REG - Vesuvius plc - Final Results <Origin Href="QuoteRef">VSVS.L</Origin> - Part 2
02/03/2017 07:06
- Part 2: For the preceding part double click ID:nRSB2923Ya
Quality management programmes including stringent quality control standards, monitoring and reporting · Experienced technical staff knowledgeable in the application of our products and technology· Targeted global Insurance programme· Experienced internal legal department controlling third party contracting
damage to infrastructure from incident at customer plant· Customer claims from product quality issues· Injury to staff and contractors
Group Income Statement
For the year ended 31 December 2016
2016 2015
Headline performance Separately reported items Total Headline performance Separately reported items Total
Notes £m £m £m £m £m £m
Continuing operations
Revenue 2 1,401.4 - 1,401.4 1,322.0 - 1,322.0
Manufacturing costs (1,018.6) - (1,018.6) (968.9) - (968.9)
Administration, selling and distribution costs (249.5) - (249.5) (229.1) - (229.1)
Tradingprofit 2 133.3 - 133.3 124.0 - 124.0
Amortisation of intangible assets - (17.1) (17.1) - (16.6) (16.6)
Restructuring charges 4 - (28.5) (28.5) - (14.6) (14.6)
Gain on employee benefit plan - 5.2 5.2 - - -
Operating profit/(loss) 133.3 (40.4) 92.9 124.0 (31.2) 92.8
Net finance costs 5 (14.5) - (14.5) (15.4) - (15.4)
Share of post-tax profit of joint ventures 1.0 - 1.0 - - -
Profit/(loss) before tax 119.8 (40.4) 79.4 108.6 (31.2) 77.4
Income tax (costs)/credits 6 (31.4) 5.0 (26.4) (27.7) 2.9 (24.8)
Profit/(loss) from:
Continuing operations 88.4 (35.4) 53.0 80.9 (28.3) 52.6
Discontinued operations 15 - 10.2 10.2 - 1.4 1.4
Profit/(loss) 88.4 (25.2) 63.2 80.9 (26.9) 54.0
Profit attributable to:
Owners of the parent 82.1 (25.2) 56.9 75.7 (26.9) 48.8
Non-controlling interests 6.3 - 6.3 5.2 - 5.2
Profit 88.4 (25.2) 63.2 80.9 (26.9) 54.0
Earnings per share - pence 7
Continuing operations - basic 17.3 17.6
- diluted 17.3 17.5
Total operations - basic 21.1 18.1
- diluted 21.0 18.1
Group Statement of Comprehensive Income
For the year ended 31 December 2016
2016 2015
£m £m
Profit 63.2 54.0
Items that will not be reclassified subsequently to income statement:
Remeasurement of defined benefit liabilities/assets 9.5 13.0
Income tax relating to items not reclassified (0.7) 1.6
Items that may be reclassified subsequently to income statement:
Exchange differences on translation of the net assets of foreign operations 207.7 (29.3)
Exchange translation differences arising on net investment hedges (41.6) (6.1)
Other comprehensive income/(loss), net of income tax 174.9 (20.8)
Total comprehensive income 238.1 33.2
Total comprehensive income attributable to:
Owners of the parent 226.2 28.2
Non-controlling interests 11.9 5.0
Total comprehensive income 238.1 33.2
Group Statement of Cash Flows
For the year ended 31 December 2016
2016 2015
Notes £m £m
Cash flows from operating activities
Cash generated from operations 10 130.2 140.0
Net interest paid (12.1) (13.6)
Income taxes paid (34.2) (31.8)
Net cash inflow from operating activities 83.9 94.6
Cash flows from investing activities
Capital expenditure (31.3) (38.1)
