provision utilised (33) (51) (84)
At 31 December 2006 1,211 88 1,299
31 December 31 December
2006 2005
Included in current
liabilities 197 241
Included in non current
liabilities 1,102 1,142
1,299 1,383
The vacant property provision represents management's best estimate of the
Group's liability to take account of the residual lease commitments over the
remaining term of the lease.
21. Share capital
31 December 2006 31 December 2005
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.
22. Share premium account
Share
premium
#000
Balance at 1 January 2005, 31 December 2005 and 31 December
2006 29,757
Chemetall PLC
Page 30
Notes to the accounts
Year ended 31 December 2006
23. Retained earnings
#000
Balance at 1 January 2005 32,368
Actuarial gain on defined benefit pension scheme (net of tax) 235
Net profit for the year 499
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 31 December 2006 37,362
24. Translation reserve
#000
Balance at 1 January 2005 47
Exchange difference on translation of overseas operations (1,103)
Balance at 1 January 2006 (1,056)
Exchange difference on translation of overseas operations (779)
Balance at 31 December 2006 (1,835)
25. Notes to the cash flow statement
31 December 31 December 2005
2006 #000
#000
Profit before taxation 3,232 1,169
Adjustments for:
Depreciation of property, plant and equipment 184 218
Amortisation of intangible assets 152 152
Movement in provisions (84) 754
Interest income (3,292) (3,062)
Interest expense 1,131 1,084
Operating cash flows before movements in
working capital 1,323 315
Movement in inventories (97) (222)
Movement in receivables (853) (1,813)
Movement in payables 19 1,795
Cash generated by operations 392 75
Income taxes received/(paid) 433 (484)
Net cash from operating activities 825 (409)
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 31
Notes to the accounts
Year ended 31 December 2006
26. Commitments
31 December 31 December 31 December 31 December
2006 2006 2005 2005
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 456 262 234 325
At the balance sheet date, the group had outstanding commitments for future
minimum lease payments under non cancellable operating leases, which fall due
as follows:
Within one year 456 185 456 262
In the second to fifth
years inclusive 1,799 173 1,813 236
After five years 2,353 - 2,795 -
4,608 358 5,064 498
27. Retirement benefit schemes
The Group operates two funded defined benefit schemes which provide for their
liabilities through trustee operated funds. In July 2004, the remaining active
members of the Metallgesellschaft Group Pension Scheme were transferred to the
Chemetall UK Pension Scheme, which provides benefits based on final pensionable
pay, at a cost of #800,000. The Process Ink Scheme is a closed scheme. The
assets of both schemes are held separately from those of the Group in a trustee
administered fund. The trustees comprise senior group employees and the assets
are managed by Legal & General Assurance (Pensions Management) Limited.
Contributions to the scheme are charged to the income statement so as to spread
the costs of pensions over employees working lives within the Group.
The Group does not have any health and medical plans providing post-retirement
benefits. The pension costs relating to the Chemetall UK and Process Ink schemes
are assessed in accordance with the advice of Aon Limited, the independent
actuaries, using, in the case of the Chemetall UK scheme, the projected unit
method.
Scheme Last Assumed Average Total Funding level value
actuarial Investment salary market of assets as
valuation Return per increase value of percentage of
annum per assets liabilities
annum at latest
valuation
dates
Chemetall
UK 1 January 6% 4% #14.9m(3) 92%
Pension 2005
scheme
Process
Ink
Company
Limited
Pension
and 1 January 9%(1) 4%(2) #2.9m 102%
Death 2005
Benefits
Plan
Chemetall PLC
Page 32
Notes to the accounts
Year ended 31 December 2006
27. Retirement benefit schemes (continued)
(1) The rate of return is assumed to reduce to 8% per annum from each member's
normal retirement age.
(2) This is the assumed rate of revaluation of deferred pensions up to normal
retirement date.
(3) The market value of the assets includes additional voluntary contributions.
