REG - Morgan Adv Mat PLC - Half-Year Results <Origin Href="QuoteRef">MGAMM.L</Origin> - Part 4
27/07/2016 07:06
- Part 4: For the preceding part double click ID:nRSa3166Fc
3. Segment information continued
Thermal Molten Metal Electrical Seals and Technical Composites and
Ceramics Systems Carbon Bearings Ceramics Defence Systems Consolidated
Year Year Year Year Year Year Year
2015 2015 2015 2015 2015 2015 2015
Restated Restated Restated Restated Restated Restated Restated
£m £m £m £m £m £m £m
Revenue from external customers 372.4 39.7 145.6 88.6 237.8 27.7 911.8
Divisional EBITA 1 55.2 5.3 19.3 9.9 26.1 (1.0) 114.8
Corporate costs (5.2)
Group EBITA 2 109.6
Restructuring costs and other one-off items (0.1) - (0.7) (0.7) (0.4) (0.3) (2.2)
Unallocated restructuring costs and other one-off items (1.4)
Group underlying operating profit 3 106.0
Amortisation of intangible assets (1.8) (0.2) (0.3) (0.2) (2.7) (1.9) (7.1)
Operating profit before specific adjusting items 98.9
Specific adjusting items included in operating profit 4 (16.0)
Operating profit 82.9
Finance income 2.5
Finance expense (20.6)
Loss on disposal of business (6.1)
Share of profit of associate (net of income tax) 0.3
Profit before taxation 59.0
Segment assets 359.4 38.1 132.4 74.0 169.4 22.6 795.9
Unallocated assets 61.1
Total assets 857.0
Segment liabilities 74.6 6.0 27.4 16.0 35.0 9.4 168.4
Unallocated liabilities: employee benefits 204.5
Other unallocated liabilities 297.7
Total liabilities 670.6
1. Segment profit is defined as Divisional EBITA which is segment operating profit before restructuring costs, other one-off items and amortisation of intangible assets.
2. Group EBITA is defined as operating profit before specific adjusting items, restructuring costs, other one-off items and amortisation of intangible assets.
3. Underlying operating profit is defined as operating profit before specific adjusting items and amortisation of intangible assets.
4. Details of 'specific adjusting items' are given in note 4 to the financial statements
The above measures of profit are shown because the Directors use them to measure the underlying performance of the business, as referred to throughout the half-year report.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Specific adjusting items
In the condensed consolidated income
statement the Group presents specific
adjusting items separately. In the
judgment of the Directors, due to the
nature and value of these items they
should be disclosed separately from the
underlying results of the Group to allow
the reader to obtain a proper
understanding of the financial information
and the best indication of underlying
performance of the Group.
Six months Six months Year
2016 2015 2015
£m £m £m
Specific adjusting items:
- Restructuring costs - - (1.5)
- Net pension settlement credit 3.8 - -
- Business exit costs - - (2.8)
- Impairment of property, plant and - - (5.9)
equipment
- Impairment of intangible assets - - (5.8)
- Net loss on disposal of businesses - - (6.1)
Total specific adjusting items before 3.8 - (22.1)
income tax credit
- Income tax credit from specific (1.5) - 3.3
adjusting items
Total specific adjusting items after 2.3 - (18.8)
income tax credit
Half year ended 30 June 2016
Net pension settlement credit
During the half year ended 30 June 2016
the Group has completed the final
termination and payment of all earned
benefits for one of its North American
Defined Benefit Plans. As a result of this
termination the Group has recognised a net
pension settlement credit of £3.8 million.
An income tax credit of £1.5 million was
recognised in respect of this item.
