REG - Melrose Ind Plc - Unaudited Interim Results <Origin Href="QuoteRef">MRON.L</Origin> - Part 3
29/10/2014 15:49
- Part 3: For the preceding part double click ID:nRSb1811Qb
leasehold property costs provision 5.4 - -
Release of items previously booked as fair value adjustments - - 28.9
Total exceptional income 5.4 - 28.9
During the six months to 30 June 2014 a historical onerous lease dispute was successfully resolved for less than expected
resulting in the release of £5.4 million from provisions as exceptional income. During 2013 certain warranty and legal
issues, inherited with the acquisition of Elster, were successfully resolved for less than expected resulting in the
release of £28.9 million of provisions as exceptional income.
6. Tax
Analysis of the charge/(credit) in the period: 6 months ended 30 June 2014£m Restated(1)6 months ended 30 June 2013£m Yearended
31 December 2013£m
Continuing operations
Current tax 26.2 17.2 44.1
Deferred tax (6.9) (0.2) 5.1
Total income tax charge from continuing operations 19.3 17.0 49.2
Discontinued operations
Current tax - 15.9 32.9
Deferred tax - (1.4) (2.5)
Total income tax charge from discontinued operations - 14.5 30.4
Total income tax charge 19.3 31.5 79.6
(1) Restated to include the results of Crosby, Acco and Harris within discontinued operations (note 9).
The effective tax rate in respect of headline profit before tax on continuing activities for the year is expected to be
27.0% (period to 30 June 2013: 27.1%). The headline tax charge on continuing activities has been calculated by applying
the expected rate for the full year to the headline profit before tax of £109.9 million (period to 30 June 2013: £107.4
million), giving a headline tax charge of £29.7 million (period to 30 June 2013: £29.1 million).
The headline tax charge on continuing activities of £29.7 million (period to 30 June 2013: £29.1 million) has been reduced
by a tax credit on exceptional items and intangible asset amortisation of £10.4 million (period to 30 June 2013: £12.1
million) to give a total tax charge on continuing activities of £19.3 million (period to 30 June 2013: £17.0 million). The
tax credit on exceptional items includes a deferred tax credit on the amortisation of intangible assets of £8.8 million
(period to 30 June 2013: £9.4 million) and a current tax credit of £1.6 million (period to 30 June 2013: £2.7 million) in
respect of restructuring costs recognised as exceptional.
In addition to the amount charged to the Income Statement, a credit of £3.0 million (period to 30 June 2013: £0.2 million)
has been recognised directly in the Statement of Comprehensive Income. This represents a tax credit of £3.0 million (period
to 30 June 2013: £nil) in respect of the remeasurement of net retirement benefit obligations and a tax credit of £nil
(period to 30 June 2013: £0.2 million) in respect of movements on cash flow hedges.
7. Earnings per share
Earnings attributable to owners of the parent 6 months ended 30 June 2014£m Restated(1)6 months ended 30 June 2013£m Year ended
31 December 2013£m
Profit for the purposes of earnings per share 50.0 75.8 562.7
Less: profit for the period from discontinued operations (note 9) - (30.1) (442.7)
Earnings for basis of earnings per share from continuing operations 50.0 45.7 120.0
(1) Restated to include the results of Crosby, Acco and Harris within discontinued operations (note 9).
6 months ended 30 June 2014 6 months ended 30 June 2013 Year ended
31 December 2013
Number Number Number
Weighted average number of Ordinary Shares for the purposes of basic earnings per share (million) 1,112.7 1,266.6 1,266.6
Further shares for the purposes of diluted earnings per share (million) 17.6 7.4 20.1
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share (million) 1,130.3 1,274.0 1,286.7
On 7 February 2014 the number of Ordinary Shares was consolidated in a ratio of 11 to 13, which reduced the number of
Ordinary Shares in issue from 1,266.6 million to 1,071.8 million.
Earnings per share 6 months ended 30 June 2014pence Restated(1)6 months ended 30 June 2013pence Yearended
31 December 2013pence
Basic earnings per share
From continuing and discontinued operations 4.5 6.0 44.4
From continuing operations 4.5 3.6 9.5
From discontinued operations - 2.4 34.9
Diluted earnings per share
From continuing and discontinued operations 4.4 5.9 43.7
From continuing operations 4.4 3.6 9.3
From discontinued operations - 2.3 34.4
(1) Restated to include the results of Crosby, Acco and Harris within discontinued operations (note 9).
