REG - Essentra plc - Half Year Results 2016 <Origin Href="QuoteRef">ESNT.L</Origin> - Part 2
29/07/2016 07:15
- Part 2: For the preceding part double click ID:nRSc6277Fa
3.3 3.3
Dividends paid (32.6) (0.2) (32.8)
At 30 June 2015 66.0 298.1 0.1 (132.8) - (25.4) 381.6 5.1 592.7
Condensed consolidated statement of changes in equity(continued)
Year ended 31 December 2015
Issued capital Merger relief reserve Capital redemption reserve Other reserve Cash flow hedging reserve Translation reserve Retained earnings Non-controlling interests Total equity
£m £m £m £m £m £m £m £m £m
At 1 January 2015 66.0 298.1 0.1 (132.8) 3.4 (8.5) 366.5 5.0 597.8
Profit for the year 67.9 0.8 68.7
Other comprehensive income (3.4) (12.9) 1.7 0.1 (14.5)
Total comprehensive income for the year - - - - (3.4) (12.9) 69.6 0.9 54.2
Purchase of employee trust shares (1.0) (1.0)
Shares options exercised 5.4 5.4
Share option expense 5.7 5.7
Tax relating to share-based incentives 2.3 2.3
Dividends paid (49.0) (0.2) (49.2)
At 31 December 2015 66.0 298.1 0.1 (132.8) - (21.4) 399.5 5.7 615.2
Condensed consolidated statement of cash flows
Six monthsended Six monthsended Year ended
Note 30 Jun 2016 30 Jun 2015 31 Dec 2015
£m £m £m
Operating activities
Profit for the period from continuing operations 34.1 35.6 68.7
Adjustments for:
Income tax expense 8.5 9.5 21.7
Net finance expense 7.0 5.3 10.3
Intangible amortisation 15.9 15.2 31.7
Exceptional operating items 4.6 16.3 39.1
Depreciation 16.0 18.4 31.9
Share option expense 3.3 3.3 5.7
Other movements (0.1) (0.4) (0.5)
Decrease/(increase) in inventories 2.8 (11.7) (14.6)
Decrease/(increase) in trade and other receivables 6.9 (38.3) (51.2)
(Decrease) /increase in trade and other payables (36.6) 17.0 13.0
Cash outflow in respect of exceptional operating items (7.2) (6.0) (22.1)
Adjustment for pension contributions 0.5 (3.1) (5.1)
Movement in provisions (2.9) (0.8) (2.3)
Cash inflow from operating activities 52.8 60.3 126.3
Income tax paid (8.5) (6.3) (15.7)
Net cash inflow from operating activities 44.3 54.0 110.6
Investing activities
Interest received 0.2 0.3 0.6
Acquisition of property, plant and equipment (24.0) (29.8) (58.6)
Proceeds from sale of property, plant and equipment 5.7 1.9 3.8
Acquisition of businesses net of cash acquired (0.1) (304.0) (304.5)
Net cash outflow from investing activities (18.2) (331.6) (358.7)
Financing activities
Interest paid (6.7) (4.9) (10.0)
Dividends paid to equity holders (37.5) (32.6) (49.0)
Dividends paid to non-controlling interests - (0.2) (0.2)
Repayments of short-term loans - (4.9) (4.9)
Proceeds from long-term loans 49.7 305.4 292.8
Purchase of employee trust shares - (1.0) (1.0)
Proceeds from sale of employee trust shares 2.2 5.0 5.4
Net cash inflow from financing activities 7.7 266.8 233.1
Net increase/(decrease) in cash and cash equivalents 33.8 (10.8) (15.0)
Net cash and cash equivalents at the beginning of the period 30.2 46.0 46.0
Net increase/(decrease) in cash and cash equivalents 33.8 (10.8) (15.0)
Net effect of currency translation on cash and cash equivalents 2.6 (0.9) (0.8)
Net cash and cash equivalents at the end of the period 7 66.6 34.3 30.2
Notes
1. Basis of preparation
The condensed set of financial statements has been prepared in accordance with
the accounting policies set out in the 2015 Annual Report which comply with
International Financial Reporting Standards as adopted by the EU and also in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure and Transparency Rules ('DTR') of the Financial Conduct
Authority. The preparation of the condensed set of financial statements
requires management to make estimates and assumptions that affect the
reporting amounts of revenues, expenses, assets and liabilities at 30 June
2016. If in the future such estimates and assumptions, which are based on
management's best judgement at the date of the condensed set of financial
statements, deviate from the actual circumstances, the original estimates and
assumptions will be modified as appropriate in the period in which the
circumstances change.
