REG - Melrose Ind PLC - Audited Results For Year Ended 31 December 2015 <Origin Href="QuoteRef">MRON.L</Origin> - Part 3
03/03/2016 07:11
- Part 3: For the preceding part double click ID:nRSC8699Qb
of Ordinary Shares for the purposes of basic earnings per share (million) 1,005.9 1,092.0
Further shares for the purposes of diluted earnings per share (million) 20.7 13.7
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share (million) 1,026.6 1,105.7
On 7 February 2014 the number of Ordinary Shares was consolidated in a ratio of 11 for 13, which reduced the number of
Ordinary Shares in issue from 1,266.6 million to 1,071.8 million.
On 20 February 2015 the number of Ordinary Shares in issue was consolidated in a ratio of 13 for 14, which reduced the
number of Ordinary Shares in issue from 1,071.8 million to 995.2 million.
Earnings per share Year ended31 December 2015pence Restated(1)year ended
31 December 2014pence
Basic earnings per share
From continuing and discontinued operations 139.9 17.8
From continuing operations (1.6) 0.8
From discontinued operations 141.5 17.0
Diluted earnings per share
From continuing and discontinued operations 137.1 17.5
From continuing operations (1.6) 0.7
From discontinued operations 138.7 16.8
(1) Restated to include the results of the Elster disposal group (note 1) and Prelok within discontinued operations (note
5).
8. Provisions
Surplus leaseholdproperty costs£m Environmental and legal costs£m Incentive plan related£m Warranty related costs£m Other£m Total£m
At 1 January 2015 restated(1) 11.0 51.0 26.6 50.8 33.4 172.8
Utilised (2.7) (4.7) (10.0) (11.5) (22.8) (51.7)
Net charge to continuing headline(2)operating profit - - 1.0 0.8 0.2 2.0
Charge to exceptional items - - - - 5.9 5.9
Net release to discontinued operating profit(3) (3.0) (16.0) 7.9 (6.3) 8.2 (9.2)
Unwind of discount 0.1 0.1 0.5 - - 0.7
Exchange differences 0.1 (0.8) - (1.9) (1.5) (4.1)
Transfer to held for sale(4) (0.5) (12.8) (24.0) (29.1) (20.0) (86.4)
At 31 December 2015 5.0 16.8 2.0 2.8 3.4 30.0
Current 2.5 4.7 - 2.0 2.8 12.0
Non-current 2.5 12.1 2.0 0.8 0.6 18.0
5.0 16.8 2.0 2.8 3.4 30.0
(1) Restated to reflect the completion of the acquisition accounting of Eclipse (note 1).
(2) As defined on the Income Statement.
(3) Net of a £15.5 million charge and a £24.7 million release prior to being transferred to liabilities held for sale at 30
June 2015.
(4) Transferred to liabilities held for sale at 30 June 2015 in accordance with IFRS 5, subsequently disposed on 29
December 2015.
The provision for surplus leasehold property costs represents the estimated net payments payable over the term of these
leases together with any dilapidation costs. This is expected to result in cash expenditure over the next one to four
years.
Environmental and legal costs provisions relate to the estimated remediation costs of pollution, soil and groundwater
contamination at certain sites and estimated future costs and settlements in relation to legal claims. Due to their nature,
it is not possible to predict precisely when these provisions will be utilised.
Incentive plan related provisions are in respect of long term incentive plans for divisional senior management, expected to
result in cash expenditure in the next four years.
The provision for warranty related costs represents the best estimate of the expenditure required to settle the Group's
obligations. Warranty terms are, on average, between one and five years.
Other provisions relate primarily to costs that will be incurred in respect of restructuring programmes, usually resulting
in cash spend within one year.
Where appropriate, provisions have been discounted using a discount rate of 3% (31 December 2014: 3%).
9. Retirement benefit obligations
Defined benefit plans
The Group sponsors defined benefit plans for qualifying employees of certain subsidiaries. The funded defined benefit plans
are administered by a separate fund that is legally separated from the Group. The trustees of the funds are required by law
to act in the interest of the fund and of all relevant stakeholders in the plans. The trustees of the pension funds are
responsible for the investment policy with regard to the assets of the fund.
On 29 December 2015, Honeywell International Inc. assumed ownership of the Elster defined benefit pension plans, along with
the FKI UK Pension Plan and the McKechnie UK Pension Plan. The remaining defined benefit pension plans in the Group at 31
December 2015 were:
§ The Brush Group (2013) ("Brush UK") Pension Plan, which is defined benefit in type and is a funded plan. The plan is
closed to new members and the accrual of future benefits for existing members.