The pension increases were assumed to be equal to those specified in the rules
of the schemes. Increases in pensions in payment, in line with retail prices but
capped at 5% were assumed to be 3% per annum (3 1/2% for the Process Ink Scheme)
and pensions increasing in line with retail prices without a cap were assumed to
be 3% per annum (4% for the Process Ink Scheme).
*For the Chemetall UK scheme, this gives an indication of the extent to which
the actuarial value of the assets secure the benefits that have been accrued to
members allowing for expected future statutory revaluations to deferred
pensions.
The most recent actuarial valuation of plan assets and the present value of the
defined benefit obligation were carried out at 31 December 2004 and updated to
31 December 2006 by AON Consulting.
The estimated amount of contributions expected to be paid to the scheme during
the current financial year is #697,000.
31 31 31 31
December December December December
2006 2005 2004 2003
#000 #000 #000 #000
Rate of increase in
salaries 4.7% 4.5% 4.5% 4.25%
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 3.0% 3.0% 3.0% 2.75%
Discount rate 5.1% 4.75% 5.25% 5.75%
Inflation 3.2% 3.0% 3.0% 2.75%
The rates used have been chosen from a range of possible amounts determined
using actuarial assumptions which due to the timescale covered may not
necessarily be borne out in practice.
Chemetall PLC
Page 33
Notes to the accounts
Year ended 31 December 2006
27. Retirement benefit schemes (continued)
Scheme assets
The fair value of the assets in the schemes (which are not intended to be
realised in the short term and may be subject to significant change) and the
present value of the schemes liabilities (which are derived from cash flow
projections over long periods and thus are inherently uncertain) were:
Value at 31 December Value at 31 December Value at 31 December
2006 2005 2004
Chemetall Process Ink Chemetall Process Ink Chemetall Process Ink
#000 #000 #000 #000 #000 #000
Market
value 22,765 3,148 22,014 3,020 19,016 2,777
of assets
Present
value
of scheme (29,389) (3,836) (29,737) (4,006) (27,156) (3,541)
liabilities
Deficit in
the (6,624) (688) (7,723) (986) (8,140) (764)
scheme
Related
deferred
tax 1,987 206 2,317 296 2,442 229
asset
Net pension
liability (4,637) (482) (5,406) (690) (5,698) (535)
Chemetall PLC
Page 34
Notes to the accounts
Year ended 31 December 2006
27. 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 35
Note to the accounts
Year ended 31 December 2006
27. 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 36
Notes to the accounts
Year ended 31 December 2006
27. Retirement benefit schemes (continued)
Operating results and other disclosures
31 December 2004
Chemetall Process Ink Total
UK Scheme
Pension
Scheme
#000 #000 #000
Analysis of the amount charged to operating
loss:
Service cost (419) (9) (428)
Past service cost - - -
Total operating charge (419) (9) (428)
Analysis of the net return:
Expected return on the pension
scheme assets 1,127 156 1,283
Interest on pension scheme
liabilities (1,278) (176) (1,454)
Net charge (151) (20) (171)
Analysis of amount recognised in the statement
of recognised income and expense
Actual return less expected return
on assets 1,042 189 1,231
Experience gains and losses on
liabilities (168) (36) (204)
Acquisitions (193) - (193)
Changes in assumptions (2,856) (328) (3,184)
Actuarial gain recognised in the
statement of recognised income and
expense (2,175) (175) (2,350)
Changes in the present value of the defined
benefit obligation are as follows:
Opening defined benefit obligation 21,520 3,110 24,630
Service Cost 419 9 428
Interest Cost 1,278 176 1,454
Contributions by members 89 2 91
Actuarial (gains) and losses 4,571 364 4,935
Benefits paid (721) (120) (841)
Closing defined benefit obligation 27,156 3,541 30,697
Changes in the fair value of Scheme assets are
as follows:
Opening fair value of Scheme
assets 15,604 2,543 18,147
Expected return 1,127 156 1,283
Actuarial gains and (losses) 2,396 189 2,585
Contributions by employer 89 7 96
