REG - Avon Rubber PLC - Final Results <Origin Href="QuoteRef">AVON.L</Origin> - Part 2
15/11/2017 07:05
- Part 2: For the preceding part double click ID:nRSO5062Wa
4 - - - 3.5 3.5
Total comprehensive income for the year - - 6.2 (2.9) 3.3
Dividends paid 5 - - - (2.4) (2.4)
Movement in shares held by the employee benefit trust 8 - - - (1.8) (1.8)
Movement in respect of employee share schemes 12 - - - 1.0 1.0
Deferred tax relating to employee share schemes 4 - - - (0.3) (0.3)
At 30 September 2016 31.0 34.7 9.1 (32.8) 42.0
Profit for the year - - - 21.5 21.5
Net exchange differences offset in reserves - - (2.3) - (2.3)
Tax relating to exchange differences offset in reserves - - 0.2 - 0.2
Cash flow hedges - - - 1.1 1.1
Actuarial loss recognised on retirement benefit scheme - - - (3.8) (3.8)
Deferred tax relating to retirement benefit scheme 4 - - - 0.6 0.6
Total comprehensive income for the year - - (2.1) 19.4 17.3
Dividends paid 5 - - - (3.2) (3.2)
Movement in shares held by the employee benefit trust 8 - - - (1.0) (1.0)
Movement in respect of employee share schemes 12 - - - 0.9 0.9
Deferred tax relating to employee share schemes 4 - - - (0.4) (0.4)
At 30 September 2017 31.0 34.7 7.0 (17.1) 55.6
Notes to the financial statements
1. Accounting policies
Basis of preparation
The financial information set out in this document does not constitute the
Group's statutory accounts for the year ended 30 September 2017 or 30
September 2016. Statutory accounts for the year ended 30 September 2016 were
approved by the Board of Directors on 16 November 2016 and delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under Section 498 of the Companies Act 2006. Statutory
accounts for the year ended 30 September 2017 have not yet been delivered to
the Registrar nor have the auditors yet reported on them.
This financial information has been prepared in accordance with International
Financial Reporting Standards and International Financial Reporting
Interpretations Committee (IFRIC) interpretations as adopted by the European
Union (collectively 'IFRSs') and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
Certain statements in this announcement constitute forward-looking statements.
Any statement in this announcement that is not a statement of historical fact
including, without limitation, those regarding the Company's future
expectations, operations, financial performance, financial condition and
business is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties include, among other factors,
changing economic, financial, business or other market conditions. These and
other factors could adversely affect the outcome and financial effects of the
plans and events described in this announcement and the Company undertakes no
obligation to update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this announcement
should be constructed as a profit forecast.
Recent accounting developments
The following amendments to existing standards were adopted for the financial
year but with no impact on the financial statements:
· Amendments to IAS 1, 'Disclosure Initiative'
· Amendments to IFRS 10, IFRS 12 and IAS 28, 'Applying the consolidation
exemption'
· Annual improvements 2012-2014 cycle
At the time of this report, the following standards and interpretations which
have not been applied in these financial statements were in issue but not yet
effective for the financial period:
· IFRS 9, 'Financial instruments' (applicable from year ending 30 September
2019)
· IFRS 15, 'Revenue from Customer Contracts' (applicable from year ending
30 September 2019)
· IFRS 16, 'Leases' (applicable from year ending 30 September 2020)
The Directors plan to adopt these standards in line with their effective
dates.
Under IFRS 16 'Leases', lessees will be required to apply a single model to
recognise a lease liability and asset for all leases, including those
classified as operating leases under current accounting standards, unless the
underlying asset has a low value or the lease term is 12 months or less. The
adoption of IFRS 16 will have a significant impact on the financial statements
as each lease will give rise to a right of use asset which will be depreciated
on a straight line basis, and a lease liability with a related interest
charge. The depreciation and interest will replace the operating lease
payments currently recognised as an expense. The impact will depend on the
transition approach and the contracts in effect at the time of the adoption.
At 30 September 2017, operating lease commitments were £19.7m and operating
lease payments for 2017 were £2.3m.
The Directors anticipate that the adoption of IFRS 9 and IFRS 15 will not have
a material impact on the amounts reported and disclosures made in the Group's
financial statements in the period of initial application.
