REG - Elementis PLC - Half-year Report
02/08/2022 07:00
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RNS Number : 5286U Elementis PLC 02 August 2022
2 August 2022
ELEMENTIS plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2022
Strong financial performance, adjusted operating profit up 21% to $66m
· Revenue up 6% (up 9% on an underlying basis*) to $478m driven
primarily by successful pricing actions to address rapid cost inflation, as
well as improved mix.
· Adjusted operating profit up 21% (25% on an underlying basis*) to
$66m, with adjusted operating margin up from 12.0% to 13.7%, as improved
price/mix offset continued cost inflation. Profit after tax of $21m compared
to $28m in prior year period, with improved performance offset by higher
adjusting items(6).
· Leverage ratio(5) down from 3.0x (H1 21) to 2.4x net debt/EBITDA and
further progress expected at the year end, in line with typical cash flow
seasonality. Net debt of $393m down on the prior year (30 June 21: $415m),
with increased earnings partially offset by working capital outflow to secure
adequate supplies of critical inventory and to fund growth.
Further strategic progress, well positioned for sustainable growth and value
creation
· Record Coatings performance, reflective of a higher quality
business with further growth potential. Strong Personal Care performance
linked to demand recovery and encouraging strategic momentum. As expected,
Talc performance was impacted by auto and paper demand related market
headwinds - self-help actions, including the full benefit of price increases,
to drive improved second half.
· Continued progress on Innovation, Growth and Efficiency strategy to
deliver medium term Group performance objectives. Delivered $36m of revenue
from new business opportunities, 10 new product launches with new product
revenues up from 13% to 14% of sales. On course for targeted $10m of annual
cost savings by 2023, with new India AP Actives plant on track for full start
up.
· Strategic review of Chromium progressing - further update expected
around calendar year end.
Upgrade to guidance - strength in a challenging environment
· Steady demand coupled with self-help actions are anticipated to drive
an improved full year financial performance and further deleveraging.
· While mindful of macroeconomic headwinds, the Group's financial
performance is expected to be towards the top end of consensus expectations^.
FINANCIAL SUMMARY
Six months ended 30 June 2022 Six months ended % Change Reported
30 June 2021
Revenue $478m $452m +6%
Profit for the period $21m $28m -25%
Basic earnings per share(2) 3.6c 4.8c -25%
Adjusted operating profit(1) $66m $54m +21%
Adjusted profit before tax(1) $53m $40m +34%
Adjusted diluted earnings per share(2) 7.1c 5.5c +29%
Adjusted operating cash flow(3) $19m $30m -37%
Net debt(4) $393m $415m -5%
Ordinary dividend per share - - -
Business performance overview
· Personal Care revenue up 23% on an underlying basis* (up 19% on a
reported basis) at $106m. Adjusted operating profit up 42% on an underlying
basis* (up 35% on a reported basis) to $26m, with adjusted operating margin of
24.5%, up from 21.6% in the prior year.
o Strong performance against a weak prior year comparative driven by improved
category demand as COVID-19 restrictions ease, pricing actions and continued
new business success in skin care and Asia.
o Margins at 24.5%, back towards historical levels, with underlying growth
offsetting input cost inflation.
· Coatings revenue up 9% on an underlying basis* (up 6% on a reported
basis), from $197m to $209m. Adjusted operating profit of $44m significantly
up on prior year ($33m), with adjusted operating profit margins of 20.9%, up
from 16.7% in the prior year.
o Strong new business momentum, particularly in North America, and
successful pricing actions partially offset by China volume weakness and
normalisation of European decorative demand.
o Continued margin improvement despite accelerating input cost inflation,
reflective of improved product portfolio, new business wins and pricing
actions.
· Talc revenue up 4% on an underlying basis* to $73m (down 5% on a
reported basis). As expected, adjusted operating profit down from $8m to $3m,
with adjusted operating margin of 3.7%, down from 10.3% in the prior year.
o Successful pricing actions offset by particularly weak European automotive
demand and strike at a major paper customer (since resolved).
o Margins impacted by short term volume impact, while pricing actions fully
mitigate variable cost increases.
· Chromium revenue up 1% to $91m. Adjusted operating profit down 9%
to $4m.
o Modest revenue improvement, with strong pricing actions and better mix
partially offset by lower volumes due to reduced production at Castle Hayne
(now resolved).
o Adjusted operating margin down from 5.1% to 4.6%, with variable cost
inflation fully offset by price increases, but outweighed by reduced plant
production and associated maintenance costs.
Commenting on the results, CEO, Paul Waterman said:
"We have made a strong start to the year, benefiting from the combination of
focused strategy execution and proactive price management. Whilst we are
mindful of the continued macroeconomic risks, the Group has demonstrated the
attractiveness of its business model and is well positioned to manage these
impacts. We expect that steady demand coupled with our self-help agenda will
drive an improved financial performance, towards the top end of expectations,
alongside further deleveraging.
The fundamentals of our business remain strong. We have high quality assets
with enduring competitive advantages and strong pricing power, and I am
confident that the implementation of our Innovation, Growth and Efficiency
strategy will position Elementis to deliver our medium term financial
ambitions and generate significant shareholder value".
Notes:
^ Based on company compiled consensus, the Board believes current market
forecast for 2022 adjusted operating profit to be in the range of $107m to
$125m with an average of $115m.
* Adjusted for constant currency. See Finance Report.
** New products defined as products launched within the last 5 years that are
patented and protected products (excluding Chromium)
1 - See note 5
2 - See note 9
3 - See Finance report
4 - See note 12
5 - See unaudited pro forma information
6 - As detailed in note 5, including a $23m non-cash impairment in respect of
non-operational nickel bio-leaching PPE
Further information
A virtual presentation for investors and analysts will be held at 09:30 BST on
2 August 2022. The presentation will be webcast on www.elementis.com
(http://www.elementis.com) and a copy of this Interim Results announcement can
also be found on this website. Conference call dial in details:
UK: 020 3936 2999 Other locations: +44 20 3936 2999
Participant access code: 530093
Enquiries
Elementis
James Curran, Investor Relations 020 7067 2994
Tulchan
Martin
Robinson 020
7353 4200
Olivia Peters
- ENDS -
Business review
CEO's report
The Group delivered a strong financial performance in the first six months of
the year, despite global supply chains remaining stretched, inflation surging
and pockets of soft demand. This is testament to the attractiveness of our
business model and the importance of our self-help agenda. Coatings and
Personal Care performed particularly well, and while Talc's financial
performance was as expected disappointing due to market related headwinds, the
fundamentals of the business are unchanged and with clear opportunities for
margin recovery and growth. The Group's performance, combined with continued
strategic momentum as part of our Innovation, Growth and Efficiency agenda,
has put us in a good position to make further progress towards our medium term
performance objectives.
Group performance
In the six months to 30 June 2022, revenue rose 9% on an underlying basis* (up
6% on a reported basis) as strong pricing and mix improvements more than
offset weaker volumes linked to unplanned maintenance in Chromium, China
coatings softness and automotive and paper related headwinds in Talc. Adjusted
operating profit rose 21% on a reported basis to $66m, with successful pricing
actions and improved mix more than offsetting cost inflation linked to global
supply chain challenges. As a result, margins improved from 12.0% to 13.7%.
Reported operating profit decreased from $45m to $32m because of increased
adjusting items, as detailed in Note 5.
Personal Care
In the six months to 30 June 2022, Personal Care revenue increased 23% on an
underlying basis* (up 19% on a reported basis) against a weak prior year
comparative driven by demand recovery, pricing actions and continued strategic
progress. As COVID-19 related social and travel restrictions further eased,
particularly in the western hemisphere, retail demand in our two key end
markets, colour cosmetics and anti-perspirant deodorants, continued to
recover. Asia and skin care, two areas of strategic focus, also showed good
momentum. Despite lockdowns in China, sales into Asia grew 18% driven by
recent capability investments, while skin care sales grew 23% supported by new
product launches.
Adjusted operating profit for Personal Care increased 42% on an underlying
basis* (up 35% on a reported basis) to $26m, with an adjusted operating margin
of 24.5% versus 21.6% in the prior year. Improved volumes and successful
pricing actions more than offset increased input costs.
Coatings
In Coatings, revenue rose 9% on an underlying basis* (up 6% on a reported
basis) to $209m with successful pricing actions and improved mix offsetting
lower volumes. All regional performance commentary is on an underlying basis*
unless otherwise stated.
· Americas revenue rose 47% on the back of strong new business success
and pricing actions. In the US, decorative demand remained healthy, driven by
steady construction and residential property activity, and continued new
business momentum for our Rheolate(®) HX rheology series. Revenue from
industrial coatings was higher than the prior year period as underlying demand
improved in areas such as maintenance and protective coatings.