Year ended 31 December 2015
Restructuring costs
The strategic objective to drive the
performance of the Electrical Carbon and
Seals and Bearings businesses to mid-teen
margins and beyond has resulted in the
Group undertaking a significant
rationalisation of the carbon material
footprint. This started in 2014 with the
downsizing of activities at the Swansea,
UK site. This footprint rationalisation
continued in 2015 with the decision to and
the announcement of the cessation of
carbon material manufacturing at the
Shanghai, China site. These operations
will be consolidated into other Group
locations, mainly the USA. This decision
resulted in a charge of £1.5 million in
the year ended 31 December 2015, £0.7
million of which relates to the impairment
loss on plant and equipment and the
balance to site clean-up costs and other
write-offs. An income tax credit of £0.2
million was recognised in respect of these
restructuring costs. The £0.7 million of
impairment loss formed part of the total
plant and equipment impairment loss of
£6.6 million recognised in the year ended
31 December 2015.
Business exit costs
The business exit costs in the year ended
31 December 2015 related to the
deconsolidation of Morgan Thermal Ceramics
Sukhoy Log Limited Liability Company
("Sukhoy") and the subsequent
remeasurement to fair value of the
retained investment.
In April 2006 the Group acquired a 51%
shareholding in Sukhoy, a fibre business
based near Yekaterinburg, Russia. The
results and assets of Sukhoy have
previously been consolidated on the basis
that the Group was satisfied that it
exercised management control. During 2015
there was a deterioration in the
relationship between Morgan and the
minority partner, exacerbated by the
increasingly difficult market conditions
in Russia. As a result, it became clear to
the Group towards the end of 2015 that it
no longer had effective control of the
business and that it was no longer
appropriate to consolidate. Based on the
recent financial performance and the
Group's view of the future prospects of
the business it was concluded that the
value of the Group's investment in Sukhoy
was nil. As a result the Group recognised
a £2.8 million charge in business exit
costs in the year ended 31 December 2015.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Specific adjusting items continued
Impairment of property, plant and equipment
The impairment of property, plant and equipment for the year
ended 31 December 2015 was as a result of a review of the
carrying value of assets that support the Group's North America
vehicle and personal protection and high-temperature furnace
-lining businesses. Both of these businesses saw significant
growth and investment in previous years but more recently they
have been in decline. The Group compared its expected future
cash flows from these businesses with the book value of the
property, plant and equipment that is dedicated to them and
determined that a total impairment charge of £5.9 million was
required. An income tax credit of £2.1 million was recognised
in respect of the impairment charge. The £5.9 million of
impairment loss forms part of the total plant and equipment
impairment loss of £6.6 million recognised in the year ended 31
December 2015.
Impairment of intangible assets
As a result of the continued reduction in demand on C&DS from UK
MoD, the review of the carrying value of the remaining
intangible assets of C&DS resulted in a further impairment
charge of £5.8 million in the year ended 31 December 2015,
relating to a full impairment of the customer relationships.
Following this impairment charge, the carrying value of the C&DS
intangibles was £9.8 million, all in respect of technology and
trademarks. This was supported by the current expectations of
the future trading performance of the C&DS business. An income
tax credit of £1.0 million was recognised in respect of the
impairment charge.
Net loss on disposal of business
On 30 January 2015 the Group completed the sale of a Thermal
Ceramics business in Wissembourg, France. This business
manufactures low-temperature fibre boards used mainly in the
building industry. The Group incurred a loss on the disposal of
this business of £6.1 million in the year ended 31 December
2015, in addition to the £1.9 million of business exit costs
recognised in the year ended 31 December 2014.
5. Net finance income and expense
Six months Six months Year
2016 2015 2015
£m £m £m
Amounts derived from financial instruments 0.2 1.0 1.0
Interest income on bank deposits measured at amortised cost 0.5 0.9 1.5
Finance income 0.7 1.9 2.5
Interest expense on financial liabilities measured at amortised cost (6.9) (7.0) (13.7)
Net interest on IAS 19 obligations (3.6) (3.4) (6.9)
Finance expense (10.5) (10.4) (20.6)
Net financing costs recognised in profit or loss (9.8) (8.5) (18.1)
6. Taxation - income tax expense
Six months Six months Year
2016 2015 2015
£m £m £m
Tax on profit 14.2 14.5 20.9
The Group's consolidated effective tax rate for the six months ended 30 June 2016 is based on the Directors' best estimate of the effective tax rate for the year excluding specific adjusting items.
