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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Polypipe Group Plc | LSE:PLP | London | Ordinary Share | GB00BKRC5K31 | ORD GBP0.001 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 567.00 | 565.00 | 567.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMPLP
RNS Number : 3258N
Polypipe Group PLC
08 August 2017
8 August 2017
Polypipe Group plc
Interim results for the six months ended 30 June 2017
Continued strong performance
Polypipe Group plc ("Polypipe", the "Company" or the "Group"), a leading manufacturer of plastic piping and ventilation systems for the residential, commercial, civils and infrastructure sectors, today announces its unaudited interim results for the six months ended 30 June 2017.
Financial Results
Hot Features
Premium
H1 H1 Change
2017 2016
Revenue GBP242.0m GBP223.3m 8.4%
Underlying operating
profit(1) GBP38.9m GBP37.7m 3.1%
Underlying operating
margin(1) 16.1% 16.9%
Underlying profit
before tax(1) GBP35.5m GBP33.7m 5.3%
Operating profit GBP34.9m GBP33.9m 2.8%
Profit before tax GBP31.5m GBP29.9m 5.3%
Earnings per share
(diluted) 12.5p 12.0p 4.2%
Underlying earnings
per share (diluted)(1) 14.3p 13.5p 5.9%
Cash generated from
operations GBP21.1m GBP30.5m (30.8)%
Dividend per share 3.6p 3.1p 16.1%
Financial Highlights
-- Performance in line with management expectations -- Revenue 8.4% higher at GBP242.0m, or 6.9% on a like for like basis(2) -- UK revenue 6.8% ahead -- Underlying operating profit 3.1% higher at GBP38.9m -- Underlying diluted earnings per share 5.9% higher at 14.3 pence per share
-- Net debt of 2.0 times LTM EBITDA(3) compared to 2.3 times in the prior year, and on track to meet management expectations for the year.
-- Interim dividend increased 16.1% to 3.6 pence per share
Operational Highlights
-- Market outperformance in both UK segments, demonstrating continued success of strategic growth initiatives of legacy material substitution, carbon efficiency and water management.
-- UK Residential Systems segment particularly strong with 9.2% growth driven predominantly by new house build.
-- Pricing actions to recover H2 2016 input cost inflation progressively implemented through first half and successfully completed.
-- Decisive action taken at our Middle East manufacturing plant (<1% Group revenue) to temporarily cease manufacturing and reduce costs in response to recent trade embargo between UAE and Qatar.
Outlook
-- Market fundamentals continue to be robust, but we remain alert to potential impact from uncertainties arising from the recent UK election and Brexit negotiations.
-- Following a slow start to the year, the UK Roads programme is expected to accelerate in H2, underpinning demand in our UK Commercial and Infrastructure Systems segment.
-- With different sectors of the UK construction market performing at different rates the Group benefits from its strategic balance of activity with no over reliance on any one sector.
-- Middle East situation unlikely to be resolved in the short term. -- Conditions in the French market continue to improve.
-- Well placed to continue to deliver results in line with management expectations for the year ending 31 December 2017.
David Hall, Chief Executive Officer said:
"The Group has delivered another record performance, building on the strong momentum from last year and demonstrating that our strategic focus on structural growth opportunities is delivering results.
Although underlying fundamentals remain positive, the Group has experienced varying conditions in its different markets and has also faced some challenges in the first half of the year. I am encouraged by the way the business has risen to these challenges which is further evidence of the depth and strength of management across the Group. As a result of our growth initiatives, balanced exposure to our markets and overall performance, the Board is confident that the Group will continue to make progress in line with management expectations for the year."
(1) Underlying profit and earnings measures exclude certain non-underlying items which are provided in Note 4, and where relevant, the tax effect of these items. The Directors consider that these measures provide a better and more consistent indication of the Group's underlying financial performance and more meaningful comparison with prior and future periods to assess trends in our financial performance.
(2) Like for like (LFL) measures are at constant currency translation. The structure of the Group is the same in both periods so no adjustment is necessary for acquisitions or disposals.
(3) LTM EBITDA is defined as underlying operating profit before depreciation for the twelve months preceding the balance sheet date.
For further information please contact:
Polypipe David Hall, Chief Executive Officer Martin Payne, Chief Financial Officer +44 (0) 1709 770 000 Brunswick Tim Danaher Simon Maine +44 (0) 20 7404 5959
A copy of this report will be available on our website www.polypipe.com today from 0700hrs (BST).
An analyst and investor presentation will be held today at Brunswick's offices, 16 Lincolns Inn Fields, London, WC2A 3ED at 1000 hrs (BST) with registration from 0930hrs.
For those unable to attend, a live conference call will be available at 1000 hrs (BST).
Dial-In number +44 (0) 1452 555 566 Conference ID 64328914
The presentation can be viewed at this link.
Notes to Editors:
Polypipe is the largest manufacturer in the UK, and among the ten largest manufacturers in Europe, of plastic piping systems for the residential, commercial, civils and infrastructure sectors by revenue. It is also a leading designer and manufacturer of energy efficient ventilation systems in the UK.
