- Part 2: For the preceding part double click ID:nRSE2269Oa
appropriate given that the company and its subsidiaries have
adequate resources to continue in operational existence for the foreseeable
future.
2. Financial risks, estimates, assumptions and judgements
The preparation of the condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements as at and for the year
ended 31 December 2013.
3. Exchange rates
The principal exchange rates used were as follows:
6 months ended30 June 2014 6 months ended30 June 2013 Year ended31 December 2013
Average Closing Average Closing Average Closing
Sterling to Euro (£1 = EUR) 1.22 1.25 1.17 1.17 1.18 1.20
Sterling to US Dollar (£1 = USD) 1.67 1.71 1.54 1.52 1.56 1.65
Sterling to Thai Bhat (£1 = THB) 54.32 55.47 46.07 46.18 48.09 54.13
Sterling to Swedish Krona (£1 = SEK) 10.90 11.43 10.03 10.24 10.19 10.59
4. Segmental information
The group has three reportable segments which are Infrastructure Products -
Roads, Infrastructure Products - Utilities and Galvanizing Services. Several
operating segments that have similar economic characteristics have been
aggregated into these reporting segments.
Income Statement
6 months ended 30 June 2014 6 months ended 30 June 2013
Revenue £m Result £m Underlyingresult* £m Revenue £m Result £m Underlyingresult* £m
Infrastructure Products - Utilities 99.4 0.5 4.6 101.5 0.7 2.5
Infrastructure Products - Roads 59.3 5.2 5.4 56.5 5.2 5.4
Infrastructure Products - Total 158.7 5.7 10.0 158.0 5.9 7.9
Galvanizing Services 65.1 12.4 12.5 63.6 11.9 12.3
Total group 223.8 18.1 22.5 221.6 17.8 20.2
Net financing costs (2.1) (1.7) (2.1) (1.7)
Profit before taxation 16.0 20.8 15.7 18.5
Taxation (4.6) (5.0) (4.1) (4.8)
Profit after taxation 11.4 15.8 11.6 13.7
Year ended 31 December 2013
Revenue £m Result £m Underlyingresult* £m
Infrastructure Products - Utilities 202.9 (2.0) 7.4
Infrastructure Products - Roads 114.0 11.2 11.7
Infrastructure Products - Total 316.9 9.2 19.1
Galvanizing Services 127.6 25.3 25.4
Total group 444.5 34.5 44.5
Net financing costs (3.9) (3.3)
Profit before taxation 30.6 41.2
Taxation (7.6) (9.9)
Profit after taxation 23.0 31.3
*Underlying result is stated before Non-Underlying items as defined in note 6,
and is the measure of segment profit used by the Chief Operating Decision
Maker, who is the Chief Executive. The Result columns are included as
additional information.
Galvanizing Services provided £3.1m revenues to Infrastructure Products -
Roads (six months ended 30 June 2013: £2.3m, the year ended 31 December 2013:
£5.0m) and £0.9m revenues to Infrastructure Products - Utilities (six months
ended 30 June 2013: £0.8m, the year ended 31 December 2013: £1.6m).
Infrastructure Products - Utilities provided £0.7m revenues to Infrastructure
Products - Roads (six months ended 30 June 2013: £0.3m, the year ended 31
December 2013: £2.2m). These internal revenues, along within revenues
generated within each segment, have been eliminated on consolidation.
The group presents the analysis of continuing operations revenue by
geographical market, irrespective of origin:
6 months ended 30 June 2014£m 6 months ended 30 June 2013£m Year ended 31 December 2013£m
UK 109.7 99.1 205.9
Rest of Europe 49.9 51.3 101.2
North America 53.7 57.4 113.2
Asia and the Middle East 9.0 12.4 20.9
Rest of World 1.5 1.4 3.3
Total 223.8 221.6 444.5
5. Operating profit
6 months ended 30 June 2014£m 6 months ended 30 June 2013£m Year ended 31 December 2013£m
Revenue 223.8 221.6 444.5
Cost of sales (145.9) (146.2) (297.7)
Gross profit 77.9 75.4 146.8
Distribution costs (11.0) (10.5) (22.3)
Administrative expenses (45.9) (47.7) (91.1)
Profit on disposal of non-current assets - 0.1 -
Impairment loss on initial classification as held for sale (3.5) - -
Profit on disposal of subsidiary 0.1 - -
Other operating income 0.5 0.5 1.1
Operating profit 18.1 17.8 34.5
6. Non-underlying items
Non-underlying items are disclosed separately in the consolidated income
statement where the quantum, nature or volatility of such items would
otherwise distort the underlying trading performance of the group. The
following are included by the group in its assessment of non-underlying
items:
- Gains or losses arising on disposal, closure, restructuring or
reorganisation of businesses that do not meet the definition of discontinued
operations
- Amortisation of intangible fixed assets arising on acquisitions
- Expenses associated with acquisitions
- Impairment charges in respect of tangible or intangible fixed assets
- Changes in the fair value of derivative financial instruments
- Significant past service items or curtailments and settlements relating
to defined benefit pension obligations resulting from material changes in the
terms of the schemes
- Net financing costs or returns on defined benefit pension obligations
- Costs incurred as part of significant refinancing activities.
