TIDMDVO
RNS Number : 9877F
Devro PLC
27 February 2018
27 February 2018
Devro plc
RESULTS FOR THE YEARED 31 DECEMBER 2017
Devro plc ("Devro" or the "group"), one of the world's leading
manufacturers of collagen products for the food industry, announces
its results for the year ended 31 December 2017.
Underlying results* Statutory results
2017 2016 2017 2016
Unaudited Unaudited
Revenue GBP256.9m GBP241.1m GBP256.9m GBP241.1m
EBITDA GBP64.1m GBP58.8m
Operating profit GBP38.1m GBP38.1m GBP33.0m GBP15.4m
Profit before tax GBP26.7m GBP28.9m GBP21.6m GBP6.2m
Basic earnings per share 12.5p 13.3p 9.3p 1.3p
Total dividend per share 8.8p 8.8p
Net debt GBP134.9m GBP153.6m
Covenant net debt* /
EBITDA 2.1 times 2.7 times
* Underlying figures are stated before exceptional items;
Covenant net debt is defined as net debt including derivative
financial liabilities (see Alternative Performance Measures section
of the Financial Review for definitions, explanations and
reconciliations to equivalent statutory measures)
Highlights
* Devro 100 programme progressing well; accelerated
revenue growth with significant cost savings
* Return to volume growth with revenue increasing 7%
year on year
o Increased volumes (+7%) and favourable exchange rates (+4%),
offset price/mix** (-4%)
o Volume growth strongest in China, South East Asia and Russia
o Strong H2 growth in Europe
o As expected, volume decline in Latin America, impacted by 2016
transition in supply
* Underlying EBITDA ahead of 2016 by 9%
o Volume growth, cost savings and exchange rate benefits, partially
offset by price/mix and full costs for new plants started up
in 2016
o Devro 100 cost reduction target exceeded with GBP7 million
savings in manufacturing
* Statutory operating profit ahead of 2016 due to lower
exceptional items in 2017
* Strong cash flow reduced net debt, achieving covenant
ratio*** of 2.1 times (2016: 2.7 times)
* Rutger Helbing to succeed Peter Page as Chief
Executive from 28 February 2018
** Price/mix is defined as the movement in average selling
price, calculated using prior year average exchange rates for both
current and prior year average selling price
*** Covenant ratio is defined as covenant net debt / underlying
EBITDA (see Alternative Performance Measures section of the
Financial Review for definitions, explanation and reconciliation to
equivalent statutory measures)
Peter Page, Chief Executive of Devro, commented
"Our priorities at the start of 2017 included sales growth to
regain market share and cost reduction in operations. We made
strong progress on both objectives, with 8% growth in sales volumes
of edible collagen casings and a GBP7 million reduction in the
manufacturing cost base, supporting a significant reduction in net
debt.
"Over the past 10 years Devro has successfully moved from
operating as a series of regional subsidiaries to an efficiently
managed single global organisation. Revenue from edible collagen
has doubled, due to a combination of pricing and volume growth in
an increasing variety of markets and applications. Numerous
excellent and dedicated colleagues have contributed to the
development of the business in many ways, for which I am sincerely
grateful.
"Growth in demand will continue as the global population
increases, consumer spending progresses and tastes become more
varied. The business is well positioned for the future."
Rutger Helbing, Group Finance Director of Devro, commented
"I am delighted to succeed Peter as Chief Executive.
"Our strategy is unchanged. In 2018, we will continue to focus
on maintaining the momentum of the Devro 100 programme to deliver
revenue growth and further cost savings across our global
operations. The total forecast benefits, associated exceptional
costs and capital expenditure over the three year period remain
unchanged, although given the accelerated cost savings achieved in
2017, the phasing will differ slightly from our original
expectations.
"We expect further volume growth in 2018, supported by the
introduction of the new Fine Ultra product platform, and continued
manufacturing efficiency improvements, in particular at our US
plant. We will continue to reduce net debt, building on the good
progress made in 2017.
"Whilst mindful of ongoing pressures from input cost inflation
and exchange rate volatility, at this early stage of the year the
Board believes that Devro is well placed to make good progress in
2018."
Contacts
Peter Page Chief Executive 020 3727 1340
Rutger Helbing Group Finance Director 020 3727 1340
Richard Mountain/Nick
Hasell FTI Consulting 020 3727 1340
There will be a presentation today at 9.00am for investors and
analysts at the offices of
FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A
4HD. A live audio feed will be available to those unable to attend
this meeting in person. To connect to the webcast facility, please
go to the following link: http://view-w.tv/943-1289-19404/en
approximately 10 minutes before the start of the briefing (8.50am).
The presentation will also be available on the company's
website.
CHAIRMAN'S STATEMENT
Global consumption of collagen casings and related products grew
by an estimated 7% in 2017, with most major markets providing
opportunities for growth. Food manufacturers continue to recognise
the benefits of using collagen casings, including more efficient
production and greater traceability of raw materials supporting
brand security and food safety.
Devro's total revenue increased 7% in 2017, with growth in sales
volumes of edible collagen casings of 8%. This return to volume
growth follows the substantial investments and extensive
organisational change of recent years.
The group's manufacturing performance continued to improve as
our global supply chain settles into more stable operations. The
Devro 100 programme achieved cost reductions of GBP7 million in the
first year, ahead of the original plan, and provides a strong
foundation for further improvements in manufacturing efficiency in
2018 and beyond.
FINANCIAL HIGHLIGHTS
Underlying EBITDA increased 9% to GBP64.1 million (2016: GBP58.8
million) as a result of volume growth, planned cost reductions, and
exchange rate benefits of GBP4.2 million (2016: GBP5.3 million),
partially offset by price/mix and the full costs for the new plants
that started up in 2016. Underlying operating profit was in line
with 2016, after higher depreciation on the new plants.
Operating profit was GBP33.0 million (2016: GBP15.4 million),
with the improvement mainly due to lower exceptional items in 2017
following the completion of the new plants in 2016. A more detailed
explanation of the group financial performance is set out in the
Financial Review below.
With improved underlying EBITDA and strong cash generation,
covenant net debt closed at GBP135.3 million, down by GBP20.9
million on prior year, reducing as envisaged in the original
capital investment plan. The covenant net debt to underlying EBITDA
ratio now stands at 2.1, down from 2.7 a year ago.
During December 2017 the funding review linked to the triennial
valuation of the UK pension scheme was completed, with no increase
in company contributions required, and with the recovery plan
reducing from 9 to 7 years. This reflects the improved funding
position of the scheme and the positive working relationship
between scheme trustees and the group.
BOARD
In December 2017 we announced that Peter Page will be completing
his tenure as Chief Executive at the end of February 2018, after
more than 10 years leading the company. Peter has been instrumental
in making Devro fit for the future through a programme of major
capital investments and by transforming a group of regional
subsidiaries into a more integrated global business.
