REG - Connect Group Plc - Unaudited Interim Results for 6mths ended 29/2/16 <Origin Href="QuoteRef">CNCTC.L</Origin> - Part 3
19/04/2016 07:06
- Part 3: For the preceding part double click ID:nRSS5683Vb
- - -
Adjustment in respect of prior year UK corporation tax (0.1) (0.7) (2.0)
Impact of overseas tax rates 0.1 0.1 0.2
Impact of change in deferred tax rate (0.4) - -
Total tax charge 3.9 3.7 7.6
Tax charge /(credit) to other comprehensive income
£m 6 months to Feb 2016 6 months to Feb 2015 12 months to Aug 2015
Current tax relating to the defined benefit pension scheme (0.4) (0.4) (0.8)
Current tax relating to share based payments - (0.1) (0.6)
Deferred tax relating to share based payments - 0.1 0.6
Deferred tax relating to share based payments 0.1 - -
Deferred tax related to retirement benefit obligations 0.4 0.3 0.9
Tax charge/(credit) to other comprehensive income 0.1 (0.1) 0.1
7 Dividends
Proposed dividends for the period 6 months to Feb 2016 6 months to Feb 2015 12 months to Aug 2015 6 months to Feb 2016 6 months to Feb 2015 12 months to Aug 2015
Per share Per share Per share £m £m £m
Final dividend - - 6.3p - - 15.4
Interim dividend 3.0p 2.9p 2.9p 7.3 7.0 7.0
3.0p 2.9p 9.2p 7.3 7.0 22.4
Recognised dividends for the period
Per share Per share Per share £m £m £m
Final dividend - prior year 6.3p 5.9p 6.0p 15.4 14.4 14.4
Interim dividend - current year - - 2.9p - - 7.0
6.3p 5.9p 8.9p 15.4 14.4 21.4
During the six month period to 29 February 2016, the final dividend for the
year ended 31 August 2015 of 6.3p (Feb 2015: 6.0p) per ordinary share was paid
to shareholders. In addition the directors are recommending an interim
dividend in respect of the period ended 29 February 2016 of 3.0p per ordinary
share (Feb 2015: 2.9p). This has not been included as a liability in these
condensed financial statements. This will be paid on 8 July 2016 to
shareholders on the Register at the close of business on 10 June 2016.
8 Earnings Per Share
6 months to Feb 2016 6 months to Feb 2015 12 months to Aug 2015
Earnings (£m) Weighted average number of shares million Pence per share Earnings (£m) Weighted average number of shares million Pence per share Earnings (£m) Weighted average number of shares million Pence per share
Weighted average number of shares in issue 245.2 223.8 233.9
Shares held by the ESOP (weighted) (2.6) (2.8) (3.0)
Basic earnings per share (EPS)
Adjusted earnings attributable to ordinary shareholders 21.5 242.6 8.9p 19.0 221.0 8.6p 45.5 230.9 19.7p
Non-recurring items (6.2) (8.8) (24.0)
Earnings attributable to ordinary shareholders 15.3 242.6 6.3p 10.2 221.0 4.6p 21.5 230.9 9.3p
Diluted earnings per share (EPS)
Effect of dilutive securities 6.5 5.4 7.6
Diluted adjusted EPS 21.5 249.1 8.6p 19.0 226.4 8.4p 45.5 238.5 19.0p
Diluted EPS 15.3 249.1 6.1p 10.2 226.4 4.5p 21.5 238.5 9.0p
Dilutive shares increased the basic number of shares at February 2016 by 6.5m
to 249.1m (Feb 2015: 226.4m) and resulted in a diluted adjusted EPS of 8.6p,
an increase of 0.2p or 2.4% on prior year.
The calculation of diluted EPS reflects the potential dilutive effect of
employee incentive schemes of 2.1m dilutive shares (Feb 2015: 3.6m) and a
weighted 4.4m shares being the time apportioned share capital relating to the
deferred consideration for the acquisition of The Big Green Parcel Holding
Company Limited.
9 Net Cash Inflow from Operating Activities
£m 6 months toFeb 2016 6 months toFeb 2015 12 months toAug 2015
Operating profit 22.6 17.7 36.3
Share of profits of jointly controlled entities (0.1) - (0.3)
Pension funding (2.6) (2.3) (5.4)
(Losses) /gains on disposal of assets - (0.1) 0.2
Depreciation of property, plant and equipment 4.4 3.3 7.3
Amortisation and impairment of intangible assets 7.2 4.3 11.4
Share based payments 1.9 1.5 8.0
Decrease in inventories 0.2 2.3 3.8
Increase /(decrease) in receivables 13.0 15.8 (7.5)
Decrease in payables (18.3) (22.0) (4.4)
Income tax paid (3.1) (3.4) (8.7)
(Decrease) /increase in provisions (5.5) 1.5 5.8
Net cash inflow from operating activities 19.7 18.6 46.5
10 Contingent Liability
The Group has a potential liability that could crystallise in respect of
previous assignments of leases where the liability could revert to the Group
if the lessee defaulted. Pursuant to the terms of the Demerger Agreement from
WH Smith PLC in 2006, any such contingent liability, which becomes an actual
liability will be apportioned between Connect Group PLC and WH Smith PLC in
the ratio 35:65 (the actual liability of Connect Group PLC in any 12 month
period is limited to £5m). The Group's share of such liability has an
estimated future cumulative gross rental commitment at 29 February 2016 of
£3.3m (31 August 2015: £3.6m).
