REG - Vesuvius plc - Half-year Report <Origin Href="QuoteRef">VSVS.L</Origin> - Part 3
27/07/2017 07:07
- Part 3: For the preceding part double click ID:nRSa2208Mb
- headline 19.7 12.8
- diluted 15.0 0.6 15.6 9.1 - 9.1
- diluted headline 19.6 12.7
Continuing Discontinued Full year
operations operations 2016
pence pence pence
Earnings per share - basic 17.3 3.8 21.1
- headline 30.4
- diluted 17.3 3.7 21.0
- diluted headline 30.3
7 Dividends
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
£m £m £m
Amounts recognised as dividends and paid to equity holders during the period
Final dividend for the year ended 31 December 2015 of 11.125p per ordinary share - 30.0 30.0
Interim dividend for the year ended 31 December 2016 of 5.15p per ordinary share - - 13.9
Final dividend for the year ended 31 December 2016 of 11.40p per ordinary share 30.8 - -
30.8 30.0 43.9
The Directors have declared an interim dividend of 5.50p per ordinary share in respect of the year ending 31 December 2017.
The dividend will be paid on 22 September 2017 to ordinary shareholders on the register at the close of business on 11
August 2017. Based upon the number of shares in issue at 30 June 2017, the total cost of the dividend would be £14.9m.
8 Net debt
Balance as at Foreign Balance as at
1 January exchange Non-cash Half year
2017 adjustments movements Cash flow 2017
£m £m £m £m £m
Cash and cash equivalents
Cash at bank and in hand 144.4 (2.1) - 9.9 152.2
Bank overdrafts (43.4) 0.4 - 15.5 (27.5)
101.0 (1.7) - 25.4 124.7
Borrowings, excluding bank overdrafts
Current (91.1) 5.4 - (1.3) (87.0)
Non-current (331.9) 5.6 - (35.1) (361.4)
(423.0) 11.0 - (36.4) (448.4)
Capitalised borrowing costs 1.7 - 0.2 - 1.9
Net debt (320.3) 9.3 0.2 (11.0) (321.8)
9 Cash generated from operations
Unaudited Unaudited
Continuing Discontinued Half year Continuing Discontinued Half year
operations operations 2017 Operations Operations 2016
£m £m £m £m £m £m
Operating profit 67.7 1.7 69.4 46.5 - 46.5
Adjustments for:
Amortisation of intangible assets 9.7 - 9.7 8.3 - 8.3
Restructuring charges 8.9 - 8.9 5.3 - 5.3
Gains relating to employee benefit plans - - - (1.0) - (1.0)
Depreciation 22.2 - 22.2 20.0 - 20.0
EBITDA (Note 16.12) 108.5 1.7 110.2 79.1 - 79.1
Net (increase)/decrease in trade and other working capital (29.5) (1.7) (31.2) (4.9) (0.2) (5.1)
Outflow related to restructuring charges (15.6) - (15.6) (10.2) - (10.2)
Additional pension funding contributions (1.1) - (1.1) (1.0) - (1.0)
Cash generated from operations 62.3 - 62.3 63.0 (0.2) 62.8
9 Cash generated from operations (continued)
Continuing Discontinued Full year
operations operations 2016
£m £m £m
Operating profit 92.9 1.2 94.1
Adjustments for:
Amortisation of intangible assets 17.1 - 17.1
Restructuring charges 28.5 - 28.5
Gains relating to employee benefit plans (5.2) - (5.2)
Depreciation 42.3 - 42.3
EBITDA (Note 16.12) 175.6 1.2 176.8
Net (increase)/decrease in trade and other working capital (20.9) (1.2) (22.1)
Outflow related to restructuring charges (16.8) - (16.8)
Additional pension funding contributions (7.7) - (7.7)
Cash generated from operations 130.2 - 130.2
10 Employee benefits
The net employee benefits balance as at 30 June 2017 of £23.3m (2016: half year £54.2m; full year £29.4m) in respect of the
Group's defined benefit retirement plans and other post-retirement benefits plans, results from an actuarial valuation of
the Group's defined benefit pension and other post-retirement obligations as at that date. As analysed in the following
table, the net balance comprised net surpluses (assets) of £81.9m (2016: half year £65.5m; full year £78.8m), relating
largely to the Group's main defined benefit pension plan in the UK, together with net liabilities (deficits) of £105.2m
(2016: half year £119.7m; full year £108.2m).
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
£m £m £m
Employee benefits - net surpluses
UK defined benefit pension plans 81.7 65.2 78.6
ROW defined benefit pension plans 0.2 0.3 0.2
Net surpluses 81.9 65.5 78.8
Employee benefits - net liabilities
UK defined benefit pension plans (1.9) (1.7) (1.9)
US defined benefit pension plans (35.6) (47.2) (37.7)
German defined benefit pension plans (44.8) (46.2) (45.3)
ROW defined benefit pension plans (16.6) (17.4) (16.4)
Other post-retirement benefit obligations (6.3) (7.2) (6.9)
Net liabilities (105.2) (119.7) (108.2)
Total liabilities (23.3) (54.2) (29.4)
10 Employee benefits (continued)
The total net charge of £3.6m (2016: half year £2.7m; full year £2.8m) recognised in the Group income statement in respect
of the Group's defined benefit retirement plans and other post-retirement benefits plans is recognised in the following
lines.