Contributions by members 521 2 523
Benefits paid (721) (120) (841)
Closing fair value of Scheme
assets 19,016 2,777 21,793
Chemetall PLC
Page 37
Notes to the accounts
Year ended 31 December 2006
27. Retirement benefit schemes (continued)
Details of experience gain and 31 31 31 31 30
losses in the period: December December December December September
2006 2005 2004 2003 2002
#'000 #'000 #'000 #'000 #'000
Difference
between the
expected and
actual return
on assets 104 2,105 1,231 424 (1,561)
Percentage of
Assets 0% 10% 7% 2% (9)%
Experience
gains and
losses on
liabilities (363) 1,348 (204) 402 1,461
Percentage of
present value
of liabilities (1)% 4% (1)% 2% 6%
Total amount
recognised in
statement of
recognised
income and
expense (1,255) 975 (2,157) 173 298
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 2006 December 2005 2004 2004
2006 2005
#000 #000 #000
Equities 8.10% 8,582 7.95% 9,446 7.75% 9,463
Corporate 5.10% 7,298 4.75% 7,496 5.25% 5,716
bonds
Government
bonds 4.60% 3,128 4.10% 3,225 4.50% 2,451
Property 8.10% 3,665 7.95% 1,704 7.75% 1,220
Cash 4.60% 92 4.10% 143 4.50% 166
Overall
rate 6.70% 22,765 6.25% 22,014 6.50% 19,016
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 2006 December 2005 2004 2004
2006 2005
#000 #000 #000
Equities 8.10% 1,398 7.95% 1,322 7.75% 1,188
Corporate 5.10% - 4.75% - 5.25% -
bonds
Government
bonds 4.60% 1,741 4.10% 1,684 4.50% 1,622
Property 8.10% - 7.95% - 7.75% -
Cash 4.60% 9 4.10% 14 4.50% (33)
Overall
rate 6.10% 3,148 5.75% 3,020 6.00% 2,777
of return
Chemetall PLC
Page 38
Notes to the accounts
Year ended 31 December 2006
27. Retirement benefit schemes (continued)
Overall expected return on assets
The overall expected return on assets is calculated as the weighted average of
the expected returns on each individual asset class.
Gilts 4.6% pa
This is equal to the Gross Redemption Yield on Government Bonds at the end of
2006 at the duration relevant for the liabilities.
Bonds 5.10% pa
This is equal to the Gross Redemption Yield on AA rated bonds at the end of 2006
at the duration relevant for the liabilities.
Cash 4.6% pa
This is equal to the long-term return on Gilts which is, in theory, an
accumulation of short-term interest rates.
Equities 8.10% pa
Aon have assumed the long-term return on UK equities by considering the income
and capital appreciation elements of total return separately. At 31 December
2006, the net dividend yield on the FTSE all-share index was 2.9%. This provides
the estimate of the income element. Aon have estimated the capital appreciation
by assuming that UK equity prices will rise 2% pa faster than price inflation
(which we assumed to be 3.2% 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 8.10% pa.
Overseas equities and property 8.10% 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.
28. Related party transactions
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the group and other related parties are disclosed
below.
Trading transactions
During the year, group companies entered into the following transactions with
related parties who are not members of this group:
Sale of goods Purchase of goods Amounts owed by Amounts owed to
related parties related parties
2006 2005 2006 2005 2006 2005 2006 2005
#000 #000 #000 #000 #000 #000 #000 #000
Fellow
subsidiary
undertakings 529 701 2,844 3,070 80 495 1,516 1,977
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 #413,000 (31 December 2005:
#387,000).
Chemetall PLC
Page 39
Notes to the accounts
Year ended 31 December 2006
28. 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
2006 2005 2006 2005
#000 #000 #000 #000
Fellow subsidiary undertakings 84,626 40,362 918 1,653
Remuneration of key management personnel
The remuneration of the directors who are the key management personnel of the
group are given in Note 6
29. Ultimate parent company and parent undertaking of larger group
The Company is controlled by Chemetall GmbH, the immediate parent Company
incorporated in Germany. The ultimate parent undertaking and controlling party
is Rockwood Holding Inc, incorporated in USA.
