REG - Vesuvius plc - Final Results <Origin Href="QuoteRef">VSVS.L</Origin> - Part 2
03/03/2016 07:12
- Part 2: For the preceding part double click ID:nRSC8744Qa
(16.6) - (17.0) (17.0)
Restructuring charges 4 - (14.6) (14.6) - - -
Operating profit/(loss) 124.0 (31.2) 92.8 142.8 (17.0) 125.8
Net finance costs 5 (15.4) - (15.4) (16.4) - (16.4)
Share of post-tax profit of joint ventures - - - 1.4 - 1.4
Profit on disposal of continuing operations 6 - - - - 0.4 0.4
Profit/(loss) before tax 108.6 (31.2) 77.4 127.8 (16.6) 111.2
Income tax (charge)/credits 7 (27.7) 2.9 (24.8) (32.9) 25.8 (7.1)
Profit/(loss) from:
Continuing operations 80.9 (28.3) 52.6 94.9 9.2 104.1
Discontinued operations 16 - 1.4 1.4 - (3.6) (3.6)
Profit/(loss) 80.9 (26.9) 54.0 94.9 5.6 100.5
Profit attributable to:
Owners of the parent 75.7 (26.9) 48.8 90.3 5.6 95.9
Non-controlling interests 5.2 - 5.2 4.6 - 4.6
Profit/(loss) 80.9 (26.9) 54.0 94.9 5.6 100.5
Earnings per share - pence 8
Continuing operations - basic 17.6 36.8
- diluted 17.5 36.7
Total operations - basic 18.1 35.5
- diluted 18.1 35.4
Group Statement of Comprehensive Income
For the year ended 31 December 2015
2015 2014
£m £m
Profit 54.0 100.5
Other comprehensive income/(loss), net of income tax
Items that will not be subsequently reclassified to income statement:
Remeasurement of defined benefit liabilities/assets 13.0 (9.9)
Income tax relating to items not reclassified 1.6 0.5
Items that may be subsequently reclassified to income statement:
Exchange differences on translation of the net assets of foreign operations (29.3) (9.6)
Exchange translation differences arising on net investment hedges (6.1) (0.3)
Change in fair value of cash flow hedges - (0.2)
Change in fair value of available-for-sale investments - (0.2)
Other comprehensive loss, net of income tax (20.8) (19.7)
Total comprehensive income 33.2 80.8
Total comprehensive income attributable to:
Owners of the parent 28.2 75.7
Non-controlling interests 5.0 5.1
Total comprehensive income 33.2 80.8
Group Statement of Cash Flows
For the year ended 31 December 2015
2015 2014
Notes £m £m
Cash flows from operating activities
Cash generated from operations 140.0 145.0
Net interest paid (13.6) (12.0)
Income taxes paid (31.8) (24.4)
Net cash inflow from operating activities 94.6 108.6
Cash flows from investing activities
Capital expenditure (38.1) (53.1)
Proceeds from the sale of property, plant and equipment 1.1 2.0
Proceeds from the sale of investments 0.3 0.6
Acquisition of subsidiaries and joint ventures, net of cash acquired 15 (25.1) (23.4)
Dividends received from joint ventures - 0.6
Other investing outflows (1.6) (2.3)
Net cash outflow from investing activities (63.4) (75.6)
Net cash inflow before financing activities 31.2 33.0
Cash flows from financing activities
Proceeds from/(repayment of) borrowings 10 44.7 (9.8)
Settlement of forward foreign exchange contracts 3.9 4.8
Purchase of own shares (5.2) (0.5)
Borrowing facility arrangement costs (1.4) -
Dividends paid to equity shareholders 9 (43.9) (41.2)
Dividends paid to non-controlling shareholders (2.2) (2.6)
Net cash outflow from financing activities (4.1) (49.3)
Net increase/(decrease) in cash and cash equivalents 10 27.1 (16.3)
Cash and cash equivalents at 1 January 38.5 52.8
Effect of exchange rate fluctuations on cash and cash equivalents 1.4 2.0
Cash and cash equivalents at 31 December 67.0 38.5
Continuing Discontinued 2015 Continuing Discontinued 2014
operations operations Total operations operations Total
£m £m £m £m £m £m
Free cash flow
Net cash inflow/(outflow) from operating activities 100.8 (6.2) 94.6 109.1 (0.5) 108.6
Additional funding contributions into Group pension plans 3.7 - 3.7 3.2 - 3.2
Capital expenditure (38.1) - (38.1) (53.1) - (53.1)
Proceeds from the sale of property, plant and equipment 1.1 - 1.1 2.0 - 2.0
Dividends received from joint ventures - - - 0.6 - 0.6
Dividends paid to non-controlling shareholders (2.2) - (2.2) (2.6) - (2.6)
Free cash flow 65.3 (6.2) 59.1 59.2 (0.5) 58.7
Group Balance Sheet
As at 31 December 2015
2015 2014
Notes £m £m
Assets
Property, plant and equipment 285.3 291.8
Intangible assets 683.7 703.9