11 Intangible Assets
Acquired intangible assets are written off over their expected useful life.
Goodwill is not amortised, but tested annually for impairment with the
recoverable amount being determined from value in use calculations. The Group
prepares cash flow forecasts derived from the most recent budgets and
forecasts for the following 3 years 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 12.1% to 12.5%, being the Group's risk adjusted
pre-tax WACC, specific for each cash generating unit. The calculation of value
in use is sensitive to the discount rate and growth rates used. Management
believes that no reasonable potential change in any of the above key
assumptions would cause the carrying value to exceed its recoverable amount.
Goodwill Acquired Intangibles Total
£m On acquisition HY2016 HY2015 FY2015 On acquisition HY2016 HY2015 FY2015 On acquisition HY2016 HY2015 FY2015
Connect Books 17.6 17.6 17.6 17.6 12.7 3.5 5.0 4.2 30.3 21.1 22.6 21.8
Connect Media 5.7 5.7 5.7 5.7 2.6 1.0 1.4 1.2 8.3 6.7 7.1 6.9
Connect News - - - - 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Connect Parcel Freight 52.1 52.1 51.4 52.1 58.1 50.1 57.1 53.6 110.2 102.2 108.5 105.7
Connect Education and Care 20.9 20.9 20.9 20.9 10.4 5.4 6.9 6.2 31.3 26.3 27.8 27.1
96.3 96.3 95.6 96.3 84.0 60.2 70.6 65.4 180.3 156.5 166.2 161.7
Other intangibles 12.3 6.7 13.1
Total Intangible assets 168.8 172.9 174.8
12. Acquisitions
There were no acquisitions in the period to 29 February 2016.
In the prior year, on 19 December 2014, Smiths News Holdings Limited acquired
100% of the issued share capital of The Big Green Parcel Holding Company
Limited (Tuffnells) for a cash consideration of £114.0m and deferred
contingent consideration of up to £15.3m, payable over three years following
the acquisition contingent on both profit targets and the continued employment
of certain former owners. The acquisition was accounted for in accordance with
IFRS3 Business Combinations. The Big Green Parcel Holding Company Limited's
main trading subsidiary is Tuffnells Parcels Express Limited. The initial cash
cost of the acquisition was £114.0m, financed by a combination of increased
debt facilities and a £55m Rights Issue. The initial cash cost of £114.0m plus
£0.5m of deferred consideration was consideration as defined by IFRS3 and was
allocated against the identified net assets with the balance recorded as
goodwill.
In the prior year on 27 August 2015, the Group purchased the remaining 49% of
shares in Magpie Investments Limited (Wordery) for an initial cash
consideration of £5.1m with a deferred consideration of £3.3m which is
contingent on both profit targets and continued employment of the former
owners.
13 Cash and Borrowings
Cash and borrowings by currency (sterling equivalent) are as follows:
£m Sterling Euro USD Other TotalAt 29 Feb 2016 At 28Feb 2015 At 31Aug 2015
Cash and cash equivalents 0.5 2.4 1.5 0.2 4.6 12.7 10.9
Term loan - disclosed within non-current liabilities (98.7) - - - (98.7) (98.0) (98.4)
Revolving credit facility (55.0) (1.6) - - (56.6) (64.5) (56.5)
Total borrowings (153.7) (1.6) - - (155.3) (162.5) (154.9)
Net borrowings (153.2) 0.8 1.5 0.2 (150.7) (149.8) (144.0)
Total borrowings
Amount due for settlement within 12 months (65.0) (1.6) - - (66.6) (64.5) (56.5)
Amount due for settlement after 12 months (88.7) - - - (88.7) (98.0) (98.4)
(153.7) (1.6) - - (155.3) (162.5) (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 29 February 2016, the Group had £94.7m (28 February 2015: £87.5m) of
undrawn committed borrowing facilities in respect of which all conditions
precedent had been met.
14 Financial Instruments
The fair value of interest rate swaps and forward currency contracts at the
reporting date are based on market values of equivalent instruments at the
balance sheet date and are disclosed below. All derivative financial
instruments are classified as level 2 based upon the degree to which the fair
value movements are observable. Level 2 fair value measurements are defined as
those derived from inputs other than quoted prices that are observable for the
asset or liability, either directly (prices from third parties) or indirectly
(derived from third party prices).