Following an extensive search process, Rutger Helbing, currently
Group Finance Director, was appointed to succeed Peter as Chief
Executive. We have initiated a search for a new Group Finance
Director. We are confident that Rutger will lead the company and
its Devro 100 strategy forward with a strong focus on delivering
value.
From 28 February 2018, Matthew Peacock will assume the role of
Interim Group Finance Director. Matthew has been our Group
Financial Controller since 2012.
Malcolm Swift joined the Board as Non-Executive Director in
April 2017, bringing significant experience of the global food
sector, particularly business-to-business sales and marketing in
the strategically important Asia-Pacific region.
Paul Neep, Senior Independent Non-Executive Director, retired
from the Board in April 2017 after 12 years' service for which we
are extremely grateful. Paul Withers succeeded Paul Neep as Senior
Independent Non-Executive Director.
EMPLOYEES
All employees have contributed to the growth and development we
have seen in 2017. On behalf of the whole Board, I am most grateful
for their commitment and professionalism. We see increasing levels
of engagement and involvement in all areas of the business to make
Devro an even better global company.
DIVID
The Board is proposing a final dividend of 6.1p per share (2016:
6.1p) bringing the total for the year to 8.8p per share (2016:
8.8p). Subject to shareholder approval at the Annual General
Meeting in April, the dividend will be paid on 11 May 2018, to
those shareholders on the register at 3 April 2018.
OUTLOOK
Our strategy is unchanged. In 2018, we will focus on maintaining
the momentum of the Devro 100 programme to deliver revenue growth
and further cost savings across our global operations. The total
forecast benefits, associated exceptional costs and capital
expenditure over the three year period remain unchanged, although
given the accelerated cost savings achieved in 2017, the phasing
will differ slightly from our original expectations.
We expect further volume growth in 2018, supported by the
introduction of the new Fine Ultra product platform, and continued
manufacturing efficiency improvements, in particular at our US
plant. We will continue to reduce net debt, building on the good
progress made in 2017.
Whilst mindful of ongoing pressures from input cost inflation
and exchange rate volatility, at this early stage of the year the
Board believes that Devro is well placed to make good progress in
2018.
Gerard Hoetmer
Chairman
BUSINESS REVIEW
Our priorities at the start of 2017 included sales growth to
regain market share and cost reduction in operations. We made
strong progress on both objectives, with 8% growth in sales volumes
of edible collagen casings and a GBP7 million reduction in the
manufacturing cost base, supporting a significant reduction in net
debt.
MARKETS OVERVIEW
Devro supplies collagen casings, gel and film to customers in
over 100 countries worldwide. Demand for collagen casings is
estimated to have increased 7% in 2017, with growth in most
markets, including China.
The global food manufacturing sector is dynamic with growing
demand for specific casing functionality in traditional sausage
applications as well as in emerging categories such as protein
snacks and confectionery.
STRATEGY
Devro's three-part strategy involves revenue growth,
manufacturing efficiency and product differentiation. In the last
quarter of 2016 the Devro 100 programme was launched to accelerate
progress in all three elements of the strategy.
Revenue growth
Devro's sales volumes of edible collagen casings, which
represent over 80% of the group's sales, increased 8% worldwide,
contributing to a reported revenue increase of 7%, reflecting a mix
of markets, products, pricing initiatives and exchange rate
variances. Of the total price/mix impact (-4%), approximately half
is due to mix, primarily related to the significant increase in
volumes in China. Our pricing actions continue to reflect the
dynamics of the specific markets in which we operate.
USA volumes increased 3% as the protein snack stick segment
continued to grow at a faster rate than total food consumption. A
5% reduction in average pricing reflects investment in securing
valuable long-term relationships with leading brand owners with
significant growth potential.
Latin America volumes declined 25%, with final quarter sales
recovering to a level comparable to prior year. The year-on-year
volume reduction follows the previously-announced changes in
product sourcing in 2016, whilst the reduction in the overall
average selling price reflects the resulting changes in country
mix. Our technical and product development specialists continue to
focus on opportunities to regain business in these markets.
Whilst the UK sausage market overall has shown little growth for
several years, 2017 volumes of Devro casings increased 2%, along
with a similar increase in average prices, reflecting a changing
customer mix, particularly the continuing success of Select Fresh
casings in the premium sausage market.
Continental European sales recovered well, with 13% volume
growth in the second half leading to 6% growth overall, accompanied
by price movements related to specific market opportunities.
Volumes sold in Russia and surrounding countries grew 21%,
recovering Devro's market share and presence following a period in
which a number of specific factors, including currency devaluation
and restrictions on EU-sourced pork products, had disrupted sales
in the region. The movement in overall average selling price
reflects changes in product mix.
Following the successful start-up of Devro's new plant in
Nantong during the second half of 2016, and strong sales in the
final quarter last year, further activity in China during 2017 led
to a 69% volume increase at constant prices in most accounts. As
the year progressed, a wider base of customers resulted in higher
monthly sales volumes and the development of some specialist
opportunities for Devro's differentiated products.
South East Asia sales volumes increased 29%, reflecting a higher
level of activity in the region following an increase in capacity
availability and product introductions.
Japan continued a 10 year period of sales growth, with volumes
increasing 5% in 2017.
Australia and New Zealand are mature markets, with a high
proportion of collagen casings principally supplied from Devro's
plant in New South Wales. Volumes declined 3%, whilst a 5%
reduction in average selling price reflected investments to secure
long term global relationships, together with some changes in
customer and product mix.
Total volumes of collagen gel sold across the group were
marginally lower than prior year. Gel provides a low cost
alternative for high volume users of cellulose and volumes grew in
previous years as new capacity was added. 2017 was a year of
consolidation in this sector.
Manufacturing efficiency
Manufacturing performance progressed well during the past year
at most locations, with the new single global supply chain
organisation structure enabling the business to improve performance
through benchmarking, sharing of best practice, and specialist
input to technical development opportunities.
2017 was the first full year of operation of the new plants in
China and the US, leading to a greater consistency and
standardisation of the process technology in use at all
manufacturing locations.
The plant in Nantong performed particularly strongly in 2017,
achieving high levels of efficiency and productivity across a range
of products. This plant is close to achieving the output levels
originally envisaged, with sales matching output in the latter part
of the year.
Whilst there has been some good progress at the plant in South
Carolina, output volumes in 2017 fell short of projections. As a
result, productivity and output efficiencies in the US plant
continue to be a matter of priority for the management team, as
improvements in this area will support growth ambitions.