§ The Brush Aftermarket North America, Inc. ("Brush US") Group Pension Plan (formerly the FKI US Pension Plan) which is
defined benefit in type and is a funded plan. The plan is closed to new members and the accrual of future benefits for
existing members. During the year certain vested participants accepted lump sum offers resulting in an adjustment to past
service cost of £2.2 million.
The cost of the Group's defined benefit plans are determined in accordance with IAS 19 (revised): "Employee benefits" using
the advice of independent professionally qualified actuaries on the basis of formal actuarial valuations and using the
projected unit credit method. In line with normal practice, these valuations are undertaken triennially in the UK and
annually in the US.
The valuation of the Brush UK Pension Plan was based on a full actuarial valuation as of 31 December 2013, updated at 31
December 2015 by independent actuaries. The Brush US Pension Plan valuation was based on a full actuarial valuation as of
31 December 2014, updated at 31 December 2015 by independent actuaries.
The Group contributed £5.1 million (2014: £5.0 million) to the continuing defined benefit pension plans in the year ended
31 December 2015.
Following agreement with the Brush Group (2013) Pension Plan Trustees, the Group has contributed £8.8 million early to the
Brush UK Pension Plan in the year ending 31 December 2016. No contributions are expected to be made in the year ending 31
December 2017. The Group expects to contribute approximately £0.1 million to the Brush US Pension Plan in the year ending
31 December 2016.
Actuarial assumptions
The major assumptions used by the actuaries in calculating the Group's pension liabilities are as set out below:
31 December 2015 31 December 2014
Brush UK Plan% p.a. Brush US Plan % p.a. Brush UK Plan% p.a. Brush US Plan % p.a.
Rate of increase in salaries n/a n/a n/a n/a
Rate of increase in pensions in payment 3.0 n/a 3.0 n/a
Discount rate 3.7 4.1 3.5 3.9
RPI inflation assumption 3.0 n/a 3.1 n/a
CPI inflation assumption 1.9 n/a 2.1 n/a
Mortality
Brush UK Pension Plan
Mortality assumptions for the Brush UK Pension Plan, as at 31 December 2015 were based on the Self Administered Pension
Scheme ("SAPS") "S1" base tables with a scaling factor of 110%, which reflected the results of a mortality analysis carried
out on the plan's membership. Future improvements are in line with the Continuous Mortality Investigation ("CMI")
improvement model with a long-term rate of improvement of 1.25% p.a. for both males and females.
The assumptions were that a member currently aged 65 will live on average for a further 21.4 years (31 December 2014: 21.6
years) if they are male and for a further 23.6 years (31 December 2014: 23.8 years) if they are female. For a member who
retires in 2035 at age 65, the assumptions were that they will live for a further 23.0 years (31 December 2014: 23.2 years)
after retirement if they are male and for a further 25.5 years (31 December 2014: 25.7 years) after retirement if they are
female.
The mortality assumptions were consistent with those adopted for the full valuation as at 31 December 2013.
Brush US Pension Plan
The mortality assumptions adopted as at 31 December 2015 were set to reflect the Group's best estimate view of life
expectancies of members of the pension arrangement. Each assumption reflected the characteristics of the membership of the
Brush US Pension Plan.
The assumptions were that a member currently aged 65 will live on average for a further 20.3 years (31 December 2014: 21.1
years) if they are male and for a further 22.3 years (31 December 2014: 23.3 years) if they are female. For a member who
retires in 2035 at age 65, the assumptions were that they will live for a further 22.0 years (31 December 2014: 22.8 years)
after retirement if they are male and for a further 23.9 years (31 December 2014: 24.9 years) after retirement if they are
female.
The mortality assumptions were consistent with those adopted for the full valuation as at 31 December 2014.