· EMEA revenue rose 20% on the prior year period as improved pricing
and robust industrial demand more than offset a normalisation in decorative
activity. Industrial coatings demand improved, reflective of new business
success, particularly for our Thixatrol(®) (organic thixotrope) products for
adhesive and sealants applications.
· In Asia, where approximately 80% of our sales come from industrial
coatings, revenue declined 27% because of weaker industrial activity in China,
our largest market (~70% of regional sales), due to COVID-19 lockdowns.
Outside of China, performance was much stronger in South East Asia as markets
such as India and Vietnam experienced resilient demand and our recent sales
and marketing investments in the region benefited performance.
Adjusted operating profit rose 37% on an underlying basis* (33% on a reported
basis) from $33m to a record level of $44m with improved price/mix and new
business success partially offset by accelerating raw material cost inflation
and volume weakness in China. As a result, adjusted operating profit margins
increased from 16.7% to a record high of 20.9%.
Talc
In Talc, revenue rose 4% on an underlying basis* (down 5% on a reported basis
from $77m to $73m) with successful pricing actions offset as expected by
volume weakness in plastic and paper applications.
Revenue from industrial talc (representing over 85% of total Talc revenue)
rose 7% on an underlying basis*, with successful price increases in response
to variable cost inflation partially offset by volume declines. Long life
plastics sales were impacted by continued European automotive production
declines (-12% vs prior year period(±)) linked to semi-conductor and
Russia/Ukraine related production issues. Sales to coatings customers grew
double digits on the prior year period driven by successful pricing actions
and growth in Asia as we continue expand the geographic presence of the
business via cross selling to existing Coatings customers.
Outside of industrial talc, sales to the graphic paper market declined by 41%
following the temporary shutdown (January-April) of our main customer's
production plant in Finland due to strike action.
Adjusted operating profit declined from $8m to $3m (margins down from 10.3% to
3.7%), as pricing actions to mitigate variable cost inflation were more than
offset by lower volumes due to challenging market demand conditions. Second
half performance is expected to be stronger driven by the full benefit of
implemented price increases, new business wins, technical ceramics order
timing and the restart of production at our customer's paper plant.
In the first half of 2022 the Group recognised a non-cash $23m impairment in
respect of non-operational nickel bioleaching property, plant and equipment.
Elementis determined that the operational, HSE and financial commitments
required were not the best use of the Group's resources. This has been treated
as an adjusting item.
Chromium
Revenue in the period was $91m, up 1% from $90m in the first six months of
2021 with improved year on year average pricing largely offset by weaker
volumes due to reduced production at our Castle Hayne plant following
unplanned maintenance.
Due to improved industrial activity following the COVID-19 related lows in
2020, demand for chromium chemicals has increased across a range of end
markets including North American automotive, leather tanning and protective
applications. As a result, we estimate global chromium industry capacity
utilisation reached approximately 90% in the first half of 2022, compared to
85% in the prior year. It is anticipated this will result in further spot
market price increases that should benefit our revenue and margin performance
in the second half of the year and into 2023.
Adjusted operating profit for the first six months of the year was $4m, down
9% on the prior year period with pricing actions to offset variable cost
increases outweighed by the volume declines. Adjusted operating profit margin
fell from 5.1% to 4.6%.
Balance sheet
At 30 June 2022 net debt was $393m compared to $415m at 30 June 2021, with
improved earnings partially offset by working capital requirements to secure
adequate supplies of critical inventory items and to fund growth, representing
a net debt to adjusted EBITDA ratio** of 2.4x (3.0x at 30 June 2021). Further
progress on debt and leverage reduction is expected in the second half, driven
by earnings and strong underlying cashflow generation, in line with typical
seasonality.
The Group successfully refinanced its term loans effective 1 July 2022. The
Group took the opportunity to reduce the overall term loan commitment from
~$400m to ~$300m, split between USD and Euro tranches. The new term loans have
a maturity of June 2026 with the option of a one year extension. The terms of
the existing $375m revolving credit facility are unchanged with maturities in
September 2024 ($72m) and September 2025 ($303m).
Interim dividend
We recognise the importance of a dividend to our shareholders. However, given
the Group's financial leverage and the continued macroeconomic uncertainty,
the Board has decided it is prudent not to declare an interim dividend for
2022. The Board will keep future dividends under review and will restart
payments as soon as it is appropriate to do so.
Strategic progress
In recent years, we have made significant progress positioning Elementis as a
premium performance additives company, based on unique assets, value chains,
and with clear opportunities for growth. Our strategic pillars of Innovation,
Growth and Efficiency are designed to leverage this differentiated portfolio
and the execution of our strategic priorities will deliver our medium term
performance objectives of:
- 17% adjusted operating profit margin: driven by Innovation, Growth,
Efficiency
- 90% plus adjusted operating cash conversion: consistent with 5 year
average historical performance
- Leverage under 1.5x net debt / EBITDA: consistent with debt
reduction track record
1. Innovation
We are a global leader in performance additives. Across decorative coatings,
premium skin creams and recyclable food packaging, our additives are integral
to performance, and our global team of scientists are continually driving the
creation of more effective and sustainable solutions to address the needs of
our customers and consumers globally.
Our innovation agenda is clear. Firstly, we want to create distinctive new
technologies that deliver both improved performance and sustainability
benefits. At present, 55% of our revenue (H1 2021: 53%) is from products that
are natural or naturally derived(†), building on our progress in recent
years. Platforms such as our castor wax based organic thixotropes for high
performance adhesives and hectorite derived skin care ingredients provide a
great foundation from which to drive this higher.
Secondly, we are focused on the key innovation challenges that our customers
face. Consumers are increasingly aware of the impact their buying decisions
have on the environment, and as a result, major Personal Care brands are, for
example, seeking to reduce the amount of water used in their production
systems. Our growing range of skin care products including Thixcin(®) R PC
and Bentone Hydroclay(TM )are well positioned to help; they are natural,
water free and can be used to create luxury products such as cleansers, face
masks and balms. Customer uptake and feedback has been strong and we are
progressing well in delivering our ambition of $10m incremental skin care
sales over the medium term.
Open innovation is also an important enabler of our strategic ambitions and in
the first half we launched several products in partnership with NXTLEVVEL
Biochem. Revenue from new products*** rose from 13% in the prior year period
to 14%, progressing towards our goal of 17% by 2025. Our innovation pipeline
is well positioned and in 2022 we are on track to bring more than 20 new
products to the market.
2. Growth
Across Personal Care, Coatings and Talc we transform natural and long-life
resources into high value additives through distinctive processing, chemistry
and formulation. These segments represent over 90% of Group earnings and
collectively we see over $100m of medium term incremental growth
opportunities.
In Coatings, our "growth platforms" are based on differentiated technologies
that respond to specific market needs or trends and currently account for
approximately one third of our revenue. In the first half, these platforms
grew 23% driven by $17m of new business wins. Our Rheolate HX(®) series of
NiSATs for premium decorative paints continue to experience significant
customer momentum, particularly in North America, and are being supported by
capacity debottlenecking and investment at our New Martinsville and Livingston
plants, alongside new product launches. In addition, the successful expansion
of capacity in Hsinchu, Taiwan is supporting the growth of our new castor wax
based rheology modifiers for use in adhesives and sealants. This innovation
focus and customer centric attitude, combined with reliable supply, has driven
notably strong new business momentum with our global key accounts. These
accounts represent the largest coatings companies in the world and sales to
them grew by 45% in the first half of the year. Recent investments in our
global key account, innovation and technical services teams will ensure we
remain close to our customers and continue to build mutually beneficial long
term partnerships.
In Personal Care, we see significant scope to expand our scale, and to do so
at high margins. Asia represents under 20% of our sales and the medium term
aim is to double our cosmetics sales in the region. Despite lockdowns in
China, in the first half we grew 18% in Asia, benefitting from recent
investments in local resources, including a new technical service centre in
Shanghai and recent product launches. To drive further growth, we have
continued to invest, with new sales capabilities in India, and the launch of
hectorite gels approved for use in Japan, providing access to a large and
growing market. In skin care, we aim to deliver $10m of incremental sales over
the medium term, and with 23% growth in the first half we are approximately
two thirds of the way to our target. Finally, in anti-perspirant actives, we
experienced a strong first half performance improvement and our new plant in
India is on course for full start up later this year, delivering significant
cost savings and enhancing our access to fast growing markets in Asia.
In Talc, while our near-term performance has, as expected, been impacted by
weak demand in automotive applications and customer specific issues in paper,
the strong fundamentals of the business are unchanged. We are the second
largest global producer of talc-based additives, and our growth strategy is
focused on expanding into new geographies and markets. In the first half of
2022, while sales in America were broadly flat, we grew 36% in Asia driven by
$8m of new business wins across long life plastics, technical ceramics and
coatings applications. We remain materially underweight in both these regions
and with considerable runway for long term growth. We also are on track for
our ultimate goal of $20-25m of revenue synergies by 2023, reaching $21m in
the first half of the year, driven by 11% growth in sales to coatings
customers, leveraging Elementis' global key account network and strong
presence in the coatings market.