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
£m £m £m
In arriving at trading profit (as defined in Note 16) - within other manufacturing costs 1.2 2.9 2.0
- within administration, selling and distribution costs 2.1 - 4.4
In arriving at profit before tax - within restructuring charges - 0.2 0.3
- gain on employee benefit plan - (1.0) (5.2)
- within net finance costs 0.3 0.6 1.3
Total net charge - continuing operations 3.6 2.7 2.8
11 Contingent liabilities
Guarantees given by the Group under property leases of operations disposed of amounted to £1.5m (2016: half year £1.6m;
full year £1.6m).
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those
covering taxation and environmental matters. Several of Vesuvius' subsidiaries are parties to legal proceedings, certain of
which are insured claims arising in the ordinary course of the operations of the company involved, and the Directors are
aware of a number of issues which are, or may be, the subject of dispute with tax authorities. Reserves are made for the
expected amounts payable in respect of known or probable costs resulting both from legal or other regulatory requirements,
or from third-party claims. As the settlement of many of the obligations for which reserve is made is subject to legal or
other regulatory process, the timing and amount of the associated outflows is subject to some uncertainty.
Certain of Vesuvius' subsidiaries are subject to lawsuits, predominantly in the US, relating to a small number of products
containing asbestos manufactured prior to the acquisition of those subsidiaries by Vesuvius. These suits usually also name
many other product manufacturers. To date, Vesuvius is not aware of there being any liability verdicts against any of these
subsidiaries. A number of lawsuits have been withdrawn, dismissed or settled and the amount paid, including costs, in
relation to this litigation has not had a material adverse effect on Vesuvius' financial position or results of
operations.
12 Related parties
All transactions with related parties are conducted on an arm's length basis and in accordance with normal business terms.
Transactions between related parties that are Group subsidiaries are eliminated on consolidation.
13 Discontinued operations
Discontinued operations income during H1 2017, related to a release of provisions no longer required of £1.7m. Discontinued
operations income during 2016 of £10.2m, comprised a £9.0m tax credit relating to the release of a provision for possible
China taxes and a £1.2m release of provisions no longer required.
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
£m £m £m
Other income 1.7 - 10.2
Profit before tax - attributable to owners of the parent 1.7 - 10.2
Earnings per share - pence
Basic 0.6 - 3.8
Diluted 0.6 - 3.7
14 Provisions
Disposal and closure costs Restructuring charges Other Total
£m £m £m £m
As at 1 January 2017 33.2 18.5 6.9 58.6
Exchange adjustments (1.6) - (0.2) (1.8)
Charge to Group income statement - 8.9 5.6 14.5
Unused amounts released to Group income statement (1.7) - - (1.7)
Adjustment to discount 0.1 - - 0.1
Cash spend (0.6) (15.6) (6.2) (22.4)
Transferred to other balance sheet accounts - (0.8) - (0.8)
As at 30 June 2017 29.4 11.0 6.1 46.5
In assessing the probable costs and realisation certainty of provisions, or related assets, reasonable assumptions are
made. Changes to the assumptions used could significantly alter the Directors' assessment of the value, timing or certainty
of the costs or related amounts.
15 Analysis of derivative financial instruments
Unaudited Unaudited
Half year 2017 Half year 2016 Full year 2016
Assets Liabilities Assets Liabilities Assets Liabilities
£m £m £m £m £m £m
Derivatives not designated for hedge accounting purposes - (0.8) 0.7 - - (0.9)
Total derivative financial instruments - (0.8) 0.7 - - (0.9)
All of the fair values shown in the table above are classified under IFRS 13 Fair Value Measurement 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 reported in the table
above will mature within a year of the balance sheet date. The method for determining the hierarchy and fair value is
consistent with that used at year-end, as disclosed on page 134 of the 2016 Annual Report.
Loan notes, included in interest-bearing loans and borrowings, are measured at amortised cost using the effective interest
rate method. The carrying value of the loan notes and other current and non-current assets and liabilities are deemed to
equate to fair value as at 30 June 2017.
16 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. 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.
16.1 Headline
Headline performance, reported separately on the face of the Group Income Statement, is from continuing operations and
before items reported separately on the face of the income statement.
16.2 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 Half Year Results statement. 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, disposals and significant
business closures.
16.3 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.
16.4 Trading profit
Trading profit 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.
16.5 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.
16.6 Effective tax rate (ETR)
The Group's 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.