Proceeds from the sale of property, plant and equipment 1.6 1.1
Proceeds from sale of investments - 0.3
Acquisition of subsidiaries and joint ventures, net of cash acquired 14 (7.7) (25.1)
Dividends received from joint ventures 2.0 -
Other investing outflows - (1.6)
Net cash outflow from investing activities (35.4) (63.4)
Net cash inflow before financing activities 48.5 31.2
Cash flows from financing activities
Proceeds from borrowings 9 0.8 44.7
Settlement of forward foreign exchange contracts 20.6 3.9
Purchase of own shares - (5.2)
Borrowing facility arrangement costs - (1.4)
Dividends paid to equity shareholders 8 (43.9) (43.9)
Dividends paid to non-controlling shareholders (2.5) (2.2)
Net cash outflow from financing activities (25.0) (4.1)
Net increase in cash and cash equivalents 9 23.5 27.1
Cash and cash equivalents at 1 January 67.0 38.5
Effect of exchange rate fluctuations on cash and cash equivalents 10.5 1.4
Cash and cash equivalents at 31 December 101.0 67.0
Continuing Discontinued 2016 Continuing Discontinued 2015
operations operations Total operations operations Total
£m £m £m £m £m £m
Free cash flow
Net cash inflow/(outflow) from operating activities 83.9 - 83.9 100.8 (65.2) 94.6
Additional funding contributions into Group pension plans 7.7 - 7.7 3.7 - 3.7
Capital expenditure (31.3) - (31.3) (38.1) - (38.1)
Proceeds from the sale of property, plant and equipment 1.6 - 1.6 1.1 - 1.1
Dividends received from joint ventures 2.0 - 2.0 - - -
Dividends paid to non-controlling shareholders (2.5) - (2.5) (2.2) - (2.2)
Free cash flow 61.4 - 61.4 65.3 (65.2) 59.1
Group Balance Sheet
As at 31 December 2016
2016 2015*
Notes £m £m
Assets
Property, plant and equipment 323.6 285.3
Intangible assets 781.9 684.6
Employee benefits - net surpluses 11 78.8 59.9
Interests in joint ventures 18.0 16.1
Investments 2.6 3.0
Income tax recoverable 1.0 1.3
Deferred tax assets 92.1 70.7
Other receivables 23.4 19.0
Total non-current assets 1,321.4 1,139.9
Cash and short-term deposits 144.4 101.5
Inventories 207.7 167.7
Trade and other receivables 393.2 316.3
Income tax recoverable 3.9 2.8
Derivative financial instruments - 0.5
Total current assets 749.2 588.8
Total assets 2,070.6 1,728.7
Equity
Issued share capital 27.8 27.8
Retained Earnings 2,370.0 2,346.5
Other reserves (1,341.4) (1,501.9)
Equity attributable to the owners of the parent 1,056.4 872.4
Non-controlling interests 42.1 32.7
Total equity 1,098.5 905.1
Liabilities
Interest-bearing borrowings 330.8 351.7
Employee benefits - net liabilities 11 108.2 95.2
Other payables 16.5 17.0
Provisions 16 32.9 29.5
Deferred tax liabilities 48.6 44.6
Total non-current liabilities 537.0 538.0
Interest-bearing borrowings 133.9 41.4
Trade and other payables 232.7 178.2
Income tax payable 41.9 48.3
Provisions 16 25.7 17.7
Derivative financial instruments 0.9 -
Total current liabilities 435.1 285.6
Total liabilities 972.1 823.6
Total equity and liabilities 2,070.6 1,728.7
Net debt
Interest-bearing borrowings - non-current 330.8 351.7
- current 133.9 41.4
Cash and short-term deposits (144.4) (101.5)
Net debt 9 320.3 291.6
*Restated to reflect the amendments to the acquisition balance sheet of
Sidermes SpA (note 14).