The Group operates from 20 facilities in total, and with over 20,000 product lines, manufactures the UK's widest range of plastic piping systems for heating, plumbing, drainage and ventilation. The Group primarily targets the UK, French and Irish building and construction markets with a presence in Italy and the Middle East and sales to specific niches in the rest of the world.
Group Results
Group revenue for the six months ended 30 June 2017 was 8.4% higher than the prior year at GBP242.0m (2016: GBP223.3m). On a constant currency basis, revenue was 6.9% higher than the prior year. The Group structure has remained the same in both periods so this represents organic growth with no adjustments required for acquisitions or disposals. This strong performance is a result of our continued focus on strategic growth initiatives such as legacy material substitution, legislative tailwinds in water management and carbon efficiency, and development of selected export markets.
Underlying operating profit was 3.1% higher than the prior year at GBP38.9m (2016: GBP37.7m). This represents an operating margin of 16.1% (2016: 16.9%), and reflects the expected time lag in progressive implementation of selling price increases to recover input cost inflation in the period.
Finance costs of GBP3.4m (2016: GBP4.0m) were lower than the prior year due to reduced levels of net debt together with improved margins through reduced leverage.
Non-underlying operating costs of GBP4.0m (2016: GBP3.8m) were incurred and relate to amortisation of intangible assets of GBP2.8m arising from the Nuaire acquisition, costs associated with the temporary cessation of production in our factory in the Middle East of GBP0.9m, and the consolidation of our ventilation businesses onto the Nuaire site of GBP0.3m.
The total tax charge for the period was GBP6.4m (2016: GBP5.9m). The underlying tax charge of GBP6.9m (2016: GBP6.6m) represents an effective underlying tax rate of 19.4% (2016: 19.6%).
Underlying profit after tax was 5.5% higher at GBP28.6m (2016: GBP27.1m), with underlying diluted earnings per share 5.9% higher at 14.3 pence (2016: 13.5 pence).
Including non-underlying items, profit after tax was 4.5% higher at GBP25.1m (2016: GBP24.0m) with diluted earnings per share also 4.2% higher at 12.5 pence (2016: 12.0 pence).
Business Review
Revenue H1 H1 LFL
2017 2016 Change Change*
-------------------------------
GBPm GBPm % %
------------------------------- ------ ------ ------- ---------
Residential Systems 115.0 105.4 9.2 9.2
Commercial and Infrastructure
Systems - UK 97.7 92.7 5.4 5.4
Inter-segment sales (7.0) (5.5)
UK operations 205.7 192.6 6.8 6.8
Commercial and Infrastructure
Systems - Mainland Europe 37.4 31.5 18.9 8.6
Inter-segment sales (1.1) (0.8)
Group revenue 242.0 223.3 8.4 6.9
------------------------------- ------ ------ ------- ---------
Underlying operating H1 H1
profit 2017 2016 Change
-------------------------------
GBPm GBPm %
------------------------------- ------ ------ -------
Residential Systems 22.9 21.5 6.5
Commercial and Infrastructure
Systems - UK 14.5 15.2 (3.9)
UK operations 37.4 36.7 2.2
Commercial and Infrastructure
Systems - Mainland Europe 1.5 1.0 32.4
Group underlying operating
profit 38.9 37.7 3.1
------------------------------- ------ ------ -------
* Like for like (LFL) measures are at constant currency translation. The structure of the Group is the same in both periods so no adjustment is necessary for acquisitions or disposals
Operational Review
The Group continued to focus on its core strategic growth initiatives in the period, in legacy material substitution, water management and carbon efficiency legislation, and development of selected export markets. We continue to make excellent progress in these areas, with revenue 8.4% higher than the prior year. The UK operations continued to outpace the market maintaining strong organic growth of 6.8%, with the UK Residential Systems segment showing the strongest growth in the period. Although selling price increases represent approximately 3% of the first half revenue growth, as noted in our 2016 Annual Report and Accounts, the earlier part of the year was impacted by the effect of the merchant order pull forward into December 2016, meaning underlying volume growth was broadly in line with revenue.
The Group has successfully implemented selling price increases and cost reduction measures progressively through the period to recover material cost and other inflation arising primarily from the effect of Sterling devaluation post the EU Referendum in June 2016. These measures leave the Group in a good position as we enter the second half of the year, and as anticipated the progressive nature of these actions through the first half has resulted in a return on sales of 16.1%, marginally lower than the same period last year.
A project to consolidate our Doncaster based ventilation business into our Nuaire business in Caerphilly, South Wales has been completed in the period. This will generate cost savings and service efficiencies which help drive improvements in the combined business. Exceptional costs of GBP0.3m relating to this project have been recorded in the results for the period.