In the view of the Directors, the Group has adequate resources to continue its
activities for the foreseeable future and, therefore it is appropriate to
continue to adopt the going concern basis in the preparation of the condensed
set of financial statements.
The comparative figures for the financial year ended 31 December 2015 are not
the Company's statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditor and delivered to the Registrar of
Companies. The report of the auditor was (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under Section 498(2) or (3) of the Companies Act 2006.
For the purpose of the condensed set of financial statements 'Essentra' or
'the Group' means Essentra plc ('the Company') and its subsidiaries.
The Group operates in industries where there are no significant seasonal or
cyclical variations in revenue. All results in the current period were
attributable to continuing operations.
Income tax expense is recognised based upon the best estimate of the weighted
average income tax rate on profit before tax and exceptional items expected
for the full financial year, taking into account the weighted average rate for
each jurisdiction.
2. Segment analysis
In accordance with IFRS 8, Essentra has determined its operating segments
based upon the information reported to the Group Management Committee. With
effect from 1 January 2016, Essentra has implemented a new organisation
structure, comprising three strategic business units. The Components, Pipe
Protection Technologies, Extrusion and Security businesses form a strategic
business unit named Component Solutions. The Speciality Tapes business is now
included within the current Health & Personal Care Packaging strategic
business unit. The Filter Products and Porous Technologies businesses form a
new strategic business unit named Filtration Products. The scope of Central
Services remains the same.
The operating segments are as follows:
Component Solutions consists of the Components business, the Extrusion
business, the Pipe Protection Technologies business and the Security business.
The Components business is a global market leading manufacturer and
distributor of plastic injection moulded, vinyl dip moulded and metal items.
The Extrusion business is a leading custom profile extruder located in the
Netherlands which offers a complete design and production service. The Pipe
Protection Technologies business specialises in the manufacture of high
performance innovative products from commodity resins to engineering-grade
thermoplastics and polymer alloys for use in a range of end-markets. The
Security business has access to the widest portfolio of products and services,
including printers, software and consumables from leading manufacturers.
Health and Personal Care Packaging consists of the Health and Personal Care
Packaging business and the Speciality Tapes business. Health and Personal Care
Packaging is a leading global provider of packaging and authentication
solutions to a diversified blue-chip customer base in the pharmaceutical,
health and personal care, consumer and specialist packaging sectors. The
Speciality Tapes business has expertise in coating multiple adhesive systems
in numerous technologies.
Filtration Products is a leading global provider of specialised filtration
solutions to an international customer base in a diverse range of end-markets,
including tobacco, health and personal care and consumer goods.
