REG - Melrose Industries - Half-year Report <Origin Href="QuoteRef">MRON.L</Origin> - Part 3
31/08/2017 07:07
- Part 3: For the preceding part double click ID:nRSe3695Pb
subsequently 1,741.6 million
new ordinary shares were issued raising £1,654.5 million to part fund the acquisition of the Nortek Group. In accordance
with IAS 33, an adjustment factor associated with the issue of the new share capital of 18.8491% has been applied to the
number of ordinary shares in issue prior to 24 August 2016 (including comparative periods presented) for the purposes of
earnings per share calculations.
(2) The results for 30 June 2016 and 31 December 2016 are a loss and therefore in accordance with IAS 33: "Earnings per
share" there is no
dilution. However, the dilutive number of shares for both periods are shown for illustrative purposes only.
(3) Relating to the 2012 Melrose incentive plan up to 31 May 2017 when 54.5 million shares were issued. No dilution
currently exists in respect of the 2017 Melrose incentive plan.
On 1 June 2017 the number of ordinary shares in issue increased by 54.5 million following the crystallisation of the 2012
Melrose incentive plan which increased the number of ordinary shares in issue from 1,886.7 million to 1,941.2 million.
Earnings per share 6 months ended 30 June 2017pence 6 months ended 30 June 2016pence Year ended
31 December 2016pence
Basic earnings per share 2.0 (0.6) (2.6)
Diluted earnings per share 2.0 (0.6) (2.6)
Underlying earnings Note 6 months ended 30 June 2017£m 6 months ended 30 June 2016£m Year ended 31 December 2016£m
Underlying earnings for the basis of underlying earnings per share 4 95.3 4.9 70.4
Underlying earnings per share
6 months ended 30 June 2017pence 6 months ended 30 June 2016pence Year ended 31 December 2016pence
Underlying basic earnings per share 5.0 0.3 4.7
Underlying diluted earnings per share 4.9 0.3 4.4
7. Dividends
6 months ended30 June 2017£m 6 months ended 30 June2016£m Year ended 31 December2016£m
Final dividend for the year ended 31 December 2015 paid of 2.6p (0.5p)(1) - 3.8 3.8
Interim dividend for the year ended 31 December 2016 of 1.4p (0.3p)(1) - - 2.0
Final dividend for the year ended 31 December 2016 of 1.9p 35.8 - -
Total dividends paid 35.8 3.8 5.8
(1) Adjusted to include the effects of the August 2016 Rights Issue.
A 2017 interim dividend of 1.4p per ordinary share totalling £27.2 million was declared by the Board on 31 August 2017 and,
in accordance with IAS 10: "Events after the reporting period", has not been included as a liability as at 30 June 2017.
8. Goodwill and other intangible assets
During the period, the Group has completed its review of the assets and liabilities acquired following the Nortek
acquisition on 31 August 2016. As a result, the Group has recorded its final adjustments to the opening balance sheet of
Nortek. In accordance with IFRS 3 "Business combinations" the Balance Sheet at 31 December 2016 has been restated to
reflect this. These adjustments increase provisions by £3.4 million, deferred tax assets by £0.3 million and other payables
by £1.8 million whilst reducing inventory by £1.2 million and deferred tax liabilities by £63.8 million. The corresponding
adjustment is to decrease goodwill by £57.7 million.
Brush has experienced tough trading conditions for a number of years and over the summer it has become clear that market
conditions have worsened further. As a result, a full impairment review was performed on the Brush goodwill and intangible
assets at the interim date. Despite the headroom decreasing in the period from that shown at 31 December 2016, no
impairment was identified at the interim date.
9. Provisions
Surplus Environmental Warranty Product Employee related Other Total
leasehold and related liability £m £m £m
property costs legal costs costs £m
£m £m £m
At 1 January 2017(1) 20.8 66.8 86.9 42.5 8.9 57.1 283.0
Utilised (2.4) (9.9) (11.2) (4.0) (16.0) (57.9) (101.4)
Net charge to operating profit(2) (1.7) 0.2 8.0 6.9 16.4 41.2 71.0
Transfer from accruals - 1.3 0.3 - - - 1.6
Unwind of discount 0.1 - - - - 0.6 0.7
Transfer to held for sale - (1.0) (1.0) - - (2.9) (4.9)
Exchange differences (0.7) (2.2) (3.6) (2.0) (0.6) (1.2) (10.3)
At 30 June 2017 16.1 55.2 79.4 43.4 8.7 36.9 239.7
Current 5.2 15.2 32.5 13.6 5.3 27.5 99.3
Non-current 10.9 40.0 46.9 29.8 3.4 9.4 140.4
16.1 55.2 79.4 43.4 8.7 36.9 239.7
43.4
8.7
36.9
239.7
(1) Restated to reflect the completion of the acquisition accounting for Nortek (note 8).
