Hayward Tyler Group PLC Unaudited Interim Results (1554P)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Hayward Tyl	LSE:HAYT	London	Ordinary Share	IM00B511CF53	ORD 1P

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	50.75	47.00	54.00				0.00	01:00:00

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
	0	0		N/A	0

Hayward Tyl (LSE:HAYT)
Historical Stock Chart

From Apr 2019 to Apr 2024

TIDMHAYT

RNS Number : 1554P

Hayward Tyler Group PLC

15 November 2016

Hayward Tyler Group plc

Unaudited interim results

for the six months ended 30 September 2016

Well positioned for growth-momentum building

Hayward Tyler Group plc (AIM: HAYT) ("Hayward Tyler Group", "HTG", the "Group" or the "Company"), the specialist engineering group, today announces its interim results for the six months ended 30 September 2016.

Financial Headlines:

   --      Revenue was GBP23.1 million in 1H2017 (1H2016: GBP21.8 million);

-- Due to the previously announced 2H2017 weighting during the current financial year, trading* operating loss was GBP5.6 million (1H2016: profit of GBP2.0 million);

   --   Diluted trading* loss per share of 9.13 pence (1H2016: earnings per share of 3.87 pence); 
   --   Cash used by operations of GBP5.0 million (1H2016: cash generated of GBP2.0 million);

-- Net debt of GBP18.3 million (at 30 September 2015: GBP10.5 million, at 31 March 2016: GBP8.6 million) following extensive investment in upgrading the Group's facilities and the operating loss in 1H2017; and

   --    5% increase in interim dividend to 0.58 pence per share (1H2016: 0.552 pence).

* trading represents the underlying performance of Hayward Tyler Group

Business Headlines:

   --      Order intake of GBP25.4 million (1H2016: GBP26.6 million);

-- Order intake highlights included a further order from FMC Technologies Inc for three subsea motors and floating vessel spares, gear boxes and long-term service agreements totalling over GBP2.3 million for Peter Brotherhood;

-- GBP15.0 million investment in the development of the Centre of Excellence in Luton completed and fully operational following the official opening by the Duke and Duchess of Cambridge on 24 August 2016; and

   --      Hayward Tyler awarded the Queen's Award for Enterprise: International Trade.

Post-Period Highlights:

-- Momentum thoughout the business has improved noticeably with a considerable number of new orders received;

-- Further order intake in the period from 1 October 2016 to 13 November 2016 of GBP10.9 million including the first steam turbine gen-set order of around GBP2.0 million as the new Peter Brotherhood together with a replacement rotor of over GBP1.0 million for an existing customer in the Middle East;

-- Winner of two categories at The Manufacturer MX Awards on 2 November 2016, namely Smart Factory and Leadership & Strategy, and short-listed in three other categories;

-- GBP3.0 million increase of committed banking facilities and relaxation of financial covenants to support the on-going requirements of the Group; and

-- Intention to increase the Company's loan note programme to match the investment in long-term assets with longer term funding.

Ewan Lloyd-Baker, Chief Executive Officer, commented:

"As previously announced we anticipated that the current financial year would be very much second half weighted and this has indeed proved to be the case. Importantly, since the end of the first half, momentum in new order wins has improved considerably with aggregate orders of GBP10.9 million secured since the end of the period. Hayward Tyler Group is well positioned for further growth following the substantial investment we have made in the Group's facilities.

In addition, we are further encouraged by the continuing strong support provided to the Group by our principal bank, Royal Bank of Scotland, with whom we have committed borrowing facilities out to 2020.

Reflecting the Board's confidence in the long term prospects of the Group, the interim dividend has been raised by 5%.

Furthermore, it was a great pleasure to host the Duke and Duchess of Cambridge to officially open the Centre of Excellence and also to present us with the Queen's Award for Enterprise: International Trade, an award that demonstrates the significant progress the Hayward Tyler Group has made, and will continue to make, with the help of everyone at the Company."