Balance Sheet disclosures
The amount recognised in the Balance Sheet arising from net liabilities in respect of defined benefit plans was as
follows:
31 December2015£m 31 December2014
£m
Present value of funded defined benefit obligations (360.7) (1,231.0)
Fair value of plan assets 343.5 1,125.2
Funded status (17.2) (105.8)
Present value of unfunded defined benefit obligations - (112.7)
Net liabilities (17.2) (218.5)
The plan liabilities and assets at 31 December 2015 were split by plan as follows:
Brush UK Plan£m Brush US Plan£m Total£m
Plan liabilities (195.7) (165.0) (360.7)
Plan assets 197.1 146.4 343.5
Net assets/(liabilities) 1.4 (18.6) (17.2)
The major categories and fair values of plan assets at the end of the reporting period for each category were as follows:
31 December 31 December
2015 2014
£m £m
Equities 129.2 380.7
Government bonds 80.1 315.2
Corporate bonds 122.2 337.9
Property 5.7 21.8
Insurance contracts - 11.9
Other 6.3 57.7
Total 343.5 1,125.2
The assets were well diversified and the majority of plan assets had quoted prices in active markets. All government bonds
were issued by reputable governments and were generally AA rated or higher. Interest rate and inflation rate swaps were
also employed to complement the role of fixed and index-linked bond holdings for liability risk management.
The trustees continually review whether the chosen investment strategy is appropriate with a view to providing the pension
benefits and to ensure appropriate matching of risk and return profiles. The main strategic policies included maintaining
an appropriate asset mix, managing interest rate sensitivity and maintaining an appropriate equity buffer. Investment
results were regularly reviewed.
There was no self investment (other than in relevant tracker funds) either in the Group's own financial instruments or
property or other assets used by the Group.
Movements in the present value of defined benefit obligations during the year:
Year ended31 December2015 Year ended 31 December2014
£m £m
At beginning of year 1,343.7 1,290.1
Acquisition of businesses - 4.6
Disposal of businesses - (68.4)
Current service cost 1.0 2.2
Past service cost (2.2) (3.5)
Interest cost on obligations 29.4 55.0
Terminations (2.6) (4.3)
Remeasurement (gains)/losses - demographic (19.2) 14.4
Remeasurement (gains)/losses - financial (39.8) 151.6
Remeasurement gains - experience (7.2) (29.7)
Benefits paid out of plan assets (56.1) (71.8)
Benefits paid out of Group assets for unfunded plans (4.8) (4.4)
Currency translation differences 0.9 7.9
Transfer to held for sale(1) (882.4) -
At end of year 360.7 1,343.7
(1) Transferred to liabilities held for sale at 30 June 2015 in accordance with IFRS 5, subsequently disposed on 29
December 2015.
The defined benefit plan liabilities were nil% (31 December 2014: 5%) in respect of active plan participants, 53% (31
December 2014: 41%) in respect of deferred plan participants and 47% (31 December 2014: 54%) in respect of pensioners.
The weighted average duration of the defined benefit plan liabilities at 31 December 2015 was 15.0 years (31 December 2014:
15.5 years).
Movements in the fair value of plan assets during the year:
Year ended 31 December2015 Year ended 31 December2014
£m £m
At beginning of year 1,125.2 1,070.8
Disposal of businesses - (64.8)
Interest income on plan assets 25.7 46.8
Return on plan assets, excluding interest income (24.4) 100.8
Contributions 15.4 34.8
Benefits paid out of plan assets (56.1) (71.8)
Plan administrative costs (2.2) (3.6)
Currency translation differences 8.5 12.2
Transfer to held for sale(1) (748.6) -
At end of year 343.5 1,125.2
(1) Transferred to liabilities held for sale at 30 June 2015 in accordance with IFRS 5, subsequently disposed on 29
December 2015.
The actual return on plan assets was a gain of £1.3 million (2014: £147.6 million).
Income Statement disclosures
Amounts recognised in the Income Statement in respect of these defined benefit plans were as follows:
Year ended 31 December2015 Restated(1)year ended 31 December2014
£m £m
Continuing operations
Included within headline(2)operating profit:
- past service cost (2.2) (3.5)
- plan administrative costs 1.3 1.1
Included within net finance costs:
- interest cost on deferred benefit obligations 14.5 16.9
- interest income on plan assets (12.9) (15.5)
Discontinued operations
Included within operating profit:
- current service cost 2.2 2.2
- past service cost (0.1) -
- plan administrative expenses 2.7 2.5
- terminations (2.6) (4.3)
Included within net finance costs:
- interest cost on deferred benefit obligations 30.0 38.1
- interest income on plan assets (26.3) (31.3)
(1) Restated to include the results of the Elster disposal group (note 1) and Prelok within discontinued operations (note
5).
(2) As defined on the Income Statement.
