REG - Norcros PLC - Interim Results <Origin Href="QuoteRef">NXR.L</Origin> - Part 2
13/11/2014 08:20
- Part 2: For the preceding part double click ID:nRSM8936Wa
Financial instruments: classification and measurement 1 April 2018
None of these standards or interpretations is expected to have a material
impact on the Group.
Risks and uncertainties
The principal strategic level risks and uncertainties affecting the Group,
together with the approach to their mitigation, remain as set out on pages 22
to 25 in the 2014 Annual Report, which is available on the Group's website
(www.norcros.com).
In summary the Group's principal risks and uncertainties are:
· key commercial relationships;
· competition;
· reliance on production facilities;
· staff retention and recruitment;
· foreign currency exchange risk;
· interest rate risk;
· pension scheme management;
· energy price risk;
· additional capital requirements to fund ongoing operations;
· performance against banking covenants;
· changing consumer preferences;
· overseas operations;
· management of the property estate; and
· acquisition risk.
The Chairman's Statement in this condensed consolidated interim financial
information includes comments on the outlook for the remaining six months of
the financial year.
Forward-looking statements
This condensed consolidated interim financial information contains
forward-looking statements. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to be correct. Due to the
inherent uncertainties, including both economic and business risk factors
underlying such forward-looking information, actual results may differ
materially from those expressed or implied by these forward-looking
statements.
The Group undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise.
Accounting estimates and judgments
The preparation of condensed consolidated interim financial information
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amount of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
In preparing the condensed consolidated interim financial information, the
significant judgments made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
applied to the consolidated financial statements for the year ended 31 March
2014.
2. Segmental reporting
The Group operates in two main geographical areas: the UK and South Africa.
All inter-segment transactions are made on an arm's length basis. The chief
operating decision maker, which is considered to be the Board, assesses
performance and allocates resources based on geography as each segment has
similar economic characteristics, complementary products, distribution
channels and regulatory environments.
Notes Continuing operations - 26 weeks ended 30 September 2014 (unaudited)
UK £m South Africa £m Group£m
Revenue 72.8 35.8 108.6
Underlying operating profit 6.4 1.0 7.4
Non-underlying operating items 4 (1.0) - (1.0)
Exceptional operating items 4 - - -
Operating profit 5.4 1.0 6.4
Finance costs (net) (0.1)
Profit before taxation 6.3
Taxation 6 (1.6)
Profit from continuing operations 4.7
Net debt 10 (20.0)
Notes Continuing operations - 26 weeks ended 30 September 2013 (unaudited)
UK£m SouthAfrica£m Group£m
Revenue 72.8 38.4 111.2
Underlying operating profit 5.9 0.7 6.6
Non-underlying operating items 4 (1.0) - (1.0)
Exceptional operating items 4 (1.6) 0.4 (1.2)
Operating profit 3.3 1.1 4.4
Finance costs (net) (4.1)
Profit before taxation 0.3
Taxation 6 -
Profit from continuing operations 0.3
Net debt 10 (28.8)
Notes Continuing operations - 52 weeks ended 31 March 2014 (audited)
UK £m SouthAfrica£m Group£m
Revenue 148.0 70.7 218.7
Underlying operating profit 14.2 1.9 16.1
Non-underlying operating items 4 (1.8) - (1.8)
Exceptional operating items 4 (1.9) 0.4 (1.5)
Operating profit 10.5 2.3 12.8
Finance costs (net) (7.0)
Profit before taxation 5.8
Taxation 6 4.3
Profit from continuing operations 10.1
Net debt 10 (26.9)
There are no differences from the last Annual Report in the basis of
segmentation or in the basis of measurement of segment profit or loss.
3. Non-GAAP measures
Condensed Consolidated Income Statement
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Profit before taxation from continuing operations 6.3 0.3 5.8
Adjusted for:
Non-underlying operating items 1.0 1.0 1.8
Exceptional operating items - 1.2 1.5
Amortisation of costs of raising debt finance 0.1 0.2 0.3
Amortisation of costs of raising debt finance - exceptional 0.4 - -
Net movement on fair value of derivative financial instruments (1.6) 2.5 3.7
Discount on property lease provisions - 0.1 0.2
IAS 19R finance cost 0.5 0.6 1.3
Underlying profit before taxation 6.7 5.9 14.6
Taxation attributable to underlying profit before taxation (1.7) (0.8) 2.4
Underlying earnings 5.0 5.1 17.0
The Directors believe that underlying profit before taxation and underlying
earnings provide shareholders with additional useful information on the
underlying performance of the Group. Underlying profit before taxation is
defined as profit before taxation, non-underlying operating items, exceptional
operating items, exceptional finance costs, amortisation of costs of raising
finance, net movement on fair value of derivative financial instruments,
discounting of property lease provisions and finance costs relating to pension
schemes.
