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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Morgan Advanced Materials Plc | LSE:MGAM | London | Ordinary Share | GB0006027295 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.00 | 0.31% | 323.00 | 322.00 | 323.00 | 324.00 | 319.00 | 322.00 | 488,952 | 16:35:16 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Carbon And Graphite Products | 1.12B | 47.3M | 0.1663 | 19.45 | 920.36M |
TIDMMGAM
RNS Number : 3690M
Morgan Advanced Materials PLC
28 July 2017
HALF-YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2017
Hot Features
Premium
Organic
Constant
As Reported Currency(1)
GBP million 1H 1H Change Change
unless otherwise stated 2017 2016 % %
Headline results
Revenue 518.9 475.4 9.2% 0.2%
Group headline operating profit(1) 61.6 55.1 11.8% 1.5%
Group headline operating profit
margin(1) 11.9% 11.6%
Headline EPS (1) 11.6p 10.5p 10.5%
Interim dividend per share 4.0p 4.0p
Cash flow from operations(1) 51.6 47.5 8.6%
Free cash flow before acquisitions,
disposals and dividends(1) 16.8 11.1
Statutory results
Operating profit 58.0 55.6
Profit before tax 92.3 46.2
Basic EPS 27.0p 10.2p
===================================== ====== ====== ============ =============
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.
Group highlights
-- Improving momentum in the business with organic constant currency growth* in the second quarter
-- Continued progress on strategy implementation, with two divestments completed. These reduce complexity and strengthen the balance sheet, with net debt / EBITDA* at 1.1 times (FY 2016: 1.6 times)
-- On track to make the planned GBP6 million incremental increase in research and development and sales capability
-- Group headline operating profit margin* improved to 11.9% (1H 2016: 11.6%) -- Headline EPS* increased to 11.6 pence (1H 2016: 10.5 pence)
Commenting on the results for Morgan Advanced Materials, Chief Executive Officer, Pete Raby said:
"We have delivered in line with our expectations in the first half of the year with improved momentum driving organic growth in the second quarter.
We are making good progress with the implementation of our strategy. Operational improvements are ahead of plan and providing the funds for reinvestment in research and development, sales and infrastructure."
Strategy implementation on track
We have made good progress with the implementation of our strategy, against the execution priorities we defined in February 2016:
1. Move to a global structure. We successfully completed the move to a global structure in March 2016 with the establishment of six global business units: Thermal Ceramics, Molten Metal Systems, Electrical Carbon, Seals & Bearings, Technical Ceramics, and Composites and Defence Systems.
2. Extend our technology leadership. We have increased technology investment at the half-year to 3.2% of sales. We will increase investment for the full year against our three to four-year goal of increasing R&D investment to around 4.0% of sales.
3. Improve operational execution. We are driving improvements in global procurement, through lean and continuous improvement activity in our production plants, through targeted improvements in yield and scrap, and through further investments in automation. Our operational improvement activity is ahead of plan at the half-year, we have delivered GBP3.5 million of the GBP6.0 million target for the full year.
4. Drive sales effectiveness and market focus. In 2016 we completed the global mapping of our sales resources to understand the roles and capabilities of our people. We are now realigning the sales teams to ensure we have the right people in the right roles. We are using pilot projects to establish the optimal organisational structures, sales processes and incentives for the business.
5. Increase investment in people management and development. During 2016 we strengthened the senior leadership population in the group and we have further strengthened that group in 2017. We have made good progress in understanding the capabilities of our scientists and started to define the roles and career paths for our materials science personnel. In the first half of 2017 we have launched the leadership behaviours we need across the group to deliver the strategy, and started development activity with our senior leaders.
6. Simplify the business. We have completed two divestments, exiting businesses where we are sub-scale and where there is limited synergy with the remainder of the group. We are simplifying the group through organic management of the tail and we continue to review the portfolio for fit with our corporate strategy.
Enquiries
Pete Raby Morgan Advanced Materials 01753 837 000
Peter Turner Morgan Advanced Materials
Mike Smith Brunswick 0207 404 5959
Results presentation today
There will be an analyst and investor presentation at 10.00 (UK time) today at The Lincoln Centre, 18 Lincoln's Inn Fields, London, WC2A 3ED.
A live video webcast and slide presentation of this event will be available on www.morganadvancedmaterials.com. We recommend you register by 09:45 (UK time).
Basis of preparation
Non-GAAP measures
Throughout this report adjusted measures are used to describe the Group's
financial performance. These are not recognised under IFRS or other generally
accepted accounting principles (GAAP).
The Executive Committee and the Board manage and assess the performance
of the business on these measures and believe that they are more representative
of ongoing trading, facilitate meaningful year-on-year comparisons, and
hence provide additional useful information to shareholders.
Throughout this report these non-GAAP measures are clearly identified by
an asterisk (*) where they appear in text, and by a footnote when they
appear in tables and charts. Definitions of these non-GAAP measures can
be found in the glossary of terms on page 36, reconciliations of the statutory
results to the adjusted measures can be found on page 10 to 14.
Operating review
Revenue EBITA(1) Margin %
================================ =============== =============== ==============
1H 1H 1H 1H 1H 1H
2017 2016 2017 2016 2017 2016
================================
GBPm GBPm GBPm GBPm % %
================================ ======= ====== ======= ====== ====== ======
Thermal Ceramics 213.1 193.9 28.6 25.6 13.4 13.2
Molten Metal Systems 23.8 20.6 3.6 2.9 15.1 14.1
================================ ======= ====== ======= ====== ====== ======
Thermal Products Total 236.9 214.5 32.2 28.5 13.6 13.3
================================ ======= ====== ======= ====== ====== ======
Electrical Carbon 81.3 75.6 8.7 10.3 10.7 13.6
Seals and Bearings 55.9 47.6 9.1 6.6 16.3 13.9
Technical Ceramics 133.2 121.8 14.9 12.8 11.2 10.5
================================ ======= ====== ======= ====== ====== ======
Carbon and Technical Ceramics
Total 270.4 245.0 32.7 29.7 12.1 12.1
================================ ======= ====== ======= ====== ====== ======
Composites and Defence Systems 11.6 15.9 (0.4) 1.1 (3.4) 6.9
================================ ======= ====== ======= ====== ====== ======
Divisional Total 518.9 475.4
Divisional EBITA(1) 64.5 59.3
Corporate costs (2.9) (2.7)
================================ ======= ====== ======= ====== ====== ======
Group EBITA(1) 61.6 56.6 11.9 11.9
Restructuring costs and
other items - (1.5)
================================ ======= ====== ======= ====== ====== ======
Group headline operating profit(1) 61.6 55.1 11.9 11.6
Amortisation of intangible assets (3.6) (3.3)
================================================= ======= ====== ====== ======
Operating profit before specific adjusting
items 58.0 51.8
Specific adjusting items included in operating
profit(2) - 3.8
================================================= ======= ====== ====== ======
Operating profit 58.0 55.6 11.2 11.7
Net financing costs (11.8) (9.8)
Profit on disposal of business 46.1 -
Share of profit of associate (net of income
tax) - 0.4
================================================= ======= ====== ====== ======
Profit before taxation 92.3 46.2
========================================= ====== ======= ====== ====== ======
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.
2. Details of Specific adjusting items can be found in Note 4 to the financial statements
Thermal Products
Revenue for the first half of the year was GBP236.9 million (1H 2016: GBP214.5 million), an increase of 10.4% compared with 1H 2016. Organic constant currency revenue* decreased by 1.4% compared to 1H 2016.
Thermal Products EBITA* for the half-year was GBP32.2 million (1H 2016: GBP28.5 million), with an EBITA margin* of 13.6% (1H 2016: 13.3%).
Revenue for Thermal Ceramics for the half-year was GBP213.1 million (1H 2016: GBP193.9 million), an increase of 9.9% compared with 2016. Organic constant currency revenue* decreased by 1.8% compared with 1H 2016. Growth in China and India was offset by a decline in North America and Europe.
Thermal Ceramics EBITA* for the half-year was GBP28.6 million (1H 2016: GBP25.6 million) with an EBITA margin* improving to 13.4% (1H 2016: 13.2%), as volume decreases were offset by operational efficiency improvements.
Revenue for Molten Metals Systems for the half-year was GBP23.8 million (1H 2016: GBP20.6 million), an increase of 15.5% compared with 1H 2016. Organic constant currency revenue* increased by 2.4%. Revenue grew in most markets, and was strongest in China and Europe.
Molten Metal Systems EBITA* for the half-year was GBP3.6 million (1H 2016: GBP2.9 million) with an EBITA margin* of 15.1% (1H 2016: 14.1%), reflecting the benefits from both operational improvements and increased volumes.
Carbon and Technical Ceramics
Revenue for Carbon and Technical Ceramics for the half-year was GBP270.4 million (1H 2016: GBP245.0 million), an increase of 10.4% compared with 2016. Organic constant currency revenue* increased by 3.4% compared with 1H 2016.
Carbon and Technical Ceramics EBITA* for the half-year was GBP32.7 million (1H 2016: GBP29.7 million), with an EBITA margin* of 12.1% (1H 2016: 12.1%).
Revenue for Electrical Carbon for the half-year was GBP81.3 million (1H 2016: GBP75.6 million), an increase of 7.5% compared with 1H 2016. Organic constant currency revenue* increased by 1.1%, with modest growth across key regions.
Electrical Carbon EBITA* for the half-year was GBP8.7 million (1H 2016: GBP10.3 million) with an EBITA margin* of 10.7% (1H 2016: 13.6%), impacted by the divestment of the Rotary Transfer Systems business and adverse product mix in the first half compared to the prior year.