2. Segment information
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Group
Executive team.
The Group has two clearly defined business segments, Protection and Dairy.
Business segments
Year ended 30 September 2017
Protection Dairy Unallocated Group
£m £m £m £m
Revenue 113.8 49.4 163.2
Segment result before depreciation, amortisation, exceptional items and defined benefit pension scheme costs 27.1 10.9 (2.0) 36.0
Depreciation of property, plant and equipment (3.7) (2.3) - (6.0)
Amortisation of development costs and software (3.6) (0.6) - (4.2)
Segment result before amortisation of acquired intangibles, exceptional items and defined benefit pension scheme costs 19.8 8.0 (2.0) 25.8
Amortisation of acquired intangibles (1.0) (2.0) - (3.0)
Exceptional items (2.9) 0.3 - (2.6)
Defined benefit pension scheme costs (0.4) (0.4)
Segment result 15.9 6.3 (2.4) 19.8
Finance income 0.1
Finance costs (0.3)
Other finance expense (1.0)
Profit before taxation 18.6
Taxation 2.9
Profit for the year 21.5
Segment assets 62.3 50.2 34.7 147.2
Segment liabilities 15.6 15.3 60.7 91.6
Other segment items
Capital expenditure
- intangible assets 2.2 0.7 - 2.9
- property, plant and equipment 1.1 1.5 - 2.6
The Protection segment includes £50.5m (2016: £52.9m) of revenues from the US
DoD, the only customer which individually contributes more than 10% to Group
revenues.
Year ended 30 September 2016
Protection (restated) Dairy Unallocated Group (restated)
£m £m £m £m
Revenue 100.9 42.0 - 142.9
Segment result before depreciation, amortisation, exceptional items and defined benefit pension scheme costs 21.5 9.8 (1.4) 29.9
Depreciation of property, plant and equipment (3.9) (2.0) - (5.9)
Amortisation of development costs and software (2.5) (0.6) - (3.1)
Segment result before amortisation of acquired intangibles, exceptional items and defined benefit pension scheme costs 15.1 7.2 (1.4) 20.9
Amortisation of acquired intangibles (1.5) (1.8) - (3.3)
Exceptional items (0.5) - - (0.5)
Defined benefit pension scheme costs - - (0.3) (0.3)
Segment result 13.1 5.4 (1.7) 16.8
Finance income -
Finance costs (0.2)
Other finance expense (0.7)
Profit before taxation 15.9
Taxation 2.0
Profit for the year from continuing operations 17.9
Discontinued operations - loss for the year (0.3)
Profit for the year 17.6
Segment assets 69.2 48.6 12.5 130.3
Segment liabilities 14.2 12.3 61.8 88.3
Other segment items
Capital expenditure
- intangible assets 2.7 0.6 - 3.3
- property, plant and equipment 1.9 1.7 - 3.6
Geographical segments by origin
Year ended 30 September 2017
North America Europe Group
£m £m £m
Revenue 123.0 40.2 163.2
Non-current assets 27.9 47.0 74.9
Year ended 30 September 2016
North America Europe Group
£m £m £m
Revenue 111.2 31.7 142.9
Non-current assets 40.2 45.0 85.2
3. Adjustments and discontinued operations
2017 2016
£m £m
Amortisation of acquired intangible assets (3.0) (3.3)
Exceptional impairment of capitalised development expenditure (2.6) -
Exceptional impairment of plant and machinery (0.3) -
Exceptional post-acquisition working capital adjustment 0.3 -
Exceptional integration costs - (0.5)
Defined benefit pension scheme administration costs (0.4) (0.3)
(6.0) (4.1)
The tax impact of the above gives rise to a deferred tax credit to the income
statement of £1.0m (2016: £0.9m).
The impairment of capitalised development expenditure and plant and machinery
in 2017 represents the write down of costs of developing the Emergency Escape
Breathing Device (EEBD) product. Further development of this product has been
terminated as there are limited commercial opportunities in the current
market.
The integration costs in 2016 relate to the acquisition of the argus thermal
imaging camera business and the relocation of the manufacturing to our
Melksham, UK site.