Devro 100
A key element of the Devro 100 programme has been to enhance
Devro's sales capability through a programme of targeted training
and individual development. The benefits of this are reflected in
the volume and share gains throughout the year, with further
advances expected in 2018.
As a result of the Devro 100 programme, the manufacturing cost
base has been reduced by GBP7 million during the year, which is in
addition to the cost savings realised in H1 related to the closure
of the old US plant. Following the establishment in late 2016 of a
single global supply chain and associated management structure, the
group has benefitted from the implementation of new and more
effective ways of working and procurement in all areas of
activity.
During 2017 a single global team established robust processes
for product development and bringing these new products to market.
In the final quarter, following extensive commercial scale testing,
Devro's Fine Ultra casings were introduced to key customers in Asia
and Europe, providing the opportunity for volume growth in future
years.
SAFETY
Over the past 10 years, safety has been a priority at Devro.
There has been an improvement in overall performance compared to
2016. Whilst there is more to do to ensure we constantly achieve
our safety goals, the move to a single supply chain with global
responsibilities is leading to a more rigorous implementation of
group standards to the benefit of all.
DEVRO TODAY
Over the past 10 years Devro has successfully moved from
operating as a series of regional subsidiaries to an efficiently
managed single global organisation. Revenue from edible collagen
has almost doubled, due to a combination of pricing and volume
growth in an increasing variety of markets and applications.
Numerous excellent and dedicated colleagues have contributed to the
development of the business in many ways, for which I am sincerely
grateful.
Growth in demand will continue as the global population
increases, consumer spending progresses and tastes become more
varied. The business is well positioned for the future.
Peter Page
Chief Executive
FINANCIAL REVIEW
As in 2016 the financial results in 2017 comprised a number of
significant moving parts including, for the first time, the full
operational costs of our new manufacturing plants in the US and
China. The adverse impact of the additional costs was offset by
benefits delivered through the Devro 100 programme, both in terms
of revenue growth and manufacturing cost reductions. As a
consequence underlying operating profit for the year was unchanged,
but underlying EBITDA increased by 9.0% after adding back the
increased depreciation, primarily related to the new plants.
Exceptional items for the year were significantly lower in 2017,
resulting in an increase of operating profit of GBP17.6
million.
In 2017, considerable progress was made in improving the
covenant net debt to underlying EBITDA ratio, which reduced from
2.7 times at 31 December 2016 to 2.1 times by the end of 2017. The
business continues to deliver strong underlying cash generation,
supported by increasing underlying EBITDA in 2017. A significant
reduction in capital and exceptional item spend also contributed to
the reduction in net debt in the year, together with exchange rate
movements, partly offset by higher cash tax payments.
With the completion of the capital investment programme in 2016,
the business is now focused on bringing the covenant net debt to
underlying EBITDA ratio down nearer to historic levels.
REVENUE
2017 2016 Change at
GBPm GBPm Change constant currency
--------- ------ ------ ------- -------------------
Revenue 256.9 241.1 +6.6% +2.2%
--------- ------ ------ ------- -------------------
Revenue for the year was ahead of 2016, with increased volumes
and the benefits of exchange rate movements, partially offset by
price/mix. Year-on-year revenue growth can be analysed as
follows:
2017 vs 2016 2016 vs 2015
------------------ ------------- -------------
Volume +6.5% -6.6%
Price/mix -4.3% -0.3%
Foreign exchange +4.4% +11.6%
------------------ ------------- -------------
Total +6.6% +4.7%
------------------ ------------- -------------
The increase in sales volumes represents a return to growth in
2017 across almost all sales areas, with particularly strong growth
in China, South East Asia and Russia, together with strong growth
in Continental Europe in the second half. The growth in China
follows the successful start-up of Devro's new plant in Nantong in
2016, with this ramp up in volumes supported by increased sales
activity once the capacity became available. The increase in
volumes in South East Asia also reflects capacity becoming
available for this region together with successfully matching
products with customers' requirements. In Russia, the volume grew
through a combination of a recovery in market share and an increase
in local sausage production following disruptions in recent years
related to import restrictions and currency devaluation.
Approximately half of the price/mix impact was due to country
mix, primarily related to the increased volumes in China where
market prices are lower than the global average. In addition there
was some investment in pricing to secure long term relationships
with key customers and also some tactical pricing related to
specific market opportunities.
OPERATING PROFIT
Operating profit for the year can be analysed as follows:
2017 2016
GBPm GBPm Change
----------------------------- ------- ------- -------
Underlying EBITDA 64.1 58.8 +9.0%
Underlying depreciation &
amortisation (26.0) (20.7) -25.6%
----------------------------- ------- ------- -------
Underlying operating profit 38.1 38.1 -
Exceptional items (5.1) (22.7)
----------------------------- ------- ------- -------
Operating profit 33.0 15.4
----------------------------- ------- ------- -------
Underlying operating profit was in line with 2016, but there
were a number of significant moving parts which are summarised
below:
GBPm
Underlying operating profit 2016 38.1
Sales volumes +6.3
Price/mix -7.8
Recovery of conversion costs +7.1
--------------------------------------------------- ------
Volume +5.6
Savings from replacement of old US plant &
2016 pre-operating costs of new plants +1.4
Start-up of new plants in 2016 -14.8
--------------------------------------------------- ------
Impact of new plants -13.4
Devro 100 cost savings +7.0
Foreign exchange (translation) +4.2
Other movements -3.4
---------------------------------------------------- ------
Underlying operating profit 2017 38.1
---------------------------------------------------- ------
The increased sales volumes and adverse impact of price/mix are
explained above. The volumes also contributed to the higher
recovery of conversion costs due to the related increase in
production volumes.
The construction of new plants in the US and China was completed
in early 2016, after which a six month start-up period was required
for each plant to bring the plants on-line and build up production.
Given that capacity from the new plants was only available for a
restricted period during the start-up period, and not available
prior to the commencement of operations, the related costs were not
reflected in underlying operating profit in 2016. The additional
costs in 2017 reflect the fact that both plants were fully
operational by the end of 2016, and therefore all related costs
were included in underlying operating profit in 2017.
The old US plant was closed at the end of H1 2016, with the
related savings benefiting H2 2016 and H1 2017.
The Devro 100 programme realised savings of GBP7.0 million in
2017, which were ahead of plan. The savings related to areas such
as sourcing of raw materials, optimising operational structures at
the plants and standardising processes through sharing best
practice across our global operations.
Devro has operations around the world in multiple currencies.
Movements in exchange rates had a favourable impact on underlying
operating profit of GBP4.2 million, reflecting the weakening of
sterling against most other key trading currencies of the group
towards the end of H1 2016. Whilst sterling was weaker for the year
as a whole in 2017, it did strengthen over the course of the year
and if exchange rates remain at current levels this will result in
a headwind for operating profit in 2018.
