REG - Serco Group PLC - Half-year Report <Origin Href="QuoteRef">SRP.L</Origin> - Part 6
03/08/2017 07:07
- Part 6: For the preceding part double click ID:nRSC9639Me
Six months ended 30 June 2017 (unaudited)£m Six months ended 30 June 2016 (restated*) (unaudited)£m Year ended 31 December 2016 (audited)£m
Interest payable on obligations under finance leases 0.8 1.0 1.6
Interest payable on other loans 7.2 7.9 15.6
Facility fees and other charges 1.4 2.0 3.5
Movement in discount on provisions 1.7 0.9 2.4
11.1 11.8 23.1
Foreign exchange on financing activities* 0.1 (0.4) (1.2)
11.2 11.4 21.9
* Finance costs have been restated as a result of the change in treatment of foreign exchange items on investing and
financing items as explained in note 1.
9. Tax
In the six months ended 30 June 2017, a total tax charge of £32.3m (2016: £3.9m) was recognised, being £32.3m (2016: £3.8m)
on continuing operations profit of £14.1m (2016: £58.1m) and £nil (2016: £0.1m) on discontinued operations losses of £nil
(2016: £7.8m).
In respect of the results of our continuing operations, the profit before interest, exceptional items and tax of £33.1m
(2016: £72.5m) less pre-exceptional finance costs of £7.6m (2016 : £7.1m) is £25.5m (2016: £65.8m), which incurs a tax
charge of £16.4m (2016: £3.7m), giving a tax rate of 64.3% (2016: 5.6%).
The principal reasons why the tax rate on profit before exceptional items and tax from continuing operations at 64.3% is
higher than the UK standard corporation tax rate of 19.25% is due to the pension movement commented on below. In addition,
higher rates of tax on profits arise on our international operations, and there is an absence of a deferred tax credit for
losses incurred in the UK, because a deferred tax asset cannot be recognised against these losses until we can confidently
forecast these losses being utilised against future profits (which includes the result of UK divisions and the majority of
corporate costs). These factors are partially offset by the impact of our joint ventures whose post-tax results are
included in our pre-tax profit.
Our tax charge continues to be materially impacted by our accounting for UK deferred taxes. To the extent that future UK
tax losses are incurred and are not recognised, our effective tax rate will be higher than prevailing standard corporation
tax rates as we will not be able to recognise the associated tax benefits arising. When our UK business returns to
sustainable profitability our existing UK tax losses will be recognised or utilised, and the effective rate will be
reduced.
Movements in the valuation of the Group's defined benefit pension schemes and the associated deferred tax impact are
reported in the Consolidated Statement of Comprehensive Income (SOCI) and do not flow through the income statement, and
therefore do not impact profit before tax or the tax charge. However, the net amount of deferred tax recognised in the
balance sheet relates to both the pension accounting and other timing differences, such as recoverable losses. As the net
deferred tax balance sheet position is capped at the level supported by future profit forecasts, the decrease in the
deferred tax liability associated with the pension changes (with the benefit reported in the SOCI) leads to a corresponding
decrease in the deferred tax asset to match the future profit forecasts. Such a reduction in the deferred tax asset
therefore leads to a charge to tax in the income statement. For the six months ended 30 June 2017, the total impact of
such movements on the statutory tax charge was £22.4m, £16.1m of which arose as a result of the pension buy-in disclosed in
note 15. As this £16.1m adjustment is the consequence of a material one off transaction in the period, it is therefore
considered to be exceptional.
As at 30 June 2017 there is a net deferred tax asset of £20.0m, this consists of a deferred tax asset of £54.1m and
deferred tax liability of £34.1m.
A £10.0m UK deferred tax asset has been recognised at 30 June 2017 (2016: £10.5m) on the basis of forecast utilisation
against future taxable profits. An expected change in the UK loss utilisation laws in the second half of 2017 is estimated
to reduce the value of this deferred tax asset by £3.7m during the second half of the year.
10. Earnings per share
Basic and diluted EPS has been calculated in accordance with IAS33 Earnings per share.