Towards the end of the period, it became clear that the trade embargo between many of the Gulf states and Qatar would severely impact revenue in our manufacturing unit in Dubai. Approximately 60% of pipeline projects emanate from Qatar and the business had just started to deliver to two significant infrastructure projects for Doha, which would have absorbed the bulk of our local manufacturing capacity. With no imminent solution in sight to this issue, and in recognition of the more general project financing issues in the wider Gulf in recent months meaning order cycles are becoming extended, the decision was taken to temporarily cease manufacturing in Dubai. Stock is available to service short term orders from non-Qatari customers, and manufacturing can be resumed at relatively short notice. However, a significant proportion of the manufacturing workforce has been made redundant, leaving only key operational management in place. Exceptional costs of GBP0.9m relating to this decision have been recorded in the results for the period, covering redundancy costs and stock provisions.
Residential Systems
Residential Systems segment revenue was 9.2% higher at GBP115.0m (2016: GBP105.4m), all of which was derived from the UK and Irish markets, and excluding inter segment revenue represented 47% of Group revenue for the six months ended 30 June 2017 (2016: 46%). The effect of selling price increases in the period largely offsets the effect of the merchant order pull forward into December 2016 noted in our 2016 Annual Report and Accounts, and so this growth is largely volume driven.
Demand has remained robust from the national house builders throughout the first half, with particularly strong demand for our underground products as they continue to open new sites. As the house builders move through different build phases on site, demand is beginning to pick up in our above ground product ranges. We continue to see the UK RM&I (repairs maintenance and improvement) market as static, with housing transactions remaining muted and consumer confidence impacted by post-election uncertainty and negative real wage growth.
This continued growth in volumes enabled Residential Systems to deliver an underlying operating profit of GBP22.9m in the first half, up 6.5% over the same period last year and representing a return on sales of 19.9% (2016: 20.4%). The progressive implementation of selling price increases and cost reduction measures to mitigate post EU Referendum material cost and other inflation resulted in margins being marginally lower than prior year.
Commercial and Infrastructure Systems - UK
Commercial and Infrastructure Systems UK segment revenue was 5.4% higher at GBP97.7m (2016: GBP92.7m), and excluding inter segment revenue represented 38% of overall Group revenue for the six months ended 30 June 2017 (2016: 40%). This segment includes our export business as well as the results of our manufacturing operation in the Middle East.
Water management and flood prevention legislation continued to drive demand for our Polystorm attenuation cells as residential driven infrastructure is installed. Furthermore, light commercial ventilation continues to perform well, driven by carbon efficiency legislation. Growth in the UK in the first half has been somewhat impacted by delays in roads projects such as the A14 upgrade, although there are encouraging signs that this project will commence in the second half. Export markets, and in particular Middle East markets, have remained tough. Project financing delays in the Middle East and distributor credit issues, combined with the ban on exporting from the UAE to Qatar have resulted in overall export revenue (including revenue from our Dubai manufacturing facility) being below the prior year. As previously noted, the decision has been taken to temporarily cease manufacturing in Dubai.
Underlying operating profit in the period at GBP14.5m (2016: GBP15.2m) was 3.9% lower than the prior year, and represents a return on sales of 14.9% (2016: 16.4%). Again, progressive implementation of selling price increases and cost reduction measures to mitigate post EU Referendum material cost and other inflation, combined with the lower revenues from our higher margin export business, meant that margins were lower than prior year.
Commercial and Infrastructure Systems - Europe
Revenue in our Commercial and Infrastructure Systems - Europe segment at GBP37.4m (2016: GBP31.5m) represented 15% of overall Group revenue for the six months ended 30 June 2017 (2016: 14%). This represented growth of 18.9% against the prior year, and 8.6% on a constant currency basis. This segment relates predominantly to our French operations, although it also includes Effast, our Italian pressure pipe business.
There have been some encouraging signs of recovery in the French market, and this has helped drive demand, particularly in the utilities sector where potable water, irrigation and gas pipes have all shown reasonable growth. The market however remains very price competitive, with distributors continuing to compete heavily with each other. Underlying operating profits improved to GBP1.5m (2016: GBP1.0m) representing an improved margin of 3.9% (2016: 3.4%) with improved volumes driving this performance.
Board and Management Changes
On 24(th) May 2017, the Group announced that David Hall, Chief Executive Officer, is to retire on 2(nd) October 2017, and is to be succeeded by Martin Payne, currently Chief Financial Officer. It further announced that Glen Sabin, currently Managing Director Polypipe Plumbing and Heating Division, would be appointed to the Board as Chief Operating Officer, also on 2(nd) October 2017. The handover process is progressing well, as is the process to find a new Chief Financial Officer. Further announcements will be made in due course.
Outlook
Despite the uncertainty caused by EU exit negotiations and the recent UK election, the Group has performed well in the first half of the year, and is well placed to achieve management expectations for the year to 31 December 2017.
The market outlook for the second half remains mixed with new house building continuing to perform well, and with some of the road projects beginning to gather pace, the infrastructure market looks as if it will perform better in the second half. We believe that UK RMI has been static and will continue to be challenging given potential consumer confidence headwinds such as negative real wage growth and continued low levels of housing transactions. Neither the wider Middle East project financing issues nor the more specific Qatar situation show any signs of being resolved in the short term, but exports into other markets are being explored to mitigate the impact on our overall export business, which is not material to the Group.