Other movements in underlying operating profit compared with
2016 included wage inflation and bonus payments.
Underlying operating profit for 2017 included an increased
depreciation charge of GBP5.3 million, primarily related to the
impact of the new plants but also including foreign exchange
movements (GBP1.3 million). So whilst underlying operating profit
for 2017 was in line with 2016, EBITDA increased by 9.0%.
Reported operating profit for the period was GBP33.0 million,
which was significantly higher than 2016 primarily due to lower
exceptional items.
Exceptional items
2017 2016
GBPm GBPm
----------------------------- ------ ------
Devro 100 programme 5.1 2.0
Capital investment projects - 20.7
Total exceptional items 5.1 22.7
----------------------------- ------ ------
During 2017 exceptional costs incurred related to the Devro 100
and restructuring programmes. An analysis of the nature of these
costs is set out in note 4 to the attached financial statements. In
addition there was GBP2.3 million of capital expenditure related to
Devro 100.
For the Devro 100 programme, as previously guided total
exceptional items are expected of between GBP10-12 million over
2017 and 2018, plus capital investments of between GBP7-8 million,
with expected benefits of between GBP13-16 million by 2019. These
expectations of total investments and savings remain unchanged but
the phasing is now expected to be different given the accelerated
delivery of savings in 2017 and lower level of exceptional items
and capital investments in 2017 than originally expected.
OPERATING MARGIN
2017 2016
----------------------------- ------ ------
Underlying operating margin 14.8% 15.8%
----------------------------- ------ ------
The underlying operating margin for the year declined by 1.0
percentage point, reflecting the full costs of the new plants in
China and the US, whilst they operated below full capacity in their
first full year of production in 2017.
The reported operating margin increased to 12.8% from 6.4%,
supported by significantly lower exceptional items in 2017,
compared with 2016.
CAPITAL INVESTMENT
2017 2016
GBPm GBPm
-------------------- ------ ------
Capital investment 10.4 22.2
-------------------- ------ ------
With the start-up of the new plants in 2016, capital investment
in 2017 was significantly lower than in 2016, and was at the lower
end of the range of historical maintenance levels.
WORKING CAPITAL
2017 2016
----------------------------- ----------------- -----------------
Number of Number of
GBPm days GBPm days
----------------------------- ----- ---------- ----- ----------
Inventories* 32 50 34 60
Trade and other receivables 35 38 35 39
Trade and other payables (35) 35 (38) 40
----------------------------- ----- ---------- ----- ----------
32 31
----------------------------- ----- ---------- ----- ----------
*Inventories days are calculated by dividing finished goods and
goods for resale at the end of the reporting period by the value of
cost of goods sold in the period multiplied by the number of days
in the period
Working capital increased by GBP1 million during the year with
the benefits of lower inventories offset by lower payables. The
lower payables largely reflect the decrease in capital accruals
noted above.
The movements in inventories reflected improved working capital
management and, combined with the higher revenues, resulted in a
reduced number of inventory days compared with 2016. With unchanged
trade and other receivables, combined with increased revenue,
receivable days also improved.
CASH FLOW AND NET DEBT
Devro continues to be a highly cash generative business. In
order to fund the significant investments made as part of the
transformation of the manufacturing footprint, new long term
facilities were put in place in 2014 to supplement the shorter term
bank facilities.
With the start up on the new plants in China and the US
completed in 2016 and resultant reduction in capital expenditure
and exceptional items, significant progress was made in 2017 in
reducing net debt, which ended the year at GBP134.9 million,
compared with GBP153.6 million at the start of the year. This
reduction included the effect of the strengthening of sterling
during 2017 (given that a part of the group's debt is denominated
in US dollars), which reduced the reported net debt figure at 31
December 2017 by GBP7.4 million. Including the effect on derivative
liabilities, covenant net debt ended the year lower at GBP135.3
million (2016: GBP156.2 million).
Key financial measures are as follows:
2017 2016
-------------------------------- ---------- ----------
Net debt GBP134.9m GBP153.6m
Covenant net debt / underlying
EBITDA ratio 2.1 times 2.7 times
Underlying operating cash
flow GBP66.9m GBP64.4m
Return on capital employed
(ROCE) 11.1% 11.5%
-------------------------------- ---------- ----------
At 31 December 2017 the covenant net debt to underlying EBITDA
ratio was 2.1 times. This represented a further reduction from the
2.4 times reported at 30 June 2017. The underlying EBITDA to net
interest payable ratio was 7.7 times at 31 December 2017, meaning
that both ratios were within their limits.
With the capital investment projects now complete, cash
generated from the business will enable net debt levels to reduce
further, which will ultimately result in the covenant net debt to
underlying EBITDA ratio returning nearer to historic levels.
The group remained within its funding facilities throughout the
year, which include the US$100 million US private placement that
took place in the first half of 2014, and the GBP110 million
revolving credit facility which was negotiated in December 2014 and
will be in place until December 2019.
Underlying operating cash flow (before pension deficit funding)
increased during the year to GBP66.9 million (2016: GBP64.4
million), with the improvement in EBITDA being partially offset by
lower improvements in working capital.
Cash outflow from exceptional items was GBP5.7 million (2016:
GBP22.9 million), contributing to improved operating cash flow of
GBP58.2 million (2016: GBP39.0 million).
The reduction in ROCE reflects the lower average capital
employed balance in 2016, related to the build up of investments
during 2016 as the new plants in the US and China were
completed.
FINANCE COSTS
2017 2016
GBPm GBPm
------------------- ------ ------
Net finance cost 8.6 6.9
Net finance cost
on pensions 2.8 2.3
------------------- ------ ------
Total net finance
cost 11.4 9.2
------------------- ------ ------
The net finance cost for the year was higher than 2016 due to
higher rates of interest on borrowings drawn down in Chinese
renminbi to support our investment in China, and the ceasing of
capitalisation of interest during 2016 following completion of the
new plants (2016: GBP0.5 million interest capitalised).
The increase in net finance cost on pensions over 2016 reflects
the higher discount rates assumed at the start of 2017 compared
with the year before.
PENSION SCHEMES
Devro operates a number of defined benefit schemes around the
group, although all of these are now closed to new entrants. The
net pension liabilities of these schemes can be analysed as
follows:
2017 2016
GBPm GBPm
------------------------------------- -------- --------
Fair value of scheme assets 247.6 254.8
Present value of scheme liabilities (329.6) (350.8)
------------------------------------- -------- --------
Net pension liabilities (82.0) (96.0)
------------------------------------- -------- --------
The decrease in net pension liabilities during the year largely
reflects revised assumptions for the UK scheme, following a review
of all components of the pension scheme in conjunction with the
pension trustees as part of the triennial valuation. This was
partially offset by a decrease in discount rate assumptions across
the schemes. Further analysis of the movement in net pension
liabilities is set out in note 6 to the attached financial
statements.
