REG - Connect Group Plc - Preliminary Results for the y/e 31 August 2016 <Origin Href="QuoteRef">CNCTC.L</Origin> - Part 3
18/10/2016 07:06
- Part 3: For the preceding part double click ID:nRSR7687Mb
trustees and investment manager total £4.1m per annum through to
March 2019. The Group recognises the present value of these agreed contributions as a pension liability of £10.3m (2015:
£13.8m).
Other defined benefit schemes
For the Consortium CARE and Platinum schemes, the Group contributed £0.8m in 2016. The funding valuation of the Consortium
CARE scheme as at 31 December 2013 was a deficit of £1.5m. The Platinum scheme's 31 December 2013 funding valuation showed
no deficit. The triennial actuarial valuation of the Tuffnells Parcels Express scheme as at 1 April 2013 was an agreed
liability of £2.5m. Guaranteed Minimum Pension ("GMP") equalisation is expected to lead to an increase in scheme
liabilities at some future date on the Consortium Care and the Tuffnells Parcels Express scheme.
The weighted average duration of the schemes is 17 years for the Pension Trust, 20 years for the Consortium Care scheme, 29
years for the Platinum scheme and 21 years for the Tuffnells Parcels Express scheme.
The principal long-term assumptions used to calculate scheme liabilities on all Group schemes are:
% p.a. 2016 2015
Discount rate 2.0 3.8
Inflation assumptions - CPI 2.0 2.2
Inflation assumptions - RPI 3.0 3.2
Demographic assumptions for WH Smith pension trust:
Life expectancy at age 65 Male Female Male Female
Member currently aged 65 21.5 23.5 21.7 23.7
Member currently aged 45 22.8 25.0 23.0 25.2
A summary of the movements in the net balance sheet asset/(liability) and amounts recognised in the Group Income Statement
and Other Comprehensive Income are as follows:
£m Fair value of scheme assets Defined benefit obligation Impact of IFRIC 14 on defined benefit pension schemes Total
At 31 August 2014 522.7 (450.7) (93.0) (21.0)
Current service cost (0.5) - - (0.5)
Net interest cost 20.0 (17.2) (3.6) (0.8)
Total amount recognised in income statement 19.5 (17.2) (3.6) (1.3)
Actual less expected return on scheme assets 28.7 - - 28.7
Actuarial gains arising from experience - 25.1 - 25.1
Actuarial loss arising from changes in financial assumptions - (2.2) - (2.2)
Actuarial gains arising from changes in demographic assumptions - 1.9 - 1.9
Change in surplus not recognised - - (52.8) (52.8)
Amount recognised in other comprehensive income 28.7 24.8 (52.8) 0.7
Employer contributions 5.3 0.1 - 5.4
Employee contributions 0.1 (0.1) - -
Benefit payments (23.6) 23.6 - -
Amounts included in cash flow statement (18.2) 23.6 - 5.4
Acquisition of subsidiary 10.6 (12.5) - (1.9)
At 31 August 2015 563.3 (432.0) (149.4) (18.1)
Current service cost - (0.3) - (0.3)
Net interest cost 20.9 (15.8) (5.7) (0.6)
Administration expenses (0.1) - - (0.1)
Past service credits - 1.1 1.1
Total amount recognised in income statement 20.8 (15.0) (5.7) 0.1
Actual less expected return on scheme assets 115.4 - - 115.4
Actuarial gains arising from experience - 7.5 - 7.5
Actuarial loss arising from changes in financial assumptions - (128.3) - (128.3)
Actuarial gains arising from changes in demographic assumptions - 3.4 - 3.4
Change in surplus not recognised - - (6.5) (6.5)
Amount recognised in other comprehensive income 115.4 (117.4) (6.5) (8.5)
Employer contributions 5.3 - - 5.3
Employee contributions 0.1 (0.1) - -
Benefit payments (33.0) 33.0 - -
Amounts included in cash flow statement (27.6) 32.9 - 5.3
At 31 August 2016 671.9 (531.5) (161.6) (21.2)
Included within Non-current assets 0.3
Included within Current liabilities (4.1)
Included within Non-current liabilities (17.4)
The charge for the current service cost is included within administrative expenses. 'Net interest costs' are calculated by
applying a discount rate to the net defined benefit asset or liability scheme assets and are included within finance income
and expense.