Employee benefits - net surpluses 12 59.9 49.8
Interests in joint ventures 16.1 16.9
Investments 3.0 3.3
Income tax recoverable 1.3 2.9
Deferred tax assets 70.7 71.4
Other receivables 19.0 16.5
Total non-current assets 1,139.0 1,156.5
Cash and short-term deposits 101.5 76.9
Inventories 168.0 191.9
Trade and other receivables 316.6 334.1
Income tax recoverable 2.8 4.0
Derivative financial instruments 0.5 -
Total current assets 589.4 606.9
Total assets 1,728.4 1,763.4
Equity
Issued share capital 27.8 27.8
Retained earnings 2,346.5 2,332.1
Other reserves (1,501.9) (1,466.7)
Equity attributable to the owners of the parent 872.4 893.2
Non-controlling interests 32.7 29.9
Total equity 905.1 923.1
Liabilities
Interest-bearing borrowings 351.7 304.9
Employee benefits - net liabilities 12 95.2 100.9
Other payables 17.0 18.2
Provisions 29.5 31.9
Deferred tax liabilities 44.6 50.3
Total non-current liabilities 538.0 506.2
Interest-bearing borrowings 41.4 40.3
Trade and other payables 178.0 221.0
Income tax payable 48.3 51.8
Provisions 17 17.6 20.8
Derivative financial instruments - 0.2
Total current liabilities 285.3 334.1
Total liabilities 823.3 840.3
Total equity and liabilities 1,728.4 1,763.4
Net debt
Interest-bearing borrowings - non-current 351.7 304.9
- current 41.4 40.3
Cash and short-term deposits (101.5) (76.9)
Net debt 10 291.6 268.3
Group Statement of Changes in EquityFor the year ended 31 December 2015
Owners Non-
Issued Other Retained of the controlling Total
share capital reserves earnings parent interests equity
£m £m £m £m £m £m
As at 1 January 2014 27.8 (1,455.8) 2,284.6 856.6 27.3 883.9
Profit - - 95.9 95.9 4.6 100.5
Other comprehensive income/(loss), net of income taxes:
Remeasurement of defined benefit liabilities/assets - - (9.9) (9.9) - (9.9)
Income tax relating to items not reclassified - - 0.5 0.5 - 0.5
Exchange differences on translation of the net assets of foreign operations - (10.2) - (10.2) 0.6 (9.6)
Exchange differences on translation of net investment hedges - (0.3) - (0.3) - (0.3)
Change in fair value of cash flow hedges - (0.2) - (0.2) - (0.2)
Change in fair value of available-for-sale investments - (0.2) - (0.2) - (0.2)
Other comprehensive (loss)/income, net of income tax - (10.9) (9.4) (20.3) 0.6 (19.7)
Total comprehensive (loss)/income - (10.9) 86.5 75.6 5.2 80.8
Purchase of own shares - - (0.5) (0.5) - (0.5)
Recognition of share-based payments - - 2.7 2.7 - 2.7
Dividends paid (note 9) - - (41.2) (41.2) (2.6) (43.8)
Total transactions with owners - - (39.0) (39.0) (2.6) (41.6)
As at 1 January 2015 27.8 (1,466.7) 2,332.1 893.2 29.9 923.1
Profit - - 48.8 48.8 5.2 54.0
Other comprehensive income/(loss), net of income taxes:
Remeasurement of defined benefit liabilities/assets - - 13.0 13.0 - 13.0
Income tax relating to items not reclassified - - 1.6 1.6 - 1.6
Exchange differences on translation of the net assets of foreign operations - (29.1) - (29.1) (0.2) (29.3)
Exchange differences on translation of net investment hedges - (6.1) - (6.1) - (6.1)
Other comprehensive (loss)/income, net of income tax (35.2) 14.6 (20.6) (0.2) (20.8)
Total comprehensive (loss)/income (35.2) 63.4 28.2 5.0 33.2
Purchase of own shares - - (5.2) (5.2) - (5.2)
Recognition of share-based payments - - 0.1 0.1 - 0.1
Dividends paid (note 9) - - (43.9) (43.9) (2.2) (46.1)
Total transactions with owners - - (49.0) (49.0) (2.2) (51.2)
As at 31 December 2015 27.8 (1,501.9) 2,346.5 872.4 32.7 905.1
Notes to the financial statements
1 Basis of preparation
1.1 Basis of accounting
The financial information set out in this annual results announcement does not
constitute the Company's statutory accounts for the years ended 31 December
2015 or 2014, but is derived from those accounts. Statutory accounts for 2014
have been delivered to the registrar of companies and those for 2015 will be
delivered in due course. The auditor has reported on those accounts; their
reports were (i) unqualified (ii) did not include a reference to any matters
to which the auditor drew attention by way of emphasis without qualifying
their report and (iii) did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006.