The largest group in which the results of the Group are consolidated is that
headed by the ultimate parent undertaking. The smallest group in which they are
consolidated is that headed by Rockwood Specialties Group Germany GmbH.. The
consolidated accounts of Rockwood Specialties Group Germany GmbH are available
to the public and may be obtained from Koenigsberger Strasse 1, 60487 Frankfurt
amd Main. The consolidated accounts of Rockwood Holding Inc are available to the
public and may be obtained from 100 Overlook Centre, Princeton, New Jersey,
08450, USA.
30. Post balance sheet events
In February 2007 the company acquired the intellectual property, customer list,
assets and inventories of the chemical business of Wirral Fospray Limited. The
final cost of the acquisition including both intangible and tangible assets is
estimated to be in the region of #950,000.
Page 40
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF CHEMETALL PLC
We have audited the individual company financial statements of Chemetall PLC for
the year ended 31 December 2006 which comprise the balance sheet and the related
notes 1 to 18. These individual company financial statements have been prepared
under the accounting policies set out therein.
We have reported separately on group financial statements of Chemetall PLC for
the year ended 31 December 2006.
This report is made solely to the company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the annual report and the
individual company financial statements in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in the statement of directors'
responsibilities.
Our responsibility is to audit the individual company financial statements in
accordance with relevant United Kingdom legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the individual company financial
statements give a true and fair view in accordance with the relevant financial
reporting framework and whether the individual company financial statements have
been properly prepared in accordance with the Companies Act 1985. We report to
you if, in our opinion, the directors' report is consistent with the individual
company financial statements. We also report to you if the company has not kept
proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law
regarding directors' remuneration and other transactions is not disclosed.
We read the directors' report and the other information contained in the annual
report for the above year as described in the contents section and consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the individual company financial statements.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the individual company financial statements. It also includes an
assessment of the significant estimates and judgements made by the directors in
the preparation of the individual company financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the individual company
financial statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the individual
company financial statements.
Opinion
In our opinion:
the individual company financial statements give a true and fair view, in
accordance with United Kingdom Generally Accepted Accounting Practice, of the
state of the company's affairs as at 31 December 2006;
the individual 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
Chemetall PLC
Page 41
Company balance sheet
31 December 2006
Note 31 December 2006 31 December 2005
(restated)
#000 #000 #000 #000
Fixed assets
Intangible assets 4 2,286 2,588
Tangible assets 5 1,196 1,250
Investments 6 33,022 33,022
36,504 36,860
Current assets
Stocks 7 1,443 1,346
Debtors 8 50,140 5,717
Cash at bank and in hand 2,132 43,194
53,715 50,257
Creditors: amounts falling due 9 (7,768) (6,841)
within one year
Net current assets 45,947 43,416
Total assets less current
liabilities 82,451 80,276
Creditors: amounts falling due 10 (12,000) (12,000)
after one year
Provisions for liabilities and
charges 11 (1,299) (1,383)
Retirement benefit obligation 16 (4,669) (5,640)
Net assets 64,483 61,253
Capital and reserves
Called up share capital 12 6,889 6,889
Share premium account 13 29,757 29,757
Revaluation reserve 13 28,582 28,582
Profit and loss account 13 (745) (3,975)
Shareholders' funds 14 64,483 61,253
These financial statements were approved by the Board of Directors on 23 April
2007.
Signed on behalf of the Board of Directors
Rob Rydings
Director
Chemetall PLC
Page 42
Notes to the accounts
Year ended 31 December 2006
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 net present value of the residual lease commitments over the long
term planning period of five years or, if earlier, the period until which the
Directors expect the properties to be sub-let. In determining the net present
value, cash flows have been discounted using an appropriate nominal, risk-free,
pre-tax rate of return (UK gilt for a 5 year period).
Capitalisation of software
Purchased software costs are capitalised and included within fixtures, fittings
and equipment and depreciated in equal instalments over their estimated useful
lives.
