TIDMVSVS
RNS Number : 2208M
Vesuvius plc
27 July 2017
Vesuvius plc
27 July 2017
Half Year Results for the six months ended 30 June 2017
Strong first half performance across all Regions and Business
Units
Vesuvius plc, a global leader in molten metal flow engineering,
announces its results for the six months ended 30 June 2017.
Financial summary
H1 2017 HY 2016 Year-on-year Underlying
change change(1)
(GBPm) (GBPm)
------------------------- -------- -------- ------------- -----------
Revenue 831.5 668.3 +24.4% 9.6%
Trading Profit(2) 86.3 59.1 +46.0% 26.7%
Return on Sales 10.4% 8.8% +160bps +140bps
Operating Profit 67.7 46.5 +45.6%
Profit Before Tax 60.8 38.2 +59.2%
Profit 46.4 27.8 +66.9%
------------------------------- -------- -------- ------------- -----------
Headline Earnings(2) 53.3 34.4 +54.9%
Headline EPS(2) (pence) 19.7 12.8 +53.9%
Statutory EPS (pence) 15.1 9.1 +65.9%
Operating cash flow(2) 67.4 65.8 +2.4%
Net Debt 321.8 310.3 +3.7%
Dividend 5.50p 5.15p +6.8%
------------------------------- -------- -------- ------------- -----------
(1) Underlying basis is at constant currency and excludes
separately reported items and the impact of acquisitions
(2) For definitions of non-GAAP measures, refer to the notes in
the financial statements
Key Points
-- Revenue and Trading Profit significantly ahead of the same period last year
-- Global steel production up across all major markets, with a
slowing trend in Q2 expected to continue into the second half
-- Achieved outperformance in EMEA and US as well as in the key
structural growth markets of China and India
-- Restructuring programme delivered GBP7.7m cost savings in H1
2017 and remains on track to achieve the GBP40m cumulative cost
savings as previously announced
-- Expansion of restructuring activities expected to increase
total annual savings by GBP15m to GBP55m by the end of 2020 at an
incremental cost of GBP25m (total cost of GBP70m)
-- Strong balance sheet with Net Debt / LTM EBITDA at 1.6x, down from 1.8x at year-end 2016
-- Reported revenue and trading profit benefited by 13.1% and
15.0% respectively versus H1 2016, due to weaker Sterling
-- Interim dividend increased by 6.8% to 5.50 pence per share
François Wanecq, Chief Executive of Vesuvius, commented:
"We had a strong H1 2017, delivering our best half-year Revenue,
Trading Profit and Return on Sales since demerger on a reported
basis. We also further demonstrated our ability to outperform
underlying markets and I was especially pleased at our progress in
recovering market position in the US. I am also happy to announce
that we have identified a further GBP15m per annum of restructuring
savings, which we expect to realise over the next three years."
"Whilst the trading environment in H1 was strong, we are
cautious about H2 as global steel production is slowing and the
second half is seasonally weaker in Foundry. Despite some
short-term headwinds, we remain confident in our ability to improve
trading margins in 2018."
For further information, please contact:
Shareholder/analyst enquiries:
Vesuvius plc François Wanecq, Chief Executive +44 (0) 207 822
0000
Guy Young, Chief Financial Officer +44 (0) 207 822 0000
Euan Drysdale, Group Head of Corporate Finance +44 (0) 207 822
0027
Virginia Skroski, Investor Relations Manager +44 (0) 207 822
0016
Media enquiries:
MHP Communications Andrew Jaques/ James White/ Ollie Hoare +44
(0) 203 128 8100
Vesuvius management will make a presentation to analysts and
investors on 27 July 2017 at 10.00 (BST) in the Great Hall of
JPMorgan Asset Management, 60 Victoria Embankment, London EC4Y 0JP.
For those unable to attend in person, an audio webcast and
conference call will also be available (UK participant dial in
+44(0)20 7136 2056; US participant dial in +1 646 254 3360;
confirmation code 9647602). This presentation will be broadcast
live on Vesuvius' website,
http://investors.vesuvius.com/investor-relations and an archive
version of the presentation will be available on the website later
that day.
About Vesuvius plc
Vesuvius is a global leader in molten metal flow engineering
principally serving the steel and foundry industries.
We develop innovative and customised solutions, often used in
extremely demanding industrial environments, which enable our
customers to improve their manufacturing processes, enhance product
quality and reduce energy consumption. These include flow control
solutions, advanced refractories and other consumable products and
increasingly, related technical services including data
capture.
We have a worldwide presence. We serve our customers through a
network of low-cost manufacturing plants located close to their own
facilities, and embed our industry experts within their operations,
who are all supported by our global technology centres.
Our core competitive strengths are our market and technology
leadership, strong customer relationships, well established
presence in developing markets and our global reach, all of which
facilitate the expansion of our addressable markets.
Our ultimate goal is to create value for our customers, and to
deliver sustainable, profitable growth for our shareholders giving
a superior return on their investment whilst providing each of our
employees with a safe workplace where he or she is recognised,
developed and properly rewarded.
Forward looking statements
This announcement contains certain forward looking statements
which may include reference to one or more of the following: the
Group's financial condition, results of operations, cash flows,
dividends, financing plans, business strategies, operating
efficiencies or synergies, budgets, capital and other expenditures,
competitive positions, growth opportunities for existing products,
plans and objectives of management and other matters.
Statements in this announcement that are not historical facts
are hereby identified as "forward looking statements". Such forward
looking statements, including, without limitation, those relating
to the future business prospects, revenue, working capital,
liquidity, capital needs, interest costs and income, in each case
relating to Vesuvius, wherever they occur in this announcement, are
necessarily based on assumptions reflecting the views of Vesuvius
and involve a number of known and unknown risks, uncertainties and
other factors that could cause actual results, performance or
achievements to differ materially from those expressed or implied
by the forward looking statements. Such forward looking statements
should, therefore, be considered in light of various important
factors that could cause actual results to differ materially from
estimates or projections contained in the forward looking
statements. These include without limitation: economic and business
cycles; the terms and conditions of Vesuvius' financing
arrangements; foreign currency rate fluctuations; competition in
Vesuvius' principal markets; acquisitions or disposals of
businesses or assets; and trends in Vesuvius' principal
industries.
The foregoing list of important factors is not exhaustive. When
considering forward looking statements, careful consideration
should be given to the foregoing factors and other uncertainties
and events, as well as factors described in documents the Company
files with the UK regulator from time to time including its annual
reports and accounts.
You should not place undue reliance on such forward looking
statements which speak only as of the date on which they are made.
Except as required by the Rules of the UK Listing Authority and the
London Stock Exchange and applicable law, Vesuvius undertakes no
obligation to update publicly or revise any forward looking
statements, whether as a result of new information, future events
or otherwise. In light of these risks, uncertainties and
assumptions, the forward looking events discussed in this
announcement might not occur.
Vesuvius plc, 165 Fleet Street, London EC4A 2AE
Vesuvius plc
Half Year Results for the six months ended 30 June 2017
During the first half of 2017, Vesuvius benefited from the 4.5%
year-on-year growth in global steel production, as reported by the
World Steel Association. At the same time, we have continued to
make further progress, in line with our objectives and strategy,
particularly around restructuring, where our targeted annual
savings have been increased by GBP15m to a total of GBP55m.
Although sterling weakness impacted the comparison of H1 2017 with
H1 2016, even without this currency tailwind, we achieved strong
underlying growth in Trading Profit and Return on Sales. However in
comparison to H1 2017, we expect trading profit in H2 2017 to be
held back by a continuation of the slowing trend in steel
production seen in Q2, the usual seasonality in Foundry sales and
rising raw material prices.
GBPm H1 Acquisitions/ H1 2017 H1 2016 Currency Acquisitions/ H1 2016 Reported Underlying%
2017 Disposals Underlying Reported Disposals Underlying % change change
Reported
--------- --------- ----------- --------- ----------- ---------
Revenue 831.5 (2.9) 828.6 668.3 87.7 - 756.0 +24.4% +9.6%
Trading
Profit 86.3 (0.2) 86.1 59.1 8.9 - 68.0 +46.0% +26.7%
Return
on sales
% 10.4% - 10.4% 8.8% - 9.0% +160bps +140bps
Group trading performance
Group revenue from our continuing operations was GBP831.5m, an
increase of 24.4% compared to the first half of 2016 on a reported
basis. Underlying Group revenue, adjusted for the effects of
acquisitions and currency translation, increased by 9.6%. Trading
profit for the first half was GBP86.3m, up 46.0% on a reported
basis (H1 2016: GBP59.1m) and up 26.7% on an underlying basis.
Return on sales increased by 160 basis points on a reported basis
and 140 basis points on an underlying basis to 10.4% in the first
half of 2017 (H1 2016: 8.8%).