An analysis of the assets at the balance sheet date is detailed below:
£m 2016 2015
Swap financing portfolio Unquoted 388.0 431.9
Interest rate and inflation swaps Unquoted 226.7 79.5
Loan fund Unquoted 26.7 25.4
Equities (CARE,Tuffnells) Unquoted 24.1 21.0
Bonds (CARE,Platinum) Unquoted 6.1 5.0
Cash (CARE,Platinum,Tuffnells) 0.3 0.5
671.9 563.3
The assets held in the swap financing portfolio provide a swap-based hedge against the change in value of a proportion of
the Trust's liabilities for changes in long-term interest rates and inflation expectations.
The actual return on scheme assets during 2016 was a gain of £136.2m (2015: a gain of £48.7m).
The value of the assets held by the trust in Connect Group PLC issued financial instruments is £nil (2015: £nil).
Sensitivity of results to changes in the main assumptions:
Assumption Change in assumption Impact on IAS 19 liabilities
Discount rate +/- 0.5% -£42.5m/+£45.9m
Rate of inflation +/- 0.5% +£42.5m/-£39.4m
Life expectancy +/- 1 year +£18.9m/-£18.9m
The sensitivity analysis for each significant actuarial assumption has been determined based on reasonably possible changes
to the assumptions at the end of the reporting period. It is based on a change in the key assumption while holding all
other assumptions constant. The effect of a change in more than one assumption will be different to the sum of the
individual changes. When calculating the sensitivities, the same methodology used to calculate the liability recognised in
the balance sheet has been applied. The methodology and types of assumptions used in preparing the sensitivity analysis is
consistent with the previous period.
The history of experience adjustments is as follows:
£m 2016 2015 2014 2013 2012
Present value of defined benefit obligation (531.5) (432.0) (450.7) (419.2) (395.3)
Fair value of assets 671.9 563.3 522.7 469.6 433.1
Impact of IFRIC 14 on defined benefit pension schemes (161.6) (149.4) (93.0) (73.5) (73.8)
Net deficit in the schemes (21.2) (18.1) (21.0) (23.1) (36.0)
Experience adjustments on scheme liabilities (117.4) 25.1 0.8 (1.4) (1.0)
Experience adjustments on scheme assets 115.4 28.7 44.6 27.9 34.0
The cumulative amount of actuarial gains and losses recognised in the statement of comprehensive income since the adoption
of IFRS is a loss of £29.2m (2015: a loss of £20.7m).
The group's defined benefit pension plans have a number of areas of risk, the most significant of which and they ways in
which the Group has sought to manage them are set out below:
Risk Description
Changes in bond yields Falling bond yields tend to increase the funding and accounting liabilities. The assets held in the swap financing portfolio of the WH Smith PensionTrust provide a swap-based hedge against the change in value of a proportion of the Trust's liabilities for
changes in long-term interest rates and inflation expectations, reducing the exposure to changes in bond yields. The Care, Platinum and Tuffnells schemes both hold investments in corporate and government bonds which offer a degree of matching, i.e. the
movement in assets arising from changes in bond yields partially matches the movement in the funding or accounting liabilities. In this way, the exposure to movements in bond yields is reduced.
Inflation risk The plans' benefit obligations are linked to inflation and higher inflation will lead to higher liabilities (although in most cases caps on the level of inflationary increases are in place to protect the plan against extreme inflation). The assets held in
the swap financing portfolio of the WH Smith Pension Trust provide a swap-based hedge against the change in value of a proportion of the Trust's liabilities for changes in long-term interest rates and inflation expectations, reducing the exposure to
inflation. For the Care, Platinum and Tuffnells schemes the majority of the assets are either unaffected by inflation (fixed interest bonds) or loosely correlated with inflation (equities), meaning that an increase in inflation will also increase the
deficit.
Life expectancy The majority of the plans' obligations are to provide a pension for the life of the member, so increases in life expectancy will result in an increase in the plans' liabilities.
Defined contribution schemes
The Group operates a number of defined contribution schemes. For the year ended 31 August 2016, company contributions
totalled £3.0m (2015: £3.0m) which is included in the Income Statement.
A defined contribution plan is a pension plan under which the group pays contributions to an independently administered
fund - such contributions are based upon a fixed percentage of employees' pay. The group has no legal or constructive
obligations to pay further contributions to the fund once the contributions have been paid. Members' benefits are
determined by the amount of contributions paid by the Company and the member, together with investment returns earned on
the contributions arising from the performance of each individual's chosen investments and the type of pension the member
chooses to buy at retirement. As a result, actuarial risk (that benefits will be lower than expected) and investment risk
(that assets invested in will not perform in line with expectations) fall on the employee.
