REG - Vesuvius plc - Half-year Report
27/07/2023 07:15
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RNS Number : 3314H Vesuvius plc 27 July 2023
27 July 2023
Half Year Results for the six months ended 30 June 2023
Resilient results ahead of our expectations, despite difficult market
conditions
Modest increase to full year expectations
Vesuvius plc, a global leader in molten metal flow engineering and technology,
announces its unaudited results for the six months ended 30 June 2023.
Financial summary H1 2023 H1 2022 Year-on-year change Underlying change((1))
(£m) (£m)
Headline (non-statutory)
Revenue 995 1,016 (2%) (3%)
Trading Profit ((2)) (adjusted EBITA) 105 127 (18%) (18%)
Return on Sales ((2)) 10.5% 12.5% (200 bps) (190 bps)
Headline basic EPS ((2)) (pence) 24.5p 31.4p (22%)
Adjusted operating cash-flow((2) ) 71 33 114%
Net Debt ((2)) 268 328 (18%)
Statutory
Operating Profit 100 122 (18%)
Profit Before Tax 95 117 (19%)
Statutory basic EPS (pence) 23.2p 30.0p (23%)
Cash generated from operations 107 69 55%
Dividend (pence per share) 6.8p 6.5p 5%
((1)) Underlying basis is at constant currency and excludes separately
reported items and the impact of acquisitions and disposals.
((2)) For definitions of non-GAAP measures, refer to Note 15 in the Condensed
Group Financial Statements.
NB. The above table and other tables in this results statement contains
amounts and percentages derived from source data which was then rounded. The
margins and percentage change figures are based on source data, not the
rounded figures.
Half Year 2023 Highlights
· Group trading profit down 18% v. H1 2022 but improved against H2
2022
o Subdued market conditions in Steel have led to volume declines vs. H1
2022. This was partly mitigated by good pricing performance
· Steel business performed well, ahead of our expectations, due to
pricing resilience in our technologically differentiated products and
solutions
o Pricing has partially offset the impact of lower volumes
o Return on Sales down 310 bps vs. H1 2022 (underlying) due to volume
declines, but improved by 160bps against H2 2022
· Good recovery of the Foundry business
o Divisional trading profit up 18% and return on sales up 130bps
(underlying) vs. H1 2022
o Trading Profit and RoS have grown sequentially between H1 2022, H2 2022
and H1 2023
· All Strategic initiatives progressing and on track
o Growth capex in India to support expansion of Steel businesses in this
fast-growing region
o 14 new product launches supported by sustained effort in R&D
· Strong progression in adjusted operating cash-flow despite
significant growth capex
o Cash conversion improving to 67%
· Strong balance sheet with net debt / EBITDA at 1.0x
· Dividend per share +5% reflecting confidence in the long-term
prospects for the business
· Further progress in sustainability, reducing our CO(2) footprint
and supporting our customers' sustainability efforts
· Lost-time injury rate down to 0.7 in the period, our best
performance on record
Comment from Patrick André, CEO:
"Despite difficult market conditions, especially in the steel sector, we have
performed well in the first half of the year, exceeding expectations, thanks,
in particular, to a very resilient pricing performance.
The Foundry division has confirmed its recovery, which should continue in 2024
when the destocking movement in the Foundry sector will have come to an end.
We expect to maintain pricing discipline in the second half of the year, and
we are progressing our efforts to gain market share through technological
differentiation. As a consequence, noting typical seasonality and despite
remaining macro-economic uncertainties, we feel confident to modestly increase
our full year expectations."
Presentation of Half Year 2023 Results
Vesuvius management will make a presentation to analysts and investors on 27
July 2023 at 08:30 UK time at the London Stock Exchange, 10 Paternoster
Square, London EC4M 7LS. For those unable to attend, the event will be
livestreamed and can be accessed by clicking here
(https://www.lsegissuerservices.com/spark/Vesuvius/events/9730b07c-e363-4b1f-a18c-65dbeac4d766)
. Participants can also join via an audio conference call. Please click here
(https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=3570697&linkSecurityString=9200601e0)
to register. Once registered, you will be provided with the information
needed to join the conference, including dial-in numbers and passcodes. Be
sure to save this information in your calendar.
For further information, please contact:
Shareholder/analyst enquiries:
Vesuvius plc Patrick André, Chief Executive +44 (0) 207 822 0000
Mark Collis, Chief Financial Officer +44 (0) 207 822 0000
Rachel Stevens, Head of Investor Relations +44 (0) 7387 545 271
Media enquiries:
MHP Communications Rachel Farrington/Ollie Hoare +44 (0) 203 128 8570
Save the date: Capital markets event - afternoon of Thursday 16 November 2023
About Vesuvius plc
Vesuvius is a global leader in molten metal flow engineering and technology
principally serving process industries operating in challenging
high‑temperature conditions.
We develop innovative and customised solutions, often used in extremely
demanding industrial environments, which enable our customers to make their
manufacturing processes safer, more efficient and more sustainable. These
include flow control solutions, advanced refractories and other consumable
products and increasingly, related technical services including data capture.
We have a worldwide presence. We serve our customers through a network of
cost-efficient manufacturing plants located close to their own facilities, and
embed our industry experts within their operations, who are all supported by
our global technology centres.
Our core competitive strengths are our market and technology leadership,
strong customer relationships, well established presence in developing markets
and our global reach, all of which facilitate the expansion of our addressable
markets.
Our ultimate goal is to create value for our customers, and to deliver
sustainable, profitable growth for our shareholders giving a superior return
on their investment whilst providing each of our employees with a safe
workplace where they are recognised, developed and properly rewarded.
We think beyond today to create solutions that will shape the future
for everyone.
Forward looking statements
This announcement contains certain forward looking statements which may
include reference to one or more of the following: the Group's financial
condition, results of operations, cash flows, dividends, financing plans,
business strategies, operating efficiencies or synergies, budgets, capital and
other expenditures, competitive positions, growth opportunities for existing
products, plans and objectives of management and other matters.
Statements in this announcement that are not historical facts are hereby
identified as "forward looking statements". Such forward looking statements,
including, without limitation, those relating to the future business
prospects, revenue, working capital, liquidity, capital needs, interest costs
and income, in each case relating to Vesuvius, wherever they occur in this
announcement, are necessarily based on assumptions reflecting the views of
Vesuvius and involve a number of known and unknown risks, uncertainties and
other factors that could cause actual results, performance or achievements to
differ materially from those expressed or implied by the forward looking
statements. Such forward looking statements should, therefore, be considered
in light of various important factors that could cause actual results to
differ materially from estimates or projections contained in the forward
looking statements. These include without limitation: economic and business
cycles; the terms and conditions of Vesuvius' financing arrangements; foreign
currency rate fluctuations; competition in Vesuvius' principal markets;
acquisitions or disposals of businesses or assets; and trends in Vesuvius'
principal industries.
The foregoing list of important factors is not exhaustive. When considering
forward looking statements, careful consideration should be given to the
foregoing factors and other uncertainties and events, as well as factors
described in documents the Company files with the UK regulator from time to
time including its annual reports and accounts.
You should not place undue reliance on such forward looking statements which
speak only as of the date on which they are made. Except as required by the
Rules of the UK Listing Authority and the London Stock Exchange and applicable
law, Vesuvius undertakes no obligation to update publicly or revise any
forward looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions,
the forward looking events discussed in this announcement might not occur.
Vesuvius plc, 165 Fleet Street, London EC4A 2AE
Registered in England and Wales No. 8217766
LEI: 213800ORZ521W585SY02
www.vesuvius.com (http://www.vesuvius.com)
Vesuvius plc
Half Year Results for the six months ended 30 June 2023
Resilient results despite difficult market conditions, ahead of our
expectations
£m H1 2023 Reported Acquisitions / Disposals H1 2023 Underlying H1 2022 Reported Currency Acquisitions / Disposals H1 2022 Underlying Reported % Change Underlying % Change
Revenue 995 - 995 1,016 14 - 1030 (2%) (3%)
Trading Profit 105 - 105 127 1 - 128 (18%) (18%)
Return on Sales 10.5% 10.5% 12.5% 12.5% (200 bps) (190 bps)
Group trading performance ahead of our initial expectations
In H1 2023, the Group generated revenues of £995m, a slight decrease of 2%
compared to H1 2022, on a reported basis and a 3% decrease on an underlying
basis, reflecting the effects of currency translation. The negative impact of
declining volumes (-8%, principally due to the declining steel production
markets and to some destocking of refractories and foundry products) has been
partially mitigated by sales price increases.
Trading profit (adjusted EBITA) was ahead of our expectations at £105m. It
represents a drop of 18% on both a reported and underlying basis as compared
with H1 2022, reflecting the drop-through impact of declining volumes,
partially offset by a small positive balance between the increase in sales
price and rising costs. Consequently, the Group achieved a return on sales of
10.5% in H1 2023, a decrease of 200 bps compared to H1 2022 on a reported
basis but an increase of 130 bps versus H2 2022.
Adjusted operating cashflow has been good in the period and significantly
ahead of that in H1 2022, up 114%, with cash conversion of 67% despite
significant capex (£45m) including growth capex to support our expansion and
development plans.
The pace of recovery of our end markets remains uncertain
Steel production in the world excluding China and Iran, which accounts for
approximately 90% of Vesuvius' Steel division sales, has started to recover in
Q2 2023 from the low levels of the previous 6 months but the pace of this
recovery is uncertain, in particular in the long steel sector, affected by the
general weakness of the construction sector. As compared with H1 2022, steel
production in H1 2023 decreased by 4.5% year-on-year to the end of June
(Source: the World Steel Association), with most major geographies recording
volume declines in the period except for India and China.
Foundry end markets have started to recover, with year-on-year end market
growth especially strong in India and China, low single digit end market
growth in NAFTA and EMEA more than offsetting declines in South America. The
Foundry division hasn't however fully benefited yet from this end market
recovery due to a destocking movement of casting products in some important
regions. We expect this destocking movement to come to an end towards the end
of the year.
Selling price increases have fully offset inflationary pressures
Our active management of selling prices has successfully offset continued cost
inflation, continuing the pattern of 2022. The success of our sales price
management reflects the importance that customers attribute to the
technological differentiation that we offer alongside on-site support which
ensures the consistent performance of our products in practice.
Technological differentiation at the heart of our strategy
Technological differentiation is at the heart of our strategy to grow market
share and margin. We have launched 14 new products in the period and delivered
a new product sales ratio (defined as the percentage of sales derived from
products launched in the previous 5 years) of 16%. Examples of new products
having been launched include, in the Steel division, "LTC34", a flow-control
product that integrates with our robotics solutions to minimise contact
between molten steel and atmospheric gases, to maximise the quality and purity
of steel produced and the Tundish Dry Vibratable Robot, an Advanced Refractory
product which is a new automated system to layer refractories in the tundish.
In the Foundry Division, we have also launched several new products in the
period, including Wasco, for high pressure die casting (HPDC) processes, used
by aluminium foundries. It enables HPDC foundries to manufacture castings with
complex internal structures - facilitating weight saving, assembly cost
reduction and the formation of larger and more complex shapes.