(2) Includes £36.3 million of restructuring charges and other non-underlying items and £34.7 million charged through
underlying operating profit.
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 eight
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.
The provision for warranty related costs represents the best estimate of the expenditure required to settle the Group's
obligations, based on past experiences. Warranty terms are, on average, between one and five years.
The employee related provision relates to the estimated cost of the Group's health insurance and workers compensation
plans. The product liability provision relates to the estimated cost of future product and general liabilities claims. Due
to their nature it is not possible to predict precisely when these provisions will be utilised.
Other provisions relate to costs that will be incurred in respect of restructuring programmes, usually resulting in cash
spend within one year. In addition other provisions include long-term incentive plans for divisional senior management and
the employer tax on equity-settled incentive schemes which are expected to result in cash expenditure over the next three
to five years.
Where appropriate, provisions have been discounted using a discount rate of 3% (31 December 2016: 3%).
10. Financial instruments
The table below sets out the Group's accounting classification of each category of financial assets and liabilities and
their fair values as at 30 June 2017, 31 December 2016 and 30 June 2016:
Current£m Non-current £m Total£m
30 June 2017
Financial assets
Cash and cash equivalents 40.9 - 40.9
Net trade receivables 328.6 - 328.6
Derivative financial assets:
Foreign currency forward contracts 4.9 - 4.9
Interest rate swaps - 6.7 6.7
Net assets held for sale 10.8 - 10.8
Financial liabilities
Derivative financial liabilities:
Foreign currency forward contracts (0.4) - (0.4)
Interest-bearing loans and borrowings (0.6) (709.4) (710.0)
Other financial liabilities (388.3) (2.2) (390.5)
31 December 2016
Financial assets
Cash and cash equivalents 42.1 - 42.1
Net trade receivables 330.1 - 330.1
Derivative financial assets:
Foreign currency forward contracts 3.8 5.2 9.0
Financial liabilities
Derivative financial liabilities:
Foreign currency forward contracts (4.2) - (4.2)
Interest-bearing loans and borrowings (0.5) (583.1) (583.6)
Other financial liabilities (420.8) (13.7) (434.5)
30 June 2016
Financial assets
Cash and cash equivalents 51.4 - 51.4
Net trade receivables 49.1 - 49.1
Derivative financial assets:
Foreign currency forward contracts 1.2 - 1.2
Financial liabilities
Derivative financial liabilities:
Foreign currency forward contracts (2.4) - (2.4)
Other financial liabilities (79.5) - (79.5)
The fair value of the derivative financial instruments is 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.
The Directors consider that the book value of net assets held for sale approximates to their fair value.
11. Notes to the Cash Flow Statement
Continuing operations 6 months 6 months Year ended 31 December
ended30 June ended30 June 2016£m
2017£m 2016£m
Reconciliation of underlyingoperating profit to cash generated from operations
Underlying operating profit 141.2 5.9 104.1
Adjustments for:
Depreciation of property, plant and equipment 15.8 4.1 15.9
Amortisation of computer software and development costs 1.9 0.3 2.2
Restructuring costs paid and movements in other provisions (42.4) (5.1) (37.6)
Defined benefit pension contributions paid (2.3) (8.8) (10.5)
(Increase)/decrease in inventories (23.3) (3.9) 15.0
(Increase)/decrease in receivables (14.8) 6.7 22.5
Decrease in payables (9.9) (6.0) (9.3)
Acquisition costs (2.9) (0.3) (41.3)
Tax paid (9.4) (0.1) (5.9)
Interest paid (5.8) (0.9) (4.5)
Incentive scheme tax related payments (147.2) - -
Net cash (used in)/from operating activities (99.1) (8.1) 50.6
Net debt reconciliation
At 31 December 2016 Cash flow Other non-cash movements Effect of foreign exchange At 30 June 2017
£m £m £m £m £m
Cash 42.1 0.3 - (1.5) 40.9
External debt (582.0) (156.2) (1.1) 30.3 (709.0)
Finance leases (1.6) 0.5 - 0.1 (1.0)
Net debt (541.5) (155.4) (1.1) 28.9 (669.1)
12. Assets held for sale
On 10 August 2017 the disposal of the Best EMEA operations to Electrolux A.G. was completed. The Best EMEA operations were
previously shown within the AQH business, within the Air Management division. At 30 June 2017 the assets and associated
liabilities of the Best EMEA business were shown as held for sale in the Balance Sheet.
1 Considered by the Board to be the best measure of performance. A reconciliation of statutory
operating profit/(loss) to underlying operating profit/(loss) is given in the Finance Director's review
2 Adjusted to include the effects of the 2016 Rights Issue
This information is provided by RNS
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