REG - Vesuvius plc - Half-year Report <Origin Href="QuoteRef">VSVS.L</Origin> - Part 3
29/07/2016 07:09
- Part 3: For the preceding part double click ID:nRSc5996Fb
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 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. Dividends
Unaudited Unaudited
Half year Half year Full year
2016 2015 2015
£m £m £m
Amounts recognised as dividends and paid to equity holders during the period
Final dividend for the year ended 31 December 2014 of 11.125p per ordinary share - 30.1 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 - -
30.0 30.1 43.9
The Directors have declared an interim dividend of 5.15p per ordinary share in respect of the year ending 31 December 2016.
The dividend will be paid on 23 September 2016 to ordinary shareholders on the register at the close of business on 12
August 2016. Based upon the number of ordinary shares in issue at 30 June 2016, the total cost of the dividend would be
£13.9m.
8. Prior year acquisitions
On the 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 valuespreviouslydisclosed£m AdjustmentsMade £m Fair value ofnet assetsacquired£m
Consideration transferred
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
The finalisation of the valuation of net assets on acquisition gave rise to an additional £0.9m of goodwill.
9. Reconciliation of the movement in net debt
Unaudited
Balance at Foreign Balance at
1 January exchange Non-cash Half Year
2016 adjustments Movements Cash flow 2016
£m £m £m £m £m
Cash and cash equivalents
Cash at bank and in hand 101.5 10.9 - 21.6 134.0
Bank overdrafts (34.5) (4.2) - (3.8) (42.5)
67.0 6.7 - 17.8 91.5
Borrowings, excluding bank overdrafts
Current (7.5) (0.7) - 2.5 (5.7)
Non-current (353.3) (37.2) - (7.5) (398.0)
(360.8) (37.9) - (5.0) (403.7)
Capitalised borrowing costs 2.2 - (0.3) - 1.9
Net debt (291.6) (31.2) (0.3) 12.8 (310.3)
10. Cash generated from operations
Unaudited Unaudited
Continuing Discontinued Half year Continuing Discontinued Half year
operations operations 2016 Operations Operations 2015
£m £m £m £m £m £m
Operating profit 46.5 - 46.5 59.9 - 59.9
Adjustments for:
Amortisation of acquired intangible assetsRestructuring charges 8.3 - 8.3 8.3 - 8.3
Restructuring charges 5.3 - 5.3 2.2 - 2.2
Gain on settlement of employee benefit plan (1.0) - (1.0) - - -
Depreciation 20.0 - 20.0 20.1 - 20.1
EBITDA (note 15.12) 79.1 - 79.1 90.5 - 90.5
Net increase in trade and other working capital (4.9) (0.2) (5.1) (13.8) (7.4) (21.2)
Outflow related to restructuring charges (10.2) - (10.2) (1.5) - (1.5)
Additional pension funding contributions (1.0) - (1.0) (1.0) - (1.0)
Cash generated from operations 63.0 (0.2) 62.8 74.2 (7.4) 66.8
Continuing Discontinued Full year
Operations operations 2015
£m £m £m
Operating profit 92.8 1.4 94.2
Adjustments for:
Amortisation of acquired intangible assetsRestructuring charges 16.6 - 16.6
Restructuring charges 14.6 - 14.6
Depreciation 37.1 - 37.1
EBITDA (note 15.12) 161.1 1.4 162.5
Net decrease/(increase) in trade and other working capital 0.3 (7.6) (7.3)
Outflow related to restructuring charges (11.5) - (11.5)
Additional pension funding contributions (3.7) - (3.7)
Cash generated from operations 146.2 (6.2) 140.0
11. Employee benefits
The net employee benefits balance as at half year 2016 of £54.2m (2015: half year £43.3m; full year £35.3m) in respect of
the Group's defined benefit pension and other post-retirement benefit obligations, comprised net surpluses of £65.5m (2015:
half year £49.5m; full year £59.9m) and net liabilities of £119.7m (2015: half year £92.8m; full year £95.2m), and results
from an interim actuarial valuation of the Group's defined benefit pension and other post-retirement obligations as at that
date.
Unaudited Unaudited
Half Year Half Year* 31 December
2016 2015 2015
£m £m £m
Employee benefits - net surpluses
UK defined benefit pension plan 65.2 49.5 59.5
ROW defined benefit pension plan 0.3 - 0.4
65.5 49.5 59.9
Employee benefits - net liabilities
UK defined benefit ex-gratia pension plans 1.7 1.8 1.8
US defined benefit pension plans 47.2 33.5 37.7
Germany defined benefit pension plans 46.2 35.0 36.3
ROW defined benefit pension plans 17.4 17.6 13.7
Other post-retirement benefit obligations 7.2 4.9 5.7
119.7 92.8 95.2
Employee benefits - total net liabilities 54.2 43.3 35.3
*Restated to reflect the amendments to the acquisition balance sheet of Sidermes spa (note 8)
The total net charges in respect of the Group's defined benefit pension and other post-retirement benefit obligations are
shown in the table below:
Unaudited Unaudited
Half year Half year Full year
2016 2015 2015
£m £m £m
In arriving at trading profit 2.9 3.1 6.4
In arriving at operating profit (0.8) 0.8 0.8
In arriving at profit before tax - within net finance costs 0.6 0.5 0.9
Total net charge - continuing operations 2.7 4.4 8.1
The net figure of £0.8m credited in arriving at operating profit is comprised of a £0.2m past service cost included in
restructuring charges and a £1.0m settlement gain. Both are disclosed under separately reported items in the Group Income
Statement.