Despite the uncertainties in some sectors of the market, other parts are expected to continue to perform well. With the long term strategic growth drivers of legacy material substitution, legislative tailwinds in water management and carbon efficiency, and development of selected export markets still strong, and a balanced exposure to the different sectors within the UK construction market, the group is confident of making further progress.
Financial Review
Finance Costs
Net underlying finance costs for the six-month period ended 30 June 2017 of GBP3.4m were GBP0.6m lower than the prior year primarily due to lower net debt as well as reduced interest rate margins resulting from reduced leverage. Interest is payable on the Group's revolving credit facility at LIBOR plus an interest rate margin ranging from 1.25% to 2.75% depending on leverage. The interest rate margin at 30 June 2017 was 1.75%.
In order to reduce exposure to future increases in interest rates the Group has entered into interest rate swaps at fixed rates ranging between 1.735% and 2.21% (excluding margin) with notional amounts hedged ranging from GBP72.2m to GBP91.7m over the period of the interest rate swaps. Details of these swaps are set out in Note 10 to these condensed set of consolidated financial statements.
The unrealised mark to market adjustment on these forward interest rate swaps at 30 June 2017 was GBP3.3m adverse (31 December 2016: GBP4.2m adverse). The movement of GBP0.9m favourable in the period is included in the Group Statement of Comprehensive Income.
Taxation
The Group's tax charge for the six months ended 30 June 2017 was GBP6.4m (2016: GBP5.9m). The underlying tax rate (underlying tax: underlying profit before tax) has been provided at the estimated full year rate of 19.4% (2016 full year: 19.6%). The UK standard tax rate reduced from 20% to 19% on 1 April 2017, and therefore on a simple time apportioned basis the UK standard tax rate for the calendar year 2017 will be 19.25%, broadly in line with the Group's underlying rate. The impact of our mainland European operations on the Group's effective tax rate is not material.
Cash Flow and Net Debt
Cash generated from operations during the period amounted to GBP21.1m (2016: GBP30.5m). This result includes a working capital outflow of GBP26.1m (2016: GBP15.5m). A significant first half working capital outflow is a standard feature of the Group's annual working capital cycle and arises primarily as a result of the timing of rebate settlements. The working capital outflow for the current period is larger than the same period last year for two reasons. Firstly, creditor outflows are GBP8.4m worse than prior year and relate to differences in the timing of purchases in the lead up to the half year, driven by merchant order pull forward in both periods. Secondly, stock levels have increased by GBP6.0m in the period compared to GBP2.4m in the prior year, which reflects stock getting back to normal levels following strong pre price increase demand in December 2016. Whilst the creditor issue is one of timing only, the stock increase is likely to be permanent whilst demand stays at current levels.
Capital expenditure of GBP11.3m (2016: GBP8.4m) is GBP3.2m higher than depreciation and in line with management expectations of GBP25.0m for the year. The large diameter continuous corrugator project at our Horncastle site (which accounts for GBP2.2m in the period) continues to make good progress and is planned to be operational in the first half of 2018.
Net debt (including unamortised debt issue costs) at 30 June 2017 was GBP178.0m and is after the final dividend of GBP13.9m (2016: GBP11.0m) and the working capital outflow and capital expenditure noted above. Leverage at 2.0 times LTM EBITDA compares to 2.3 times proforma LTM EBITDA at 30 June 2016 and 1.9 times LTM EBITDA at 31 December 2016. The Group's working capital cycle means cash generation is significantly stronger in the second half of the year such that leverage will reduce in line with management expectations for the year.
Dividend
The Board has declared an interim dividend of 3.6 pence per share, a 16.1% increase on the 2016 interim dividend. This dividend will be paid on 22 September 2017 to shareholders on the register at the close of business on 25 August 2017.
Our dividend policy is to pay a minimum of 40% of the Group's annual underlying profit after tax. The Directors intend that the Group will pay the total annual dividend in two tranches, an interim dividend and a final dividend, to be announced at the time of announcement of the interim and preliminary results respectively in the approximate proportions of one-third and two-thirds, respectively.
Going Concern
The Group continues to meet its day-to-day working capital and other funding requirements through a combination of long term funding and cash deposits. The Group's bank financing facilities consists of a GBP300.0m revolving credit facility of which GBP92.0m was undrawn at 30 June 2017. Cash balances of a further GBP29.0m as at 30 June 2017 gives total facility headroom of GBP121.0m.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future and for a period of at least twelve months from the date of this report. Accordingly, the Board continues to adopt and consider appropriate the going concern basis in preparing these condensed set of consolidated financial statements.
Principal Risks and Uncertainties
The Board continually assesses and monitors the key risks of the business and Polypipe has developed a risk management framework to identify, report, and manage its principal risks and uncertainties. The principal risks and uncertainties that could have a material impact on the Group's performance and prospects, and the mitigating activities which are aimed at reducing the impact or likelihood of a major risk materialising, have not changed from those which are set out in detail in the principal risks and uncertainties section of our 2016 Annual Report and Accounts. The Directors believe that, whilst not specifically noted, the potential impact of the EU Referendum result is covered within these principal risks and uncertainties.