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Operating profit from continuing operations 6.4 4.4 12.8
Adjusted for:
Depreciation 3.0 3.0 5.9
Non-underlying operating items 1.0 1.0 1.8
Exceptional operating items - 1.2 1.5
Underlying EBITDA 10.4 9.6 22.0
EBITDA is a measure commonly used by investors and financiers to assess
business performance. Underlying EBITDA has been provided which reflects
EBITDA as adjusted for non-underlying and exceptional operating items. The
Directors consider that these measures provide shareholders with additional
useful information on the performance of the Group.
Condensed Consolidated Statement of Cash Flows
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Cash generated from continuing operations (note 10) 9.9 6.6 13.9
Adjusted for:
Cash outflows from exceptional items 0.7 2.6 4.4
Pension fund deficit recovery contributions 1.0 1.0 2.0
Underlying operating cash flow 11.6 10.2 20.3
Underlying operating cash flow is defined as cash generated from continuing
operations before cash outflows from exceptional items and pension fund
deficit recovery contributions.
The Directors believe that underlying operating cash flow provides
shareholders with additional useful information on the underlying cash
generation of the Group.
4. Non-underlying and exceptional operating items
As described in note 3, the Directors believe that underlying profit before
taxation and underlying earnings provide shareholders with additional useful
information on the underlying performance of the Group. In order to arrive at
underlying profit before taxation and underlying earnings, certain items
including non-underlying and exceptional operating items have been excluded.
An analysis of non-underlying and exceptional operating items is shown below.
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Non-underlying operating items
IAS 19R pension administration expenses1 0.8 0.8 1.4
Intangible asset amortisation2 0.2 0.2 0.4
1.0 1.0 1.8
1 The implementation of IAS 19R, 'Employee benefits', has required that
certain costs of administering the Group's pension schemes are recognised in
the income statement.
2 Following the acquisition of Vado in 2013, the Group recognised an
intangible asset which is subject to a non-cash amortisation charge.
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Exceptional operating items
Profit on disposal of surplus property1 (0.4) (0.5) (0.5)
Restructuring costs2 - 1.5 1.5
Deferred remuneration3 0.3 0.2 0.3
Legal costs4 0.1 - 0.2
- 1.2 1.5
1 A profit of £0.4m was generated in the period following the sale of a
small parcel of land in Braintree, UK. During the previous period the Group
disposed of a residual manufacturing facility in South Africa generating a
profit of £0.5m.
2 Restructuring costs related to redundancies and asset write-downs as a
result of restructuring initiatives throughout the Group's business units.
3 In accordance with IFRS 3R, a significant proportion of deferred
consideration payable to the former shareholders of Vado is required to be
treated as remuneration and, accordingly, is expensed to the income statement
as incurred.
4 Legal costs related to the ongoing dispute over the disposal of the
surplus land at the Highgate site in Tunstall, UK.
5. Earnings per share
Basic and diluted earnings per share
Basic earnings per share (EPS) is calculated by dividing the profit
attributable to shareholders by the weighted average number of ordinary shares
in issue during the year, excluding those held in the Norcros Employee Benefit
Trust. For diluted EPS, the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all potential dilutive ordinary
shares. The calculation of EPS is based on the following profits and numbers
of shares:
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Profit for the period from continuing operations 4.7 0.3 10.1
Profit/(loss) for the period from discontinued operations 0.1 0.2 (1.4)
Profit for the period 4.8 0.5 8.7
26 weeks ended 30 September 2014 (unaudited) number 26 weeksended30 September2013(unaudited)number 52 weeksended31 March2014(audited)number
Weighted average number of shares for basic earnings per share 589,593,699 583,188,384 583,950,031
Share options and warrants 21,595,473 19,654,417 24,374,489
Weighted average number of shares for diluted earnings per share 611,189,172 602,842,801 608,324,520
26 weeks ended 30 September 2014 (unaudited) 26 weeksended30 September2013(unaudited) 52 weeksended31 March2014(audited)
Basic earnings per share:
From continuing operations 0.8p 0.1p 1.7p
From discontinued operations - - (0.2p)
From profit for the period 0.8p 0.1p 1.5p
Diluted earnings per share:
From continuing operations 0.8p 0.1p 1.6p
From discontinued operations - - (0.2p)
From profit for the period 0.8p 0.1p 1.4p
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share has also been provided which
reflects underlying earnings from continuing operations divided by the
weighted average number of shares set out above.
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Underlying earnings for the period (note 3) 5.0 5.1 17.0
26 weeks ended 30 September 2014 (unaudited) 26 weeksended30 September2013(unaudited) 52 weeksended31 March2014(audited)
Basic underlying earnings per share 0.8p 0.9p 2.9p
Diluted underlying earnings per share 0.8p 0.9p 2.8p
6. Taxation
Taxation comprises:
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Current
UK taxation 0.5 0.4 1.1
Deferred
Origination and reversal of temporary differences 1.1 (0.4) (5.4)
Taxation 1.6 - (4.3)
Current tax expense is recognised based on management's estimate of the
weighted average annual income tax rate expected for the full financial year.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes relate to the same fiscal authority.