Group Statement of Changes in Equity
For the year ended 31 December 2016
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 2015 27.8 (1,466.7) 2,332.1 893.2 29.9 923.1
Profit - - 48.8 48.8 5.2 54.0
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 translation differences arising on 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 8) - - (43.9) (43.9) (2.2) (46.1)
Total transactions with owners - - (49.0) (49.0) (2.2) (51.2)
As at 1 January 2016* 27.8 (1,501.9) 2,346.5 872.4 32.7 905.1
Profit - - 56.9 56.9 6.3 63.2
Remeasurement of defined benefit liabilities/assets - - 9.5 9.5 - 9.5
Income tax relating to items not reclassified - - (0.7) (0.7) - (0.7)
Exchange differences on translation of the net assets of foreign operations - 202.1 - 202.1 5.6 207.7
Exchange translation differences arising on net investment hedges - (41.6) - (41.6) - (41.6)
Other comprehensive (loss)/income, net of income tax - 160.5 8.8 169.3 5.6 174.9
Total comprehensive (loss)/income - 160.5 65.7 226.2 11.9 238.1
Recognition of share-based payments - - 1.7 1.7 - 1.7
Dividends paid (note 8) - - (43.9) (43.9) (2.5) (46.4)
Total transactions with owners - - (42.2) (42.2) (2.5) (44.7)
As at 31 December 2016 27.8 (1,341.4) 2,370.0 1,056.4 42.1 1,098.5
*Restated to reflect the amendments to the acquisition balance sheet of
Sidermes SpA (note 14).
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
2016 or 2015, but is derived from those accounts. Statutory accounts for 2015
have been delivered to the registrar of companies and those for 2016 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 and each component of other comprehensive income 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 2016 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 the foreseeable future. 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
ending 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. Based on an assessment of the adoption of IFRS 9, the Group does not
believe there will be a significant impact on its Consolidated Financial
Statements.
IFRS 15 Revenue from Contracts with Customers (effective after 1 January 2018,
for the year ending 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 an
assessment of the adoption of IFRS 15, the Group 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 ending 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
For reporting purposes, the Group is organised into two main business
segments: Steel and Foundry. It is the Vesuvius Board which makes the key
operating decisions in respect of these segments. The information used by the
Vesuvius Board to review performance and determine resource allocation between
the business segments is presented with the Group's activities segmented
between the two business segments, Steel and Foundry. Taking into account the
basis on which the Group's activities are reported to the Vesuvius Board, the
Directors believe that these two business segments are the appropriate way to
analyse the Group's results.
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
2016
Steel Foundry Continuingoperations
£m £m £m
Segment revenue 942.0 459.4 1,401.4
Segment EBITDA 107.0 68.6 175.6
Segment depreciation (27.8) (14.5) (42.3)
Segment trading profit 79.2 54.1 133.3
Amortisation of acquired intangible assets (17.1)
Restructuring charges (28.5)
Gain on employee benefit plan 5.2
Operating profit 92.9
Net finance costs (14.5)
Share of post-tax profit of joint ventures 1.0
Profit before tax 79.4
2015
Steel Foundry Continuingoperations
£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 intangible assets (16.6)
Restructuring charges (14.6)
Operating profit 92.8
Net finance costs (15.4)
Profit before tax 77.4
3 Amortisation of intangible assets
Other intangible assets are 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 2016
years £m
Foseco
- Customer relationships 11.3 64.8
- Trade name 11.3 40.8
- Intellectual property rights 1.3 10.0
Mould and tundish business Carboox
- Customer relationships 19.9 3.7
- Trade name 1.9 0.4
119.7
4 Restructuring charges from continuing operations
The 2016 restructuring charges were £28.5m (2015: £14.6m). The Group-wide
restructuring programme initiated in 2015 was continued, resulting in charges
of £28.5m (2015: £15.5m) reflecting redundancy costs of £21.4m (2015: £13.6m),
plant closure costs of £4.2m (2015: £1.3m), consultancy fees of £2.0m (2015:
£0.6m) and an inventory write-off of £0.9m (2015: £nil). In 2015 there was
also a release of onerous lease provisions of £0.5m and a £0.4m release of
provisions for potential claims that had since expired relating to the
termination of agents.
The net tax credit attributable to the total restructuring charges was £3.8m
(2015: £1.5m).