The information communicated in this announcement is inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No.596/2014.

Enquiries:

 
 Hayward Tyler Group plc 
  Ewan Lloyd-Baker, Chief Executive      Tel: +44 (0)1582 731144 
  Officer 
  Nicholas Flanagan, Chief Financial 
  Officer 
------------------------------------  --------------------------- 
 FinnCap Limited - NOMAD & Broker 
  Matt Goode - Corporate Finance         Tel: +44 (0)20 7220 0500 
  Emily Watts - Corporate Finance 
  Tony Quirke - Corporate Broking 
------------------------------------  --------------------------- 
 Buchanan                              Tel: +44 (0)20 7466 5000 
  Charles Ryland 
  Chris Judd 
  Jane Glover 
------------------------------------  ---------------------------

Chief Executive's Review

Overview

When Hayward Tyler Group published its results for FY2016 we set out our priorities for the current financial year, which were as follows:

-- Continue to focus on implementing our strategy for growth through product and market development;

-- Continue to increase order intake through improvements to the 'win-order' process across all markets;

   --        Re-establish Peter Brotherhood and embed the business in the Group; and 
   --        Continue to look for wider opportunities to develop and grow the Group.

As explained below, our focus has very much been on the first three of these priorities, which puts us in a stronger position to take the Group forward.

That being said, at the time of the results for FY2016, we indicated that the performance in FY2017 would be strongly weighted to the second half of the year, presenting us with a challenge for 2H2017. However, we remain confident in meeting market expectations of revenues of around GBP80 million for the full year based on our strong pipeline, recent improved levels of order intake, increased order book and reduced lead times from operational improvements that shorten the revenue cycle.

Performance Review

Revenue in 1H2017 was 6% ahead of prior year at GBP23.1 million (1H2016: GBP21.8 million) as a result of the inclusion of Peter Brotherhood and driven by an opening order book(1) and order intake(2) in 1Q2017. Order intake in the first half was GBP25.4 million (1H2016: GBP26.6 million) resulting in an order book of GBP48.0 million as at 30 September 2016 (at 31 March 2016: GBP36.1 million). As a result of the lower revenue in 1H2017, the Group did not have the revenues to cover its factory overheads generating an underlying operating loss of GBP5.6 million, however, management is confident in the Group's ability to meet full year market expectations.

Further details of the financial performance in 1H2017 are set out in the Financial Review.

1 Order book represents contracts that had yet to be shipped to customers as at a reporting date

2 Order intake represents contracts for which purchase orders were received from customers in a reporting period

Centre of Excellence

On 24 August 2016 we were delighted to announce the official opening by the Duke and Duchess of Cambridge of our Centre of Excellence in Luton, the culmination of GBP15.0 million of investment in property, plant and equipment. The opening gave us an opportunity to showcase the new facility to our Royal guests, our customers and other stakeholders and see the outcome of all the hard work we have delivered over the past few years. In addition, the Duke and Duchess also made the presentation of the Queen's Award for Enterprise: International Trade.

The Centre of Excellence adds world-class capabilities to create the world's most advanced facility for specialist motor manufacture, which is also "Fit for Nuclear". It provides single process flow lines that increase the pace of production and thereby reduce lead times, which provide us with the opportunity to double capacity from the Luton facility whilst reducing working capital levels by reducing order fulfilment periods. The Centre of Excellence now features particulate control systems and specialist test capabilities, key value-adds for all our customers but particularly critical for the nuclear and subsea oil and gas sectors. Furthermore, the new facility has enabled us to reduce our environmental footprint.

The GBP15.0 million investment, the largest in Hayward Tyler's history, supports the long-term growth plans across our international markets. The refurbishment included:

-- Adding a further 40% to create an overall facility with c.11,000 square metres including designated test pits for power, oil and gas, and nuclear;

   --      Re-furbishing the existing facility; 
   --      Improving and upgrading the electrical supply; 
   --      Revising the production layout; 
   --      Installing specialist test and particulate controls systems; and 
   --      Spending GBP5.0 million on new process capable plant and machinery.