Revenue for Seals and Bearings for the half-year was GBP55.9 million (1H 2016: GBP47.6 million) an increase of 17.4% compared with 1H 2016. Organic constant currency revenue* increased by 7.6%. Strong sales into the aerospace, oil and gas and water markets, with increasing demand in China and Europe, have offset the impact of weaker automotive markets in Korea.
Seals and Bearings EBITA* for the half-year was GBP9.1 million (1H 2016: GBP6.6 million) with an EBITA margin* of 16.3% (1H 2016: 13.9%), driven by increased revenue and continued operational improvements.
Revenue for Technical Ceramics was GBP133.2 million (1H 2016: GBP121.8 million) an increase of 9.4% compared with 1H 2016. Organic constant currency revenue* increased by 3.3%, reflecting growth in the aerospace and semiconductor markets.
Technical Ceramics EBITA* for the half-year was GBP14.9 million (1H 2016: GBP12.8 million) with an EBITA margin* of 11.2% (1H 2016: 10.5%), as increases in volumes and improvements in operational execution more than offset the impact of the divestment of the UK Electro-Ceramics business.
Composites and Defence Systems
Revenue for Composites and Defence Systems for the half-year was GBP11.6 million (1H 2016: GBP15.9 million), representing a decrease of 27.0% as defence markets remain subdued. Organic constant currency revenue* declined 27.7%.
Composites and Defence Systems EBITA* for the half-year was a loss of GBP(0.4) million (1H 2016: GBP1.1 million) with an EBITA margin* of (3.4)% (1H 2016: 6.9%), reflecting the impact of lower activity levels in the defence markets.
Group Financial review
Group revenue was GBP518.9 million (1H 2016: GBP475.4 million), an increase of 9.2% compared with 2016. The increase was as a result of the decline in value of sterling against other currencies, with much of the Group's businesses being denominated in non-sterling currencies. On an organic constant currency basis* the Group grew at 0.2% in the first half.
Group headline operating profit* was GBP61.6 million (1H 2016: GBP55.1 million). Headline operating profit margin* was 11.9%, compared to 11.6% for 2016.
The Group amortisation charge for the half-year 2017 was GBP3.6 million (1H 2016: GBP3.3 million).
Operating profit was GBP58.0 million (1H 2016: GBP55.6 million). Operating profit margin was 11.2%, compared to 11.7% for 2016.
The net finance charge was GBP11.8 million (1H 2016: GBP9.8 million), comprising the net bank interest and similar charges of GBP8.4 million (1H 2016: GBP6.4 million), income from financial instruments of GBP0.1 million (1H 2016: GBP0.2 million) and the finance charge under IAS 19 (revised) GBP3.5 million (1H 2016: GBP3.6 million), being the interest charge on pension scheme net liabilities.
The Group taxation charge, excluding specific adjusting items, was GBP13.8 million (1H 2016: GBP12.7 million). The effective tax rate, excluding specific adjusting items for the half-year was 29.9% (1H 2016: 30.0%).
Headline EPS* was 11.6 pence (1H 2016: 10.5 pence), and basic earnings per share was 27.0 pence (1H 2016: 10.2 pence).
Specific adjusting items
1H 1H
2017 2016
GBPm GBPm
===================================== ===== =====
Specific adjusting items
Net pension settlement credit - 3.8
Net profit on disposal of business 46.1 -
===================================== ===== =====
Total specific adjusting items 46.1 3.8
Income tax (charge) / credit from
specific adjusting items 1.3 (1.5)
===================================== ===== =====
Total specific adjusting items after
income tax (charge) / credit 47.4 2.3
===================================== ===== =====
Specific adjusting items were GBP46.1 million (1H 2016: GBP3.8 million), and consisted of the following disposals:
-- On 31 March 2017, the Group completed the sale of its UK Electro-Ceramics business, comprising the two sites at Ruabon and Southampton. The Group also announced the closure of its US Electro-Ceramics business, which formed the remainder of the Group's Electro-Ceramics business. This latter site will be closed when delivery of the last time orders from customers have been completed, currently anticipated to be in 2019.
The Group reflected a profit on disposal of GBP27.2 million associated with this transaction.
-- On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.
The Group reflected a profit on disposal of GBP18.9 million associated with this transaction.
Cash Flow
1H 1H
2017 2016
GBPm GBPm
========= ======== ========
Cash generated from operations 51.0 43.2
Add back cash flows from restructuring costs
and other items 0.6 4.3
================================================================ ======== ========
Cash flow from operations(1) 51.6 47.5
Net capital expenditure (13.9) (17.7)
Net interest paid (8.3) (6.2)
Tax paid (12.0) (8.3)
Restructuring costs and other items (0.6) (4.2)
===================================================== ==== === ======== ========
Free cash flow before acquisitions, disposals
and dividends(1) 16.8 11.1
Dividends paid to external plc shareholders (20.0) (20.0)
Net cash flows from other investing and financing
activities 75.4 (1.4)
Exchange movement 1.7 (15.3)
===================================================== ======== ======== ========
Movement in net debt(1) in period 73.9 (25.6)
===================================================== ======== ======== ========
Opening net debt(1) (242.5) (216.0)
===================================================== ======== ======== ========
Closing net debt(1) (168.6) (241.6)
===================================================== ======== ======== ========
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.
Cash flow from operations* was GBP51.6 million (1H 2016: GBP47.5 million).
Free cash flow before acquisitions, disposals and dividends* was GBP16.8 million (1H 2016: GBP11.1 million).
Net debt* at 30 June 2017 was GBP168.6 million (FY 2016: GBP242.5 million) representing a net debt to EBITDA ratio* of 1.1 times (FY 2016: 1.6 times).
Defined benefit pension plans
The Group pension deficit has decreased by GBP12.4 million since the year end to GBP258.7 million on an IAS 19 basis (FY 2016: GBP271.1 million), due to the increased contributions paid by the Company, investment gains, primarily in the UK and US offsetting actuarial losses arising from a fall in bond yields:
-- The UK schemes deficit decreased by GBP5.7 million to GBP174.8 million (FY 2016: GBP180.5 million). Increased company contributions and investment gains offset actuarial losses from movements in the discount rate.
The discount rate reduced to 2.57% (FY 2016: 2.62%).
-- The US schemes deficit decreased by GBP4.7 million to GBP44.3 million (FY 2016: GBP49.0 million). Increased company contributions, exchange rate benefits and investment gains offset actuarial losses from movements in the discount rate. The discount rate reduced to 3.85% (FY 2016: 4.16%).
-- The European schemes deficit decreased by GBP2.3 million to GBP35.2 million (FY 2016: GBP37.5 million). Impacts from the Rotary Transfer systems disposal and benefits from movements in the discount rate offset negative exchange rate impacts. The discount rate increased to 1.90% (FY 2016: 1.60%).
-- The Rest of World schemes deficit increased by GBP0.3 million to GBP4.4 million (FY 2016: GBP4.1 million).
The discount rate decreased to 2.80% (FY 2016: 2.9 %).
The triennial valuations of the two UK Defined Benefit (DB) Pensions schemes completed in the half year ended 30 June 2017.
The valuations identified a combined actuarial deficit across both schemes of around GBP132 million, an increase of GBP50 million on the position reported by the previous actuarial valuations in 2013. The deterioration in the funded position of the schemes was due principally to adverse market conditions, particularly the low prevailing interest rate environment which has significantly increased the value of the Schemes' liabilities.
Agreement has been reached with the Trustees to increase the Company's contributions to address these funding shortfalls. The funding plan agreed with the Trustees will see the Company's annual deficit-related contributions to the schemes increase by GBP5 million to GBP12 million per year (with effect from April 2017 and increasing thereafter by 2.75% per year) for the next 8-10 years (depending on the Scheme).
These arrangements will be reviewed again following the next triennial valuations as at 31 March 2019.
Total contributions to the Group's Global DB pension schemes, principally in the UK and the US, are expected to total GBP25 million over the full year.
Foreign exchange
The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows:
1H 1H
2017 2016
=========== ================== ==================
GBP to: Closing Average Closing Average
rate rate rate rate
US dollar 1.30 1.26 1.33 1.43
Euro 1.14 1.16 1.20 1.28
=========== ======== ======== ======== ========
For illustrative purposes, the table below provides details of the impact on first half 2017 revenue and Group EBITA* if the actual reported results, calculated using 2017 average exchange rates for the six months to 30 June 2017 were restated for GBP weakening by 10 cents against USD in isolation and 10 cents against the Euro in isolation:
Increase in first half 2017 revenue/Group Revenue Group EBITA(1)
EBITA((1) if: GBPm GBPm
==================================================== ========= ==================
GBP weakens by 10c against the US dollar
in isolation 18.4 2.6
GBP weakens by 10c against the Euro in
isolation 10.4 2.0
==================================================== ========= ==================
1. Definitions of these non-GAAP measures can be found in the
glossary of terms on page 36, reconciliations of the statutory
results to the adjusted measures can be found on pages 10 to 14.
Interim dividend
The Board has resolved to pay an interim dividend of 4.0 pence per Ordinary share. The dividend will be paid on 24 November 2017 to Ordinary shareholders on the register of members at the close of business on 3 November 2017.
Principal risks and uncertainties
The Group has an established risk management methodology which seeks to identify, prioritise and mitigate risks, underpinned by a 'three lines of defence' model comprising of an internal control framework, monitoring and independent assurance processes. The Board considers that risk management and internal control are fundamental to achieving the Group aim of creating long-term sustainable shareholder value.
The current risks, representing those risks that the Board feels could have the most significant effect on achieving the Group's strategy of building a sustainable business for the long term and delivering strong returns to the Group's shareholders, are set out in the 2016 Annual Report, which is available on the Group's website at www.morganadvancedmaterials.com.