Capital investment projects continue at pace, to support growth
Capex, excluding leases, in FY23 is expected to be c. £100 - 110m of which
approximately half is allocated to growth projects and customer installations,
which drive the use of our refractories. This is part of a larger growth capex
programme which was initiated in H2 2021 and will be largely completed by June
2024. It will support our long-term growth in the fastest growing regions of
the world in the coming years, especially in India South-East Asia and Middle
East Africa.
Our strategic expansion in Flow Control is progressing well. The new VISO
capacity in Kolkata, India was completed in Q1 as planned, adding 50% to
original capacity, and is now operational, helping Vesuvius fulfil the strong
demand in the region. The investment in VISO in Skawina, Poland, increasing
capacity by 35%, has been completed and is now operational, and the Slide Gate
investment at the same site, to double EMEA capacity, is on track to be
completed by the end of this year as planned.
In Foundry, we are making good progress on our two major capex projects. The
first is in China in non-ferrous flux production to support market share gains
in Chinese aluminium foundries, and the second is in the US where we are
upgrading our coatings production line to support market share gains in this
important product where our technological differentiation is significant.
Additionally, there are a number of smaller sustainability-related projects
which will also generate attractive cost savings, such as adding solar panels
at our Ramos Arizpe plant in Mexico, which will become Foundry's first fully
carbon neutral plant.
In totality, the EBITDA benefit of this programme of expansion capex is
expected to be c. £40m per annum, achieved in 2026 / 2027.
Working capital
Trade working capital at 30 June 2023 increased by £31m versus 31 December
2022 on a constant currency basis as the challenges of the cyber attack in the
first quarter have slowed down our efforts to reduce inventories. However,
working capital as a percentage of sales is now on a falling trajectory,
having peaked in February on a three-month rolling average basis.
Further improvement in our health and safety performance
Health and safety is of paramount importance and we have an overall aim of
zero accidents. In the half-year, we achieved a Lost Time Injury Frequency
Rate (LTIFR) of 0.72, a substantial reduction compared to 1.07 in H1 2022 and
the best result ever achieved by the Vesuvius Group.
Progress in our sustainability objectives
Vesuvius is focused on both improving our own sustainability performance and
helping our customers reduce their environmental footprint. We are continuing
to make strong progress in the reduction of our CO(2) footprint and are proud
that our latest Sustainalytics score was upgraded for the third year in a row.
We are now in the top 14(th) percentile of our peers.
We have also recently received the ecoMetals 2023 award for our SEMCO coatings
products which offer our customers the benefits of at least 50% faster drying
times, at least 20% reductions in formaldehyde emissions and at least a 90%
saving in energy. This is one of the many products where improved
environmental performance plays a key role in the value that we provide to our
customers.
Interim Dividend
The Board has declared an interim dividend of 6.8 pence per share, which is a
5% increase on the interim dividend for 2022 of 6.5 pence per share.
The interim dividend will be paid on 15 September 2023 to shareholders on the
register at the close of business on 4 August 2023. The ex-dividend date will
be 3 August 2023. Any shareholder wishing to participate in the Vesuvius
Dividend Reinvestment Plan needs to have submitted their election to do so by
24 August 2023.
Outlook
Despite difficult market conditions, especially in the steel sector, we have
performed well in the first half of the year, exceeding expectations, thanks,
in particular, to a very resilient pricing performance.
We expect to continue to maintain pricing discipline in the second half of the
year and we are progressing our efforts to gain market share through
technological differentiation. As a consequence, noting typical seasonality
and despite remaining macro-economic uncertainties, we feel confident to
modestly increase our full year expectations.
Operating and Financial Review
Basis of Preparation
All references in this operating and financial review are to headline
performance unless stated otherwise. See Note 15.1 to the Group Financial
Statements for the definition of headline performance. We also look at
underlying performance, adjusting for effects of currency translation,
(restating the previous period's results at the same foreign exchange (FX)
rates used in the current period), acquisitions and disposals (removing the
results of acquired or disposed-of businesses in both the current and prior
years). See Note 15.2 to the Group Financial Statements for the definition of
underlying performance.
Operating review
Vesuvius comprises two Divisions, Steel and Foundry. The Steel Division
operates as three business lines, Flow Control, Advanced Refractories and
Sensors & Probes.
£m H1 2023 Revenue H1 2022 Revenue % change
As reported Acquisition/Disposals Underlying As reported Currency Acquisition/Disposals Underlying Reported Underlying
Steel 711 - 711 744 11 - 755 (4%) (6%)
Foundry 284 - 284 272 3 - 275 4% 3%
Total Group 995 - 995 1,016 14 - 1030 (2%) (3%)
Group revenue has dropped 2% on a reported basis, reflecting growth of 4%
within Foundry and a fall of 4% in the Steel business unit, both on a reported
basis. Changes in FX, principally the USD relative strength to GBP, provided a
£14m tailwind, resulting in a 3% underlying revenue decline year-on-year.
This change comprises a £81m (c.-8%) impact from declining volumes,
principally in Steel, in part due to the reduction in steel production volumes
in the world excluding China and Iran of 4.5% in the half-year and some market
share losses in Advanced Refractories. This has been partially offset by price
rises to offset costs of £46m (c. +4%).
£m H1 2023 Trading profit H1 2022 Trading profit % change
As reported Acquisition/Disposals Underlying As reported Currency Acquisition/Disposals Underlying Reported Underlying
Steel 75 - 75 102 1 - 103 (26%) (27%)
Foundry 30 - 30 26 - - 25 17% 18%
Total Group 105 105 127 1 128 (18%) (18%)
Group trading profit has dropped 18% on both a reported and underlying basis,
reflecting growth of 17% within Foundry and a fall of 26% in Steel, on a
reported basis. The underlying year-on-year change comprises a £32m impact
from declining volumes, as volume reductions had a drop-through impact of
c.40% relative to revenue, reflecting the under-absorption of overhead. This
was partially offset by a net gain of c. £11m as the increase in sales price
and the benefit of positive mix modestly outweighed rising costs in the
period. Cyber remediation costs of £3.5m were also included in trading profit
in the period.
Return on sales, defined as trading profit divided by revenue, was 10.5% for
the Group, a reduction of 200bps from 12.5% in H1 2022 and of 60 bps versus
11.1% reported for FY22, reflecting the impact of a 18% drop in trading profit
relative to a 2% reduction in revenue.
Half-year comparison
Underlying on a constant currency basis H1 2023 (£m) H2 2022 (£m) H1 2022 (£m)
Steel revenue 711 722 755
Foundry revenue 284 272 275
Total Group revenue 995 995 1030
Steel trading profit 75 64 103
Foundry trading profit 30 28 25
Total Group trading profit 105 92 128
Steel RoS 10.5% 8.9% 13.6%
Foundry RoS 10.6% 10.1% 9.3%
Group RoS 10.5% 9.20% 12.5%
The table above shows the current and past two half-year periods all at
constant currency.
As shown above, on a sequential basis, Foundry has shown two successive
half-year periods of improvement and Steel is also on an improving trend
versus H2 2022.
Steel Division
Steel Division H1 2023 (£m) H1 2022 (£m) Change Underlying change (%)
(%)
Flow Control Revenue 401 402 - (2%)
Advanced Refractories Revenue 290 321 (10%) (11%)
Steel Sensors & Probes Revenue 20 21 (2%) (4%)
Total Steel Revenue 711 744 (4%) (6%)
Total Steel Trading Profit 75 102 (26%) (27%)
Total Steel Return on Sales 10.5% 13.7% (320 bps) (310 bps)
The Steel Division reported revenues of £711m in H1 2023, a decrease of 4%
compared to
H1 2022 on a reported basis and 6% on an underlying basis, reflecting the
declining steel production market which was down 4.5% in H1 (Source: WSA),
partially offset by the year-on-year increase in sales price.
Steel Division trading profit fell 26% to £75m driven by the declining
volumes across both the Flow Control and Advanced Refractories business units.
Return on sales compressed 320bps to 10.5% compared to H1 2022 and 100bps
compared to the FY22 return on sales of 11.5%, with the margin impacted by the
operational de-gearing of declining volumes. Compared to H2 2022, trading
profit increased by £11m and return on sales increased 160bps.
Flow Control
Flow Control Revenue H1 2023 (£m) H1 2022 (£m) Change Underlying change (%)
(%)
Americas 163 155 5% 2%
Europe, Middle East & Africa (EMEA) 127 142 (11%) (12%)
Asia-Pacific 112 105 7% 8%
Total Flow Control Revenue 402 402 - (2%)
Flow Control revenue was broadly flat with a small underlying decline in sales
of 2%, reflecting volumes declines which were lower than the market declines
in the Americas and Asia-Pacific, and modest under-performance in EMEA , due
mostly to refractory destocking and payment difficulties of some customers.
In the Americas, underlying revenues grew modestly, reflecting some residual
price rises, offset by reductions in volumes as steel production in both NAFTA
and South America fell, albeit slightly outperforming the market.
In EMEA, revenue fell 12% year-on-year on an underlying basis. This resulted
from a volume decline, principally driven by a contraction in steel production
of c. 8% (EMEA excluding Iran) in the year to June compounded by some
destocking and payment difficulties described above, and the impact of sharply
reduced revenues from Russia and Ukraine, partially offset by residual
year-on-year price increases.
In Asia Pacific, revenues grew 8% on an underlying basis. Revenue growth in
China was ahead of the market reflecting customer wins, and India also
continued to out-perform the market growth of c. 7%. Our underlying market
share in both North Asia and South-East Asia was broadly stable. In North
Asia, Q1 was impacted by customer end-product de-stocking, which normalised
into Q2.
Advanced Refractories
Advanced Refractories Revenue H1 2023 (£m) H1 2022 (£m) Change Underlying change (%)
(%)
Americas 113 120 (5%) (9%)
Europe, Middle East & Africa (EMEA) 95 120 (21%) (23%)
Asia-Pacific 82 81 1% 2%
Total Advanced Refractories Revenue 290 321 (10%) (11%)
Advanced Refractories reported revenues of £290m in H1 2023, a decrease of
11% on an underlying basis, driven by reducing steel production volumes in all
regions except India and some market share reduction, partially mitigated by a
dynamic pricing performance.
Revenue fell 9% in the Americas on an underlying basis, driven by significant
volume declines reflecting both a contracting market and some market share
reduction, in both NAFTA and South America.
In EMEA, underlying revenues reduced by 23% during the period, driven by
market volume declines of 8% and market share declines in the Middle East and
in Africa.
In Asia Pacific, revenues were broadly flat on an underlying basis, with
strong volume growth and market share gains in India.
Steel Sensors & Probes
Steel Sensors & Probes Revenue H1 2023 H1 2022 (£m) Change Underlying change (%)
(£m) (%)
Americas 14 14 1% (1%)
Europe, Middle East & Africa (EMEA) 6 7 (10%) (13%)
Asia-Pacific 0.3 0.2 31% 30%
Total Steel Sensors & Probes Revenue 20 21 (2%) (4%)
In H1 2023 Revenues in Steel Sensors & Probes were £20m, down c. 4%
period-on-period on an underlying basis, due to a slow-down of steel
production in our reference customers.
The revenues in EMEA fell 13% in a declining market while in the Americas the
revenue was flat over the period despite particular challenges in the Mexican
market, with an overall market decline of 4%.
