Report of the Directors
Business Review

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“Underlying earnings per share fell by only 2% to 150 pence, despite the reduction in underlying profit before tax
of 9%.”

Robert MacLeod
Group Finance Director

Profit Before Tax

The group’s underlying profit before tax decreased by 9% to £389.2 million (2011/12 £426.0 million). Profit before tax was 13% lower at £354.9 million (2011/12 £409.3 million). Principal items excluded from underlying profit were:

Underlying Profit Reconciliation

  Year ended 31st March 2013 Year ended 31st March 2012
  Profit
before
tax
£ million
Income
tax
expense
£ million
Profit for
the year
£ million
Profit
before
tax
£ million
Income
tax
expense
£ million
Profit for
the year
£ million
Underlying basis 389.2 (81.7) 307.5 426.0 (100.0) 326.0
Amortisation of acquired intangibles (16.9) 5.4 (11.5) (16.7) 6.1 (10.6)
Major impairment / restructuring (17.4) (2.8) (20.2)
Reported basis 354.9 (79.1) 275.8 409.3 (93.9) 315.4

Exchange Rates

The main impact of exchange rate movements on the group’s results comes from the translation of foreign subsidiaries’ profit into sterling as the group does not hedge the impact on the income statement or balance sheet of these translation effects. The group’s underlying operating profit at constant exchange rates is shown in the table below:

Underlying Operating Profit

  Year ended 31st March   2012 at 2013  
  2013
£ million
2012
£ million
%
change
exchange
rates
£ million
%
change
Environmental Technologies 226.0 211.8 +7 210.4 +7
Precious Metal Products 147.1 200.8 -27 199.5 -26
Fine Chemicals 71.1 69.7 +2 69.8 +2
Corporate (29.4) (32.2)   (32.1)  
Total group 414.8 450.1 -8 447.6 -7

During the year, sterling strengthened slightly against the euro but weakened slightly against the US dollar and Chinese renminbi. Together these decreased reported group underlying operating profit for the year by £1.8 million.

Of the group’s underlying operating profit that is denominated in overseas currencies the average exchange rates during 2012/13 were:

  Share of
2012/13
non-sterling
denominated
underlying
Average exchange rate
  operating profit 2012/13 2011/12
US dollar 42% 1.580 1.597
Euro 28% 1.228 1.160
Chinese renminbi 11% 9.93 10.21

Going forward, each one cent change in the average US dollar exchange rate and each one cent change in the euro exchange rate have approximately a £0.8 million and £0.7 million effect respectively on underlying operating profit in a full year.

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