The Group has reviewed these risks and concluded that they adequately represent the current principal risks and uncertainties of the Group and will continue to remain relevant for the second half of the financial year.
The following are the Group's principal risks and uncertainties: Technical leadership; Macro-economic and political environment; Environment, health and safety; Product quality, safety and liability; IT risks and cyber risks; Supply chain and business continuity; Contract risk management; Treasury and Tax risks; Pension funding; Changes to or non-compliance with laws and regulations.
The Board reviews the status of all principal risks with a notable potential impact at Group level throughout the year. Additionally, the Audit Committee carried out focused risk reviews of each Division. The reviews include an analysis of principal risks, together with the controls, monitoring and assurance processes established to mitigate those risks to acceptable levels.
Going Concern
As reported on page 34 of the 2016 Annual Report, the Group meets its day-to-day working capital requirements through local banking arrangements and the committed GBP200 million unsecured five-year multi-currency revolving credit facility, which remains undrawn at the half-year.
The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is able to operate within the level of its committed facilities. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of 12 months from the date of this Statement. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated financial statements for the six months ended 30 June 2017.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
-- The condensed consolidated set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;
-- The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7 of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8 of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Information on the current directors of Morgan Advanced Materials plc responsible for providing this Statement is maintained on the Company's website at www.morganadvancedmaterials.com.
By order of the Board
Pete Raby
Chief Executive Officer
Peter Turner
Chief Financial Officer
Definitions and reconciliations of non-GAAP to GAAP measures
Reference is made to the following non-GAAP measures throughout this document. These measures are shown because the Directors consider they provide useful information to shareholders, including additional insight into ongoing trading and year-on-year comparisons. These non-GAAP measures should be viewed as complementary to, not replacements for, the comparable GAAP measures.
Headline profit and earnings measures
Group headline operating profit is stated before specific adjusting items and amortisation of intangible assets. Specific adjusting items are excluded on the basis that they distort trading performance. Amortisation is excluded as the charge arises primarily on externally acquired intangible assets since the adoption of IFRS and does not therefore reflect all intangible assets consistently.
Earnings before interest, tax and amortisation (EBITA) is stated before specific adjusting items, amortisation of intangible assets, restructuring costs and other items. Segment EBITA is stated before unallocated corporate costs.
Thermal Molten Thermal Electrical Seals Technical Carbon Composites Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and and total costs(1)
Systems Division Bearings Technical Defence
Ceramics Systems
GBPm GBPm GBPm GBPm GBPm Division GBPm GBPm GBPm
1H 2017 GBPm GBPm GBPm
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Operating
profit/(loss) 27.7 3.5 31.2 8.5 9.0 12.6 30.1 (0.4) 60.9 (2.9) 58.0
Add back - - - - - - - - - - -
specific
adjusting
items included
in operating
profit
Add back
amortisation
of intangible
assets 0.9 0.1 1.0 0.2 0.1 2.3 2.6 - 3.6 - 3.6
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Group headline
operating
profit 61.6
Add back - - - - - - - - - - -
restructuring
costs and
other items
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Group EBITA 61.6
Corporate
costs(1) 2.9 2.9
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Divisional
EBITA/global
business
unit EBITA 28.6 3.6 32.2 8.7 9.1 14.9 32.7 (0.4) 64.5
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
1.Corporate costs consist of the cost of the central head office.
Thermal Molten Thermal Electrical Seals Technical Carbon Composites Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and and total costs(1)
Systems Division Bearings Technical Defence
Ceramics Systems
GBPm GBPm GBPm GBPm GBPm Division GBPm GBPm GBPm
1H 2016 GBPm GBPm GBPm
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Operating
profit/(loss) 24.9 2.8 27.7 9.5 6.5 11.4 27.4 0.4 55.5 0.1 55.6
Add back
specific
adjusting
items
included
in operating
profit - - - - - - - - - (3.8) (3.8)
Add back
amortisation
of intangible
assets 0.7 0.1 0.8 0.2 0.1 1.4 1.7 0.8 3.3 - 3.3
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Group headline
operating
profit 55.1
Add back
restructuring
costs and
other items - - - 0.6 - - 0.6 (0.1) 0.5 1.0 1.5
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Group EBITA 56.6
Corporate
costs(1) - - - - - - - - - 2.7 2.7
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
Divisional
EBITA/global
business
unit EBITA 25.6 2.9 28.5 10.3 6.6 12.8 29.7 1.1 59.3
============== ======== ======= ======== ========== ======== ========= ========= ========== ======= ========= =====
1.Corporate costs consist of the cost of the central head office.
Group Organic Growth
Group organic growth is the growth of the business excluding the impacts of acquisitions, divestments and foreign currency impacts. This measure is used as it allows revenue and EBITA to be compared on a like for like basis.
Year-on-year movements in Segment Revenue
Thermal Molten Thermal Electrical Seals Technical Carbon Composites Segment
Ceramics Metal Products Carbon and Ceramics and and Total
Systems Division Bearings Technical Defence
Ceramics Systems
Division
1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016
versus versus versus versus versus versus versus versus versus
1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========== ========= ========== =========== ========== ========== =========== =========== ========
2016 Revenue 193.9 20.6 214.5 75.6 47.6 121.8 245.0 15.9 475.4
========== ========= ========== =========== ========== ========== =========== =========== ========
Impact of
foreign
currency
movements 22.6 2.7 25.3 8.9 4.7 12.8 26.4 0.1 51.8
Impacts of
acquisitions
and
disposals - - - (4.0) - (5.4) (9.4) - (9.4)
Impact of
underlying
business (3.4) 0.5 (2.9) 0.8 3.6 4.0 8.4 (4.4) 1.1
Underlying % (1.8)% 2.4% (1.4)% 1.1% 7.6% 3.3% 3.4% (27.7%) 0.2%
2017 Revenue 213.1 23.8 236.9 81.3 55.9 133.2 270.4 11.6 518.9
========== ========= ========== =========== ========== ========== =========== =========== ========
Year-on-year movements in Segment and Group EBITA
Thermal Molten Thermal Electrical Seals Technical Carbon Composites Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and and Total Costs
Systems Division Bearings Technical Defence
Ceramics Systems
Division
1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H 2016 1H
versus versus versus versus versus versus versus versus versus versus 2016
1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 1H 2017 versus
1H
2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
2016 Segment
& Group
EBITA 25.6 2.9 28.5 10.3 6.6 12.8 29.7 1.1 59.3 (4.2) 55.1
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Impact of
foreign
currency
movements 3.5 0.4 3.9 1.6 0.8 1.6 4.0 - 7.9 - 7.9
Impacts of
acquisitions
and
disposals - - - (1.0) - (1.2) (2.2) - (2.2) - (2.2)
Impact of
underlying
business (0.5) 0.3 (0.2) (2.2) 1.7 1.7 1.2 (1.5) (0.5) 1.3 0.8
Underlying
% (2.0)% 10.3% (0.7)% (21.4)% 25.8% 13.3% 4.0% - (0.8)% - 1.5%
2017 Segment
& Group
EBITA 28.6 3.6 32.2 8.7 9.1 14.9 32.7 (0.4) 64.5 (2.9) 61.6
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Group EBITDA
Group EBITDA is defined as operating profit before specific adjusting items, restructuring costs, other items, depreciation and amortisation of intangible assets.
The Group uses this measure as it is a key metric in covenants over debt facilities. A reconciliation of operating profit to Group EBITDA is as follows:
1H 1H
2017 2016
GBPm GBPm
====================================== ====== ======
Operating Profit 58.0 55.6
Add back: specific adjusting items
included in operating profit - 3.8
Add back: restructuring costs and
other items - 1.5
Add back: depreciation 15.7 14.1
Add back: amortisation of intangible
assets 3.6 3.3
====================================== ====== ======
Group EBITDA 77.3 78.3
====================================== ====== ======
Cash flow from operations and free cash flow before acquisitions, disposals and dividends
Cash flow from operations excludes the cash flows associated with restructuring activities and is shown because it illustrates the timing of the outflows relating to restructuring charges that may be incurred over more than one reporting period.
Free cash flow before acquisitions and disposals is defined as cash generated from operations less net capital expenditure, net interest paid and tax paid.
The Group discloses this measure of free cash flow as this provides readers of the financial statements with a measure of the cash flows from the business before corporate level cash flows (acquisitions, disposals and dividends).
A reconciliation of cash generated from operations to cash flow from operations and free cash flow before acquisitions, disposals and dividends is as follows:
1H 1H
2017 2016
GBPm GBPm
========================================= ======= =======
Cash generated from operations 51.0 43.2
Add back: cash flows from restructuring
costs and other items 0.6 4.3
========================================= ======= =======
Cash flow from operations 51.6 47.5
Net capital expenditure (13.9) (17.7)
Net interest paid (8.3) (6.2)
Tax paid (12.0) (8.3)
Restructuring costs and other items (0.6) (4.2)
========================================= ======= =======
Free cash flow before acquisitions,
disposals and dividends 16.8 11.1
========================================= ======= =======
Net debt
Net debt is defined as interest-bearing loans and borrowings and bank overdrafts less cash and cash equivalents. The Group discloses this metric as it is a key metric in covenants over debt facilities.
1H 1H
2017 2016
GBPm GBPm
==================================== ======== ========
Cash and cash equivalents 164.7 57.2
Non-current interest-bearing loans
and borrowings (197.0) (274.9)
Current interest-bearing loans and
borrowings and bank overdrafts (136.3) (23.9)
==================================== ======== ========
Net debt (168.6) (241.6)
==================================== ======== ========
Return on invested capital
Return on invested capital (ROIC) is defined as the 12-month Group headline operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the 12-month average adjusted net assets (third-party working capital, property, plant and equipment, land and buildings, intangible assets and other balance sheet items).