Foreign exchange
Although Sterling has strengthened against most major currencies
during 2017, for the year-on-year comparison with H1 2016, we
continue to benefit from a foreign exchange tailwind, given that
based on Vesuvius' basket of currencies, Sterling was 15% weaker in
H1 2017 than its average H1 2016 level. In H1 2017, Trading Profit
benefited from a foreign exchange tailwind of approximately GBP8.9m
compared with average H1 2016 rates.
For H2 2017, all other things being equal, were spot foreign
exchange rates to persist, our H2 2016 Trading Profit would be
broadly unchanged.
Restructuring
We are expanding our restructuring activities to new territories
where the successful methods applied so far should deliver
significant further benefits. This has led to the identification of
an additional GBP15m of annual savings which we expect to deliver
between 2018 and the end of 2020 at a cost of approximately GBP25m.
This is incremental to the GBP40m annual savings and GBP45m of
costs which we have previously disclosed. The additional projects
identified include industrial efficiency and restructuring
opportunities in North America and the establishment of a European
Shared Services centre in Poland.
Restructuring costs in 2017 are expected to reach GBP23m.
Working Capital
Whilst trade working capital increased by GBP31.1m due to
increased Revenues, we have achieved a modest reduction in working
capital as a percentage of sales during H1 2017, to 26.2% from
26.6% at year-end 2016. There are various initiatives underway to
reduce working capital further and while these take time to flow
through into the figures, we have started to see encouraging
results in the following two key areas: our average creditor days
payable have increased from 43 to 47 since year-end 2016,
reflecting changes to agreed payment terms, which equates to a cash
release of c.GBP8.8m; and we have also made material progress in
China with a 20.2% reduction in trade debtors.
Financial position
Net Debt / EBITDA ratio has improved from 1.8x at year end 2016
to 1.6x at 30 June 2017, well within our preferred range of between
1.75x and 1.25x. However, Net Debt at 30 June 2017 was up slightly
at GBP321.8m, versus GBP320.3m at end 2016, due to several factors:
increase in trade working capital required to fund increased
Revenues; GBP30.8m final dividend payment; and GBP15.6m
restructuring costs, offset by our GBP42.0m Free Cash Flow
generation.
We have extended the term of our Revolving Credit Facility by
two years until 2022 and our liquidity including cash and undrawn
credit lines currently totals GBP316m.
Board and senior management
As announced on 18 July 2017, Patrick André, President, Flow
Control, will be appointed as Chief Executive and will join the
Board on 1 September 2017, succeeding François Wanecq, who is
retiring. François will remain with the Group until the end of 2017
to ensure an orderly transition.
As announced in March, Holly Keller Koeppel joined the Board as
an additional Independent Non-executive Director on 3 April 2017.
She serves on the Audit, Remuneration and Nomination
Committees.
Health and safety
Vesuvius places great emphasis on the importance of health and
safety in the workplace and in the communities in which we operate.
Safety is of paramount importance as our employees often operate in
harsh environments. We continue to work hard at reducing incident
severity and developing robust standards and practices aimed at
improving the safety and health of our people in all that they do.
In the first half of 2017, our lost time injury frequency rate
remained broadly stable at 1.6. We continue to focus our efforts to
ensure a safe working environment for all our people and the
continuous improvement of our group wide safety programmes.
Dividend
The Board has recommended an interim dividend increase of 6.8%
to 5.50 pence per share (H1 2016: 5.15 pence per share). This
dividend will be paid on 22 September 2017 to shareholders on the
register at the close of business on 11 August 2017. Any
shareholder wishing to participate in the Vesuvius Dividend
Reinvestment Plan ("DRIP") needs to have submitted their election
to do so by 1 September 2017. The Board intends to deliver
long-term dividend growth provided that this is supported by
underlying earnings, cash flows, capital expenditure requirements
and the prevailing market outlook.
Outlook
From our strong start in Q1 2017, revenue growth slowed in the
second quarter of the year, and looking ahead we expect seasonality
in Foundry to drive marginally lower Group sales in H2 2017 vs H1
2017. Whilst we have continued to identify and deliver benefits
from our restructuring activities, we expect H2 2017 trading profit
to be held back by raw material cost inflation and short term
higher costs related to the increased demand experienced in the
restructured Flow Control Europe. Despite these short-term
headwinds, we remain confident in our ability to improve trading
margins and working capital performance in 2018.
Operational Review
Vesuvius comprises two divisions, Steel and Foundry. The Steel
division operates as three business lines, Steel Flow Control,
Advanced Refractories and Digital Services (formerly Technical
Services).
Steel Division
According to the World Steel Association, global steel
production in the first half of 2017 increased 4.5% compared with
the previous year. All major steel producing countries were up year
on year, most significantly China, India and the US up 4.6%, 5.3%
and 1.3%, respectively. It is important to highlight that this H1
2017 increase in global steel production is off the relatively low
base of H1 2016 and full year 2017 growth expectations for the
market are materially lower than the H1 increase.
Revenue in the Steel division increased by 27% on a reported
basis. On an underlying basis, Steel Division revenue was up 11.7%.
This higher growth rate relative to global steel production,
reflects market share gains in EMEA, the US and also in our key
strategic growth markets of China and India.
Trading profit improved 55.5% year on year. On an underlying
basis, trading profit increased 37.1%, with return on sales
increasing by 170bps.
Steel Division H1 2017 H1 2016 Change Underlying
-----------------------
(GBPm) (GBPm) (%) change
----------------------- -------- -------- ------- -----------
Steel Flow Control
Revenue 301.0 240.8 25.0% 9.9%
Advanced Refractories
Revenue 240.4 185.3 29.7% 14.5%
Digital Services
Revenue 21.2 17.1 24.0% 5.7%
------------------------ -------- -------- ------- -----------
Total Steel Revenue 562.7 443.1 27.0% 11.7%
------------------------ -------- -------- ------- -----------
Total Steel Trading
Profit 51.7 33.2 55.5% 37.1%
------------------------ -------- -------- ------- -----------
Total Steel Return
on Sales 9.2% 7.5% 170bps 170bps
------------------------ -------- -------- ------- -----------
Steel Flow Control
Steel Flow Control supplies the stoppers and tubes used to
channel and control the flow of molten steel from ladle to tundish
and from tundish to mould; slide gate refractories for ladles and
tundishes; slide gate systems; tundish and mould fluxes; and
control devices to monitor and regulate steel flow into the mould.
These products have been designed to resist extreme
thermomechanical stress and corrosive environments. The majority of
these products are consumed during the process of making steel and,
consequently, demand is primarily linked to steel production
volumes. Continuing innovation allows us to offer enriched
solutions that create additional value in our customers'
processes.
Steel Flow Control H1 2017 H1 2016 Change Underlying
Revenue
---------------------
(GBPm) (GBPm) (%) change
--------------------- -------- -------- ------- -----------
Americas 102.3 80.7 26.8% 5.3%
Europe, Middle East
& Africa (EMEA) 117.4 92.8 26.5% 15.6%
Asia-Pacific 81.3 67.3 20.8% 7.9%
---------------------- -------- -------- ------- -----------
Total Steel Flow
Control Revenue 301.0 240.8 25.0% 9.9%
---------------------- -------- -------- ------- -----------
Year-on-year, reported revenue in Steel Flow Control increased
25% to GBP301.0m, mostly due to a recovery in Europe and the
Americas. On an underlying basis, revenue was up 9.9%.
In the Americas, Steel Flow Control's underlying revenues
increased 5.3% to GBP102.3m against a 4.5% increase in steel
production volumes. Our outperformance relative to steel production
is due to market share gains in North America. In the US in
particular, our market share is continuing to recover from the low
point of the second half of 2015 when we were impacted by customer
closures and volume losses due to market pricing pressure.
Steel production in EMEA increased 3.5%, and Vesuvius
outperformed the market with underlying revenue up 15.6%,
reflecting market share gains. Most of this increase of sales was
provided by imports into EMEA from our plants located in China,
India and Mexico, with significant additional logistics costs. Our
EMEA plants produced more than last year despite the closure of two
plants in Italy and one plant in the Czech Republic and are
expected to continue ramping up production over the coming
quarters, progressively reducing the need for imports from China,
India and Mexico.
Underlying revenue increased by 7.9% in Asia-Pacific, compared
to an 4.8% increase in steel production volume in the region.
Revenues increased faster than the steel market in India, where the
penetration of our products continues to grow. Revenues also
increased faster than the steel market in China.
Advanced Refractories
Products of the Advanced Refractories business line include
specialist refractory materials for lining steelmaking vessels such
as blast furnaces, ladles and tundishes, which are subject to
extreme temperatures, corrosion and abrasion. These materials are
in the form of powder mixes, which are spray-applied or cast onto
the vessel to be lined ("monolithics") and refractory shapes (e.g.
bricks, pads and dams). Vesuvius is one of the world's largest
manufacturers of monolithic refractory linings. Advanced
Refractories delivers installation technologies, products adapted
to fit customers' processes and effective and efficient logistics
services. These factors are combined with significant R&D, a
deep knowledge of customers' processes and project management
capability to deliver market-leading solutions for customers.