2. Segment analysis(continued)
June 2016
Component Solutions Health & Personal Care Packaging Filtration Products Eliminations Central Services1 Total
£m £m £m £m £m £m
External revenue 146.5 215.4 183.3 - - 545.2
Intersegment revenue 0.6 1.3 0.4 (2.3) - -
Total revenue 147.1 216.7 183.7 (2.3) - 545.2
Adjusted operating profit/(loss) 2 26.4 22.1 29.5 - (7.9) 70.1
Segment assets 191.1 258.8 252.0 - 12.9 714.8
Intangible assets 172.3 513.3 54.7 - - 740.3
Unallocated items 3 - - 105.7 105.7
Total assets 363.4 772.1 306.7 - 118.6 1,560.8
Segment liabilities 40.4 99.4 69.7 - 14.6 224.1
Unallocated items 3 - - - - 673.9 673.9
Total liabilities 40.4 99.4 69.7 - 688.4 898.0
June 2015
Component Solutions Health & Personal Care Packaging Filtration Products Eliminations Central Services1 Total
£m £m £m £m £m £m
External revenue 146.6 201.9 201.9 - - 550.4
Intersegment revenue 0.5 1.6 0.4 (2.5) - -
Total revenue 147.1 203.5 202.3 (2.5) - 550.4
Adjusted operating profit/(loss) 2 31.8 24.7 34.2 - (8.8) 81.9
Segment assets 172.7 222.0 214.9 - 7.7 617.3
Intangible assets 159.1 473.2 44.3 - - 676.6
Unallocated items 3 - - - - 71.9 71.9
Total assets 331.8 695.2 259.2 - 79.6 1,365.8
Segment liabilities 43.5 105.0 62.9 - 24.1 235.5
Unallocated items 3 - - - - 537.6 537.6
Total liabilities 43.5 105.0 62.9 - 561.7 773.1
December 2015
Component Solutions Health & Personal Care Packaging Filtration Products Eliminations Central Services1 Total
£m £m £m £m £m £m
External revenue 285.2 419.3 393.6 - - 1,098.1
Intersegment revenue 1.0 3.3 0.8 (5.1) - -
Total revenue 286.2 422.6 394.4 (5.1) - 1,098.1
Adjusted operating profit/(loss) 2 58.1 57.5 72.1 - (16.2) 171.5
Segment assets 178.3 237.7 235.8 - 9.7 661.5
Intangible assets 160.3 485.6 45.7 - - 691.6
Unallocated items 3 - - 63.8 63.8
Total assets 338.6 723.3 281.5 - 73.5 1,416.9
Segment liabilities 44.8 115.6 74.3 - 18.0 252.7
Unallocated items 3 - - - - 549.0 549.0
Total liabilities 44.8 115.6 74.3 - 567.0 801.7
1 Central Services includes group finance, tax, treasury, legal, group
assurance, human resources, information technology, corporate development and
other services provided centrally to support the operating segments
2 Operating profit before intangible amortisation and exceptional items
3 The unallocated assets relate to income and deferred tax assets, retirement
benefit assets, derivatives and cash and cash equivalents. The unallocated
liabilities relate to interest bearing loans and borrowings, retirement
benefit obligations, derivatives, deferred tax liabilities and income tax
payable. Intersegment transactions are carried out on an arm's length basis.
3. Exceptional items
Six monthsended30 Jun 2016£m Six monthsended30 Jun 2015£m Yearended31 Dec 2015£m
Exceptional operating items
Acquisition fees 0.2 0.1 0.2
Acquisition integration and restructuring costs 4.2 18.2 34.1
Other 0.2 (2.0) 4.8
4.6 16.3 39.1
Exceptional tax items - (1.7) (1.7)
Acquisition-related costs are incurred during the period in respect of the
acquisition of Kamsri Printing & Packaging PVT. Ltd based in India (period
ended 30 June 2015 and year ended 31 December 2015: acquisition of Specialty
Plastics).
Acquisition integration and restructuring costs are incurred during the period
in respect of:
· additional integration costs in relation to the ongoing integration of
the Clondalkin SPD business (£3.8m) offset with the gain on disposal of
certain properties which were acquired with that business (£1.3m); and
· the costs associated with the closure of the Components site at Xiamen,
China, and integration of those operations into other sites in Asia as part of
the Components Asia restructuring programme following the Abric acquisition
(£1.7m)
The items in the period ended 30 June 2015 and year ended 31 December 2015
relate to Clondalkin SPD, Abric and Speciality Plastics. The costs for June
2015 also included the effect of unwinding the fair value adjustment on
inventory in relation to the acquisition of Clondalkin SPD, amounting to
£1.9m.
Other exceptional items in the period ended 30 June 2016 relate to
· further costs of £2.8m associated with the closure of the Filters site
in Jarrow and integration of previous Jarrow operations into the Hungary site
offset with the net release of property provisions of £1.5m on the disposal of
certain properties in Filtration Products; and
· the release of a provision of £1.1m for contingent deferred
consideration in relation to a prior period acquisition.