The calculation of the basic and diluted EPS is based on the following data:
Number of shares Six months ended 30 June 2017 (unaudited) millions Six months ended 30 June 2016 (unaudited)millions Year ended 31 December 2016 (audited) millions
Weighted average number of ordinary shares for the purpose of basic EPS 1,091.1 1,088.8 1,088.3
Effect of dilutive potential ordinary shares: Share options - 40.2 37.3
Weighted average number of ordinary shares for the purpose of diluted EPS 1,091.1 1,129.0 1,125.6
At 30 June 2017, options over 214,632 (30 June 2016: 310,493) shares were excluded from the weighted average number of
shares used for calculating diluted earnings per share because their exercise price was above the average share price for
the period and they were, therefore, anti-dilutive.
The impact of dilutive shares has only been applied where a profit has been made.
Earnings per share continuing and discontinued
Basic EPS Earnings Per share amount Earnings Per share amount Earnings Per share amount
30 June 2017 (unaudited)£m 30 June 2017 (unaudited) 30 June 2016 (unaudited) 30 June 2016 (unaudited)pence 31 December 2016 (audited)£m 31 December 2016 (audited)
pence £m pence
Earnings for the purpose of basic EPS (18.3) (1.68) 46.5 4.27 (1.2) (0.11)
Effect of dilutive potential ordinary shares - - - (0.15) - -
Diluted EPS (18.3) (1.68) 46.5 4.12 (1.2) (0.11)
Basic EPS excluding exceptional items
Earnings for the purpose of basic EPS (18.3) (1.68) 46.5 4.27 (1.2) (0.11)
Add back exceptional items 11.4 1.04 12.3 1.13 70.9 6.51
Add back tax on exceptional items 15.9 1.46 - - (3.1) (0.28)
Earnings excluding exceptional operating items for the purpose of basic EPS 9.0 0.82 58.8 5.40 66.6 6.12
Earnings per share continuing
Basic EPS Earnings Per share amount Earnings Per share amount Earnings Per share amount
30 June 2017 (unaudited)£m 30 June 2017 (unaudited) 30 June 2016(unaudited) 30 June 2016(unaudited)pence 31 December 2016 (audited)£m 31 December 2016 (audited)
pence £m pence
Earnings for the purpose of basic EPS (18.3) (1.68) 54.4 5.00 16.9 1.55
Effect of dilutive potential ordinary shares - - - (0.18) - (0.05)
Diluted EPS (18.3) (1.68) 54.4 4.82 16.9 1.50
Basic EPS excluding exceptional items
Earnings for the purpose of basic EPS (18.3) (1.68) 54.4 5.00 16.9 1.55
Add back exceptional items 11.4 1.04 7.7 0.71 56.3 5.17
Add back tax on exceptional items 15.9 1.46 0.1 - (3.1) (0.28)
Earnings excluding exceptional operating items for the purpose of basic EPS 9.0 0.82 62.2 5.71 70.1 6.44
Earnings per share discontinued
Basic EPS Earnings Per share amount Earnings Per share amount Earnings Per share amount
30 June 2017 (unaudited)£m 30 June 2017 (unaudited) 30 June 2016 (unaudited) 30 June 2016 (unaudited)pence 31 December 2016£m 31 December 2016
pence £m pence
Earnings for the purpose of basic EPS - - (7.9) (0.73) (18.1) (1.66)
Effect of dilutive potential ordinary shares - - - 0.03 - -
Diluted EPS - - (7.9) (0.70) (18.1) (1.66)
Basic EPS excluding exceptional items
Earnings for the purpose of basic EPS - - (7.9) (0.73) (18.1) (1.66)
Add back exceptional items - - 4.6 0.43 14.6 1.34
Add back tax on exceptional items - - - - - -
Earnings excluding exceptional operating items for the purpose of basic EPS - - (3.3) (0.30) (3.5) (0.32)
11. Goodwill
The value of each CGU is based on value in use calculations derived from forecast cash flows based on past experience,
adjusted to reflect market trends, economic conditions and key risks. These forecasts include an estimate of new business
wins and an assumption that the final year forecast continues on into perpetuity at a CGU specific growth rate.
Goodwill is required to be tested for impairment at least once every financial year, irrespective of whether there is any
indication of impairment. The annual impairment review typically takes place in the final quarter of the year. However, if
there are indicators of impairment an earlier review is also required.
The political environment in the USA, UK and the Middle East has become more unpredictable in recent months, which in turn
makes it harder to forecast outcomes for our business. However, there have been no indicators of impairment since the full
impairment test undertaken for 2016 year end.