1.2 Basis of consolidation
The Consolidated Financial Statements of the Group incorporate the financial
statements of the Company and entities controlled by the Company (its
'subsidiaries'). Control exists when the Company has the power to direct the
relevant activities of an entity that significantly affect the entity's return
so as to have rights to the variable return from its activities. In assessing
whether control exists, potential voting rights that are currently exercisable
are taken into account. The results of subsidiaries acquired or disposed of
during the year are included in the Group income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those detailed
herein to ensure that the Group financial statements are prepared on a
consistent basis. All intra-Group transactions, balances, income and expenses
are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's interest therein. Non-controlling
interests consist of the amount of those interests at the date of the original
business combination together with the non-controlling interests' share of
profit or loss, each component of other comprehensive income and dividends
paid since the date of the combination. Total comprehensive income is
attributed to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
1.3 Going concern
The Directors have prepared cash flow forecasts for the Group for a period in
excess of 12 months from the date of approval of the 2015 financial
statements. These forecasts reflect an assessment of current and future
end-market conditions and their impact on the Group's future trading
performance. The forecasts show that the Group will be able to operate within
the current committed debt facilities and show continued compliance with the
Company's financial covenants. On the basis of the exercise described above
and the Group's available committed debt facilities, the Directors consider
that the Group and Company have adequate resources to continue in operational
existence for 12 months from the date of signing the 2015 financial
statements. Accordingly, they continue to adopt a going concern basis in
preparing the financial statements of the Group and the Company.
1.4 Functional and presentation currency
The financial statements are presented in millions of pounds sterling, which
is the functional currency of the Company, and rounded to one decimal place.
1.5 Disclosure of 'separately reported items'
IAS 1 Presentation of Financial Statements, provides no definitive guidance as
to the format of the income statement, but states key lines which should be
disclosed. It also encourages the disclosure of additional line items and the
reordering of items presented on the face of the income statement when
appropriate for a proper understanding of the entity's financial performance.
In accordance with IAS 1, the Company has adopted a columnar presentation for
its Group income statement, to separately identify Headline Performance
results, as the Directors consider that this gives a better view of the
underlying results of the ongoing business. As part of this presentation
format, the Company has adopted a policy of disclosing separately on the face
of its Group income statement, within the column entitled 'Separately reported
items', the effect of any components of financial performance for which the
Directors consider separate disclosure would assist both in a better
understanding of the financial performance achieved and in making projections
of future results. In its adoption of this policy, the Company applies an
even-handed approach to both gains and losses and aims to be both consistent
and clear in its accounting and disclosure of such items.
Both materiality and the nature and function of the components of income and
expense are considered in deciding upon such presentation. Such items may
include, inter alia, the financial effect of exceptional items which occur
infrequently, such as major restructuring activity, initial recognition and
subsequent increase, decrease and amortisation of US deferred tax assets,
together with items always reported separately, such as amortisation charges
relating to acquired intangible assets, profits or losses arising on the
disposal of continuing or discontinued operations and the taxation impact of
the aforementioned exceptional items and items reported separately.