Cash costs of £16.8m (2015: £11.5m) (Note 10) were incurred in the year in
respect of the restructuring programme leaving provisions
made but unspent of £18.5m as at 31 December 2016 (2015: £9.8m), of which
£2.7m relates to future costs in respect of leases expiring between one and
six years.
5 Finance costs
Total net finance costs for the year of £14.5m is analysed in the table
below.
2016 2015
£m £m
Interest payable on borrowings
Loans, overdrafts and factoring arrangements 15.1 14.9
Obligations under finance leases 0.2 0.1
Amortisation of capitalised borrowing costs 0.5 0.4
Total interest payable on borrowings 15.8 15.4
Interest on net retirement benefits obligations 1.3 0.9
Adjustments to discounts on provisions and other liabilities (0.2) 1.0
Adjustments to discounts on receivables 0.3 (0.3)
Finance income (2.7) (1.7)
Total net finance costs 14.5 15.4
6 Income tax costs
The Group's effective tax rate, based on the income tax costs associated with
headline performance of £31.4m (2015: £27.7m), was 26.4% in 2016 (2015:
25.5%).
The Group's total income tax costs include a credit of £5.0m (2015: £2.9m)
relating to separately reported items comprising: a credit of £3.8m (2015:
£1.5m credit) in relation to restructuring charges; a credit of £3.7m (2015:
£4.7m credit) relating to the amortisation of intangible assets; a charge of
£2.1m (2015: £3.3m charge) in respect of the potential recognition of US
temporary differences and a charge of £0.4m (2015: £nil) relating to the gain
on employee benefit plan. The net tax charge in the Group statement of
comprehensive income in the year amounted to £0.7m (2015: £1.6m credit)
related to tax on net actuarial gains and losses on employee benefits plans
and tax on exchange differences.
7 Earnings per share ("EPS")
7.1 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 £46.7m (2015: £47.4m), being the profit for the year of £53.0m
(2015: £52.6m) less non-controlling interests of £6.3m (2015: £5.2m); basic
and diluted EPS from total operations are based on the profit attributable to
owners of the parent of £56.9m (2015: £48.8m); headline and diluted headline
EPS are based upon headline profit from continuing operations attributable to
owners of the parent of £82.1m (2015: £75.7m). The table below reconciles
these different profit measures.
Continuing Continuing
operations2016 operations2015
£m £m
Profit attributable to owners of the parent 46.7 47.4
Adjustments for separately reported items: 17.1
Amortisation of intangible assets 17.1 16.6
Restructuring charges 28.5 14.6
Gain on employee benefit plan (5.2) -
Income tax credit (5.0) (2.9)
Headline profit attributable to owners of the parent 82.1 75.7
7.2 Weighted average number of shares
2016 2015
£m £m
For calculating basic and headline EPS 269.9 269.7
Adjustment for dilutive potential ordinary shares 0.8 0.6
For calculating diluted and diluted headline EPS 270.7 270.3
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
dilutive potential 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 earnings per
share, or increase loss per share, from continuing operations.
7.3 Per share amounts
Continuing Discontinued Total Continuing Discontinued Total
operations operations 2016 operations operations 2015
pence pence pence pence pence pence
Earnings per share - basic 17.3 3.8 21.1 17.6 0.5 18.1
- headline 30.4 28.1
- diluted 17.3 3.7 21.0 17.5 0.6 18.1
- diluted headline 30.3 28.0
8 Dividends
2016 2015
£m £m
Amounts recognised as dividends
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
Final dividend for the year ended 31 December 2015 of 11.125p per ordinary share 30.0 -
Interim dividend for the year ended 31 December 2016 of 5.15p per ordinary share 13.9 -
43.9 43.9
A final dividend for the year ended 31 December 2015 of £30.0m (2014: £30.1m),
equivalent to 11.125 pence (2014: 11.125 pence) per ordinary share, was paid
in May 2016 (May 2015) and an interim dividend for the year ended 31 December
2016 of £13.9m (2015: £13.8m), equivalent to 5.15 pence (2015: 5.15 pence) per
ordinary share, was paid in September 2016 (September 2015).