In the USA, there is no clear determination of the future of the Affordable Care Act (ACA), and the shape of the budget for
Federal Government spending remains unsettled. The Group's position is that structural changes to the ACA will be
implemented over a matter of years rather than months, and it is expected that the customer will launch in the near future
a tender to provide services beyond the expiry of the current contract in June 2018.
12. Analysis of Net Debt
At 1 January 2017£m Cash Reclassified as held for sale £m Acquisitions £m Disposals £m Exchange differences £m Non cash movements £m At 30 June 2017 £m
flow £m
Cash and cash equivalents 177.8 (58.7) - - - (1.4) - 117.7
Loan receivables 22.9 - - - - - 0.6 23.5
Loans payable (299.9) 3.8 - - - 14.8 (0.4) (281.7)
Obligations under finance leases (28.2) 7.6 - - - 0.1 (1.0) (21.5)
Derivatives relating to Net Debt 18.1 - - - - (5.0) - 13.1
(109.3) (47.3) - - - 8.5 (0.8) (148.9)
At 1 January 2016£m Cash Reclassified as held for sale £m Acquisitions £m Disposals £m Exchange differences £m Non cash movements £m At 30 June 2016(restated*) £m
flow £m
Cash and cash equivalents 323.6 (160.8) - - - 3.4 - 166.2
Loan receivables 19.9 - - - - 0.1 0.4 20.4
Loans payable (381.9) 135.8 - - - (26.8) (0.6) (273.5)
Obligations under finance leases (43.8) 8.4 - - - (0.3) - (35.7)
Derivatives relating to Net Debt* 14.6 - - - - 5.9 - 20.5
(67.6) (16.6) - - - (17.7) (0.2) (102.1)
* Net Debt has been restated to include derivative financial instruments that relate to other components of Net Debt.
See note 1.
At 1 January 2016 £m Cash Reclassified as held for sale £m Acquisitions £m Disposals £m Exchange differences £m Non cash movements £m At 31 December 2016 £m
flow £m
Cash and cash equivalents 323.6 (153.7) - 0.1 - 7.8 - 177.8
Loan receivables 19.9 - - - - 0.1 2.9 22.9
Loans payable (381.9) 135.8 - - - (52.8) (1.0) (299.9)
Obligations under finance leases (43.8) 16.7 (0.2) - - (0.4) (0.5) (28.2)
Derivatives relating to Net Debt 14.6 - - - - 3.5 - 18.1
(67.6) (1.2) (0.2) 0.1 - (41.8) 1.4 (109.3)
13. Provisions
Employee related £m Property £m Contract £m Other £m Total £m
At 1 January 2016 36.4 18.3 302.1 124.9 481.7
Reclassified to trade and other payables - - (13.1) - (13.1)
Charged to income statement - exceptional - - - 7.9 7.9
Charged to income statement - other 6.9 1.5 4.4 4.5 17.3
Released to income statement (2.3) (0.1) (17.7) (4.8) (24.9)
Utilised during the period (5.6) (3.0) (44.8) (3.6) (57.0)
Reclassification - (3.0) 0.7 2.3 -
Unwinding of discount - - 0.8 - 0.8
Exchange differences 2.9 0.8 6.9 3.2 13.8
At 30 June 2016 (unaudited) 38.3 14.5 239.3 134.4 426.5
Acquisitions - 0.6 14.0 - 14.6
Reclassified to trade and other payables - - 1.6 (8.3) (6.7)
Charged to income statement - exceptional 0.4 - - 14.8 15.2
Charged to income statement - other 18.7 2.9 52.2 19.2 93.0
Released to income statement - exceptional (0.2) - (0.6) - (0.8)
Released to income statement - other (3.0) (0.2) (47.2) (12.4) (62.8)
Utilised during the period (11.9) (3.2) (37.2) (14.1) (66.4)
Reclassification - 0.1 (8.0) 2.6 (5.3)
Transfer from assets held for sale - - - 3.3 3.3
Eliminated on disposal of subsidiary - - - (1.7) (1.7)
Unwinding of discount - 0.1 1.6 - 1.7
Exchange differences 2.8 0.4 4.5 3.4 11.1
At 31 December 2016 (audited) 45.1 15.2 220.2 141.2 421.7
Charged to income statement - exceptional 2.4 - - - 2.4
Charged to income statement - other 8.8 0.7 - 2.4 11.9
Released to income statement - exceptional (0.3) - - - (0.3)
Released to income statement - other (3.1) (0.4) - (3.8) (7.3)
Utilised during the period (4.8) (1.6) (40.4) (2.7) (49.5)
Unwinding of discount - - 1.7 - 1.7
Exchange differences (0.9) (0.1) (1.2) (1.8) (4.0)
At 30 June 2017 (unaudited) 47.2 13.8 180.3 135.3 376.6
Analysed as:
Current 11.9 3.5 70.9 70.1 156.4
Non current 35.3 10.3 109.4 65.2 220.2
Contract provisions are onerous contract provisions which will be utilised over the life of each individual contract, the
longest remaining life which runs until 2024. The present value of the estimated future cash outflows required to settle
the contract obligations as they fall due over the respective contracts has been used in determining the provision. The