Advanced Refractories H1 2017 H1 2016 Change Underlying
Revenue
-----------------------------
(GBPm) (GBPm) (%) change
----------------------------- -------- -------- ------- -----------
Americas 74.5 62.3 19.6% 4.4%
Europe, Middle East
& Africa (EMEA) 110.0 81.6 34.8% 20.7%
Asia-Pacific 55.9 41.4 35.1% 17.8%
------------------------------ -------- -------- ------- -----------
Total Advanced Refractories
Revenue 240.4 185.3 29.7% 14.5%
------------------------------ -------- -------- ------- -----------
Revenue in Advanced Refractories increased 29.7% to GBP240.4m on
a reported basis compared with the first half of 2016. Underlying
revenue increased 14.5%, with sales increasing year-on-year in all
regions. The EMEA revenue increase was partly due to the
significant progress in regaining share in Europe despite
competitive market conditions. Underlying revenue in Asia-Pacific
grew by 17.8%, mostly due to India's continued growth cycle. During
the second quarter, a number of key raw material supplies were
negatively impacted by tightening environmental regulations in
China. As a result, prices increased significantly and will take
some months to be negotiated into our sales contracts with
customers.
Digital Services (formerly Technical Services)
The business line formerly known as Technical Services has been
renamed Digital Services to reflect the evolution of our strategy
towards an objective of offering digitalised solutions to our
customers to make their underlying processes more efficient and
reliable. Digital Services complements existing product lines by
providing new services to our existing customers. Digital Services
focuses on the capture and interpretation of key manufacturing
data, complementing Vesuvius' strong presence and expertise in
molten metal engineering to create new technologies and integrate
them into expert process management systems. Applications include:
data acquisition using sensors and laser scanners; slag prevention
technology; and caster data acquisition in the tundish and mould,
which uses sensors to obtain temperature measurement, metallurgical
data and other mould information.
Digital Services H1 2017 H1 2016 Change Underlying
Revenue
------------------------
(GBPm) (GBPm) (%) change
------------------------ -------- -------- ------- -----------
Americas 12.5 9.8 27.4% 4.4%
Europe, Middle East
& Africa (EMEA) 7.5 6.9 7.5% -3.9%
Asia-Pacific 1.2 0.4 192.8% 373.8%
------------------------- -------- -------- ------- -----------
Total Digital Services
Revenue 21.2 17.1 24.0% 5.7%
------------------------- -------- -------- ------- -----------
Digital Services generated revenues of GBP21.2m, an increase of
24% year-on-year on a reported basis. On an underlying basis,
revenues increased 5.7%. We have gained market share in the Middle
East, India and North America, but at the same time have been
facing pricing pressure from competition in some regions. Revenue
and margins have also been impacted by the appreciation of the
Brazilian Real.
It is important to recognise that the sale of Digital Services
products takes place to a significant extent through the existing
Steel Flow Control and Advanced Refractory sales forces, generating
sales which are captured in the Steel Division's reported
revenues.
Foundry Division
Vesuvius' Foundry division, trading as Foseco, is a world leader
in the supply of consumable products, solutions and associated
services related to the foundry industry. The foundry process is
highly sequential and is critically dependent on consistency of
product quality and productivity optimisation. The Foundry
division's products, solutions and use of advanced computer
simulation techniques allow foundries to reduce defects and hence
reduce labour-intensive fettling and machining, minimise metal
usage requirements, influence the metal solidification process and
automate moulding and casting, thus reducing cost, energy usage and
mould size. The conditioning of molten metal, the nature of the
mould used and, especially, the design of the way metal flows into
the mould are key parameters in a foundry, determining both the
quality of the finished castings and the labour, energy and metal
usage efficiency of the foundry. Vesuvius' products and associated
services to foundries improve these parameters.
Foundry Division H1 2017 H1 2016 Change Underlying
------------------------
(GBPm) (GBPm) (%) change
------------------------ -------- -------- ------- -----------
Foundry Revenue 268.8 225.2 19.4% 5.5%
------------------------- -------- -------- ------- -----------
Foundry Trading Profit 34.6 25.9 33.6% 14.1%
------------------------- -------- -------- ------- -----------
Foundry Return on
Sales 12.9% 11.5% 140bps 100bps
------------------------- -------- -------- ------- -----------
The worldwide foundry market remained mixed, with significant
regional and end market specific variations. The market was
supported by the progression in light vehicle output in China,
India and Mexico, but it was adversely affected by recent weakness
in the US auto sector.
Foundry Revenue H1 2017 H1 2016 Change Underlying
-----------------------
(GBPm) (GBPm) (%) change
----------------------- -------- -------- ------- -----------
Americas 56.1 45.0 24.6% 5.2%
Europe, Middle East
& Africa (EMEA) 122.0 106.1 15.0% 4.3%
Asia-Pacific 90.7 74.1 22.4% 7.5%
------------------------ -------- -------- ------- -----------
Total Foundry Revenue 268.8 225.2 19.4% 5.5%
------------------------ -------- -------- ------- -----------
In the first half of 2017, revenue in the Foundry division
increased 19.4% to GBP268.8m on a reported basis, whilst underlying
revenue increased by 5.5%. Trading profit improved by 14.1% ahead
of H1 2016 on an underlying basis. This reflected business gains in
certain areas, the successful launch of new products with higher
margins and the ongoing benefits of restructuring initiatives.
Underlying revenue in the Americas increased by 5.2%. Industries
such as construction and mining are recovering slowly but this was
countered by weaker US light vehicle production. Growth was also
achieved in Mexico due to business gains and further penetration of
the mining sector. Sales in Brazil are also recovering albeit
slowly.
Underlying revenue in EMEA increased by 4.3% year-on-year, in
part due to light vehicle production being up 2.4% and heavy truck
production up 7.7%. We also saw slight increases in iron casting
output relating to the agriculture and construction sectors.
In Asia-Pacific, underlying revenue increased by 7.5% to
GBP90.7m. Sales were up in all major markets, with India and China
up 5.1% and 10.0% respectively year-on-year, benefiting from
increased light vehicle production in India and increased light
vehicle and truck production in China. We are also seeing business
gains in China as a result of initiatives recently implemented.
Financial Review
The following review considers a number of our financial KPIs
and sets out other relevant financial information
Basis of Preparation
We have continued to adopt a columnar presentation format for
our accounts separately identifying headline performance results,
as we consider that this gives a better view of the underlying
results of the ongoing business.
Headline profit before tax (PBT) and earnings per share
(EPS)
Details relating to revenue, trading profit and return on sales
are provided in the Financial Summary and Operating Review in this
release. Net finance costs in 2017 of GBP7.3m were GBP0.6m below H1
2016. The key changes in 2017 were lower costs associated with
unwinding of discounted provisions and lower interest on net
retirement obligations. These were partially offset by higher
interest charges from an in increase in the average net debt for
the period.
Headline PBT was GBP79.4m (H1 2016: GBP50.8m), 56.2% higher than
last year on a reported basis. Including amortisation GBP9.7m (H1
2016: GBP8.3m) and the exceptional restructuring charges GBP8.9m
(H1 2016: GBP5.3m), our PBT of GBP60.8m (H1 2016: GBP38.2m) was
59.2% higher than 2016.
Headline EPS at 19.7p is 53.9% higher than 2016. Statutory EPS
at 15.1p is 65.9% higher than 2016.
Return on Net Operating Assets
RONA is our principal measure of capital efficiency. We do not
exclude the results of businesses acquired and disposed from this
calculation as capital efficiency is an important consideration in
our portfolio decisions. It is calculated by dividing trading
profit plus our share of profits from joint ventures by our average
operating assets (property, plant and equipment, and trade working
capital).
We measure this on a 12-month moving average basis at constant
currency to ensure we focus on sustainable underlying improvements.
Our RONA for H1 2017 was 23.6% compared to 19.4% in H1 2016, driven
by higher profits over the trailing 12-month period.
Free Cash Flow and Working Capital
Trade working capital as a percentage of sales was 26.2% (H1
2016: 26.6%), measured on a 12-month moving average basis. In
absolute terms on a constant currency basis trade working capital
increased by GBP31.1m in H1 2017, the majority of this increase is
attributable to the increase in sales.
Operating cash flow was GBP67.4m, which is higher than last year
at GBP65.8m. This represented a cash conversion ratio of 78% which
is lower than the H1 2016 ratio of 111%. This reduction in cash
conversion was primarily driven by a higher working capital outflow
compared to the prior year.
Free cash flow from continuing operations of GBP26.4m (H1 2016:
GBP33.3m) is after charging GBP15.6m (H1 2016: GBP10.2m) of cash
costs for restructuring activities for the period.