6. Finance costs
£m Note 2016 2015
Interest on bank overdrafts and loans (5.5) (5.8)
Net interest expense on defined benefit obligation 5 (0.6) (0.8)
Interest payable on finance leases (0.7) (0.4)
Net change in fair value of derivative assets - (0.2)
Unwinding of discount on provisions - trading 13 (0.2) (0.1)
Finance costs (7.0) (7.3)
7. Income tax expense
£m 2016 2015
Adjusted Exceptional items Total Adjusted Exceptional items Total
Current tax 13.1 (1.4) 11.7 12.4 (2.3) 10.1
Adjustment in respect of prior year UK corporation tax (0.8) (0.1) (0.9) (1.1) (0.9) (2.0)
Total current tax charge 12.3 (1.5) 10.8 11.3 (3.2) 8.1
Deferred tax - current year (0.3) (1.5) (1.8) (0.2) (0.3) (0.5)
Deferred tax - prior year (0.1) (0.1) (0.2) - - -
Deferred tax - impact of rate change 0.5 (0.8) (0.3) - - -
Total tax on profit 12.4 (3.9) 8.5 11.1 (3.5) 7.6
Effective tax rate 20.4% 20.3% 19.7% 26.3%
The effective adjusted income tax rate for the year was 20.4% (2015: 19.7%). After adjusting for the impact of Exceptional
items of £3.9m (2015: £3.5m), the effective statutory income tax rate was 20.3% (2015: 26.3%).
The tax rates used in the 2016 and 2015 reconciliations of the tax charge are the main rates of UK corporation tax, those
being 20.0% (2015: 20.6%).
Reconciliation of the tax charge
£m 2016 2015
Profit before tax 41.9 29.0
Tax on profit at the standard rate of UK corporation tax 20.0% (2015: 20.6%) 8.4 5.9
Permanent differences 1.4 3.5
Adjustment in respect of prior year UK corporation tax (1.1) (2.0)
Impact of change in UK tax rate (0.3) -
Impact of overseas tax rates 0.1 0.2
Total tax charge 8.5 7.6
Tax charges to other comprehensive income and directly in equity
£m 2016 2015
Current tax relating to the defined benefit pension scheme (0.8) (0.8)
Current tax relating to share based payments (0.1) (0.6)
Deferred tax relating to impact of change in tax rate 0.4 -
Deferred tax relating to derivative financial instruments (0.3) -
Deferred tax relating to share based payments 0.3 0.6
Deferred tax relating to retirement benefit obligations (0.9) 0.9
Tax (credit)/ charge to other comprehensive income and directly in equity (1.4) 0.1
8. Dividends
Amounts paid & proposed as distributions to equity shareholders in the years:
Paid & proposed dividends for the year 2016 2015 2016 2015
Per share Per share £m £m
Interim dividend - paid 3.0p 2.9p 7.3 7.0
Final dividend - proposed 6.5p 6.3p 15.9 15.4
9.5p 9.2p 23.2 22.4
Recognised dividends for the year
Final dividend - prior year 6.3p 6.0p 15.4 14.4
Interim dividend - current year 3.0p 2.9p 7.3 7.0
9.3p 8.9p 22.7 21.4
The proposed final dividend for the year ended 31 August 2016 of 6.5p is subject to approval by shareholders at the Annual
General Meeting on 26 January 2017 and in line with IAS10 - 'Events after the reporting period', this dividend has not been
included as a liability in these accounts. The proposed dividend, if approved, will be paid on 10 February 2017 to
shareholders on the register at close of business on 13 January 2017.
9. Earnings per share
2016 2015
£m Pence £m Pence
Earnings Weighted average number of shares million per share Earnings Weighted average number of shares million per share
Weighted average number of shares in issue 245.9 233.9
Shares held by the ESOP (weighted) (2.5) (3.0)
Basic earnings per share (EPS)
Adjusted earnings attributable to ordinary shareholders 48.3 243.4 19.8p 45.5 230.9 19.7p
Exceptional and other items (14.9) (24.0)
Earnings attributable to ordinary shareholders 33.4 243.4 13.7p 21.5 230.9 9.3p
Diluted earnings per share (EPS)
Effect of dilutive share options 3.8 7.6
Diluted adjusted EPS 48.3 247.2 19.5p 45.5 238.5 19.0p
Diluted EPS 34.9 247.2 13.5p 21.5 238.5 9.0p
Dilutive shares increase the basic number of shares at 31 August 2016 by 3.8m to 247.2m (31 August 2015: 238.5m).