individual provisions are discounted where the impact is assessed to be material. Discount rates used are calculated based
on the estimated risk free rate of interest for the region in which the provision is located and matched against the ageing
profile of the provision. Rates applied are in the range of 0.17% to 3.30%. A full analysis is performed at least
annually of the future profitability of all contracts with marginal performances and of the balance sheet items directly
linked to these contracts. Due to the significant size of the balance and the inherent level of uncertainty over the
amount and timing of the related cash flows upon which onerous contract provisions are based, if the expected operational
performance varies from the best estimates made at the previous balance sheet date, a material change in estimate may be
required. The key drivers behind operational performance is the level of activity required to be serviced, which is often
directed by the actions of the UK Government, and the efficiency of Group employees and resources.
Employee related provisions are for long-term service awards and terminal gratuities liabilities, which are based on
contractual entitlement, together with an estimate of the probabilities that employees will stay until retirement and
receive all relevant amounts. There are also amounts included in relation to restructuring. The provisions will be
utilised over various periods driven by local legal or regulatory requirements, the timing of which is not certain.
Property provisions relate to leased properties which are either underutilised or vacant and where the unavoidable costs
associated with the lease exceed the economic benefits expected to be generated in the future. The provision has been
calculated based on the discounted cash outflows required to settle the lease obligations as they fall due, with the
longest running lease ending in April 2039.
Other provisions are held for indemnities given on disposed businesses, legal and other costs that the Group expects to
incur over an extended period, in respect of past events. These costs are based on past experience of similar items and
other known factors and represent management's best estimate of the likely outcome and will be utilised with reference to
the specific facts and circumstances, with the majority expecting to be settled by 31 December 2021.
14. Contingent liabilities
At 30 June 2017 the Company has guaranteed overdrafts, finance leases, and bonding facilities of its joint ventures and
associates up to a maximum value of £4.8m (31 December 2016: £20.4m). The actual commitment outstanding at 30 June 2017
was £4.8m (31 December 2016: £17.9m).
The Company and its subsidiaries have provided certain guarantees and indemnities in respect of performance and other
bonds, issued by its banks on its behalf in the ordinary course of business. The total commitment outstanding as at 30
June 2017 was £247.9m (31 December 2016: £252.1m).
As we have disclosed before, we are under investigation by the UK's Serious Fraud Office. In November 2013, the UK's
Serious Fraud Office announced that it had opened an investigation, which remains ongoing, into the Group's Electronic
Monitoring Contract. We are cooperating fully with the Serious Fraud Office's investigation but it is not possible to
predict the outcome at this time.
The Group is aware of claims and potential claims which involve or may involve legal proceedings against the Group. The
Directors are of the opinion, having regard to legal advice received and the Group's insurance arrangements, that it is
unlikely that these matters will, in aggregate, have a material effect on the Group's financial position.
15. Defined benefit schemes
The costs related to defined benefit pension schemes included within operating profit in the six months ended 30 June 2017
amount to £7.3m (2016: £7.0m). Included in investment income and finance costs is a credit of £1.6m (2016: £2.3m) relating
to the net interest income on our consolidated pension schemes. Among our non contract specific schemes, the largest is
the Serco Pension and Life Assurance Scheme (SPLAS). The most recent full actuarial valuation of this scheme was
undertaken as at 5 April 2015 and resulted in an actuarially assessed deficit of £4.0m.