Operating cash flow and cash conversion:
H1 2017 H1 2016
-----------------------------------------
(GBPm) (GBPm)
----------------------------------------- -------- --------
Cash generated from operations 62.3 63.0
Add: Outflows relating to restructuring
charges 15.6 10.2
Add: Additional pension funding
contributions 1.1 1.0
Less: Capital expenditure (13.2) (9.1)
Add: Proceeds from the sale of
property, plant and equipment 1.6 0.7
----------------------------------------- -------- --------
Operating cash flow 67.4 65.8
----------------------------------------- -------- --------
Trading profit 86.3 59.1
Cash conversion 78% 111%
----------------------------------------- -------- --------
Interest Cover and Net Debt
As at 30 June 2017, the Group had committed borrowing facilities
of GBP564.3m (December 2016: GBP576.9m), of which GBP123.1m were
undrawn (December 2016: GBP158.3m).
Net debt as at 30 June 2017 was GBP321.8m, an increase of
GBP1.5m since 31 December 2016.
The Group's debt facilities have two financial covenants: the
ratios of net debt to EBITDA (maximum three times limit) and EBITDA
to interest (minimum four times limit). These ratios are monitored
regularly to ensure the Group has sufficient financing available to
run the business and fund future growth. At 30 June 2017, the net
debt to EBITDA ratio was 1.6x (December 2016: 1.8x) and EBITDA to
interest was 14.4x (December 2016: 13.4x).
Restructuring
In the first half of 2017 we reported GBP8.9m of restructuring
costs (H1 2016: GBP5.3m) that were predominantly made up of
redundancy and legal and professional fees. The cash costs in H1
2017 were GBP15.6m (H1 2016: GBP10.2m) which primarily relate to
redundancy costs in Italy. We are carrying a restructuring
provision at 30 June 2017 of GBP11.0m.
Capital Expenditure
Capital expenditure in H1 2017 of GBP14.6m (H1 2016: GBP9.4m)
comprised GBP12.1m in the Steel division (H1 2016: GBP6.7m) and
GBP2.5m in the Foundry division (H1 2016: GBP2.7m). Capital
expenditure on revenue generating customer installation assets was
GBP4.5m (H1 2016: GBP1.9m).
Pensions
The Group has a limited number of historical defined benefit
plans mainly in the UK, US, Germany and Belgium. The main plans in
the UK and US are largely closed to further benefit accruals and
55% of the liabilities in the UK have already been insured. The
total net deficit attributed to these defined benefit obligations
at the end of June 2017 was GBP23.3m (December 2016: GBP29.4m),
representing an improvement of GBP6.1m. The key movements giving
rise to this were re-measurement gains of GBP14.7m, principally on
the UK plan offset by a loss on plan assets of GBP9.5m.
The majority of the ongoing pension plans are defined
contribution plans, where our only obligation is to make
contributions, with no further commitments on the level of
post-retirement benefits. During H1 2017, GBP4.4m (H1 2016:
GBP5.3m) of contributions were made into the plans.
Taxation
The Group's effective tax rate, based on the income tax costs
associated with headline performance of GBP22.1m (H1 2016:
GBP13.1m), was 28.0% in the first half of 2017 (H1 2016:
25.5%).
The Group's total income tax costs include a credit of GBP6.0m
(H1 2016: GBP2.7m) relating to separately reported items
comprising: a net credit of GBP0.9m (H1 2016: GBP0.8m) in relation
to restructuring charges; and a credit of GBP5.1m (H1 2016:
GBP1.9m) relating to the amortisation of acquired intangible
assets. Tax charged in the Group statement of comprehensive income
during the half year amounted to GBP0.7m (H1 2016: GBP1.4m credit),
which related to net actuarial gains on the UK and German employee
benefit plans.
Going concern
The Directors have prepared cash flow forecasts for the Group
for a period in excess of 12 months from the date of approval of
the 2017 interim financial statements. These forecasts reflect an
assessment of current and future end-market conditions and their
impact on the Group's future trading performance. The forecasts
show that the Group will be able to operate within the current
committed debt facilities and show continued compliance with the
Company's financial covenants. On the basis of the exercise
described above and the Group's available committed debt
facilities, the Directors consider that the Group and Company have
adequate resources to continue in operational existence for a
period of at least 12 months from the date of signing of the 2017
interim financial statements. Accordingly, they continue to adopt a
going concern basis in preparing the financial statements of the
Group and the Company.
Principal Risks and Uncertainties
Risk Management
The Board is responsible for setting the Group's risk appetite
and ensuring that appropriate risk management systems are in place.
The Group undertakes a continuous process of risk identification
and review, which includes both top down and bottom up processes,
allowing operational, functional, senior executive and Board
members' views on risk to be independently gathered.
Risk mitigation
Once risks are identified by the Group, they are actively
managed in order to mitigate exposure and, where cost effective,
the risk is transferred to insurers. The senior management 'owners'
for each principal risk update the mitigations of that specific
risk and contribute to the analysis of likelihood and materiality.
This is reported to the Board. We have also built a business
structure that gives protection against the principal risks we face
with diversified currencies, a widespread customer base, local
production matching the diversity of our markets and intensive
training of our employees.
Board Monitoring
The Board defines the Group's risk appetite, considering the
nature and extent of the principal risks that the Group should
take. During 2016, the Board discussed the classification of the
Group's risks, considering the range and limits of the risks the
Group should adopt. The Board's oversight of principal risks also
involved a Board review of the processes by which the Group manages
those risks, establishing a clear understanding at Board level of
the individuals and groups in the business formally responsible for
the management of specific risks.
Principal Risks
The risks identified are those the Board considers to be the
most relevant to the Group in relation to their potential impact on
the achievement of its strategic objectives. All of the risks set
out could materially affect the Group, its businesses, future
operations and financial condition and could cause actual results
to differ materially from expected or historical results. These
risks are not the only ones that the Group will face. Some risks
are not yet known and some currently not deemed to be material
could become so.
Changes to Risk in 2017
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The directors do not consider that the principal risks and
uncertainties have changed since the publication of the annual
report for the year ended 31 December 2016. The risks and
uncertainties are summarised below:
Risk and context Potential Impact Mitigation
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Demand volatility
Vesuvius' * Unplanned drop in demand and/or revenue due to * Geographic diversification of revenues
expectations reduced production
of future trading
are based upon an * Product innovation & service offerings securing
assessment of * Margin reduction long-term revenue streams and maintaining performance
end-market differential
conditions, which
are subject to some * Customer failure leading to increased bad debts
uncertainty. * Increase in service and product lines by the
Vesuvius' development of the Digital Services business
end-markets are * Loss of market share to competition
historically
somewhat cyclical * R&D includes assessment of emerging technologies
in nature. * Cost pressures at customers leading to use of cheaper
solutions
* Manufacturing capacity rationalisation and flexible
cost base
* Diversified customer base: no customer is greater
than 10% of revenue
* Robust credit and working capital control to mitigate
the risk of default by counterparties
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Protectionism &
Globalisation * Restricted access to market due to enforced * Highly diversified manufacturing footprint with
Pressure from local, preference of local suppliers manufacturing sites located in 26 countries
national or regional
requirements
conflict * Increased barriers to entry for new businesses or * Strong local management with delegated authority to
with the quality expansion run their businesses and manage customer
and efficiency relationships
delivered
by scale and * Increased costs from import duties or taxation
standardisation. * Cost flexibility
* Loss of market share
* Tax risk management and control framework together
with a strong control of inter-company trading
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Financial
uncertainty * Customer and other counterparty default * Capital allocation discipline
Fluctuations in the
value of currencies,
interest rates, or * Restricted access to capital hampering ability to * Capital structuring, including fixed rate borrowing
rates of inflation fund growth and matching of debt to cash flow earnings currency
may adversely impact
the Group's
financial * Reduction in earnings from increased interest charges * Alignment of cost structure with revenue where
position or results possible
of operations.
Availability * Reduced market liquidity and increased cost of
of sufficient capital * Effective planning of the debt refinancing profile to
capital avoid exposure to short term market disruptions
is critical to allow
Vesuvius to deliver
its business plan.
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Complex and changing
regulatory * Revenue reduction from reduced end-market access * Globally disseminated Code of Conduct highlighting
environment ethical approach to business
Vesuvius is subject
to worldwide legal * Disruption of supply chain and route to market
and regulatory * Worldwide confidential Speak up procedure
regimes,
some of which impose * Increased internal control processes
extra-jurisdictional * Compliance programmes and training across the Group
obligations on
companies * Increased frequency of regulatory investigations
and are continually * Independent Internal audit function
updated.
* Reputational damage
* Experienced Internal legal function
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Business
interruption * Loss of a major plant temporarily or permanently * Diversified manufacturing footprint.