Deferred tax is calculated in full on temporary differences under the
liability method.
The movement on the deferred tax account is as shown below:
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Deferred tax asset at the beginning of the period 11.6 8.7 8.7
(Charged)/credited to the income statement (1.1) 0.4 5.4
Credited/(charged) to statement of comprehensive income 3.7 (1.3) (2.5)
Exchange movement (0.1) - -
Deferred tax asset at the end of the period 14.1 7.8 11.6
At30 September 2014 (unaudited) £m At30 September2013(unaudited)£m At31 March2014(audited)£m
Accelerated capital allowances 2.9 0.4 3.0
Tax losses 3.8 2.5 4.5
Other timing differences (0.7) (0.7) (0.3)
Deferred tax asset relating to pension deficit 8.1 5.6 4.4
14.1 7.8 11.6
7. Finance income and costs
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Finance costs
Interest payable on bank borrowings 0.7 0.7 1.5
Amortisation of costs of raising debt finance 0.1 0.2 0.3
Movement on fair value of derivative financial instruments - 2.5 3.7
Unwind of discount on property lease provisions - 0.1 0.2
Finance costs 0.8 3.5 5.7
Exceptional finance costs1 0.4 - -
Total finance costs 1.2 3.5 5.7
Finance income
Movement on fair value of derivative financial instruments (1.6) - -
Total finance income (1.6) - -
1 Following the refinancing of the Group's banking facilities in July
2014, the unamortised costs relating to the previous facility were written off
in full.
8. Borrowings
At30 September 2014 (unaudited) £m At30 September2013(unaudited)£m At31 March2014(audited)£m
Non-current
Bank borrowings (unsecured):
- bank loans 21.0 35.0 31.0
- less: costs of raising finance (0.6) (0.6) (0.5)
Total non-current 20.4 34.4 30.5
Current
Bank borrowings (unsecured):
- finance leases and hire purchase contracts - 0.1 0.1
- bank overdrafts 4.1 - 0.7
Total current 4.1 0.1 0.8
Total borrowings 24.5 34.5 31.3
The fair value of bank loans equals their carrying amount as they bear
interest at floating rates.
The repayment terms of borrowings are as follows:
At30 September 2014 (unaudited) £m At30 September2013(unaudited)£m At31 March2014(audited)£m
Not later than one year 4.1 0.1 0.8
After more than one year:
- between one and two years - - 31.0
- later than two years and not later than five years 21.0 35.0 -
- costs of raising finance (0.6) (0.6) (0.5)
20.4 34.4 30.5
Total borrowings 24.5 34.5 31.3
In July 2014 the Group agreed a new unsecured £70m revolving credit facility
with a £30m accordion facility with Lloyds Bank plc, Barclays Bank plc and
HSBC Bank plc. The new banking facility is in force for five years to July
2019.
Net debt
The Group's net debt is calculated as follows:
At30 September 2014 (unaudited) £m At30 September2013(unaudited)£m At31 March2014(audited)£m
Cash and cash equivalents (4.5) (5.7) (3.9)
Cash and cash equivalents included within assets classified as held-for-sale - - (0.5)
Total borrowings 24.5 34.5 31.3
Net debt 20.0 28.8 26.9
9. Called up share capital
At30 September 2014 (unaudited) £m At30 September2013(unaudited)£m At31 March2014(audited)£m
Issued and fully paid
594,917,377 ordinary shares of 1p each 5.9 5.8 5.8
During the period the Company issued 6,997,419 ordinary shares to the Norcros
Employee Benefit Trust in order to satisfy vestings of options under the
Company's Approved Performance Share Plan. A further 34,467 ordinary shares
were issued to members of a SAYE scheme who exercised options during the
period.
10. Consolidated Cash Flow Statements
(a) Cash generated from continuing operations
26 weeks ended 30 September 2014 (unaudited) £m 26 weeksended30 September2013(unaudited)£m 52 weeksended31 March2014(audited)£m
Profit before taxation 6.3 0.3 5.8
Adjustments for:
- non-underlying operating items included in the above 1.0 1.0 1.8
- exceptional operating items included in the above - 1.2 1.5
- cash outflows from exceptional items (0.7) (2.6) (4.4)
- depreciation 3.0 3.0 5.9
- difference between current service cost and normal pension contributions - - (0.1)
- pension fund deficit recovery plan contributions (1.0) (1.0) (2.0)
- profit on disposal of property, plant and equipment - 0.1 0.1
- total finance costs 1.2 3.5 5.7
- finance income (1.6) - -
- IAS 19R finance cost 0.5 0.6 1.3
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