TAX
2017 2016
GBPm GBPm
-------------------------------------------- ------ ------
Tax charge on underlying profit before tax 5.8 6.7
Tax charge/(credit) on exceptional items
& exceptional tax charge 0.2 (2.7)
-------------------------------------------- ------ ------
Tax charge in income statement 6.0 4.0
-------------------------------------------- ------ ------
The group operates around the world and earns profits which are
subject to tax at differing rates in different tax jurisdictions.
Tax reforms were enacted in the US on 22 December 2017, and
although effective from 1 January 2018 the reforms did have an
impact on the tax charge in 2017 due to the revaluation of deferred
tax assets and liabilities to reflect the change in federal tax
rate. The impact on 2017 was an additional tax charge of GBP4.2m
which was reported as an exceptional item.
The underlying tax charge includes the effect of additional
deferred tax assets on previously unrecognised losses. These
additional deferred tax assets have been recognised in the year as
a result of an increase in the projected taxable profits in the
relevant jurisdictions, reflecting the benefit of a review of
internal funding structures. To the extent that the additional
deferred tax assets related to losses previously charged to
exceptional items, the associated tax credit has also been reported
as an exceptional item.
EARNINGS PER SHARE
2017 2016
------------------------------------- ------ ------
Underlying basic earnings per share 12.5p 13.3p
Basic earnings per share 9.3p 1.3p
------------------------------------- ------ ------
We have again presented an adjusted earnings per share (EPS)
measure, which excludes exceptional items, to provide a better
indication of the underlying performance of the group. Underlying
basic EPS reduced by 0.8p with the unchanged underlying operating
profit and lower effective tax rate (+0.2p), being more than offset
by the effects of increased interest (-1.0p).
The increase in basic EPS reflects lower exceptional costs in
2017, more than offsetting the factors resulting in lower
underlying basic EPS.
DIVID
2017 2016
------------------- ----- -----
Interim per share 2.7p 2.7p
Final per share 6.1p 6.1p
------------------- ----- -----
Total 8.8p 8.8p
------------------- ----- -----
The Board is recommending an unchanged dividend in 2017.
ALTERNATIVE PERFORMANCE MEASURES
In addition to statutory financial measures, management uses
certain alternative performance measures (which are not defined by
IFRS) to assess the operating performance and financial position of
the group. The alternative performance measures that Devro uses are
'constant exchanges rates', 'underlying', 'earnings before
interest, tax, depreciation and amortisation (EBITDA)', 'net debt',
'covenant net debt' and 'return on capital employed (ROCE)'.
Constant exchange rates
The group has operations across the world in multiple
currencies, and is exposed to translation risk on fluctuations in
foreign exchange rates. As a result the group's reported revenue
will be impacted by movements in actual exchange rates. The group
presents revenue growth on a constant currency basis in order to
eliminate the translation effect of foreign exchange rate
movements, enabling investors to better understand the operational
performance of the group.
Revenue growth at constant currency is calculated by translating
both the current and prior year local currency amounts using the
prior period average exchange rates.
Underlying
Underlying figures are stated before exceptional items. Devro is
undergoing a major transformation including the construction and
start-up of two new plants in China and the US which completed in
2016, a restructuring of operations in Scotland and Australia
initiated in 2014 and the Devro 100 programme with full benefits
expected by 2019. The incremental costs associated with this
transformation are significant, and as a result have been
classified as exceptional items.
A reconciliation from the underlying figures to the equivalent
reported figures is presented below:
2017 2016
Exceptional Exceptional
Underlying items Reported Underlying items Reported
-------------------------- ----------- ------------ --------- ----------- ------------ ---------
Operating profit (GBPm) 38.1 (5.1) 33.0 38.1 (22.7) 15.4
Operating margin (%) 14.8% (2.0%) 12.8% 15.8% (9.4%) 6.4%
Profit before tax (GBPm) 26.7 (5.1) 21.6 28.9 (22.7) 6.2
Basic earnings per share
(p) 12.5p (3.2p) 9.3p 13.3p (12.0p) 1.3p
-------------------------- ----------- ------------ --------- ----------- ------------ ---------
Earnings before interest, tax, depreciation and amortisation
(EBITDA)
EBITDA is defined as operating profit excluding depreciation and
amortisation. This measure is used by management to assess
operational efficiency and, given that it excludes non-cash
depreciation and amortisation, it is a useful approximation for
cash generation from operations. This measure is in common use
elsewhere and a reconciliation from reported figures is shown
below:
2017 2016
Exceptional Exceptional
Underlying items Reported Underlying items Reported
Operating profit (GBPm) 38.1 (5.1) 33.0 38.1 (22.7) 15.4
Depreciation & amortisation
(GBPm) 26.0 - 26.0 20.7 2.3 23.0
----------------------------- ----------- ------------ --------- ----------- ------------ ---------
EBITDA (GBPm) 64.1 (5.1) 59.0 58.8 (20.4) 38.4
EBITDA margin (%) 25.0% 23.0% 24.4% 15.9%
----------------------------- ----------- ------------ --------- ----------- ------------ ---------
Net debt
Net debt is defined as the excess of total borrowings over cash
and cash equivalents. It is a measure that provides additional
information on the group's financial position and is a measure in
common use elsewhere. A reconciliation from reported figures is
presented below:
2017 2016
GBPm GBPm
--------------------------- -------- --------
Current borrowings (1.5) (1.9)
Non-current borrowings (144.2) (161.6)
--------------------------- -------- --------
Total borrowings (145.7) (163.5)
Cash and cash equivalents 10.8 9.9
--------------------------- -------- --------
Net debt (134.9) (153.6)
--------------------------- -------- --------
Furthermore, the definition of net debt used to calculate one of
the group's banking covenant ratios also includes derivative
financial liabilities, as shown below:
2017 2016
GBPm GBPm
---------------------- -------- --------
Net debt (134.9) (153.6)
Derivative financial
liabilities (0.4) (2.6)
---------------------- -------- --------
Covenant net debt (135.3) (156.2)
---------------------- -------- --------
Return on capital employed
Return on capital employed (ROCE) is used as a measure of how
well the group is utilising its available capital, and is a measure
in common use elsewhere. ROCE is calculated by presenting
underlying operating profit as a proportion of average capital
employed.
Capital employed for this purpose is defined as net assets
excluding interest-bearing assets and liabilities, derivative
financial instruments, current and deferred tax balances, pension
obligations and provisions for liabilities and other charges.
