REG - TT electronics PLC - Half Yearly Report <Origin Href="QuoteRef">TTG.L</Origin> - Part 2
29/10/2014 13:43
- Part 2: For the preceding part double click ID:nRSS4519Pa
unaudited and were authorised for issue in accordance with a
resolution of the Board of Directors. They do not constitute statutory
financial statements as defined in Section 434 of the Companies Act 2006. The
comparative figures for the year ended 31 December 2013 are based on the
Company's statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditors and delivered to the registrar of
companies. The report of the auditors was unqualified, did not include a
reference to any matter to which the auditors drew attention by way of
emphasis without qualifying their report, and did not contain a statement
under section 498 of the Companies Act 2006.
2. Basis of preparation
a) Condensed consolidated half-year financial statements
These condensed consolidated half-year financial statements have been prepared
in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU.
These condensed consolidated half-year financial statements do not include all
the information and disclosures required in the annual financial statements
and should be read in conjunction with the 2013 Annual Report.
b) Basis of accounting
The accounting policies adopted are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2013. Adoption of amendments to published standards and
interpretations effective for the Group for the half-year ended 30 June 2014
did not have any impact on the financial position and performance of the
Group.
c) Estimates
The preparation of half-year financial statements requires management to make
judgements, estimates and assumptions which affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expense. Actual results may differ from these estimates.
In preparing the condensed consolidated half-year financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were consistent with
those applied to the consolidated financial statements as at and for the year
ended 31 December 2013.
d) Going concern
After making appropriate enquiries, the Directors have a reasonable
expectation that the Company has adequate resources and financial headroom to
continue in operational existence for the foreseeable future. Therefore they
continue to adopt the going concern basis of accounting in preparing the
Condensed consolidated half-year financial statements. The Group's business
activities, together with the factors likely to affect its future development,
performance and position are set out in the Business review on pages 4 to 8.
The Group had net debt of £14.9 million at 30 June 2014 (31 December 2013: Net
cash of £26.9 million). The Group had available £39.4 million of undrawn
committed borrowing facilities and £60.4 million of undrawn uncommitted
borrowing facilities, representing overdraft lines (£18.6 million) and the
accordion facility (£41.8 million). Given the considerable financial resources
available, together with long term partnerships with a number of key customers
and suppliers across different geographic areas and industries, the Directors
believe that the Group is well placed to manage its business risks
successfully.
The Group continues to manage foreign currency risk at a transactional level
through the use of hedges which are monitored by the Group Treasury
Committee.
The Treasury Committee regularly reviews counterparty credit risk, and ensures
cash balances are held with carefully assessed counterparties with strong
credit ratings.
Pages 24 to 27 of the 2013 Annual Report provide details of the Group's policy
on managing its operational and financial risks.
Notes to the Condensed consolidated financial statements continued
3. Segmental reporting
The Group is organised into three divisions, as shown below, according to the
nature of the products and services provided. Each of these divisions
represents an operating segment in accordance with IFRS 8 'Operating segments'
and there is no aggregation of segments. The chief operating decision maker
is the Board of Directors. The operating segments are:
· Sensing and Control - the provision of integrated and intelligent
solutions meeting customer requirements comprising sensors which convert
physical variables into electronic signals and controls that process input
from the sensor and instruct systems;
· Components - specialist resistive and magnetic components and
mircocircuits, connectors and interconnection systems; and
· Integrated Manufacturing Services - the provision of global electronics
manufacturing capability with logistics and integrated solutions.
The accounting policies of the reportable segments are the same as the Group's
accounting policies and are as published in the 2013 Annual Report.
The key performance measure of the operating segments is operating profit
before exceptional items. The Group reports non-trading income or expenditure
as exceptional when the size, nature or function of an item or aggregation of
similar items is such that separate presentation is relevant to an
understanding of its financial position. Segment operating profit represents
the profit earned by each segment after the allocation of central head office
administration costs and is reviewed by the chief operating decision maker.