Tangible fixed assets and depreciation
Depreciation is provided to write off the cost less the estimated residual value
of tangible fixed assets by equal instalments over their estimated useful
economic lives as follows:
Short leasehold property - Life of the lease
Plant, machinery and equipment - 10-33% per annum
Fixtures and fittings - 20% per annum
No depreciation is provided on freehold land.
Chemetall PLC
Page 43
Notes to the accounts
Year ended 31 December 2006
1. Accounting policies (continued)
Intangible fixed assets - patents and concessions
Patent costs are amortised in line with the stated life of the patents, between
1 and 20 years.
Goodwill
On acquisition, the fair value of net assets is assessed and adjustments are
made to bring the accounting policies of businesses acquired into alignment with
those of the Company. The difference between the price paid for new interests
and the fair value of identifiable net assets acquired is capitalised and
amortised over its useful economic life, depending on the nature of the
acquisition for a period not exceeding twenty years. Any costs of integrating
the acquired business are taken to the profit and loss account.
Goodwill relating to acquisitions prior to 5 April 1998, the date that Financial
Reporting Standard No 10: Goodwill and Intangible Assets (FRS 10) became
applicable to the company, has been written off to reserves. Goodwill previously
eliminated against reserves is charged to the profit and loss account in so far
as it relates to disposals in the year.
Shares in subsidiary undertakings and fixed asset investments
Shares in subsidiary undertakings are included in the Company's balance sheet at
directors' valuation.
Chemetall PLC
Page 44
Notes to the accounts
Year ended 31 December 2006
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 #2,352,000 (2005: profit #2,317,000).
Chemetall PLC
Page 45
Notes to the accounts
Year ended 31 December 2006
3. Staff numbers and costs
The average number of persons employed by the company (including directors)
during the period, analysed by category, was as follows:
Number of employees
Year ended Year ended
31 December 2006 31 December 2005
Specialised Industrial Chemicals 93 94
The aggregate payroll costs of these persons were as follows:
Year ended 31 December 2006 Year ended 31 December 2005
#000 #000
Wages and salaries 3,242 3,624
Social security
costs 373 367
Other pension
costs 657 801
4,272 4,792
Chemetall PLC
Page 46
Notes to the accounts
Year ended 31 December 2006
4. Intangible fixed assets
Customer Patents and
contracts concessions Goodwill Total
#000 #000 #000 #000
Cost
At 1 January
2006 and 31
December 2006 250 1,108 3,000 4,358
Amortisation
At 1 January
2006 (130) (815) (825) (1,770)
Charged in year (120) (32) (150) (302)
At 31 December
2006 (250) (847) (975) (2,072)
Net book value
at 31 December
2006 - 261 2,025 2,286
Net book value
at 31 December
2005 120 293 2,175 2,588
Patents and trademarks are amortised over their estimated useful lives, until
expiry of legal rights.
Historically, #10,597,000 of goodwill has been written off directly to the
profit and loss reserve as a matter of accounting policy.
5. Tangible fixed assets
Leasehold Fixtures,
land and Plant and fittings, tools Total
buildings machinery and equipment
#000 #000 #000 #000
Cost
At 1 January
2006 2,481 2,370 779 5,630
Additions 87 43 - 130
At 31
December 2,568 2,413 779 5,760
2006
Depreciation
At 1 January
2006 (1,562) (2,047) (771) (4,380)
Charge for
the (130) (49) (5) (184)
year
At 31
December (1,692) (2,096) (776) (4,564)
2006
Net book
value
At 31
December 876 317 3 1,196
2006
At 31
December 919 323 8 1,250
2005
Chemetall PLC
Page 47
Notes to the accounts
Year ended 31 December 2006
6. Fixed asset investments
Shares in
Group
Undertaking
#000
Company
Cost or valuation and net book value
At beginning and end of year 33,022
Investments are carried at directors' valuation. The original cost of the
investments was #4,440,000 with the revaluation surplus of #28,582,000 being
taken to the revaluation reserve.