Cash contributions into the Group's defined benefit pension plans amounted to £2.1m (2015: half year £2.1m; full year
£6.9m), which included additional funding contributions of £1.0 m (2015: half year £1.0m; full year £3.7m).
12. Other reserves
Within other reserves as at half year 2016 is £1,499.0m (full year 2015: £1,499.0m) arising from the demerger of Cookson
Group plc, being the excess of the Vesuvius plc share capital of £1,777.9m over the total share capital and share premium
of Cookson Group plc as at 14 December 2012 of £278.9m. Also included are translation reserves of £114.1m (full year 2015:
(£2.3m)) and investment revaluation reserves of £0.6m (full year 2015: £0.6m).
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. Contingent liabilities
Guarantees given by the Group under property leases of operations disposed of amounted to £1.6m (full year 2015: £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
15. 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.
15.1 Headline
Headline performance is from continuing operations and before items reported separately on the face of the income
statement.
15.2 Underlying
Underlying performance is adjusted to exclude the effects of changes in exchange rates, business acquisitions and
disposals.
15.3 Return on sales
Return on sales is calculated as trading profit divided by revenue.
15.4 Trading profit
Trading profit is defined as profit from operations before separately reported items. The Directors believe that trading
profit is an important measure of the underlying trading performance of the Group.
15.5 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.
15.6 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.
15.7 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.
15.8 Operating cash flow
Operating cash flow is cash generated from continuing operations before restructuring, demerger payments and additional
pension funding contributions but after deducting capital expenditure net of assets disposals.
15.9 Cash conversion
Cash conversion is calculated as operating cashflow divided by trading profit.
15.10
Free cash flow
Free cash flow is defined as net cash flow from operating activities after tax, 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. "Recurring free cash flow" is free cash flow before restructuring
payments.
15.11 Average trade working capital to sales ratio
The average trade working capital to sales ratio is calculated as the percentage of average trade working capital balances
to the annualised revenue for the period. Average trade working capital (comprising inventories, trade receivables, and
trade payables) is calculated as the average of the 12 previous month end balances, and annualised revenue is the revenue
for the previous 12 months.
15.12 Earnings before interest tax depreciation and amortisation ("EBITDA")
EBITDA is calculated as the total of trading profit before depreciation and amortisation of non-acquired intangibles
charges.
15.13 Net interest
Net interest is calculated as interest payable on borrowings less interest receivable, excluding any item separately
reported.
15.14 Interest cover
Interest cover is the ratio of EBITDA to net interest.
15.15 Net debt
Net debt comprises the net total of current and non-current interest-bearing borrowings and cash and short-term deposits.
15.16 Net debt to EBITDA
Net debt to EBITDA is the ratio of net debt at the period-end to EBITDA for the preceding 12 month period.
15.17 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 (being the average over the previous 12 months of property, plant and equipment, trade working capital and other
operating receivables and payables).
15.18 Constant rates
Figures presented at constant rates represent December and June 2015 results retranslated at June 2016 exchange rates.
16. Exchange rates
The Group reports its results in pounds sterling. A substantial portion of the Group's revenue and profit 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 period 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 period end rates. The principal exchange rates used were as
follows:
Income and expenseAverage rates Assets and liabilitiesPeriod end rates
Half year 2016 Half year 2015 Full year 2015 Half year to Half year change Half year to full year change Half year 2016 Half year 2015 Full year 2015 Half year to Half year change Half year to full year change
US Dollar 1.44 1.52 1.53 5% 6% 1.33 1.57 1.47 15% 10%
Euro 1.29 1.37 1.38 6% 7% 1.20 1.41 1.36 15% 12%
Chinese Renminbi 9.38 9.47 9.60 1% 2% 8.84 9.74 9.57 9% 8%
Japanese Yen 160.51 183.04 185.07 12% 13% 137.39 192.37 177.30 28% 23%
Brazilian Real 5.32 4.52 5.09 (18%) (5%) 4.28 4.87 5.84 12% 27%
Indian Rupee 96.41 95.61 98.00 (1%) 2% 89.81 99.87 97.56 10% 8%
South African Rand 22.12 18.13 19.48 (22%) (14%) 19.53 19.11 22.79 (2%) 14%
Non-GAAP supplementary information
5 year history at constant currency
HY 2012 HY 2013 HY 2014 HY 2015 HY 2016
Revenue (£m) 757.6 712.3 737.3 717.2 668.3
Steel 499.3 480.4 500.6 484.7 443.1
Foundry 258.3 231.9 236.7 232.5 225.2
Trading Profit (£m) 70.7 63.1 72.0 71.6 59.1
Steel 46.9 39.7 49.0 45.0 33.2
Foundry 23.8 23.4 23.0 26.6 25.9
Return on Sales 9.3% 8.9% 9.8% 10.0% 8.8%
Steel 9.4% 8.3% 9.8% 9.3% 7.5%
Foundry 9.2% 10.1% 9.7% 11.5% 11.5%
This information is provided by RNS
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