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Original Source: FD (FAIR DISCLOSURE) WIRE
JIM LENG, CHAIRMAN, CORUS GROUP: Okay. Good morning everybody and welcome to Corus's preliminary results. Thank you for joining us this morning. I am Jim Leng and as usual, I am joined by my colleagues - Philippe Varin, our Chief Executive, and David Lloyd, our Finance Director.
At the time of our interim results in this particular room 6 months ago, I suggested that it wasn't unreasonable performance against our Restoring Success program. The questions I posed then, I believe, are just as relevant today. Are we beginning to deliver? Are we on track? And can we see the benefits of our self-help Restoring Success program coming through? These are the questions that Philippe and David will address in their presentations.
Although we are not yet at the halfway stage of the Restoring Success program, it's not unreasonable to add a supplementary question. What are our thoughts beyond Restoring Success? Philippe will begin to cover this in his presentation. I'll return later with some concluding remarks but now let me hand over to David, who'll walk you through our financial performance over the last 12 months.
DAVID LLOYD, FINANCE DIRECTOR, CORUS GROUP: Thank you Jim and good morning ladies and gentlemen. My part of today's presentation will cover 3 main areas. I'll run through the Group's financial performance for 2004, the highlights of each of our business segments and finally, an update on our refinancing and our financial calendar for 2005.
Starting with a summary of the Group's financial results. Turnover in 2004 amounted to some [pounds sterling]9.3b, up 17% on 2003. EBITDA before restructuring and impairment charges was [pounds sterling]934m, representing a margin of 10% on turnover for the full year, with H2 reaching 13%. The underlying operating result was [pounds sterling]627m, generating a return on net assets of 19%. This compares with the guidance given in the December trading update of in excess of [pounds sterling]600m.
The Group operating results after restructuring and impairment costs was [pounds sterling]582m, split [pounds sterling]147m in H1 and [pounds sterling]435m in H2, and represents a year on year improvement of [pounds sterling]790m. Profit before tax amounted to [pounds sterling]559m, benefiting from gains on the disposal of non-core assets and surplus businesses. The retained profit of [pounds sterling]446m equates to an earnings per share of 10 pence. Net debt decreased to [pounds sterling]854m, reflecting the strong operating performance, and represents a reduction of 30% from the position at the half year.
This slide provides a brief reminder of the divisional structure which is the basis for the segmentation of the Group's results. A more detailed description of each division is included as an appendix in the results pack. The dotted lines highlight those businesses which have been identified as non-core to the Group's strategy and the red ticks indicate where transactions have been completed.
The North American distribution businesses in quarter 1, Tuscaloosa in July and Teesside Cast Products in December. The Group will move to quarterly reporting with effect from June 2005, in line with this structure.
Turning now to our divisional results and firstly it's Strip Products. Turnover for the full year amounted to [pounds sterling]4.7b, an increase of 21% over 2003, attributable to a combination of increased sales volume, up 4%, and higher average revenue per ton, up 16%. The underlying operating profit was [pounds sterling]386m, split [pounds sterling]110m in H1 and [pounds sterling]276m in H2. And this compares to the full year result of [pounds sterling]47m in 2003. The equivalent EBITDA margin increased to 12% compared to 6% in 2003, reaching 14% in the second half of the year.
For Long Products turnover, amounted to [pounds sterling]2.6b, an increase of 21%, entirely attributable to higher average selling prices, with deliveries largely unchanged from 2003. The underlying operating result was [pounds sterling]177m, of which [pounds sterling]146m was generated in H2, reflecting the improvement in the competitive position of Corus' blast furnace based production. EBITDA at [pounds sterling]240m represented a margin of some 9% for the full year, reaching 13% in H2.
Turnover for Distribution and Building Systems increased 15% in 2004, attributable to higher selling prices that improved average revenue per ton by 25%, offset by a reduction in sales volume of 9%. The year-on-year comparison of deliveries is distorted by the exceptionally high level of third party slab supply into Asia and China in 2003, from our trading opportunities. Excluding this and the impact on the North American disposals, sales volume remained relatively unchanged.
The underlying operating result improved from a broadly breakeven position in 2003 to a profit of [pounds sterling]83m in 2004, equivalent to an EBITDA of some 4%. Again, H2 performance was considerably up on H1, contributing [pounds sterling]72m of the full year operating result.
And finally, turning to Aluminum. Turnover was up 6%, attributable to a 10% higher volume, offset by a 3% reduction in average revenue per ton. The reduction in average price reflected a combination of higher volumes from our Duffel operation, following earlier investments, and lower margins in the division's Canadian operations as a result of the weaker U.S. dollar. LME primary metal prices measured in U.S. dollars was some 20% above 2003 but when measured in euros the increase was only 10%, as a result of exchange rate movements.
Overall, the underlying divisional operating profit reached [pounds sterling]50m compared to [pounds sterling]31m in 2003, driven by improved performance from our roll businesses. And the EBITDA margin was 8.2%.
This next slide provides a bridge of the key movements in the overall Group operating result, from a loss of [pounds sterling]66m in 2003 to a profit of [pounds sterling]627m in 2004. The Group clearly benefited from a positive cost price relationship, estimated at [pounds sterling]550m, as higher selling prices particularly in the second half of the year, together with some enrichment in product mix, more than offset increases in raw material, energy, freight and other input costs.
Production and manufacturing efficiencies, although disrupted by raw material availability and quality, especially coke, made further significant year-on-year gains, building on the substantial improvements made during 2003.
The impact of foreign exchange movements is also shown on this slide. Firstly, dealing with the impact of the U.S. dollar, the blue areas show a net gain of approximately [pounds sterling]80m. On the 1 hand, the Group's input costs were reduced due to the weaker U.S. dollar, but this was partly offset by a reduction in the sterling equivalent value of dollar sales.
The impact of a slightly weaker euro, the orange area, was limited to circa [pounds sterling]20m in 2004. So the overall impact of exchange rate movements, relative to 2003, is therefore estimated a gain of [pounds sterling]100m.
Restoring Success has contributed to all aspects of the improvement in the operating result and approximately [pounds sterling]215m or 30% of the year-on-year improvement can be attributed to the various initiatives under this program. Philippe will take you through …