The total cost of GBP15.0 million was funded from a 3-year loan note (GBP3.0 million), equipment finance leases (GBP3.1 million), equity (GBP3.1 million), Regional Growth Fund grant (GBP2.3 million) and short-term borrowings (GBP3.5 million).

The Centre of Excellence became fully operational in August 2016 and its contribution is critical to delivering orders that are scheduled to ship in 2H2017.

Peter Brotherhood

On 30 October 2015 we completed the acquisition of the trade and assets of the Peterborough operations of Dresser-Rand. This acquisition provided us with a great opportunity to resurrect the Peter Brotherhood brand and re-invigorate the Peter Brotherhood business that has existed for almost 150 years. In more recent times it has focused on energy efficient solutions for land and marine based applications including steam turbines, reciprocating gas compressors and combined heat and power units for the power generation, oil and gas, marine and process markets. Whereas Hayward Tyler operates in the +300MW part of the power market, Peter Brotherhood provides us with process capability in the range 1MW to 40MW, ideal for de-centralised power supply, a key feature for growth in energy supply.

The acquisition provided us with a process capable, motivated work force and a 14,700 square metres modern facility, demonstrated by the design, build, test and completion of the GBP3.6 million S-Oil steam turbine gen-set. Additionally, the business had a small order book and a significant installed base of equipment. Our challenge has been to re-establish the sales and marketing function of the business completely, which included inter alia:

-- Restoring the Peter Brotherhood name that had remained unused for eight years but is still widely recognised in the industry;

-- Creating a whole sales and marketing team, which included transferring some members of the engineering team into sales, together with recruiting Non-TUPE Dresser-Rand staff and external hires including some former employees of the old Peter Brotherhood;

   --       Re-establishing key customer and agency relationships across the world;

-- Developing promotional materials and attending key industry events to re-promote the Peter Brotherhood name and its capabilities;

-- Implementing a 5D customer services model to serve the aftermarket through customer care agreements that cover technical support, parts supply and management, repair services, upgrades and revamps, and customer training; and

-- Implementing marketing, sales and operational planning together with the Lanner Witness simulation modelling that has been so successful in Hayward Tyler.

This challenge has been significant, which is reflected in the low order intake achieved in 1H2017 of GBP6.0 million. However, we are encouraged by the significant pipeline of potential orders and recent contract wins since the period end that suggest that the win-order process is gathering momentum post the period end. Notable achievements in the period since 31 March 2016 include:

   --      Growing the pipeline to over GBP200 million;

-- Re-establishing a key customer relationship with a global supplier to the marine and energy markets and securing a GBP1.9 million order for a steam turbine gen-set as well as multiple future opportunities and potential global framework agreement;

-- Doubling aftermarket order intake to a current average of over GBP0.8 million per month; and

   --       Winning GBP1.5 million of gearbox orders (for use in radar towers) from Siemens.

Key Growth Drivers

There are two aspects to the key growth drivers for the Group - the market or external growth drivers and the investment or internally generated growth drivers.

Market Drivers

The underlying market fundamentals remain positive for the Group. We summarise the key market drivers as follows:

-- Growth in demand for energy driven by the world's population being projected to exceed 9.5 billion people by 2050;

-- Energy policy is pushing change within energy markets. For example, the drive for lower emissions, increased efficiency and cost savings is leading to the replacement of older plant and facilities. In addition, the promotion of decentralised power supply and sourcing of energy from multiple sources (e.g. fossil fired, oil and gas, nuclear and renewables) to spread risk provides opportunities to our diversified businesses;

-- Optimising the use of energy resources such as dwindling oil reserves means that capital equipment has to be able to operate in ever more extreme conditions. Our robust products, like the subsea motor, provide customers with the opportunity to maximise the returns from their multi-million pound investments; and

-- Aftermarket services, whether it's benefiting from our significant installed base or extending the life of facilities, provide significant growth opportunities to our businesses.

