REG - Victrex PLC - Half-year Report <Origin Href="QuoteRef">VCTX.L</Origin> - Part 2
15/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSO0705Fa
91.8 25.2 117.0 201.5 50.8 252.3
Segment gross profit 59.9 22.5 82.4 51.4 22.2 73.6 114.2 44.5 158.7
Sales, marketing and administrative expenses (32.3) (26.1) (58.4)
Operating profit 50.1 47.5 100.3
Net financing income - - -
Profit before tax 50.1 47.5 100.3
Income tax expense (10.4) (8.8) (17.8)
Profit for the period attributable toowners of the parent 39.7 38.7 82.5
6. Exceptional items
Six months ended31 March 2017£m Six months ended31 March 2016£m Year ended30 September 2016£m
Included within Sales, marketing and administrative expenses
Pension curtailment gain - 2.5 2.6
Costs of pension change - (1.5) (1.5)
Restructuring costs (2.0) (1.0) (1.6)
Exceptional items before tax (2.0) - (0.5)
Tax on exceptional items 0.4 - 0.1
Exceptional items (1.6) - (0.4)
(0.4)
Restructuring costs
Restructuring costs in both periods were incurred relating to a reorganisation
across a number of the group's manufacturing and non-manufacturing locations.
Closure of Defined Benefit Section of the Pension Scheme
In the prior year, the closure of the Defined Benefit Section of the Pension
Scheme to future benefit accrual on 31 March 2016, resulted in a curtailment
gain of £2.6m. This non cash gain represented a one off reduction in
accounting liabilities as benefits are no longer linked to future salary
increases. The Scheme had been closed to new members in 2001. Offsetting this
gain was a charge of £1.5m for transitional benefits provided to active
Pension Scheme members and the costs of closing the scheme.
As part of the closure of the Defined Benefit Section of the Pension Scheme
the company made a one off cash contribution of £3.6m in January 2016.
7. Income tax expense
Taxation of profit before tax in respect of the six months ended 31 March 2017
has been provided at the estimated effective rates chargeable for the full
year in the respective jurisdiction.
Six months ended31 March 2017£m Six months ended31 March 2016£m Year ended30 September 2016£m
UK corporation tax 8.9 7.6 15.5
Overseas tax 1.1 1.1 1.7
Deferred tax 0.4 0.1 0.6
10.4 8.8 17.8
17.8
The deferred tax assets/liabilities at 31 March 2017 and 30 September 2016
have been calculated at a rate of 17%, being the UK tax rate substantively
enacted at the respective balance sheet dates.At 31 March 2016, this change
had not been substantively enacted into law and therefore deferred tax was
recognised at 18%.
8. Earnings per share
Six months ended31 March 2017 Six months ended31 March 2016 Year ended30 September 2016
Earnings per share - basic 46.4p 45.5p 96.8p
- diluted 46.3p 45.4p 96.7p
Profit for the financial period (£m) 39.7 38.7 82.5
Weighted average number of shares used - basic 85,422,476 85,253,273 85,258,855
- diluted 85,599,364 85,368,640 85,343,190
9. Derivative financial instruments
The notional contract amount, carrying amount and fair value of the Group's
forward exchange contracts and swaps are as follows:
As at 31 March 2017 As at 31 March 2016 As at 30 September 2016
Notional contract amount Carrying amount and fair value Notional contract amount Carrying amount and fair value Notional contract amount Carrying amount and fair value
£m £m £m £m £m £m
Current assets 44.7 1.7 1.0 1.4 (22.1) 2.1
Current liabilities 140.2 (8.1) 168.6 (11.6) 196.9 (19.5)
184.9 (6.4) 169.6 (10.2) 174.8 (17.4)
The fair values have been calculated by applying (where relevant), for
equivalent maturity profiles, the rate at which forward currency contracts
with the same principal amounts could be acquired on the balance sheet date.
These are categorised as Level 2 within the fair value hierarchy under IFRS
7.