The Group is subject impairing our ability to serve our customers
to operational risks
including natural * Dual sourcing strategy and development of substitutes
catastrophe, * Damage to or restriction in ability to use assets
terrorist
action, fire / * Disaster recovery planning
explosion, * Denial of access to critical systems of control
environmental processes
regulation, * Business continuity planning with strategic
industrial actions, maintenance of excess capacity
supply chain issues, * Disruption of manufacturing processes
and cyber risk.
* Physical and IT control systems security, access and
* Inability to source critical raw materials training
* Cyber risks integrated into wider risk-management
structure
* Well established global Insurance programme
* Group-wide safety management programmes
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Failure to secure
Innovation * Product substitution by customers * Enduring & significant investment in R&D, with market
Not maintaining leading research
and/or
developing the * Increased competitive pressure through lack of
necessary differentiation of Vesuvius offering * A shared strategy for innovation across the Group,
sustainable deployed via our R&D centres
differentiation
in products, systems * Commoditisation of product portfolio through lack of
and services by development * Stage gate process from innovation to
driving commercialisation to foster innovation and increase
innovative alignment with strategy
solutions. * Lack of response to changing customer needs
Competitive
advantage * Programmes of Manufacturing and Process Excellence
derived from * Loss of intellectual property protection
proprietary
intellectual * Quality programme, focused on quality and consistency
property
is lost through
inadequate * Stringent intellectual property registration and
protection. defence
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Attracting &
retaining * Staff turnover in growing countries and regions * Contacts with universities to identify and develop
staff talent
Failure to attract
sufficient new * Stagnation of ideas and development opportunities
talent * Internal focus on talent development and training,
to the Group based with tailored career-stage programmes
on industry * Loss of expertise and critical business knowledge
perception
and competition. * Career path planning and global opportunities for
Failure to retain * Organisational culture is not maintained high potential staff
and maintain a
talent
pipeline and * Reduced management pipeline for succession to senior * Internal programmes for the structured transfer of
internal positions technical and other knowledge
succession options,
for middle and
senior * Clearly elucidated values to underpin business
management culture
positions.
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Quality, Health &
Safety * Product or application failures lead to adverse * Active safety programmes, with ongoing wide-ranging
Vesuvius works in financial impact or loss of reputation as technology monitoring and safety training
highly challenging leader
manufacturing
environments, * Quality management programmes including stringent
providing products, * Health & safety breach, manufacturing downtime or quality control standards, monitoring and reporting
systems and services damage to infrastructure from incident at customer
that are mission plant
critical and for * Experienced technical staff knowledgeable in the
which reliability application of our products and technology
is paramount. * Customer claims from product quality issues
* Targeted global Insurance programme
* Injury to staff and contractors
* Experienced internal legal department controlling
third party contracting
--------------------- ------------------------------------------------------------ ------------------------------------------------------------
Directors' responsibility statement
We confirm that to the best of our knowledge:
(a) The condensed financial statements have been prepared in
accordance with IAS 34, Interim Financial Reporting, as adopted by
the EU; and
(b) This half-yearly financial report includes a fair review of the information required by:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related parties' transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period; and any changes in the related parties'
transactions described in the last annual report that could do
so.
On behalf of the Board
Guy Young
Chief Financial Officer
26 July 2017
Vesuvius plc Board of Directors:
John McDonough CBE, Chairman
François Wanecq, Chief Executive
Guy Young, Chief Financial Officer
Douglas Hurt, Non-executive Director, Senior Independent
Director and Chairman of the Audit Committee
Jane Hinkley, Non-executive Director and Chairman of the
Remuneration Committee
Christer Gardell, Non-executive Director
Hock Goh, Non-executive Director
Holly Koeppel, Non-executive Director
Independent review report to Vesuvius plc
Report on the condensed half year financial statements
Our conclusion
We have reviewed Vesuvius plc's condensed half year financial
statements (the "interim financial statements") in the Half Year
Results of Vesuvius plc for the 6 month period ended 30 June 2017.
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Group Balance Sheet as at 30 June 2017;
-- the Condensed Group Income Statement and Condensed Group
Statement of Comprehensive Income/(Loss) for the period then
ended;
-- the Condensed Group Statement of Cash Flows for the period then ended;
-- the Condensed Group Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Results have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Half
Year Results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
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 United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2017
Notes:
a) The maintenance and integrity of the Vesuvius plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Condensed Group Income Statement
For the six months ended 30 June 2017
---------------------------------- -----------------------------------------
Half year 2017 Half year 2016 Full year 2016
------------------------------------- ---------------------------------- -----------------------------------------
Separately Unaudited Separately Unaudited Separately
Headline reported Half year Headline reported Half year Headline reported Full year
performance(1) items 2017 performance items 2016 performance items 2016
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- ----- -------------- ---------- --------- ----------- ---------- --------- ----------- ---------- ----------------
Continuing operations
Revenue 2 831.5 - 831.5 668.3 - 668.3 1,401.4 - 1,401.4
Manufacturing costs (596.9) - (596.9) (485.2) - (485.2) (1,018.6) - (1,018.6)
Administration, selling
and distribution costs (148.3) - (148.3) (124.0) - (124.0) (249.5) - (249.5)
---------------------------------------------- ----- -------------- ---------- --------- ----------- ---------- --------- ----------- ---------- ----------------
2,
Trading profit 16 86.3 - 86.3 59.1 - 59.1 133.3 - 133.3
Amortisation of acquired
intangible assets - (9.7) (9.7) - (8.3) (8.3) - (17.1) (17.1)
Restructuring charges 3 - (8.9) (8.9) - (5.3) (5.3) - (28.5) (28.5)
Gain on employee benefit
plan 10 - - - - 1.0 1.0 - 5.2 5.2
Operating profit/(loss) 2 86.3 (18.6) 67.7 59.1 (12.6) 46.5 133.3 (40.4) 92.9
Finance expense (8.9) - (8.9) (9.9) - (9.9) (17.4) - (17.4)
Finance income 1.6 - 1.6 2.0 - 2.0 2.9 - 2.9
-------------- ---------- --------- ----------- ---------- --------- ----------- ---------- ----------------
Net finance costs 4 (7.3) - (7.3) (7.9) - (7.9) (14.5) - (14.5)
Share of post-tax income
(loss) of joint ventures 0.4 - 0.4 (0.4) - (0.4) 1.0 - 1.0
Profit/(loss) before tax 2 79.4 (18.6) 60.8 50.8 (12.6) 38.2 119.8 (40.4) 79.4
Income tax (charge)/credits 5 (22.1) 6.0 (16.1) (13.1) 2.7 (10.4) (31.4) 5.0 (26.4)
---------------------------------------------- ----- -------------- ---------- --------- ----------- ---------- --------- ----------- ---------- ----------------
Profit/(loss) from:
Continuing operations 57.3 (12.6) 44.7 37.7 (9.9) 27.8 88.4 (35.4) 53.0
Discontinued operations - 1.7 1.7 - - - - 10.2 10.2
---------------------------------------------- ----- -------------- ---------- --------- ----------- ---------- --------- ----------- ---------- ----------------
Profit/(loss) 57.3 (10.9) 46.4 37.7 (9.9) 27.8 88.4 (25.2) 63.2
============================================== ===== ============== ========== ========= =========== ========== ========= =========== ========== ================
Profit attributable to:
Owners of the parent 53.3 (10.9) 42.4 34.4 (9.9) 24.5 82.1 (25.2) 56.9
Non-controlling interests 4.0 - 4.0 3.3 - 3.3 6.3 - 6.3
---------------------------------------------- ----- -------------- ---------- --------- ----------- ---------- --------- ----------- ---------- ----------------
Profit/(loss) 57.3 (10.9) 46.4 37.7 (9.9) 27.8 88.4 (25.2) 63.2
============================================== ===== ============== ========== ========= =========== ========== ========= =========== ========== ================
Earnings per share - pence 6
Continuing operations
- basic 15.1 9.1 17.3
-
diluted 15.0 9.1 17.3
Total operations - basic 15.7 9.1 21.1
-
diluted 15.6 9.1 21.0
============================================== ===== ============== ========== ========= =========== ========== ========= =========== ========== ================
(1) Headline performance is defined in Note 16.1
Condensed Group Statement of Comprehensive Income/(Loss)
For the six months ended 30 June 2017
Unaudited Unaudited
Half
Half year year Full year
2017 2016 2016
Notes GBPm GBPm GBPm
---------------------------------------------------- ----- --------- --------- ---------
Profit 46.4 27.8 63.2
Items that will not be reclassified subsequently
to income statement:
--------- --------- ---------