Current Non-current
Feb 2016 Feb 2015 Aug 2015 Feb 2016 Feb 2015 Aug 2015
Derivatives that are being designated and effective as hedging instruments carried at fair value
Interest rate swaps - Liabilities - - - (1.3) - (0.2)
- - - (1.3) - (0.2)
Forward foreign currency contracts - Assets 0.1 - - - - -
0.1 - - - - -
15 Provisions
£m Reorganisation provisions Insurance provisions Deferred consideration Property provisions Total
Gross provision:
At 1 September 2014 0.7 1.4 - 3.6 5.7
Additions - 0.2 2.4 - 2.6
Acquisition of subsidiary - 1.2 - 4.0 5.2
Utilised in period (0.4) (0.1) - (0.1) (0.6)
At 28 February 2015 0.3 2.7 2.4 7.5 12.9
Discount:
At 1 September 2014 - - - (0.4) (0.4)
Acquisition of subsidiary - - - (0.1) (0.1)
Unwinding of discount utilisation - - - 0.1 0.1
At 28 February 2015 - - - (0.4) (0.4)
Net book value at 28 February 2015 0.3 2.7 2.4 7.1 12.5
Gross provision:
At 1 March 2015: 0.3 2.7 2.4 7.5 12.9
Additions 2.3 - 2.8 1.0 6.1
Acquisition of subsidiary - 0.1 - 0.1 0.2
Released (0.2) (0.1) - (0.2) (0.5)
Utilised in period (1.4) 0.1 - (0.5) (1.8)
At 31 August 2015 1.0 2.8 5.2 7.9 16.9
Discount:
At 1 March 2015 - - - (0.4) (0.4)
Additions - - - - -
Acquisition of business - - - (0.1) (0.1)
Released - - - - -
Unwinding of discount utilisation - - - - -
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
Gross provision:
At 1 September 2015 1.0 2.8 5.2 7.9 16.9
Additions 0.6 0.2 1.0 - 1.8
Release - (0.1) - (0.3) (0.4)
Utilised in period (1.3) - (5.2) (0.2) (6.7)
At 29 February 2016 0.3 2.9 1.0 7.4 11.6
Discount:
At 1 September 2015 - - - (0.5) (0.5)
Acquisition of subsidiary - - - - -
Unwinding of discount utilisation - - - 0.1 0.1
At 29 February 2016 - - - (0.4) (0.4)
Net book value at 29 February 2016 0.3 2.9 1.0 7.0 11.2
£m Feb 2016 Feb 2015 Aug 2015
Included within current liabilities 5.2 6.6 10.4
Included within non-current liabilities 6.0 5.9 6.0
Total 11.2 12.5 16.4
The property provision represents the estimated future cost of the Group's
historic onerous and reversionary leases in non-trading properties and newly
acquired properties based on known and estimated rental sub-leases. This
provision has been discounted at 8%, and this discount will be unwound over
the life of the leases. Insurance provisions represent the expected future
costs of employer's liability, public liability and motor accident claims.
16 Share Capital
(a) Called up share capital
£m Feb 2016 Feb 2015 Aug 2015
Issued and fully paid ordinary shares of 5p each
Opening balance 12.2 9.5 9.5
Shares issued in the period/ year 0.1 2.7 2.7
Closing balance 12.3 12.2 12.2
During the period to 29 February 2016, 2,544,199 ordinary 5p shares were
issued for a consideration of £4,038,819 resulting in a share premium of
£3,911,608. Of these 2,164,181 shares related to the deferred share capital
payable to the former owners of The Big Green Parcel Holding Company Limited
following its acquisition in December 2014.
(b) Movement in share capital
Number (m) Ordinary shares of 5p each
Opening balance 244.1
Issued in the year 2.5
Closing balance 246.6
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 meetings of
the Company. The Company has one class of ordinary shares, which carry no
right to fixed income.
(c) Share premium
£m Feb 2016 Feb 2015 Aug 2015
Opening balance 55.2 5.3 5.3
Share issues during the year 3.9 49.8 49.9
Closing balance 59.1 55.1 55.2
The rights issue in December 2014 incurred £3.0m of directly attributable
costs which have been accounted for in share premium.
17 Related Party Transactions
No related party transactions had a material impact on the financial
performance in the period or financial position of the Group at 29 February
2016. There have been no material changes to or material transactions with
related parties as disclosed in Note 32 of the Annual Report and Accounts for
the year ended 31 August 2015.
18 Responsibility Statement
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting';
- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board.
Mark Cashmore Nick Gresham
Group Chief Executive Chief Financial Officer
19 April 2016 19 April 2016
This information is provided by RNS
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