Foundry Division
Foundry Division H1 2023 (£m) H1 2022 (£m) Change Underlying change (%)
(%)
Foundry Revenue 284 272 4% 3%
Foundry Trading Profit 30 26 17% 18%
Foundry Return on Sales 10.6% 9.5% 110bps 130bps
The end markets for Foundry were positive in most regions, with year-on-year
end market growth especially strong in the key Asian Pacific markets of India
and China, low single-digit end market growth in NAFTA and EMEA and declines
in South America. The impact of destocking in the end markets has adversely
effected the demand from our customers, and hence our sales progression in the
period is more muted.
Vesuvius' Foundry Division reported revenues of £284m in H1 2023, an increase
of 4% compared to H1 2022 on a reported basis. On an underlying basis, Foundry
Division revenue was up 3%. This increase in revenues was driven by price
increases which primarily took place in 2022 to offset cost inflation, plus
market share growth in key regions including India, China and NAFTA partially
offset by volume decline in EMEA, South America and parts of Asia versus H1
2022.
The Foundry Division also achieved some margin recovery, with trading profit
growing 17% to £30m, as Return on Sales increased 110bps to 10.6%, compared
to H1 2022. The Foundry Division also grew trading profit and return on sales
compared to H2 2022.
Foundry Revenue H1 2023 (£m) H1 2022 (£m) Change Underlying change (%)
(%)
Americas 73 67 9% 4%
Europe, Middle East & Africa (EMEA) 120 117 3% 2%
Asia-Pacific 90 88 3% 5%
Total Foundry Revenue 284 272 4% 3%
Foundry revenues in the Americas grew 4% year-on-year on an underlying basis,
which reflects the positive impact of price increases, which primarily took
place in 2022 to offset cost inflation, plus market share gains in NAFTA,
partially offset by volume declines in South America versus H1 2022. The
challenges in South America are due to general economic weakness in Brazil, in
addition to a decline of over 20% in truck volumes which were impacted by a
change in emissions standards which came into effect in early 2023, resulting
in a spike in purchases ahead of the change, followed by a steep decline.
In EMEA, underlying revenues were slightly up compared to 2022 (+2%
underlying), reflecting successful commercial initiatives initiated towards
the end of 2022 to regain volume lost in the region earlier that year,
resulting in monthly volumes towards the end of H1 2023 returning to the level
of the same period of 2022.
Foundry revenues in Asia Pacific grew 5% year-on-year on an underlying basis,
which reflects strong end market growth and market share gains in India, as
well as a partial recovery in key Chinese end markets after a challenging
2022. Our strong performance in these regions was partially offset by weakness
in North Asia, especially in Taiwan.
Financial Review
H1 2023 performance overview
Income statement
Group revenue of £995m is down by 2% on a reported basis to (H1 22: £1016m)
and trading profit fell 18% on a reported basis to £105m (H1 22: £127m), as
set out in the operating review above.
Operating profit decreased 18% to £100m (H1 22: £122m), reflecting the
changes in trading profit described above, net of amortisation of intangible
assets of £5.2m (H1 22: £5.1m). In H1 2023, we spent £18m on R&D
activities (H1 22: £18m), which represents 1.8% of our revenue (H1 22: 1.7%).
Headline PBT was £100m (H1 22: £122m), a reduction of 18%, reflecting the
reduction in operating profit and a slight reduction in net finance cost. The
lower net finance cost of £5.5m versus £6.6m in H1 22 is principally due to
an increase in the finance income from deposits held in India and Argentina,
offsetting the rise in finance costs from rising interest rates.
PBT including amortisation of acquired intangibles of £5m was £95m (H1 22:
£117m), 19% lower than the comparable period.
Headline EPS from continuing operations fell 22% to 24.5p (H1 22: 31.4p),
reflecting the lower profit described above and the increase in the minority
interest, which principally relates to our growing business in India.
Taxation
The Group's effective tax rate is the income tax associated with headline
performance of (H1 23: £27m, H1 22: £33m), divided by the headline profit
before tax and before the Group's share of post-tax profit of joint ventures.
The Group's headline effective tax rate was 27.5% in H1 2023 as guided (H1 22:
27.5%; full year 26.5%) . The increase in rate versus FY22 is due to a change
in geographic mix of profit. We expect the Group's effective tax rate to be
27.5% for the full year 2023.
Cash flow
The Group generated adjusted operating cash flows of £71m, representing a
114% increase versus H1 2022 (£33m). This implies a cash conversion rate in
H1 2023 of 67% (H1 22: 26%). H1 2023 cash conversion reflected continued
higher levels of investment in capex of £45m (H1 22: £39m). Free cash flow
from continuing operations was £42m in H1 2022 (H1 22: £2m).
Working capital
Trade working capital as a percentage of sales in H1 2023 was 24.1% (2022:
half year 22.8%; full year 23.8%), measured on a 12-month moving average
basis. On a 3-month moving average basis, this ratio has fallen from 24.7% at
31 December 2022 to 23.3% at 30 June 2023 reflecting the progress made in the
half-year, where debtors which reduced from 80 days to 78 days, inventory days
reduced by one day to 87 days, and creditor days increased by just under three
days.
In absolute terms, on a constant currency basis, trade working capital
increased by £31m in H1 2022 to £480m compared to the balance as at 31
December 2022. The increase was due to a rise in inventory (+£18m) and
debtors (+£31m), partially offset by an increase in creditors (+£18m).
Capital expenditure
Capital expenditure in H1 2022 was £45m (H1 22: £39m) of which c. £34m was
spent in the Steel division and the remainder in Foundry.
Balance sheet
Financial position
At 30 June 2023, Net Debt was £268m, (31 December 2022: £255m), as free cash
flow of £42m was offset by payment of the 2022 full-year dividend (£42m),
additional right-of-use assets (£11m) and other factors including FX (£2m).
The net debt to EBITDA ratio increased slightly to 1.0x versus 31 December
2022 (0.9x), principally reflecting the drop in last-12-month EBITDA. EBITDA
to interest was 34.0x (2022: 30 June 29.2x; 31 December 29.8x). The Group had
committed borrowing facilities of £710m as at 30th June 2023 (2022: 30 June
£721m; 31 December £722m), of which £310m was undrawn (2022: 30 June
£257m; 31 December £323m). Liquidity stood at £471m on 30 June 2023 (30
June 2022: £416m; 31 December 2022: £494m). We define liquidity as undrawn
committed debt facilities plus our cash on balance sheet, less the cash in
China which is used as collateral against an equivalent bi-lateral loan in the
UK.
The Group's debt facilities have two financial covenants: the ratios of net
debt to EBITDA (maximum 3.25x limit) and EBITDA to interest (minimum 4x
limit). Certain adjustments are made to the net debt calculations for bank
covenant purposes, the most significant of which is to exclude the impact of
IFRS 16.
Return on Invested Capital
ROIC is calculated as trading profit less amortisation of acquired intangibles
plus share of post-tax profit of joint ventures and associates for the
previous 12 months after tax, divided by the average (being the average of the
opening and closing balance sheet) invested capital (defined as: total assets
excluding cash plus non-interest-bearing liabilities), at the average foreign
exchange rate for the year. In the period, ROIC was 8.6%, down from 10.7% at
31 December 2022, reflecting the reduction in rolling 12-month trading profit.
Pensions
The Group has a limited number of historical defined benefit plans located
mainly in the UK, USA, Germany and Belgium. The main plans in the UK and USA
are largely closed to further benefits accrual. In the funded UK plan, an
insurance asset from PIC matches the remaining pension liabilities of the UK
Plan, with the result that the Company no longer bears any investment,
longevity, interest rate or inflation risks in respect of this UK Plan. The
Group's net pension liability on 30 June 2023 was £50.8m (2022 full year:
£56.1m deficit). The improvement is principally due to a £3.8m gain from
changes to actuarial assumptions which was mainly due to an increase in bond
yields.
Principal Risks and Uncertainties
Risk Management
The Board exercises oversight of the Group's principal risks, undertaking a
specific review of the way in which the Group manages those risks. The Group
undertakes a continuous process to identify and review risk. This assessment
undergoes a formal review at half-year and at year end. The principal risks
identified are actively managed in order to mitigate exposure. The risks are
analysed in the context of our business structure which gives protection
against a number of principal risks we face with diversified currencies, a
widespread customer base, local production matching the diversity of our
markets and intensive training of our employees. Additionally, we seek to
mitigate risk through contractual measures. Where cost-effective, the risk is
transferred to insurers. Our processes are not designed to eliminate risk, but
to identify our principal risks and seek to reduce them to a reasonable level
in the context of the delivery of the Group's strategy.
Principal risks
The Board believes that there has been no material change to the Group's
principal risks and uncertainties during the year to date. The principal risks
and uncertainties faced by the Group therefore remain those as set out on
pages 27 to 33 of our 2022 Annual Report. The risks identified are those the
Board considers to be the most relevant to the Group in relation to their
potential impact on the achievement of its Strategic Objectives. All of the
risks set out could materially affect the Group, its businesses, future
operations and financial condition, and could cause actual results to differ
materially from expected or historical results. The Group continues to focus
on risk mitigation. These risks are not the only ones that the Group faces or
will face. Some risks are not yet known and some currently not deemed to be
material could become so.
Risk
End market risks Protectionism and globalisation Product quality failure
Vesuvius suffers an unplanned drop in demand, revenue and/or margin because of The Vesuvius business model cannot adapt or respond quickly enough to threats Vesuvius staff/contractors are injured at work or customers, staff or third
market volatility beyond its control from protectionism and globalisation parties suffer physical injury or financial loss because of failures in
Vesuvius products
Complex and changing regulatory environment Failure to secure innovation Business interruption
Vesuvius experiences a contracting customer base or increased transaction and Vesuvius fails to achieve continuous improvement in its products, systems and Vesuvius loses production capacity or experiences supply chain disruption due
administrative costs due to compliance with changing regulatory requirements services to physical site damage (accident, fire, natural disaster, terrorism) or other
events such as industrial action, cyber attack or global health crises
People, culture and performance Health and safety Environmental, Social and Governance (ESG) criteria
Vesuvius is unable to attract and retain the right calibre of staff, fails to Vesuvius staff or contractors are injured at work because of failures in Vesuvius fails to capitalise on the opportunity to help its customers
instil an appropriate culture or fails to embed the right systems to drive Vesuvius' operations, equipment or processes significantly reduce their carbon emissions as environmental pressure grows on
personal performance in pursuit of the Group's long-term growth the steel industry or Vesuvius fails to meet the expectations of its various
stakeholders including employees and investors
With regard to the remainder of the year, the Board is particularly cognisant
of the following areas of risk:
End market risk: The Board continues to monitor the implications of the
changing global economic environment, with short term forecasts for steel
volumes and automotive output still subdued (despite the longer term growth
trend continuing). Ongoing inflationary pressures and interest rate levels
also continue to be closely monitored. Whilst the geographic diversity of our
business and our presence in both mature and developing markets provides
robust mitigation to any regional disruptions or economic decline, the
potential effects of this global economic uncertainty continue to be watched.
Protectionism and globalisation: The potential impacts of global political
uncertainty are kept under close review, such as the effects of the
Russia-Ukraine war and the international dialogue ongoing between China and
the USA, which challenge the more recent historical trends towards greater
globalisation. The Board continues to consider security of supply of raw
materials and access to other resources, including energy, which could impact
both our operations and those of our customers in this context.