1.6 New and revised IFRS
IFRS 9 Financial Instruments (effective after 1 January 2018, for the year-end
2018), replaces the existing guidance in IAS 39 Financial Instruments
Recognition and Measurement. IFRS 9 includes revised guidance on the
classification and measurement of financial instruments, including a new
expected credit loss model for calculating impairment on financial assets, and
new general hedge accounting requirements. It also carries forward the
guidance on recognition and derecognition of financial instruments from IAS
39. The Group is currently assessing the potential impact on its Consolidated
Financial Statements resulting from the application of IFRS 9.
IFRS 15 Revenue from Contracts with Customers (effective after 1 January 2018,
for the year-end 2018), establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaces existing revenue
recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts
and IFRIC 13 Customer Loyalty Programmes. Based on a preliminary assessment of
the adoption of IFRS 15, the Group currently does not believe there will be a
significant impact on its Consolidated Financial Statements.
IFRS 16 Leases (effective after 1 January 2019, for the year- end 2019),
replaces the existing guidance in IAS 17 Leases. IFRS 16 provides a single
lessee accounting model, requiring lessees to recognise assets and liabilities
for all leases unless the lease term is 12 months or less or the underlying
asset has a low value. The Group is currently assessing the potential impact
on its Consolidated Financial Statements resulting from the application of
IFRS 16.
Other new or amended standards are not expected to have a significant impact
on the Group's financial statements.
2. Segment information
Operating segments for continuing operations
Operating segments are reported in a manner consistent with the internal
reporting provided to the Executive Directors of the Board, who make the key
operating decisions and are responsible for allocating resources and assessing
performance of the operating segments. Reflecting the Group's management and
internal reporting structure, segmental information is presented in respect of
the two main business segments: Steel and Foundry.
Segment revenue represents revenue from external customers (inter-segment
revenue is not material). Trading profit includes items directly attributable
to a segment as well as those items that can be allocated on a reasonable
basis.
2.1 Income Statement
The operating segment results from continuing operations for 2015 and 2014 are
presented below.
2015
Steel Foundry Continuing operations
£m £m £m
Segment revenue 897.6 424.4 1,322.0
Segment EBITDA 103.8 57.3 161.1
Segment depreciation (24.3) (12.8) (37.1)
Segment trading profit 79.5 44.5 124.0
Amortisation of acquired intangible assets (16.6)
Restructuring charges (14.6)
Operating profit 92.8
Net finance costs (15.4)
Profit before tax 77.4
2014
Steel Foundry Continuingoperations
£m £m £m
Segment revenue 981.4 463.0 1,444.4
Segment EBITDA 121.9 59.4 181.3
Segment depreciation (25.5) (13.0) (38.5)
Segment trading profit 96.4 46.4 142.8
Amortisation of acquired intangible assets (17.0)
Operating profit 125.8
Net finance costs (16.4)
Share of post-tax profit of joint ventures 1.4
Profit on disposal of continuing operations 0.4
Profit before tax 111.2
3. Amortisation of intangible assets
Other intangible assets arose in 2008 on the acquisition of Foseco plc and are
being amortised on a straight-line basis over their estimated useful lives.
The assets acquired and their remaining useful lives are shown below.
Net book
Remaining value
useful life 2015
years £m
Customer relationships (useful life: 20 years) 12.3 60.1
Trade name (useful life: 20 years) 12.3 44.3
Intellectual property rights (useful life: ten years) 2.3 18.1
122.5
4. Restructuring charges from continuing operations
The 2015 restructuring charges were £14.6m (2014: nil). During the year a
Group-wide restructuring programme was initiated resulting in charges of
£15.5m (2014: nil) reflecting redundancy costs of £13.6m, plant closure costs
of £1.3m, and consultancy fees of £0.6m. This was partially offset by a
release of onerous lease provisions of £0.5m (2014: nil) and a £0.4m (2014:
nil) release of provisions for potential claims that have now expired relating
to the termination of agents.
The net tax credit attributable to the total restructuring charges was £1.5m
(2014: nil).
Cash costs of £11.5m (2014: £5.8m) were incurred in the year in respect of the
restructuring programme leaving provisions made but unspent of £9.8m as at 31
December 2015 (2014: £8.0m), of which £3.3m relates to future costs in respect
of leases expiring between one and seven years.
5. Finance costs
Total net finance costs for the year of £15.4m is analysed in the table
below.