The undertakings in which the Company's interest at the period end is more than
20% are as follows:
Country of Principal Voting Class and percentage of
incorporation activity power shares held
held Company
Subsidiary
undertakings
AM Craig Ltd England Holding 100% 100% ordinary
company
Brent
International
BV The Netherlands Investment 100% 100% ordinary
company
7. Stocks
31 December 2006 31 December 2005
#000 #000
Raw materials and consumables 403 355
Work in progress 20 13
Finished goods and goods for resale 1,020 978
1,443 1,346
Chemetall PLC
Page 48
Notes to the accounts
Year ended 31 December 2006
8. Debtors
31 December 2006 31 December 2005
#000 #000
Amounts falling due within one year:
Trade debtors 2,995 3,183
Amounts due from group undertakings 44,533 822
Prepayments and accrued income 151 274
Deferred tax (see below) 2,461 1,438
50,140 5,717
Amounts due from group undertakings are due on or before 31 December 2007 (2005:
31 December 2006), 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 2006 31 December 2005
Recognised Unrecognised Recognised Unrecognised
#000 #000 #000 #000
Accelerated capital
allowances 127 - 62 -
Short-term timing
differences 393 - 425 -
Tax losses carried
forward 1,941 725 951 2,155
2,461 725 1,438 2,155
Retirement benefit
obligations * 2,000 - 2,418 -
Deferred tax asset 4,461 725 3,856 2,155
*The deferred tax asset in respect of retirement benefit obligations has been
offset against the liability.
9. Creditors: amounts falling due within one year
31 December 2006 31 December 2005
#000 #000
Trade creditors 1,619 1,181
Amounts owed to group undertakings 2,693 2,764
Taxation 1,172 343
Accruals and deferred income 1,744 2,013
Preference dividend 540 540
7,768 6,841
Chemetall PLC
Page 49
Notes to the accounts
Year ended 31 December 2006
10. Creditors: amounts falling due after one year
31 December 2006 31 December 2005
No. #000 No. #000
Authorised
Non-equity: 9% redeemable
preference shares of #1 each 15,000,000 15,000 15,000,000 15,000
Allotted, called up and fully
paid
Non equity: 9% redeemable
preference shares of #1 each 12,000,000 12,000 12,000,000 12,000
The Company issued 12,000,000 9% redeemable preference shares of #1 each. These
preference shares entitle their holders to a fixed cumulative preference
dividend at a rate of 9% per annum, per share. On a winding up the preference
shareholders are entitled to a sum equal to the nominal capital paid up or
credited as paid up, on the preference shares held by them, together with all
arrears (if any) of the preference dividend. They carry the right to receive
notice of, or attend, or vote at General Meetings only in special circumstances
such as when the preference dividend is six months or more in arrears or if
redemption has not been made on the due date, or in such cases as a winding up
of the Company or a reduction in its share capital. The preference shares have
to be redeemed at par on 3 July 2008. The 9% redeemable preference shares are
presented as "Creditors: amounts falling due after one year" in the balance
sheet to comply with FRS 25 "Financial Instruments: Disclosure And
Presentation".
11. Provisions for liabilities and charges
Vacant property provision Other provision Total
#000 #000 #000
At 1 January 2006 1,244 139 1,383
Utilisation in the year (33) (51) (84)
At 31 December 2006 1,211 88 1,299
12. Called up share capital
31 December 2006 31 December 2005
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
The 9% redeemable preference shares are presented as "Creditors: amounts falling
due after one year" in the balance sheet to comply with FRS 25 "Financial
Instruments: Disclosure And Presentation".
Chemetall PLC
Page 50
Notes to the accounts
Year ended 31 December 2006
13. Share premium and reserves
Revaluation Share Profit
reserve premium and loss
#000 account account
#000 #000
At 1 January 2006 28,582 29,757 (3,975)
Retained profit for the year - - 2,352
Retirement benefit obligations - - 878
At 31 December 2006 28,582 29,757 (745)
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 2006,
the realised distributable reserves of the company amounted to #4,210,000 (2005:
#1,510,000).