1H 1H
2017 2016
GBPm GBPm
======================================= ====== ======
Operating Profit 109.6 81.0
Add back: specific adjusting items
included in operating profit 5.6 12.1
Add back: amortisation of intangible
assets 8.2 6.9
======================================= ====== ======
Group headline operating profit (12
month rolling) 123.4 100.0
======================================= ====== ======
12-month average adjusted net assets:
Third-party working capital 174.1 165.0
Property, plant and equipment 181.8 160.2
Land and buildings 112.5 97.8
Intangible assets 236.9 233.1
Other assets (net) 15.1 13.5
======================================= ====== ======
12-month average adjusted net assets 720.4 669.6
======================================= ====== ======
ROIC 17.2% 14.9%
======================================= ====== ======
Headline earnings per share
Headline earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax expense and non-controlling interests, divided by the weighted average number of ordinary shares during the period. This measure of earnings is shown because the Directors consider it provides a better indication of headline performance.
Whilst amortisation of intangible assets is a recurring charge it is excluded from these measures on the basis that it primarily arises on externally acquired intangible assets and therefore does not reflect consistently the benefit that all of Morgan's businesses realise from their intangible assets, which may not be recognised separately.
Further information on earnings per share can be found in note 7 to the financial statements.
Constant currency revenue and Group headline operating profit
Constant currency revenue and Group headline operating profit are derived by translating the prior year results at current year average exchange rates. These measures are used as they allow revenue to be compared excluding the impact of foreign exchange rates. Page 8 provides further information on the principal foreign currency exchange rates used in the translation of the Group's results to constant currency at average exchange rates.
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months to Six months to 30 Year ended 31
30 June 2017 June 2016 December 2016
================================== ================================== ==================================
Results Specific Total Results Specific Total Results Specific Total
before adjusting before adjusting before adjusting
specific items(1) specific items(1) specific items(1)
adjusting adjusting adjusting
items items items
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========== =========== ======== =========== =========== ======== =========== =========== ========
Revenue 3 518.9 - 518.9 475.4 - 475.4 989.2 - 989.2
Operating costs before
restructuring costs,
other one-off items
and amortisation
/ impairment of intangible
assets (457.3) - (457.3) (418.8) - (418.8) (871.3) - (871.3)
Profit from operations
before restructuring
costs, other one-off
items and amortisation
/ impairment of intangible
assets 61.6 - 61.6 56.6 - 56.6 117.9 - 117.9
Retructuring costs
and other one-off
items: 4
Restructuring costs - - - (1.5) - (1.5) (1.5) - (1.5)
Net pension settlement
credit - - - - 3.8 3.8 - 6.8 6.8
Gain on disposal
of properties - - - - - - 0.5 - 0.5
Profit from operations
before amortisation
/ impairment of intangible
assets 3 61.6 - 61.6 55.1 3.8 58.9 116.9 6.8 123.7
Amortisation of intangible
assets (3.6) - (3.6) (3.3) - (3.3) (7.9) - (7.9)
Impairment of intangible
assets 4 - - - - - - - (8.5) (8.5)
Operating profit 3 58.0 - 58.0 51.8 3.8 55.6 109.0 (1.7) 107.3
Finance income 0.9 - 0.9 0.7 - 0.7 2.3 - 2.3
Finance expense (12.7) - (12.7) (10.5) - (10.5) (22.3) - (22.3)
=========== =========== ======== =========== =========== ======== =========== =========== ========
Net financing costs 5 (11.8) - (11.8) (9.8) - (9.8) (20.0) - (20.0)
Net profit / (loss)
on disposal of businesses 4 - 46.1 46.1 - - - - - -
Share of profit of
associate (net of
income tax) - - - 0.4 - 0.4 0.6 - 0.6
Profit before taxation 46.2 46.1 92.3 42.4 3.8 46.2 89.6 (1.7) 87.9
Income tax expense 6 (13.8) 1.3 (12.5) (12.7) (1.5) (14.2) (26.6) (2.8) (29.4)
Profit for the period 32.4 47.4 79.8 29.7 2.3 32.0 63.0 (4.5) 58.5
=========== =========== ======== =========== =========== ======== =========== =========== ========
Profit for the period
attributable to:
Owners of the parent 29.5 47.4 76.9 26.7 2.3 29.0 56.8 (4.5) 52.3
Non-controlling
interests 2.9 2.9 3.0 - 3.0 6.2 - 6.2
Profit for the period 32.4 47.4 79.8 29.7 2.3 32.0 63.0 (4.5) 58.5
=========== =========== ======== =========== =========== ======== =========== =========== ========
Earning per share
from continuing operations 7
Basic 27.0p 10.2p 18.4p
Diluted 27.0p 10.2p 18.3p
Dividends(2)
Proposed interim
dividend - pence 4.0p 4.0p 4.0p
-
GBPm 11.4 11.4 11.4
Approved final dividend
- pence 7.0p
- GBPm 20.0
1. Details of 'Specific adjusting items' are given in note 4 to the financial statements.
2. The proposed interim and approved final dividends are based upon the number of shares outstanding at the balance sheet date.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Translation Hedging Retained Total Non- Total comprehensive
reserve reserve earnings parent contoliing income
comprehensive interests
income
GBPm GBPm GBPm GBPm GBPm GBPm
============ ========= ========== =============== ============ ====================
Six months ended 30
June 2016
Profit for the period - - 29.0 29.0 3.0 32.0
============ ========= ========== =============== ============ ====================
Items that will not
be reclassified
subsequently
to profit or loss:
Remeasurement loss on
defined benefit plans - - (65.0) (65.0) - (65.0)
Tax effect of components
of other comprehensive
income not reclassified - - 5.1 5.1 - 5.1
============ ========= ========== =============== ============ ====================
- - (59.9) (59.9) - (59.9)
============ ========= ========== =============== ============ ====================
Items that may not be
reclassified subsequently
to profit or loss:
Foreign exchange transation
differences 29.3 - - 29.3 4.7 34.0
Net loss on hedge of
net investment in foreign
subsidiaries (14.8) - - (14.8) - (14.8)
Cash flow hedges:
Change in fair value - (2.2) - (2.2) - (2.2)
============ ========= ========== =============== ============ ====================
14.5 (2.2) - 12.3 4.7 17.0
============ ========= ========== =============== ============ ====================
Total Comprehensive
income, net of tax 14.5 (2.2) (30.9) (18.6) 7.7 (10.9)
============ ========= ========== =============== ============ ====================
Year ended 31 December
2016
Profit for the period - - 52.3 52.3 6.2 58.5
============ ========= ========== =============== ============ ====================
Items that will not
be reclassified
subsequently
to profit or loss:
Remeasurement loss on
defined benefit plans - - (68.1) (68.1) - (68.1)
Tax effect of components
of other comprehensive
income not reclassified - - 0.6 0.6 - 0.6
============ ========= ========== =============== ============ ====================
- - (67.5) (67.5) - (67.5)
============ ========= ========== =============== ============ ====================
Items that may not be
reclassified subsequently
to profit or loss:
Foreign exchange transation
differences 37.4 - - 37.4 5.5 42.9
Net loss on hedge of
net investment in foreign
subsidiaries (17.7) - - (17.7) (17.7)
Cash flow hedges:
Change in fair value - (3.7) - (3.7) - (3.7)
Transferred to profit
or loss - 0.8 - 0.8 - 0.8
============ ========= ========== =============== ============ ====================
19.7 (2.9) - 16.8 5.5 22.3
============ ========= ========== =============== ============ ====================
Total Comprehensive
income, net of tax 19.7 (2.9) (15.2) 1.6 11.7 13.3
============ ========= ========== =============== ============ ====================
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Translation Hedging Retained Total Non- Total
reserve reserve earnings parent contoliing comprehensive
comprehensive interests income
income
GBPm GBPm GBPm GBPm GBPm GBPm
============ ========= ========== =============== ============ ===============
Six months ended 30
June 2017
Profit for the period - - 76.9 76.9 2.9 79.8
============ ========= ========== =============== ============ ===============
Items that will not
be reclassified subsequently
to profit or loss:
Remeasurement gain
on defined benefit
plans - - 5.3 5.3 - 5.3
Tax effect of components
of other comprehensive
income not reclassified - - (0.3) (0.3) - (0.3)
============ ========= ========== =============== ============ ===============
- - 5.0 5.0 - 5.0
============ ========= ========== =============== ============ ===============
Items that may not
be reclassified subsequently
to profit or loss:
Foreign exchange transation
differences (6.9) - - (6.9) - (6.9)
Cash flow hedges:
Change in fair value - 2.5 - 2.5 - 2.5
Transferred to profit
or loss - 0.1 - 0.1 - 0.1
============ ========= ========== =============== ============ ===============
(6.9) 2.6 - (4.3) - (4.3)
============ ========= ========== =============== ============ ===============
Total Comprehensive
income, net of tax (6.9) 2.6 81.9 77.6 2.9 80.5
============ ========= ========== =============== ============ ===============
CONDENSED CONSOLIDATED BALANCE SHEET
Six months Six months Year ended
to 30 June to 30 June 31 December
Note 2017 2016 2016
GBPm GBPm GBPm
============ ============ =============
Assets
Property, plant and equipment 288.3 283.0 303.7
Intangible assets 219.8 242.9 240.4
Investments 7.3 5.9 6.0
Other receivables 4.6 4.9 4.7
Deferred tax assets 4.7 14.1 6.1