Defined benefit pension scheme costs relate to administrative expenses of the
scheme which is closed to future accrual. £1.0m (2016: £0.7m) of other finance
expense relating to the pension scheme is also treated as an adjustment.
The impact on the cash flow statement of the exceptional items was £0.3m cash
inflow (2016: £0.4m cash outflow).
2017 2016
£m £m
Loss from discontinued operations - 0.3
The loss from discontinued operations in 2016 relates to dilapidations costs
of former leased premises of a business which was disposed of in 2006. There
was no tax impact of these costs.
Discontinued operations had no impact on the cashflow statement in 2017 (2016:
£0.3m).
4. Taxation
2017 2016 (restated)
£m £m
UK current tax 2.2 1.2
UK adjustment in respect of previous periods (0.3) -
Overseas current tax 1.5 2.2
Overseas adjustment in respect of previous periods (2.6) (3.8)
Total current tax charge/(credit) 0.8 (0.4)
Deferred tax - current year 0.6 (0.9)
Deferred tax - adjustment in respect of previous periods (4.3) (0.7)
Total deferred tax credit (3.7) (1.6)
Total tax credit (2.9) (2.0)
The tax on the Group's profit before taxation differs from the theoretical
amount that would arise using the standard UK tax rate applicable to profits
of the consolidated entities as follows:
2017 2016 (restated)
£m £m
Profit before taxation 18.6 15.9
Profit before taxation at the average standard rate of 19.5% (2016: 20.0%) 3.6 3.2
Permanent differences (0.1) (1.0)
Losses for which no deferred taxation asset was recognised - (0.6)
Differences in overseas tax rates 0.8 0.8
Adjustment in respect of previous periods (7.2) (4.4)
Tax (credit) (2.9) (2.0)
The £7.2m credit adjustment in respect of previous periods includes a £2.3m
tax credit in connection with company restructuring in previous years and the
release of provisions following an updated assessment of uncertain tax
positions.
The income tax credited directly to equity during the year was £0.2m (2016:
£1.7m charge).
The deferred tax credited directly to equity during the year was £0.2m (2016:
£3.2m).
Deferred tax liabilities
Accelerated capital allowances Other temporary differences Total
£m £m £m
At 1 October 2015 2.5 7.2 9.7
Arising on acquisition of subsidiaries - 0.5 0.5
Credited to profit for the year (0.3) (1.2) (1.5)
Exchange differences 0.3 1.0 1.3
At 30 September 2016 2.5 7.5 10.0
Credited to profit for the year (0.7) (2.8) (3.5)
Exchange differences 0.1 0.2 0.3
At 30 September 2017 1.9 4.9 6.8
Deferred tax assets have been recognised in respect of temporary differences
giving rise to deferred tax assets where it is probable that these assets will
be recovered.
Deferred tax assets
Retirement benefit obligation Share options (restated) Accelerated capital allowances Other temporary differences Total (restated)
£m £m £m £m £m
At 30 September 2015 3.3 0.7 0.4 0.1 4.5
Credited/(charged) to profit for the year - 0.2 - (0.1) (0.1)
Credited/(charged) to equity on recognition 3.5 (0.3) - - 3.2
At 30 September 2016 6.8 0.6 0.4 - 7.8
Credited/(charged) against profit for the year 0.1 0.2 (0.1) - 0.2
Credited/(charged) to equity 0.6 (0.4) - - 0.2
At 30 September 2017 7.5 0.4 0.3 - 8.2
The standard rate of corporation tax in the UK is 19%.
A number of changes to the UK corporation tax system were announced in the
March 2016 Budget Statement, which reduce the main rate of corporation tax to
17% by 1 April 2020. These changes were substantively enacted at the balance
sheet date. The overall effect of the change has not had any material impact
on the Group's deferred tax liabilities as the majority of the Group's
deferred tax liabilities are not held in the UK. The impact on the Group's
deferred tax asset was a reduction of £1.4m.
The Group has not recognised deferred tax assets in respect of the following
matters in the UK, as it is uncertain when the criteria for recognition of
these assets will be met.