Headline(1) diluted earnings per share
Following the disposals in 2013 and the share consolidation in February 2014, headline(1) diluted earnings per share is
calculated using the headline(1) profit after tax attributable to the owners of the parent and the number of shares in
issue at 30 June 2014, following the Return of Capital.
6 months ended 30 June 2014 6 months ended 30 June 2013 Year ended
31 December 2013
£m £m £m
Headline(1)profit after tax attributable to owners of the parent 79.9 76.9 164.2
6 months ended 30 June 2014 6 months ended 30 June 2013 Year ended
31 December 2013
Number Number Number
Number of shares in issue at 30 June 2014 (million) 1,071.8 1,071.8 1,071.8
Further shares for the purpose of diluted earnings per share (million) 17.6 7.4 20.1
Number of shares for the purpose of diluted headline(1)earnings per share (million) 1,089.4 1,079.2 1,091.9
Headline(1)diluted earnings per share (pence) 7.3 7.1 15.0
(1) Before exceptional costs, exceptional income and intangible asset amortisation.
8. Dividends
6 months ended30 June 2014£m 6 months ended 30 June2013£m Year ended 31 December2013£m
Final dividend for the year ended 31 December 2012 paid of 5.0p - 63.3 63.3
Interim dividend for the year ended 31 December 2013 paid of 2.75p - - 34.8
Final dividend for the year ended 31 December 2013 paid of 5.0p 53.6 - -
Total dividends paid 53.6 63.3 98.1
Proposed interim dividend for the period ended 30 June 2014 of 2.8p 30.0 - -
A proposed 2014 interim dividend of 2.8p per Ordinary Share was approved by the Board on 28 August 2014 and, in accordance
with IAS 10: "Events after the reporting period", has not been included as a liability as at 30 June 2014.
9. Discontinued operations
The comparative information in these interim financial statements for the period ended 30 June 2013 has been restated to
exclude the results and cash flows of Crosby, Acco and Harris from continuing operations and include them as discontinued
operations. Discontinued operations also contain the results and cash flows of Truth and Marelli.
Financial performance of discontinued operations:
6 months ended30 June 2014£m Restated(1)6 months ended30 June 2013£m Year ended31 December 2013£m
Revenue - 261.0 392.8
Operating costs - (211.8) (313.3)
Headline(2)operating profit - 49.2 79.5
Intangible asset amortisation - (3.8) (6.3)
Exceptional items - (0.7) (0.7)
Net finance costs - (0.1) (0.1)
Profit before tax - 44.6 72.4
Headline(2) tax - (15.9) (32.5)
Exceptional tax(3) - 1.4 2.1
Profit after tax - 30.1 42.0
Cumulative translation differences recycled on disposals - - 12.1
Gain on disposal of net assets of discontinued operations - - 388.6
Profit for the period from discontinued operations - 30.1 442.7
Attributable to:
Owners of the parent - 30.1 442.7
- 30.1 442.7
(1) Restated to include the results of Crosby, Acco and Harris within discontinued operations.
(2) Before exceptional costs, exceptional income and intangible asset amortisation.
(3) Includes exceptional tax and tax on exceptional items and intangible asset amortisation.
10. 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 2014 21.2 54.1 21.6 56.1 24.8 177.8
Utilised (2.9) (0.7) - (9.9) (8.6) (22.1)
Net charge to headline(1) operating profit - 0.1 3.5 2.1 - 5.7
Net charge to exceptional items(2) (5.4) - - - 14.5 9.1
Unwind of discount 0.1 - 0.5 - - 0.6
Exchange differences (0.1) (1.1) - (1.3) (1.1) (3.6)
At 30 June 2014 12.9 52.4 25.6 47.0 29.6 167.5
Current 2.6 6.4 12.7 17.6 24.5 63.8
Non-current 10.3 46.0 12.9 29.4 5.1 103.7
12.9 52.4 25.6 47.0 29.6 167.5
(1) Before exceptional costs, exceptional income and intangible asset amortisation.