Investment Drivers

We summarise the key investment drivers as follows:

-- As mentioned above, the Centre of Excellence provides us with a unique process capable facility that increases the pace of production, reduces lead times and has the potential to double capacity. The Centre of Excellence became fully operational at the end of August 2016;

-- Research and development is a key tenet of our strategy for growth, which includes transforming existing technologies, for example by finding new applications for existing products in new markets, and innovating new technologies for existing markets. Ultimately we expect to further diversify our product offering by developing new products for new markets;

-- We have made, and continue to make, a significant investment in our people. This is demonstrated by the very significant amount of training and development we have deployed in the last two years, the continuing graduate and apprentice schemes employed in Hayward Tyler Luton and now Peter Brotherhood too, and our focus on the front-end of the business;

-- As previously discussed, the acquisition of Peter Brotherhood provides us with the opportunity to re-establish this company including building-up its aftermarket business based on its significant installed base;

-- We have increased our investment in marketing from GBP0.1 million in 1H2016 to GBP0.3 million in 1H2017. This marketing covers a wide range of initiatives, which include adopting account based marketing plans across the Group. For example, actively investing and resourcing marketing and sales programmes geared to key growth accounts and opportunities and launching specific programmes targeted around specific customer opportunities including tactical programmes to support the sales process to increase the conversion rate or to convert faster or to open new doors. This approach is in addition to, and complementary to, the existing sales programmes and is geared to support our focus on the win-order process; and

-- The first half of the year benefitted from revenue and order intake generated from our strategic alliances with FMC Technologies and Ebara Corporation. These alliances, together with other potential alliances that we are seeking to develop, offer significant scope for growth.

Outlook

The outlook for the 2H2017 and beyond is positive based on the key growth drivers for the Group, discussed above, the pipeline of new opportunities and recent levels of order intake, which as previously explained, will be very much weighted to the second half of the current financial year.

Our businesses have a pipeline of opportunities that exceed GBP500 million. Over the last nine months we have established a universal and consistent approach to determining the pipeline of opportunities across all our businesses, which includes identifying, recording and analysing each potential contract. This enhanced understanding helps us to target and prioritise our resources to maximise the chance of converting the pipeline into orders. The rate of this conversion, particularly of aftermarket orders with their shorter lead times and higher profit margins, is key to the recovery of the Group's results in 2H2017.

The rate of order intake has improved during the course of the year to date and continues to improve further. Order intake in 1Q2017 was GBP8.2 million (1Q2016: GBP13.4 million). This rose to GBP17.3 million in 2Q2017 (2Q2016: GBP13.2 million) and in the period from 1 October 2016 to 13 November we received further orders of GBP10.9 million. This increased rate reflects the greater focus placed by the Company on the whole win-order process across the Group. Furthermore the sales teams are now fully integrated into the sales and operational planning process, which provides better understanding of load gaps for the operations and management of opportunities. For example, this enables a member of the sales team to identify a capacity gap and to offer a customer a strategic price that fills that gap, maximising the utilisation of our facilities. Of the GBP48.0 million order book at 30 September 2016, GBP21.3 million is expected to be recognised as revenue in 2H2017. That leaves the Group with a requirement to "book and fill"(1) orders of GBP35.8 million in 2H2017, which is expected to be drawn from opportunities currently under negotiation plus regular aftermarket orders of over GBP60 million.

1 Book and fill represents order intake to secure and recognise as revenue in 2H2017 to meet market expectation of around GBP80 million revenue in FY2017

Separately I'd like to thank all of our employees for their continuing dedication, focus, determination and patience as we develop and grow the overall Group and continue to seek out the opportunities to work better together as Hayward Tyler and Peter Brotherhood. With the greater uncertainty created as a result of the Brexit vote and unexpected result of the US election, it is reassuring to know that in HTG we have a group with over 350 years of combined engineering heritage and pedigree, a reassuring track record in uncertain times.