Group financing (including finance costs and finance income) and income taxes
are managed on a Group basis and are not allocated to operating segments.
Goodwill is allocated to the individual cash generating units within the
segment of which it is a part.
a) Income statement information - continuing operations
Six months ended 30 June 2014
£million Sensing and Control Components Integrated Manufacturing Services Total
Revenue from external customers 143.6 48.1 69.4 261.1
Segment operating profit before exceptional items 6.6 3.7 2.6 12.9
Exceptional items (12.7)
Operating profit 0.2
Net finance costs (0.6)
Loss before taxation (0.4)
Notes to the Condensed consolidated financial statements continued
a) Income statement information - continuing operations continued
Six months ended 30 June 2013
£million Sensing and Control Components Integrated Manufacturing Services Total
Revenue from external customers 141.5 51.1 68.4 261.0
Segment operating profit before exceptional items 8.9 1.0 2.8 12.7
Exceptional items (2.6)
Operating profit 10.1
Net finance costs (1.2)
Profit before taxation 8.9
Year ended 31 December 2013
£million Sensing and Control Components Integrated Manufacturing Services Total
Revenue from external customers 285.2 100.4 146.6 532.2
Segment operating profit before exceptional items 17.3 4.1 8.8 30.2
Exceptional items (11.2)
Operating profit 19.0
Net finance costs (0.7)
Profit before taxation 18.3
There is no significant revenue between segments.
b) Analysis of revenue by destination - continuing operations
£million Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
United Kingdom 43.4 49.2 104.1
Rest of Europe 133.4 128.2 260.1
North America 45.6 47.0 94.4
Central and South America 1.8 2.0 3.9
Asia 35.4 33.8 68.8
Rest of the World 1.5 0.8 0.9
Total continuing operations 261.1 261.0 532.2
Notes to the Condensed consolidated financial statements continued
4. Exceptional items
£million Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
Continuing operations
S&C Operational Improvement Plan (10.2) - (3.1)
Other restructuring costs (2.5) (2.4) (5.9)
Costs relating to closure of Boone, North Carolina plant - (0.2) (1.2)
Negative goodwill on business acquisition - 0.4 0.4
M&A costs (including aborted deals) - (0.4) (1.4)
Total (12.7) (2.6) (11.2)
For the six months ended 30 June 2014 exceptional items relate to:
· The Operational Improvement Plan (OIP), which is a fundamental
restructuring of the manufacturing footprint and sales organisation of the
Sensing and Control division. The charge in the first half of 2014 arose from
the move of production from Fullerton, California to Mexico and restructuring
costs arising from the proposed transfer of manufacturing at Werne, Germany to
our best cost facilities in Romania.
· Other restructuring costs of £2.5 million on the half year arise from
site consolidation in the UK and the establishment of a Romania facility for
the IMS division, and costs incurred to ensure continuity of supply relating
to a supplier in distress.
· The provisions recorded at the half year in respect of these
restructuring activities have been made in accordance with international
accounting standards (IAS 37) and represent management's best estimate of the
expected outcome at this stage.
For the six months ended 30 June 2013 exceptional items relate to:
· the closure and relocation of the ACW Technology facilities from
Southampton to Tonypandy in Wales of £1.1 million;
· the relocation and start-up costs of production facilities in Romania
of £0.4 million;
· the relocation of production facilities in Malaysia of £0.5 million;
· restructuring costs arising from the creation of the new organisation
structure of £0.4 million;
· the costs relating to the closure of Boone, North Carolina plant of
£0.2 million;
· the release of a surplus Fair Value inventory provision created at the
date of the acquisition of ACW Technology of £0.4 million; and
· the amortisation of the Fair Value adjustment made to inventory at the
date of the acquisition of ACW Technology of £0.4 million.
Notes to the Condensed consolidated financial statements continued
For the year ended 31 December 2013, the exceptional items relate to:
· OIP charges in the year comprising:
· the closure of the facility at Fullerton, USA and transfer of production to
Mexico of £0.3 million;
· the closure of sales offices in France, Italy and Japan of £2.3 million;
and
· consultancy costs of £0.5 million.