These principal risks and uncertainties cover raw material prices; business disruption; reliance on key customers; recruitment and retention of key personnel; economic conditions; Government action and policies; Government regulations and standards relating to the manufacture and use of building materials; product liability; information systems; acquisitions and financial risk management (foreign currency exchange risk, credit risk, liquidity risk and interest rate risk).
A copy of the 2016 Annual Report and Accounts is available on the Company's website www.polypipe.com.
Forward-Looking Statements
This report contains various forward-looking statements that reflect management's current views with respect to future events and financial and operational performance. These forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors, which may be beyond the Group's control and which may cause actual results or performance to differ materially from those expressed or implied from such forward-looking statements. All statements (including forward-looking statements) contained herein are made and reflect knowledge and information available as of the date of preparation of this report and the Group disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. Nothing in this report should be construed as a profit forecast.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of consolidated financial statements has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the European Union; and -- The Interim Management Report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, 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 consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
(b) DTR 4.2.8R 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 and Accounts that could do so.
This report was approved by the Board of Directors on 8 August 2017 and is available on the Company's website www.polypipe.com.
The Directors of the Company are:
Ron Marsh Chairman David Hall Chief Executive Officer Martin Payne Chief Financial Officer Paul Dean Non-executive Director and Senior Independent Director Mark Hammond Non-executive Director Moni Mannings Non-executive Director
By order of the Board:
D G Hall M K Payne Chief Executive Officer Chief Financial Officer
INTERIM GROUP INCOME STATEMENT
for the six months ended 30 June 2017 (unaudited)
Notes Six months ended Six months ended
30 June 2017 30 June 2016
Underlying Non-Underlying* Total Underlying Non-Underlying* Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 3 242.0 - 242.0 223.3 - 223.3
Cost of sales (144.1) (1.2) (145.3) (129.8) - (129.8)
----------- ---------------- -------- ----------- ---------------- --------
Gross profit 97.9 (1.2) 96.7 93.5 - 93.5
Selling and
distribution
costs (37.9) - (37.9) (34.3) - (34.3)
Administration
expenses (21.1) - (21.1) (21.5) - (21.5)
-----------
Trading profit 38.9 (1.2) 37.7 37.7 - 37.7
Profit on disposal
of property,
plant and equipment - - - - 0.1 0.1
Amortisation
of intangible
assets - (2.8) (2.8) - (3.9) (3.9)
Operating profit 3 38.9 (4.0) 34.9 37.7 (3.8) 33.9
Finance costs 5 (3.4) - (3.4) (4.0) - (4.0)
----------- ---------------- -------- ----------- ---------------- --------
Profit before
tax 35.5 (4.0) 31.5 33.7 (3.8) 29.9
Income tax 6 (6.9) 0.5 (6.4) (6.6) 0.7 (5.9)
----------- ---------------- -------- ----------- ---------------- --------
Profit for
the period
attributable
to the owners
of the parent
company 28.6 (3.5) 25.1 27.1 (3.1) 24.0
=========== ================ ======== =========== ================ ========
Basic earnings
per share (pence) 7 12.7 12.0
======== ========
Diluted earnings
per share (pence) 7 12.5 12.0
======== ========
Dividend per
share (pence)
- interim 8 3.6 3.1
======== ========
* Non-underlying items are presented separately. Non-underlying items are detailed in Note 4 to the condensed set of consolidated financial statements.
INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2017 (unaudited)
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Profit for the period attributable
to the owners of the parent
company 25.1 24.0
----------- -----------
Other comprehensive income/(expense):
Items which will be reclassified
subsequently to the income
statement:
Exchange differences on translation
of foreign operations 0.3 1.9
Effective portion of changes
in fair value of interest
rate swaps 0.9 (3.3)
Tax relating to items that
will be reclassified to the
income statement (0.1) 0.6
----------- -----------
Other comprehensive income/(expense)
for the period net of tax 1.1 (0.8)
----------- -----------
Total comprehensive income
for the period attributable
to the owners of the parent
company 26.2 23.2
=========== ===========
INTERIM GROUP BALANCE SHEET
at 30 June 2017 (unaudited)
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Non-current assets
Property, plant
and equipment 104.2 99.9 101.0
Intangible assets 368.8 374.6 371.6
--------- --------- ------------
Total non-current
assets 473.0 474.5 472.6
Current assets
Assets held for
sale 0.7 - 0.7
Inventories 58.3 51.0 52.2
Trade and other
receivables 59.2 51.9 40.1
Cash and cash equivalents 29.0 30.3 26.5
--------- --------- ------------
Total current assets 147.2 133.2 119.5
--------- --------- ------------
Total assets 620.2 607.7 592.1
========= ========= ============
Current liabilities
Trade and other
payables (93.1) (88.8) (91.8)
Other financial
liabilities (3.3) (6.1) (5.7)
Income tax payable (7.2) (7.0) (7.0)
--------- --------- ------------
Total current liabilities (103.6) (101.9) (104.5)
--------- --------- ------------
Non-current liabilities
Loans and borrowings (207.0) (221.6) (190.8)
Other liabilities (2.1) (2.0) (2.1)
Deferred income
tax liabilities (6.9) (8.7) (7.3)
--------- --------- ------------
Total non-current
liabilities (216.0) (232.3) (200.2)
Total liabilities (319.6) (334.2) (304.7)
--------- --------- ------------
Net assets 300.6 273.5 287.4
========= ========= ============
Capital and reserves
Equity share capital 0.2 0.2 0.2
Capital redemption
reserve 1.1 1.1 1.1
Treasury shares (4.6) (1.7) (4.6)
Hedging reserve (2.7) (4.4) (3.5)
Foreign currency
retranslation reserve 0.7 (0.6) 0.4
Retained earnings 305.9 278.9 293.8
--------- --------- ------------
Total equity 300.6 273.5 287.4
========= ========= ============
INTERIM GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2017 (unaudited)
Foreign
Equity Capital currency
share redemption Treasury Hedging retranslation Retained Total
capital reserve shares reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Six months ended
30 June 2017
Opening balance 0.2 1.1 (4.6) (3.5) 0.4 293.8 287.4
---------- ------------- ----------- ---------- --------------- ----------- ---------
Profit for
the period - - - - - 25.1 25.1
Other comprehensive
income - - - 0.8 0.3 - 1.1
---------- ------------- ----------- ---------- --------------- ----------- ---------
Total comprehensive
income for
the period - - - 0.8 0.3 25.1 26.2
Dividends
paid - - - - - (13.9) (13.9)
Share-based
payments - - - - - 0.9 0.9
---------- ------------- ----------- ---------- --------------- ----------- ---------
Closing balance 0.2 1.1 (4.6) (2.7) 0.7 305.9 300.6
========== ============= =========== ========== =============== =========== =========
Six months ended
30 June 2016
Opening balance 0.2 1.1 (1.7) (1.7) (2.5) 265.6 261.0
---------- ------------- ----------- ---------- --------------- ----------- ---------
Profit for
the period - - - - - 24.0 24.0
Other comprehensive
(expense)/income - - - (2.7) 1.9 - (0.8)
---------- ------------- ----------- ---------- --------------- ----------- ---------
Total comprehensive
income for
the period - - - (2.7) 1.9 24.0 23.2
Dividends
paid - - - - - (11.0) (11.0)
Share-based
payments - - - - - 0.3 0.3
---------- ------------- ----------- ---------- --------------- ----------- ---------
Closing balance 0.2 1.1 (1.7) (4.4) (0.6) 278.9 273.5
========== ============= =========== ========== =============== =========== =========
INTERIM GROUP CASH FLOW STATEMENT
for the six months ended 30 June 2017 (unaudited)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Operating activities
Profit before tax 31.5 29.9 54.4
Net finance costs 3.4 4.0 7.6
----------- ----------- -------------
Operating profit 34.9 33.9 62.0
Non-cash items:
Profit on disposal
of property, plant
and equipment (0.1) (0.1) (0.3)
Non-underlying items:
- amortisation of intangible
assets 2.8 3.9 6.8
- provision for restructuring 1.2 - -
costs
- settlement of restructuring (0.3) - -
costs
- impairment of freehold
land and buildings - - 0.9
Depreciation 8.1 8.0 16.3
Share-based payments 0.6 0.3 1.0
----------- ----------- -------------
Operating cash flows
before movement in
working capital 47.2 46.0 86.7
Movement in working
capital:
Receivables (18.9) (20.3) (8.3)
Payables (1.2) 7.2 11.5
Inventories (6.0) (2.4) (3.4)
----------- ----------- -------------
Cash generated from
operations 21.1 30.5 86.5
Income tax paid (6.4) (4.3) (10.1)
----------- ----------- -------------
Net cash flows from
operating activities 14.7 26.2 76.4
----------- ----------- -------------
Investing activities
Proceeds from disposal
of property, plant
and equipment 0.2 0.2 0.4
Purchase of property,
plant and equipment (11.3) (8.4) (19.1)
----------- ----------- -------------
Net cash flows from
investing activities (11.1) (8.2) (18.7)
----------- ----------- -------------
Financing activities
Drawdown of bank loan 16.0 5.5 -
Repayment of bank loan - - (25.5)
Interest paid (3.2) (3.8) (7.3)
Dividends paid (13.9) (11.0) (17.1)
Purchase of own shares - - (2.9)
----------- ----------- -------------
Net cash flows from
financing activities (1.1) (9.3) (52.8)
----------- ----------- -------------
Net change in cash
and cash equivalents 2.5 8.7 4.9
Cash and cash equivalents
- opening balance 26.5 21.6 21.6
----------- ----------- -------------
Cash and cash equivalents
- closing balance 29.0 30.3 26.5
=========== =========== =============
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2017
1. Basis of preparation
Polypipe Group plc is incorporated in the UK. The condensed set of consolidated financial statements have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and IAS 34, Interim Financial Reporting, as adopted by the European Union.
