REG - Essentra plc - Results for the Half Year Ended 30 June 2014 <Origin Href="QuoteRef">ESNT.L</Origin> - Part 2
06/09/2014 22:42
- Part 2: For the preceding part double click ID:nRSe7975Na
(0.9) 6.1
Increase in trade and other receivables (25.8) (28.9) (23.3)
(Decrease)/increase in trade and other payables (0.8) 5.2 11.9
Cash outflow in respect of exceptional operating items (1.6) (4.3) (10.5)
Additional pension contributions (0.3) (2.9) (6.1)
Provisions utilised in the period (1.2) (4.2) (10.8)
Cash inflow from operating activities 45.9 45.7 127.7
Income tax paid (10.3) (10.7) (17.5)
Net cash inflow from operating activities 35.6 35.0 110.2
Investing activities
Interest received 0.1 0.2 0.3
Acquisition of property, plant and equipment (14.8) (26.2) (44.1)
Proceeds from sale of property, plant and equipment 1.2 0.4 0.4
Acquisition of businesses net of cash acquired (2.6) (153.1) (188.9)
Net cash outflow from investing activities (16.1) (178.7) (232.3)
Financing activities
Interest paid (4.9) (4.7) (9.6)
Dividends paid to equity holders (24.8) (20.0) (31.2)
Dividends paid to non-controlling interests - (0.8) (1.0)
Acquisition of non-controlling interests - - (1.9)
Proceeds from equity issue - 141.7 141.7
Proceeds from issue of shares to non-controlling interests - 0.7 1.5
Repayments of short-term loans (5.2) (2.0) -
Proceeds from short-term loans - - 0.2
Repayments of long-term loans (25.3) - -
Proceeds from long-term loans 33.9 31.1 37.5
Purchase of employee trust shares (4.4) (3.5) (16.3)
Proceeds from sale of employee trust shares 3.5 3.8 4.7
Net cash inflow/(outflow) from financing activities (27.2) 146.3 125.6
Net (decrease)/increase in cash and cash equivalents (7.7) 2.6 3.5
Net cash and cash equivalents at the beginning of the period 44.1 41.4 41.4
Net (decrease)/increase in cash and cash equivalents (7.7) 2.6 3.5
Net effect of currency translation on cash and cash equivalents (0.9) 2.4 (0.8)
Net cash and cash equivalents at the end of the period 6 35.5 46.4 44.1
Notes
1. Basis of preparation
The condensed set of financial statements has been prepared in accordance with
the accounting policies set out in the 2013 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
2014. 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 2013 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 operating 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. These
segments are as follows:
Component & Protection Solutions consists of a Component Distribution business
and a Pipe Protection Technologies business. Component Distribution is a
global market leading manufacturer and distributor of plastic injection
moulded, vinyl dip moulded, and metal items. The Pipe Protection Technologies
business specialises in the manufacture of high performance innovative
products from commodity resins to engineering-grade thermoplastics and polymer
alloys.
Porous Technologies is a global market leading developer and manufacturer of
custom fluid handling components, engineered from a portfolio of technologies
that includes bonded and non-woven fibre, polyurethane foam, and porous
plastic.
Packaging & Securing Solutions is a global market leading provider of
packaging and securing solutions through a range of cartons, tapes, leaflets,
foils and labels for the consumer and specialist packaging, point of sale and
paper & board industries. The division is also a leading supplier of
authentication technologies and identity solutions.
Filter Products is an independent cigarette filter manufacturer supplying a
wide range of value adding high quality innovative filters, packaging
solutions to the roll your own sector and analytical laboratory services for
ingredient measurement for the industry.
Other represents Essentra Extrusion BV which is a leading custom profile
extruder located in The Netherlands offering a complete design and production
service.