The calculation of diluted EPS reflects the potential dilutive effect of employee incentive schemes of 2.3m dilutive shares
(31 August 2015: 4.1m) and a weighted 1.5m shares (31 August 2015: 3.5m) being the time apportioned share capital relating
to the deferred consideration for the acquisition of The Big Green Parcel Holding Company Limited.
10. Intangible assets
Acquired Intangibles Internally generated development costs Computer software costs
£m Goodwill Customer relationships Trade name Software Total
Cost:
At 1 September 2015 96.3 48.8 33.5 1.5 9.1 13.8 203.0
Additions - - - - 2.1 2.6 4.7
Transfers between asset classes - - - - - - -
Disposals - - - - - (0.2) (0.2)
At 31 August 2016 96.3 48.8 33.5 1.5 11.2 16.2 207.5
Accumulated amortisation:
At 1 September 2015 - 13.6 4.0 0.8 5.4 4.4 28.2
Amortisation charge - 6.4 3.5 0.3 1.8 2.7 14.7
Transfers between asset classes - - - - - - -
Disposal - - - - - (0.2) (0.2)
At 31 August 2016 - 20.0 7.5 1.1 7.2 6.9 42.7
Net book value at 31 August 2016 96.3 28.8 26.0 0.4 4.0 9.3 164.8
Cost:
At 1 September 2014 44.2 22.0 3.0 0.7 6.0 6.8 82.7
Additions - - - - 1.6 3.6 5.2
Acquisition of subsidiary 52.1 26.8 30.5 0.8 - - 110.2
Transfers between asset classes - - - - 2.3 5.1 7.4
Disposals - - - - (0.8) (1.7) (2.5)
At 31 August 2015 96.3 48.8 33.5 1.5 9.1 13.8 203.0
Accumulated amortisation:
At 1 September 2014 - 8.5 1.4 0.6 3.9 2.6 17.0
Amortisation charge - 5.1 2.6 0.2 1.6 1.9 11.4
Transfers between asset classes - - - - 0.7 1.6 2.3
Disposal - - - - (0.8) (1.7) (2.5)
At 31 August 2015 - 13.6 4.0 0.8 5.4 4.4 28.2
Net book value at 31 August 2015 96.3 35.2 29.5 0.7 3.7 9.4 174.8
0.7
3.7
9.4
174.8
The Group leases software under various finance lease arrangements. The net book value of finance leases contained within
the software balance above is £0.4m (2015: £0.7m).
Goodwill and Intangibles by CGU
Goodwill of £4.1m and acquired intangibles totalling £5.1m arose from the acquisition of the business and assets of
Bertrams on 20 March 2009 have been allocated to the Connect Books combined cash generating unit (CGU).
The acquisition of Dawson Holdings PLC on 23 August 2011, resulted in goodwill of £18.1m and acquired intangibles of £7.8m.
These were allocated to the two remaining individual CGU's identified at the time of the acquisition; Connect Books and
Connect Media.
On the acquisition of Hedgelane Limited on 23 April 2012, the Group recognised goodwill of £20.9m and acquired intangibles
of £10.4m which were attributed to the Education and Care CGU.
The acquisition of 100% of the issued share capital of Houtschild Internationale Boekhandel B.V. on 13 June 2012 produced a
further £0.3m of goodwill which were attributed to Connect Books CGU.
The acquisition of Erasmus on 17 January 2013 generated £0.8m of goodwill and £0.3m of acquired intangible assets which
were attributed to Connect Books CGU.
The acquisition of certain Blackwell contracts on 20 May 2013 generated £2.0m of acquired intangibles, attributed to
Connect Books CGU.
The acquisition of trade and assets of Martin Lavell acquired on 1 September 2013 generated acquired intangibles of £0.3m,
attributable to News CGU.
The acquisition of Tuffnells on 19 December 2014 generated £52.1m of goodwill and £58.1m of intangible assets which were
attributed to Connect Parcel Freight CGU.