In June 2017 the Trustees of SPLAS entered into a bulk annuity purchase whereby an insurer will fund future benefit
payments to the relevant members, commonly referred to as a "buy-in". The liability to pay the members remains with SPLAS
and therefore the pension scheme will continue to include the relevant pension liabilities, but an insurance asset is held
at fair value, which is an equal and opposite amount to the liability. This removes the risk of longevity and investment
movements for this portion of the scheme on a funding basis, and also removes the accounting risk of movements in
underlying assumptions on the liabilities. Of the total remeasurements recognised in the statement of other comprehensive
income in the six months ended 30 June 2017 of £130.8m, £95.0m related to the revaluation of the assets and liabilities as
a result of this transaction. Whilst the impact substantially reduced the asset on an IAS19 valuation basis, on an
actuarial basis the transaction decreased the deficit of the scheme by approximately £12m. As a result of the
transaction, the scheme also exited a longevity swap arrangement early, at a cost borne by the scheme of £7.5m. A summary
of the amounts recognised in the statement of other comprehensive income respect of the Group's total defined benefit
pension scheme position is set out below.
Included within the SOCI Six months ended 30 June 2017 (unaudited)£m Six months ended 30 June 2016 (restated*) (unaudited)£m Year ended 31 December 2016 (audited)£m
Impact of SPLAS pension buy-in (95.0) - -
Cost of exiting the SPLAS longevity swap (7.5) - -
Actual return on scheme assets 1.1 199.5 286.1
Less: interest income on scheme assets (20.7) (24.5) (49.2)
(122.1) 175.0 236.9
Effect of changes in demographic assumptions - - 26.2
Effect of changes in financial assumptions (19.2) (153.3) (282.8)
Effect of experience adjustments 10.5 - 28.7
Remeasurements recognised in the SOCI (130.8) 21.7 9.0
Change in franchise adjustment 0.1 0.5 1.7
Change in members' share (0.1) 0.3 1.2
Actuarial gains on reimbursable rights - 0.8 2.9
Total pension (loss) / gain recognised in the SOCI (130.8) 22.5 11.9
The assets and liabilities of the schemes are:
Scheme assets at fair value (unaudited) Contract Non contract specific Total
specific 30 June 2017£m 30 June 2017£m
30 June 2017£m
Equities 8.7 44.8 53.5
Bonds except LDI 2.8 20.4 23.2
Liability driven investments (LDI) - 761.5 761.5
Gilts - - -
Property 1.3 - 1.3
Cash and other 3.0 3.3 6.3
Annuity policies - 572.2 572.2
Fair value of scheme assets 15.8 1,402.2 1,418.0
Present value of scheme liabilities (22.9) (1,400.8) (1,423.7)
Net amount recognised (7.1) 1.4 (5.7)
Franchise adjustment* 3.9 - 3.9
Members' share of deficit 2.6 - 2.6
Net retirement benefit asset (0.6) 1.4 0.8
Net pension liability (0.6) (16.9) (17.5)
Net pension asset - 18.3 18.3
Deferred tax liabilities - (0.2) (0.2)
Net retirement benefit asset (after tax) (0.6) 1.2 0.6
* The franchise adjustment represents the amount of scheme deficit that is expected to be funded outside the contract
period.
Scheme assets at fair value (unaudited) Contract Non contract specific Total
specific 30 June 2016£m 30 June 2016£m
30 June 2016£m
Equities 3.0 47.6 50.6
Bonds except LDI 0.6 19.8 20.4
Liability driven investments (LDI) - 1,308.7 1,308.7
Gilts - 70.3 70.3
Property 0.6 1.3 1.9
Cash and other 1.0 16.7 17.7
Annuity policies - 23.2 23.2
Fair value of scheme assets 5.2 1,487.6 1,492.8
Present value of scheme liabilities (9.2) (1,347.3) (1,356.5)
Net amount recognised (4.0) 140.3 136.3
Franchise adjustment* 2.4 - 2.4
Members' share of deficit 1.6 - 1.6
Net retirement benefit asset - 140.3 140.3
Net pension liability - (13.6) (13.6)
Net pension asset - 153.9 153.9
Deferred tax liabilities - (25.2) (25.2)
Net retirement benefit asset (after tax) - 115.1 115.1
* The franchise adjustment represents the amount of scheme deficit that is expected to be funded outside the contract
period.