3. Efficiency
At Elementis we are always seeking to reduce the impact of our operations on
the environment and lower our cost to serve. Due to ongoing global supply
chain challenges the Group is experiencing approximately 20% unit cost
inflation across raw materials, logistics and energy in 2022. We have
responded by focusing on what we can control - running our plants effectively
and providing security of supply to customers. In the first half of the year
our technical service team helped rapidly qualify over 20 alternative raw
materials and manufacturing processes, enabling our systems to continue
operating and supplying our customers. In addition, we deployed raw material
hedging strategies and implemented price increases where necessary. These
actions, combined with further self-help, mean we are confident of defending
our margins and making progress towards our $10m of savings by 2023.
A key enabler of $10m supply chain savings by 2023 are our global process
improvement projects led by our team of engineers. In the first half we
completed 45 projects including the installation of enhanced water monitoring
systems in Vuonos, Finland, reducing water usage at the site by over 80%, and
the re-engineering of our AP Actives production in New York state to use
alternative raw materials that are equally effective but 20% cheaper.
Our process engineers also support our growth ambitions. Following the
commercial success of our premium decorative rheology modifiers, and ahead of
new capacity installation later this year, our team in Livingston, Scotland
successfully debottlenecked 20% extra capacity thanks to optimised reaction
times and increased production staffing. These continuous improvement
initiatives are delivering significant efficiency, growth and sustainability
benefits across the Group, and with 70 further projects in the pipeline we are
well positioned for further progress.
Sustainability and the reduction of our environmental footprint is at the
forefront of all operational decisions. Our new anti-perspirant actives plant
in India, which is on track for full start up in late third quarter, is an
additional enabler of our $10m of supply chain savings. This facility will
create a cost advantaged global supply chain that is well positioned to serve
fast growth markets, and, being a closed water production system, is an
incredibly environmentally friendly facility.
Chromium
In April 2022, we announced a strategic review of Chromium to establish
whether the full potential of the business can be best delivered as part of
Elementis or via a full or partial divestment. The review is progressing as
planned and a further update is anticipated around the year end.
Outlook
While supply chain conditions remain extremely challenging and global economic
risks are elevated, the Group has again demonstrated resilience and the
importance of its self-help agenda. We will continue to maintain our focus on
Innovation, Growth and Efficiency and in 2022 expect to deliver $50m of new
business opportunities, over 20 new products and progress towards $10m of
additional efficiency savings by 2023.
For the rest of the year, we are confident that our self-help actions and a
steady demand environment will deliver an improved financial performance,
towards the top end of consensus expectations^, and a further reduction in
leverage.
Notes:
Where we refer to adjusted performance measures (e.g. adjusted operating
profit), see note 5.
* Adjusted for FX (where constant currency reflects prior year results
translated at current year exchange rates). See Finance report for the
constant currency impact at a business unit level.
** Excluding the impact of IFRS 16
*** New products defined as products launched within the last 5 years,
patented and protected products (excluding Chromium)
(†) Naturally derived products defined in accordance with IS0 16128 standard
and explicitly excludes ingredients derived from fossil fuels
(± ) Source: IHS Automotive
^ Based on company compiled consensus, the Board believes current market
forecast for 2022 adjusted operating profit to be in the range of $107m to
$125m with an average of $115m.
Finance report
Revenue for the six months Revenue Effect of Increase Revenue
ended 30 June
2021
exchange
2022
2022
$m
rates
$m
$m
$m
Personal Care 88.8 (2.6) 19.4 105.6
Coatings 196.6 (5.4) 18.1 209.3
Talc 76.5 (6.9) 2.9 72.5
Chromium 90.2 ― 0.7 90.9
Revenue 452.1 (14.9) 41.1 478.3
Adjusted operating profit for the six months Adjusted operating profit Effect of Increase/ Adjusted operating profit
ended 30 June
2021
exchange
2022
$m
rates (decrease)
$m
$m
2022
$m
Personal Care 19.2 (0.9) 7.6 25.9
Coatings 32.9 (1.0) 11.9 43.8
Talc 7.9 (0.6) (4.6) 2.7
Chromium 4.6 ― (0.4) 4.2
Central costs (10.3) 0.5 (1.2) (11.0)
Adjusted operating profit 54.3 (2.0) 13.3 65.6
2022 Operating profit/(loss) Adjusting 2022 2021 Operating profit/(loss) Adjusting items 2021 Adjusted operating profit/(loss)*
$m
items
Adjusted operating profit/(loss)(*)
$m
$m
$m
$m
$m
Operating profit for the six months
ended 30 June
Personal Care 21.7 4.2 25.9 14.7 4.5 19.2
Coatings 42.6 1.2 43.8 30.1 2.8 32.9
Talc (23.3) 26.0 2.7 4.9 3.0 7.9
Chromium 2.1 2.1 4.2 5.7 (1.1) 4.6
Central costs (11.0) ― (11.0) (10.3) ― (10.3)
Total operating profit 32.1 33.5 65.6 45.1 9.2 54.3
*See note 5
Group results
Group revenue for the first six months of 2022 was $478.3m, compared to
$452.1m in the same period last year, an increase of $26.2m (5.8%).
Excluding the impact of currency, Group revenue rose by 9.4%, driven by
particularly strong performance in the Personal Care and Coatings as a result
of new business wins, improved mix and successful pricing actions.
Group adjusted operating profit was $65.6m, compared to $54.3m in the same
period last year, an increase of 20.8%, and 25.4% excluding currency movements
representing an adjusted operating profit margin of 13.7% well up from the
2021 margin of 12.0%. Cost inflation was more than offset by sales price
increases. Operating profit decreased from $45.1m in the prior year period to
$32.1m with the strong operating performance being more than offset by the
impact of the adjusting items, specifically the $23m impairment of the nickel
bioleaching property, plant and equipment in the Talc business (see note 5).
Central costs
Central costs are costs that are not identifiable as expenses of a particular
business and comprise the global corporate offices in the UK and US which
include the Board of Directors, executive and senior management. The increase
in central costs for the first half of 2022 was primarily due to underlying
cost inflation.
Adjusting items
In addition to the statutory results, the Group uses alternative performance
measures, such as adjusted operating profit and adjusted diluted earnings per
share, to provide additional useful analysis of the performance of the
business. The Board considers these non-GAAP measures as an alternative way to
measure the Group's performance. Adjusting items in the 6 months ended June
2022 resulted in a charge of $25.8m before tax, an increase of $20.5m against
the same period last year. The key categories of adjusting items are
summarised below. For more information on adjusting items and the Group's
policy for adjusting items, please see Note 5.
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Charge/(credit)
Adjusting items:
Business transformation 3.1 2.7 4.6
Environmental provisions (0.3) (1.5) 8.3
Impairment of property, plant and equipment 23.0 - -
Amortisation of intangibles arising on acquisition 7.7 8.0 16.0
Impairment of goodwill - - 52.3
Sale of Montreal land - - (1.0)
Total charge to operating profit 33.5 9.2 80.2
Sale of business - 1.1 1.7
Mark to market of derivatives (7.7) (5.0) (10.7)
Tax credit in relation to adjusting items (5.1) (0.6) (11.3)
Total adjusting items 20.7 4.7 59.9
In the first half of 2022, $33.5m of charges to operating profit were
classified as adjusting items. Of these items, $7.7m relates to the
amortisation of intangibles arising on acquisitions. Business transformation
costs of $3.1m represent costs relating to previously initiated programmes to
optimise our supply chain and manufacturing footprint, and costs incurred in
relation to the Chromium strategic review announced in April 2022. A credit of
£0.3m to the environmental provision is comprised of a credit of $5.9m
related to the impact of changes in discount rates and a charge of $5.6m
related to changes in inflation assumptions. An impairment of $23.0m relates
to a non-operational nickel bioleaching plant in Finland following
management's decision not to operate the plant for operational, HSE and
financial reasons.
The credit to finance income of $7.7m represents movements in mark to market
valuation of financial instruments which are not in hedging relationships.
An explanation of other adjusting items relating to the previous period can be
found within the Finance report of the 2021 Annual report and accounts.
Other expenses
Other expenses are administration costs incurred and paid by the Group's
pension schemes, which relate primarily to former employees of legacy
businesses, and were $0.7m in the period compared to $1.0m in the previous
year.