Cyber Security
In February 2023, the Group was the subject of a cyber incident involving
unauthorised access to our IT systems. This required the instigation of the
Group's Cyber Incident Plan. Our systems were shut down to contain the
incident on a precautionary basis, and our sites implemented their business
continuity plans to maintain their operations. The results of the initial
investigation have been considered by the Board and further mitigating actions
are being executed to improve the Group's cyber resilience for the future.
Going forward, consideration will be given to additional strategic and
operational improvements for the Group's systems and processes, to reduce the
potential for future attacks and further improve the Group's resilience for
dealing with such incidents.
Climate Change
The Group's overall risk management processes also incorporate consideration
of the potential impact of climate-related risks on the Group. The Group does
not regard climate change itself to represent a material stand-alone risk for
the Group's operations. Whilst a significant proportion of the Group's revenue
is generated from Steel manufacture and automotive castings, industries that
are under transition as a result of their focus on improving environmental
performance, we believe these changes will be positive for the Group. The
opportunities in the Group's business strategy, which is founded on helping
our customers to improve their manufacturing efficiency and the quality of
their products - and therefore reducing their climate impact - will play a
critical part in the development of the Group going forward. We also see
potential benefits for the Group from the acceleration of the energy
transition, as this will create continued demand for the high quality steel
that is produced using Vesuvius' products and solutions.
The Group continues to recognise that climate change could present further
uncertainty for the Group in terms of increased regulation, evolution of the
geographical distribution of our customer base and the costs of meeting more
onerous disclosure requirements. The risks we associate with our
sustainability performance and our end customers' sustainability transition -
badged as ESG - are identified as a separate element of the Group risk
register, recognising the work Vesuvius can do to mitigate the environmental
impact of our customers' processes. Other elements of this risk are
incorporated into the appropriate Principal Risk and Uncertainties that the
Group has identified. In 2023, the Group has continued its focus on the
identified environmental sustainability KPIs. Under the Group's Sustainability
initiative we seek to drive a lower CO(2)e emission intensity, reduce
normalised energy usage, and take the steps necessary to meet the target set
of being CO(2)e emissions net zero by 2050 at the latest.
Half Year Results for the six months ended 30 June 2023
Directors' responsibility statement
The Directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
1) an indication of important events that have occurred
during the first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
2) material related-party transactions in the first
six months and any material changes in the related-party transactions
described in the last annual report.
The names and functions of the Directors of Vesuvius plc are as follows:
Carl-Peter Forster Chairman
Patrick André Chief Executive
Mark Collis Chief Financial Officer
Douglas Hurt Non-executive Director,
Senior Independent Director and
Chair of the Audit Committee
Kath Durrant Non-executive Director and
Chair of the Remuneration
Committee
Carla Bailo Non-executive Director
Dinggui Gao Non-executive Director
Friederike Helfer Non-executive Director
On behalf of the Board
Mark Collis
Chief Financial Officer
26 July 2023
Independent review report to Vesuvius plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Vesuvius plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half Year Results of
Vesuvius plc for the 6-month period ended 30 June 2023 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Group Balance Sheet as at 30 June 2023;
· the Condensed Group Income Statement and Condensed Group Statement of
Comprehensive Income for the period then ended;
· the Condensed Group Statement of Cash Flows for the period then ended;
· the Condensed Group Statement of Changes in Equity for the period then
ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Results of Vesuvius
plc have been prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results based on our review. Our conclusion,
including our Conclusion relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2023
Condensed Group Income Statement
For the six months ended 30 June 2023
Half year 2023 (Unaudited) Half year 2022 (Unaudited) Full year 2022
Headline performance((1)) Separately reported items((1)) Total Headline performance((1)) Separately reported items((1)) Total Headline performance((1)) Separately reported items((1)) Total
Notes £m £m £m £m £m £m £m £m £m
Revenue 2 995.3 - 995.3 1,015.9 - 1,015.9 2,047.4 - 2,047.4
Manufacturing costs (712.7) - (712.7) (718.0) - (718.0) (1,475.9) - (1,475.9)
Administration, selling & distribution costs (177.7) - (177.7) (170.5) - (170.5) (344.3) - (344.3)
Trading profit((2)) 2 104.9 - 104.9 127.4 - 127.4 227.2 - 227.2
Amortisation of acquired intangible assets - (5.2) (5.2) - (5.1) (5.1) - (10.4) (10.4)
Operating profit/(loss) 2 104.9 (5.2) 99.7 127.4 (5.1) 122.3 227.2 (10.4) 216.8
Finance expense (12.7) - (12.7) (9.2) - (9.2) (20.8) - (20.8)
Finance income 7.2 - 7.2 2.6 - 2.6 9.4 - 9.4
Net finance costs 3 (5.5) - (5.5) (6.6) - (6.6) (11.4) - (11.4)
Share of post-tax profit of joint ventures and associates 0.5 - 0.5 1.0 - 1.0 1.2 - 1.2
Profit/(loss) before tax 2 99.9 (5.2) 94.7 121.8 (5.1) 116.7 217.0 (10.4) 206.6
Income tax (charge)/credits 4 (27.3) 1.5 (25.8) (33.2) 1.4 (31.8) (57.2) 39.1 (18.1)
Profit/(loss) 72.6 (3.7) 68.9 88.6 (3.7) 84.9 159.8 28.7 188.5
Profit/(loss) attributable to:
Owners of the parent 66.0 (3.7) 62.3 84.7 (3.7) 81.0 152.4 28.7 181.1
Non-controlling interests 6.6 - 6.6 3.9 - 3.9 7.4 - 7.4
Profit/(loss) 72.6 (3.7) 68.9 88.6 (3.7) 84.9 159.8 28.7 188.5
Earnings per share
- pence 5
Total operations - basic 24.5((1)) 23.2 31.4((1)) 30.0 56.5((1)) 67.2
- 24.3((1)) 23.0 31.2((1)) 29.8 56.1((1)) 66.7
diluted
(1) Headline performance and separately reported items are non-GAAP
measures. Headline performance is defined in Note 15.1 and separately reported
items are defined in Note 1.5.
(2) Trading profit is a non-GAAP measure and is defined in Note 15.4.
The above results were derived from continuing operations. Manufacturing costs
are costs of goods sold. The pre-tax separately reported items would form part
of Administration, selling & distribution costs if classified within
headline performance, which including these amounts would total £182.9m (2022
half year: £175.6m, 2022 full year: £354.7m).
Condensed Group Statement of Comprehensive Income
For the six months ended 30 June 2023
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
Notes £m £m £m
Profit 68.9 84.9 188.5
Items that will not subsequently be reclassified to income statement:
Remeasurement of defined benefit assets/liabilities 3.8 27.9 27.4
Income tax relating to items not reclassified 4 (1.1) (7.9) (8.2)
Items that may subsequently be reclassified to income statement:
Exchange differences on translation of the net assets of foreign (82.6) 100.4 96.7
Operations
Exchange differences arising on translation of net investment hedges 10.4 (11.6) (20.7)
Net change in costs of hedging (1.2) - -
Change in the fair value of the hedging instrument (2.0) 6.8 8.3
Amounts reclassified from the income statement 3.4 (7.1) (7.5)
Other comprehensive (loss)/ income, net of income tax (69.3) 108.5 96.0
Total comprehensive (loss)/ income (0.4) 193.4 284.5
Total comprehensive income attributable to:
Owners of the parent (4.5) 186.9 276.5
Non-controlling interests 4.1 6.5 8.0
Total comprehensive (loss)/ income (0.4) 193.4 284.5
The above results were derived from continuing operations.
Condensed Group Statement of Cash Flows
For the six months ended 30 June 2023
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
Notes £m £m £m
Cash flows from operating activities
Cash generated from operations 8 106.8 69.0 268.3
Interest paid (8.4) (7.4) (15.6)
Interest received 6.0 2.1 6.3
Income taxes paid (23.2) (23.6) (47.9)
Net cash inflow from operating activities 81.2 40.1 211.1
Cash flows from investing activities
Capital expenditure (41.9) (38.6) (89.2)
Proceeds from the sale of property, plant and equipment 4.2 1.3 3.1
Acquisition of subsidiaries and joint ventures, net of cash acquired - 0.5 (3.5)
Dividends received from joint ventures - - 1.3
Net cash outflow from investing activities (37.7) (36.8) (88.3)
Net cash inflow before financing activities 43.5 3.3 122.8
Cash flows from financing activities
Proceeds from borrowings 7 16.0 50.1 18.7
Repayment of borrowings 7 (10.8) (9.1) (55.7)
Purchase of ESOP Shares (1.1) (1.9) (6.9)
Dividends paid to equity shareholders 6 (42.4) (40.5) (58.1)
Dividends paid to non-controlling shareholders (1.4) (1.3) (3.2)
Net cash outflow from financing activities (39.7) (2.7) (105.2)
Net increase in cash and cash equivalents 7 3.8 0.6 17.6
Cash and cash equivalents at 1 January 179.8 162.4 162.4
Effect of exchange rate fluctuations on cash and cash equivalents (13.3) 9.2 (0.2)
Cash and cash equivalents at the end of the reporting period 170.3 172.2 179.8
Free cash flow 15.11
Net cash inflow from operating activities 81.2 40.1 211.1
Capital expenditure (41.9) (38.6) (89.2)
Proceeds from the sale of property, plant and equipment 4.2 1.3 3.1
Dividends received from joint ventures - - 1.3
Dividends paid to non-controlling shareholders (1.4) (1.3) (3.2)
Free cash flow(1) 15.11 42.1 1.5 123.1
((1))For definitions of alternative performance measures, refer to Note 15
Condensed Group Balance Sheet
As at 30 June 2023
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
Notes £m £m £m
Assets
Property, plant and equipment 414.1 380.2 417.6
Intangible assets 703.3 732.6 737.5
Employee benefits - surpluses 9 28.3 24.5 26.2
Interests in joint ventures and associates 12.3 14.5 13.0
Investments 0.7 0.8 0.5
Deferred tax assets 112.3 94.8 110.6
Other receivables 32.4 18.8 33.7
Derivative financial instruments 14 1.2 3.1 2.7
Total non-current assets 1,304.6 1,269.3 1,341.8
Cash and short-term deposits 7 173.2 177.2 184.2
Inventories 318.4 360.7 316.0
Trade and other receivables 485.3 547.1 476.9
Income tax receivable 8.7 2.3 15.3
Derivative financial instruments 14 0.1 0.2 0.1
Total current assets 985.7 1,087.5 992.5
Total assets 2,290.3 2,356.8 2,334.3
Condensed Group Balance Sheet (continued)
As at 30 June 2023
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
Notes £m £m £m
Equity
Issued share capital 27.8 27.8 27.8
Retained earnings 2,649.6 2,545.5 2,623.8
Other reserves (1,460.9) (1,381.7) (1,391.4)
Equity attributable to the owners of the parent 1,216.5 1,191.6 1,260.2
Non-controlling interests 62.1 59.8 59.4
Total equity 1,278.6 1,251.4 1,319.6
Liabilities
Interest-bearing borrowings 7 320.2 348.2 327.2
Employee benefits - liabilities 9 79.1 78.5 82.3
Other payables 10.5 7.8 13.8
Provisions 13 47.7 36.0 49.3
Deferred tax liabilities 21.9 28.9 11.9
Total non-current liabilities 479.4 499.4 484.5
Interest-bearing borrowings 7 122.1 159.8 114.7
Trade and other payables 383.8 416.8 378.4
Income tax payable 11.3 11.9 19.6
Provisions 13 14.9 17.3 17.4
Derivative financial instruments 14 0.2 0.2 0.1
Total current liabilities 532.3 606.0 530.2
Total liabilities 1,011.7 1,105.4 1,014.7
Total equity and liabilities 2,290.3 2,356.8 2,334.3
Condensed Group Statement of Changes in Equity
For the six months ended 30 June 2023
Issued share capital Other reserves Retained earnings Owners of the parent Non-controlling interests Total equity
£m £m £m £m £m £m
As at 1 January 2023 27.8 (1,391.4) 2,623.8 1,260.2 59.4 1,319.6
Profit - - 62.3 62.3 6.6 68.9
Remeasurement of defined benefit assets/liabilities - - 3.8 3.8 - 3.8
Income tax relating to items not reclassified - - (1.1) (1.1) - (1.1)
Exchange differences on translation of the net assets of foreign operations - (80.1) - (80.1) (2.5) (82.6)
Exchange differences arising on translation of net investment hedges - 10.4 - 10.4 - 10.4
Net change in costs of hedging - (1.2) - (1.2) - (1.2)