Scheme assets at fair value (audited) Contract Non contract specific Total
specific 31 December 2016£m 31 December 2016£m
31 December 2016£m
Equities 3.3 43.3 46.6
Bonds except LDI 0.7 20.2 20.9
Liability driven investments (LDI) - 1,390.6 1,390.6
Gilts - 72.4 72.4
Property 0.6 - 0.6
Cash and other 1.2 4.2 5.4
Annuity policies - 20.0 20.0
Fair value of scheme assets 5.8 1,550.7 1,556.5
Present value of scheme liabilities (12.0) (1,418.0) (1,430.0)
Net amount recognised (6.2) 132.7 126.5
Franchise adjustment* 3.7 - 3.7
Members' share of deficit 2.5 - 2.5
Net retirement benefit asset - 132.7 132.7
Net pension liability - (17.7) (17.7)
Net pension asset - 150.4 150.4
Deferred tax liabilities - (17.6) (17.6)
Net retirement benefit asset (after tax) - 115.1 115.1
* The franchise adjustment represents the amount of scheme deficit that is expected to be funded outside the contract
period.
Key pension assumptions:
Main assumptions 30 June 2017(unaudited) % 30 June 2016 (unaudited) % 31 December 2016(audited) %
Rate of salary increases 2.7 2.3 2.8
Rate of increase in pensions in payment 2.2 (CPI) and 3.2 (RPI) 1.7 (CPI) and 2.7 (RPI) 2.3 (CPI) and 3.3 (RPI)
Rate of increase in deferred pensions 2.2 (CPI) and 3.2 (RPI) 1.8 (CPI) and 2.8 (RPI) 2.3 (CPI) and 3.3 (RPI)
Inflation assumption 2.2 (CPI) and 3.2 (RPI) 1.8 (CPI) and 2.8 (RPI) 2.3 (CPI) and 3.3 (RPI)
Discount rate 2.6 2.9 2.7
Post retirement mortality 30 June 2017(unaudited)years 30 June 2016(unaudited) years 31 December 2016(audited)years
Current pensioners at 65 - male 22.5 22.6 22.5
Current pensioners at 65 - female 25.1 25.2 25.0
Future pensioners at 65 - male 24.3 24.5 24.2
Future pensioners at 65 - female 26.9 27.1 26.9
The defined benefit obligation is calculated on the actuarial assumptions agreed as at that date. The sensitivities set out
below are calculated by changing each assumption in turn following the methodology above with all other things held
constant. The change in the defined benefit obligation from updating the single assumption represents the impact of that
assumption on the calculation of the defined benefit obligation.
Pension assumption sensitivities 30 June 2017(unaudited)£m 30 June 2016(unaudited)£m 31 December 2016(audited)£m
Discount rate - 0.5% increase (113.7) (110.7) (116.5)
Discount rate - 0.5% decrease 128.5 125.2 132.5
Inflation - 0.5% increase 89.6 110.0 106.1
Inflation - 0.5% decrease (86.5) (99.6) (87.6)
Rate of salary increase - 0.5% increase 7.7 10.8 7.8
Rate of salary increase - 0.5% decrease (7.4) (10.2) (7.4)
Mortality - one year age rating 42.7 32.8 44.2
16. Notes to the consolidated cash flow statement
30 June 2017 Before exceptional items £m 30 June 2017 Exceptional items £m 30 June 2017 Total £m 30 June 2016 Before exceptional items(restated) £m 30 June 2016 Exceptional items £m 30 June 2016 Total(restated) £m
Operating profit / (loss) for the period - continuing operations* 33.1 (11.4) 21.7 72.5 (7.7) 64.8
Operating loss for the period - discontinued operations - - - (3.2) (4.2) (7.4)
Operating profit / (loss) for the period* 33.1 (11.4) 21.7 69.3 (11.9) 57.4
Adjustments for:
Share of profits in joint ventures and associates (14.6) - (14.6) (17.7) - (17.7)
Share based payment expense 6.9 - 6.9 4.9 - 4.9
Exceptional impairment of property, plant and equipment - - - - (0.3) (0.3)
Impairment of property, plant and equipment - - - 0.3 - 0.3
Exceptional impairment of intangible assets - 2.8 2.8 - 0.3 0.3
Depreciation of property, plant and equipment 13.1 - 13.1 12.2 - 12.2