(2) Net of £14.5 million of exceptional costs relating to restructuring and a £5.4 million surplus leasehold property costs
provision released to exceptional income.
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 five
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 2013: 3%).
11. Retirement benefit obligations
The defined benefit obligation at 30 June 2014 of £236.9 million (31 December 2013: £219.3 million) is estimated based on
the latest full actuarial valuations at 31 March 2013 for the FKI UK Pension Plans (which include the FKI UK Pension Plan,
the Bridon Group (2013) Pension Plan and the Brush Group (2013) Pension Plan), 31 December 2011 for the McKechnie UK
Pension Plan and 31 December 2012 for the FKI US Pension Plans. The valuations of the most significant plans, namely, the
FKI UK Pension Plans, the FKI US Pension Plans, the McKechnie UK Pension Plan and the Elster European Pension Plans in
Germany have been updated at 30 June 2014 by independent actuaries to reflect updated assumptions regarding discount rates,
inflation rates and asset values. These assumptions were as follows:
30 June 2014
FKI UKPlans McKechnie UK Plan FKI USPlans Elster European Plans
% p.a. % p.a. % p.a. % p.a.
Rate of increase in salaries N/A N/A N/A 2.75
Rate of increase in pensions in payment 3.20 3.20 N/A 1.90
Discount rate 4.10 4.10 4.20 2.70
RPI inflation assumptions 3.30 3.30 N/A 1.90
31 December 2013
FKI UKPlans McKechnie UK Plan FKI USPlans Elster EuropeanPlans
% p.a. % p.a. % p.a. % p.a.
Rate of increase in salaries N/A 3.90(1) N/A 2.75
Rate of increase in pensions in payment 3.20 3.20 N/A 1.90
Discount rate 4.40 4.40 4.70 3.50
RPI inflation assumptions 3.40 3.40 N/A 1.90
(1) Closed to the accrual of future benefits but active members' benefits are linked to current salaries.
In addition, the defined benefit plan assets and liabilities have been updated to reflect the £16.4 million of
contributions made to the defined benefit plans during the period and the benefits earned during the period to 30 June
2014.
12. Financial instruments
The table below sets out the Group's accounting classification of each category of financial assets and liabilities and
their fair values at 30 June 2014 and 31 December 2013:
Total£m
30 June 2014
Financial assets
Cash and cash equivalents 115.3
Net trade receivables 237.4
Derivative financial assets 6.2
Financial liabilities
Interest-bearing loans and borrowings (865.9)
Derivative financial liabilities (5.5)
Other financial liabilities (355.2)
31 December 2013
Financial assets
Cash and cash equivalents 200.4
Net trade receivables 249.0
Derivative financial assets 13.2
Financial liabilities
Interest-bearing loans and borrowings (341.2)
Derivative financial liabilities (7.2)
Other financial liabilities (385.5)
Maturity of financial liabilities
The maturity profile of anticipated future cash flows including interest in relation to the Group's financial liabilities,
on an undiscounted basis and which, therefore, differs from both the carrying value and fair value is shown in the table
below. Interest on floating rate debt is based on the relevant LIBOR curve for US Dollar and Sterling balances and the
EURIBOR curve for Euro balances. Interest on hedging interest rate swaps is based on the relevant forward LIBOR curves for
US Dollar and Sterling amounts and EURIBOR curve for Euro amounts and is illustrated as a net cash flow.
Interest-bearing loans and borrowings£m Derivative financial liabilities£m Other financial liabilities £m Total financial liabilities£m
Within one year 26.1 5.1 353.9 385.1
In one to two years 31.5 0.4 1.3 33.2
In two to five years 889.3 - - 889.3
Effect of financing rates (81.0) - - (81.0)
30 June 2014 865.9 5.5 355.2 1,226.6
Within one year 9.6 7.2 384.0 400.8
In one to two years 22.0 - 1.5 23.5
In two to five years 368.8 - - 368.8
Effect of financing rates (59.2) - - (59.2)
31 December 2013 341.2 7.2 385.5 733.9
Fair value measurements recognised in the Balance Sheet
The fair value of foreign currency forward contracts is determined using quoted forward exchange rates at the reporting
date and yield curves derived from quoted interest rates matching the maturities of the contracts.
The fair value of interest rate swap contracts is determined using yield curves derived from quoted interest rates.