Net finance costs
30 June 30 June
2022
2021
$m
$m
Finance income 0.1 0.3
Finance cost of borrowings (10.6) (12.1)
(10.5) (11.8)
Net pension finance income/(expense) 0.3 (0.3)
Unwind of discount on provisions (0.6) (0.6)
Fair value movement on derivatives 7.7 5.0
Interest on lease liabilities (0.7) (0.8)
Net finance costs (3.8) (8.5)
Net finance costs for the first six months of the year of $3.8m were $4.7m
lower than the same period last year. Within this total, net interest costs
were $1.3m lower at $10.5m due to a reduced level of borrowings. Net pension
finance costs were a $0.3m credit in 2022 compared with a $0.3m debit in 2021
due an increase in the discount rates. The unwind of discount on provisions
and interest on lease liabilities in the period remained in line with the
previous year. The fair value movement on derivatives which are not in hedging
relationships is credited to finance income.
Tax
The Group reports an adjusted tax charge for the first half of 2022 of $11.9m
(2021: $7.5m); giving rise to an adjusted effective tax rate of 22.3% (2021:
18.7%). The adjusted effective tax rate is higher than the prior year due to
the loss of benefit from the Group's tax efficient financing structure, which
was unwound during 2021.
Tax on adjusting items for the first half of 2022 amounts to a credit of $5.1m
(2021: credit of $0.6m); resulting in a total statutory tax charge for the
period of $6.8m (2021 charge of $6.9m) and a reported effective tax rate of
24.6% (2021: 19.9%).
For the full year 2022, we currently forecast an adjusted effective tax rate
of around 23%.
Earnings per share
Statutory basic earnings per share was 3.6 cents for the period compared to
basic earnings per share of 4.8 cents in the prior period.
Basic adjusted and diluted adjusted earnings per share for the first half of
2022, calculated on the adjusted earnings of $41.5m (2021: $32.3m), were both
7.1 cents compared to 5.6 cents and 5.5 cents respectively for the same period
last year.
Note 9 provides disclosure of earnings per share calculations both including
and excluding the effects of adjusting items and the potential dilutive
effects of outstanding and exercisable options.
Adjusted cash flow
Cash flow is summarised below:
30 June 30 June
2022
2021
$m
$m
Profit before interest, tax, depreciation and amortisation (Adjusted EBITDA)* 90.2 80.2
Change in working capital (48.8) (26.5)
Net capital expenditure (21.9) (24.2)
Other (0.5) 0.6
Adjusted operating cash flow 19.0 30.1
Pension contribution net of current service cost 0.4 0.5
Net interest paid (9.2) (11.8)
Tax (11.1) (24.0)
Adjusting items (1.1) (5.5)
Payment of lease liabilities (3.8) (3.3)
Free cash flow (5.8) (14.0)
Acquisitions and disposals - 1.9
Currency fluctuations 13.4 4.9
Decrease/(increase) in net debt 7.6 (7.2)
Net debt at start of period (401.0) (408.1)
Net debt as at end of period (393.4) (415.3)
* See alternative performance measures on page 32
Net debt as at 30 June 2022 of $393.4m is slightly down on the 2021 year end
position of $401.0m, and down $21.9m compared with 30 June 2021. Adjusted
operating cash flow in the period of $19.0m was lower than the $30.1m in the
comparative 2021 period, with higher earnings partially offset by an increased
working capital outflow as a result of revenue growth and as a response to
supply chain challenges.
Net capital expenditure in the period was $21.9m, $2.3m lower than the
previous year. Capital spending for the whole year is expected to be between
$50-55m. Key areas of growth spend are the new plant in India, which is on
course for full start up later this year, NiSAT capacity expansion in
Livingston, UK and low temperature organic thixotrope investment in Asia. In
addition there has been spend in Chromium on the replacement of equipment and
investment in ERP systems for the Talc business.
There were no pension payments to the UK pension scheme in the period (2021:
nil). The most recent triennial review was completed in November 2021 and as a
result of the surplus identified no top up contributions are required. The
next review is due in September 2023.
Tax payments in the period of $11.1m were much lower than those in 2021 due to
the one off $20m payment (at the exchange rate on the date of the transaction)
in 2021 in respect of EU state aid which we expect to be repaid in due course.
Dividend payments were nil in the first six months of 2022 (2021: nil).
Despite the improvement in operating results and the net debt position, there
is still significant market uncertainty and the Board believe it appropriate
to continue to reduce net debt. The Board will continue to monitor the
situation and will review the dividend position in the second half of the
year.
Overall the Group had a net debt position at 30 June 2022 of $393.4m,
representing a net debt/EBITDA ratio of 2.4x on a pre-IFRS 16 basis (2.6x at
December 2021). Further reduction in leverage is expected by the year end,
driven by improved trailing months earnings and robust cash conversion. In the
first half of 2022 the Group successfully completed the refinancing of its
Term Loan facility. The new $300m Term Loan facility extends to June 2026 with
a one year extension option.
Working capital
Working capital days 30 June 30 June 31 December
2022 2021 2021
Inventory 121 96 105
Debtors 43 44 42
Creditors 73 66 71
Average working capital to sales (%) 21.7 21.7 20.0
Total working capital for the Group of $202.2m was $38.2m higher than at 31
December 2021, driven by higher sales and higher inventory levels to secure
adequate supplies of critical inventory. As a result, inventory days increased
from 105 (December 2021) to 121 days. Debtor days and creditor days have
remained reasonably stable.
Balance sheet
30 June 30 June 31 December 2021
2022
2021
$m
$m
$m
Property, plant and equipment 452.6 506.5 499.7
Other net assets 840.2 832.6 802.3
Net debt (393.4) (415.3) (401.0)
Equity 899.4 923.8 901.0
Property, plant and equipment decreased by $47.1m compared to the value at 31
December 2021, $23.0m as a result of the impairment of the nickel bioleaching
equipment in the Talc business, $23.3m as a result of currency translation and
depreciation of $24.4m for the 6 months running ahead of net capital
expenditure of $21.9m. Other net assets increased by $37.9m primarily as a
result of working capital increases.
Equity decreased by $1.6m compared to the value at 31 December 2021 as a
result of the statutory profit in the period of $20.8m, actuarial gains on
pensions of $9.8m offset by deferred tax on actuarial movements of $2.2m and a
loss of $39.3m due to foreign exchange impact on other comprehensive income.
The remainder of the movement relates primarily to share based payment
provisions and movements in derivatives.
The main dollar currency exchange rates as at 30 June 2022 and average rates
in the period were:
2022 2022 2021 2021
30 June
Average
30 June
Average
Sterling 0.82 0.77 0.72 0.72
Euro 0.96 0.91 0.84 0.83
Pensions and post retirement plans
UK US Other Total
$m
$m
$m
$m
Movement in net deficit
Net surplus/(deficit) in schemes at 1 January 2022 56.6 (8.3) (9.0) 39.3
Current service cost (0.3) (0.4) (0.2) (0.9)
Contributions - 0.2 0.3 0.5
Administration costs (0.5) (0.2) - (0.7)
Net interest expense 0.5 (0.1) (0.1) 0.3
Actuarial gain 8.3 1.3 0.2 9.8
Currency translation difference (6.1) - 0.7 (5.4)
Net surplus/(deficit) in schemes at 30 June 2022 58.5 (7.5) (8.1) 42.9
During the period the surplus, under IAS 19, on the Group's pension and
post-retirement medical plans improved by $3.6m to a net surplus of $42.9m.
During the first six months of 2022 the UK scheme had an annualised return on
scheme assets of 35.8% (2021: (2.1%)), liabilities decreased by 23% (2021:
decreased by 8%) and the net surplus increased by $1.9m. This movement was
driven by actuarial changes due predominantly to an increase in the discount
rate which more than offset a decrease in scheme assets over the period.
Within the US schemes the net deficit decreased by $0.8m mainly due to an
increase in the discount rate. Contributions in the period totalled $0.5m
(2021: $0.6m), all to the US plans. There were no pension payments to the UK
pension scheme in the period (2021: nil). The most recent triennial review was
completed in November 2021 and as a result of the surplus identified no top up
contributions are required. The next review is due in September 2023.
Related party transactions
There were no material related party transactions entered into during the
first half of the year and there have been no material changes to the related
party transactions disclosed in the Company's 2021 Annual report and accounts
on
page 181.
Conflict between Russia and Ukraine
The conflict between Russia and Ukraine has had a major impact on global
economic and financial markets. Elementis has not been directly impacted to a
material extent by the conflict and the resulting trade sanctions implemented
against Russia and Belarus - Elementis has no operational assets or staff in
Russia, Belarus or the Ukraine, no material individual customers in Russia or
Belarus nor any single-point supply exposure.
Elementis did respond immediately to the sanctions introduced and ceased all
supply of product to Russia and Belarus. An estimate of the impact of the
revenues lost from this is c.$12 million on an annualised basis, impacting
Personal Care, Coatings and Talc to similar degrees. There are no receivables
of note due from any Russian or Belarus customers.