E Lloyd-Baker

Chief Executive Officer

15 November 2016

Financial Review

Basis of Reporting

The Group financial statements in this report have been prepared in accordance with International Financial Reporting Standards.

Operating Results

Revenue in 1H2017 was 6% ahead of prior year at GBP23.1 million (1H2016: GBP21.8 million) helped by the inclusion of Peter Brotherhood revenue of GBP6.7 million (1H2016: GBPnil). On a like-for-like basis Hayward Tyler revenue was GBP16.4 million (1H2016: GBP21.8 million). The mix of revenue from Original Equipment (OE) and Aftermarket (AM) remained constant year-on-year at 34%:66%. Gross profit margin was lower at 14% (1H2016: 34%), which was entirely due to revenue being too low to cover factory overheads including labour, rent and utilities of GBP5.5 million. Excluding these overheads the underlying gross profit margin was 38% as set out in the analysis below:

 
 GBPm              Underlying    Unrecovered   Reported 
                                 fixed costs 
----------------  -----------  -------------  --------- 
 Revenue                 23.1              -       23.1 
 Cost of sales         (14.3)          (5.5)     (19.9) 
----------------  -----------  -------------  --------- 
 Gross Profit             8.8          (5.5)        3.3 
----------------  -----------  -------------  --------- 
 Gross Profit %           38%              -        14%

This underlying gross profit, analysed between OE and AM and set out in the table below, shows a gross loss in Peter Brotherhood resulting from cost overruns, and a strong performance in all other segments reflecting normal aftermarket profit margins and the continuing upward trend on Hayward Tyler's OE business.

 
                        Peter Brotherhood            Hayward Tyler         Group    Group 
 GBPm                  Original                   Original                 1H2017   1H2016 
                      Equipment   Aftermarket    Equipment   Aftermarket    Total    Total 
------------------  -----------  ------------  -----------  ------------  -------  ------- 
 Revenue                    2.3           4.4          5.5          10.9     23.1     21.8 
 Cost of sales            (2.6)         (2.1)        (4.0)         (5.6)   (14.3)   (14.4) 
------------------  -----------  ------------  -----------  ------------  -------  ------- 
 Underlying Gross 
  Profit                  (0.3)           2.3          1.5           5.3      8.8      7.5 
------------------  -----------  ------------  -----------  ------------  -------  ------- 
 Underlying Gross 
  Profit %                (13)%           51%          28%           49%      38%      34%

Overall the revenue and margin delivered a trading(1) operating loss for the period of GBP5.6 million (1H2016: profit of GBP2.0 million) after year-on-year increased net operating charges relating to Peter Brotherhood business (GBP2.1 million) together with increased sales and marketing (GBP0.8 million). The trading loss before tax was GBP6.6 million (1H2016: profit of GBP1.8 million). There were non-trading operating charges in the period of GBP0.1 million (1H2016: GBP0.3 million), which relate to costs incurred on the acquisition of Peter Brotherhood.

The Group is exposed to the US Dollar through its operating business in the USA and from UK exports to China. On a constant exchange rate(2) basis revenue and trading profit before tax in 1H2016 would have been higher by GBP1.4 million and GBP0.5 million respectively.

1 trading represents the underlying performance of HTG

2 constant exchange rate is calculated by rebasing prior year figures at current year average rate of GBP1:USD1.3758

Finance Charges

Finance costs in the period, which mainly represent interest payable, were GBP0.4 million (1H2016: GBP0.3 million). In addition, there was a loss on the fair value of derivatives of GBP0.6 million (1H2016: gain of GBP0.1 million) that arose on the revaluation of foreign exchange hedge contracts to 30 September 2016 exchange. These hedges were established prior to the Brexit vote and the subsequent fall in the value of Sterling.