As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of consolidated financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2016. These statements do not include all the information required for full annual consolidated financial statements and should be read in conjunction with the full Annual Report and Accounts for the year ended 31 December 2016.
The comparative figures for the financial year ended 31 December 2016, where reported, are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
There are no accounting standards or interpretations that have become effective in the current reporting period which have had a material effect on the net assets, results and disclosures of the Group.
The following listing of standards and interpretations issued are those that the Group reasonably expect to have an impact on disclosures, financial position or performance; but which have an effective date after the date of these consolidated financial statements. The Group has not early adopted them and plans to adopt them from the effective dates adopted by the European Union.
International Accounting Standards Effective
(IAS/IFRSs) date
------------------------------------------ ----------
IFRS 9 Financial Instruments: 1 January
Classification and Measurement 2018
-------- -------------------------------- ----------
IFRS 15 Revenue from Contracts 1 January
with Customers 2018
-------- -------------------------------- ----------
IFRS 16 Leases 1 January
2019
-------- -------------------------------- ----------
None of these standards or interpretations are expected to have a material impact on the Group's consolidated financial statements with the exception of IFRS 16, Leases. Under IFRS 16 the present distinction between operating and finance leases will be removed, resulting in all leases being recognised on the balance sheet (except for those with a very low value). At inception, a right-of-use asset will be recognised together with an equivalent liability reflecting the discounted lease payments over the estimated term of the lease. Whilst the overall cost of using the asset over the lease term should be the same, it is likely that the weighting of the charge between periods may differ due to the requirement to distinguish between the lease and non-lease elements of the agreement. Adoption of this standard is likely to result in an increase in gross assets and gross liabilities in the balance sheet, and finance costs being reclassified in the income statement. Currently the Group does not have any finance leases but does have operating leases. It is not practicable to provide a reasonable financial estimate of the effect of these standards until a detailed review has been completed.
The condensed set of consolidated financial statements are prepared on a going concern basis. This is considered appropriate given that the Company and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future.
There have been no related party transactions in the period to 30 June 2017 apart from compensation of key management personnel.
Two non-statutory measures have been used in preparing the condensed set of consolidated financial statements:
-- Underlying profit and earnings measures exclude certain non-underlying items which are provided in Note 4, and where relevant, the tax effect of these items. The Directors consider that these measures provide a better and more consistent indication of the Group's underlying financial performance and more meaningful comparison with prior and future periods to assess trends in our financial performance.
-- LTM EBITDA is defined as underlying operating profit before depreciation for the twelve months preceding the balance sheet date.
2. Financial risks, estimates, assumptions and judgements
The preparation of the condensed set of 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 expenses. Actual results may differ from estimates.
In preparing these condensed set of consolidated financial statements, the 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 as at and for the year ended 31 December 2016.
3. Segment information
The Group has three reporting segments - Residential Systems (all UK by origin), Commercial and Infrastructure Systems - UK, and Commercial and Infrastructure Systems - Mainland Europe. Several operating segments that have similar economic characteristics have been aggregated into these three reporting segments.
Six months ended Six months ended
30 June 2017 30 June 2016
-------------------------------- ------------------------------
Underlying Underlying
Revenue Result result Revenue Result result
GBPm GBPm GBPm GBPm GBPm GBPm
Residential Systems 115.0 22.6 22.9 105.4 21.6 21.5
Commercial and
Infrastructure
Systems - UK 97.7 13.6 14.5 92.7 15.2 15.2
Inter-segment
sales (7.0) (5.5)
---------- ------- ----------- -------- ------- -----------
UK operations 205.7 36.2 37.4 192.6 36.8 36.7
Commercial and
Infrastructure
Systems - Mainland
Europe 37.4 1.5 1.5 31.5 1.0 1.0
Inter-segment
sales (1.1) (0.8)
Non-underlying
Group items - (2.8) - - (3.9) -
---------- ------- ----------- -------- ------- -----------
Total - Group 242.0 34.9 38.9 223.3 33.9 37.7
========== ========
Net finance costs (3.4) (3.4) (4.0) (4.0)
Profit before
tax 31.5 35.5 29.9 33.7
======= =========== ======= ===========
Geographical analysis
Revenue by destination:
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
UK 185.7 171.4
Rest of Europe 41.0 35.5
Rest of World 15.3 16.4
----------- -----------
Total - Group 242.0 223.3
=========== ===========
4. Non-underlying items
Non-underlying items comprised:
Six months Six months
ended ended 30 June
30 June 2017 2016
--------------------- ---------------------
Gross Tax Net Gross Tax Net
GBPm GBPm GBPm GBPm GBPm GBPm
Profit on disposal
of property, plant
and equipment - - - 0.1 - 0.1
Restructuring costs (1.2) - (1.2) - - -
Amortisation of intangible
assets (2.8) 0.5 (2.3) (3.9) 0.7 (3.2)
Total non-underlying
items (4.0) 0.5 (3.5) (3.8) 0.7 (3.1)
====== ===== ====== ====== ===== ======
Restructuring costs of GBP1.2m (2016: GBPnil) related to the temporary cessation of production in our factory in the Middle East of GBP0.9m and the consolidation of our ventilation business on to one site of GBP0.3m.