A reconciliation from reported figures is presented below:
2017 2016 2015
GBPm GBPm GBPm
----------------------------- ------- ------- -------
Intangible assets 10.4 10.4 9.2
Property, plant and
equipment 291.1 308.6 270.1
Inventories 32.3 33.8 28.5
Trade and other receivables 35.1 35.2 38.4
Trade and other payables (34.5) (37.8) (33.7)
----------------------------- ------- ------- -------
Total capital employed 334.4 350.2 312.5
Average capital employed* 342.3 331.4
----------------------------- ------- ------- -------
Underlying EBIT 38.1 38.1
----------------------------- ------- ------- -------
Return on capital employed 11.1% 11.5%
----------------------------- ------- ------- -------
* Average capital employed is calculated as the average between
the balances as at the start of the year and as at the end of the
year.
GOING CONCERN
At 31 December 2017 the group was operating within the banking
covenants related to its revolving credit facility and US private
placement facilities. The group's detailed financial forecasts
indicate that there is sufficient headroom in the facilities for
the 12 months from the date of approval of this statement and that
they can be repaid in line with the expected terms.
After making enquiries, the directors have a reasonable
expectation that the group has adequate resources to continue in
operation for the 12 months from the date of approval of this
statement. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
Rutger Helbing
Group Finance Director
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
for the year ended 31 December
2017 2017 2017 2016 2016 2016
Exceptional Exceptional
Underlying items Reported Underlying items Reported
Note GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue 2 256.9 - 256.9 241.1 - 241.1
------------------- ---- ---------- ----------- -------- ---------- ----------- --------
3,
Operating profit 4 38.1 (5.1) 33.0 38.1 (22.7) 15.4
Finance income - - - 0.1 - 0.1
Finance cost (8.6) - (8.6) (7.0) - (7.0)
Net finance cost
on pensions (2.8) - (2.8) (2.3) - (2.3)
------------------- ---- ---------- ----------- -------- ---------- ----------- --------
Profit before tax 26.7 (5.1) 21.6 28.9 (22.7) 6.2
Tax (5.8) (0.2) (6.0) (6.7) 2.7 (4.0)
Profit for the
year attributable
to owners of the
parent 20.9 (5.3) 15.6 22.2 (20.0) 2.2
------------------- ---- ---------- ----------- -------- ---------- ----------- --------
Earnings per share
Basic 5 9.3p 1.3p
Diluted 5 9.3p 1.3p
All results relate to continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the year ended 31 December
2017 2016
GBP'm GBP'm
Profit for the year 15.6 2.2
Other comprehensive income/(expense) for the
year
Items that will not be reclassified to profit
or loss
Pension obligations:
* re-measurements 12.7 (33.0)
* movement in deferred tax (8.4) 5.2
----------------------------------------------------- ----- ------
4.3 (27.8)
Items that may be reclassified subsequently
to profit or loss
Cash flow hedges:
- net fair value gains/(losses) 2.2 (0.1)
- reclassified and reported in operating profit - (1.0)
- tax on fair value movements (0.4) 0.2
Net investment hedges:
- fair value losses (2.2) (1.6)
- tax on fair value movements 0.4 0.3
Net exchange adjustments 12.5 19.8
12.5 17.6
Other comprehensive income/(expense) for the
year, net of tax 16.8 (10.2)
----------------------------------------------------- ----- ------
Total comprehensive income/(expense) for the
year attributable to owners of the parent 32.4 (8.0)
----------------------------------------------------- ----- ------
CONSOLIDATED BALANCE SHEET (UNAUDITED)
at 31 December
2017 2016
Note GBP'm GBP'm
ASSETS
Non-current assets
Property, plant and equipment 291.1 308.6
Intangible assets 10.4 10.4
Deferred tax assets 35.3 40.3
Trade and other receivables 4.5 4.7
341.3 364.0
Current assets
Inventories 32.3 33.8
Trade and other receivables 30.6 30.5
Derivative financial instruments 1.8 1.4
Current tax assets - 0.1
Cash and cash equivalents 10.8 9.9
75.5 75.7
----------------------------------- ----- -------- --------
Total assets 416.8 439.7
----------------------------------- ----- -------- --------
LIABILITIES
Current liabilities
Trade and other payables (31.2) (34.4)
Current tax liabilities (5.1) (7.0)
Borrowings (1.5) (1.9)
Derivative financial instruments (0.4) (2.6)
Provisions for other liabilities
and charges (0.2) (0.8)
(38.4) (46.7)
Non-current liabilities
Borrowings (144.2) (161.6)
Pension obligations 6 (82.0) (96.0)
Deferred tax liabilities (18.1) (19.4)
Other payables (3.3) (3.4)
Provisions for other liabilities
and charges (3.6) (3.6)
(251.2) (284.0)
Total liabilities (289.6) (330.7)
----------------------------------- ----- -------- --------
Net assets 127.2 109.0
----------------------------------- ----- -------- --------
EQUITY
Capital and reserves attributable to owners of
the parent
Ordinary shares 16.7 16.7
Share premium 9.3 9.3
Other reserves 83.4 70.8
Retained earnings 17.8 12.2
Total equity 127.2 109.0
----------------------------------- ----- -------- --------
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
Ordinary Share Other Retained Total
shares premium reserves earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------------------- --- -------- -------- ---------- --------- -------
Balance at 1 January 2017 16.7 9.3 70.8 12.2 109.0
Comprehensive income/(expense)
Profit for the year - - - 15.6 15.6
Other comprehensive income/(expense) - - 12.5 4.3 16.8
Total comprehensive income/(expense) - - 12.5 19.9 32.4
Transactions with owners
Performance Share Plan charge,
net of tax - - 0.5 - 0.5
Performance Share Plan credit
in respect of awards lapsed - - (0.4) 0.4 -
Dividends paid - - - (14.7) (14.7)
Total transactions with owners - - 0.1 (14.3) (14.2)
Balance at 31 December 2017 16.7 9.3 83.4 17.8 127.2
-------------------------------------- --- -------- -------- ---------- --------- -------
Balance at 1 January 2016 16.7 9.3 52.9 52.2 131.1
Comprehensive income/(expense)
Profit for the year - - - 2.2 2.2
Other comprehensive income/(expense) - - 17.6 (27.8) (10.2)
Total comprehensive income/(expense) - - 17.6 (25.6) (8.0)
Transactions with owners
Performance Share Plan charge,
net of tax - - 0.6 - 0.6
Performance Share Plan credit
in respect of awards lapsed - - (0.3) 0.3 -
Dividends paid - - - (14.7) (14.7)
Total transactions with owners - - 0.3 (14.4) (14.1)
Balance at 31 December 2016 16.7 9.3 70.8 12.2 109.0
-------------------------------------- --- -------- -------- ---------- --------- -------
CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
For the year ended 31 December
2017 2016
Note GBP'm GBP'm
----------------------------------------------------- ---- ------ ------
Cash flows from operating activities
Cash generated from operations 7 58.2 39.0
Interest received - 0.1
Interest paid (8.3) (7.8)
Tax paid (11.9) (5.8)
----------------------------------------------------- ---- ------ ------
Net cash generated from operating activities 38.0 25.5
----------------------------------------------------- ---- ------ ------
Cash flows from investing activities
Purchase of property, plant and equipment (11.2) (22.3)
Purchase of intangible assets (1.3) (1.7)
Capital grants received - 0.7
Net cash used in investing activities (12.5) (23.3)
----------------------------------------------------- ---- ------ ------
Cash flows from financing activities
Borrowing under the loan facilities (9.8) 8.4
Proceeds from financial instruments 0.3 3.4
Dividends paid (14.7) (14.7)
----------------------------------------------------- ---- ------ ------
Net cash used in financing activities (24.2) (2.9)
----------------------------------------------------- ---- ------ ------
Net increase/(decrease) in cash and cash equivalents 1.3 (0.7)
----------------------------------------------------- ---- ------ ------
Net cash and cash equivalents at 1 January 8.0 7.7
Net increase / (decrease) in cash and cash
equivalents 1.3 (0.7)
Exchange gain on cash and cash equivalents - 1.0
----------------------------------------------------- ---- ------ ------
Net cash and cash equivalents at 31 December 9.3 8.0
----------------------------------------------------- ---- ------ ------
Cash and cash equivalents 10.8 9.9
Bank overdrafts (1.5) (1.9)
----------------------------------------------------- ---- ------ ------
Net cash and cash equivalents at 31 December 9.3 8.0
----------------------------------------------------- ---- ------ ------
1. Financial information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2017
or 2016.