14. Reconciliation of movements in shareholders funds
31 December
31 December 2005
2006 #000
#000
At 1 January 61,253 76,447
Reclassification of preference shares as a financial
liability - (12,000)
Retirement benefit obligations - (6,233)
At 1 January 61,253 58,214
Profit for the year 2,352 2,317
Retirement benefit obligations 878 722
At 31 December 64,483 61,253
The amounts were restated in 2005 to show the effect of the following changes:
Preferrence shares of #12,000,000 were re-classed in previous year from equity
to liabilities in line with FRS 25.
Retirement benefit obligation was reclassified in line with FRS 17.
Chemetall PLC
Page 51
Notes to the accounts
Year ended 31 December 2006
15. Commitments
Annual commitments under non-cancellable operating leases are as follows:
31 December 31 December 31 December 31 December
2006 2006 2005 2005
Land and Other Land and Other
Buildings #000 Buildings #000
#000 #000
Operating leases which expire:
Within one year - 55 4 263
In the second to fifth
years inclusive 14 99 35 236
Over five years 442 - 441 -
456 154 480 499
16. Pension scheme
The company operated two funded defined benefit schemes which provide for their
liabilities through trustee operated funds.
In July 2004, the remaining active members of the Metallgesellschaft Group
Pension Scheme were transferred to the Chemetall UK Pension Scheme, which
provides benefits based on final pensionable pay, at a cost of #800,000. The
assets of the scheme are held separately from those of the company in a trustee
administered fund. The trustees comprise senior group employees and the assets
are managed by Legal & General Assurance (Pensions Management ) Limited.
Contributions to the scheme are charged to the profit and loss account so as to
spread the costs of pensions over employees working lives within the company.
The company does not have any health and medical plans providing post-retirement
benefits. The pension costs relating to the Chemetall UK and Process Ink schemes
are assessed in accordance with the advice of Aon Limited, the independent
actuaries, using, in the case of the Chemetall UK scheme, the projected unit
method.
The table below illustrates that, under the Minimum Funding Requirement (MFR),
the Process Ink Scheme (which is a paid-up scheme from 30 June 1999, with the
exception of one member who is in receipt of ill health benefits and as a result
continues to accrue pension benefits) has deficits in relation to current
accrued benefits. This deficit is being funded by monthly contributions (up to
19 November 2012) of #300.
The Chemetall UK scheme was sufficiently funded under the MFR.
Chemetall PLC
Page 52
Notes to the accounts
Year ended 31 December 2006
16. 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 6% 4% #14.9m(3) 92%
Pension 2005
scheme
Process
Ink
Company
Limited
Pension
and 1 January 9%(1) 4%(2) #2.9m 102%
Death 2005
Benefits
Plan
(1) The rate of return is assumed to reduce to 8% per annum from each member's
normal retirement age.
(2) This is the assumed rate of revaluation of deferred pensions up to normal
retirement date.
(3) The market value of the assets includes additional voluntary contributions.
The pension increases were assumed to be equal to those specified in the rules
of the schemes. Pension increases in payment in line with retail prices but
capped at 5% were assumed to be 3% per annum (31/2% for the Process Ink Scheme)
and pensions increasing in line with retail prices without a cap were assumed to
be 3% per annum (4% for the Process Ink Scheme).
*For the Chemetall UK scheme, this gives an indication of the extent to which
the actuarial value of the assets secure the benefits that have been accrued to
members allowing for expected future statutory revaluations to deferred
pensions.
Chemetall PLC
Page 53
Notes to the accounts
Year ended 31 December 2006
16. Pension scheme (continued)
Included in the balance sheet at 31 December 2006 is a pension accrual of #nil
(31 December 2005: #126,000) 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 were:
31 31 31 December
December December 2004
2006 2005 #000
#000 #000
Rate of increase in salaries 4.7% 4.5% 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 3.0% 3.0% 3.0%
Discount rate 5.1% 4.75% 5.25%
Inflation assumptions 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.