Goodwill is not amortised, but tested annually for impairment or more frequently if there are indications that goodwill
might be impaired with the recoverable amount being determined from value in use calculations. The recoverable amounts of
the combined cash generating units are determined from the value in use calculations. The Group prepares cash flow
forecasts derived from the most recent budgets and forecasts for the following 3 years as approved by the Board and
extrapolates these cash flows on an estimated growth rate of 1% into perpetuity. The rate used to discount the forecast
cash flows range from 12.0% to 14.2%, being the Group's risk adjusted pre-tax WACC, specific for each cash generating unit.
Pre-tax discount rates are derived from the Group's post-tax WACC of 8% risk adjusted by 2% to 3%. The calculation of value
in use is sensitive to the discount rate and growth rates used.
The Group has conducted sensitivity analysis on the impairment test of each CGU. The sensitised value in use exceeds the
carrying value for all the CGUs, except the Books CGU. The Books CGU has headroom on its carrying value of £2.6m prior to
any sensitivities. An increase in the risk adjusted post tax WACC from 11% to 12% for the Books CGU or a reduction in
operating profits by 5% would cause the carrying value to equal the recoverable amount.
Goodwill Acquired Intangibles Total
£m 2016 2015 On acquisition 2016 2015 On acquisition 2016 2015 On acquisition
Connect Books 17.6 17.6 17.6 2.9 4.2 12.7 20.5 21.8 30.3
Connect Media 5.7 5.7 5.7 0.8 1.2 2.6 6.5 6.9 8.3
Connect News - - - 0.1 0.2 0.3 0.1 0.2 0.3
Connect Education and Care 20.9 20.9 20.9 4.7 6.2 10.4 25.6 27.1 31.3
Connect Parcel Freight 52.1 52.1 52.1 46.7 53.6 58.1 98.8 105.7 110.2
96.3 96.3 96.3 55.2 65.4 84.1 151.5 161.7 180.4
The individual material intangible assets relate to the customer relationships and brand acquired on the acquisition of
Tuffnells. The carrying value of these assets at 31 August 2015 is £20.9m and £25.4m respectively with a remaining
amortisation period of 6 and 8.5 years respectively.
11. Cash and borrowings
Cash and borrowings by currency (Sterling equivalent) are as follows:
£m Sterling Euro US Dollar Other Total 2016 2015
Cash and cash equivalents 3.0 4.3 1.3 0.5 9.1 10.9
Term loan - disclosed within current liabilities (20.0) - - - (20.0) -
Term loan - disclosed within non-current liabilities (79.1) - - - (79.1) (98.4)
Revolving credit facility (41.0) - - - (41.0) (56.5)
Total borrowings (140.1) - - - (140.1) (154.9)
Net borrowings (137.1) 4.3 1.3 0.5 (131.0) (144.0)
Total borrowings
Amount due for settlement within 12 months (61.0) - - - (61.0) (56.5)
Amount due for settlement after 12 months (79.1) - - - (79.1) (98.4)
(140.1) - - - (140.1) (154.9)
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less. The carrying amount of these assets approximates their fair value.
At 31 August 2016, the Group had £109.0m (2015: £95.1m) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met. Interest payable under the current facility is calculated as the cost of one month LIBOR
plus an interest margin of between 1.35% and 2.35% dependent on the net debt/ adjusted EBITDA covenant ratio.
12. Obligations under finance leases
£m 2016 2015
Minimum lease payments Present value of minimum lease payments Minimum lease payments Present value of minimum lease payments
Amount payable under finance leases:
Within one year 3.8 3.0 3.3 2.9
In the second to fifth years inclusive 8.8 7.7 7.0 6.5
Total 12.6 10.7 10.3 9.4
Less: future finance charges (1.9) - (0.9) -
Present value of lease obligations 10.7 10.7 9.4 9.4
Less: amount due for settlement within 12 months (shown under current liabilities) (3.0) (2.9)
Amount due for settlement after 12 months 7.7 6.5
Group policy is to acquire certain items of its fixtures, equipment and software under finance leases. The average lease
term is 4 years. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no
arrangements have been entered into for contingent rental payments.
The fair value of the Group's lease obligations approximates to their carrying amount.