2015 2014
£m £m
Interest payable on borrowings
Loans, overdrafts and factoring arrangements 14.9 14.2
Obligations under finance leases 0.1 0.1
Amortisation of capitalised arrangement fees 0.4 1.8
Total interest payable on borrowings 15.4 16.1
Interest on net retirement benefits obligations 0.9 1.8
Unwinding of discounted provisions 1.0 1.1
Finance income (1.9) (2.6)
Total net finance costs 15.4 16.4
6. Profit on disposal of continuing operations
The profit on disposal of continuing operations in 2015 is £nil (2014: £0.4m).
In 2014, profit on disposal of continuing operations comprised £0.8m profit on
the sale of non-current assets in the USA and Czech Republic, and a £0.4m loss
on the dilution of interests in an investment holding in Italy.
7. Income tax costs
The Group's effective tax rate, based on the income tax costs associated with
headline performance of £27.7m (2014: £32.9m), was 25.5% in 2015 (2014:
26.0%)
The income tax credit on separately reported items of £2.9m (2014: £25.8m)
comprises non-cash deferred tax movements relating to the amortisation of a
deferred tax liability arising from the 2008 acquisition of Foseco plc (£4.7m;
2014: £4.0m) and tax credits relating to restructuring charges (£1.5m; 2014:
£nil), net of movements in the deferred tax asset previously recognised in
respect of US tax losses and certain other temporary differences (£3.3m; 2014:
£21.8m credit).
The net income tax credit recognised directly in the Group statement of
comprehensive income of £1.6m (2014: £0.5m) comprises £0.9m (2014: nil) in
respect of deferred tax on pension obligations and £0.7m (2014: nil) in
respect of exchange differences.
8. Earnings per share ('EPS')
8.1 Earnings for EPS
Basic and diluted EPS from continuing operations are based upon the profit
attributable to owners of the parent, as reported in the Group income
statement, of £47.4m (2014: £99.5m), being the profit for the year of £52.6m
(2014: £104.1m) less non-controlling interests of £5.2m (2014: £4.6m);
headline and diluted headline EPS are based upon headline profit from
continuing operations attributable to owners of the parent of £75.7m (2014:
£90.3m). The table below reconciles these different profit measures.
Continuing Continuing
operations2015 operations2014
£m £m
Profit attributable to owners of the parent 47.4 99.5
Adjustments for separately reported items:
Amortisation of acquired intangible assets 16.6 17.0
Restructuring charges 14.6 -
(Profit) on disposal of continuing operations - (0.4)
Income tax credit (2.9) (25.8)
Headline profit attributable to owners of the parent 75.7 90.3
8.2 Weighted average number of shares
2015 2014
£m £m
For calculating basic and headline EPS 269.7 270.3
Adjustment for potentially dilutive ordinary shares 0.6 0.8
For calculating diluted and diluted headline EPS 270.3 271.1
For the purposes of calculating diluted and diluted headline EPS, the weighted
average number of ordinary shares is adjusted to include the weighted average
number of ordinary shares that would be issued on the conversion of all
potentially dilutive ordinary shares expected to vest, relating to the
Company's share-based payment plans. Potential ordinary shares are only
treated as dilutive when their conversion to ordinary shares would decrease
EPS, or increase loss per share, from continuing operations.
8.3 Per share amounts
Continuing Discontinued 2015 Continuing Discontinued 2014
operations operations total operations operations total
pence pence pence pence pence pence
Earnings/(loss) per share - basic 17.6 0.5 18.1 36.8 (1.3) 35.5
- headline 28.1 0.5 28.6 33.4 (1.3) 32.1
- diluted 17.5 0.6 18.1 36.7 (1.3) 35.4
- diluted headline 28.0 0.5 28.5 33.3 (1.3) 32.0
9. Dividends
2015 2014
£m £m
Amounts recognised as dividends
Final dividend for the year ended 31 December 2013 of 10.25p per ordinary share - 27.7
Interim dividend for the year ended 31 December 2014 of 5.00p per ordinary share - 13.5
Final dividend for the year ended 31 December 2014 of 11.125p per ordinary share 30.1 -
Interim dividend for the year ended 31 December 2015 of 5.15p per ordinary share 13.8 -
43.9 41.2
A final dividend for the year ended 31 December 2014 of £30.1m (2013: £27.7m)
equivalent to 11.125 pence (2013: 10.25 pence) per ordinary share, was paid in
May 2015 (May 2014) and an interim dividend for the year ended 31 December
2015 of £13.8m (2014: £13.5m) equivalent to 5.15 pence (2014: 5.00 pence) per
ordinary share was paid in September 2015 (September 2014).