Change in the fair value of the hedging instrument - (2.0) - (2.0) - (2.0)
Amounts reclassified from the income statement - 3.4 - 3.4 - 3.4
Other comprehensive income/(loss), net of income tax - (69.5) 2.7 (66.8) (2.5) (69.3)
Total comprehensive income/(loss) - (69.5) 65.0 (4.5) 4.1 (0.4)
Recognition of share-based payments - - 4.3 4.3 - 4.3
Purchase of ESOP shares - - (1.1) (1.1) - (1.1)
Dividends paid (Note 6) - - (42.4) (42.4) (1.4) (43.8)
Total transactions with owners - - (39.2) (39.2) (1.4) (40.6)
As at 30 June 2023 27.8 (1,460.9) 2,649.6 1,216.5 62.1 1,278.6
Condensed Group Statement of Changes in Equity (continued)
For the six months ended 30 June 2023
Issued share capital Other reserves Retained earnings Owners of the parent Non-controlling interests Total equity
£m £m £m £m £m £m
As at 1 January 2022 27.8 (1,467.6) 2,483.4 1,043.6 54.6 1,098.2
- - 81.0 81.0 3.9 84.9
Profit
Remeasurement of defined benefit liabilities/assets - - 27.9 27.9 - 27.9
Income tax relating to items not reclassified - - (7.9) (7.9) - (7.9)
Exchange differences on translation of the net assets of foreign operations - 97.8 - 97.8 2.6 100.4
Exchange differences arising on translation of net investment hedges - (11.6) - (11.6) - (11.6)
Net change in costs of hedging - - - - - -
Change in the fair value of the hedging instrument - 6.8 - 6.8 - 6.8
Amounts reclassified from the Income Statement - (7.1) - (7.1) - (7.1)
Other comprehensive income/(loss), net of income tax - 85.9 20.0 105.9 2.6 108.5
Total comprehensive income/(loss) - 85.9 101.0 186.9 6.5 193.4
Recognition of share-based payments - - 3.5 3.5 - 3.5
Purchase of ESOP shares - - (1.9) (1.9) - (1.9)
Dividends paid (Note 6) - - (40.5) (40.5) (1.3) (41.8)
Total transactions with owners - - (38.9) (38.9) (1.3) (40.2)
As at 30 June 2022 27.8 (1,381.7) 2,545.5 1,191.6 59.8 1,251.4
Within other reserves as at 30 June 2023 is £1,499.0m (2022: 30 June and 31
December, £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
Notes to the Condensed Group Financial Statements
1. Basis of preparation
1.1 Basis of accounting
These Condensed Group Financial Statements of Vesuvius plc ("Vesuvius" or the
"Company") and its subsidiary and joint venture companies (the "Group") have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
These Condensed Group Financial Statements have been prepared using the same
accounting policies as used in the preparation of the Group's Annual financial
statements for the year ended 31 December 2022, except for taxes on income in
the interim period which are accrued using the tax rate that would be
applicable to the expected total annual profit or loss. The assessment of the
Group's critical accounting estimates and judgements remain consistent with
the 2022 Annual Report and Financial Statements. The Group's Annual report
and financial statements for the year ended 31 December 2022 were prepared in
accordance with UK-adopted international accounting standards (IFRS) and the
requirements of the Companies Act 2006.
The Condensed Group Financial Statements do not include all of the information
required for full annual financial statements, and should be read in
conjunction with the consolidated financial statements of the Group for the
year-ended 31 December 2022. The financial information presented in this
document is unaudited but has been reviewed by the Company's auditor.
The comparative figures for the financial year ended 31 December 2022 have
been extracted from the Group's Annual Report and Financial Statements for
that financial year. Those accounts have been reported on by the Company's
auditor and delivered to Companies House. The report of the auditor was
unqualified, did not include reference to any matters to which the auditor
drew attention by way of emphasis without qualifying its report and did not
contain a statement under section 498(2) or (3) of the Companies Act 2006.
These sections address whether proper accounting records have been kept,
whether the Company's accounts are in agreement with those records and whether
the auditor has obtained all the information and explanations necessary for
the purposes of its audit.
1.2 Basis of consolidation
The Condensed Group Financial Statements 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 Condensed Group Income Statement from the
effective date of acquisition or up to the effective date of disposal, as
appropriate.
The principal accounting policies applied in the preparation of these
Condensed Group Financial Statements are set out in the Notes. These policies
have been consistently applied to all of the years presented, unless otherwise
stated. 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 Condensed 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 less their
dividends since the date of the combination. Their share of comprehensive
income/(loss) 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 scenarios for the Group for a period of
at least 12 months from the date of approval of the 2023 Interim Condensed
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 analysis undertaken includes a severe but plausible downside scenario
which assumes a decline in business activity and profitability in H2 2023
(which it is assumed does not increase in 2024) to the level achieved in H2
2020, when the business performance was most impacted by COVID. This down-side
scenario considered cost saving measures, in line with those implemented
during the actual H2 2020 period. Debt maturing during the period is assumed
to be re-financed and a normal continuation of dividend payments was assumed.
H2 2020 considered for the down-side scenario simulation reflects the lowest
half year performance in the last five years. Relative to H1 2023, this
downside scenario implies a c.26% decline in sales and a c.46% decline in
Trading Profit, with no improvement from this level assumed in 2024.
Even in this downside scenario, the forecasts show that the Group maintains
considerable headroom against its covenants. Net debt / EBITDA (pre-IFRS 16
in-line with the covenant calculation) never exceeds 0.9x in the forecast
period considered, compared to a maximum acceptable leverage per covenant of
3.25x. Equally, significant headroom is maintained in the down-side case for
the interest coverage covenant (EBITDA / interest, pre-IFRS16 in line with
covenant calculation): the lowest interest coverage in the period is 20.8x
compared to the minimum required by the covenant of 4.0x.
Based on the exercise described above and the Group's available committed
liquidity which currently stands at £471m, the Directors consider that the
Group and the Company have adequate resources to continue in operational
existence for a period of at least 12 months from the date of signing of these
Interim Condensed Financial Statements. Accordingly, they continue to adopt a
going concern basis in preparing the Condensed Financial statements of the
Group and the Company.
1.4 Functional and presentational 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"
Columnar presentation
The Group has adopted a columnar presentation for its Condensed Group Income
Statement, to separately identify headline performance results, as the
Directors consider that this gives a useful view of the underlying results of
the ongoing business. As part of this presentation format, the Group 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 users both in a useful understanding of the
financial performance achieved for a given year and in making projections of
future results.
1.6 Disclosure of "separately reported items" (continued)
Separately reported items
Both materiality and the nature 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 (which may require more than one year to
complete), significant movement in the Group's deferred tax balances, items
reported separately for consistency, 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 items reported separately.
The amortisation charge in respect of intangible assets recognised on business
combinations is excluded from the trading results of the Group since they are
non-cash charges and are not considered reflective of the core trading
performance of the Group.
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.
1.7 New and revised IFRS
Certain new accounting standards and interpretations have been published that
are applicable for periods commencing 1 January 2023 and others that are not
mandatory for reporting periods commencing on 1 January 2023 and have not been
early adopted by the Group.
The Group is finalising its assessment of the impact of IFRS 17 Insurance
Contracts and other new standards applicable for periods commencing 1 January
2023 to ensure compliance. These are not expected to have a significant impact
on the Group's financial position, performance, cash flows and disclosures.
Benchmark reform
The replacement of Libor with alternative interest rate benchmarks is now well
progressed and the Group has reviewed the impact of this on its financial
statements. The £385m central bank facility signed on 5 July 2021 provides
for the use of SONIA and EURIBOR for GBP and EUR drawdowns respectively. As
provided for within the terms of the facility, SOFR was agreed as a
replacement reference rate for USD Libor in May 2023.
The Group's US Private Placement Notes, bilateral loan agreement and
cross-currency interest rate swaps are not exposed to Libor rates and as a
result are unaffected by the benchmark reform. The Group concludes that
benchmark reform has no material impact on its financial statements. The Group
also confirms it has made no changes to its risk management strategy as a
result of benchmark reform.
OECD Pillar two model
The group is within the scope of the OECD Pillar two model rules. Pillar two
legislation was recently substantively enacted in some of the territories in
which the group operates and will come into effect in these territories from 1
January 2024. At the interim reporting date, none of the Pillar two
legislation is effective and so the group has no related current tax exposure.
On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK,
introducing a global minimum effective tax rate of 15%. The legislation
implements a domestic top-up tax and a multinational top-up tax, effective for
accounting periods starting on or after 31 December 2023. The Group does not
account for deferred tax on top-up taxes and therefore, there was no impact on
the recognition and measurement of deferred tax balances as a result of the
legislation being substantively enacted.
2 Segment information
Operating segments for continuing operations
The Group's operating segments are determined taking into consideration how
the Group's components are reported to the Group's Chief Executive Officer,
who makes the key operating decisions and is responsible for allocating
resources and assessing performance of the components. Taking into account the
Group's management and internal reporting structure, the operating segments
are Steel Flow Control, Steel Advanced Refractories, Steel Sensors &
Probes and the Foundry Division. The principal activities of each of these
segments are described in the Operational Review.
Steel Flow Control, Steel Advanced Refractories and Steel Sensors & Probes
operating segments are aggregated into the Steel reportable segment. In
determining that aggregation is appropriate, judgement is applied which takes
into account the economic characteristics of these operating segments which
include a similar nature of products, customers, production processes and
margins.
Revenue from contracts with customers
Revenue comprises the fair value of the consideration received or receivable
for goods supplied and services rendered to customers after deducting rebates,
discounts and value-added taxes, and after eliminating sales within the Group.
Revenue from contracts with customers is recognised when control of the goods
or services are transferred to the customer, upon the completion of specified
performance obligations, at an amount that reflects the considerations to
which the Group expects to be entitled to in exchange for these consumable
products and associated services.
The revenue recognition policy applicable to the current and comparative
periods and information about the Group's performance obligations was
disclosed in Note 5 of the 2022 Annual Report and Financial Statements.
