REG - TT Electronics PLC - Final Results <Origin Href="QuoteRef">TTG.L</Origin> - Part 2
09/03/2017 07:06
- Part 2: For the preceding part double click ID:nRSI9286Ya
management to assist them in making operating decisions
because they represent the underlying operating performance of the Group and
facilitate internal comparisons of performance over time.
Alternative performance measures are presented as management believe they
provide investors with a means of evaluating performance of the Group on a
consistent basis, similar to the way in which management evaluates
performance, that is not otherwise apparent on an IFRS basis, given that
certain non-recurring, infrequent or non-cash items that management does not
believe are indicative of the underlying operating performance of the Group
are included when preparing financial measures under IFRS.
The Directors consider there to be four main alternative performance measures:
underlying operating profit, free cash flow, underlying EPS (see note 9) and
underlying effective tax rate.
Underlying operating profit
This has been defined as operating profit from continuing operations excluding
the impacts of significant restructuring programmes, significant one-off asset
impairments and business acquisition and divestment related activity. Business
acquisition and divestment related items include the amortisation of
intangible assets recognised on acquisition, the writing off of the
pre-acquisition profit element of inventory written up on acquisition, other
direct costs associated with business combinations and adjustments to
contingent consideration related to acquired businesses. Items related to
significant restructuring programmes include the impact of the Operational
Improvement Plan initiated in 2014, other significant changes in footprint
(including movement of production facilities and sale of properties) and
significant costs of management changes.
2016 2015
£million Operating profit Tax Operating profit Tax
As reported 27.6 (6.5) 16.3 (3.4)
Restructuring
Operational Improvement Plan (2.9) 0.2 (1.8) 1.1
Other restructuring (1.3) 0.6 (0.7) 0.2
Property items 4.3 (0.7) - -
Charges associated with management changes - - (0.4) 0.1
0.1 0.1 (2.9) 1.4
Asset impairments - - (1.7) -
Acquisition related costs
Contingent consideration - - 0.8 -
Release of divestment provision 0.9 - - -
Amortisation of intangible assets arising on business combinations (3.5) 0.7 (0.8) 0.2
Other acquisition related costs (1.2) 0.2 (0.8) 0.2
(3.8) 0.9 (0.8) 0.4
Total items excluded from underlying measure (3.7) 1.0 (5.4) 1.8
Underlying measure 31.3 (7.5) 21.7 (5.2)
Restructuring £0.1 million credit (2015: £2.9 million charge)
In the year ended 31 December 2016 restructuring costs related to further
costs incurred on the Operational Improvement Plan initiated in a previous
year, costs associated with other site restructuring (net of a release for
certain sites) and a credit of £4.3 million arising on sale of properties (net
of a write down of certain properties).
In the year ended 31 December 2015 total restructuring costs of £2.9 million
were incurred, of which £1.8 million related to the Operational Improvement
Plan, £0.7 million related to other restructuring costs and £0.4 million
related to the change of management structure.
Impairments £nil (2015: £1.7 million)
In the year ended 31 December 2015 asset impairment costs of £1.7 million were
incurred, relating mainly to the North American resistors business, reflecting
the downturn in activity experienced in the second half of the year.
Acquisition related costs £3.8 million (2015: £0.8 million)
In the year ended 31 December 2016 acquisition costs amounted to £3.8 million
which included a credit of £0.9 million relating to the release of a provision
established for warranty liabilities arising from a divestment that are no
longer required, £3.5 million amortisation of acquisition intangibles and £1.2
million of other costs, relating primarily to the integration of Aero
Stanrew.
In the year ended 31 December 2015 acquisition costs amounted to £0.8 million
which related to £0.8 million of acquisition related costs, £0.8 million of
amortisation of acquired intangible assets and a £0.8 million credit relating
to the reversal of an accrual for deferred acquisition consideration.
Free cash flow
This has been defined as net cash flow from operating activities less cash
flow from investing activities (excluding acquisitions and disposal proceeds)
less interest paid.
£million 2016 2015
Net cash flow from operating activities 26.6 25.3
Net cash flow from investing activities (9.8) (56.2)
Acquisition of business - 39.8
Cash with acquired businesses - (1.6)
Interest paid (3.0) (2.2)
Free cash flow 13.8 5.1
Underlying earnings per share
This is the profit for the year attributable to owners of the Company adjusted
to exclude the items not included within underlying operating profit divided
by the weighted average number of shares in issue during the year (see note
9).