16.7 Headline earnings per share
Headline earnings per share is calculated by dividing headline profit before tax less associated income tax costs,
attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year. 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.
16.8 Operating cash flow
Operating cash flow is cash generated from continuing operations before restructuring and additional pension funding
contributions but after deducting capital expenditure net of asset disposals. It is used in calculating the Group's cash
conversion.
16.9 Cash conversion
Cash conversion is calculated as operating cash flow divided by trading profit. It is useful for measuring the rate at
which cash is generated from trading profit.
16.10 Free cash flow
Free cash flow is defined as net cash flow from operating activities after net outlays for the purchase and sale of
property, plant and equipment, dividends from joint ventures and dividends paid to non-controlling shareholders, but before
additional funding contributions to Group pension plans. 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.
16.11 Average trade working capital to sales ratio
The average trade working capital to sales ratio is calculated as the percentage of average trade working capital balances
to the total revenue for the year, at constant currency. Average trade working capital (comprising inventories, trade
receivables and trade payables) is calculated as the average of the 12 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.
16.12 Earnings before interest, tax, depreciation and amortisation ('EBITDA')
EBITDA is calculated as the total of trading profit before depreciation and amortisation of non-acquired intangibles
charges. It is used in the calculation of the Group's interest cover and net debt to EBITDA ratios.
16.13 Net interest
Net interest is calculated as interest payable on borrowings less interest receivable, excluding any item separately
reported. It is used in the calculation of the Group's interest cover ratio.
16.14 Interest cover
Interest cover is the ratio of EBITDA to net interest. 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.
16.15 Net debt
Net debt comprises the net total of current and non-current interest-bearing borrowings and cash and short-term deposits.
Net debt is a measure of the Group's net indebtedness to banks and other external financial institutions.
16.16 Net debt to EBITDA
Net debt to EBITDA is the ratio of net debt at the year-end to EBITDA for that year. 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.
16.17 Return on net assets ('RONA')
RONA is calculated as trading profit plus share of post-tax profit of joint ventures, divided by average net operating
assets, at constant currency (being the average over the previous 12 months of property, plant and equipment, trade working
capital and other operating receivables and payables). It is one of the Group's key performance indicators and is used to
assess the financial performance and asset management of the Group and is one of the measures used in monitoring the
Group's capital.
16.18 Constant currency
Figures presented at constant currency represent June and December 2016 numbers retranslated at June 2017 exchange rates.
17 Exchange rates
The Group reports its results in pounds sterling. A substantial portion of the Group's revenue and profits are denominated
in currencies other than pounds sterling. It is the Group's policy to translate the income statements and cash flow
statements of its overseas operations into pounds sterling using average exchange rates for the year reported (except when
the use of average rates does not approximate the exchange rate at the date of the transaction, in which case the
transaction rate is used) and to translate balance sheets using year-end rates. The principal exchange rates used were as
follows:
Income and expense Assets and liabilities
Average rates Period end rates
Half year 2017 Half year 2016 Full year 2016 Half year to Half year change Half year to Full year change Half year 2017 Half year 2016 Full year 2016 Half year to Half year change Half year to Full year change
US Dollar 1.26 1.44 1.36 (12.3%) (7.3%) 1.30 1.33 1.23 (2.1%) 5.6%
Euro 1.16 1.29 1.22 (9.5%) (5.0%) 1.14 1.20 1.17 (4.8%) (2.8%)
Chinese Renminbi 8.65 9.38 9.00 (7.8%) (3.9%) 8.83 8.84 8.56 (0.1%) 3.1%
Japanese Yen 141.37 160.51 147.62 (11.9%) (4.2%) 146.34 137.39 144.17 6.5% 1.5%
Brazilian Real 4.00 5.32 4.75 (24.9%) (15.8%) 4.31 4.28 4.01 0.7% 7.3%
Indian Rupee 82.67 96.41 91.13 (14.2%) (9.3%) 84.16 89.81 83.82 (6.3%) 0.4%
South African Rand 16.62 22.12 20.00 (24.9%) (16.9%) 16.99 19.53 16.94 (13.0%) 0.3%
Alternative performance measures - Supplementary information
5-year history at constant currency
H1 H1 H1 H1 H1
2013 2014 2015 2016 2017
Revenue (£m) 803.3 831.3 811.2 756.0 831.5
Steel 540.8 563.5 548.3 501.3 562.7
Foundry 262.5 267.7 262.9 254.7 268.8
Trading Profit (£m) 72.9 82.3 80.4 68.0 86.3
Steel 45.2 55.2 49.8 39.2 51.7
Foundry 27.8 27.1 30.5 28.8 34.6
Return on Sales 9.1% 9.9% 9.9% 9.0% 10.4%
Steel 8.4% 9.8% 9.1% 7.8% 9.2%
Foundry 10.6% 10.1% 11.6% 11.3% 12.9%
This information is provided by RNS
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