2. Segment analysis (continued)
Revenue Operating profit
Six monthsended Six monthsended Year ended Six monthsended Six monthsended Year ended
30 Jun 2014 30 Jun 2013 31 Dec 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
£m £m £m £m £m £m
Component & Protection Solutions 123.8 115.6 223.7 32.5 28.5 52.6
Porous Technologies 44.4 51.9 100.0 6.7 13.0 23.5
Packaging & Securing Solutions 108.6 76.5 181.8 18.3 13.5 30.2
Filter Products 141.7 129.5 269.9 19.8 18.0 40.1
Other 13.0 12.2 24.8 0.9 0.9 1.5
Central Services 1 - - - (9.2) (8.7) (17.5)
Elimination of intersegment 2 (0.4) (1.1) (2.1) - - -
431.1 384.6 798.1 69.0 65.2 130.4
Intangible amortisation (8.7) (5.6) (14.2)
Exceptional operating items (6.3) (9.3) (19.2)
Total 431.1 384.6 798.1 54.0 50.3 97.0
Adjusted operating margin 3 16.0% 17.0% 16.3%
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 Intersegment revenue is primarily attributable to Packaging & Securing
Solutions
3 Adjusted operating margin is defined as operating profit before intangible
amortisation and exceptional operating items divided by revenue
Exceptional operating items
Six monthsended30 Jun 2014£m Six monthsended30 Jun 2013£m Yearended31 Dec 2013£m
Acquisition fees 0.2 2.8 4.7
Acquisition integration and restructuring costs 6.1 4.1 12.6
Other - 2.4 1.9
6.3 9.3 19.2
Acquisition-related costs incurred during the period in respect of the
acquisition of Kelvindale (period ended 30 June 2013 and year ended 31
December 2013: acquisitions of Ulinco, Contego, Dakota and Mesan, and
transactions that did not complete).
Acquisition integration and restructuring costs incurred during the period in
respect of Contego, Dakota and Mesan (period ended 30 June 2013: Contego and
Ulinco; year ended 31 December 2013: Richco, Ulinco, Contego, Dakota and
Mesan).
Other exceptional items in the period ended 30 June 2013 comprised £2.4m
relating to costs incurred in relation to rebranding of the Group to Essentra;
the amount in year ended 31 December 2013 comprised £2.4m costs incurred in
relation to rebranding of the Group to Essentra, a £0.8m credit adjustment for
contingent deferred consideration in relation to the acquisition of Reid
Supply Company, and £0.3m relating to Extrusion restructuring.
3. Earnings per share
Six monthsended Six monthsended Year ended
30 Jun 2014 30 Jun 2013 31 Dec 2013
£m £m £m
Continuing operations
Earnings attributable to equity holders of Essentra plc 35.4 31.1 60.1
Adjustments
Intangible amortisation 8.7 5.6 14.2
Exceptional operating items 6.3 9.3 19.2
15.0 14.9 33.4
Tax relief on adjustments (2.9) (2.7) (6.8)
Adjusted earnings 47.5 43.3 86.7
Basic weighted average ordinary shares in issue (million) 233.6 223.1 228.2
Dilutive effect of employee share option plans (million) 5.2 6.8 6.1
Diluted weighted average ordinary shares (million) 238.8 229.9 234.3
Continuing operations
Basic earnings per share 15.2p 13.9p 26.3p
Adjustment 5.1p 5.5p 11.7p
Adjusted earnings per share 20.3p 19.4p 38.0p
Diluted earnings per share 14.8p 13.5p 25.7p
Diluted adjusted earnings per share 19.9p 18.8p 37.0p
Adjusted earnings per share is provided to reflect the underlying earnings
performance of Essentra.
4. Property, plant and equipment
During the period Essentra's operations spent £15.3m (six months ended 30 Jun
2013: £23.7m; year ended 31 Dec 2013: £41.5m) on land and buildings, plant and
machinery and fixtures, fittings and equipment.
Land and buildings, plant and machinery and fixtures, fittings and equipment
with a net book value of £1.1m (six months ended 30 Jun 2013: £0.3m; year
ended 31 Dec 2013: £0.5m) were disposed of for proceeds of £1.2m (six months
ended 30 Jun 2013: £0.4m; year ended 31 Dec 2013: £0.4m).