Remeasurement of defined benefit assets/liabilities 5.4 (9.9) 9.5
Income tax relating to items not reclassified 5 (0.7) 1.4 (0.7)
Items that may be reclassified subsequently
to income statement:
Exchange differences on translation of
the net assets of foreign operations (23.6) 146.7 207.7
Exchange translation differences arising
on net investment hedges 6.4 (27.1) (41.6)
--------- --------- ---------
Other comprehensive (loss)/income, net
of income tax (12.5) 111.1 174.9
Total comprehensive income 33.9 138.9 238.1
==================================================== ===== ========= ========= =========
Total comprehensive income attributable
to:
Owners of the parent 30.1 132.4 226.2
Non-controlling interests 3.8 6.5 11.9
Total comprehensive income 33.9 138.9 238.1
---------------------------------------------------- ----- --------- --------- ---------
Total comprehensive income attributable to owners
of the parent arises from:
Continuing operations 26.1 132.4 216.0
Discontinued operations 4.0 - 10.2
---------------------------------------------------- ----- --------- --------- ---------
Total comprehensive income attributable
to owners of the parent 30.1 132.4 226.2
---------------------------------------------------- ----- --------- --------- ---------
Condensed Group Statement of Cash Flows
For the six months ended 30 June 2017
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
Notes GBPm GBPm GBPm
----------------------------------------------- ----- --------- --------- ---------
Cash flows from operating activities
Cash generated from operations 9 62.3 63.0 130.2
Net interest paid (6.8) (5.8) (12.1)
Income taxes paid (19.3) (16.3) (34.2)
Net cash inflow from operating activities 36.2 40.9 83.9
Cash flows from investing activities
--------- --------- ---------
Capital expenditure (13.2) (9.1) (31.3)
Proceeds from the sale of property,
plant and equipment 1.6 0.7 1.6
Acquisition of subsidiaries and joint
ventures, net of cash acquired (0.1) - (7.7)
Disposal of subsidiaries and joint ventures,
net of cash disposed of 0.9 - -
Dividends received from joint ventures 1.7 0.9 2.0
Net cash (outflow) from investing activities (9.1) (7.5) (35.4)
----------------------------------------------- ----- --------- --------- ---------
Net cash inflow before financing activities 27.1 33.4 48.5
Cash flows from financing activities
--------- --------- ---------
Proceeds from borrowings 36.4 4.9 0.8
Settlement of forward foreign exchange
contracts (6.3) 10.4 20.6
Dividends paid to equity shareholders 7 (30.8) (30.0) (43.9)
Dividends paid to non-controlling shareholders (1.0) (0.9) (2.5)
--------- --------- ---------
Net cash (outflow) from financing activities (1.7) (15.6) (25.0)
----------------------------------------------- ----- --------- --------- ---------
Net increase in cash and cash equivalents 8 25.4 17.8 23.5
Cash and cash equivalents at beginning
of period 101.0 67.0 67.0
Effect of exchange rate fluctuations
on cash and cash equivalents (1.7) 6.7 10.5
Cash and cash equivalents at end of
period 124.7 91.5 101.0
=============================================== ===== ========= ========= =========
Free cash flow from continuing operations
(Note 16.10)
Net cash inflow from operating activities 36.2 40.9 83.9
Additional funding contributions into
Group pension plans 1.1 1.0 7.7
Capital expenditure (13.2) (9.1) (31.3)
Proceeds from the sale of property,
plant and equipment 1.6 0.7 1.6
Dividends received from joint ventures 1.7 0.9 2.0
Dividends paid to non-controlling shareholders (1.0) (0.9) (2.5)
----------------------------------------------- ----- --------- --------- ---------
Free cash flow from continuing operations 16 26.4 33.5 61.4
Discontinued operations - (0.2) -
----------------------------------------------- ----- --------- --------- ---------
Free cash flow 16 26.4 33.3 61.4
=============================================== ===== ========= ========= =========
Condensed Group Balance Sheet
As at 30 June 2017
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
Notes GBPm GBPm GBPm
------------------------------------ ----- --------- ---------- ---------
Assets
--------- ---------- ---------
Property, plant and equipment 311.3 309.8 323.6
Intangible assets 761.5 755.4 781.9
Employee benefits - net surpluses 10 81.9 65.5 78.8
Interests in joint ventures 16.1 17.0 18.0
Investments 2.5 2.8 2.6
Income tax recoverable 1.0 1.3 1.0
Deferred tax assets 89.3 76.3 92.1
Other receivables 22.6 20.3 23.4
---------
Total non-current assets 1,286.2 1,248.4 1,321.4
Cash and short-term deposits 8 152.2 134.0 144.4
Inventories 225.7 190.0 207.7
Trade and other receivables 427.4 375.0 393.2
Income tax recoverable 2.4 1.8 3.9
Derivative financial instruments - 0.7 -
---------
Total current assets 807.7 701.5 749.2
Total assets 2,093.9 1,949.9 2,070.6
==================================== ===== ========= ========== =========
Equity
--------- ---------- ---------
Issued share capital 27.8 27.8 27.8
Retained earnings 2,388.0 2,333.4 2,370.0
Other reserves (1,358.4) (1,385.5) (1,341.4)
---------
Equity attributable to the owners
of the parent 1,057.4 975.7 1,056.4
Non-controlling interests 44.9 38.4 42.1
------------------------------------ ----- --------- ---------- ---------
Total equity 1,102.3 1,014.1 1,098.5
------------------------------------ ----- --------- ---------- ---------
Liabilities
--------- ---------- ---------
Interest-bearing borrowings 8 360.0 396.6 330.8
Employee benefits - net liabilities 10 105.2 119.7 108.2
Other payables 18.0 19.6 16.5
Provisions 14 30.6 30.3 32.9
Deferred tax liabilities 44.8 45.4 48.6
--------- ---------- ---------
Total non-current liabilities 558.6 611.6 537.0
Interest-bearing borrowings 8 114.0 47.7 133.9
Trade and other payables 260.1 217.5 232.7
Income tax payable 42.2 43.9 41.9
Provisions 14 15.9 15.1 25.7
Derivative financial instruments 15 0.8 - 0.9
---------
Total current liabilities 433.0 324.2 435.1
------------------------------------ ----- ---------
Total liabilities 991.6 935.8 972.1
------------------------------------ ----- ---------
Total equity and liabilities 2,093.9 1,949.9 2,070.6
==================================== ===== ========= ========== =========
Condensed Group Statement of Changes in Equity
For the six months ended 30 June 2017
Issued Owners
share Other Retained of the Non-controlling Total
capital reserves earnings parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January 2016 27.8 (1,501.9) 2,346.5 872.4 32.7 905.1
Profit - - 24.5 24.5 3.3 27.8
Remeasurement of defined benefit
liabilities/assets - - (9.9) (9.9) - (9.9)
Income tax relating to items
not reclassified - - 1.4 1.4 - 1.4
Exchange differences on the
net assets of foreign operations - 143.5 - 143.5 3.2 146.7
Exchange translation differences
arising on net investment hedges - (27.1) - (27.1) - (27.1)
-------- --------- --------- ------- --------------- -------
Other comprehensive income/(loss),
net of income tax - 116.4 (8.5) 107.9 3.2 111.1
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income - 116.4 16.0 132.4 6.5 138.9
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 0.9 0.9 - 0.9
Dividends paid (note 7) - - (30.0) (30.0) (0.8) (30.8)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - (29.1) (29.1) (0.8) (29.9)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2016, unaudited 27.8 (1,385.5) 2,333.4 975.7 38.4 1,014.1
------------------------------------ -------- --------- --------- ------- --------------- -------
Profit - - 32.4 32.4 3.0 35.4
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
liabilities/assets - - 19.4 19.4 - 19.4
Income tax relating to items
not reclassified - - (2.1) (2.1) - (2.1)
Exchange differences on the
net assets of foreign operations - 58.6 - 58.6 2.4 61.0
Exchange translation differences
arising on net investment hedges - (14.5) - (14.5) - (14.5)
-------- --------- --------- ------- --------------- -------
Other comprehensive income,
net of income tax - 44.1 17.3 61.4 2.4 63.8
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income - 44.1 49.7 93.8 5.4 99.2
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 0.8 0.8 - 0.8
Dividends paid (note 7) - - (13.9) (13.9) (1.7) (15.6)
Total transactions with owners - - (13.1) (13.1) (1.7) (14.8)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 1 January 2017 27.8 (1,341.4) 2,370.0 1,056.4 42.1 1,098.5
------------------------------------ -------- --------- --------- ------- --------------- -------
Profit - - 42.4 42.4 4.0 46.4
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
liabilities/assets - - 5.4 5.4 - 5.4
Income tax relating to items
not reclassified - - (0.7) (0.7) - (0.7)
Exchange differences on the
net assets of foreign operations - (23.4) - (23.4) (0.2) (23.6)
Exchange translation differences
arising on net investment hedges - 6.4 - 6.4 - 6.4
-------- --------- --------- ------- --------------- -------
Other comprehensive income/(loss),
net of income tax - (17.0) 4.7 (12.3) (0.2) (12.5)
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income - (17.0) 47.1 30.1 3.8 33.9
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 1.7 1.7 - 1.7
Dividends paid (note 7) - - (30.8) (30.8) (1.0) (31.8)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - (29.1) (29.1) (1.0) (30.1)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2017 27.8 (1,358.4) 2,388.0 1,057.4 44.9 1,102.3
------------------------------------ -------- --------- --------- ------- --------------- -------
Notes to the Financial Statements
1 Basis of preparation
1.1 Basis of accounting
These condensed financial statements of Vesuvius plc ("Vesuvius"
or the "Company") and its subsidiary and joint venture companies
(the "Group") have been prepared in accordance with International
Accounting Standard ("IAS") 34 Interim Financial Reporting, as
adopted by the EU and in accordance with the Disclosure and
Transparency Rules of the UK's Financial Conduct Authority.
