REG - Connect Group Plc - Unaudited Preliminary Results year ended 31 Aug 17 <Origin Href="QuoteRef">CNCTC.L</Origin> - Part 4

Smiths NewsAnnouncement

26/10/2017 07:06

- Part 4: For the preceding part double click  ID:nRSZ6489Uc 

£1.5m (£1.5m August 2016) is held in
respect of a potential fine and associated legal costs. 
 
The property provision represents the estimated future cost of the Group's onerous leases on non-trading properties and for
potential dilapidation costs across the Group.  These provisions have been discounted at a risk adjusted rate and this
discount will be unwound over the life of the leases.  The provisions cover the period to 2031 however a significant
portion of the potential liability falls within five years. 
 
Deferred contingent consideration relates to amounts provided in relation to the acquisition of the remaining 49% share of
Wordery on 27 August 2015, the cost being contingent upon achievement of profit targets and the future employment of the
former owners of the business. 
 
16.       Operating lease commitments 
 
The group as lessee: 
 
Minimum lease payments under non-cancellable operating leases are as follows: 
 
 Continuing  2017                                                          2016   
 £m          Land & buildings                        Equipment & vehicles  Total        Land & buildings  Equipment & vehicles  Total  
             Within one year                         9.4                   12.5   21.9                    9.6                   13.7   23.3  
             In the second to fifth years inclusive  25.2                  23.3   48.5                    25.4                  23.1   48.5  
             In more than five years                 18.8                  0.5    19.3                    16.9                  -      16.9  
                                                     53.4                  36.3   89.7                    51.9                  36.8   88.7  
                                                                                                                                             
 
 
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                                      2017  2016  
 Within one year                         0.2   0.3   
 In the second to fifth years inclusive  0.3   0.2   
                                         0.5   0.5   
 
 
Property rental income earned during the year was £0.3m (2016: £0.3m). 
 
17.       Net cash inflow from operating activities 
 
 £m                                                                                    Note  2017    2016    
 Operating profit - continuing                                                               41.7    42.2    
 Operating profit - discontinued                                                             9.5     6.7     
 Operating profit - total                                                                    51.2    48.9    
 Losses on disposal of assets                                                                0.4     -       
 Share of profits of jointly controlled entities                                             (0.4)   (0.3)   
 Gain on disposal of subsidiary                                                        11    (19.0)  -       
 Adjustment for pension funding                                                              (5.2)   (5.3)   
 Depreciation of property, plant and equipment                                               9.3     8.9     
 Amortisation and impairment of intangible assets                                            23.1    14.7    
 Impairment of loan to joint venture                                                         0.6     -       
 Share based payments                                                                        (1.2)   1.6     
 (Increase) in inventories                                                                   (2.0)   (0.3)   
 Decrease in receivables                                                                     2.7     9.7     
 (Decrease) in payables                                                                      (1.8)   (7.2)   
 Increase/ (Decrease) in provisions                                                          4.7     (3.4)   
 Non cash pension costs                                                                      (0.3)   (0.6)   
 Income tax paid                                                                             (10.9)  (8.5)   
                                                                                                             
 Net cash inflow from operating activities                                                   51.2    58.2    
                                                                                                             
 Net cashflow from operating activities is stated after the following adjusted items:                        
 Payment of deferred consideration                                                           (1.1)   (5.1)   
 Re-organisation & restructuring costs                                                       (4.7)   (5.7)   
 Fees relating to disposal activity                                                          (0.5)           
                                                                                             (6.3)   (10.8)  
 
 
18.       Share Capital 
 
(a)           Share capital 
 
 £m                                                2017  2016  
 Issued and fully paid:                                        
 At 1 September                                    12.3  12.2  
 Shares issued during the year                     0.1   0.1   
 247.7m ordinary shares of 5p each (2016: 246.7m)  12.4  12.3  
 
 
(b)           Movement in share capital 
 
 Number (m)                       Ordinary shares of 5p each  
 31 August 2016                   246.7                       
 Shares issued during the year    1.0                         
 At 31 August 2017                247.7                       
 
 
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 2017, 946,334 ordinary 5p shares were issued. 394,007 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 were issued to satisfy share scheme exercises. 
 
During the year to 31 August 2016, 2,606,751 ordinary 5p shares were issued.  2,164,181 ordinary shares 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 were issued to satisfy share scheme exercises. 
 
(c)           Share premium 
 
 £m                                         2017  2016  
                                                        
 Balance at 1 September                     59.2  55.2  
 Premium arising on issue of equity shares  1.3   4.0   
 Balance at 31 August                       60.5  59.2  
                                                        
 
 
19.       Reserves 
 
(a)           Demerger reserve 
 
 £m              2017     2016     
 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                                  2017   2016   
 Balance at 1 September              (3.5)  (4.1)  
 Acquired in the period              (0.5)  (1.1)  
 Disposed of on exercise of options  0.9    1.7    
 Balance at 31 August                (3.1)  (3.5)  
 
 
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 as at 31 August 2017 was 2,241,459 (2016: 2,313,644). 
 
(c)           Hedging & translation reserve 
 
 £m                                                                    2017   2016   
 Balance at 1 September                                                (1.1)  (0.5)  
 Settlement on termination                                             0.8    -      
 Net movement in cash flow hedges                                      0.6    (1.2)  
 Exchange differences on translating net assets of foreign operations  0.2    0.6    
 Balance at 31 August                                                  0.5    (1.1)  
 
 
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. 
 
20.       Retained Earnings 
 
                                                     £m      
 Balance at 31 August 2015                           226.5   
 Amounts recognised in Total comprehensive income    26.3    
 Dividends paid                                      (22.7)  
 Employee share schemes                              (1.7)   
 Equity-settled share based payments, net of tax     (2.2)   
 Balance at 31 August 2016                           226.2   
 Amounts recognised in Total comprehensive income    35.1    
 Dividends paid                                      (23.6)  
 Employee share schemes                              (0.9)   
 Equity-settled share based payments, net of tax     (1.9)   
 Balance at 31 August 2017                           234.9   
 
 
21.       Post balance sheet events 
 
In October 2017 the Group agreed new bank facilities of £175m with six relationship banks with a term which runs until
January 2021.  The new facility comprises of a term loan of £50m with no amortisation and an RCF for £125m on a higher
interest margin than the previous facility but with similar covenant terms to the previous facility. 
 
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