5. Finance costs
Six months Six months
ended ended
30 June 30 June
2017 2016
GBPm GBPm
Interest on bank loan 2.8 3.5
Debt issue cost amortisation 0.2 0.2
Other finance costs 0.4 0.3
Finance costs 3.4 4.0
=========== ===========
6. Income tax
Tax has been provided on the profit before tax, at the estimated effective rate for the full year of 20.3% (2016: 19.7%). Tax on underlying profit before tax was 19.4% (2016: 19.6%).
7. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the period attributable to the owners of the parent company by the weighted average number of ordinary shares outstanding during the period. The diluted earnings per share amounts are calculated by dividing profit for the period attributable to the owners of the parent company by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The calculation of basic and diluted earnings per share is based on the following:
Six months Six months
ended ended
30 June 30 June
2017 2016
Weighted average number of
ordinary shares for the purpose
of basic earnings per share 198,287,022 199,273,278
Share options 2,196,051 831,665
-------------- --------------
Weighted average number of
ordinary shares for the purpose
of diluted earnings per share 200,483,073 200,104,943
============== ==============
Underlying earnings per share is based on the result for the period after tax, excluding the impact of non-underlying items of GBP3.5m (2016: GBP3.1m). The Directors consider that this measure provides a better and more consistent indication of the Group's underlying financial performance and more meaningful comparison with prior and future periods to assess trends in our financial performance. The underlying earnings per share is calculated as follows:
Six Six
months months
ended ended
30 June 30 June
2017 2016
Underlying profit for the period
attributable to the owners of
the parent company (GBPm) 28.6 27.1
========= =========
Underlying basic earnings per
share (pence) 14.4 13.6
========= =========
Underlying diluted earnings per
share (pence) 14.3 13.5
========= =========
8. Dividends
The Directors have proposed an interim dividend for the current year of GBP7.1m which equates to 3.6 pence per share.
9. Analysis of net debt
30 June 30 June 31 December
2017 2016 2016
GBPm GBPm GBPm
Cash and cash equivalents 29.0 30.3 26.5
-------- -------- ------------
Non-current loans
and borrowings:
- Bank loan (208.0) (223.0) (192.0)
- Unamortised debt
issue costs 1.0 1.4 1.2
-------- -------- ------------
(207.0) (221.6) (190.8)
-------- -------- ------------
Net debt (178.0) (191.3) (164.3)
======== ======== ============
10. Other financial liabilities
Fair values of financial assets and financial liabilities
The book value of trade and other receivables, trade and other payables, cash balances, bank loan and other financial liabilities equates to fair value.
30 June 2017 Carrying Fair value
value GBPm
GBPm
Interest rate swaps (3.3) (3.3)
========= ===========
30 June 2016 Carrying Fair value
value GBPm
GBPm
Forward foreign currency derivatives (0.7) (0.7)
Interest rate swaps (5.4) (5.4)
========= ===========
31 December 2016 Carrying Fair value
value GBPm
GBPm
Forward foreign currency derivatives (1.5) (1.5)
Interest rate swaps (4.2) (4.2)
========= ===========
The interest rate on the Group's GBP300m revolving credit facility is variable, being payable at LIBOR plus a margin. To reduce the Group's exposure to future increases in interest rates the Group has entered into interest rate swaps for the following notional amounts, with interest payable at a fixed rate return dependant on the swap of either 2.21% or 1.735% (2016: 2.21% or 1.735%) (excluding margin):
Year ended 31 December Notional Notional
amount - amount -
rate of rate of 1.735%
2.21% GBPm
GBPm
2017 70.2 10.7
2018 66.6 25.1
2019 - 82.0
To August 2020 - 72.2
The fair value of the interest rate swaps were determined by reference to market values.
Forward foreign currency exchange contracts fair value was determined using quoted forward exchange rates matching the maturities of the contracts.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The fair values disclosed above all relate to items categorised as Level 2.
There have been no transfers in any direction in the period.
INDEPENDENT REVIEW REPORT TO
POLYPIPE GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set of consolidated financial statements in the interim financial report for the six months ended 30 June 2017 which comprises the Interim Group Income Statement, the Interim Group Statement of Comprehensive Income, the Interim Group Balance Sheet, the Interim Group Statement of Changes in Equity, the Interim Group Cash Flow Statement and the related Notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland), Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority.
As disclosed in Note 1, the annual consolidated financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of consolidated financial statements included in this interim financial report has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the interim financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the interim financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority.
Ernst & Young LLP
Leeds
8 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKODQPBKDBFK
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August 08, 2017 02:00 ET (06:00 GMT)
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