Amortisation of intangible assets 13.4 - 13.4 11.8 - 11.8
Exceptional profit on disposal of subsidiaries and operations - (0.8) (0.8) - 1.2 1.2
Loss on disposal of property, plant and equipment 0.1 - 0.1 0.4 - 0.4
Loss on disposal of intangible assets - - - - - -
Non cash R&D expenditure offset against intangible assets (0.4) - (0.4) 0.1 - 0.1
Decrease in provisions (42.1) (0.6) (42.7) (77.8) (14.5) (92.3)
Other non-cash movements* 0.2 - 0.2 0.1 - 0.1
Total non-cash items* (23.4) 1.4 (22.0) (65.7) (13.3) (79.0)
Operating cash inflow / (outflow) before movements in working capital 9.7 (10.0) (0.3) 3.6 (25.2) (21.6)
Decrease in inventories 5.6 - 5.6 0.3 - 0.3
(Increase) / decrease in receivables (24.4) (1.4) (25.8) 4.5 - 4.5
Increase / (decrease) in payables 3.7 (8.3) (4.6) (19.0) (6.9) (25.9)
Movements in working capital (15.1) (9.7) (24.8) (14.2) (6.9) (21.1)
Cash generated by operations* (5.4) (19.7) (25.1) (10.6) (32.1) (42.7)
Tax paid (7.9) - (7.9) (6.6) - (6.6)
Non cash R&D expenditure - - - (0.1) - (0.1)
Net cash outflow from operating activities* (13.3) (19.7) (33.0) (17.3) (32.1) (49.4)
* Operating profit and other non-cash items have been restated following the change in accounting policy to include
foreign exchange movements on investment and financing arrangements in net finance costs and to reflect the associated cash
flows and non-cash movements in a consistent manner.
31 December 2016 Before exceptional items £m 31 December 2016 Exceptional items £m 31 December 2016 Total £m
Operating profit / (loss) for the year - continuing operations 98.5 (56.3) 42.2
Operating loss for the year - discontinued operations (3.3) (14.2) (17.5)
Operating profit / (loss) for the year 95.2 (70.5) 24.7
Adjustments for:
Share of profits in joint ventures and associates (33.4) - (33.4)
Share based payment expense 9.7 - 9.7
Exceptional impairment of goodwill - 17.8 17.8
Exceptional impairment of property, plant and equipment - (0.8) (0.8)
Impairment of property, plant and equipment 0.7 - 0.7
Exceptional impairment of intangible assets - 0.3 0.3
Impairment of intangible assets 0.7 - 0.7
Depreciation of property, plant and equipment 24.8 - 24.8
Amortisation of intangible assets 26.2 - 26.2
Exceptional profit on disposal of subsidiaries and operations - (0.1) (0.1)
Loss on disposal of property, plant and equipment 0.4 - 0.4
Loss on disposal of intangible assets 0.8 - 0.8
Non cash R&D expenditure offset against intangible assets 0.2 - 0.2
Decrease in provisions (118.4) (1.1) (119.5)
Other non-cash movements 0.4 - 0.4
Total non-cash items (54.5) 16.1 (38.4)
Operating cash inflow / (outflow) before movements in working capital 7.3 (54.4) (47.1)
Decrease in inventories 1.3 - 1.3
Decrease in receivables 59.0 13.9 72.9
(Decrease) / increase in payables (84.0) 0.6 (83.4)
Movements in working capital (23.7) 14.5 (9.2)
Cash generated by operations (16.4) (39.9) (56.3)
Tax paid (5.6) - (5.6)
Non cash R&D expenditure (0.4) - (0.4)
Net cash outflow from operating activities (22.4) (39.9) (62.3)
17. Related party transactions
Transactions between the Company and its wholly owned subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions between the Group and its joint venture undertakings and
associates are disclosed below. There have been no related party transactions other than as disclosed.
Group companies entered into the following transactions with joint ventures and associates:
Transactions for the six months ended 30 June 2017
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