Elementis does not single source any product directly from Russia or Ukraine
but the Group, like all other companies, has been impacted by the global
supply challenges and the inflationary impact of the conflict. Energy and key
raw material inputs have increased significantly in price during H1 and
Elementis has responded to this with sales price increases and a hedging
strategy for energy and key raw materials such as aluminum. In response to the
Global supply chain challenges, Elementis has increased its strategic
inventory levels to ensure continuity of production and supply to our
customers.
Elementis will continue to monitor the impact of the conflict and respond
appropriately to impacts on the business.
Cautionary statement
The Elementis plc interim results announcement for the half year ended 30 June
2022, which comprises the CEO's report, Finance report and the Directors'
responsibility statement (which taken together constitute the Interim
management report) and the interim financial statements and accompanying notes
(incorporating a Condensed consolidated balance sheet at 30 June 2022,
Condensed consolidated income statement, Condensed consolidated statement of
comprehensive income, Condensed consolidated cash flow statement and Condensed
consolidated statement of changes in equity, each for the six months ended 30
June 2022) (altogether 'Half yearly financial report'), contains information
which viewers or readers might consider to be forward looking statements
relating to or in respect of the financial condition, results, operations or
businesses of Elementis plc. Any such statements involve risk and uncertainty
because they relate to future events and circumstances. There are many factors
that could cause actual results or developments to differ materially from
those expressed or implied by any such forward looking statements. Nothing in
this Half yearly financial report should be construed as a profit forecast.
Directors' responsibility statement
A full list of the Directors can be found on the Elementis corporate website
at: www.elementis.com (http://www.elementis.com) .
The Directors confirm that to the best of their knowledge:
· The condensed set of financial statements set out in this Half-yearly
financial report has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the United Kingdom.
· The condensed set of consolidated financial statements, which has been
prepared in accordance with the applicable set of accounting standards, gives
a true and fair view of the assets, liabilities, financial position and profit
or loss of the issuer, or the undertakings included in the consolidation as a
whole as required by DTR 4.2.4R; and
· The interim management report contained in this Half-yearly financial
report includes a fair review of the information required by:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of the 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.
- DTR 4.2.8R of the 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 related party transactions
described in the 2021 Annual report and accounts that could have a material
effect on the financial position or performance of the entity during the first
six months of the current financial year.
Approved by the Board on 2 August 2022 and signed on its behalf by:
Paul
Waterman
Ralph Hewins
CEO
CFO
2 August
2022
2 August 2022
INDEPENDENT REVIEW REPORT TO ELEMENTIS PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2022 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated cashflow statement, the
condensed consolidated statement of changes in equity, and related notes 1 to
16.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, 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 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.
As disclosed in note 2, the annual financial statements of the group will be
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE (UK), however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of financial
statement in the half-yearly financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued by the
Financial Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our review work, for this report, or for the conclusions
we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
2 August 2022
Condensed consolidated income statement
for the six months ended 30 June 2022
Note 2022 2021 2021
Six months ended
Six months
Year
30 June
ended
ended
$m
30 June
31 December
$m
$m
(unaudited)
(unaudited) (audited)
Revenue 4 478.3 452.1 880.1
Cost of sales (293.8) (283.8) (545.2)
Gross profit 184.5 168.3 334.9
Distribution costs (76.8) (73.9) (151.9)
Administrative expenses (75.6) (49.3) (156.6)
Operating profit 4 32.1 45.1 26.4
Loss on disposal - (1.1) (1.7)
Other expenses (0.7) (1.0) (2.1)
Finance income 6 7.8 5.3 11.0
Finance costs 7 (11.6) (13.8) (27.8)
Profit before tax 4 27.6 34.5 5.8
Tax 8 (6.8) (6.9) (3.3)
Profit for the period 20.8 27.6 2.5
Attributable to: 20.8 27.6 2.5
Equity holders of the parent
Earnings per share
Basic earnings (cents) 9 3.6 4.8 0.4
Diluted earnings (cents) 9 3.5 4.7 0.4
Condensed consolidated statement of comprehensive income for the six months
ended 30 June 2022
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
(unaudited) (unaudited) (audited)
Profit for the period 20.8 27.6 2.5
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of retirement benefit obligations 9.8 48.5 63.5
Deferred tax associated with retirement benefit obligations (2.2) (11.8) (14.6)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 0.3 (16.7) (29.1)
Effective portion of change in fair value of net investment hedge (38.6) 12.3 10.7
Tax associated with change in fair value of net investment hedge - - 1.8
Tax associated with changes in cashflow hedges - - (0.4)
Recycling of deferred foreign exchange losses on disposal - (0.4) (0.4)
Effective portion of changes in fair value of cash flow hedges 5.9 1.5 (0.1)
Fair value of cash flow hedges transferred to income statement 1.8 (0.2) 2.7
Exchange differences on translation of share options reserves (1.0) 0.1 -
Other comprehensive (loss)/income, net of tax (24.0) 33.3 34.1
Total comprehensive (loss)/income for the period (3.2) 60.9 36.6
Attributable to:
Equity holders of the parent (3.2) 60.9 36.6
Total comprehensive (loss)/income for the period (3.2) 60.9 36.6
Condensed consolidated balance sheet
at 30 June 2022
2022 2021 2021
30 June
30 June
31 December
$m
$m
$m
(unaudited) (unaudited) (audited)
Non-current assets
Goodwill and other intangible assets 785.2 882.9 815.7
Property, plant and equipment 452.6 506.5 499.7
Tax recoverable 17.7 20.1 19.7
Deferred tax assets 28.0 26.3 28.0
Net retirement benefit surplus 58.5 45.2 56.6
Derivative financial instruments 4.0 - -
Total non-current assets 1,346.0 1,481.0 1,419.7
Current assets
Inventories 218.8 160.9 186.1
Trade and other receivables 152.0 155.2 138.9
Derivative financial instruments 7.0 1.5 0.2
Current tax asset 7.1 7.2 7.1
Cash and cash equivalents 76.7 93.6 84.6
Total current assets 461.6 418.4 416.9
Total assets 1,807.6 1,899.4 1,836.6
Current liabilities
Bank overdrafts and loans (5.3) - -
Trade and other payables (168.6) (152.9) (161.0)
Financial liabilities (0.8) (11.5) (1.4)
Current tax liabilities (14.3) (27.1) (17.4)
Lease liabilities (6.8) (7.3) (6.4)
Provisions (7.9) (6.2) (8.7)
Total current liabilities (203.7) (205.0) (194.9)
Non-current liabilities
Loans and borrowings (463.2) (505.2) (482.5)
Retirement benefit obligations (15.7) (19.4) (17.3)
Deferred tax liabilities (146.7) (151.1) (150.0)
Lease liabilities (31.1) (34.2) (33.8)
Provisions (47.8) (47.2) (53.1)
Financial liabilities - (13.5) (4.0)
Total non-current liabilities (704.5) (770.6) (740.7)
Total liabilities (908.2) (975.6) (935.6)
Net assets 899.4 923.8 901.0
Equity
Share capital 52.2 52.2 52.2
Share premium 243.0 240.5 240.8
Other reserves 58.5 104.8 90.7
Retained earnings 545.7 526.3 517.3
Equity attributable to equity holders of the parent 899.4 923.8 901.0
Total equity and reserves 899.4 923.8 901.0
Condensed consolidated cash flow statement
for the six months ended 30 June 2022
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
(unaudited) (unaudited) (audited)
Operating activities:
Profit for the period 20.8 27.6 2.5
Adjustments for:
Other expenses 0.7 1.0 2.1
Finance income (7.8) (0.3) (11.0)
Finance costs 11.6 8.8 27.8
Tax charge 6.8 6.9 3.3
Depreciation and amortisation 32.5 33.9 68.3
(Decrease)/increase in provisions and financial liabilities (3.3) (6.1) 0.8
Pension payments net of current service cost 0.4 0.5 (0.1)
Share based payments expense 2.1 2.5 5.1
Impairment of goodwill - - 52.3
Loss on disposal of business - 1.1 1.7
Impairment of property, plant and equipment 23.0 - -
Operating cash flows before movements in working capital 86.8 75.9 152.8
Increase in inventories (40.3) 3.0 (24.2)
Increase in trade and other receivables (19.3) (46.8) (33.8)
Decrease in trade and other payables 13.0 17.3 26.3
Cash generated by operations 40.2 49.4 121.1
Income taxes paid (11.1) (24.0) (30.9)
Interest paid (9.3) (12.1) (23.5)
Net cash flow from operating activities 19.8 13.3 66.7
Investing activities:
Interest received 0.1 0.3 0.3
Disposal of property, plant and equipment 0.5 - 0.7
Purchase of property, plant and equipment (22.3) (24.3) (52.7)
Purchase of business - - (0.2)
Disposal of business - 1.9 0.5
Acquisition of intangible assets (0.1) (0.1) (0.4)
Contingent consideration paid - - (13.2)
Net cash flow from investing activities (21.8) (22.2) (65.0)