2017 2016
£m £m
Losses - -
Other 0.7 0.7
0.7 0.7
5. Dividends
On 2 February 2017, the shareholders approved a final dividend of 6.32p per
qualifying ordinary share in respect of the year ended 30 September 2016. This
was paid on 17 March 2017 absorbing £1.9m of shareholders' funds.
The Board of Directors declared an interim dividend of 4.11p (2016: 3.16p) per
qualifying ordinary share in respect of the year ended 30 September 2017. This
was paid on 8 September 2017 absorbing £1.3m (2016: £1.0m) of shareholders'
funds.
After the balance sheet date the Board of Directors proposed a final dividend
of 8.21p per qualifying ordinary share in respect of the year ended 30
September 2017, which will absorb an estimated £2.5m of shareholders' funds.
Subject to shareholder approval, the dividend will be paid on 16 March 2018 to
shareholders on the register at the close of business on 16 February 2018. In
accordance with accounting standards this dividend has not been provided for
and there are no corporation tax consequences.
6. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the year, excluding those held in the employee share ownership
trust. The company has dilutive potential ordinary shares in respect of the
Performance Share Plan. Adjusted earnings per share removes the effect of the
amortisation of acquired intangible assets, exceptional items, acquisition
costs and defined benefit pension scheme costs.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below.
2017 2016
Weighted average number of ordinary shares in issue used in basic calculations (thousands) 30,434 30,276
Potentially dilutive shares (weighted average) (thousands) 186 612
Fully diluted number of ordinary shares (weighted average) (thousands) 30,620 30,888
2017 2016 (restated)
Basic eps Diluted eps Basic eps Diluted eps
£m pence pence £m pence pence
Profit attributable to equity shareholders of the Company 21.5 70.6 70.2 17.6 58.1 57.0
Loss from discontinued operations - - - 0.3 1.0 1.0
Profit from continuing operations 21.5 70.6 70.2 17.9 59.1 58.0
Adjustments 3.7 12.2 12.1 3.9 12.8 12.6
Profit excluding loss from discontinued operations, amortisation of acquired intangible assets, exceptional items, acquisition costs and defined benefit pension scheme costs 25.2 82.8 82.3 21.8 71.9 70.6
7. Provisions for liabilities and charges
Property
obligations Total
£m £m
Balance at 30 September 2015 2.6 2.6
Payments in the year (0.1) (0.1)
Balance at 30 September 2016 2.5 2.5
Payments in the year (0.5) (0.5)
Balance at 30 September 2017 2.0 2.0
2017 2016
Analysis of total provisions £m £m
Non-current 1.7 1.8
Current 0.3 0.7
2.0 2.5
Property obligations include an onerous lease provision of £1.2m in respect of
unutilised space at the Group's leased Melksham facility in the UK. £0.3m of
this provision is expected to be utilised in 2018 and the remaining £0.9m over
the following five years. Other property obligations relate to former premises
of the Group which are subject to dilapidation risks and are expected to be
utilised within the next ten years. Property provisions are subject to
uncertainty in respect of the utilisation, non-utilisation, or subletting of
surplus leasehold property and the final negotiated settlement of any
dilapidation claims with landlords.
8. Share capital
No. of shares Ordinary shares Share premium No. of shares Ordinary shares Share premium
2017 2017 2017 2016 2016 2016
£m £m £m £m
Called up allotted and fully paid ordinary shares of £1 each
At the beginning of the year 31,023,292 31.0 34.7 31,023,292 31.0 34.7
At the end of the year 31,023,292 31.0 34.7 31,023,292 31.0 34.7
Ordinary shareholders are entitled to receive dividends and are entitled to
vote at meetings of the Company.
At 30 September 2017 565,803 (2016: 718,789) ordinary shares were held by a
trust in respect of obligations under the 2010 Performance Share Plan.
Dividends on these shares have been waived. The market value of the shares
held in the trust at 30 September 2017 was £5.3m (2016: £7.3m). These shares
are held at cost as treasury shares and deducted from shareholders' equity.
During 2017 the trust acquired 100,000 (2016: 181,890) shares at a cost of
£1.0m (2016: £1.8m).
247,099 (2016: 343,526) shares were used to satisfy awards following the
vesting of shares relating to the 2010 Performance Share Plan.