Tax

The tax credit for the period was GBP1.5 million (1H2016: charge of GBP0.1 million). The trading tax credit relates to an effective tax credit rate of 23%, which reflects that more than 80% of the losses in 1H2017 occurred in the UK. In addition, there was a non-trading tax charge of GBP0.1 million (1H2016: GBP10,000) that mainly represents a reduction in the deferred tax asset following the change in UK corporation tax rate from 20% to 18%.

Loss After Tax

The trading loss after tax for the period was GBP5.1 million (1H2016: profit GBP1.8 million), which delivered a trading basic loss per share (LPS) of 9.25 pence (1H2016: earnings per share (EPS) of 3.91 pence) and a trading diluted LPS of 9.13 pence (1H2016: diluted EPS of 3.87 pence). Basic LPS was 9.65 pence (1H2016: EPS of 3.33 pence) and diluted LPS was 9.53 pence (1H2016: diluted EPS of 3.30 pence).

Dividend

The Group paid its final dividend of 0.83 pence per share in respect of the year to 31 March 2016 in August 2016. An interim dividend in respect of the current year of 0.58 pence per share will be paid on 23 February 2017 to all shareholders on the register on 13 January 2017, the ex-dividend date being 12 January 2017.

Capital Expenditure

Purchase of fixed assets was GBP4.1 million in the period (1H2016: GBP5.0 million). GBP2.4 million of these purchases relate to investment in the Centre of Excellence including expenditure on the building works, fitting-out the building and new plant and machinery. GBP1.4 million relates to expenditure in HT Colchester on new plant and equipment together with a revised layout of the shop floor to increase capacity.

Working Capital

Management of working capital continues to be a key focus of the Group. This focus enabled the Group to generate GBP0.4 million from working capital (1H2016: GBP0.1 million). Following a temporary increase in revolving credit facilities, undrawn borrowing facilities at 30 September 2016 were GBP4.2 million (at 31 March 2016: GBP5.1 million).

Borrowings, Banking & Finance

Net debt at 30 September 2016 was GBP18.3 million (at 31 March 2016: GBP8.6 million) driven by the trading operating loss in the period of GBP5.6 million (1H2016: profit GBP2.0 million) and continued investment in fixed assets of GBP4.1 million (1H2016: GBP5.0 million) of which GBP2.0 million has been funded by finance leases. Net debt comprised term borrowings of GBP5.8 million (at 31 March 2016: GBP5.9 million), finance leases of GBP3.3 million (at 31 March 2016: GBP1.6 million) and drawings under revolving credit facilities of GBP10.0 million (at 31 March 2016: GBP6.2 million) offset by cash of GBP0.8 million (at 31 March 2016: GBP5.1 million).

As announced on 14 November 2016, the Company reached agreement with its principal bank, Royal Bank of Scotland, to amend and restate the Company's multicurrency committed borrowing facilities agreement (the "Agreement"). The main changes to the Agreement are a short-term increase in the revolving credit facility ("RCF") of GBP3.0 million, which matures on 31 January 2017, to GBP11.9 million and a relaxation of quarterly financial covenants, which will now be measured from 31 March 2017 onwards, to give the Group the financial flexibility to deliver the expected improvement in trading of the business in 2H2017. The new repayment schedule under both facilities is detailed below, and the maturity dates of the committed facilities remain unchanged as follows:

   --        GBP2.9 million term facility(1) matures on 30 September 2020; and 
   --        GBP11.9 million revolving credit facility(2) on 30 November 2018.