============ ============ =============
Total non-current assets 524.7 550.8 560.9
============ ============ =============
Inventories 144.8 147.7 148.2
Derivative financial assets 9 1.0 1.2 2.1
Trade and other receivables 199.3 203.2 205.7
Cash and cash equivalents 8 164.7 57.2 122.4
============ ============ =============
Total current assets 509.8 409.3 478.4
============ ============ =============
Total assets 1034.5 960.1 1,039.3
============ ============ =============
Liabilities
Interest-bearing loans and
borrowings 197.0 274.9 204.0
Employee benefits 11 258.7 271.4 271.1
Provisions 6.7 1.7 2.3
Derivative financial liabilities 9 0.1 7.2 1.8
Non-trade payables 1.9 1.5 0.3
Deferred tax liabilities 6.2 5.1 8.3
============ ============ =============
Total non-current liabilities 470.6 561.8 487.8
============ ============ =============
Interest-bearing loans and
borrowings and bank overdrafts 136.3 23.9 160.9
Trade and other payables 174.0 179.7 192.5
Current tax payable 17.9 19.6 16.6
Provisions 8.4 7.7 5.8
Derivitative financial liabilities 9 3.9 11.0 11.0
============ ============ =============
Total current liabilities 340.5 241.9 386.8
============ ============ =============
Total liabilities 811.1 803.7 874.6
============ ============ =============
Total net assets 223.4 156.4 164.7
============ ============ =============
Equity
Share capital 71.8 71.8 71.8
Share premium 111.7 111.7 111.7
Reserves 42.5 48.3 46.8
Retained earnings (46.0) (118.1) (109.5)
============ ============ =============
Total equity attributable to
equity holders of parent Company 180.0 113.7 120.8
============ ============ =============
Non-controlling interests 43.4 42.7 43.9
============ ============ =============
Total equity 223.4 156.4 164.7
============ ============ =============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Translation Hedging Fair Capital Other Retained Total Non-controlling Total
Capital premium reserve reserve value redemption reserves earnings parent interests equity
reserve reserve (1) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========= ========= ============ ========= ========= ============ ========== ========== ======== ================ =======
Balance at 1
January
2016 71.8 111.7 (16.5) 0.4 (1.0) 35.7 11.4 (63.7) 149.8 36.6 186.4
Profit for the
period - - - - - - - 29.0 29.0 3.0 32.0
Other
comprehensive
income - - 14.5 (2.2) - - - (59.9) (47.6) 4.7 (42.9)
Transactions
with
owners:
Dividends - - - - - - - (19.8) (19.8) (1.6) (21.4)
Equity-settled
share-based
payment
transactions - - - - - - - 1.4 1.4 - 1.4
Adjustment
arising
from change in
non-controlling
interest - - - - - - - 0.9 0.9 - 0.9
========= ========= ============ ========= ========= ============ ========== ========== ======== ================ =======
Balance at 30
June 2016 71.8 111.7 (2.0) (1.8) (1.0) 35.7 11.4 (112.1) 113.7 42.7 156.4
========= ========= ============ ========= ========= ============ ========== ========== ======== ================ =======
Balance at 1
January
2016 71.8 111.7 (16.5) 0.4 (1.0) 35.7 11.4 (63.7) 149.8 36.6 186.4
Profit for the
period - - - - - - - 52.3 52.3 6.2 58.5
Other
comprehensive
income - - 19.7 (2.9) - - - (67.5) (50.7) 5.5 (45.2)
Transactions
with
owners:
Dividends - - - - - - - (31.2) (31.2) (4.4) (35.6)
Equity-settled
share-based
payment
transactions - - - - - - - 0.8 0.8 - 0.8
Own shares
acquired
for share
incentive
schemes - - - - - - - (0.2) (0.2) - (0.2)
Balance at 31
December 2016 71.8 111.7 3.2 (2.5) (1.0) 35.7 11.4 (109.5) 120.8 43.9 164.7
========= ========= ============ ========= ========= ============ ========== ========== ======== ================ =======
Balance at 1
January
2017 71.8 111.7 3.2 (2.5) (1.0) 35.7 11.4 (109.5) 120.8 43.9 164.7
Profit for the
period - - - - - - 76.9 76.9 2.9 79.8
Other
comprehensive
income - - (6.9) 2.6 - - - 5.0 0.7 (0.9) (0.2)
Transactions
with
owners:
Disposal of a
Non-Controlling
Interest
without
a change in
control - - - - - - - 0.5 0.5 - 0.5
Dividends - - - - - - - (20.0) (20.0) (2.5) (22.5)
Equity-settled
share-based
payment
transactions - - - - - - - 1.0 1.0 - 1.0
Proceeds from
exercise of
share
options - - - - - - - 0.1 0.1 - 0.1
Balance at 30
June 2017 71.8 111.7 (3.7) 0.1 (1.0) 35.7 11.4 (46.0) 180.0 43.4 223.4
========= ========= ============ ========= ========= ============ ========== ========== ======== ================ =======
1. The 2016 Special Reserves have been incorporated into Retained Earnings for the presentation of Changes in Equity.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year ended
to 30 to 30 31 December
Note June 2017 June 2016 2016
GBPm GBPm GBPm
=========== =========== =============
Operating activities
Profit for the period 79.8 32.0 58.5
Adjustments for:
Depreciation 15.7 14.1 29.5
Amortisation 3 3.6 3.3 7.9
Net financing costs 5 11.8 9.8 20.0
Profit on disposal of business 4 (46.1) - -
Share of profit from associate (net
of income tax) - (0.4) (0.6)
Profit on sale of property, plant and
equipment 0.1 - (0.4)
Income tax expense 6 12.5 14.2 29.4
Non-cash specific adjusting items included
in operating profit 4 - (4.0) 1.1
Equity-settled share-based payment expenses 0.9 1.4 0.8
=========== =========== =============
Cash generated from operations before
changes in working capital and provisions 78.3 70.4 146.2
(Increase)/decrease in trade and other
receivables (1.9) (8.2) (6.1)
(Increase)/decrease in inventories (5.3) (3.6) 1.4
(Decrease)/increase in trade and other
payables (11.2) (4.5) (0.1)
Decrease in provisions (2.1) (3.1) (5.2)
Payments to defined benefit pension plans (6.8) (7.8) (14.5)
=========== =========== =============
Cash generated from operations 51.0 43.2 121.7
Interest paid (9.2) (6.9) (15.3)
Income tax paid (12.0) (8.3) (22.2)
=========== =========== =============
Net cash from operating activities 29.8 28.0 84.2
=========== =========== =============
Investing activities
Purchase of property, plant and equipment (15.1) (17.7) (39.5)
Proceeds from sale of property, plant
and equipment 1.2 - 1.1
Purchase of investments (0.5) (0.4) (1.0)
Interest received 0.9 0.7 2.2
Disposal of subsidiaries, net of cash 78.3 - -
disposed
Loan repayment by associate - 0.2 2.1
Forward contracts used in net investment
hedging - (0.7) (12.3)
=========== =========== =============
Net cash from investing activities 64.8 (17.9) (47.4)
=========== =========== =============
Financing activities
Proceeds from exercise of share options 0.1 0.9 (0.2)
Increase/(decrease) in borrowings 8 (23.9) 12.1 63.4
Payment of finance lease liabilities 8 (0.2) (0.2) (0.3)
Dividends paid - to external plc shareholders (20.0) (20.0) (31.4)
Proceeds from unclaimed dividends - 0.2 0.2
Dividends paid to non-controlling interests (2.5) (1.6) (4.4)
=========== =========== =============
Net cash from financing activities (46.5) (8.6) 27.3
=========== =========== =============
Net increase/(decrease) in cash and cash
equivalents 48.1 1.5 64.1
Cash and cash equivalents at start of
period 122.4 49.8 49.8
Effect of exchange rate fluctuations
on cash held (5.8) 5.9 8.5
=========== =========== =============
Cash and cash equivalents at period end(1) 8 164.7 57.2 122.4
=========== =========== =============
1. A reconciliation of cash and cash equivalents to net borrowings is shown in note 8.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
Morgan Advanced Materials plc (the 'Company') is a company domiciled in the United Kingdom. The condensed consolidated financial statements of the Company for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates. The half-year condensed consolidated financial statements have been drawn up to 30 June 2017.
The condensed consolidated financial statements for the six months ended 30 June 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements for the year ended 31 December 2016. The condensed consolidated financial statements do not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards.
These condensed consolidated half-year financial statements do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report 2016.
Preparing the condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing the condensed consolidated financial statements, significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2016.
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, these condensed consolidated financial statements have been prepared by applying the accounting policies that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2016.
The following accounting standards that are applicable to the Group have been issued by the IASB, but are not yet effective at 30 June 2017. The Group is currently analysing the impact these standards would have on its consolidated results and financial position.
IFRS 15 - Revenue form contracts with customers (see further details below)
IFRS 16 - Leases
IFRS 15 Revenue from Contracts with Customers is effective for periods beginning on or after 1 January 2018 and introduces a new revenue recognition model that requires the transaction price receivable from customers to be allocated between the Group's performance obligations under contracts on a relative stand-alone selling price basis.
The Group is systematically reviewing its customer contracts and its systems data capture capability across the six global business units to assess the impact of the new Standard and ensure compliance. Based on the Group's review, it is anticipated that there are no significant impacts to the Group as a result of the new Standard. Both Thermal Ceramics and Composites and Defence customers receive a combination of goods and services, therefore we anticipate that the timing of revenue recognition on these could change under IFRS 15.