The tax effect of the above is also included.
Details in respect of the non-underlying items recognised in the current and
prior year are set out below.
Six months ended 30 June 2014
At the period end, the group was in advanced discussions for the disposal of
two of its non-core operations, Bromford Iron & Steel and JA Envirotanks, in a
single transaction. Consequently, the assets and liabilities of those
businesses have been classified as assets and liabilities held for sale at 30
June 2014, and valued at the lower of their carrying amount and their
estimated fair value. This classification has resulted in an impairment as
follows:
£m
Property, plant and equipment 1.8
Inventories 2.5
Current assets 2.5
Current liabilities (1.8)
Net assets 5.0
Fair value less cost to sell 1.5
Impairment loss on initial classification as held for sale (3.5)
The fair value of the assets and liabilities of the disposal group is shown
below:
£m
Assets held for sale 3.3
Liabilities held for sale (1.8)
Net assets held for sale 1.5
The group also holds a number of properties that are currently being actively
marketed for disposal and which have therefore been classified as assets held
for sale at 30 June 2014, at a value of £2.3m. No loss on classification as
held for sale was recognised in respect of these properties. Assets held for
sale therefore total £5.6m at the period end.
Non-underlying items included in operating profit also include the following:
- A profit of £0.1m arising on the disposal of Staco Redman Limited, a
small non-core operation, on 23 April 2014. Consideration for the disposal was
£0.3m and net assets disposed were £0.2m, including £0.2m of cash.
- Amortisation of acquired intangible fixed assets of £1.0m.
Non-underlying items included in financial income and expense represent the
net financing cost on pension obligations of £0.4m.
Year ended 31 December 2013
Non-underlying items included in operating profit comprise the following:
- Business reorganisation costs of £9.2m, principally relating to
redundancies and other costs associated with site closures, including the
Access Design site at Telford and the Pipe Supports facility in China. The net
costs included asset impairment charges of £1.8m.
- Amortisation of acquired intangible fixed assets of £2.2m.
- Acquisition expenses of £0.4m in respect of the acquisitions made by the
group.
- Profits on disposal of properties of £1.8m.
Non-underlying items included in financial income and expense represent the
net financing cost on pension obligations of £0.6m.
7. Net financing costs
6 months ended 30 June 2014£m 6 months ended 30 June 2013£m Year ended 31 December 2013£m
Interest on bank deposits 0.2 0.3 0.7
Financial income 0.2 0.3 0.7
Interest on bank loans and overdrafts 1.9 1.9 3.9
Interest on finance leases and hire purchase contracts - 0.1 0.1
Total interest expense 1.9 2.0 4.0
Interest cost on net pension scheme deficit 0.4 0.4 0.6
Financial expense 2.3 2.4 4.6
Net financing costs 2.1 2.1 3.9
8. Taxation
Tax has been provided on the underlying profit at the estimated effective rate
of 24.0% (2013: 26.0%) for existing operations for the full year.
9. Earnings per share
The weighted average number of ordinary shares in issue during the period was
77.8m, diluted for the effect of outstanding share options 78.8m (six months
ended 30 June 2013: 77.4m and 78.4m diluted, the year ended 31 December 2013:
77.6m and 78.6m diluted).
Underlying earnings per share are shown below as the directors consider that
this measurement of earnings gives valuable information on the underlying
performance of the group:
6 months ended30 June 2014 6 months ended30 June 2013 Year ended31 December 2013
Penceper share £m Penceper share £m Penceper share £m
Basic earnings 14.6 11.4 15.0 11.6 29.6 23.0
Non-underlying items* 5.7 4.4 2.7 2.1 10.8 8.3
Underlying earnings 20.3 15.8 17.7 13.7 40.4 31.3
Diluted earnings 14.4 11.4 14.8 11.6 29.2 23.0
Non-underlying items* 5.7 4.4 2.7 2.1 10.6 8.3
Underlying diluted earnings 20.1 15.8 17.5 13.7 39.8 31.3
* Non-underlying items as detailed in note 6.