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
2006 2005 2004
Chemetall Process Ink Chemetall Process Ink Chemetall Process Ink
#000 #000 #000 #000 #000 #000
Market
value 22,765 3,148 22,014 3,020 19,016 2,777
of assets
Present
value
of scheme (28,746) (3,836) (29,086) (4,006) (27,156) (3,541)
liabilities
Deficit in
the (5,981) (688) (7,072) (986) (8,140) (764)
scheme
Related
deferred
tax 1,794 206 2,122 296 2,442 229
asset
Net pension
liability (4,187) (482) (4,950) (690) (5,698) (535)
Chemetall PLC
Page 54
Notes to the accounts
Year ended 31 December 2006
16. Pension scheme (continued)
Operating results and other disclosures
Chemetall Process Ink 31
UK Scheme December
Pension 2006
Scheme #000 Total
#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 55
Notes to the accounts
Year ended 31 December 2006
16. 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 56
Notes to the accounts
Year ended 31 December 2006
16.Pension scheme (continued)
Operating results and other disclosures
Chemetall Process Ink 31
UK Scheme December
2004
Pension #000 Total
Scheme
#000 #000
Analysis of the amount charged to operating
profit:
Service cost (419) (9) (428)
Past service cost - - -
Total operating charge (419) (9) (428)
Analysis of the net return:
Expected return on the
pension scheme assets 1,127 156 1,283
Interest on pension
scheme liabilities (1,278) (176) (1,454)
Net charge (151) (20) (171)
Analysis of amount recognised in the statement
of total recognised gains and losses:
Actual return less
expected return on
assets 1,042 189 1,231
Experience gains and
losses on liabilities (168) (36) (204)
Changes in assumptions (2,856) (328) (3,184)
Actuarial (loss)/gain
recognised in the
statement of total
recognised gains and
losses (1,982) (175) (2,157)
Movement in deficit during the period:
Deficit at 31 December
2003 (5,916) (567) (6,483)
Movement in the period:
Current service cost (419) (9) (428)
Contributions 521 7 528
Net interest cost (151) (20) (171)
Aquisitions (193) - (193)
Actuarial (loss)/gain (1,982) (178) (2,157)
Deficit at 31 December
2004 (8,140) (764) (8,904)
Chemetall PLC
Page 57
Notes to the accounts
Year ended 31 December 2006
16. Pension scheme (continued)
Details of experience gain and 31 31 31 31 30
losses in the period: December December December December September
2006 2005 2004 2003 2002
#'000 #'000 #'000 #'000 #'000
Difference
between the
expected and
actual return
on assets 104 2,105 1,231 424 (1,561)
Percentage of
Assets 0% 10% 7% 2% (9)%
Experience
gains and
losses on
liabilities (363) 1,348 (204) 402 1,461
Percentage of
present value
of liabilities (1)% 4% (1)% 2% 6%
Total amount
recognised in
statement of
recognised
income and
expense (1,255) 975 (2,157) 173 298
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
2006 December 2005 December 2004 December
2006 2005 2004
#000 #000 #000
Equities 8.1% 8,582 7.95% 9,446 7.75% 9,643
Corporate 5.1% 7,298 4.75% 7,496 5.25% 5,716
bonds
Government
bonds 4.6% 3,128 4.10% 3,225 4.50% 2,451
Property 8.1% 3,665 7.95% 1,704 7.75% 1,220
Cash 4.6% 92 4.10% 143 4.50% 166
Overall
rate 6.7% 22,765 6.25% 22,014 6.50% 19,016
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
2006 December 2005 December 2004 December
2006 2005 2004
#000 #000 #000
Equities 8.1% 1,398 7.95% 1,322 7.75% 1,188
Corporate 5.1% - 4.75% - 5.25% -
bonds
Government
bonds 4.6% 1,741 4.10% 1,684 4.50% 1,622
Property 8.1% - 7.95% - 7.75% -
Cash 4.6% 9 4.10% 14 4.50% (33)
Overall
rate 6.1% 3,148 5.75% 3,020 6.00% 2,777
of return
Chemetall PLC
Page 58
Notes to the accounts
Year ended 31 December 2006
17. 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 Holding Inc, incorporated in USA.
18. 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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