Segmental analysis
Unaudited Half Year 2023
Flow Control Advanced Refractories Sensors Steel Foundry Total
& Probes
£m £m £m
Segment revenue 401.8 289.6 20.1 711.5 283.8 995.3
at a point in time 710.7 283.8 994.5
Over time 0.8 - 0.8
Segment adjusted EBITDA * 94.3 38.6 132.9
Segment depreciation (19.5) (8.5) (28.0)
Segment trading profit 74.8 30.1 104.9
Return on sales # 10.5% 10.6% 10.5%
Amortisation of acquired intangible assets (5.2)
Operating profit 99.7
Net finance costs (5.5)
Share of post-tax profit of joint ventures 0.5
Profit before tax 94.7
Capital expenditure additions 33.5 11.7 45.2
Inventory 259.5 58.9 318.4
Trade debtors 286.4 103.0 389.4
Trade creditors (183.5) (62.3) (245.8)
2 Segment information (continued)
Unaudited Half Year 2022
Flow Control Advanced Refractories Sensors Steel Foundry Total
& Probes
£m £m £m
Segment revenue 402.6 320.8 20.6 744.0 271.9 1,015.9
at a point in time 743.3 271.9 1,015.2
Over time 0.7 - 0.7
Segment adjusted EBITDA * 119.5 34.1 153.6
Segment depreciation (17.8) (8.4) (26.2)
Segment trading profit 101.7 25.7 127.4
Return on sales # 13.7% 9.5% 12.5%
Amortisation of acquired intangible assets (5.1)
Operating profit 122.3
Net finance costs (6.6)
Share of post-tax profit of joint ventures 1.0
Profit before tax 116.7
Capital expenditure additions 33.2 5.0 38.2
Inventory 296.7 64.0 360.7
Trade debtors 334.2 103.9 438.1
Trade creditors (210.3) (68.6) (278.9)
Full Year 2022
Flow Control Advanced Refractories Sensors Steel Foundry Total
& Probes
£m £m £m
Segment revenue 810.9 645.3 40.2 1,496.4 551.0 2,047.4
at a point in time 1,493.7 551.0 2,044.7
Over time 2.7 - 2.7
Segment adjusted EBITDA * 210.6 72.1 282.7
Segment depreciation (37.9) (17.6) (55.5)
Segment trading profit 172.7 54.5 227.2
Return on sales # 11.5% 9.9% 11.1%
Amortisation of acquired intangible assets (10.4)
Operating profit 216.8
Net finance costs (11.4)
Share of post-tax profit of joint ventures 1.2
Profit before tax 206.6
Capital expenditure additions 85.2 18.7 103.9
Inventory 259.6 56.4 316.0
Trade debtors 288.0 92.8 380.8
Trade creditors (177.2) (62.3) (239.5)
# Return on sales is defined in note 15.3
* Adjusted EBITDA is defined in note 15.13
2 Segment information (continued)
External revenue Non-current assets
Unaudited Half year Unaudited Half year Full year Unaudited Half year Unaudited Half year Full year
2023 2022 2022 2023 2022 2022
£m £m £m £m £m £m
EMEA 347.5 385.8 741.6 486.0 467.6 500.0
Asia 284.2 273.6 565.2 216.7 231.4 237.0
North America 277.9 265.3 549.1 410.0 405.0 384.3
South America 85.7 91.2 191.5 50.1 42.8 44.3
Continuing operations 995.3 1,015.9 2,047.4 1,162.8 1,146.8 1,165.6
External revenue disclosed in the table above is based upon the geographical
location from which the products and services are invoiced. Non-current assets
exclude employee benefits net surpluses and deferred tax assets. Information
relating to the Group's products and services is given in the Strategic Report
as disclosed in the 2022 Annual Report and Financial Statements. The Group is
not dependent on any single customer for its revenue and no single customer,
for the years presented in the tables above, accounts for more than 10% of the
Group's total external revenue. £34.8m (2022 half year £33.0m; 2022 full
year £70.9m) of revenue was generated from the UK, and total non-current
assets in the UK amounted to £76.4m (2022 half year £91.7m; 2022 full year
£93.9m).
3 Net finance costs
Unaudited Half year Unaudited Half year Full year
2023 2022 2022
£m £m £m
Interest payable on borrowings
Loans and overdrafts 8.9 6.7 15.4
Interest on lease liabilities 1.0 0.8 1.9
Amortisation of capitalised arrangement costs 0.5 0.5 1.0
Total interest payable on borrowings 10.4 8.0 18.3
Interest on net retirement benefits obligations 1.1 0.7 1.4
Adjustments to discounts on provisions and other liabilities 1.2 0.5 1.1
Adjustments to discounts on receivables (0.7) (0.3) (0.6)
Finance income (6.5) (2.3) (8.8)
Total net finance costs 5.5 6.6 11.4
Within the table above, total finance costs are £12.7m (2022 half year:
£9.2m, 2022 full year: £20.8m) and total finance income is £7.2m (2022 half
year: £2.6m, 2022 full year: £9.4m).
4 Income tax
A key measure of the Group's tax burden is the headline effective tax rate,
which the Group calculates on the income tax associated with headline
performance, divided by the headline profit before tax excluding the Group's
share of post-tax profit of joint ventures. The Group's headline effective tax
rate was in-line with expectations at 27.5% in H1 2023 (2022 half year 27.5%;
2022 full year 26.5%) based on the income tax charge associated with headline
performance of £27.3m (2022 half year £33.2m; 2022 full year £57.2m).
The Group's total net income tax charge reflected in the Condensed Group
Income Statement include a credit of £1.5m (2022 half year £1.4m; 2022 full
year £39.1m) relating to separately reported items comprising a credit of
£1.5m (2022 half year £1.4m; 2022 full year £2.7m) relating to the
amortisation of intangible assets and a credit of £nil (2022 half year £nil;
2022 full year £36.4m) mainly relating to the recognition of UK deferred tax
assets.
The Group's total net income tax charge reflected in the Condensed Group
Statement of Comprehensive Income was £1.1m (2022 half year £7.9m; 2022 full
year: £8.2m). It was in respect of tax on net actuarial gains and losses on
employee benefits.
5 Earnings per share ("EPS")
5.1 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 Condensed Group
Income Statement. The table below reconciles these different profit measures.
Unaudited Half year Unaudited Half year Full year
2023 2022 2022
£m £m £m
Profit attributable to owners of the parent 62.3 81.0 181.1
Adjustments for separately reported items:
Amortisation of acquired intangible assets 5.2 5.1 10.4
Income tax (credit)/charge (1.5) (1.4) (39.1)
Headline profit attributable to owners of the parent 66.0 84.7 152.4
5.2 Weighted average number of shares
Unaudited Half year Unaudited Half year Full year
2023 2022 2022
millions millions millions
For calculating basic and headline EPS 269.0 270.1 269.6
Adjustment for potentially dilutive ordinary shares 2.1 1.4 1.9
For calculating diluted and diluted headline EPS 271.1 271.5 271.5
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 were all outstanding share
options to vest in full, 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.
5.3 Per share amounts
Unaudited Half year Unaudited Half year Full year 2022
2023 2022
Pence Pence pence
Earnings per share - basic 23.2 30.0 67.2
- diluted 23.0 29.8 66.7
- headline ((1)) 24.5 31.4 56.5
- diluted headline 24.3 31.2 56.1
((1)) For definition of headline earnings per share, refer to Note 15.8
6 Dividends
Unaudited Half year Unaudited Half year Full year
2023 2022 2022
£m £m £m
Amounts recognised as dividends and paid to equity shareholders
during the period
Final dividend for the year-ended 31 December 2021 of 15.0p per ordinary share - 40.5 40.5
Interim dividend for the year-ended 31 December 2022 of 6.5p per ordinary - - 17.6
share
Final dividend for the year-ended 31 December 2022 of 15.75p per ordinary 42.4 - -
share
42.4 40.5 58.1
The Directors have declared an interim dividend of 6.8p in respect of the
year-ending 31 December 2023.
7 Reconciliation of movement in net debt
Balance as at Foreign exchange adjustments Fair value gains/ Non-cash movements(*) Cash flow Balance as at 30 June 2023
1 Jan 2023 (losses)
£m £m £m £m £m
Cash and cash equivalents
Cash at bank and in hand 184.2 (13.4) - - 2.4 173.2
Short term deposits - - - - - -
Bank overdrafts (4.4) 0.1 - - 1.4 (2.9)
179.8 (13.3) - - 3.8 170.3
Borrowings, excluding bank overdrafts (440.2) 14.5 - (10.8) (5.2) (441.7)
Capitalised arrangement costs 2.7 - - (0.4) - 2.3
Derivative financial instruments 2.7 - (1.6) - - 1.1
Net debt (255.0) 1.2 (1.6) (11.2) (1.4) (268.0)
(*) (£10.8m (2022 half year: £5.5m) of new leases were entered into during
the year.)
Balance as at Foreign exchange adjustments Fair value Non-cash movements(*) Cash flow Balance as at 31 Dec 2022
1 Jan 2022 gains/
(losses)
£m £m £m £m £m
Cash and cash equivalents
Cash at bank and in hand 169.1 0.1 - - 15.0 184.2
Short term deposits - - - - - -
Bank overdrafts (6.7) (0.3) - - 2.6 (4.4)
162.4 (0.2) - - 17.6 179.8
Borrowings, excluding bank overdrafts (440.3) (25.4) - (11.5) 37.0 (440.2)
Capitalised borrowing costs 3.3 - - (0.6) - 2.7
Derivative financial instruments (2.5) - 5.2 - - 2.7
Net debt (277.1) (25.6) 5.2 (12.1) 54.6 (255.0)
(*) (£11.5m (2021: £17.1m) of new leases were entered into during the year.)
7 Reconciliation of movement in net debt (continued)
Net debt is a measure of the Group's net indebtedness to banks and other
external financial institutions and comprises the total of cash and short-term
deposits, current and non-current interest-bearing borrowings, derivative
financial instruments and lease liabilities.
Cash is held both centrally and in operating territories. There is no
restricted cash. For certain territories including Argentina, China, India and
Russia cash is more readily used locally than for broader group purposes.
8 Cash Generated from Operations
Unaudited Half year Unaudited Half year
2023 2022
£m £m
Operating profit 99.7 122.3
Adjustments for:
Amortisation of acquired intangible assets 5.2 5.1
Trading Profit 104.9 127.4
Profit on disposal of non-current assets (2.3) (0.1)
Depreciation and amortisation 28.0 26.2
Defined benefit retirement plans net charge 3.0 3.0
Net increase in inventories (18.1) (40.2)
Net increase in trade receivables (31.3) (62.9)
Net increase in trade payables 18.1 9.8
Net decrease in other working capital 9.3 10.0
Outflow related to restructuring charges (1.0) (0.5)
Defined benefit retirement plans cash outflows (3.2) (2.8)
Vacant site remediation costs paid (0.6) (0.9)
Cash generated from operations 106.8 69.0
Full year 2022
£m
Operating profit 216.8
Adjustments for:
Amortisation of acquired intangible assets 10.4
Trading Profit 227.2
Profit on disposal of non-current assets (0.1)
Depreciation and amortisation 55.5
Defined benefit retirement plans net charge 5.6
Net decrease in inventories 2.2
Net increase in trade receivables (9.2)
Net decrease in trade payables (28.0)
Net decrease in other working capital 24.7
Outflow related to restructuring charges (1.5)
Defined benefit retirement plans cash outflows (6.3)
Vacant site remediation costs paid (1.8)
Cash generated from operations 268.3
9 Employee benefits
The net employee benefits liability as at 30 June 2023 was £50.8m (2022 half
year: £54.0m; 2022 full year: £56.1m) derived from an actuarial valuation of
the Group's defined benefit pension and other post-retirement obligations as
at that date.