In addition to the above, £3.2m is included in current liabilities in respect
of the fair value of the derivative instruments associated with TxV. Further
details are provided in note 10. These are categorised as Level 2 within the
fair value hierarchy under IFRS 7.
10. Investment in joint venture
On 10 January 2017 Victrex established a Joint Venture with Tri-Mack Plastics
which will focus on developing a new supply chain, with the capability to
manufacture, at scale, unique and differentiated Loaded Brackets, blending new
PEEK and PAEK polymer grades and composite materials. The results and
financial position of TxV are consolidated into the group income statement and
group balance sheet respectively based on the level of control Victrex exerts
over TxV. Victrex's investment in TxV amounts to $14m.
Under the terms of the Joint Venture Agreement both parties have access to
financial derivatives over the equity of TxV. The nature of these derivatives
provides Victrex with the potential to increase its level of ownership. Where
this is not under Victrex's control the exercise price of the derivative is
recognised as a financial liability as required by IAS 32 Financial
Instruments - Disclosure. The value of this liability is $4m. Where a
financial liability is recognised, the anticipated level of potential
ownership on exercise of the derivative is taken into account in determining
that a non-controlling interest should not be recognised.
11. Exchange rates
The most significant Sterling exchange rates used in the financial statements
under the Group's accounting policies are:
Six months ended31 March 2017 Six months ended31 March 2016 Year ended30 September 2016
Average Closing Average Closing Average Closing
US Dollar 1.41 1.25 1.55 1.44 1.54 1.31
Euro 1.28 1.15 1.37 1.26 1.35 1.18
Yen 158 141 182 162 179 135
12. Reconciliation of profit to cash generated from operations
Six months ended31 March 2017£m Six months ended31 March 2016£m Year ended30 September 2016£m
Profit after tax for the period 39.7 38.7 82.5
Income tax expense 10.4 8.8 17.8
Operating profit 50.1 47.5 100.3
Adjustments for:
Depreciation 7.3 7.6 14.8
Amortisation 0.8 0.4 0.8
Loss on disposal of non-current assets 0.1 - -
Increase in inventories (3.7) (9.8) (3.4)
Decrease/(increase) in trade and other receivables 4.7 (3.0) (13.4)
Increase/(decrease) in trade and other payables 9.5 0.8 (3.3)
Equity-settled share-based payment transactions 0.9 0.9 1.8
(Gains)/losses on derivatives recognised in income statement that have not yet settled (0.4) 0.7 5.4
Retirement benefit obligations charge less contributions (0.9) (7.0) (7.0)
Cash generated from operations 68.4 38.1 96.0
(7.0)
Cash generated from operations
68.4
38.1
96.0
13. Related party transactions
The Group's related parties are as disclosed in the Annual Report and
Financial Statements 2016. There were no material differences in related
parties or related party transactions in the six months ended 31 March 2017
except for transactions with key management personnel. The most significant of
these was on 8 December 2016, under the 2009 Long Term Incentive Plan
('LTIP'), when 41,469, 17,745, 15,379 and 14,802 share option awards were
granted to D R Hummel, L S Burdett, T J Cooper and M L Court respectively at
an option price of nil p per share when the market price was 1,857p per
share.
14. Subsequent events
On 3 April 2017, the Group acquired 100% of the issued share capital of Zyex
Limited, which is recognised as a global leader in the manufacture of PEEK
based fibres, principally for the Aerospace, Automotive and Industrial
markets. The consideration was approximately £9.6m but will be finalised
through a completion accounts mechanism. The completion accounts are
contracted to be completed within 80 days, after which the initial fair value
accounting required by IFRS 3 Business Combinations will be completed.