13. Provisions
£m Reorganisation provisions Insurance and legal provision Deferred contingent consideration Property provisions Total
Gross provision:
At 1 September 2015 1.0 2.8 5.2 7.9 16.9
Additions 1.3 1.9 1.9 0.8 5.9
Released (0.1) (0.2) - (1.3) (1.6)
Utilised in year (1.6) (0.2) (5.1) (0.6) (7.5)
At 31 August 2016 0.6 4.3 2.0 6.8 13.7
Discount:
At 1 September 2015 - - - (0.5) (0.5)
Unwinding of discount utilisation - - - 0.2 0.2
At 31 August 2016 - - - (0.3) (0.3)
Net book value at 31 August 2016 0.6 4.3 2.0 6.5 13.4
Gross provision:
At 1 September 2014 0.7 1.4 - 3.6 5.7
Additions 2.3 0.1 5.2 1.0 8.6
Acquisition of business - 1.3 - 4.1 5.4
Released (0.2) - - (0.2) (0.4)
Utilised in year (1.8) - - (0.6) (2.4)
At 31 August 2015 1.0 2.8 5.2 7.9 16.9
Discount:
At 1 September 2014 - - - (0.4) (0.4)
Acquisition of business - - - (0.1) (0.1)
At 31 August 2015 - - - (0.5) (0.5)
Net book value at 31 August 2015 1.0 2.8 5.2 7.4 16.4
£m 2016 2015
Included within current liabilities 8.5 10.4
Included within non-current liabilities 4.9 6.0
Total 13.4 16.4
Reorganisation provisions include amounts for programmes which consist primarily redundancy costs, that have been announced
prior to the year end and are all expected to be utilised during the following financial year.
Insurance & legal provisions represent the expected future costs of employer's liability, public liability, motor accident
claims and legal claims. In January 2016, an employee in our Parcel Freight division was fatally injured in an accident at
our Brierley Hill depot. Since the incident, we have been assisting the Health & Safety Executive ("HSE") in its
investigation and gave evidence at a Coroner's Inquest held in September 2016. The HSE has not yet completed its
investigation and our Parcel Freight division has, to date, not been formally charged.
In the event that the Parcel Freight division is charged and subsequently found guilty of a Health and Safety offence, the
Board expects that a fine and associated legal costs will be incurred, for which we are not insured. In the opinion of the
Board and its advisers, there is significant uncertainty over the potential outcome and timing of this process. Having
considered these uncertainties and having regard for the circumstances surrounding this incident, the Board considers it
appropriate to make a provision of £1.5m for any potential fine and associated legal costs.
The Board will keep this provision under review as the HSE investigation proceeds and the current uncertainties are
resolved. It is currently expected that any charges brought against our Parcel Freight division are likely to conclude
within 24 months of the balance sheet date.
This provision has been charged as an Exceptional item (see Note 4) and is referred to in the Health & Safety section of
the Operating Review.
The property provision represents the estimated future cost of the Group's onerous and reversionary leases in non-trading
properties based on known and estimated rental sub-leases and for dilapidations on certain properties. The provision has
been discounted at a risk adjusted rate and this discount will be unwound over the life of the leases. The provision is
expected to be utilised over the period to 2026, when all of the leases provisions will have expired.
Deferred contingent consideration relates to amounts provided in relation to the acquisition of The Big Green Parcel
Holding Company Limited (Tuffnells) on 19 December 2014 and Wordery on 27 August 2015, the cost being contingent upon
achievement of profit targets and the future employment of the former owners of the businesses.
14. Operating lease commitments
The group as lessee:
Minimum lease payments under non-cancellable operating leases are as follows:
2016 2015
£m Land & buildings Equipment & vehicles Total Land & buildings Equipment & vehicles Total
Within one year 10.7 14.1 24.8 10.2 12.4 22.6
In the second to fifth years inclusive 29.8 23.6 53.4 30.3 19.9 50.2
In more than five years 20.7 - 20.7 23.3 - 23.3
61.2 37.7 98.9 63.8 32.3 96.1
The Group leases various distribution properties and plant and equipment under non-cancellable operating lease agreements.
The leases have varying terms, escalation clauses and renewal rights.
The group as lessor:
At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:
£m 2016 2015
Within one year 0.3 0.1
In the second to fifth years inclusive 0.2 0.1
0.5 0.2
Property rental income earned during the year was £0.3m (2015: £0.1m).