A proposed final dividend for the year ended 31 December 2016 of £30.8m,
equivalent to 11.40 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 19 May 2017 to ordinary shareholders on the register
at 7 April 2017.
9 Net debt
Balance as at Foreign Balance as at
1 January exchange Non-cash 31 December
2016 as restated adjustments movements Cash flow 2016
£m £m £m £m £m
Cash and cash equivalents
Cash at bank and in hand 101.5 17.4 - 25.5 144.4
Bank overdrafts (34.5) (6.9) - (2.0) (43.4)
67.0 10.5 - 23.5 101.0
Borrowings, excluding bank overdrafts
Current (7.5) (8.9) (81.1) 6.4 (91.1)
Non-current (353.3) (52.5) 81.1 (7.2) (331.9)
(360.8) (61.4) - (0.8) (423.0)
Capitalised borrowing costs 2.2 - (0.5) - 1.7
Net debt (291.6) (50.9) (0.5) 22.7 (320.3)
As at 31 December 2016, the Group had committed borrowing facilities of
£576.9m (2015: £532.4m), of which £158.3m (2015: £181.1m) were undrawn. These
undrawn facilities are due to expire in June 2020. The Group's borrowing
requirements are met by USPP and a multi-currency committed syndicated bank
facility of £300m (2015: £300m). The USPP facility was fully drawn as at 31
December 2016 and amounted to £276.9m ($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.
10 Cash generated from operations
Continuing Discontinued Total Continuing Discontinued Total
operations operations 2016 Operations Operations 2015
£m £m £m £m £m £m
Operating profit 92.9 1.2 94.1 92.8 1.4 94.2
Adjustments for:
Amortisation of intangible assetsRestructuring charges 17.1 - 17.1 16.6 - 16.6
Restructuring charges 28.5 - 28.5 14.6 - 14.6
Gains relating to employee benefit plans (5.2) - (5.2) - - -
Depreciation 42.3 - 42.3 37.1 - 37.1
EBITDA 175.6 1.2 176.8 161.1 1.4 162.5
Net (increase)/decrease in trade and other working capital (20.9) (1.2) (22.1) 0.3 (7.6) (7.3)
Outflow related to restructuring charges (16.8) - (16.8) (11.5) - (11.5)
Additional pension funding contributions (7.7) - (7.7) (3.7) - (3.7)
Cash generated from operations 130.2 - 130.2 146.2 (6.2) 140.0
11 Employee benefits
The net employee benefits balance as at 31 December 2016 of £29.4m (2015:
£35.3m) 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 £78.8m (2015: £59.9m), relating entirely to the Group's
main defined benefit pension plan in the UK, together with net liabilities
(deficits) of £108.2m (2015: £95.2m).
2016 2015
£m £m
Employee benefits - net surpluses
UK defined benefit pension plans 78.6 59.5
ROW defined benefit pension plans 0.2 0.4
Net surpluses 78.8 59.9
Employee benefits - net liabilities
UK defined benefit pension plans (1.9) (1.8)
US defined benefit pension plans (37.7) (37.7)
German defined benefit pension plans (45.3) (36.3)
ROW defined benefit pension plans (16.4) (13.7)
Other post-retirement benefit obligations (6.9) (5.7)
Net liabilities (108.2) (95.2)
Total liabilities (29.4) (35.3)
The total net charge of £2.8m (2015: £8.1m) 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.
2016 2015
£m £m
In arriving at trading profit: -within other manufacturing costs 2.0 2.1
-within administration, selling and distribution costs 4.4 4.3
In arriving at profit before tax: -within restructuring charges 0.3 0.8
-gain on employee benefit plan (5.2) -
-within net finance costs 1.3 0.9
Total net charge - continuing operations 2.8 8.1
At 31 December 2016 the settlement gain of £5.2m (2015: £nil) which arose
during the year principally related to the buy-out of members of the US plan
and German members moving their existing plans into a new defined contribution
plan.