The financial information for 2016 is derived from the statutory
accounts for 2016 which have been delivered to the registrar of
companies. The auditor has reported on the 2016 accounts; their
report was (i) unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The statutory accounts for 2017 will be finalised on the basis
of the financial information presented by the directors in this
preliminary announcement and will be delivered to the registrar of
companies in due course.
2. Segment information
The chief operating decision maker has been identified as the
Board. The Board reviews the group's financial results on a
geographical segment basis with three identifiable operating
segments:
-- Americas: includes North America and Latin America
-- Asia - Pacific: includes Australia, New Zealand, Japan, China
and the rest of South East Asia
-- Europe: includes Continental Europe, UK, Ireland and Africa
The Board assesses the performance of the operating segments
based on underlying operating profit. This measurement basis
excludes the effects of exceptional income and expenditure from the
operating segments. The Board assesses the operating segments based
on group profit for external sales in each region, rather than
statutory profit for the region which also includes profit on
intercompany sales. Finance income and cost, and net finance cost
on pensions, are not included in the segment results that are
reviewed by the Board.
During the year the basis used by the Board was revised to
reflect the new global organisation structure that was implemented
in the last quarter of 2016, which created a single global Supply
Chain organisation and single global Business Development
organisation. Following this organisational change, the
manufacturing asset base is now managed on a global basis, rather
than by region. As a result the segmental information has been
presented on the amended basis and the prior year figures have been
restated on a consistent basis.
Profit for the geographic segments is determined as revenue less
standard cost of manufacture and direct selling costs. The Global
costs comprise Global Supply Chain (including any variances from
standard cost of manufacture), Global Business Development
(including research & development) and Global Business Services
(including finance and human resources).
Americas Asia-Pacific Europe Global Total group
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------- ------ ------ ------- ------ ------ ------ ------- ------- ------ -------
Revenue
Sales to external
customers 61.6 64.0 85.3 75.5 110.0 101.6 - - 256.9 241.1
-------------------- ------ ------ ------- ------ ------ ------ ------- ------- ------ -------
Underlying
operating
profit 23.7 24.4 28.4 27.4 40.7 41.6 (54.7) (55.3) 38.1 38.1
Exceptional
items (5.1) (22.7)
-------------------- ------ ------ ------- ------ ------ ------ ------- ------- ------ -------
Operating
profit 33.0 15.4
Finance income - 0.1
Finance cost (8.6) (7.0)
Net finance
cost on pensions (2.8) (2.3)
-------------------- ------ ------ ------- ------ ------ ------ ------- ------- ------ -------
Profit before
tax 21.6 6.2
-------------------- ------ ------ ------- ------ ------ ------ ------- ------- ------ -------
3. Operating profit
2017 2016
Exceptional Exceptional
Underlying items Reported Underlying items Reported
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue 256.9 - 256.9 241.1 - 241.1
Cost of sales (166.3) - (166.3) (152.1) (18.5) (170.6)
Gross profit 90.6 - 90.6 89.0 (18.5) 70.5
Selling and distribution
costs (19.6) - (19.6) (19.1) - (19.1)
Administrative
expenses (23.6) (5.1) (28.7) (19.5) (4.2) (23.7)
Research & development
expenditure (7.3) - (7.3) (7.2) - (7.2)
Other expenses (2.7) - (2.7) (5.3) - (5.3)
Total operating
expenses (53.2) (5.1) (58.3) (51.1) (4.2) (55.3)
Other operating
income 0.7 - 0.7 0.2 - 0.2
Net operating expenses (52.5) (5.1) (57.6) (50.9) (4.2) (55.1)
Operating profit/(expense) 38.1 (5.1) 33.0 38.1 (22.7) 15.4
---------------------------- ----------- ------------ --------- ----------- ------------ ---------
An additional GBP1.2m (2016: GBP0.8m) of development expenditure
has been capitalised within intangible assets.
4. Exceptional items
Exceptional charges included in operating profit were GBP5.1m
(2016: GBP22.7m).
2017 2016
GBP'm GBP'm
------------------------------------------------------ ------- -------
Devro 100 programme (i) 5.1 2.0
Investment projects
Pre-operating costs to establish new manufacturing
plants (ii) - 20.3
Costs related to the closure of old manufacturing
plant (iii) - 0.4
- 20.7
Total exceptional items 5.1 22.7
------------------------------------------------------ ------- -------
Devro is undergoing a major transformation including the
construction and start-up of two new plants in China and the US
which completed in 2016, a restructuring of operations in Scotland
and Australia initiated in 2014, and the Devro 100 programme with
full benefits expected by 2019. The Devro 100 programme is focussed
on accelerating revenue growth, through significantly improving
sales capabilities, delivering substantial improvements in
manufacturing efficiencies to reduce unit costs and introducing the
next generation of differentiated products. The incremental costs
associated with implementing this transformation are significant,
and as a result have been classified as exceptional items.
(i) Redundancy costs and other incremental external cost, including professional fees.