Other exceptional items in the period ended 30 June 2015 related to the
release in respect of warranty obligations for the disposal of Globalpack, an
entity disposed of in 2007. Other exceptional items in the period ended 31
December 2015 related to costs associated with the closure of the Filters site
in Jarrow of £11.5m, offset by a release of £1.9m in respect of warranty
obligations for the 2007 disposal of Globalpack and a £4.8m credit adjustment
for contingent deferred consideration in relation to prior period
acquisitions.
Exceptional tax items in 2015 related to the release of tax indemnity
provisions of £1.7 million in respect of the 2007 Globalpack disposal.
4. Earnings per share
Six monthsended Six monthsended Year ended
30 Jun 2016 30 Jun 2015 31 Dec 2015
£m £m £m
Continuing operations
Earnings attributable to equity holders of Essentra plc 33.8 35.3 67.9
Adjustments
Intangible amortisation 15.9 15.2 31.7
Exceptional operating items 4.6 16.3 39.1
20.5 31.5 70.8
Tax relief on adjustments (4.1) (6.4) (13.4)
Exceptional tax item - (1.7) (1.7)
Adjusted earnings 50.2 58.7 123.6
Basic weighted average ordinary shares in issue (million) 260.9 258.6 259.5
Dilutive effect of employee share option plans (million) 2.8 4.1 3.7
Diluted weighted average ordinary shares (million) 263.7 262.7 263.2
Continuing operations
Basic earnings per share 13.0p 13.7p 26.2p
Adjustment 6.2p 9.0p 21.4p
Basic adjusted earnings per share 19.2p 22.7p 47.6p
Diluted earnings per share 12.8p 13.4p 25.8p
Diluted adjusted earnings per share 19.0p 22.3p 47.0p
Adjusted earnings per share is provided to reflect the underlying earnings
performance of Essentra.
5. Property, plant and equipment
During the period, the additions of land and buildings, plant and machinery
and fixtures, fittings and equipment amounted to £22.5m (six months ended 30
June 2015: £28.5m; year ended 31 December 2015: £60.5m).
Land and buildings, plant and machinery and fixtures, fittings and equipment
with a net book value of £4.1m (six months ended 30 June 2015: £1.9m; year
ended 31 December 2015: £4.3m) were disposed of for proceeds of £5.7m (six
months ended 30 June 2015: £1.9m; year ended 31 December 2015: £3.8m).
6. Retirement benefit obligations
Movement in pension net assets/(liabilities) during the period
30 Jun 2016 30 Jun 2015 31 Dec 2015
£m £m £m
Movements
Beginning of period (0.8) (1.7) (1.7)
Service cost (0.9) (1.0) (2.5)
Employer contributions 0.4 2.3 4.0
Return on plan assets excluding amounts in net finance income 16.3 (2.9) (8.5)
Actuarial (loss)/gain arising from changes in financial assumptions (22.6) 6.2 6.2
Actuarial gain arising from experience adjustment 1.4 0.1 4.2
Net finance cost (0.1) (0.1) (0.2)
Benefits paid - - 0.5
Business combination - (4.7) (4.9)
Curtailments and settlements - 1.7 3.0
Currency translation (3.1) 0.6 (0.9)
End of period (9.4) 0.5 (0.8)
The principal defined benefit schemes were reviewed by independent qualified
actuaries as at 30 June 2016. The assets of the schemes have been updated to
the balance sheet date to take account of the investment returns achieved by
the schemes and the level of contributions. The liabilities of the schemes at
the balance sheet date have been updated to reflect latest discount rates and
other assumptions as well as the level of contributions. The principal
assumptions used by the independent qualified actuaries were as follows:
Europe
30 Jun 2016 30 Jun 2015 31 Dec 2015
£m £m £m
Rate of increase in salaries (pre-2010) 1 3.00% 3.00% 3.00%
Rate of increase in salaries (post-2010) 1 3.00% 3.00% 3.00%
Rate of increase in pensions 1
At RPI capped at 5% 2.90% 3.20% 3.10%
At CPI capped at 5% 1.90% 2.30% 2.20%
At CPI minimum 3%, capped at 5% 3.10% 3.30% 3.30%
At CPI capped at 2.5% 1.70% 1.80% 1.80%
Discount rate 3.20% 3.80% 3.80%
Inflation rate - RPI 2.90% 3.30% 3.20%
Inflation rate - CPI 1.90% 2.30% 2.20%
US
30 Jun 2016 30 Jun 2015 31 Dec 2015
£m £m £m
Rate of increase in salaries 3.00% 3.00% 3.00%
Rate of increase in pensions n/a n/a n/a
Discount rate 3.70% 4.55% 4.37%
Inflation rate n/a n/a n/a
1 For service prior to April 2010, pension at retirement is linked to salary
at retirement. For service after April 2010, pension is linked to salary at
April 2010 with annual increases capped at 3%
7. Analysis of net debt
30 Jun 2016 31 Dec 2015
£m £m
Cash at bank and in hand 28.7 23.8
Short-term deposits repayable on demand 37.9 6.4
Cash and cash equivalents 66.6 30.2
Debt due within one year (60.7) (0.6)
Debt due after one year (439.8) (403.5)
Net debt (433.9) (373.9)
At 30 June 2016 the Group's facilities primarily comprised US$160m US Private
Placement Loan Notes and revolving credit facilities of E167.5m and £271.0m.