5. Retirement benefit obligations
Movement in pension net assets/(liabilities) during the period
30 Jun 2014 30 Jun 2013 31 Dec 2013
£m £m £m
Movements
Beginning of period 10.6 (3.9) (3.9)
Service cost (1.2) (1.3) (2.4)
Employer contributions 1.5 4.2 8.5
Return on plan assets excluding amounts in net finance income 4.3 4.4 10.8
Actuarial gain/(loss) arising from changes in financial assumptions (8.3) 9.5 3.6
Actuarial gain/(loss) arising from changes in demographic assumptions - - (2.6)
Actuarial gain/(loss) arising from experience adjustment - - (0.6)
Net finance income 0.4 0.1 (0.1)
Business combination - - (1.1)
Other - (2.7) (1.6)
Currency translation 0.6 (1.3) -
End of period 7.9 9.0 10.6
The principal defined benefit schemes were reviewed by independent qualified
actuaries as at 30 June 2014. 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 2014 30 Jun 2013 31 Dec 2013
£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% 3.20% 3.30% 3.30%
At CPI capped at 5% 2.30% 2.60% 2.40%
At CPI minimum 3%, capped at 5% 3.20% 3.40% 3.30%
At CPI capped at 2.5% 1.90% 2.00% 1.90%
Discount rate 4.30% 4.80% 4.50%
Inflation rate - RPI 3.30% 3.40% 3.40%
Inflation rate - CPI 2.30% 2.60% 2.40%
US
30 Jun 2014 30 Jun 2013 31 Dec 2013
£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 4.30% 4.80% 4.90%
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%
6. Analysis of net debt
30 Jun 2014 31 Dec 2013
£m £m
Cash at bank and in hand 29.5 42.0
Short-term deposits repayable on demand 6.0 2.1
Cash and cash equivalents 35.5 44.1
Debt due within one year (1.2) (6.5)
Debt due after one year (258.1) (254.7)
Net debt (223.8) (217.1)
At 30 June 2014 the Group's facilities primarily comprised US$160m US Private
Placement Loan Notes and revolving credit facilities of £165.6m and E187.7m.
7. Acquisitions
During 2014, Essentra reassessed the fair value adjustments made in respect of
Contego Healthcare Limited ("Contego") which was acquired on 30 April 2013,
and made changes to certain accruals, property, plant and equipment, and
deferred tax assets. The impact on goodwill is an increase of £1.7m.
In addition, Essentra reassessed the fair value adjustments made in respect of
Dakota and Mesan, which were also acquired in 2013. In respect of the
acquisition of Dakota, some changes were made to certain accruals and
adjustments to the fair value of receivables and inventories. These
adjustments were insignificant individually and in aggregate. The
acquisitions carried out by the Group in 2014 were not material.
8. Dividends
Per share Total
Six months ended 30 Jun 2014 Six months ended 30 Jun 2013 Yearended 31 Dec 2013 Six months ended 30 Jun 2014 Six months ended 30 Jun 2013 Year ended 31 Dec 2013
p p p £m £m £m
2013 interim: paid 28 October 2013 4.8 4.8 11.2 11.2
2013 final: paid 2 May 2014 10.6 24.8
2014 interim:payable 30 October 2014 5.7 13.4
5.7 4.8 15.4 13.4 11.2 36.0
The interim dividend for 2014 of 5.7p per 25p ordinary share will be paid on
30 October 2014 to equity holders on the share register on 26 September 2014.
9. 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.
10. Financial instruments
Essentra held the following financial instruments at fair value at 30 June
2014. 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 £6.0m relating to
the acquisition of Ulinco Components AB and Mesan Kilit A.S. (31 Dec 2013:
deferred contingent consideration of £6.2m relating to the acquisitions of
Ulinco Components AB and Mesan Kilit A.S.). 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 2014 31 Dec 2013
£m £m
Financial assets
Derivatives 1.0 0.2
Financial liabilities
Derivatives (0.2) (0.3)
Deferred contingent consideration (6.0) (6.2)
Total (5.2) (6.3)
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 £93.6m (31 Dec 2013: £95.5m) and £101.5m (31 Dec
2013: £105.7m) respectively. The carrying amount of the other financial
instruments is a reasonable approximation of their fair value.
11. Subsequent events
On 1 July 2014, Essentra plc refinanced its bank facilities, and replaced the
existing £330m sterling and euro-denominated five-year revolving credit
facilities with a new £390m five-year facility at more competitive terms.
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
Matthew Gregory
Chief Executive Group
Finance Director
31 July 2014
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 2014 which comprises the condensed consolidated income statement,
condensed consolidated statement of comprehensive income, condensed
consolidated balance sheet, condensed consolidated statement of changes in
equity, 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 2014 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR
of the UK FCA.
Mike Barradell
for and on behalf of KPMG LLP
Chartered Accountants
31 July 2014
15 Canada Square
London E14 5GL
This information is provided by RNS
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