A proposed final dividend for the year ended 31 December 2015 of £30.0m,
equivalent to 11.125 pence per ordinary share, is subject to approval by
shareholders at the Company's Annual General Meeting and has not been included
as a liability in these financial statements. If approved by shareholders, the
dividend will be paid on 20 May 2016 to ordinary shareholders on the register
at 8 April 2016.
10. Net debt
Balance as at Foreign Balance as at
1 January exchange Non-cash 31 December
2015 adjustments movements Cash flow 2015
£m £m £m £m £m
Cash and cash equivalents
Cash at bank and in hand 76.9 (0.2) - 24.8 101.5
Bank overdrafts (38.4) 1.6 - 2.3 (34.5)
38.5 1.4 - 27.1 67.0
Borrowings, excluding bank overdrafts
Current (2.2) (0.1) - (5.2) (7.5)
Non-current (305.8) (8.0) - (39.5) (353.3)
(308.0) (8.1) - (44.7) (360.8)
Capitalised arrangement fees 1.2 - (0.4) 1.4 2.2
Net debt (268.3) (6.7) (0.4) (16.2) (291.6)
As at 31 December 2015, the Group had committed borrowing facilities of
£532.4m (2014: £647.4m), of which £181.1m (2014: £343.5m) were undrawn. These
undrawn facilities are due to expire in June 2020. The Group's borrowing
requirements are met by US Private Placement Loan Notes ("USPP") and a
multi-currency committed syndicated bank facility of £300m (2014: £425m). The
USPP facility was fully drawn as at 31 December 2015 and amounted to £232.4m
($310m and E30m), of which $110m is repayable in 2017, $140m in 2020, E15m in
2021, $30m in 2023, E15m in 2025 and $30m in 2028. The syndicated bank
facility is repayable in June 2020.
11. Cash generated from operations
Continuing Discontinued 2015 Continuing Discontinued 2014
operations operations total Operations Operations total
£m £m £m £m £m £m
Operating profit 92.8 1.4 94.2 125.8 (3.6) 122.2
Adjustments for:
Amortisation of acquired intangible assetsRestructuring charges 16.6 - 16.6 17.0 - 17.0
Restructuring charges 14.6 - 14.6 - - -
Depreciation 37.1 - 37.1 38.5 - 38.5
EBITDA 161.1 1.4 162.5 181.3 (3.6) 177.7
Net (increase)/decrease in trade and other working capital 0.3 (7.6) (7.3) (26.8) 3.1 (23.7)
Outflow related to restructuring charges (11.5) - (11.5) (5.8) - (5.8)
Additional pension funding contributions (3.7) - (3.7) (3.2) - (3.2)
Cash generated from operations 146.2 (6.2) 140.0 145.5 (0.5) 145.0
12. Employee benefits
The net employee benefits balance as at 31 December 2015 of £35.3m (2014:
£51.1m) in respect of the Group's defined benefit retirement plans and other
post-retirement benefits plans, results from an actuarial valuation of the
Group's defined benefit pension and other post-retirement obligations as at
that date. As analysed in the following table, the net balance comprised net
surpluses (assets) of £59.9m (2014: £49.8m), relating almost entirely to the
Group's main defined benefit pension plan in the UK, together with net
liabilities (deficits) of £95.2m (2014: £100.9m).
2015 2014
£m £m
Employee benefits - net surpluses
UK defined benefit pension plan 59.5 49.8
ROW defined benefit pension plans 0.4 -
59.9 49.8
Employee benefits - net liabilities
UK (ex-gratia) defined benefit pension plan 1.8 1.0
US defined benefit pension plans 37.7 35.6
German defined benefit pension plans 36.3 39.9
ROW defined benefit pension plans 13.7 19.0
Other post-retirement benefit obligations 5.7 5.4
95.2 100.9
The total net charge of £8.1m (2014: £4.1m) recognised in the Group income
statement in respect of the Group's defined benefit retirement plans and other
post-retirement benefits plans is recognised in the following lines.