There were no other new accounting standards or amendments to standards that were required to be adopted in the period and the Group did not adopt any of the new accounting standards that could have been adopted early.
The comparative figures for the financial year ended 31 December 2016 are not the Company's statutory consolidated accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying his report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The consolidated financial statements of the Group as at and for the year ended 31 December 2016 are available on request from the Company's registered office at Quadrant, 55-57 High Street, Windsor, Berkshire SL4 1LP or at www.morganadvancedmaterials.com.
The condensed consolidated financial statements for the six months ended 30 June 2017 and the comparative period have neither been audited nor reviewed. The condensed consolidated financial statements for the six months ended 30 June 2017 were approved by the Board on 27 July 2017.
2. DISPOSALS
Half year ended 30 June 2017
Electro - Ceramics:
On 31 March 2017, the Group completed the sale of its UK Electro-Ceramics business, comprising the two sites at Ruabon and Southampton.
The transaction was structured as a sale of the business, assets and goodwill for a consideration of GBP47 million on a cash-free, debt-free basis, paid in cash on completion and subject to customary working capital adjustments.
In the year ended 31 December 2016, UK Electro-Ceramics generated an operating profit of GBP6.2 million on revenues of GBP22.7 million. Gross assets at 31 December 2016 were GBP6.7 million.
The Group also announced the closure of its US Electro-Ceramics business, which formed the remainder of the Group's Electro-Ceramics business.
The disposal and closure of the electro-ceramics business reduced the Group's assets and liabilities as follows:
31 March
2017
GBPm
===============
Trading net assets of disposal
group 7.4
Goodwill of disposal group 5.8
Transaction costs associated
with the disposal 6.5
Total consideration 46.9
Gain on disposal 27.2
The disposal group was included in the Technical Ceramics operating segment.
Global Rotary Transfer Systems Business:
On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.
The sale valued the business at EUR40.0 million on a cash-free, debt-free basis, with consideration payed in cash on completion, subject to customary closing working capital adjustments.
In the year to 31 December 2016, the Rotary business generated GBP3.2 million of operating profit on GBP15.5 million of sales. Gross assets at 31 December 2016 were GBP5.9 million.
The disposal and closure of the rotary transfer systems business reduced the Group's assets and liabilities as follows:
31 March
2017
GBPm
===============
Trading net assets of disposal
group 3.5
Goodwill of disposal group 7.1
Transaction costs associated
with the disposal 3.1
Total consideration 32.6
Gain on disposal 18.9
The disposal group was included in the Electrical Carbon operating segment.
Half year ended 30 June 2016
During the half year ended 30 June 2016 the Group disposed of its remaining 28.77% shareholding in Assam Carbon Products Limited for nil consideration. This shareholding was held at nil value and, as a result, there is no profit or loss on disposal.
There were no other acquisitions or disposals made during the half year ended 30 June 2016.
3. SEGMENT INFORMATION
The Group reports as two Divisions and six global business units, which have been identified as the Group's reportable operating segments. These have been identified on the basis of internal management reporting information that is regularly reviewed by the Group's Board of Directors (the Chief Operating Decision Maker) in order to allocate resources and assess performance.
The information presented below represents the operating segments of the Group.
Thermal Molten Thermal Electrical Seals Technical Carbon Composites Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and and totals costs
Systems Division Bearings Technical Defence
Ceramics Systems
Division
Six Six Six Six Six Six Six Six Six Six Six
months months months months months months months months months months months
to 30 to 30 to 30 to 30 to 30 to 30 to 30 to to 30 to 30 to 30
June June June June June June June 30 June June June June
2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Revenue from
external
customers 213.1 23.8 236.9 81.3 55.9 133.2 270.4 11.6 518.9 - 518.9
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Divisional
EBITA(2) 28.6 3.6 32.2 8.7 9.1 14.9 32.7 (0.4) 64.5 - 64.5
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Corporate costs - - - - - - - - - (2.9) (2.9)
Group EBITA(2) 61.6
Restructuring - - - - - - - - - - -
costs and other
items
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Group headline
operating
profit(2) 61.6
Amortisation
of intangible
assets (0.9) (0.1) (1.0) (0.2) (0.1) (2.3) (2.6) - (3.6) - (3.6)
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Operating
profit
before
specific
adjusting
items 58.0
Specific - - - - - - - - - - -
adjusting
items included
in operating
profit (1)
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Operating
profit/(loss) 27.7 3.5 31.2 8.5 9.0 12.6 30.1 (0.4) 60.9 (2.9) 58.0
========== ========= ========== =========== ========== ========== =========== =========== ======== ==========
Finance income 0.9
Finance expense (12.7)
Profit on
disposal
of business 46.1
Share of profit -
of associate
(net of income
tax)
=======
Profit before
taxation 92.3
=======
Segment assets 399.4 42.0 441.4 143.9 85.2 179.5 408.6 10.5 860.5 174.0 1034.5
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Segment
liabilities 81.6 6.8 88.4 26.3 15.0 38.0 79.3 6.1 173.8 637.3 811.1
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Segment capital
expenditure 4.2 0.7 4.9 3.5 1.9 4.3 9.7 0.5 15.1 - 15.1
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Segment
depreciation 6.1 1.0 7.1 2.6 2.3 3.4 8.3 0.3 15.7 - 15.7
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
1. Details of specific adjusting items are given in note 4 to the financial statements.
2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.
Thermal Molten Thermal Electrical Seals Technical Carbon Composites Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and and totals costs
Systems Division Bearings Technical Defence
Ceramics Systems
Division
Six Six Six Six Six Six Six Six Six Six Six
months months months months months months months months months months
to 30 to 30 to 30 to 30 to 30 to 30 to 30 to 30 to 30
June June June June June June June June June
2016 2016 2016 2016 2016 2016 2016 2016 2016
months to 30
June
201
to 67
30 June
2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Revenue from
external
customers 193.9 20.6 214.5 75.6 47.6 121.8 245.0 15.9 475.4 - 475.4
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Divisional
EBITA(2) 25.6 2.9 28.5 10.3 6.6 12.8 29.7 1.1 59.3 - 59.3
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Corporate costs - - - - - - - - - (2.7) (2.7)
Group EBITA(2) 56.6
Restructuring
costs and
other
items - - - (0.6) - - (0.6) 0.1 (0.5) (1.0) (1.5)
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Group headline
operating
profit(2) 55.1
Amortisation
of intangible
assets (0.7) (0.1) (0.8) (0.2) (0.1) (1.4) (1.7) (0.8) (3.3) - (3.3)
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Operating
profit
before
specific
adjusting
items 51.8
Specific
adjusting
items included
in operating
profit (1) - - - - - - - - - 3.8 3.8
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Operating
profit/(loss) 24.9 2.8 27.7 9.5 6.5 11.4 27.4 0.4 55.5 0.1 55.6
========== ========= ========== =========== ========== ========== =========== =========== ======== ==========
Finance income 0.7
Finance expense (10.5)
Loss on -
disposal
of business
Share of profit
of associate
(net of income
tax) 0.4
=======
Profit before
taxation 46.2
=======
Segment assets 404.4 40.9 445.3 149.1 82.9 185.9 417.9 19.4 882.6 77.5 960.1
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Segment
liabilities 82.2 6.4 88.6 28.9 16.7 38.4 84.0 6.6 179.2 624.5 803.7
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Segment capital
expenditure 9.5 0.6 10.1 2.8 1.8 2.8 7.4 0.2 17.7 - 17.7
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
Segment
depreciation 5.0 0.8 5.8 2.3 2.1 3.7 8.1 0.2 14.1 - 14.1
========== ========= ========== =========== ========== ========== =========== =========== ======== ========== =======
1. Details of specific adjusting items are given in note 4 to the financial statements.
2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.
Thermal Molten Thermal Electrical Seals Technical Carbon Composites Segment Corporate Group
Ceramics Metal Products Carbon and Ceramics and and totals costs
Systems Division Bearings Technical Defence
Ceramics Systems
Division
Year Year Year Year Year Year Year Year Year Year Year
ended ended ended ended ended ended ended ended ended ended ended
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 31 31 31
2016 2016 2016 2016 2016 2016 2016 December December December December
2016 2016 2016 2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Revenue from
external
customers 413.3 43.5 456.8 156.2 97.7 248.1 502.0 30.4 989.2 - 989.2
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Divisional
EBITA(2) 55.0 6.7 61.7 19.7 14.2 26.6 60.5 1.1 123.3 - 123.3
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Corporate costs - - - - - - - - - (5.4) (5.4)
Group EBITA(2) 117.9
Restructuring
costs and
other
items 0.1 - 0.1 (0.1) 0.1 - - 0.1 0.2 (1.2) (1.0)
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Group headline
operating
profit(2) 116.9
Amortisation
of intangible
assets (1.5) (0.1) (1.6) (0.4) (0.3) (4.2) (4.9) (1.4) (7.9) - (7.9)
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Operating
profit
before
specific
adjusting
items 109.0
Specific
adjusting
items included
in operating
profit (1) - - - - - - - (8.5) (8.5) 6.8 (1.7)
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Operating
profit/(loss) 53.6 6.6 60.2 19.2 14.0 22.4 55.6 (8.7) 107.1 0.2 107.3
============= ============= ============= ============= ============= ============= ============= =========== ========= ==========
Finance income 2.3
Finance expense (22.3)
Loss on -
disposal
of business
Share of profit
of associate
(net of income
tax) 0.6
=========
Profit before
taxation 87.9
=========
Segment assets 417.8 42.2 460.0 154.9 86.1 188.1 429.1 15.8 904.9 134.4 1,039.3
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Segment
liabilities 88.5 7.5 96.0 30.0 18.2 37.0 85.2 7.9 189.1 685.5 874.6
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Segment capital
expenditure 17.7 2.1 19.8 8.3 4.4 6.5 19.2 0.5 39.5 - 39.5
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
Segment
depreciation 10.8 1.7 12.5 4.9 4.3 7.3 16.5 0.5 29.5 - 29.5
============= ============= ============= ============= ============= ============= ============= =========== ========= ========== =========
1. Details of specific adjusting items are given in note 4 to the financial statements.
2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted measures can be found on pages 10 to 14.