· Other restructuring costs of £5.9 million comprise of the following:
· the closure of the loss-making connectors business in the USA at a cost of
£2.0 million;
· the closure and relocation of the ACW Technology facilities from Southampton
to Tonypandy in Wales for £1.1 million;
· the transfer of production lines from Germany and Austria, and start-up
costs in Romania of £1.3 million;
· the relocation of production facilities in Malaysia of £0.5 million by IMS;
· costs arising from the creation of the new organisation structure of £0.6
million; and
· costs incurred to ensure continuity of supply relating to a supplier in
distress of £0.4 million.
· The additional costs relating to the Boone property in North Carolina
mainly comprise environmental clean-up costs;
· Negative goodwill arising on the release of a surplus Fair Value
inventory provision created at the date of the acquisition of ACW Technology
of £0.4 million; and
· M&A costs arising from the acquisition of ACW in December 2012 and
other costs for potential acquisitions and disposals.
The group reports non-trading income or expenditure as exceptional when the
size, nature or function of an item or aggregation of similar items is such
that separate presentation is relevant to an understanding of its financial
position.
5. Finance income and costs
£million Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
Interest income - 0.1 0.1
Foreign exchange gains 0.6 0.5 2.7
Finance income 0.6 0.6 2.8
Interest expense 0.6 0.3 0.8
Foreign exchange losses 0.1 0.7 1.0
Net interest on employee obligations 0.4 0.7 1.5
Amortisation of arrangement fees 0.1 0.1 0.2
Finance costs 1.2 1.8 3.5
Net finance costs 0.6 1.2 0.7
6. Taxation
The half year tax charge is based on a forecast effective tax rate for the
full year (excluding exceptional items) of 23.8%. This compares to the
effective tax rate for full year 2013 of 24.1%. The reduction in the effective
tax rate reflects further progress in optimising the Group's tax position and
in managing tax risks.
Notes to the Condensed consolidated financial statements continued
7. Earnings per share
Basic earnings per share is calculated by dividing the loss/profit
attributable to the owners of the Company by the weighted average number of
shares in issue during the period. The weighted average number of shares in
issue is 158.2 million (30 June 2013: 157.2 million, 31 December 2013: 157.6
million).
Headline earnings per share is based on profit for the period from continuing
operations excluding exceptional items and their associated tax effect.
Pence Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
Basic (loss)/earnings per share
Continuing operations (2.1) 4.1 8.8
Discontinued operations - (0.5) (0.5)
Total (2.1) 3.6 8.3
Pence Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
Diluted (loss)/earnings per share
Continuing operations (2.1) 4.1 8.7
Discontinued operations - (0.5) (0.5)
Total (2.1) 3.6 8.2
The numbers used in calculating headline earnings per share are shown below:
£million Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
Continuing operations
Profit for the period attributable to owners of the Company (3.3) 6.4 13.8
Exceptional items 12.7 2.6 11.2
Tax effect of exceptional items (0.1) (0.3) (2.6)
Headline earnings 9.3 8.7 22.4
Headline earnings per share (pence) 5.9 5.5 14.2
8. Dividends
Pence per share Six months ended Pence Year ended
30 June 2014 per share 31 December 2013
£million £million
Final dividend for prior year 3.8 6.0 3.5 5.5
Interim dividend for current year - - 1.6 2.5
3.8 6.0 5.1 8.0
The Directors have declared an interim dividend of 1.7 pence per share which
will be paid on 30 October 2014 to shareholders on the register on 17 October
2014. Shares will become ex-dividend on 16 October 2014. The Group's
dividend policy is to increase dividends progressively whilst maintaining
cover of at least two times underlying earnings per share.
Notes to the Condensed consolidated financial statements continued
9. Retirement benefit schemes
The Group operates one significant defined benefit scheme in the UK and an
overseas defined benefit scheme in the USA. These schemes are closed to new
members and the UK scheme is closed to future accrual.