5,887 (2016: 6,890) ordinary shares of £1 each were awarded in relation to the
annual incentive plan.
9. Cash generated from operations
2017 2016
£m £m
Continuing operations
Profit for the year 21.5 17.9
Adjustments for:
Taxation (2.9) (2.0)
Depreciation 6.0 5.9
Amortisation of intangible assets 7.2 6.4
Impairment of plant and machinery 0.3 -
Impairment of development expenditure 2.6 -
Defined benefit pension scheme cost 0.4 0.3
Finance income (0.1) -
Finance costs 0.3 0.2
Other finance expense 1.0 0.7
Movement in respect of employee share scheme 0.9 1.0
Increase in inventories (1.7) (0.4)
Increase/(decrease) in receivables (4.7) (0.7)
Increase/(decrease) in payables and provisions 4.8 3.4
Cash generated from continuing operations 35.6 32.7
Analysed as:
Cash generated from continuing operations prior to the effect of exceptional operating items 35.3 33.1
Cash effect of exceptional operating items 0.3 (0.4)
Discontinued operations
Loss for the year - (0.3)
Cash used in discontinued operations - (0.3)
Cash generated from operations 35.6 32.4
Cash flows relating to the discontinued operations are as follows:
2017 2016
£m £m
Cash flows from operating activities - (0.3)
Cash used in discontinued operations - (0.3)
Analysis of net cash/(debt)
This note sets out the calculation of net debt, a measure considered important
in explaining our financial position.
At 1 Oct 2016 Cash flow Exchange movements At 30 Sept 2017
£m £m £m £m
Cash at bank and in hand 4.5 22.0 - 26.5
Overdrafts - - - -
Net cash and cash equivalents 4.5 22.0 - 26.5
Debt due in less than 1 year (2.5) 0.8 (0.1) (1.8)
2.0 22.8 (0.1) 24.7
On 9 June 2014 the Group agreed new bank facilities with Barclays Bank and
Comerica Bank. The combined facility comprises a revolving credit facility of
$40m and expires on 30 November 2019. This facility is priced on the Dollar
LIBOR plus margin of 1.25% and includes financial covenants which are measured
on a quarterly basis. The Group was in compliance with its financial covenants
during 2017 and 2016.
InterPuls S.p.A. had a fixed term loan of E2.0m which expired on 31 October
2017. This facility is priced on EURIBOR plus margin of 1.15%.
10. Exchange rates
The following significant exchange rates applied during the year:
Average rate Closing rate Average rate Closing rate
2017 2017 2016 2016
US Dollar 1.267 1.339 1.423 1.296
Euro 1.147 1.134 1.282 1.161
11. Share based payments
The Group operates an equity-settled share-based performance share plan (PSP).
An expense of £0.9m was recognised in the year. In 2017 an error was
identified in the process for valuing the share based payments charged to the
income statement in previous years. The comparative figures for 2016 have
therefore been restated to correct the charge and the related disclosures. The
effect is to increase the 2016 share based payment charge from £0.1m to £1.0m
and to reduce statutory and adjusted operating profit by £0.9m. The share
based payment charge is a non-cash amount and there is no impact on the
group's balance sheet.
A Monte Carlo simulation was used to calculate the fair value of awards
granted that are subject to a Total Shareholder Return performance condition.
The fair value of other awards was calculated as the market price of the
shares at the date of grant reduced by the present value of the dividends
expected to be paid over the vesting period. The principal assumptions used
were:
2017 2016
(restated)
Weighted average fair value (£) 8.02 8.13
Key assumptions used:
Weighted average share price (£) 10.40 10.72
Expected volatility (%) 28 23
Risk-free interest rate (%) 0.2 0.8
Expected option term (yrs.) 3.0 3.0
Dividend yield (%) 0.9 0.7
Volatility is estimated based on actual experience over the last three years.
12. Annual Report & Accounts
Copies of the Directors' report and the audited financial statements for the
year ended 30 September 2017 will be posted to shareholders who have elected
to receive a copy and may also be obtained from the Company's registered
office at Hampton Park West, Semington Road, Melksham, Wiltshire, SN12 6NB,
England. Full audited financial statements will be available on the Company's
website at www.avon-rubber.com.
This information is provided by RNS
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