All the liabilities in the UK were insured following a buy-in agreement with
Pension Insurance Corporation plc ("PIC") in 2021. This buy-in agreement
secured an insurance asset from PIC that matches the remaining pension
liabilities of the UK Plan, with the result that the Company no longer bears
any investment, longevity, interest rate or inflation risks in respect of the
UK Plan.
As disclosed in note 26 of the 2022 Annual Report and Financial Statements,
the above amounts may materially change in the next 12 months if there is a
change in assumptions.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
£m £m £m
Employee benefits - net surpluses
UK defined benefit pension plans 26.7 23.3 24.5
ROW defined benefit pension plans 1.6 1.2 1.7
Net surpluses 28.3 24.5 26.2
Employee benefits - net liabilities
UK defined benefit pension plans (1.1) (1.6) (1.1)
US defined benefit pension plans (19.8) (21.8) (22.5)
Germany defined benefit pension plans (37.2) (34.7) (38.4)
ROW defined benefit pension plans (11.2) (13.1) (10.9)
Other post-retirement benefit plans (9.8) (7.3) (9.4)
Net liabilities (79.1) (78.5) (82.3)
Net liabilities (50.8) (54.0) (56.1)
The expense recognised in the Condensed Group Income Statement in respect of
the Group's defined benefit retirement plans and other post-retirement benefit
plans is shown below.
Unaudited Half year Unaudited Half year 2022 Full year 2022
2023
£m £m £m
In arriving at trading profit - within other manufacturing costs 0.7 0.8 1.7
(as defined in Note 15.4)
- within administration, selling and distribution costs 2.3 2.2 3
.
9
In arriving at profit before tax - within net finance costs 1.1 0.7 1.4
Total net charge 4.1 3.7 7.0
10 Contingent liabilities
Vesuvius has extensive international operations and
is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters.
Certain of Vesuvius' subsidiaries are subject to legacy matter 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. Each year a number of these lawsuits are withdrawn,
dismissed or settled. 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.
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 (see Note 30 of the 2022
Annual Report and Financial Statements for further information). The amount
paid, including costs in relation to this litigation, has not had a material
effect on Vesuvius' financial position or results of operations in the current
period.
11 Related parties
The nature of related party transactions in H1 2023 are in line with those
transactions disclosed in Note 34 of the 2022 Annual Report and Financial
Statements. All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms. Transactions with
joint ventures and associates are consistent with those disclosed in Note 34
of the 2022 Annual Report and Financial Statements. Transactions between
related parties that are Group subsidiaries are eliminated on consolidation.
Unaudited Half year Unaudited Half year
2023
2022
Transactions with joint ventures and associate £m £m
Sales to joint ventures 2.1 2.6
Purchases from joint ventures 14.5 19.4
Dividends received from joint ventures - -
Trade payables owed to joint ventures 9.9 11.4
Trade receivables owed by joint ventures 1.0 0.6
There were no transactions with the associate in the period.
12 Acquisitions and divestments
There were no acquisitions or divestments in the period.
13 Provisions
Disposal, closure and environmental costs Restructuring charges Other Total
£m £m £m £m
As at 1 January 2023 57.7 3.6 5.4 66.7
Exchange adjustments (2.7) 0.2 (0.1) (2.6)
Charge to Condensed Group Income Statement 0.6 - 4.1 4.7
Adjustment to discount 1.2 - - 1.2
Cash spend (2.7) (1.0) (3.7) (7.4)
As at 30 June 2023 54.1 2.8 5.7 62.6
Disposal, closure and environmental costs Restructuring charges Other Total
£m £m £m £m
As at 1 January 2022 41.7 5.0 4.0 50.7
Exchange adjustments 4.4 (0.4) 0.4 4.4
Charge to Condensed Group Income Statement 2.0 - 5.7 7.7
Adjustment to discount 0.5 - - 0.5
Cash spend (3.7) (0.5) (5.8) (10.0)
As at 30 June 2022 44.9 4.1 4.3 53.3
Of the total provision balance at 30 June 2023 of £62.6m (30 June 2022:
£53.3m), £47.7m (30 June 2022: £36.0m) is recognised in the Group Balance
Sheet within non-current liabilities and £14.9m (30 June 2022: £17.3m)
within current liabilities.
In assessing the probable costs and realisation certainty of provisions,
reasonable assumptions are made. Changes to the assumptions used could
significantly alter the Directors' assessment of the value, timing or
certainty of the costs. The nature of the provisions held remains consistent
with those held at 31 December 2022 and further description is set out within
Note 30 of the 2022 Annual Report and Financial Statements.
14 Financial instruments
The Company's financial assets are measured at amortised cost with the
exception of certain investments in debt, which are measured at fair value
through other comprehensive income, and certain derivative instruments, which
are measured at fair value through profit or loss. Financial liabilities are
measured at amortised cost with the exception of certain derivative
instruments, which are measured at fair value through profit and loss.
IFRS 13 Fair Value Measurement requires classification of financial
instruments within a hierarchy that prioritises the inputs to fair value
measurement. The three levels of the fair value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for identical assets or
liabilities;
Level 2 - Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly;
Level 3 - Inputs that are not based on observable market data.
The following table summarises Vesuvius' financial instruments measured at
fair value, and shows the level within the fair value hierarchy in which the
financial instruments have been classified:
Unaudited Unaudited
Half year 2023 Half year 2022 Full year 2022
Assets Liabilities Assets Liabilities Assets Liabilities
£m £m £m £m £m £m
Investments (Level 2) 0.7 0.8 - 0.5 -
Derivatives not designated for hedge 0.1 (0.2) 0.2 (0.2) 0.1 (0.1)
accounting purposes (Level 2)
Derivatives designated for hedge 1.2 - 3.1 - 2.7 -
accounting purposes (Level 2)
All of the derivative financial instruments not designated for hedge
accounting purposes reported in the table above will mature within a year of
the balance sheet date. There were no transfers between fair value hierarchies
during the period. The method for determining the hierarchy and for valuing
the financial instruments is consistent with that used at year-end, as
disclosed in Note 25 of the 2022 Annual Report and Financial Statements.
Fair value disclosures have not been made in respect of other financial
assets and liabilities on the basis that the carrying amount is deemed to be a
reasonable approximation of fair value.
The Group's Treasury department, acting in accordance with policies approved
by the Board, is principally responsible for managing the financial risks
faced by the Group. The Group's activities expose it to a variety of financial
risks, the most significant of which are market risk and liquidity risk. The
condensed interim financial statements do not include all financial risk
management information and disclosures required in the annual financial
statements; they should be read in conjunction with the Group's 2022 Annual
Report and Financial Statements, in which further details of these financial
risks were disclosed in Note 25. There have been no changes in the risk
management policies since year end.
In June 2020 the Group executed a $86m Cross currency interest rate swap
('CCIRS') with 3 of its relationship banks. The effect of this is to convert
the $86m Private Placement Notes issued in June 2020 into €76.6m. The timing
and amount of the US Dollar cashflows under the CCIRS exactly mirror those of
the Private Placement Notes and the maturity date of the CCIRS also matches
the repayment date of the Notes. The CCIRS would by default be revalued
through the Income Statement; however as it is in a designated hedging
relationship it is instead revalued through Other Comprehensive Income. More
specifically, the US Dollar exposure is designated as a cashflow hedge of the
underlying Private Placement Notes and the Euro exposure is designated as a
net investment hedge of part of the Group's foreign operations. The CCIRS is
presented as a non-current asset or liability as it is expected to be settled
more than 12 months after the end of the reporting period.
With the exception of the CCIRS change in the fair value of Derivatives
outstanding at 30 June 2023 has been booked through the Income Statement.
All of the fair values shown in the table above are classified under IFRS 13
as Level 2 measurements which have been calculated using quoted prices from
active markets, where similar contracts are traded and the quotes reflect
actual transactions in similar instruments. All of the derivative assets and
liabilities not designated for hedge accounting purposes reported in the table
above will mature within a year of the balance sheet date.
14 Financial instruments (continued)
The cross-currency interest rate swaps are fair valued at each reporting date
and the Group applies hedge accounting in accordance with IFRS 9 such that the
movement in fair value is accounted for directly within equity. The USD
component is designated as a cashflow hedge of the $86m US Private Placement
Notes. The Euro component is designated as a net investment hedge of the
Group's Euro denominated net assets.
As at 30 June 2023, €244.0m (2022 half year: €249.0m; full year:
€246.0m) and $60.0m (2022 half year: $60.0m; full year: $60.0m) of
borrowings were designated as hedges of net investments in €244.0m (2022
half year: €249.0m; full year: €246.0m) and $60.0m (2022 half year:
$60.0m; full year: $60.0m) worth of overseas foreign operations. In addition,
the €76.6m (2022 half year: €76.6m; full year: €76.6m) CCIRS liability
has been designated as a net investment hedge of a further €76.6m (2022 half
year: €76.6m; full year: €76.6m) worth of overseas foreign operations.
As the value of the borrowings and the CCIRS liability exactly matches the
designated hedged portion of the net investments, the relevant hedge ratio is
1:1. The net investment hedges are therefore 100% effective with no
ineffectiveness. It is noted that hedge ineffectiveness would arise in the
event there were insufficient euro-denominated overseas foreign operations to
be matched against the €76.6m CCIRS liability.
As at 30 June 2023, the Group had $146.0m (2022 half year: $146.0m; full year:
$146.0m), €198.0m (2022 half year: €198.0m; full year: €198.0m) and
£28.0m (2022 half year: £28.0m; full year: £28.0m) of US Private Placement
Loan Notes (USPP) outstanding, which carry a fixed rate of interest,
representing 78% (2022 half year: 68%; full year: 81%) of the Group's total
borrowings outstanding at that date. The Group had £47.5m (2022 half year:
£102.0m; full year: £33.0m) and €46.0m (2022 half year: €51.0m; full
year: €48.0m) short-term drawdowns in relation to its committed bank
facilities, which carry floating rates of interest, representing 22% (2022
half year: 32%; full year: 19%) of the Group's total borrowings outstanding at
30 June 2023. Maturities of the corresponding USPP Notes were disclosed in
Note 25 to the 2022 Annual Report and Financial Statements.
The currency and interest rate profile of the Group's borrowings is detailed
in the tables below.
Financial liabilities (gross borrowings)
Fixed rate Floating rate Total
£m £m £m
Sterling 28.0 48.4 76.4
United States dollar 114.9 0.5 115.4
Euro 170.1 40.6 210.7
Other - 0.5 0.5
Capitalised costs (0.8) (1.5) (2.3)
As at 30 June 2023 312.2 88.5 400.7
Sterling 28.0 33.3 61.3
United States dollar 120.7 1.9 122.6
Euro 175.2 44.8 220.0
Capitalised costs (0.9) (1.8) (2.7)
As at 31 December 2022 323.0 78.2 401.2
14 Financial instruments (continued)
The maturity analysis of the Group's financial liabilities is shown in the
tables below. The cash flows shown are undiscounted.