Financing activities:
Issue of shares by the Company and the ESOT net of issue costs - - 0.1
Net movement on existing debt 0.6 (3.7) (18.7)
Payment of lease liabilities (3.8) (3.3) (6.7)
Net cash used in financing activities (3.2) (7.0) (25.3)
Net decrease in cash and cash equivalents (5.2) (15.9) (23.6)
Cash and cash equivalents at beginning of period 84.6 111.0 111.0
Foreign exchange on cash and cash equivalents (2.7) (1.5) (2.8)
Cash and cash equivalents at end of period 76.7 93.6 84.6
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2022
Share capital Share premium Translation reserve Hedging reserve Other Retained earnings Total
$m
$m
$m
$m
reserves
$m
equity
$m
$m
At 1 January 2022 52.2 240.8 (67.7) (8.6) 167.0 517.3 901.0
Profit for the period - - - - - 20.8 20.8
Other comprehensive income:
Exchange differences - - (38.3) - (1.0) - (39.3)
Movement in cash flow hedges - - - 7.7 - - 7.7
Remeasurement of retirement benefit obligations - - - - - 9.8 9.8
Deferred tax adjustment on pension scheme deficit - - - - - (2.2) (2.2)
Transactions with owners:
Issue of shares by the Company - 2.2 - - (2.2) - -
Share based payments - - - - 2.1 - 2.1
Fair value of cash flow hedges transferred to net assets - - - (0.5) - - (0.5)
At 30 June 2022 52.2 243.0 (106.0) (1.4) 165.9 545.7 899.4
Share capital Share premium Translation reserve Hedging reserve Other Retained earnings Total
$m
$m
$m
$m
reserves
$m
equity
$m
$m
At 1 January 2021 52.1 237.7 (48.9) (8.9) 166.4 462.0 860.4
Profit for the period - - - - - 27.6 27.6
Other comprehensive income:
Exchange differences - - (4.4) - 0.1 - (4.3)
Recycling of foreign exchange gains on disposal - - (0.4) - - - (0.4)
Movement in cash flow hedges - - - 1.3 - - 1.3
Remeasurement of retirement benefit obligations - - - - - 48.5 48.5
Deferred tax adjustment on pension scheme deficit - - - - - (11.8) (11.8)
Transactions with owners:
Issue of shares by the Company 0.1 2.8 - - (2.9) - -
Share based payments - - - - 2.5 - 2.5
At 30 June 2021 52.2 240.5 (53.7) (7.6) 166.1 526.3 923.8
Notes to the interim financial statements for the six months ended 30 June
2022
1. General Information
Elementis plc (the 'Company') and its subsidiaries (together, the 'Group')
manufacture specialty chemicals. The Group has operations in the US, UK,
Brazil, Germany, Finland, The Netherlands, China, Taiwan, Malaysia and India.
The Company is a limited liability company incorporated and domiciled in
England, UK and is listed on the London Stock Exchange.
2. Accounting policies
Basis of preparation
The annual financial statements of Elementis plc will be prepared in
accordance with United Kingdom adopted International Financial Reporting
Standards. This condensed set of financial statements (also referred to as
'interim financial statements' in this announcement) has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the United
Kingdom.
As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed set of financial statements has been prepared
applying the same accounting policies and presentation that were applied in
the preparation of the Company's published consolidated financial statements
for the year ended 31 December 2021 except for the adoption of new standards
effective as of 1 January 2022. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2022, but do not have an impact
on the interim condensed consolidated financial statements of the Group.
During the period, as discussed in note 5, an impairment of $23.0m was made
within the Talc business relating to the nickel bioleaching plant in
Finland. Other key judgements and sources of estimation uncertainty remain
unchanged from those as set in the Annual Report and Accounts at 31 December
2021.
The information for the year ended 31 December 2021 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying the report and did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
3. Going concern
Given the continuing uncertainties resulting from the macro-economic
environment in which the Group operates, the directors have placed a
particular focus on the appropriateness of adopting the going concern basis in
preparing the condensed consolidated financial statements for the six months
ended 30 June 2022.
The Group's going concern assessment covers the period of at least 12 months
from the date of authorisation of these consolidated half year financial
statements (the "going concern period"), and takes into account its
substantial liquidity, committed expenditure, likely ongoing levels of costs
and the new banking facilities as disclosed in note 15.
In preparing the assessment, alongside the most likely "base case" forecast,
the Board has considered a "reverse stress test case" which flexes sales and
costs to determine what circumstances would be required to breach banking
covenants. This assessment shows the Group has sufficient liquidity to
discharge its liabilities as they fall due throughout the going concern period
under the base case, assuming continued access to our revolving credit
facilities. Access to these credit facilities is dependent on the Group
operating within its financial covenants.
Testing up to 30 June 2022 confirmed that the Group operated within these
covenants and under the base case the Group is expected to remain within its
financial covenants throughout the going concern period and the conditions
necessary for the reverse stress scenario to be applicable were deemed remote.
The directors also considered factors likely to affect future performance and
development, the Group's financial position, current excess liquidity
position, high level of cash conversion and the principal risks and
uncertainties facing the Group, including the Group's exposure to credit,
liquidity and market risk and the mechanisms for dealing with these risks.
In conclusion, after reviewing the base case and considering the remote
likelihood of the scenario in the reverse stress test case occurring as well
as having considered the uncertainty relating to the macro-economic
environment and the mitigating actions available, the directors have formed
the judgement that, at the time of approving the consolidated financial
statements, there are no material uncertainties that cast doubt on the Group's
going concern status and that it is appropriate to prepare the consolidated
accounts on the going concern basis.
4. Segment reporting
Personal Care - production of rheological modifiers and compounded products,
including active ingredients for anti-perspirant deodorants, for supply to
Personal Care manufacturers
Coatings - production of rheological modifiers and additives for decorative
and industrial coatings
Talc - production and supply of talc for use in plastics, coatings, technical
ceramics and paper sectors
Chromium - production of chromium chemicals
2022 2021 2021
Six months Six Year
ended months ended ended
30 June 30 June 31 December
Revenue
Personal Care 105.6 88.8 174.7
Coatings 209.3 196.6 384.3
Talc 72.5 76.5 150.4
Chromium 90.9 90.2 170.7
Total revenue 478.3 452.1 880.1
All revenues are external and relate to the sale of goods. Revenue and
operating profit in Coatings (Decorative Paints) and Personal Care (AP
Actives) are marginally impacted by seasonal influences. Revenue and operating
profit tend to be higher in the first half of the year as our customers ramp
up production ready to meet end-customer demand in the summer months, when
weather conditions are favourable for painting and when anti-perspirants are
in greater demand.
Reported profit before tax for the six months Personal Care Coatings $m Talc Chromium Segment totals Central Total
$m
$m
costs
$m
ended 30 June 2022 $m $m
$m
Adjusted operating profit/(loss) 25.9 43.8 2.7 4.2 76.6 (11.0) 65.6
Adjusting Items
Business transformation - (0.6) (0.2) (2.3) (3.1) - (3.1)
Increase in environmental provisions due to a change in cost of remediation - - - (5.6) (5.6) - (5.6)
work identified
Decrease in environmental provisions due to change in discount rate - - - 5.9 5.9 - 5.9
Impairment of goodwill - - - - - - -
Write-off of plant and equipment - - (23.0) - (23.0) - (23.0)
Amortisation of intangibles arising on acquisition (4.2) (0.6) (2.8) (0.1) (7.7) - (7.7)
Reported operating profit 21.7 42.6 (23.3) 2.1 43.1 (11.0) 32.1
Other expenses - - - - - (0.7) (0.7)
Finance income - - - - - 7.8 7.8
Finance costs(1) - - - - - (11.6) (11.6)
Reported profit /(loss) before income tax 21.7 42.6 (23.3) 2.1 43.1 (15.5) 27.6
(1)Finance income of $7.8m includes the mark to market on derivatives of
$7.7m.
Adjusted profit before tax for the six months Personal Care Coatings $m Talc Chromium Segment totals Central Total
$m
$m
costs
$m
ended 30 June 2021 $m $m
$m
Adjusted operating profit/(loss) 19.2 32.9 7.9 4.6 64.6 (10.3) 54.3
Adjusting Items
Business transformation (0.1) (2.3) - (0.3) (2.7) - 2.7
Increase in environmental provisions due to additional remediation work - - - (0.5) (0.5) - 0.5
identified
Increase in environmental provisions due to change in discount rate - - - 2.0 2.0 - (2.0)
Amortisation of intangibles arising on acquisition (4.4) (0.5) (3.0) (0.1) (8.0) - 8.0
Reported operating profit /(loss) 14.7 30.1 4.9 5.7 55.4 (10.3) 45.1
Loss on disposal - - - - - (1.1) (1.1)
Other expenses - - - - - (1.0) (1.0)
Finance income(1) - - - - - 5.3 5.3
Finance costs - - - - - (13.8) (13.8)
Reported profit /(loss) before income tax 14.7 30.1 4.9 5.7 55.4 (20.9) 34.5
( )
(1) Adjusted finance income of $5.3m includes the mark to market on
derivatives of $5.0m.