10. Dividends
Dividends paid in the period were the prior year's interim dividend of £4.7m
(2013: £4.5m). The final dividend for 2013 of £7.8m (2013: £7.1m) was paid on
4 July 2014. Dividends declared after the balance sheet date are not
recognised as a liability, in accordance with IAS10. The directors have
proposed an interim dividend for the current year of £5.0m, 6.4p per share
(2013: £4.7m, 6.0p per share).
11. Analysis of net debt
6 months ended 30 June 2014£m 6 months ended 30 June 2013£m Year ended 31 December 2013£m
Cash and cash equivalents 3.6 5.9 10.0
Interest bearing loans and borrowings due within one year (0.4) (1.3) (0.8)
Interest bearing loans and borrowings due after more than one year (101.7) (107.1) (96.4)
Net debt (98.5) (102.5) (87.2)
6 months ended 30 June 2014£m 6 months ended 30 June 2013£m Year ended 31 December 2013£m
Change in net debt
Operating profit 18.1 17.8 34.5
Non-cash items 12.3 8.8 17.4
Operating cash flow before movement in working capital 30.4 26.6 51.9
Net movement in working capital (10.5) (6.0) 1.9
Change in provisions and employee benefits (4.7) (1.5) 0.4
Operating cash flow 15.2 19.1 54.2
Tax paid (4.3) (11.0) (15.3)
Net financing costs paid (1.7) (1.7) (3.4)
Capital expenditure (16.8) (10.2) (22.1)
Proceeds on disposal of non-current assets 0.2 0.2 3.0
Free cash flow (7.4) (3.6) 16.4
Dividends paid (note 10) (4.7) (4.5) (11.6)
Acquisitions - (6.4) (6.6)
Disposals 0.1 - -
Issue of new shares 0.2 1.7 2.0
Purchase of shares for employee benefit trust (1.0) - -
Net debt (increase)/decrease (12.8) (12.8) 0.2
Effect of exchange rate fluctuations 1.5 (2.9) (0.6)
Net debt at the beginning of the period (87.2) (86.8) (86.8)
Net debt at the end of the period (98.5) (102.5) (87.2)
12. Financial instruments
The table below sets out the group's accounting classification of its
financial assets and liabilities and their fair values as at 30 June. The fair
values of all financial assets and liabilities are not materially different to
the carrying values.
Designated at fair value £m Amortised cost£m Total carrying value£m Fair value£m
Cash and cash equivalents - 3.6 3.6 3.6
Interest bearing loans due within one year - (0.4) (0.4) (0.4)
Interest bearing loans due after more than one year - (101.7) (101.7) (101.7)
Derivative assets 0.2 - 0.2 0.2
Derivative liabilities (0.8) - (0.8) (0.8)
Other assets - 92.6 92.6 92.6
Other liabilities - (73.8) (73.8) (73.8)
Total at 30 June 2014 (0.6) (79.7) (80.3) (80.3)
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
- Level 1 : unadjusted quoted prices in active markets for identical
assets or liabilities.
- Level 2 : inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either as a direct price or
indirectly derived from prices.
- Level 3 : inputs for the asset or liability that are not based on
observable market data.
Level 1 £m Level 2£m Level 3£m Total£m
Derivative financial assets - 0.2 - 0.2
Derivative financial liabilities - (0.8) - (0.8)
At 30 June 2014 - (0.6) - (0.6)
At 30 June 2014 the group did not have any liabilities classified at Level 1
or Level 3 in the fair value hierarchy. There have been no transfers in any
direction in the period.
The group determines Level 2 fair values for its financial instruments based
on broker quotes, tested for reasonableness by discounting expected future
cash flows using market interest rates for a similar instrument at the
measurement date.
13. Subsequent events
On 11 July 2014 the group acquired the trade and assets of Variable Message
Signs Limited ("VMS") for a consideration of £0.3m including the assumption of
outstanding debt.
VMS is a producer of variable message signs for the UK roads market and will
fall into the Infrastructure Products - Roads
This information is provided by RNS
The company news service from the London Stock Exchange