2015 2014
£m £m
In arriving at trading profit: -within other manufacturing costs 2.1 2.0
-within administration, selling and distribution costs 4.3 0.3
In arriving at profit before tax: -within restructuring charges 0.8 -
-within net finance costs 0.9 1.8
Total net charge - continuing operations 8.1 4.1
As at 31 December 2014, the defined benefit pension plan in the Netherlands
was converted to a defined contribution plan, eliminating the net obligation
of the defined benefit plan, resulting in a settlement gain of £3.6m from the
conversion of the plan, recognised within trading profit.
13. Contingent liabilities
Guarantees given by the Group under property leases of operations disposed of
amounted to £1.7m (2014: £2.3m).
Vesuvius has extensive international operations and is subject to various
legal and regulatory regimes, including those covering taxation and
environmental matters. Several of Vesuvius' subsidiaries are parties to legal
proceedings, certain of which are insured claims arising in the ordinary
course of the operations of the company involved, and the Directors are aware
of a number of issues which are, or may be, the subject of dispute with tax
authorities. Reserves are made for the expected amounts payable in respect of
known or probable costs resulting both from legal or other regulatory
requirements, or from third-party claims. As the settlement of many of the
obligations for which reserve is made is subject to legal or other regulatory
process, the timing and amount of the associated outflows is subject to some
uncertainty.
Certain of Vesuvius' subsidiaries are subject to lawsuits, predominantly in
the US, relating to a small number of products containing asbestos
manufactured prior to the acquisition of those subsidiaries by Vesuvius. These
suits usually also name many other product manufacturers. To date, Vesuvius is
not aware of there being any liability verdicts against any of these
subsidiaries. A number of lawsuits have been withdrawn, dismissed or settled
and the amount paid, including costs, in relation to this litigation has not
had a material adverse effect on Vesuvius' financial position or results of
operations.
14. Related parties
All transactions with related parties are conducted on an arm's length basis
and in accordance with normal business terms. Transactions between related
parties that are Group subsidiaries are eliminated on consolidation.
15. Acquisition of subsidiaries and joint ventures, net of cash acquired
On the 15 May, the Group acquired a 100% ownership interest in the Sidermes
Group ('Sidermes'), a leading supplier of temperature and chemical measurement
solutions.
2015
£m
Consideration transferred
Cash 24.4
Total consideration transferred 24.4
Identifiable assets acquired and liabilities assumed at fair value
Inventories 6.7
Trade and other receivables 6.4
Property, plant and equipment 5.7
Cash 0.6
Trade and other payables (3.7)
Deferred tax liability (1.2)
Employee benefits net liabilities (0.9)
Interest bearing borrowings (0.8)
Provisions (0.3)
Total identifiable net assets at fair value 12.5
Goodwill 11.9
Fair values are provisional and may be revised.
The £25.1m disclosed in the Group statement of cash flows in respect of the
acquisition of subsidiaries, net of cash acquired, comprised £24.4m paid for
current year acquisitions, less £0.6m of cash acquired with current year
acquisitions and a release of contingent consideration payment for ECIL Met
Tec and Process Metrix (£0.8m and £0.5m respectively).
These acquisitions contributed £7.5m of revenue, and a £0.6m trading loss to
the Group's results. Had the acquisition occurred on 1 January 2015, the
contribution would have been £12.9m of revenue, and a trading loss of £0.6m.
The Group incurred acquisition related costs of £0.1m relating to external
legal fees and due diligence costs which have been included within
administration costs in the Group income statement.
The goodwill arising from the acquisition is attributable to the synergies
which are expected from combining Sidermes, a complementary business, with the
operations of the Group.
16. Discontinued operations
The net cash outflow from discontinued operations of £6.2m during 2015
represented the net payment of £5.5m to MacDermid following the settlement
agreement in 2014, £0.4m VAT recovered, and £0.3m other payments. Discontinued
operations income of £1.4m related to a partial reimbursement of costs charged
in 2014 for the MacDermid claim.
Discontinued operations in 2014 comprise of a release of £1.1m of provision
relating to a VAT case which was resolved in Vesuvius' favour and a charge of
£4.7m in relation to settlement of actions brought by MacDermid (incorporated
in the United States) against Vesuvius and Alent plc that arose out of
corporate activity between the parties in 2006.