5. Adjusting items and alternative performance measures
In addition to the statutory results, the Group uses alternative performance
measures, such as adjusted operating profit and adjusted diluted earnings per
share, to provide additional useful analysis of the performance of the
business. The Board considers these non-GAAP measures as an alternative way to
measure the Group's performance. Adjusting items in the 6 months ended June
2022 resulted in a charge of $25.8m before tax, an increase of $20.5m against
the same period from last year. The key categories of adjusting items are
summarised below.
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Operating profit 32.1 45.1 26.4
Adjusting items:
Business transformation 3.1 2.7 4.6
Environmental provisions
Increase in provisions due to change in cost of remediation work identified 5.6 0.5 9.6
Decrease in provisions due to change in discount rate (5.9) (2.0) (1.3)
Impairment of property, plant and equipment 23.0 - -
Sale of Montreal land - - (1.0)
Impairment of goodwill - - 52.3
Amortisation of acquired intangibles 7.7 8.0 16.0
Net adjusting items 33.5 9.2 80.2
Adjusted operating profit 65.6 54.3 106.6
Adjusting items:
Sale of business - 1.1 1.7
Mark to market of derivative financial instruments (7.7) (5.0) (10.7)
Net adjusting items on profit before tax 25.8 5.3 71.2
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Adjusted operating profit
Personal Care 25.9 19.2 36.7
Coatings 43.8 32.9 61.8
Talc 2.7 7.9 14.0
Chromium 4.2 4.6 14.1
Central costs (11.0) (10.3) (20.0)
Adjusted operating profit 65.6 54.3 106.6
Other expenses (0.7) (1.0) (2.1)
Finance income(1) 0.1 0.3 0.3
Finance costs (11.6) (13.7) (27.9)
Adjusted profit before tax 53.4 39.9 76.9
(1)Adjusted finance income of $0.1m excludes the mark to market on derivatives
of $7.7m.
Adjusting items in the period fall into the following categories:
Business transformation
As announced in April 2022, the Group has initiated a strategic review of its
Chromium business. The review will establish whether the full potential of
Chromium can best be delivered as part of Elementis, or via a full or partial
divestment. Costs of $2.3m have been incurred in the 6 months to 30 June 2022
in respect of this review. In addition to this, costs of $0.8m have been
incurred in other businesses relating to optimisation of the supply chain.
Environmental provision
The Group's environmental provision is calculated on a discounted cash flow
basis, reflecting the time period over which spending is estimated to take
place. The net movement on the provision for the period to 30 June 2022 is
$0.3m. This is comprised of an income statement credit of $5.9m due to a
change in discount rates and an income statement charge of $5.6m due to the
impact of inflation assumptions. As the provision relates to non-operational
facilities these movements are classified as adjusting items.
Impairment of property, plant and equipment
In the first half of 2022 the Group recognised a non-cash $23.0m impairment in
respect of non-operational nickel bioleaching property, plant and equipment in
the Talc business. Elementis determined that the operational, HSE and
financial commitments required were not the best use of the Group's resources.
Sale of Montreal land
In 2021 the Group disposed of a non-core parcel of land in Montreal, Canada.
The profit on disposal has been treated as an adjusting item.
Impairment of goodwill
In 2021 in Talc, while the business fundamentals were unchanged, the
significant impact of COVID-19 on wider industrial activity and global supply
chain issues, especially affecting the automotive sector, and the near term
forecast profitability of the business, resulted in a goodwill impairment of
$53.1m. This impairment was reflected as a P&L charge of $52.3m and a
$0.8m movement in exchange differences on translation of foreign operations in
other comprehensive income.
Amortisation of intangibles arising on acquisition
Amortisation of $7.7m represents the charge in respect of the Group's acquired
intangible assets. As in previous periods, these are included in adjusting
items as they are a non-cash charge arising from historical investment
activities.
An explanation of other adjusting items relating to the full year 2021 can be
found within the 2021 Annual Report and Accounts.
6. Finance income
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Interest on bank deposits 0.1 0.3 0.3
Fair value movement on derivatives 7.7 5.0 10.7
7.8 5.3 11.0
7. Finance costs
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Interest on bank loans 10.6 12.1 23.3
Unwind of discount on provisions 0.6 0.6 2.6
Pension and other post-retirement liabilities (0.3) 0.3 0.3
Interest on lease liabilities 0.7 0.8 1.6
11.6 13.8 27.8
8. Tax
The charge for tax on profits of $6.8m or 24.6% (2021: charge of $6.9m, or
19.9%) is based on the probable tax charge in those jurisdictions where
profits arise. Within this figure is a tax credit of $5.1m (2021: $0.6m) in
respect of adjusting items.
9. Earnings per share
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Earnings for the purposes of basic earnings per share 20.8 27.6 2.5
Adjusting items net of tax 20.7 4.7 59.9
Adjusted earnings 41.5 32.3 62.4
Number(m) Number(m) Number(m)
Weighted average number of shares for the purposes of basic 582.1 581.0
earnings per share
580.6
Effect of dilutive share options 5.3 8.7 7.8
Weighted average number of shares for the purposes of diluted 587.4 588.8
earnings per share
589.3
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
cents
cents
cents
Earnings per share:
Basic 3.6 4.8 0.4
Diluted 3.5 4.7 0.4
Adjusted earnings per share:
Basic 7.1 5.6 10.7
Diluted 7.1 5.5 10.6
10. Dividends
The following dividends were declared and paid by the Group:
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Dividends paid on ordinary shares - - -
11. Pension
Valuations for IAS 19 purposes were conducted as of 30 June 2022. At this date
the Group is reporting a surplus on its UK scheme of $58.5m (30 June 2021:
surplus of $45.2m) and a deficit on all other schemes of $15.6m (30 June 2021:
deficit of $19.4m). Additional commentary is included in the Finance Report.
12. Movement in net borrowings
2022 2021 2021
Six months
Six months
Year
ended
ended
ended
30 June
30 June
31 December
$m
$m
$m
Change in net borrowings resulting from cash flows:
Decrease in cash and cash equivalents (5.2) (15.9) (23.6)
Increase in bank overdrafts and loans (5.6) - -
Decrease in borrowings 5.0 3.7 18.7
(5.8) (12.2) (4.9)
Currency translation differences 13.4 5.0 12.0
(Decrease)/increase in net debt (7.6) (7.2) 7.1
Net debt at beginning of period (401.0) (408.1) (408.1)
Net debt at end of period (393.4) (415.3) (401.0)
13. Financial risk management
The Group has exposure to the following financial risks:
· credit risk;
· liquidity risk; and
· market risk.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Group's risk
management policies are established to identify and analyse the risks faced by
the Group, to set appropriate risk limits and controls, and to monitor risks
and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group's activities.
The Group's Audit Committee, assisted by Internal Audit, oversees how
management monitors compliance with the Group's risk management policies and
procedures and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group. These interim financial statements
do not include all the financial risk management information and disclosures
that are required in the Annual report and accounts and should be read in
conjunction with the financial statements for the year ended 31 December 2021.
The Group's risk management policies have not changed since the year end.
The Group measures fair values in respect of financial instruments in
accordance with IFRS 13, using the following fair value hierarchy that
reflects the significance of the inputs used in making the measurements:
Level 1: Quoted market price (unadjusted) in an active market for an identical
instrument.
Level 2: Valuation techniques based on observable inputs, either directly or
indirectly.
Level 3: Valuation techniques using significant unobservable inputs.
Derivatives are held at fair value and are categorised within Level 2. All
other financial instruments are held at amortised cost, which is assumed to
approximate their fair values. All the fair values of financial assets and
liabilities carried at amortised cost are considered to be Level 2 valuations
which are determined using directly or indirectly observable inputs other than
unadjusted quoted prices.
14. Contingent liabilities
As is the case with other chemical companies, the Group occasionally receives
notices of litigation relating to regulatory and legal matters. A provision is
recognised when the Group believes it has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Where it is
deemed that an obligation is merely possible and that the probability of a
material outflow is not remote, the Group would disclose a contingent
liability.
In 2013 the UK Government (through HMRC) introduced the UK Finance Company
Exemption ('FCE') regime. Elementis entered into the FCE regime during 2014.
In October 2017 the European Commission opened a State Aid investigation into
the regime. In April 2019 the European Commission concluded that the FCE
regime constituted State Aid in circumstances where Groups had accessed the
regime using a financing company with UK significant people functions; the
European Commission therefore instructed the UK Government to collect any
relevant State Aid amounts. The UK government and other UK-based international
companies, including Elementis, appealed to the General Court of the European
Union against the decision in 2019.