The following table sets out the Group's assets and liabilities that are measured and recognised at fair value:
Recurring fair value measurements 30 June 2014Current£m 30 June2014Non-current£m 30 June 2014Total£m 31 December 2013Current£m 31 December2013Non-current£m 31 December 2013Total£m
Derivative financial assets
Foreign currency forward contracts 2.8 0.1 2.9 5.1 - 5.1
Interest rate swaps 0.6 2.7 3.3 - 8.1 8.1
3.4 2.8 6.2 5.1 8.1 13.2
Derivative financial liabilities
Foreign currency forward contracts (5.1) (0.4) (5.5) (4.7) - (4.7)
Interest rate swaps - - - (2.5) - (2.5)
(5.1) (0.4) (5.5) (7.2) - (7.2)
The fair value of these financial instruments are derived from inputs other than quoted prices that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) and they are therefore
categorised within level 2 of the fair value hierarchy set out in IFRS 13: "Fair value measurement". The Group's policy is
to recognise transfers into and out of the different fair value hierarchy levels at the date of the event or change in
circumstances that caused the transfer to occur. There have been no transfers between levels in the period.
13. Notes to the Cash Flow Statement
6 months Restated(1)6 months Year ended 31 December
ended30 June ended30 June 2013£m
2014£m 2013£m
Reconciliation of headline(2)operating profit to cash generated by continuing operations
Headline(2) operating profit from continuing operations 128.5 132.9 274.9
Adjustments for:
Depreciation of property, plant and equipment 17.0 17.8 35.4
Amortisation of computer software and development costs 2.7 2.8 5.3
Restructuring costs paid and movements in other provisions (13.9) (28.6) (63.3)
Operating cash flows before movements in working capital 134.3 124.9 252.3
(Increase)/decrease in inventories (7.8) 5.9 27.9
Decrease/(increase) in receivables 0.3 11.4 (1.2)
Decrease in payables (21.7) (32.6) (40.2)
Cash generated by operations 105.1 109.6 238.8
Tax paid (21.4) (15.4) (46.9)
Interest paid (16.9) (24.5) (53.2)
Acquisition costs - - (11.4)
Defined benefit pension contributions paid (16.4) (15.8) (32.7)
Incentive plan payments - - (3.4)
Net cash from operating activities from continuing operations 50.4 53.9 91.2
(1) Restated to include the cash flows of Crosby, Acco and Harris within discontinued operations (note 9).
(2) Before exceptional costs, exceptional income and intangible asset amortisation.
Cash flow from discontinued operations 6 months Restated(1)6 months Year ended 31 December
ended30 June ended30 June 2013£m
2014£m 2013£m
Cash generated from discontinued operations - 32.7 59.6
Tax paid - (7.1) (13.9)
Defined benefit pension contributions paid - (0.3) (0.9)
Net cash from operating activities from discontinued operations - 25.3 44.8
Purchase of property, plant and equipment - (6.9) (11.6)
Purchase of computer software - - (0.1)
Interest received - - 0.1
Net cash used in investing activities from discontinued operations - (6.9) (11.6)
Net cash used in financing activities from discontinued operations - - -
(1) Restated to include the cash flows of Crosby, Acco and Harris within discontinued operations (note 9).
Net debt reconciliation
At 31 December 2013 Cash flow(1) Other non-cash movements Effect of foreign exchange At 30 June 2014
£m £m £m £m £m
Cash 200.4 (84.5) - (0.6) 115.3
Debt due within one year - - - - -
Debt due after one year (341.2) (532.9) (2.3) 10.5 (865.9)
Net debt (140.8) (617.4) (2.3) 9.9 (750.6)
(1) Includes a £595.3 million return of capital to shareholders and £53.6 million of dividends paid.
14. Return of capital
On 7 February 2014 a £595.3 million return of capital was approved by shareholders. At this date 1,266.6 million 47 pence
'C' shares were created utilising £595.3 million of the merger reserve. The 'C' shares were subsequently redeemed in the
period resulting in a £595.3 million transfer to the capital redemption reserve.
Alongside the return of capital the number of Ordinary Shares was consolidated in a ratio of 11 to 13, which reduced the
number of Ordinary Shares in issue from 1,266.6 million to 1,071.8 million.
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