Underlying effective tax rate
This is defined as the tax charge, adjusted to exclude items not included
within underlying operating profit divided by underlying profit before tax,
which is also adjusted to exclude the items not included within underlying
operating profit.
£million 2016 2015
Underlying operating profit 31.3 21.7
Net finance costs (4.4) (2.5)
Underlying profit before tax 26.9 19.2
Underlying tax (see above) 7.5 5.2
Underlying effective tax rate 27.9% 27.0%
7 Taxation
a) Analysis of the tax charge for the year
£million 2016 2015
Current tax
Current income tax charge 6.5 7.1
Adjustments in respect of current income tax of previous year 1.7 (1.5)
Total current tax charge 8.2 5.6
Deferred tax
Relating to origination and reversal of temporary differences (1.7) (2.2)
Total tax charge in the income statement 6.5 3.4
UK tax is calculated at 20.0% (2015: 20.25%) of taxable profits. Overseas tax
is calculated at the tax rates prevailing in the relevant countries. The
Group's effective tax rate for the year from continuing operations was 28.2%
(the underlying tax rate was 27.9% (see note 6)).
Included within the total tax charge above is a £1.0 million credit relating
to items reported outside underlying profit (2015: £1.8 million).
b) Reconciliation of the total tax charge for the year
£million 2016 2015
Profit before tax from continuing operations 23.2 13.8
Profit before tax multiplied by the standard rate of corporation tax in the UK of 20.0% (2015: 20.25%) 4.6 2.8
Effects of:
Overseas tax rate differences 0.9 0.7
Income not taxable and items not deductible for tax purposes (1.0) 0.4
Adjustment to current tax in respect of prior years 1.7 (1.5)
Impact on deferred tax arising from changes in tax rates 0.2 0.1
Recognition and utilisation of tax losses and other items not previously recognised (0.7) (0.1)
Current year tax losses and other items not recognised 2.5 2.0
Adjustment to value of deferred tax assets (1.7) (1.0)
Total tax charge reported in the income statement 6.5 3.4
The enacted UK corporation tax rate applicable is 19% from 1 April 2017 and
17% from 1 April 2020.
8 Dividends
2016 2016 2015 2015
pence per share £million pence per share £million
Final dividend for prior year 3.8 6.2 3.8 6.0
Interim dividend for current year 1.7 2.7 1.7 2.7
5.5 8.9 5.5 8.7
The Directors recommend a final dividend of 3.9 pence per share which when
combined with the interim dividend of 1.7 pence per share gives a total
dividend for the year of 5.6 pence per share. The Group has a progressive
dividend policy. The final dividend will be paid on 2 June 2017 to
shareholders on the register on 19 May 2017.
9 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
owners of the Company by the weighted average number of shares in issue during
the year.
Underlying earnings per share is based on the underlying profit after interest
and tax.
Pence 2016 2015
Basic earnings per share 10.3 6.5
Diluted earnings per share 10.3 6.5
The numbers used in calculating underlying, basic and diluted earnings per
share are shown below.
Underlying earnings per share:
£million 2016 2015
Continuing operations
Profit for the year attributable to owners of the Company 16.7 10.4
Restructuring (0.1) 2.9
Asset impairments - 1.7
Acquisition related costs 3.8 0.8
Tax effect of above items (see note 7) (1.0) (1.8)
Underlying earnings 19.4 14.0
Underlying earnings per share (pence) 12.0 8.8
The weighted average number of shares in issue is as follows:
Million 2016 2015
Basic 162.2 159.2
Adjustment for share awards - 0.1
Diluted 162.2 159.3
10 Reconciliation of net cash flow to movement in net debt
£million Net cash Borrowings and finance leases Net debt
At 1 January 2015 39.4 (53.7) (14.3)
Cash flow 0.3 (41.6) (41.3)
Non-cash items - (0.2) (0.2)
Exchange differences 0.6 (0.9) (0.3)
At 1 January 2016 40.3 (96.4) (56.1)
Cash flow 5.5 (0.6) 4.9
Non-cash items - (1.8) (1.8)
Exchange differences 4.0 (6.4) (2.4)
At 31 December 2016 49.8 (105.2) (55.4)
Net cash includes overdraft balances of £nil (2015: £0.6 million).