The amounts recognised in the Condensed consolidated balance sheet are:
£million Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
Fair value of assets 397.1 391.5 394.1
Present value of funded obligation (412.9) (419.4) (414.6)
Net liability recognised in the balance sheet (15.8) (27.9) (20.5)
The amounts recognised in the Condensed consolidated income statement are:
£million Six months Six months Year ended
ended ended 31 December 2013
30 June 2014 30 June 2013
Scheme administration costs 0.3 0.3 1.3
Net interest on employee obligations 0.4 0.7 1.5
Settlements and curtailments - - (0.4)
The triennial valuation of the UK scheme as at April 2013 showed a deficit of
£19.1 million compared with £39.4 million at April 2010. It was agreed with
the Trustee that the existing recovery plan is sufficient to address the
deficit; namely contributions of £4.1 million, £4.3 million and £4.5 million
to be paid over the next three 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. This actuarial
valuation has been updated by the actuaries to assess the assets and
liabilities of the schemes at 30 June 2014.
An actuarial valuation of the USA defined benefit scheme was carried out by
independent qualified actuaries in 2012 using the projected unit credit
method. Pension scheme assets are stated at their market value at 30 June
2014.
Notes to the Condensed consolidated financial statements continued
10. Reconciliation of net cash flow to movement in net (debt)/funds
£million Net cash Borrowings Net
and finance (debt)/funds
leases
At 1 January 2013 59.1 (12.4) 46.7
Cash flow (22.7) (15.1) (37.8)
Non-cash items - (0.1) (0.1)
Exchange differences 0.9 (0.7) 0.2
At 1 July 2013 37.3 (28.3) 9.0
Cash flow 18.9 (1.4) 17.5
Non-cash items - - -
Exchange differences (1.7) 2.1 0.4
At 1 January 2014 54.5 (27.6) 26.9
Cash flow (25.9) (16.0) (41.9)
Non-cash items - (0.1) (0.1)
Exchange differences (0.7) 0.9 0.2
Balance at 30 June 2014 27.9 (42.8) (14.9)
Net cash represents cash and cash equivalents less bank overdrafts. Net cash
includes overdraft balances of £nil (30 June 2013: £nil, 31 December 2013:
£nil).
11. Share capital
During the period the Company issued 278,708 ordinary shares on the vesting of
the Long Term Incentive Plan awards issued in April 2011. The shares were then
allocated to award holders via an Employee Benefit Trust for nil
consideration. A charge of £0.1 million has been recognised in retained
earnings accordingly.
The Company also issued 74,664 ordinary shares as a result of share options
being exercised under the 2004 Approved Plan and Unapproved Plan, the
Sharesave scheme and Share Purchase plans. The aggregate consideration
received was £0.1 million, which was represented by a £0.1 million increase in
share premium.
These transactions led to an increase in share capital of £0.1 million.
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 during the six months ended 30
June 2014 that have affected the financial position or performance of the
Group.
Notes to the Condensed consolidated financial statements continued
13. Principal risks and uncertainties
As described on pages 24 to 27 of the 2013 Annual Report, 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. The Directors do not believe that the risks faced by the Group have
changed significantly during the first six months of 2014, and these relate to
the following areas:
Economic downturn; acquisitions; disposals; new products or technical
capability; operational improvement plan; customer concentration; margin
erosion; health and safety; attract and retain talent; IT delivery and
support; supply chain reliance and costs; business continuity; product
liability and contractual risk; legal and regulatory compliance and financial
risks.
14. Post balance sheet event
On 14 July 2014 the Group announced the acquisition of Roxspur. Roxspur is a
leading UK supplier of temperature, flow, pressure and level sensors, together
with calibration services, for critical applications serving global customers
in segments including oil and gas, power generation, water management and
materials processing. The acquisition will form part of the Sensing and
Control division.
Initial net consideration of £7.5 million was paid in cash with a further
amount of up to £2.5 million payable in cash in 2016 based on the performance
of the business in the period from completion to 31 December 2015.
This information is provided by RNS
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