Following a review of the presentation of tax balances the deferred tax asset and liability balances at 30 June 2015 have been re-presented to reflect management's view of a more likely basis for recovery of the assets and settlement of the liabilities. The re-presentation results in a decrease of the deferred tax asset at 30 June 2015 of £31.0 million and an equal decrease to the deferred tax liability. Therefore there is no effect on the prior year
net asset position.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. Earnings per share
Earnings per share from continuing operations
The calculation of basic/diluted earnings per share from continuing operations at 30 June 2016 was based on the following:
Six months Six months Year
2016 2015 2015
Basic Diluted Basic Diluted Basic Diluted
£m £m £m £m £m £m
Profit attributable to equity holders of the Company from continuing operations 29.0 29.0 32.4 32.4 33.9 33.9
Weighted average number of Ordinary shares
Issued Ordinary shares at the beginning of the period (millions) 285.4 285.4 285.4 285.4 285.4 285.4
Effect of shares issued in period and shares held by The Morgan General Employee Benefit Trust (millions) (0.6) (0.6) (0.3) (0.3) (0.3) (0.3)
Dilutive effect of share options/incentive schemes (millions) n/a 0.1 n/a 0.5 n/a 0.4
Basic/diluted weighted average number of Ordinary shares during the period (millions) 284.8 284.9 285.1 285.6 285.1 285.5
Earnings per share from continuing operations (pence) 10.2p 10.2p 11.4p 11.3p 11.9p 11.9p
Underlying earnings per share
The calculation of basic/diluted underlying earnings per share at 30 June 2016 was based on the following:
Six months Six months Year
2016 2015 2015
Basic Diluted Basic Diluted Basic Diluted
£m £m £m £m £m £m
Underlying operating profit and share of profit of associate before specific adjusting items and amortisation, less net financing costs, income tax expense and non-controlling interests 30.0 30.0 36.0 36.0 59.4 59.4
Basic/diluted weighted average number of Ordinary shares during the period - calculated as above (millions) 284.8 284.9 285.1 285.6 285.1 285.5
Earnings per share before specific adjusting items and amortisation of intangible assets (pence) 10.5p 10.5p 12.6p 12.6p 20.8p 20.8p
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. Cash and cash equivalents
30 June 30 June 31 December
2016 2015 2015
£m £m £m
Bank balances 44.4 43.8 38.8
Cash deposits 12.8 8.6 11.0
Cash and cash equivalents 57.2 52.4 49.8
Reconciliation of cash and cash equivalents to net debt*
Six months Six months Year
2016 2015 2015
£m £m £m
Opening borrowings (265.8) (270.0) (270.0)
(Increase)/decrease in borrowings (12.1) (6.6) 8.5
Payment of finance lease liabilities 0.2 0.1 0.2
Effect of movements in foreign exchange on borrowings (21.1) 7.0 (4.5)
Closing borrowings (298.8) (269.5) (265.8)
Cash and cash equivalents 57.2 52.4 49.8
Closing net debt (241.6) (217.1) (216.0)
* Net debt is defined as interest-bearing loans and borrowings, bank overdrafts less cash and cash equivalents.
9. Financial risk management
Fair Values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
30 June 30 June 30 June 30 June 31 December 31 December
2016 2016 2015 2015 2015 2015
£m £m £m £m £m £m
Financial assets and liabilities at amortised cost
4.32% Euro Senior Notes 2017 (16.9) (17.4) (14.3) (15.1) (14.9) (15.5)
6.12% US Dollar Senior Notes 2017 (131.6) (138.2) (111.5) (119.6) (118.8) (125.5)
6.26% US Dollar Senior Notes 2019 (56.4) (62.7) (47.7) (52.8) (50.9) (56.0)
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