16.1 Results of discontinued operations
2015 2014
£m £m
Other income 1.4 -
Expenses - (3.6)
Profit/(loss) before tax 1.4 (3.6)
Income tax costs - -
Profit on disposal of discontinued operations - -
Profit/(loss) for the year attributable to owners of the parent 1.4 (3.6)
Earnings per share - pence
Basic 0.5 (1.3)
Diluted 0.5 (1.3)
17. Provisions
During 2015 the Group recognised net charges of £9.2m (2014: net charges
£5.8m) in the income statement to provide for various litigation settlements
and other claims.
18. Non-GAAP financial measures
The Company uses a number of non-Generally Accepted Accounting Practice
("non-GAAP") financial measures in addition to those reported in accordance
with IFRS. The Directors believe that these non-GAAP measures, listed below,
are important when assessing the underlying financial and operating
performance of the Group and its divisions.
18.1 Headline
Headline performance is from continuing operations and before items reported
separately on the face of the income statement.
18.2 Underlying
Underlying performance is adjusted to exclude the effects of changes in
exchange rates, business acquisitions and disposals.
18.3 Return on sales
Return on sales is calculated as trading profit divided by revenue.
18.4 Trading profit
Trading profit is defined as operating profit before separately reported
items. The Directors believe that trading profit is an important measure of
the underlying trading performance of the Group.
18.5 Headline profit before tax
Headline profit before tax is calculated as the net total of trading profit,
plus the Group's share of post-tax profit of joint ventures and total net
finance costs associated with headline performance.
18.6 Effective tax rate
The Group's effective tax rate is calculated on the income tax costs
associated with headline performance, divided by headline profit before tax
and before the Group's share of post-tax profit of joint ventures.
18.7 Headline earnings per share
Headline earnings per share is calculated by dividing headline profit before
tax less associated income tax costs, attributable to owners of the parent by
the weighted average number of ordinary shares in issue during the year.
18.8 Operating cash flow
Operating cash flow is cash generated from continuing operations before
restructuring and additional pension funding contributions but after deducting
capital expenditure net of asset disposals.
18.9 Free cash flow
Free cash flow is defined as net cash flow from operating activities after net
outlays for the purchase and sale of property, plant and equipment, dividends
from joint ventures and dividends paid to non-controlling shareholders, but
before additional funding contributions to Group pension plans.
18.10 Average working capital to sales ratio
The average working capital to sales ratio is calculated as the percentage of
average working capital balances to the total revenue for the year, using
constant foreign exchange rates. Average trade working capital (comprising
inventories, trade receivables and trade payables) is calculated as the
average of the 12 previous month-end balances.
18.11 Earnings before interest tax depreciation and amortisation ('EBITDA')
EBITDA is calculated as the total of trading profit before depreciation
charges and amortisation of non-acquired intangible charges.
18.12 Net interest
Net interest is calculated as interest payable on borrowings less interest
receivable, excluding any item separately reported.
18.13 Interest cover
Interest cover is the ratio of EBITDA to net interest.
18.14 Net debt
Net debt comprises the net total of current and non-current interest-bearing
borrowings and cash and short-term deposits.
18.15 Net debt to EBITDA
Net debt to EBITDA is the ratio of net debt at the year-end to EBITDA for that
year.
18.16 Return on net assets ('RONA')
RONA is calculated as trading profit plus share of post-tax profit of joint
ventures, divided by average net operating assets, at constant foreign
exchange rates (being the average over the previous 12 months of property,
plant and equipment, trade working capital and other operating receivables and
payables).
18.17 Constant rates
Figures presented at constant rates represent December 2014 numbers
re-translated to December 2015 exchange rates.
19. Exchange rates
The Group reports its results in pounds sterling. A substantial portion of the
Group's revenue and profits are denominated in currencies other than pounds
sterling. It is the Group's policy to translate the income statements and cash
flow statements of its overseas operations into pounds sterling using average
exchange rates for the year reported (except when the use of average rates
does not approximate the exchange rate at the date of the transaction, in
which case the transaction rate is used) and to translate balance sheets using
year-end rates. The principal exchange rates used were as follows:
Income and expenseAverage rates Assets and liabilitiesYear End rates
Change Change
2015 2014 2015 2014
US Dollar 1.5288 1.6485 7.3% 1.4738 1.5573 5.4%
Euro 1.3776 1.2406 -11.0% 1.3571 1.2873 -5.4%
Chinese Renminbi 9.6034 10.1570 5.5% 9.5681
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