Responsibility Statement of the Directors
The Directors confirm that to the best of their knowledge:
· The condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 - Interim Financial Reporting as adopted by
the European Union; and
· The Interim Management Report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules of the Financial
Conduct Authority, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed consolidated financial statements and a description of the principal
risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules of the Financial
Conduct Authority, being:
i. related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the financial
position or performance of the entity during that period; and
ii. any changes in the related party transactions described in the last Annual
Report that have done so.
The Directors of Victrex plc are detailed on pages 38 and 39 of the Victrex
plc Annual Report 2016.
By order of the Board
David Hummel Louisa Burdett
Chief Executive Group Finance Director
15 May 2017 15 May 2017
Forward-looking Statements
Sections of this Half-yearly Financial Report may contain forward-looking
statements, including statements relating to: certain of the Group's plans and
expectations relating to its future performance, results, strategic
initiatives and objectives, future demand and markets for the Group's products
and services; research and development relating to new products and services;
and financial position, including its liquidity and capital resources. These
forward-looking statements are not guarantees of future performance. By their
nature, all forward looking statements involve risks and uncertainties because
they relate to events that may or may not occur in the future, and are or may
be beyond the Group's control, including: changes in interest and exchange
rates; changes in global, political, economic, business, competitive and
market forces; changes in raw material pricing and availability; changes to
legislation and tax rates; future business combinations or disposals;
relations with customers and customer credit risk; events affecting
international security, including global health issues and terrorism; the
impact of, and changes in, legislation or the regulatory environment
(including tax); and the outcome of litigation. Accordingly, the Group's
actual results and financial condition may differ materially from those
expressed or implied in any forward looking statements. Forward-looking
statements in this Half-yearly Financial Report are current only as of the
date on which such statements are made. The Group undertakes no obligation to
update any forward-looking statements, save in respect of any requirement
under applicable law or regulation. Nothing in this press release shall be
construed as a profit forecast.
Independent Review Report to Victrex plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the Half-yearly Financial Report for the six months ended 31
March 2017 which comprises the Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Comprehensive Income, Condensed
Consolidated Balance Sheet, Condensed Consolidated Cash Flow Statement,
Condensed Consolidated Statement of Changes in Equity and the related
explanatory notes. We have read the other information contained in the
Half-yearly Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Disclosure
and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority
('the UK FCA'). Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
Directors' responsibilities
The Half-yearly Financial Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
Half-yearly Financial Report in accordance with the DTR of the UK FCA.
The annual financial statements of the Company are prepared in accordance with
IFRS as adopted by the EU. The condensed set of financial statements included
in this Half-yearly Financial Report has been prepared in accordance with IAS
34 - Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Half-yearly Financial Report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. 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 Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-yearly
Financial Report for the six months ended 31 March 2017 is not prepared, in
all material respects, in accordance with IAS 34 as adopted by the EU and the
DTR of the UK FCA.
Stuart Burdass (Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants
1 St Peter's Square
Manchester
M2 3AE
15 May 2017
Shareholder Information
The Company's Annual Reports and Half-yearly Financial Reports are available
on request from the Company's Registered Office or to download from our
corporate website, www.victrexplc.com.
Financial calendar
Ex-dividend date for interim dividend 8 June 2017
Record date for interim dividend *** 9 June 2017
Payment of interim dividend 30 June 2017
2017 year end 30 September 2017
Announcement of 2017 full year results December 2017
Annual General Meeting February 2018
Payment of final dividend February 2018
Victrex plc
Registered in England
Number 2793780
Registered Office:
Victrex Technology Centre
Hillhouse International
Thornton Cleveleys
Lancashire FY5 4QD
United Kingdom
Tel: +44 (0) 1253 897700
Fax: +44 (0) 1253 897701
Web: www.victrexplc.com
* References to core volumes, core revenue or core business excludes Consumer
Electronics
**Constant currency values have been reached by applying current year (H1
2017) effective currency rates to prior year (H1 2016) transactions
# Operating cash conversion is cash generated from operations / operating
profit
*** The date by which shareholders must be recorded on the share register to
receive the dividend
This information is provided by RNS
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