4. SPECIFIC ADJUSTING ITEMS
In the condensed consolidated income statement the Group presents specific adjusting items separately. In the judgment of the Directors, due to the nature and value of these items they should be disclosed separately from the underlying results of the Group to allow the reader to obtain a proper understanding of the financial information and the best indication of underlying performance of the Group.
Six months Six months Year ended
to 30 June to 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
============ ============ =============
Specific adjusting items:
Net pension settlement credit - 3.8 6.8
Impairment of intangible assets - - (8.5)
Net profit on disposal of business 46.1 - -
============ ============ =============
Total specific adjusting items
before income tax credit 46.1 3.8 (1.7)
Income tax (charge) / credit
from specific adjusting items 1.3 (1.5) (2.8)
============ ============ =============
Total specific adjusting items
after income tax credit 47.4 2.3 (4.5)
============ ============ =============
Half year ended 30 June 2017
Net profit on disposal of business:
On 31 March 2017, the Group completed the sale of its UK Electro-Ceramics business, comprising the two sites at Ruabon and Southampton. The Group also announced the closure of its US Electro-Ceramics business, which formed the remainder of the Group's Electro-Ceramics business.
The Group reflected a profit on disposal of GBP27.2 million associated with this transaction.
On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.
The Group reflected a profit on disposal of GBP18.9 million associated with this transaction.
Half year ended 30 June 2016
Net pension settlement credit:
During the half year ended 30 June 2016 the Group has completed the final termination and payment of all earned benefits for one of its North American Defined Benefit Plans.
As a result of this termination the Group recognised a net pension settlement credit of GBP3.8 million. An income tax credit of GBP1.5 million was recognised in respect of this item.
5. NET FINANCE INCOME AND EXPENSE
Six months Six months Year ended
to 30 June to 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
============ ============ =============
Amounts derived from financial
instruments 0.1 0.2 0.3
Interest income on bank deposits
measured at amortised cost 0.8 0.5 2.0
============ ============ =============
Finance income 0.9 0.7 2.3
============ ============ =============
Interest expense on financial
liabilities measured at amortised
cost (9.2) (6.9) (15.2)
Net interest on IAS 19 obligations (3.5) (3.6) (7.1)
============ ============ =============
Finance expense (12.7) (10.5) (22.3)
============ ============ =============
Net financing costs recognised
in profit or loss (11.8) (9.8) (20.0)
============ ============ =============
6. TAXATION - INCOME TAX EXPENSE
Six months Six months Year ended
to 30 June to 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
============ ============ =============
Tax on profit 12.5 14.2 29.4
============ ============ =============
The Group's consolidated effective tax rate for the six months ended 30 June 2017 is based on the Directors' best estimate of the effective tax rate for the year excluding specific adjusting items.
7. EARNINGS PER SHARE
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016
2016
GBPm GBPm GBPm
=========== =========== =============
Profit for the period attributable
to equity shareholders 76.9 29.0 52.3
Specific adjusting items (46.1) (3.8) 1.7
Amortisation of intangible assets 3.6 3.3 7.9
Tax effect of the above (1.3) 1.5 2.8
Non-controlling interests' share - - -
of the above adjustments
=========== =========== =============
Adjusted profit for the period 33.1 30.0 64.7
=========== =========== =============
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016
2016
Pence Pence Pence
=========== =========== =============
Earnings per ordinary share 27.0p 10.2p 18.4p
Specific adjusting items (16.2)p (1.3)p 0.6p
Amortisation of intangible assets 1.3p 1.1p 2.7p
Tax effect of the above (0.5)p 0.5p 1.0p
Non-controlling interests' share - - -
of the above adjustments
=========== =========== =============
Headline earnings per share(1) 11.6p 10.5p 22.7p
=========== =========== =============
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted
measures can be found on pages 10 to 14.
8. CASH AND CASH EQUIVALENTS RECONCILED TO NET DEBT
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016
2016
GBPm GBPm GBPm
=========== =========== =============
Bank balances 57.1 44.4 61.4
Cash deposits 107.6 12.8 61.0
=========== =========== =============
Cash and cash equivalents 164.7 57.2 122.4
=========== =========== =============
Reconciliation of cash and cash
equivalents to net debt(1)
Six months Six months Year ended
to 30 to 30 30 December
June 2017 June 2016
2016
GBPm GBPm GBPm
=========== =========== =============
Opening borrowings (364.9) (265.8) (265.8)
(Increase)/decrease in borrowings 23.9 (12.1) (63.4)
Payment of finance lease liabilities 0.2 0.2 0.3
Effect of movements in foreign
exchange on borrowings 7.5 (21.1) (36.0)
=========== =========== =============
Closing borrowings (333.3) (298.8) (364.9)
=========== =========== =============
Cash and cash equivalents 164.7 57.2 122.4
=========== =========== =============
Closing net debt(1) (168.6) (241.6) (242.5)
=========== =========== =============
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 36, reconciliations of the statutory results to the adjusted
measures can be found on pages 10 to 14.
9. FINANCIAL RISK MANAGEMENT
Fair Values
The fair values of financial assets and liabilities, together with the carrying amounts shown in
the balance sheet, are as follows:
Six months Six months to Year ended
to 30 June 30 June 31 December
2017 2016 2016
Carrying Fair Carrying Fair Carrying Fair
Amount value Amount value Amount value
GBPm GBPm GBPm GBPm GBPm GBPm
========= ======== ========= ======== ========= ========
Financial assets and liabilities
at amortised cost
4.32% Euro Senior Notes
2017 - - (16.9) (17.4) (17.3) (17.5)
6.12% US Dollar Senior
Notes 2017 (134.5) (136.2) (131.6) (138.2) (142.1) (146.3)
6.26% US Dollar Senior
Notes 2019 (57.6) (61.2) (56.4) (62.7) (60.8) (65.4)
1.18% Euro Senior Notes
2023 (22.0) (21.4) - - (21.3) (21.0)
3.17% US Dollar Senior
Notes 2023 (11.6) (11.2) - - (12.2) (11.7)
1.55% Euro Senior Notes
2026 (22.0) (21.1) - - (21.4) (20.8)
3.37% US Dollar Senior
Notes 2026 (74.8) (70.5) - - (79.0) (73.1)
1.74% Euro Senior Notes
2028 (8.8) (8.3) - - (8.6) (8.3)
Bank and other loans (1.3) (1.3) (92.9) (84.7) (1.3) (1.3)
Obligations under finance
leases (0.7) (0.7) (1.0) (1.0) (0.9) (0.9)
Trade and other payables (92.7) (92.7) (96.4) (96.4) (100.5) (100.5)
Loans and receivables 179.7 179.7 182.6 182.6 184.5 184.5
Cash and cash equivalents 164.7 164.7 57.2 57.2 122.4 122.4
========= ======== ========= ======== ========= ========
(81.6) (80.2) (155.4) (160.6) (158.5) (159.9)
Available-for-sale financial
instruments
Available-for-sale financial
assets 0.4 0.4 0.6 0.6 0.5 0.5
========= ======== ========= ======== ========= ========
Derivatives and other
items at fair value
Forward exchange contracts
used for hedging (0.7) (0.7) (11.0) (11.0) (2.0) (2.0)
Cross currency swaps (2.3) (2.3) (6.0) (6.0) (7.2) (7.2)
========= ======== ========= ======== ========= ========
(84.2) (82.8) (171.8) (177.0) (167.2) (168.6)
========= ======== ========= ======== ========= ========
The 4.32% Senior notes were repaid on 30 June 2017.
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the preceding table.
Equity securities
Fair value is based on quoted market prices at the balance sheet date.
Derivatives
Forward exchange contracts are marked to market either using listed market prices or by discounting the contractual forward price and deducting the current spot rate.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows. The interest rates used to determine the fair value of loans and borrowings are 1.3% - 2.8% (30 June 2016: 1.3% - 2.8%; 31 December 2016: 1.1% - 4.2%).
Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect changes in interest rates.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value.
Cash and cash equivalents, trade and other payables and loans and receivables
The Group has disclosed the fair value of cash and cash equivalents, current loans and receivables and current payables at their carrying amount, given their notional amount is deemed to be their fair value.