These condensed financial statements have been prepared using
the same accounting policies as used in the preparation of the
Group's annual financial statements for the year ended 31 December
2016, which were prepared in accordance with International
Financial Reporting Standards as adopted by the EU ("IFRS"). They
do not include all of the information required for full annual
financial statements, and should be read in conjunction with the
consolidated financial statements of the Group for the year ended
31 December 2016. The financial information presented in this
document is unaudited, but has been reviewed by the Company's
auditor.
The comparative figures for the financial year ended 31 December
2016 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the Registrar of Companies. The report of the
auditor was unqualified, did not include reference to any matters
to which the auditor drew attention by way of emphasis without
qualifying its report and did not contain a statement under section
498(2) or (3) of the Companies Act 2006. These sections address
whether proper accounting records have been kept, whether the
Company's accounts are in agreement with those records and whether
the auditor has obtained all the information and explanations
necessary for the purposes of its audit.
1.2 Basis of consolidation
The consolidated financial statements of the Group incorporate
the financial statements of the Company and entities controlled by
the Company (its "subsidiaries"). Control exists when the Company
has the power to direct the relevant activities of an entity that
significantly affect the entity's return so as to have rights to
the variable return from its activities. In assessing whether
control exists, potential voting rights that are currently
exercisable are taken into account. The results of subsidiaries
acquired or disposed of during the year are included in the Group
income statement from the effective date of acquisition or up to
the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those detailed herein to ensure that the Group financial
statements are prepared on a consistent basis. All intra-Group
transactions, balances, income and expenses are eliminated on
consolidation.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's interest
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination together
with the non-controlling interests' share of profit or loss and
each component of other comprehensive income since the date of the
combination. Total comprehensive income is attributed to the
non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
1.3 Going concern
The Directors have prepared cash flow forecasts for the Group
for a period in excess of 12 months from the date of approval of
the 2017 interim financial statements. These forecasts reflect an
assessment of current and future end-market conditions and their
impact on the Group's future trading performance. The forecasts
show that the Group will be able to operate within the current
committed debt facilities and show continued compliance with the
Company's financial covenants. On the basis of the exercise
described above and the Group's available committed debt
facilities, the Directors consider that the Group and Company have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt a going
concern basis in preparing the financial statements of the Group
and the Company.
1.4 Functional and presentation currency
The financial statements are presented in millions of pounds
Sterling, which is the functional currency of the Company, and
rounded to one decimal place.
1.5 Disclosure of "separately reported items"
IAS 1 Presentation of Financial Statements provides no
definitive guidance as to the format of the income statement, but
states key lines which should be disclosed. It also encourages the
disclosure of additional line items and the reordering of items
presented on the face of the income statement when appropriate for
a proper understanding of the entity's financial performance. In
accordance with IAS 1, the Company has adopted a columnar
presentation for its Group income statement, to separately identify
headline performance results (as defined in Note 16), as the
Directors consider that this gives a better view of the underlying
results of the ongoing business. As part of this presentation
format, the Company has adopted a policy of disclosing separately
on the face of its Group income statement, within the column
entitled 'Separately reported items', the effect of any components
of financial performance for which the Directors consider separate
disclosure would assist both in a better understanding of the
financial performance achieved and in making projections of future
results. In its adoption of this policy, the Company applies an
even-handed approach to both gains and losses and aims to be both
consistent and clear in its accounting and disclosure of such
items.
Both materiality and the nature and function of the components
of income and expense are considered in deciding upon such
presentation. Such items may include, inter alia, the financial
effect of exceptional items which occur infrequently, such as major
restructuring activity, initial recognition and subsequent
increase, decrease and amortisation of US deferred tax assets,
together with items always reported separately, such as
amortisation charges relating to acquired intangible assets,
profits or losses arising on the disposal of continuing or
discontinued operations and the taxation impact of the
aforementioned exceptional items and items reported separately.
1.6 New and revised IFRS
IFRS 9 Financial Instruments (effective from 1 January 2018, for
the year ending 2018), replaces the existing guidance in IAS 39
Financial Instruments Recognition and Measurement. IFRS 9 includes
revised guidance on the classification and measurement of financial
instruments, including a new expected credit loss model for
calculating impairment on financial assets, and new general hedge
accounting requirements. It also carries forward the guidance on
recognition and de-recognition of financial instruments from IAS
39. Based on an assessment of the adoption of IFRS 9, the Group
does not believe there will be a significant impact on its
Consolidated Financial Statements.
IFRS 15 Revenue from Contracts with Customers (effective from 1
January 2018, for the year ending 2018) establishes a comprehensive
framework for determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance,
including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC
13 Customer Loyalty Programmes. Based on an initial assessment of
the adoption of IFRS 15, the Group does not believe there will be a
significant impact on its Consolidated Financial Statements.
IFRS 16 Leases (effective from 1 January 2019, for the year
ending 2019), replaces the existing guidance in IAS 17 Leases. IFRS
16 provides a single lessee accounting model, requiring lessees to
recognise assets and liabilities for all leases unless the lease
term is 12 months or less or the underlying asset has a low value.
The Group is currently assessing the potential impact on its
Consolidated Financial Statements resulting from the application of
IFRS 16.
IFRIC 23 Uncertainty over income tax treatments (effective from
1 January 2019, for the year ending 2019, not yet endorsed),
clarifies how to recognise and measure deferred and current income
tax assets and liabilities where there is uncertainty over tax
treatment under IAS 12. The Group is currently assessing the
potential impact on its Consolidated Financial Statements resulting
from the application of IFRIC 23.
Other new or amended standards are not expected to have a
significant impact on the Group's financial statements.
2 Segment information
Operating segments for continuing operations
For reporting purposes, the Group is organised into two business
segments: Steel and Foundry. It is the Vesuvius Board which makes
the key operating decisions in respect of these segments. The
information used by the Vesuvius Board to review performance and
determine resource allocation between the business segments is
presented with the Group's activities segmented between the two
business segments, Steel and Foundry. Taking into account the basis
on which the Group's activities are reported to the Vesuvius Board,
the Directors believe that these two business segments are the
appropriate way to analyse the Group's results.
Segment revenue represents revenue from external customers
(inter-segment revenue is not material). Trading profit includes
items directly attributable to a segment as well as those items
that can be allocated on a reasonable basis.
2.1 Income statement
Unaudited Half year 2017
----------------------------
Continuing
Steel Foundry operations
GBPm GBPm GBPm
------------------------------------------- ------ ------- -----------
Segment revenue 562.7 268.8 831.5
------------------------------------------- ------ ------- -----------
Segment EBITDA 66.3 42.2 108.5
Segment depreciation (14.6) (7.6) (22.2)
------------------------------------------- ------ ------- -----------
Segment trading profit 51.7 34.6 86.3
------------------------------------------- ------ -------
Return on sales margin 9.2% 12.9% 10.4%
Amortisation of acquired intangibles (9.7)
Restructuring charges (8.9)
Gain on employee benefit plan -
-----------
Operating profit 67.7
Net finance costs (7.3)
Share of post-tax profit of joint ventures 0.4
------------------------------------------- ------ ------- -----------
Profit before tax 60.8
------------------------------------------- ------ ------- -----------
Capital expenditure additions 12.1 2.5 14.6
------------------------------------------- ------ ------- -----------
2.1 Income statement (continued)
Unaudited Half year 2016
--------------------------------------
Steel Foundry Continuing operations
GBPm GBPm GBPm
------------------------------------------- ------ ------- ---------------------
Segment revenue 443.1 225.2 668.3
------------------------------------------- ------ ------- ---------------------
Segment EBITDA 46.3 32.8 79.1
Segment depreciation (13.1) (6.9) (20.0)
------------------------------------------- ------ ------- ---------------------
Segment trading profit 33.2 25.9 59.1
------------------------------------------- ------ -------
Return on sales margin 7.5% 11.5% 8.8%
Amortisation of acquired intangibles (8.3)
Restructuring charges (5.3)
Gain on employee benefit plan 1.0
---------------------
Operating profit 46.5
Net finance costs (7.9)
Share of post-tax profit of joint ventures (0.4)
------------------------------------------- ------ ------- ---------------------
Profit before tax 38.2
------------------------------------------- ------ ------- ---------------------
Capital expenditure additions 6.7 2.7 9.4
------------------------------------------- ------ ------- ---------------------
Full year 2016
----------------------------
Continuing
Steel Foundry operations
GBPm GBPm GBPm
------------------------------------------- ------ ------- -----------
Segment revenue 942.0 459.4 1,401.4
------------------------------------------- ------ ------- -----------
Segment EBITDA 107.0 68.6 175.6
Segment depreciation (27.8) (14.5) (42.3)
------------------------------------------- ------ ------- -----------
Segment trading profit 79.2 54.1 133.3
------------------------------------------- ------ -------
Return on sales margin 8.4% 11.8% 9.5%
Amortisation of acquired intangibles (17.1)
Restructuring charges (28.5)
Gain on employee benefit plan 5.2
-----------
Operating profit 92.9
Net finance costs (14.5)
Share of post-tax profit of joint ventures 1.0
------------------------------------------- ------ ------- -----------
Profit before tax 79.4
Capital expenditure additions 23.7 11.5 35.2
------------------------------------------- ------ ------- -----------
3 Restructuring charges from continuing operations
The Group-wide restructuring programme initiated in 2015 was
continued, resulting in charges of GBP8.9m (2016: half year
GBP5.3m; full year GBP28.5m) reflecting redundancy costs of GBP3.0m
(2016: half year GBP4.9m; full year GBP21.4m), plant closure costs
of GBP0.3m (2016: half year GBPnil; full year GBP4.2m), the full
programme's consultancy and professional fees of GBP4.8m (2016:
half year GBP0.4m; full year GBP2.0m) and an inventory write-off of
GBP0.8m (2016: half year GBPnil; full year GBP0.9m).