(ii) Costs related to the projects to establish new
manufacturing plants in the USA and China, including project
management, legal and professional fees, and other incremental
costs incurred prior to the commencement of normal production that
are not eligible for capitalisation.
(iii) Costs incurred in the USA related to the closure of the
old manufacturing plant. Costs comprise redundancy and retention
costs.
5. Earnings per share
2017 2016
GBP'm GBP'm
Profit attributable to equity holders 15.6 2.2
Underlying profit attributable to equity
holders 20.9 22.2
Earnings per share
- Basic 9.3p 1.3p
- Underlying basic 12.5p 13.3p
- Diluted 9.3p 1.3p
- Underlying diluted 12.4p 13.2p
Shares in issue 2017 2016
Weighted average number of shares in the
year 166,949,022 166,941,137
Adjustments for:
- Performance Share Plan 1,691,003 1,717,046
-------------------------------------------- ------------ ------------
Weighted average number of shares adjusted
for potential dilution 168,640,025 168,658,183
-------------------------------------------- ------------ ------------
Basic earnings per share is calculated by dividing the profit
for the year attributable to owners of the parent of GBP15.6m
(2016: GBP2.2m) by 166,949,022 (2016: 166,941,137) shares, being
the weighted average number of shares in issue throughout the
year.
Shares arising from the Performance Share Plan are only treated
as dilutive where the effect is to reduce earnings per share.
Diluted earnings per share is calculated by dividing the profit for
the year attributable to ordinary shareholders of GBP15.6m (2016:
GBP2.2m) by the average number of shares, including the effect of
all dilutive potential shares, of 168,640,025 (2016:
168,658,183).
Underlying earnings per share is calculated in order to
eliminate the effect of exceptional items after tax in 2017 of
GBP5.3m (2016: GBP20.0m) on the results. Underlying basic earnings
per share is calculated by dividing the underlying profit
attributable to ordinary shareholders of GBP20.9m (2016: GBP22.2m)
by 166,949,022 (2016: 166,941,137) shares, being the weighted
average number of shares in issue throughout the year.
6. Pension obligations
The group operates a number of pension schemes throughout the
world. The major schemes are of the defined benefit type and, with
the exception of Germany where book reserves are supported by
insurance policies, the assets of the schemes are held in separate
trustee-administered funds. The defined benefit schemes are closed
to new entrants. The total pension obligation cost for the group
was GBP9.1m (2016: GBP8.2m), of which GBP4.2m (2016: GBP4.0m)
related to the overseas schemes.
The major assumptions used by the actuaries in calculating the
IAS 19 valuation for the following principal countries were:
% Australia United Kingdom USA
2017 2016 2017 2016 2017 2016
--------------------- ----- ----- -------- ------- ----- -----
Discount rate 3.6 4.1 2.5 2.6 3.4 3.9
Rate of increase in
salaries* 3.3 3.5 1.0 1.0 - -
General inflation 2.3 2.5 3.1 3.3 - -
--------------------- ----- ----- -------- ------- ----- -----
* As part of the changes to the United Kingdom plan agreed in
2010, future pensionable salary increases are capped at 1% per
annum. No rate of increase in salaries has been assumed in respect
of the USA plan as the plan is now frozen.
Net pension assets and liabilities at 31 December were as
follows:
Australia United Kingdom USA Other Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Total fair value of
scheme assets 10.1 10.6 188.1 190.7 47.4 51.3 2.0 2.2 247.6 254.8
Present value of scheme
liabilities (10.1) (10.6) (235.3) (251.8) (80.4) (84.4) (3.8) (4.0) (329.6) (350.8)
------- ------- -------- -------- ------- ------- ------ ------ -------- --------
Deficit - - (47.2) (61.1) (33.0) (33.1) (1.8) (1.8) (82.0) (96.0)
Related deferred tax
assets - - 5.8 10.4 7.3 11.2 0.7 0.5 13.8 22.1
Net pension liabilities - - (41.4) (50.7) (25.7) (21.9) (1.1) (1.3) (68.2) (73.9)
-------------------------- ------- ------- -------- -------- ------- ------- ------ ------ -------- --------
Movements in the deficit during the year were as follows:
Australia United Kingdom USA Other Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
------------------------------- ------ ------ -------- ------- ------- ------- ------ ------ ------- -------
Deficit in scheme at beginning
of year - - (61.1) (29.3) (33.1) (25.9) (1.8) (1.2) (96.0) (56.4)
Movement in year:
Pension charge (0.7) (0.6) (3.3) (2.7) (1.9) (1.8) (0.1) (0.1) (6.0) (5.2)
Employer contributions 0.4 0.4 3.6 3.8 0.4 - - - 4.4 4.2
Re-measurements 0.3 0.1 13.6 (32.9) (1.3) 0.1 0.1 (0.3) 12.7 (33.0)
Exchange (losses)/ gains - 0.1 - - 2.9 (5.5) - (0.2) 2.9 (5.6)
------------------------------- ------ ------ -------- ------- ------- ------- ------ ------ ------- -------
Deficit in scheme at end of
year - - (47.2) (61.1) (33.0) (33.1) (1.8) (1.8) (82.0) (96.0)
------------------------------- ------ ------ -------- ------- ------- ------- ------ ------ ------- -------
7. Reconciliation of profit before tax to cash generated from
operations
2017 2016
GBP'm GBP'm
Profit before tax 21.6 6.2
Adjustments for:
Finance income - (0.1)
Finance cost 8.6 7.0
Net finance cost on pensions 2.8 2.3
Pension cost adjustment for normal contributions 1.8 1.1
Depreciation of property, plant and equipment 25.0 22.1
Amortisation of intangible assets 1.0 0.9
Release from capital grants balance (0.2) (0.2)
Pension deficit funding (3.0) (2.5)
Performance Share Plan 0.5 0.6
Changes in working capital:
Decrease/(increase) in inventories 0.9 (1.1)
Decrease/(increase) in trade and other receivables 0.4 5.4
(Decrease)/increase in trade and other payables (0.9) (0.2)
Decrease in provisions (0.3) (2.5)
Cash generated from/(used in) operations 58.2 39.0
----------------------------------------------------- ------ -------
Of which:
Cash generated from/(used in) underlying
operations before pension deficit funding 66.9 64.4
Pension deficit funding (3.0) (2.5)
Exceptional items (5.7) (22.9)
Cash generated from/(used in) operations 58.2 39.0
----------------------------------------------------- ------ -------
8. Analysis of net debt
2017 2016
GBP'm GBP'm
Cash and cash equivalents 10.8 9.9
Bank overdrafts (1.5) (1.9)
9.3 8.0
Other bank borrowings (69.8) (80.4)
US dollar private placement (74.4) (81.2)
Net debt (134.9) (153.6)
----------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKADBBBKBNBB
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