Statement of Comprehensive Income disclosures
Amounts recognised in the Statement of Comprehensive Income in respect of these defined benefit plans were as follows:
Year ended31 December2015 Year ended 31 December2014
£m £m
Return on plan assets, excluding amounts included in net interest expense (38.2) 100.8
Actuarial gains/(losses) arising from changes in demographic assumptions 31.9 (14.4)
Actuarial gains/(losses) arising from changes in financial assumptions 48.7 (151.6)
Actuarial gains arising from experience adjustments 15.1 29.7
Net remeasurement gain/(loss) on retirement benefit obligations 57.5 (35.5)
Risks and sensitivities
The defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, salary risk, interest
rate risk and market (investment) risk. The Group is not exposed to any unusual, entity specific or plan specific risks.
A sensitivity analysis on the principal assumptions used to measure the plan liabilities at the year end was as follows:
Change in assumption Decrease/(increase) to plan liabilities£m Increase/(decrease) to profit before tax£m
Discount rate Increase by 0.10% 5.0 0.2
Decrease by 0.10% (5.1) (0.2)
Inflation assumption(1) Increase by 0.10% (3.0) n/a
Decrease by 0.10% 1.3 n/a
Assumed life expectancy at age 65 (rate of mortality) Increase by 1 year (11.1) n/a
Decrease by 1 year 11.0 n/a
(1) The inflation sensitivity encompasses the impact on pension increases, where applicable.
The sensitivity analysis above was determined based on reasonable possible changes to the respective assumptions, while
holding all other assumptions constant. There has been no change in the methods and assumptions used in preparing the
sensitivity analysis from prior years.
The sensitivities were based on the relevant assumptions and membership profile as at 31 December 2015 and were applied to
the obligations at the end of the reporting period. Whilst the analysis does not take account of the full distribution of
cash flows expected, it does provide an approximation to the sensitivity of the assumptions shown. Extrapolation of these
results beyond the sensitivity figures shown may not be appropriate and the sensitivity analysis presented may not be
representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions
would occur in isolation of one another as some of the assumptions may be correlated.
10. Issued capital and reserves
Share Capital 31 December 2015 Restated(1)31 December2014£m
£m
Allotted, called-up and fully paid
995,206,966 (31 December 2014: 995,206,966) Ordinary Shares of 1p each (31 December 2014: 26.5p each) 10.0 263.8
10.0 263.8
(1) In accordance with IFRS 3, the prior year Issued share capital, Merger reserve, Capital redemption reserve and Other
reserves balances have been restated to reflect the nominal share capital and reserves position of the new parent company
as if it had been the holding company during both periods presented. The overall impact on net equity is £nil (note 1).
The rights of each class of share are described in the Directors' report.
On 20 February 2015 at a General meeting of the Company, shareholders approved a resolution to return £200.4 million to
shareholders.
In conjunction with this Return of Capital, on 20 February 2015 the number of Ordinary Shares in issue was consolidated in
a ratio of 13 for 14 in order to maintain comparability of the Company's share price before and after the Return of
Capital. On 20 February 2015 the number of Ordinary Shares in issue became 995,206,966 each with a nominal value of 7/55
pence.
On 19 November 2015, a Scheme of Arrangement approved by the High Court of England and Wales became effective and resulted
in New Melrose Industries PLC (subsequently renamed Melrose Industries PLC on 19 November 2015) becoming the new holding
company of Melrose Industries PLC (subsequently renamed Melrose Holdings Limited on 19 November 2015) and its subsidiaries.
The arrangement resulted in the issue of 1 new 26.5 pence New Melrose Industries PLC Ordinary Share for each 7/55 pence
Melrose Industries PLC Ordinary Share. New Melrose Industries PLC consequently issued 995,206,966 Ordinary Shares with a
total nominal value of £263.8 million.
As explained in note 1, Ordinary Share Capital for the year ended 31 December 2014 has been restated to reflect the nominal
value of the Ordinary Shares of New Melrose Industries PLC at the date of which New Melrose Industries PLC became the new
holding company. The nominal value of each Ordinary Share in issue at 31 December 2014 has therefore been restated from
7/55 pence to 26.5 pence and the number of shares in issue has been restated from 1,071,761,339 to 995,206,966.
On 23 November 2015, the nominal value of each Ordinary Share of New Melrose Industries PLC was reduced from 26.5 pence to
1 penny and resulted in a transfer of £253.8 million to Retained earnings.