The net tax credit attributable to the total restructuring
charges was GBP0.9m (2016: half year GBP0.8m; full year
GBP3.8m).
Cash costs of GBP15.6m (2016: half year GBP10.2m; full year
GBP16.8m) (Note 9) were incurred in the period in respect of the
restructuring programme leaving provisions made but unspent of
GBP11.0m as at 30 June 2017 (2016: half year GBP5.3m; full year
GBP18.5m), of which GBP2.7m relates to future costs in respect of
leases expiring between one and six years (2016: half year GBP2.9m;
full year GBP2.7m).
4 Finance costs
Total net finance costs for the period of GBP7.3m is analysed in
the table below.
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
GBPm GBPm GBPm
------------------------------------------------ --------- --------- ---------
Interest payable on borrowings
Loans, overdrafts and factoring arrangements 8.1 7.0 15.1
Obligations under finance leases 0.2 0.1 0.2
Amortisation of capitalised borrowing costs 0.3 0.3 0.5
------------------------------------------------ --------- --------- ---------
Total interest payable on borrowings 8.6 7.4 15.8
Interest on net retirement benefits obligations 0.3 0.6 1.3
Adjustments to discounts on provisions
and other liabilities 0.1 1.9 (0.2)
Adjustments to discounts on receivables (0.1) (0.5) 0.3
Finance income (1.6) (1.5) (2.7)
------------------------------------------------ --------- --------- ---------
Total net finance costs 7.3 7.9 14.5
------------------------------------------------ --------- --------- ---------
5 Income tax costs
The Group's effective tax rate, based on the income tax costs
associated with headline performance of GBP22.1m (2016: half year
GBP13.1m; full year GBP31.4m), was 28% in the first half of 2017
(2016: half year 25.5%; full year 26.4%).
The Group's total income tax costs include a credit of GBP6.0m
(2016: half year GBP2.7m; full year GBP5.0m) relating to separately
reported items comprising: a credit of GBP0.9m (2016: half year
GBP0.8m credit; full year GBP3.8m credit) in relation to
restructuring charges; a credit of GBP5.1m (2016: half year GBP1.9m
credit; full year GBP3.7m credit) relating to the amortisation of
intangible assets; a charge of GBPnil (2016: half year GBPnil; full
year GBP2.1m charge) in respect of the recognition of US temporary
differences and a net charge of GBPnil (2016: half year GBPnil;
full year GBP0.4m charge) relating to the gain on employee benefit
plan. The net tax charge in the Group statement of comprehensive
income in the year amounted to GBP0.7m (2016: half year GBP1.4m;
full year GBP0.7m) related to tax on net actuarial gains and losses
on employee benefits plans.
6 Earnings per share ("EPS")
6.1 Earnings for EPS
Basic and diluted EPS from continuing operations are based upon
the profit attributable to owners of the parent, as reported in the
Group income statement, of GBP40.7m (2016: half year GBP24.5m; full
year GBP46.7m), being the profit for the period of GBP44.7m (2016:
half year GBP27.8m; full year GBP53.0m) less non-controlling
interests of GBP4.0m (2016: half year GBP3.3m; full year GBP6.3m);
basic and diluted EPS from total operations are based on the profit
attributable to owners of the parent of GBP42.4m (2016: half year
GBP24.5m; full year GBP56.9m); headline and diluted headline EPS
are based upon headline profit from continuing operations
attributable to owners of the parent of GBP53.3m (2016: half year
GBP34.4m; full year GBP82.1m). The table below reconciles these
different profit measures.
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
Notes GBPm GBPm GBPm
--------------------------------------- ----- --------- --------- ---------
Profit attributable to owners of the
parent 40.7 24.5 46.7
Adjustments for separately reported
items:
Amortisation of intangible assets 9.7 8.3 17.1
Restructuring charges 8.9 5.3 28.5
Gain on employee benefit plan - (1.0) (5.2)
Income tax credit (6.0) (2.7) (5.0)
--------------------------------------- ----- --------- --------- ---------
Headline profit attributable to owners
of the parent 15 53.3 34.4 82.1
--------------------------------------- ----- --------- --------- ---------
6.2 Weighted average number of shares
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
GBPm GBPm GBPm
-------------------------------------------------- --------- --------- ---------
For calculating basic and headline EPS 270.2 269.7 269.9
Adjustment for dilutive potential ordinary shares 2.0 0.5 0.8
-------------------------------------------------- --------- --------- ---------
For calculating diluted and diluted headline EPS 272.2 270.2 270.7
-------------------------------------------------- --------- --------- ---------
For the purposes of calculating diluted and diluted headline
EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would
be issued on the conversion of all dilutive potential ordinary
shares expected to vest, relating to the Company's share-based
payment plans. Potential ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease
earnings per share, or increase loss per share, from continuing
operations.
6.3 Per share amounts
Unaudited Unaudited
Continuing Discontinued Half year Continuing Discontinued Half year
operations operations 2017 operations operations 2016
pence pence pence pence pence pence
------------------------------------------- ---------- ------------ --------- ---------- ------------ ---------
Earnings per share - basic 15.1 0.6 15.7 9.1 - 9.1
-
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
GBPm GBPm GBPm
---------------------------------------------- --------- --------- ---------
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 GBP14.9m.
8 Net debt
Balance Balance
as at Foreign as at
1 January exchange Non-cash Half year
2017 adjustments movements Cash flow 2017
GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- ----------- --------- --------- ---------
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
Half
Continuing Discontinued Half year Continuing Discontinued year
operations operations 2017 Operations Operations 2016
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ---------- ------------ --------- ---------- ------------ ---------
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)
Full
Continuing Discontinued year
operations operations 2016
GBPm GBPm GBPm
------------------------------------- ---------- ------------ ------
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 GBP23.3m
(2016: half year GBP54.2m; full year GBP29.4m) 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 GBP81.9m (2016: half year
GBP65.5m; full year GBP78.8m), relating largely to the Group's main
defined benefit pension plan in the UK, together with net
liabilities (deficits) of GBP105.2m (2016: half year GBP119.7m;
full year GBP108.2m).
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
GBPm GBPm GBPm
------------------------------------------ --------- --------- ---------
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 GBP3.6m (2016: half year GBP2.7m; full
year GBP2.8m) 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
GBPm GBPm GBPm
--------------------------------- ---------------------------------------------- --------- --------- ---------
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 GBP1.5m (2016: half year
GBP1.6m; full year GBP1.6m).
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 GBP1.7m. Discontinued
operations income during 2016 of GBP10.2m, comprised a GBP9.0m tax
credit relating to the release of a provision for possible China
taxes and a GBP1.2m release of provisions no longer required.
Unaudited Unaudited
Half year Half year Full year
2017 2016 2016
GBPm GBPm GBPm
------------------------------------------- --------- --------- ---------
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 Restructuring
costs charges Other Total
GBPm GBPm GBPm GBPm
----------------------------------- ------------ ------------- ----- ------
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
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------ ----------- ------ ----------- ------ -----------
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 Half Half Half
year year year year
to to to to
Half Half Full Half Full Half Half Full Half Full
year year year year year year year year year year
2017 2016 2016 change change 2017 2016 2016 change 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 (GBPm) 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 (GBPm) 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
The company news service from the London Stock Exchange
END
IR PGUQCMUPMGBQ
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