15. Net cash inflow from operating activities
£m 2016 2015
Operating profit 48.9 36.3
Losses on disposal of assets - 0.2
Share of profits of jointly controlled entities (0.3) (0.3)
Adjustment for pension funding (5.3) (5.4)
Depreciation of property, plant and equipment 8.9 7.3
Amortisation and impairment of intangible assets 14.7 11.4
Share based payments 1.6 8.0
(Increase)/ decrease in inventories (0.3) 3.8
Decrease/(Increase) in receivables 9.7 (7.5)
(Decrease) in payables (7.2) (4.9)
Non cash pension costs (0.6) 0.5
Income tax paid (8.5) (8.7)
(Decrease)/ increase in provisions (3.4) 5.8
Net cash inflow from operating activities 58.2 46.5
Net cash inflow from operating activities is stated after the following Exceptional cash items:
Payment of deferred contingent consideration (5.1) -
Re-organisation and restructuring costs (5.7) (4.3)
Acquisition expenses - (3.9)
Total Exceptional cash items (10.8) (8.2)
16. Share Capital
(a) Share capital
£m 2016 2015
Issued and fully paid:
At 1 September 12.2 9.5
Shares issued during the year 0.1 2.7
246.7m ordinary shares of 5p each (2015:244.1m) 12.3 12.2
(b) Movement in share capital
Number (m) Ordinary shares of 5p each
31 August 2015 244.1
Shares issued during the year 2.6
At 31 August 2016 246.7
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at the general meetings of the Company. The Company has one class of ordinary shares, which carry no right to
fixed income.
During the year to 31 August 2016, 2,606,751 ordinary 5p shares were issued. 2,164,181 were issued in relation to the
satisfaction of deferred consideration to the former owners of The Big Green Parcel Holding Company Limited (Tuffnells).
The remainder was issued to satisfy share scheme exercises.
During the year to 31 August 2015, 54,855,669 ordinary 5p shares were issued for a consideration of £55,765,415 resulting
in a share premium of £49,889,432 after accounting for equity issue related costs of £3.1m. 54,137,236 shares were issued
as a result of the rights issue in December 2014.
(c) Share premium
£m 2016 2015
Balance at 1 September 55.2 5.3
Premium arising on issue of equity shares 4.0 49.9
Balance at 31 August 59.2 55.2
17. Reserves
(a) Demerger reserve
£m 2016 2015
At 1 September (280.1) (280.1)
At 31 August (280.1) (280.1)
This relates to reserves created following the capital re-organisation undertaken as part of the demerger of WH Smith PLC
in 2006. The balance represented the difference between the share capital and reserves of the Group restated on a pro-forma
basis as at 31 August 2004 and the previously reported share capital.
(b) Own shares reserve
£m 2016 2015
Balance at 1 September (4.1) (5.2)
Acquired in the period (1.5) (4.2)
Disposed of on exercise of options 2.1 5.3
Balance at 31 August (3.5) (4.1)
The reserve represents the cost of shares in Connect Group PLC purchased in the market and held by the Smiths News Employee
Benefit Trust to satisfy awards and options granted under the Group's Executive Share Schemes. The number of ordinary
shares held by the Trust at 31 August 2016 was 2,313,644 (2015: 2,807,124).
(c) Hedging & translation reserve
£m 2016 2015
Balance at 1 September (0.5) (0.3)
Net movement in cash flow hedges (net of tax) (1.2) (0.6)
Amounts previously recognised in the consolidated statement of comprehensive income - 0.5
Exchange differences on translating net assets of foreign operations 0.6 (0.1)
Balance at 31 August (1.1) (0.5)
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash
flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in the profit or loss only when
the hedged transaction ceases to be effective.
18. Related party transactions
Transactions between businesses within this Group, which are related parties, have been eliminated on consolidation and are
not disclosed in this note.
Transactions with the Group's pension schemes are disclosed in Note 5.
Trading transactions
Sales to related parties Amounts owed by related parties
£m 2016 2015 2016 2015
Jointly controlled entities 2.9 3.2 0.8 0.6
Sales to related parties are for management fees, payment is due on the last day of the month following the date of
invoice.
Non-trading transactions
Loans to related parties
£m 2016 2015
Jointly controlled entities 0.3 0.3
The loans to related parties have no set date for repayment and accrue interest at LIBOR + 2%.
Aggregate remuneration of key management personnel
The remuneration of the directors and the executive management team, who are the key management personnel of the Group, is
set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures.'
£m 2016 2015
Short-term employee benefits 4.5 4.1
Share based payments 0.8 0.8
5.3 4.9
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Smiths News
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