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Six months to 30 June Six months to 30 June
2017 2016
Level Level Total Level Level Total
1 2 1 2
GBPm GBPm GBPm GBPm GBPm GBPm
====== ======== ======== ======= ======== ========
Available-for-sale financial
assets 0.4 - 0.4 0.6 - 0.6
Derivative financial
assets - 1.0 1.0 - 1.2 1.2
====== ======== ======== ======= ======== ========
0.4 1.0 1.4 0.6 1.2 1.8
====== ======== ======== ======= ======== ========
Derivative financial
liabilities - (4.0) (4.0) - (18.2) (18.2)
====== ======== ======== ======= ======== ========
Year ended 31 December
2016
Level Level Total
1 2
GBPm GBPm GBPm
======= ======== ========
Available-for-sale financial
assets 0.5 - 0.5
Derivative financial
assets - 2.1 2.1
======= ======== ========
0.5 2.1 2.6
======= ======== ========
Derivative financial
liabilities - 11.3 11.3
======= ======== ========
The table below analyses financial instruments disclosed
at fair value, by valuation method:
Six months to 30 June Six months to 30 June
2017 2016
Level Level Total Level Level Total
1 2 1 2
GBPm GBPm GBPm GBPm GBPm GBPm
====== ======== ======== ======= ======== ========
4.32% Euro Senior Notes
2017 - - - - (17.4) (17.4)
6.12% US Dollar Senior
Notes 2017 - (136.2) (136.2) - (138.2) (138.2)
6.26% US Dollar Senior
Notes 2019 - (61.2) (61.2) - (62.7) (62.7)
1.18% Euro Senior Notes
2023 - (21.4) (21.4) - - -
3.17% US Dollar Senior
Notes 2023 - (11.2) (11.2) - - -
1.55% Euro Senior Notes
2026 - (21.1) (21.1) - - -
3.37% US Dollar Senior
Notes 2026 - (70.5) (70.5) - - -
1.74% Euro Senior Notes
2028 - (8.3) (8.3) - - -
Obligations under finance
leases - (0.7) (0.7) - (1.0) (1.0)
====== ======== ======== ======= ======== ========
- (330.6) (330.6) - (219.3) (219.3)
====== ======== ======== ======= ======== ========
Year ended 31 December
2016
Level Level Total
1 2
GBPm GBPm GBPm
======= ======== ========
4.32% Euro Senior Notes
2017 - (17.5) (17.5)
6.12% US Dollar Senior
Notes 2017 - (146.3) (146.3)
6.26% US Dollar Senior
Notes 2019 - (65.4) (65.4)
1.18% Euro Senior Notes
2023 - (21.0) (21.0)
3.17% US Dollar Senior
Notes 2023 - (11.7) (11.7)
1.55% Euro Senior Notes
2026 - (20.8) (20.8)
3.37% US Dollar Senior
Notes 2026 - (73.1) (73.1)
1.74% Euro Senior Notes
2028 - (8.3) (8.3)
Obligations under finance
leases - (0.9) (0.9)
======= ======== ========
- (365.0) (365.0)
======= ======== ========
There have been no transfers between Level 1 and Level 2 between 1 January 2016 and 30 June 2017, and there were no Level 3 financial instruments between Level 1 and Level 2 between 1 January 2016 and 30 June 2017.
10. RELATED PARTIES
The Company has related party relationships with its subsidiaries and its associates and with its Directors and executive officers.
Transactions with key management personnel
Details of transactions with key management personnel are described in note 26 of the Group's 2016 Annual Report.
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016
2016
Transactions with associate GBPm GBPm GBPm
=========== =========== =============
Purchases from associate 0.6 1.0 1.4
Loan owed by associate - 1.8 -
Trade payables due to associate 0.3 0.4 0.2
=========== =========== =============
At 30 June 2017 the Group does not have any trade receivables owed by associates which have been fully provided for (30 June 2016 and 31 December 2016: Nil).
Except as disclosed in the table above:
There were no related party transactions during the period that have materially affected the financial position or the performance of the Group during the period; and
There have been no changes in the nature of related party transactions as described in note 26 of the Group's 2016 Annual Report, (page 151) which could have a material effect on the financial position or performance of the Group during the period.
11. EMPLOYEE BENEFITS
30 June 30 June 30 June 30 June 30 June
2017 2017 2017 2017 2017
UK USA Europe Rest Total
of World
GBPm GBPm GBPm GBPm GBPm
======== ======== ======== ========== ========
Pension plans and employee benefits
Present value of unfunded defined
benefit obligations - (8.7) (34.9) (2.1) (45.7)
Present value of funded defined
benefit obligations (591.1) (142.1) (0.8) (10.0) (744.0)
Fair value of plan assets 416.3 106.5 0.5 7.7 531.0
======== ======== ======== ========== ========
Net obligations (174.8) (44.3) (35.2) (4.4) (258.7)
======== ======== ======== ========== ========
Movements in present value of defined
benefit obligation
At 1 January 2017 (588.7) (155.9) (37.9) (12.3) (794.8)
Current service cost (1.2) - (0.5) (0.8) (2.5)
Interest cost (7.5) (3.0) (0.3) (0.1) (10.9)
Remeasurement losses (4.0) (4.9) 1.8 0.2 (6.9)
Benefits paid 10.6 4.7 0.6 0.5 16.4
Contributions by members (0.3) - - - (0.3)
Acquisitions / Disposals - - 1.6 - 1.6
Exchange adjustments - 8.3 (1.0) 0.4 7.7
======== ======== ======== ========== ========
At 30 June 2017 (591.1) (150.8) (35.7) (12.1) (789.7)
======== ======== ======== ========== ========
Movements in fair value of plan
assets
At 1 January 2017 408.2 106.9 0.4 8.2 523.7
Interest on plan assets 5.2 2.2 - 0.1 7.5
Remeasurement gains 8.2 4.4 - (0.3) 12.3
Contributions by employer 5.5 3.6 0.6 0.6 10.3
Contributions by members 0.3 - - - 0.3
Administrative expenses (0.5) - - - (0.5)
Benefits paid (10.6) (4.7) (0.6) (0.5) (16.4)
Exchange adjustments - (5.9) 0.1 (0.4) (6.2)
======== ======== ======== ========== ========
At 30 June 2017 416.3 106.5 0.5 7.7 531.0
======== ======== ======== ========== ========
Principal actuarial assumptions
at 30 June 2017 were:
Discount rate 2.57 3.85 1.90 2.80
Inflation (UK: RPI/CPI) 3.13 n/a 1.70 n/a
/ 2.03
30 June 30 June 30 June 30 June 30 June
2016 2016 2016 2016 2016
UK USA Europe Rest Total
of World
GBPm GBPm GBPm GBPm GBPm
======== ======== ======== ========== ========
Pension plans and employee benefits
Present value of unfunded defined
benefit obligations - (9.4) (36.6) (2.3) (48.3)
Present value of funded defined
benefit obligations (566.4) (169.6) (1.8) (15.7) (753.5)
Fair value of plan assets 399.7 116.7 0.4 13.6 530.4
======== ======== ======== ========== ========
Net obligations (166.7) (62.3) (38.0) (4.4) (271.4)
======== ======== ======== ========== ========
Principal actuarial assumptions % % % %
at 30 June 2016 were:
Discount rate 2.80 3.80 1.30 2.10
Inflation (UK: RPI/CPI) 2.70 n/a 1.70 n/a
/ 1.50
31 December 31 December 31 December 31 December 31 December
2016 2016 2016 2016 2016
UK USA Europe Rest Total
of World
GBPm GBPm GBPm GBPm GBPm
============ ============ ============ ============ ============
Pension plans and employee benefits
Present value of unfunded defined
benefit obligations - (9.4) (35.9) (2.5) (47.8)
Present value of funded defined
benefit obligations (588.7) (146.5) (2.0) (9.8) (747.0)
Fair value of plan assets 408.2 106.9 0.4 8.2 523.7
============ ============ ============ ============ ============
Net obligations (180.5) (49.0) (37.5) (4.1) (271.1)
============ ============ ============ ============ ============
Principal actuarial assumptions % % % %
at 31 December 2016 were:
Discount rate 2.62 4.16 1.60 2.90
Inflation (UK: RPI/CPI) 3.20 n/a 1.70 n/a
/ 2.10
Glossary
Cash flow from Cash generated from operations before cash flows from
operations* restructuring costs and other items.
See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Constant currency Constant currency revenue and Group headline operating
profit are derived by translating the prior year results
at current year average exchange rates.
See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Corporate costs Corporate costs consist of the costs of the central
head office.
Free cash flow Cash generated from operations less net capital expenditure,
before acquisitions net interest paid and tax paid.
and dividends* See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Group earnings EBITA is defined as Group operating profit before specific
before interest, adjusting items and amortisation of intangible assets.
tax and amortisation Segment - Divisional and global business unit - EBITA
(EBITA) * is stated before unallocated corporate costs.
See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Group earnings EBITDA is defined as operating profit before specific
before interest, adjusting items, amortisation of intangible assets,
tax, depreciation restructuring costs and other items, and depreciation.
and amortisation See Definitions and Reconciliations of Non-GAAP Measures
(EBITDA)* to GAAP Measures on pages 10 to 14.
Group headline Operating profit adjusted to exclude specific adjusting
operating profit* items and amortisation of intangible assets.
See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Headline earnings Headline earnings per share is defined as operating
per share (EPS)* profit adjusted to exclude specific adjusting items
and amortisation of intangible assets, plus share of
profit of associate less net financing costs, income
tax expense and non-controlling interests, divided by
the weighted average number of ordinary shares during
the period.
See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Net debt* Interest-bearings loans and borrowings and bank overdrafts
less cash and cash equivalents.
See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Group Organic The Group results excluding acquisition and disposal
impacts at constant currency.
Restructuring Include the costs of restructuring activity and gain
costs and other on disposal of property.
items See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Return on invested Group headline operating profit (operating profit excluding
capital (ROIC)* specific adjusting items and
amortisation of intangible assets) divided by the 12-month
average adjusted net assets (excludes long term employee
benefits, deferred tax assets and liabilities, current
tax payable, provisions, cash and cash equivalents and
interest-bearing loans and borrowings.
See Definitions and Reconciliations of Non-GAAP Measures
to GAAP Measures on pages 10 to 14.
Revenue growth Revenue growth is defined as current year revenue translated
using current year average exchange rates divided by
prior year revenue translated using prior year average
exchange rates.
Specific adjusting See note 6 to the financial statements for further details
items
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FMGZNLNLGNZM
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July 28, 2017 02:01 ET (06:01 GMT)
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