12 Contingent liabilities
Guarantees given by the Group under property leases of operations disposed of
amounted to £1.6m (2013: £1.7m).
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.
13 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.
14 Acquisition of subsidiaries and joint ventures, net of cash acquired
14.1 Current year acquisition
On 1 December 2016, the Group acquired a 100% ownership interest in Mastercodi
Industrial Ltda, the mould and tundish flux business of Carboox, for total
consideration of £8.0m, of which £0.7m was deferred. The fair value of the net
assets acquired was £4.9m and included identified intangible assets relating
to customer relationships and trade names of £3.8m. The transaction resulted
in the recognition of £3.1m of goodwill attributable to the synergies which
are expected from combining the business with the operations of the Group.
The £7.7m disclosed in the Group statement of cash flows in respect of the
acquisitions of subsidiaries, net of cash acquired, comprised £7.3m paid for
current year acquisitions and a £0.4m payment of contingent consideration
payment for Process Metrix.
14.2 Prior year acquisition
On 15 May 2015, the Group acquired a 100% ownership interest in the Sidermes
Group ('Sidermes'), a leading supplier of temperature and chemical measurement
solutions. The fair values of the acquired assets and liabilities disclosed as
provisional in the 2015 Annual Report in respect of this acquisition have been
finalised during the period. The following adjustments have been made, as at
the date of acquisition:
Fair values Adjustments Fair value of net
Previously disclosed made assets acquired
Consideration transferred £m £m £m
Cash 24.4 - 24.4
Total consideration transferred 24.4 - 24.4
Identifiable assets acquired and liabilities assumed at fair value
Inventories 6.7 (0.3) 6.4
Trade and other receivables 6.4 (0.3) 6.1
Property, plant and equipment 5.7 - 5.7
Cash 0.6 - 0.6
Trade and other payables (3.7) (0.2) (3.9)
Deferred tax liability (1.2) - (1.2)
Employee benefits net liabilities (0.9) - (0.9)
Interest bearing borrowings (0.8) - (0.8)
Provisions (0.3) (0.1) (0.4)
Total identifiable net assets at fair value 12.5 (0.9) 11.6
Goodwill 11.9 0.9 12.8
15 Discontinued operations
Discontinued operations income during 2016 of £10.2m, comprised a £9.0m tax
credit relating to the release of a provision for possible China taxes and a
£1.2m release of provisions no longer required. In 2015, discontinued
operations income of £1.4m related to a partial reimbursement of costs charged
in 2014 for the MacDermid claim.
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 payment, and £0.3m other payments.
15.1 Results of discontinued operations
2016 2015
£m £m
Other income 10.2 1.4
Profit before tax - attributable to owners of the parent 10.2 1.4
Earnings per share - pence
Basic 3.8 0.5
Diluted 3.7 0.6
15.2 Cash flows from discontinued operations
2016 2015
£m £m
Net cash outflow from - operating activities - (6.2)
16 Provisions
Disposal and Restructuring
Closure costs charges Other Total
£m £m £m £m
As at 1 January 2016 * 30.7 9.8 6.7 47.2
Exchange adjustments 4.9 1.3 0.7 6.9
Charge to Group income statement 0.2 24.1 10.7 35.0
Unused amounts released to Group income statement (2.6) - (0.5) (3.1)
Adjustment to discount (0.3) 0.1 - (0.2)
Cash spend (1.4) (16.8) (10.7) (28.9)
Transferred from other balance sheet accounts 1.7 - - 1.7
As at 31 December 2016 33.2 18.5 6.9 58.6
*Restated to reflect the amendments to the acquisition balance sheet of
Sidermes SpA (note 14).
In assessing the probable costs and realisation certainty of provisions, or
related assets, reasonable assumptions are made. Changes to the assumptions
used could significantly alter the Directors' assessment of the value, timing
or certainty of the costs or related amounts.
17 Alternative Performance Measures
The Company uses a number of Alternative
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