In Spring 2020 HMRC requested that affected Groups submit their UK significant
people function analysis. The deadline for submission of these analyses was
delayed due to the impact of COVID-19 and Elementis submitted its analysis to
HMRC in July 2020. In December 2020 the UK government introduced legislation
to commence collection proceedings.
Elementis received a charging notice from HMRC on 5 February 2021 which
assessed for the maximum exposure of $19m (excluding interest). This was paid
to HMRC on 5 March 2021. A charging notice for associated interest of $1m was
received on 24 June 2021 and paid on 7 July 2021. Whilst Elementis lodged an
appeal against the charging notices that did not defer the payment of the tax
assessed.
The UK Government's appeal against the European Commission's decision was
heard by the General Court of the European Union during October 2021 and on 8
June 2022 the General Court of the European Union ruled against the UK
Government. The UK Government has communicated that it is preparing a further
appeal to the European Court of Justice. As Elementis continues to consider
that the appeal process will ultimately be successful at 30 June 2022 an asset
of $17.7m has been recorded within non current assets on the expectation that
the charge will be repaid in due course.
As part of an agreement entered into in 2002 on the acquisition of the
Chromium operations at Castle Hayne, the Group would be liable for part of the
cost of the closure of a quarry which is currently used for the deposit of
solid, non-toxic, waste materials from its manufacturing operations in the
event of such a closure. There are a number of potential options available to
management to either extend the current life of the quarry or to effect
closure of the quarry. Management have engaged third party engineers to
explore, evaluate and quantify the options available for the future use and/or
closure of the quarry and expect this work to conclude during Q3 2022.
Management's assessment is that at this stage whilst there is a present
obligation, there is not a probable outflow of resources associated with the
closure of the quarry and even in the event of a probable outflow it is not
possible at this stage to determine a reliable estimate.
15. Events after balance sheet date
The Group successfully refinanced its term loans effective 1 July 2022. The
Group took the opportunity to reduce the overall term loan commitment from
~$400m to ~$300m, split between USD and Euro tranches. The new term loans have
a maturity of June 2026 with the option of a one year extension. The terms of
the existing $375m revolving credit facility are unchanged with maturities in
September 2024 ($72m) and September 2025 ($303m).
16. Related party transactions
Management have performed a review for any related party transactions and have
concluded that position remains unchanged from the year ended 31 December 2021
and is consistent with the information disclosed on page 181 of the Company's
2021 Annual report and accounts.
Principal risks and uncertainties
The Group has policies, processes and systems in place to help identify,
evaluate and manage risks throughout the organisation that may have a material
effect on its business operations and the delivery of its strategic
objectives, including its business model, future performance, solvency,
liquidity and / or reputation. The Board continues to take a proactive
approach to recognising and mitigating risk with the aim of protecting its
employees and safeguarding the interests of the Group, its shareholders,
employees, customers, suppliers and all other stakeholders.
The principal risks and uncertainties facing the Group have not substantively
changed from those set out in the Annual Report and Accounts for the 12 months
ended 31 December 2021 (pages 68 to 72), however some of the principal risks
and uncertainties identified are trending upwards and further details on these
are provided below.
More generally, with respect to COVID-19, whilst there remains some ongoing
impact on the Group in terms of staff absences, as people continue to contract
the disease and behave responsibly, most of the Group's businesses are now
operating largely unimpeded.
Global economic conditions and competitive market pressures
The global economy continues to experience significant inflation, driven
principally by a shortage of supply from the restart of the global economy
post COVID-19 and the ramifications of the conflict between Russia and
Ukraine. The inflationary environment has had a significant impact on the
price of key raw materials, logistics and energy. There is a risk that the
continuing inflationary pressures, combined with the response of central banks
to raise interest rates, could lead to a slowdown in the global economy or
even a global recession. These dynamics could lead to increased competitive
pressures in the marketplace, resulting in a loss of market share and / or
reduced margins.
In response, the Group continues to focus on developing high quality
businesses that have enduring competitive advantages in structural growth
markets, serving a customer base that provides the widest spread of
geographical and end market applications as possible. The rising cost of key
raw materials, logistics and energy are being closely monitored and the Group
continues to implement price increases where necessary in order to protect
margins. In addition, where appropriate, forward contracts are in place to
provide future certainty. The impact of interest rate rises on the Group's
interest expense is mitigated by the hedging arrangements in place.
Business interruption as a result of supply chain failure of key raw materials
The restart of the global economy post-COVID 19, combined with the recent
lockdowns in China and the impact of the conflict between Russia and Ukraine,
has created significant global supply chain challenges with respect to the
reliability and availability of raw materials. The Group is dependent on
numerous raw materials from various sources and has therefore faced, and
continues to face, challenges in securing supplies on a timely basis. In
response the Group has continued to work at pace to identify and qualify new
and alternative sources of supply. The Group also continues to recalibrate
inventory levels to ensure that they are appropriate for current supplier lead
times.
IT networks, data security and privacy
Consistent with wider developments, the Group is increasingly relying on IT
systems for its relationships with customers and suppliers, controls,
reporting and internal communications. Any significant disruption could cause
delays to key operations and an inability to meet customers' requirements,
resulting adverse financial consequences. Ensuring compliance with data
protection legislation is also critical, as failure to do so would expose the
Group to financial and reputational costs. Since the outbreak of the conflict
between Russia and Ukraine there have been an increased level of cyber attacks
globally and such events pose a significant risk to the Group.
In response the Group continues to focus on and invest in IT security
controls, as well as ensuring that there are robust emergency response and
business continuity plans in place. Data management is supported by a focus on
processes and controls and the implementation of a privacy and data protection
management platform.
In summary, the Group continues to maintain appropriate mitigation strategies
to minimise any potential business disruption and will continue to carry out
regular and robust assessment and management of the Group's risks.
Alternative performance measures
A reconciliation from reported profit for the year to earnings before
interest, tax, depreciation and amortisation (EBITDA) is provided to support
understanding of the summarised cash flow included within the finance report
on pages 9 to 13.
2022 2021 2021
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
Profit for the period 20.8 27.6 2.5
Adjustments for:
Finance income after adjusting items (0.1) (0.3) (11.0)
Finance costs and other expenses after adjusting items 12.3 9.8 29.9
Tax charge 6.8 6.9 3.3
Depreciation and amortisation 32.5 33.9 68.3
Excluding intangibles arising on acquisition (7.7) (8.0) (16.0)
Adjusting items impacting operating profit 25.6 10.3 81.5
Adjusted EBITDA 90.2 80.2 158.5
There are also a number of key performance indicators (KPIs) used in this
report. The reconciliations to these are given below.
Adjusted operating cash flow
Adjusted operating cash flow is defined as the net cash flow from operating
activities less net capital expenditure but excluding income tax paid or
received, interest paid or received, pension contributions net of current
service cost and adjusting items.
2022 2021 2021
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
Net Cash flow from operating activities 19.8 13.3 66.7
Less:
Net capital expenditure (21.9) (24.2) (52.4)
Add:
Income tax paid or received 11.1 24.0 30.9
Interest paid or received 9.2 11.8 23.5
Pension contributions net of current service cost (0.4) (0.5) 0.1
Adjusting items - non cash 0.1 0.2 (13.2)
Adjusting items - cash 1.1 5.5 20.4
Adjusted operating cash flow 19.0 30.1 76.0
Adjusted operating cash conversion
Adjusted operating cash conversion is defined as operating cash flow (as
defined above) excluding payments for provisions and share based pay, divided
by operating profit from total operations after adjusting items.
2022 2021 2021
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
Operating profit after adjusting items 65.6 54.3 106.6
Operating cash flow 19.0 30.1 76.0
Add/(deduct):
Provisions and share based pay 0.5 (0.6) (1.9)
19.5 29.5 74.1
Adjusted operating cash flow conversion 30% 54% 70%
Average trade working capital to sales ratio
The trade working capital to sale ratio is defined as the 12 month average
trade working capital divided by sales, expressed as a percentage. Trade
working capital comprises inventories, trade receivables (net of provisions)
and trade payables. It specifically excludes repayments, capital or interest
related receivables or payables, changes due to currency movements and items
classified as other receivables and other payables.
Adjusted operating profit/operating margin
Adjusted operating profit is the profit derived from the normal operations of
the business. Adjusted operating margin is the ratio of operating profit,
after adjusting items, to sales.
Unaudited information
To support a full understanding of the performance of the Group, the
information below provides the calculation of Net Debt / EBITDA.
$m
EBITDA for the last twelve months to 30 June 2022 168.5
IFRS 16 adjustment (6.6)
Adjusted EBITDA pre IFRS 16 161.9
Net Debt 393.4
Net Debt / EBITDA* 2.43
*Where EBITDA is the adjusted EBITDA on continuing operations of the Group on
a pre IFRS 16 basis.
- ENDS -
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