As at 30 June 2023 Within one year Between 1-2 years Between 2-5 years Over 5 years Total contractual cash flows Carrying amount
£m £m £m £m £m £m
Trade payables 245.8 - - - 245.8 245.8
Loans & overdrafts 47.9 56.2 211.1 128.2 443.4 403.0
Lease liabilities 10.6 9.4 15.0 14.0 49.0 41.6
Capitalised arrangement fees - - - - - (2.3)
Derivative liability 0.2 - - - 0.2 0.2
Total financial liabilities 304.5 65.6 226.1 142.2 738.4 688.3
As at 31 December 2022 Within one year Between Between Over 5 years Total contractual cash flows Carrying amount
1-2 years 2-5 years
£m £m £m £m £m £m
Trade payables 239.5 - - - 239.5 239.5
Loans & overdrafts 52.6 9.2 255.3 133.4 450.5 403.8
Lease liabilities 12.3 9.2 13.2 13.5 48.2 40.8
Capitalised arrangement fees - - - - - (2.7)
Derivative liability 0.1 - - - 0.1 0.1
Total financial liabilities 304.5 18.4 268.5 146.9 738.3 681.5
In July 2022 and May 2023, the Group exercised its option to request a
one-year extension to the maturity of its £385m committed bank facility.
Following the requests £385m of the facility matures in August 2026. At the
time of the extension the reference to USD LIBOR was replaced with reference
to SOFR.
In H1 2023, the Group did not hold any borrowings for which the interest
payable referenced LIBOR benchmarks.
15 Alternative performance measures
The Company uses a number of Alternative Performance Measures (APMs) in
addition to those reported in accordance with IFRS. The Directors believe that
these APMs, listed below, are important when assessing the underlying
financial and operating performance of the Group and its Divisions, providing
management with key insights and metrics in support of the ongoing management
of the Group's performance and cash flow. A number of these align with KPI's
and other key metrics used in the business and therefore are considered useful
to also disclose to the users of the financial statements. The following APMs
do not have standardised meaning prescribed by IFRS and therefore may not be
directly comparable to similar measures presented by other companies.
15.1 Headline performance
Headline performance, reported separately on the face of the Condensed Group
Income Statement, is from continuing operations and before items reported
separately on the face of the Condensed Group Income Statement.
15.2 Underlying revenue, underlying trading profit and underlying return
on sales
Underlying revenue, underlying trading profit and underlying return on sales
are the headline equivalents of these measures after adjustments to exclude
the effects of changes in exchange rates, business acquisitions and disposals.
Reconciliations of underlying revenue and underlying trading profit can be
found in the Financial Summary. Underlying revenue growth is one of the
Group's key performance indicators and provides an important measure of
organic growth of Group businesses between reporting periods, by eliminating
the impact of exchange rates, acquisitions and disposals.
15.3 Return on Sales ('ROS')
ROS is calculated as trading profit divided by revenue. It is one of the
Group's key performance indicators and is used to assess the trading
performance of Group businesses. A calculation of ROS is included in Note 2.
15.4 Trading profit/adjusted EBITA
Trading profit/adjusted EBITA is defined as operating profit before separately
reported items. It is one of the Group's key performance indicators and is
used to assess the trading performance of Group businesses. It is also used as
one of the targets against which the annual bonuses of certain employees are
measured.
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. It is one of the Group's
key performance indicators and is used to assess the financial performance of
the Group as a whole.
15.6 Headline effective tax rate ('ETR')
The Group's headline ETR 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 and associates.
15.7 Headline earnings
Headline earnings is profit after tax before separately reported items
attributable to owners of the parent.
15.8 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. It is
one of the Group's key performance indicators and is used to assess the
underlying earnings performance of the Group as a whole. It is also used as
one of the targets against which the annual bonuses of certain employees are
measured. Headline earnings per share is disclosed in Note 5.
15 Alternative performance measures (continued)
15.9 Adjusted operating cash flow
Adjusted operating cash flow is cash generated from operations before
restructuring and vacant site remediation costs but after deducting capital
expenditure net of asset disposals. It is used in calculating the Group's cash
conversion.
Unaudited Half year Unaudited Half year Full year
2023 2022 2022
£m £m £m
Cash generated from continuing operations 106.8 69.0 268.3
Add: Outflows relating to restructuring charges 1.0 0.5 1.5
Add: Vacant site remediation costs paid 0.6 0.9 1.8
Less: Capital expenditure (41.9) (38.6) (89.2)
Add: Proceeds from the sale of property, plant and equipment 4.2 1.3 3.1
Adjusted operating cash flow 70.7 33.1 185.5
Trading Profit 104.9 127.4 227.2
Cash Conversion 67% 26% 82%
15.10 Cash conversion
Cash conversion is calculated as adjusted operating cash flow divided by
trading profit. It is useful for measuring the rate at which cash is generated
from trading profit. It is also used as one of the targets against which the
annual bonuses of certain employees are measured. The calculation of cash
conversion is detailed in Note 15.9 above.
15.11 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. It is
one of the Group's key performance indicators and is used to assess the
underlying cash generation of the Group and is one of the measures used in
monitoring the Group's capital. A reconciliation of free cash flow is included
underneath the Condensed Group Statement of Cash Flows.
15.12 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 total revenue for
the previous 12 months, at constant currency. Average trade working capital
(comprising inventories, trade receivables and trade payables) is calculated
as the average of the 13 previous month-end balances. It is one of the Group's
key performance indicators and is useful for measuring the level of working
capital used in the business and is one of the measures used in monitoring the
Group's capital.
Unaudited Half year Unaudited Half year Full year
2023 2022
£m £m 2022
£m
Average trade working capital 480.4 426.4 487.3
Last 12 months total revenue 1,989.9 1,868.6 2,047.4
Average trade working capital to sales ratio 24.1% 22.8% 23.8%
15 Alternative performance measures (continued)
15.13 Adjusted earnings before interest, tax, depreciation and amortisation
(adjusted EBITDA)
Adjusted EBITDA is calculated as the total of trading profit before
depreciation and amortisation of non-acquired intangible assets. It is used in
the calculation of the Group's interest cover and net debt to adjusted EBITDA
ratios. A reconciliation of adjusted EBITDA is included in Note 2.
15.14 Net interest payable on borrowings
Net interest payable on borrowings is calculated as total interest payable on
borrowings less finance income, excluding interest on net retirement benefit
obligations, adjustments to discounts and any item separately reported. It is
used in the calculation of the Group's interest cover ratio.
Unaudited Half year Unaudited Half year Full year
2023 2022
£m £m 2022
£m
Total interest payable on borrowings (note 3) 10.4 8.0 18.3
Finance income (note 3) (6.5) (2.3) (8.8)
Net interest payable on borrowings 3.9 5.7 9.5
15.15 Interest cover
Interest cover is the ratio of adjusted EBITDA for the last 12 months to net
interest payable on borrowings for the last 12 months. It is one of the
Group's key performance indicators and is used to assess the financial
position of the Group and its ability to fund future growth. This measure is
also a component of the Group's covenant calculations.
Unaudited Half year Unaudited Half year Full year
2023 2022
£m £m 2022
£m
Last 12 months adjusted EBITDA 262.0 248.0 282.7
Last 12 months net interest payable on borrowings 7.7 8.5 9.5
Interest cover 34.0x 29.2x 29.8x
15.16 Net debt
Net debt comprises the net total of current and non-current interest-bearing
borrowings (including IFRS16 lease liabilities), cash and short-term deposits
and derivative financial instruments. Net debt is a measure of the Group's net
indebtedness to banks and other external financial institutions. A
reconciliation of the movement in net debt is included in Note 7.
15.17 Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is the ratio of net debt at the period-end to
adjusted EBITDA for the last 12 months. It is one of the Group's key
performance indicators and is used to assess the financial position of the
Group and its ability to fund future growth and is one of the measures used in
monitoring the Group's capital.
Unaudited Half year Unaudited Half year Full year
2023 2022
£m £m 2022
£m
Net debt (note 7) 268.0 327.7 255.0
Last 12 months adjusted EBITDA (note 2) 262.0 248.0 282.7
Net debt to adjusted EBITDA 1.0x 1.3x 0.9x
15 Alternative performance measures (continued)
15.18 Return on invested capital (ROIC)
The Group has adopted ROIC as its key measure of return from the Group's
invested capital. ROIC is calculated as trading profit less amortisation of
acquired intangibles plus share of post-tax profit of joint ventures and
associates for the previous 12 months after tax, divided by the average (being
the average of the opening and closing balance sheet) invested capital
(defined as: total assets excluding cash plus non-interest-bearing
liabilities), at the average foreign exchange rate for the year.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
£m £m
Average invested capital 1,574.4 1,437.9 1,503.6
Trading profit (note 15.4) 196.8 198.7 227.2
Amortisation of acquired intangible assets (10.4) (9.9) (10.4)
Share of post-tax profit from joint ventures and associates 0.7 1.7 1.2
Tax on trading profit and amortisation of acquired intangible assets (51.3) (51.9) (57.5)
135.8 138.6 160.5
ROIC 8.6% 9.6% 10.7%
15.19 Constant currency
Figures presented at constant currency represent 2022 amounts retranslated at
average 2023 exchange rates.
15.20 Liquidity
Liquidity is the Group's cash and short-term deposits plus undrawn committed
debt facilities less cash used as collateral on loans and any gross up of cash
in notional cash pools.
Unaudited Half year Unaudited Half year Full year
2023 2022
£m £m 2022
£m
Cash and short term deposits 173.2 177.2 184.2
Undrawn committed debt facilities 309.5 257.1 322.5
Cash used as collateral on loans (11.5) (18.0) (13.0)
Gross up of cash in notional pools - (0.1) (0.1)
Liquidity 471.2 416.2 493.6
15.21 Last twelve months ('LTM')
Some results are presented or calculated using data from the last twelve
months from the reference date.
16 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
period end rates. The principal exchange rates used were as follows:
Income and expense
Average rates
Half year 2023 Half year 2022 Half year to Half year change Full year to Half year change
Full year 2022
US Dollar 1.23 1.30 1.24 -5.4% -0.8%
Euro 1.14 1.19 1.17 -4.2% -2.6%
Chinese Renminbi 8.56 8.42 8.31 1.7% 3.0%
Japanese Yen 166.52 159.48 161.86 4.4% 2.9%
Brazilian Real 6.25 6.59 6.38 -5.2% -2.0%
Indian Rupee 101.37 98.87 96.99 2.5% 4.5%
South African Rand 22.48 19.97 20.16 12.6% 11.5%
Assets and liabilities
Period end rates
Half year 2023 Half year 2022 Half year to Half year change Full year to Half year change
Full year 2022
US Dollar 1.27 1.22 1.21 4.1% 5.0%
Euro 1.16 1.16 1.13 0.0% 2.7%
Chinese Renminbi 9.23 8.15 8.37 13.3% 10.3%
Japanese Yen 183.34 165.25 158.60 10.9% 15.6%
Brazilian Real 6.08 6.40 6.39 -5.0% -4.9%
Indian Rupee 104.29 96.12 100.06 8.5% 4.2%
South African Rand 23.92 19.81 20.57 20.7% 16.3%
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