Translation reserve
The Translation reserve contains exchange differences on the translation of subsidiaries with a functional currency other
than Sterling and exchange gains or losses on the translation of liabilities that hedge the Company's net investment in
foreign subsidiaries.
Hedging reserve
The Hedging reserve represents the cumulative fair value gains and losses on derivative financial instruments for which
cash flow hedge accounting has been applied.
Merger reserve and Other reserves
The Merger reserve represents the excess of fair value over nominal value of shares issued in consideration for the
acquisition of subsidiaries. Other reserves comprise accumulated adjustments in respect of Group reconstructions.
11. Cash flow statement
Year ended 31 December 2015£m Restated(1)year ended 31 December2014£m
Reconciliation of headline(2)operating profit to cash generated by continuing operations
Headline(2) operating profit from continuing operations 20.8 47.7
Adjustments for:
Depreciation of property, plant and equipment 7.6 6.5
Amortisation of computer software and development costs 0.5 0.6
Restructuring costs paid and movements in provisions (28.8) (4.6)
Defined benefit pension contributions paid (5.1) (5.0)
(Increase)/decrease in inventories (9.9) 4.6
Decrease/(increase) in receivables 10.8 (7.3)
Decrease in payables (12.3) (12.9)
Tax paid (2.8) (3.4)
Interest paid (38.6) (36.7)
Net cash used in operating activities from continuing operations (57.8) (10.5)
(1) Restated to include the results of the Elster disposal group (note 1) and Prelok within discontinued operations (note
5).
(2) As defined on the Income Statement.
Cash flow from discontinued operations Year ended 31 December 2015£m Restated(1)year ended 31 December2014£m
Cash generated from discontinued operations 172.9 201.6
Defined benefit pension contributions paid (30.1) (34.2)
Tax paid (51.2) (35.9)
Interest paid (1.6) (2.2)
Acquisition costs (0.8) (2.3)
Net cash from operating activities from discontinued operations 89.2 127.0
Purchase of property, plant and equipment (26.0) (28.4)
Proceeds from disposal of property, plant and equipment 1.7 3.9
Purchase of computer software and development costs (15.5) (7.7)
Cash acquired on acquisition of subsidiaries - 1.5
Acquisition of subsidiaries and non-controlling interests - (97.6)
Purchase of non-controlling interests (1.5) -
Dividends received from joint ventures 2.2 2.1
Dividends paid to non-controlling interests (0.4) (0.4)
Interest received 0.8 0.5
Net cash used in investing activities from discontinued operations (38.7) (126.1)
Net cash used in financing activities from discontinued operations - -
(1) Restated to include the results of the Elster disposal group (note 1) and Prelok within discontinued operations (note
5).
Net debt reconciliation
31 December 2014 Cash flow Disposals Other non-cash movements Foreign exchange difference 31 December 2015
£m £m £m £m £m £m
Cash 70.5 (890.7) 3,261.9 - 9.7 2,451.4
Debt due within one year (0.9) 0.3 0.6 - - -
Debt due after one year (570.9) 594.8 - (15.9) (8.0) -
Net (debt)/cash (501.3) (295.6) 3,262.5 (15.9) 1.7 2,451.4
12. Post Balance Sheet events
At a General Meeting of New Melrose Industries PLC (subsequently renamed Melrose Industries PLC on 19 November 2015) held
on 2 October 2015 and a General Meeting of Melrose Industries PLC (subsequently renamed Melrose Holdings Limited on 19
November 2015) held on 29 October 2015, shareholders approved a Return of Capital of between £2.0 billion and £2.5 billion
following the completion of the disposal of Elster. On 29 December 2015 the Company announced that the Return of Capital
would be 240 pence per Ordinary Share totalling £2,388.5 million.
'B' shares with a total value of £2,388.5 million were created on 26 January 2016 resulting in a corresponding reduction in
the Merger reserve. The 'B' shares were cancelled on 27 January 2016 and capital return payments representing the nominal
value of the 'B' shares (240 pence each) were made to shareholders on 5 February 2016.
Alongside the capital return, on 28 January 2016 the number of Ordinary Shares in issue was consolidated in a ratio of 7
for 48 in order to maintain comparability of the Company's share price before and after the capital return. On 28 January
2016 the number of Ordinary Shares in issue became 145,134,353 each with a nominal value of 48/7 pence.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Melrose Industries
See all newsREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
AnnouncementREG - Melrose Industries - Transaction in Own Shares
Announcement