1 repayments of GBP216,000 on 30 June and 31 December of each year with a final repayment of GBP1,176,000 on 30 September 2020

2 limit reduces by GBP600,000 on 31 December 2016, GBP3,000,000 on 31 January 2017, GBP300,000 on 31 March 2017 and a final maturity on 30 November 2018

The Group established a secured loan note programme of GBP3.0 million in 2015 ("Loan Note Programme") to provide a diversified source of funding. The Company is seeking to increase the Loan Note Programme, initially by GBP3.0 million, in order to maintain a more appropriate maturity profile on the Company's borrowings and to repay GBP3.0 million of short-term borrowings under the RCF by 31 January 2017. The RCF was used to purchase fixed assets for the Centre of Excellence and, accordingly, the new issue under the Loan Note Programme will enable the Group to match long-term assets with medium to long-term debt. The Group intends to increase the overall Loan Note Programme from GBP3.0 million to GBP10.0 million, leaving GBP4.0 million already authorised, but not issued, available for further growth opportunities.

Pensions

Within the UK, the Group operates a defined benefit plan, with benefits linked to final salary, and a defined contribution plan. With effect from 1 June 2003 the defined benefit plan was closed to future service accruals and new UK employees offered membership of the defined contribution plan. The majority of UK employees are members of one of these arrangements.

A full actuarial valuation of the defined benefit plan is produced every three years (the last one being as at 1 January 2014), however, a valuation is prepared at each period end for the purposes of the report and accounts by independent qualified actuaries. The net surplus at 31 March 2016 was GBP0.2 million and this has been maintained at 30 September 2016.

Further comment on pensions is given in note 10 to these financial statements.

Key Performance Indicators

As discussed in the Company's report and accounts for the year to 31 March 2016, we use various internal and external measures to assess our performance against our strategy to strengthen the business, increase profitability and generate a positive shareholder return. The key performance indicators (KPIs) set out below help to determine how successful we have been in achieving our strategic objectives:

 
 KPI               Target                  Progress in period 
----------------  ----------------------  ---------------------------------- 
 Strategic Objective - to ensure the strength of our business 
---------------------------------------------------------------------------- 
 Order Intake      Achieve orders          Ahead of target at 1.2x. 
                    of >1.1x historical     On a like-for-like basis 
                    revenue                 the KPI was below target 
                                            at 0.9x 
----------------  ----------------------  ---------------------------------- 
 Cash conversion   Convert >85% of         Ahead of target at 87% reflecting 
                    EBITDA to cash          the improvement in working 
                                            capital, however, operating 
                                            loss led to increased net 
                                            debt 
----------------  ----------------------  ---------------------------------- 
 Net debt to       Achieve a ratio         Adverse to target at (554.9):1 
  EBITDA            of 2:1 or lower         as a result of the operating 
                                            loss in 1H2017 
----------------  ----------------------  ---------------------------------- 
 Strategic Objective - to increase profitability 
---------------------------------------------------------------------------- 
 Gross Profit      Generate a gross        Adverse to target at 14% 
  %                 profit margin of        reflecting the high level 
                    >35%                    of unrecovered factory overheads 
                                            as a result of low revenue. 
                                            Excluding these overheads 
                                            the underlying gross profit 
                                            % was 38% 
----------------  ----------------------  ---------------------------------- 
 Trading EBIT      Generate EBIT which     Adverse to target at loss 
  %                 is 10-15% of revenue    of (24)% driven by lower 
                    for the period          gross profit % and increased 
                                            operating charges from addition 
                                            of Peter Brotherhood and 
                                            increased sales and marketing 
                                            costs 
----------------  ----------------------  ---------------------------------- 
 Strategic Objective - to generate positive shareholder 
  return 
---------------------------------------------------------------------------- 
 Trading EPS       Generate year on        Adverse to target as a result 
  Growth            year growth of          of the diluted loss per share 
                    >10%                    of (9.13) pence 
----------------  ----------------------  ----------------------------------

Statement of Financial Position

Total equity decreased by GBP5.2 million from 31 March 2016 to GBP20.6 million as a result of the net loss in 1H2017 (GBP5.3 million) and the final dividend in respect of the prior year (GBP0.4 million) offset by the gain on the translation of overseas subsidiaries (GBP0.5 million).

N Flanagan

Chief Financial Officer

15 November 2016

H ayward Tyler Group plc