11 Retirement benefit schemes
Defined contribution schemes
The Group operates 401(k) plans in North America and defined contribution
arrangements in the rest of the world. The assets of these schemes are held
independently of the Group. The total contributions charged by the Group in
respect of defined contribution schemes were £2.7 million (2015: £2.4
million).
Defined benefit schemes
During the year the Group operated a significant defined benefit scheme in the
UK and schemes in the USA (which includes a post retirement medical benefit
element). The Group's main scheme is the UK plan which commenced in 1993 and
increased in size in 2006 and 2007 through the merger of the UK former
schemes. The parent company is the sponsoring employer in the UK plan. The UK
plan is governed by TTG Pension Trustees Limited (the "Trustee") that has
control over the operation, funding and investment strategy in consultation
with the Group.
The triennial valuation of the UK scheme as at April 2016 showed a deficit of
£46.0 million against the Trustee's funding objective compared with £19.1
million at April 2013. The Company has agreed additional fixed contributions
extending to 2020 with the UK Scheme, based on the actuarial deficit at April
2016. These planned contributions amount to £4.7 million, £4.9 million, £5.1
million and £3.9 million to be paid over the next four years. In addition, the
Company has set aside £3.0 million over the last three years to be utilised in
agreement with the Trustee for reducing the long-term liabilities of the
scheme. Both the UK and USA schemes are closed to new members and the UK
scheme was closed to future accrual in 2010.
The amounts recognised in respect of the pension deficit in the Consolidated
balance sheet are:
£million 2016 2015
Fair value of assets 546.2 442.2
Present value of defined benefit obligation (551.9) (463.3)
Net liability recognised in the Consolidated balance sheet (5.7) (21.1)
Amounts recognised in the consolidated income statement are:
£million 2016 2015
Scheme administration costs 1.2 0.8
Net interest cost 0.7 0.4
Settlements and curtailments (0.6) -
12 Related party transactions
Transactions between the Company and its subsidiaries have been eliminated on
consolidation and are not disclosed in this note.
No related party transactions have taken place in 2016 or 2015 that have
affected the financial position or performance of the Group.
13 Principal risk and uncertainties
The Group continues to be exposed to a number of operational and financial
risks and has an established, structured approach to identifying, assessing
and managing those risks. These risks relate to the following areas: general
economic downturn; contractual risks; pricing and margin pressures; research
and development; people and capability; supplier resilience; and legal and
regulatory compliance.
14 Alternative performance measure definitions
This financial information includes alternative performance measures that are
not prepared in accordance with IFRS. These alternative performance measures
have been selected by management to assist them in making operating decisions
because they represent the underlying operating performance of the Group and
facilitate internal comparisons of performance over time.
Alternative performance measures are presented as management believe they
provide investors with a means of evaluating performance of the Group on a
consistent basis, similar to the way in which management evaluates
performance, that is not otherwise apparent on an IFRS basis, given that
certain non-recurring, infrequent or non-cash items that management does not
believe are indicative of the underlying operating performance of the Group
are included when preparing financial measures under IFRS.
The Group uses the following alternative performance measures:
Underlying operating profit
Definition: Operating profit from continuing operations excluding the impacts
of significant restructuring programmes, significant one-off asset impairments
and business acquisition and divestment related activity.
Free cash flow
Definition: Net cash flow from operating activities less net cash flow from
investing activities less interest paid.
Underlying earnings per share
Definition: Profit for the year attributable to the owners of the Company
adjusted to exclude the items not included within underlying operating profit
divided by the weighted average number of shares in issue during the period.
We have chosen EPS as a KPI as it is a standard metric to determine corporate
profitability for shareholders. In addition, it is a measure used as one of
the performance conditions in the Group's Long Term Incentive Plan.
Underlying effective tax rate
Definition: The tax charge adjusted to exclude items not included within
underlying operating profit divided by underlying profit before tax, which is
also adjusted to exclude the items not included within underlying operating
profit.
This information is provided by RNS
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