8. Acquisitions
The Group acquired the pharmaceutical assets of Kamsri Printing & Packaging
PVT. Ltd ("Kamsri") based in India in January 2016. This acquisition was not
material.
9. Dividends
Per share Total
Six months ended 30 Jun 2016 Six months ended 30 Jun 2015 Yearended 31 Dec 2015 Six months ended 30 Jun 2016 Six months ended 30 Jun 2015 Year ended 31 Dec 2015
p p p £m £m £m
2015 interim: paid 30 October 2015 6.3 6.3 6.3 16.5 16.4 16.4
2015 final: paid 3 May 2016 14.4 37.5
2016 interim:payable 30 October 2016
6.3 6.3 20.7 16.5 16.4 53.9
The interim dividend for 2016 of 6.3p per 25p ordinary share will be paid on
31 October 2016 to equity holders on the share register on 30 September 2016.
10. Related party transactions
Other than the compensation of key management, Essentra has not entered into
any material transactions with related parties since the last Annual Report.
11. Financial instruments
Essentra held the following financial instruments at fair value at 30 June
2016. The only financial instrument with fair value determined by reference
to significant unobservable inputs, which is classified as level 3 in the fair
value hierarchy, is the deferred contingent consideration of £1.5m primarily
relating to the acquisition of Kamsri, Specialty Plastics and Abric (31 Dec
2015: deferred contingent consideration of £1.5m relating to the acquisition
of Mesan Kilit A.S., Specialty Plastics and Abric). The other financial
instruments included in the table below are determined to be level 2 in the
fair value hierarchy. There have been no transfers between levels of the fair
value hierarchy. There are no non-recurring fair value measurements.
30 Jun 2016 31 Dec 2015
£m £m
Financial assets
Derivatives 2.0 0.4
Financial liabilities
Derivatives (3.5) (0.4)
Deferred contingent consideration (1.5) (1.5)
Total (3.0) (1.5)
The fair values of forward foreign exchange contracts and cross currency swaps
have been calculated based on period end forward exchange rates compared to
contracted rates. The carrying amount and fair value of the US Private
Placement Loan Notes are £119.8m (31 December 2015: £108.3m) and £129.2m (31
December 2015: £117.4m) respectively. The carrying amount of the other
financial instruments is a reasonable approximation of their fair value.
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
• the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Colin Day Stefan
Schellinger
Chief Executive Group
Finance Director
29 July 2016
Independent review report to Essentra plc
Introduction
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 2016 which comprises the condensed consolidated balance sheet, the
condensed consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of changes in
equity, the condensed consolidated statement of cash flows and the related
explanatory notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority
("the UK FCA"). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this 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 reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the Group are prepared in accordance with
IFRSs as adopted by the EU. The condensed set of financial statements included
in this half-yearly financial report has been prepared in accordance with IAS
34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2016 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR
of the UK FCA.
Stephen Wardell
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
29 July 2016
This information is provided by RNS
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