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Aga Rangemaster Grp (AGA)

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Friday 24 August, 2012

Aga Rangemaster Grp

Half Yearly Report

RNS Number : 7078K
Aga Rangemaster Group PLC
24 August 2012
 



 






24th August 2012

 

FOR IMMEDIATE RELEASE

 

AGA RANGEMASTER GROUP PLC

2012 HALF-YEARLY FINANCIAL REPORT

 

Resilient performance : growth expected for full year

 

 

AGA Rangemaster Group plc ('the Group'), the specialist in range cooking and kitchen living, is pleased to announce its interim results for the half year ended 30th June 2012.

 

 

Half year to 30th June

Continuing operations

2012
£m

2011
£m

Revenue

119.2

121.4

Operating profit excluding property profit

1.5

2.1

Profit before tax

1.6

4.2

Basic earnings per share

1.9p

4.3p

Underlying basic earnings per share excluding non-recurring costs

3.9p

4.8p

Total equity

123.1

174.9

Interim dividend

-

0.8p

Net cash

11.9

25.2

 

 

Financial and operational highlights

 

 

·      Classic AGA cooker volumes up 4%:

-     Positive reception for iTotal Control since May launch.

-     Largest ever AGA with 5-ovens launches in September.

·      European export growth achieved for Rangemaster.  Ireland remains challenging.

·      Resurgence at Fired Earth with revenues up 7%.

·      Cash balances reduced on legal case settlement and increased pension contributions.

·      Agreement on clear stable medium-term financing plan for the pension scheme in sight and includes limits on pension contributions and dividend payments.

·      Growth in 2012 expected in spite of subdued markets with onus on new products and internationalisation.

 

 

"The continued challenges in the economy and lack of activity in the property market have clearly had an impact on demand in the first half as customers delay purchasing big ticket items. However, our investment in innovation, efficiency drive and great product offer ensures that we are well placed to respond when the market recovers. Our recent collaboration with the Chinese group Vatti demonstrates the opportunities ahead to enter into new markets."     

 

 

William McGrath
Chief Executive

Enquiries:

William McGrath, Chief Executive
Shaun Smith, Finance Director
Simon Sporborg / Charlotte Kenyon (Brunswick)

020 7404 5959 (today)
01926 455 731 (thereafter)
020 7404 5959


AGA RANGEMASTER GROUP PLC

 

2012 INTERIM MANAGEMENT REPORT

 

Overview

 

The initial signs of market improvements early in the year were not sustained resulting in a further period of weak demand - with the product introductions having maintained rather than expanded revenues.  Good sales progress for AGA cookers and for Rangemaster in Europe and a much better performance by Fired Earth were the most encouraging features of a period in which consumers lacked confidence and the willingness to invest in their kitchens at anywhere close to the levels of five years ago.  Yet with operational gearing enhanced by the continuing rationalisation programmes we fully expect that even a limited market pick up could readily improve the performance of the business.

 

Half year performance

 

Revenues in the first half were £119.2 million - 1.8% down on the first half of 2011, 0.7% down at constant exchange rates.  There was no appreciable shift in the overall geographical balance of the business with UK sales being 63% of the total; Europe 22% and the rest of the world 15%. Operating profits were £1.5 million against £2.1 million - excluding property profits.  Rationalisation of the AGA Rangemaster distribution and retail structures - made possible by the newer, easier to install products - gave rise to a non-recurring cost of £1.4 million.  The board has decided not to pay an interim dividend (which cost £0.5 million last year at 0.8 pence per share) as part of the agreement reached in principle with the trustee of the Group's main pension scheme to restructure the financing arrangements for the scheme through to the end of 2015.  The aim is to provide medium-term clarity and stability.

 

Operating performances

 

That the excellent work on product and the continuing programmes of cost reduction and efficiency improvements did not totally offset the impact of a weak demand backcloth shows just how tough our core markets continue to be.  Classic AGA volumes were up 4% - responding particularly well to our spring promotion and stock clearance programme.  The iTotal Control, showing the AGA can be a futuristic product which can be controlled remotely, gained great coverage following its launch in May and its inclusion in a garden kitchen at the Chelsea Flower Show.  The Total Control, launched in 2011, is now established on display on the Continent and in North America raising sales expectations for the second half.  It is a more readily exportable product now being factory finished, in electric and not requiring a flue.  The 5-oven electric AGA - the size of the traditional 4-oven model - is out at the start of September, largely completing a phase of our product development programme for AGA and providing an excellent sales platform.

 

Our Rayburn and Stanley solid fuel ranges are being more closely aligned using our Waterford Stanley factory and distribution centre in Waterford.  Waterford Stanley is having continued success with stove operations and we hope to expand that in the UK.  With the major renovation and eco markets still so slow, unsurprisingly Rayburn and Stanley sales were down again.  Waterford Stanley had a particularly difficult spring as tax increases in Ireland impacted consumers. Our annual revenues in Ireland are now running £10 million lower than they were five years ago.

 

Rangemaster continued to prove resilient with sales by value down 1%, in line with the UK range cooker market, in the first half where Rangemaster has a market share by value of close to 50%.  There are some indicators of market improvement. We continue to lead and expand the market on the Continent notably in France where sales were up again.  The active marketing programme for 2012 on the Continent highlights the range cooker as one of the distinctive British specialisms - it dates back to its invention at our Leamington Spa factory in 1830 - has worked well.  We have recently gained over 200 new displays with two major French retailers which will grow sales in the second half.

 

At Fired Earth the strong progress we have made over the last year continued with sales up nearly 7% and order intake, notably for the core tile lines, was encouraging.  Margins were maintained and our newly refurbished stores around London did particularly well.  New store openings in Dulwich and Winchester have been successful and are now being followed with a new 1,000 sq ft store in Blackheath which has just opened.  A valorisation process is still expected in 2013.

 

International developments

 

In North America markets proved patchy after a promising start to the year.  Our new premium Marvel Professional line is successfully replacing sharply reduced Original Equipment Manufacturer ('OEM') sales. Our production and distribution structures in North America based in Greenville, Michigan are well established and we have strengthened our dealer base during the year.  We have the capacity to grow rapidly as market conditions allow.

 

Grange has introduced the 'My Grange' concept in its owned retail outlets and there is a roll out programme for our international dealers.  'My Grange' provides the online ordering capability to specify colour and finish which can change the business model for Grange and its dealers being less space and inventory-intensive than traditional ways to sell furniture.  We expect the impact to increase in the second half helping the operations outside North America to be profitable.  In North America, losses have continued and further reorganisation is being planned.

 

La Cornue had a strong first half.  It has seen new product and sales concepts introduced - notably the '1908' hybrid of the La Cornue vaulted oven and a Rangemaster hob and the 'W' series cooker developed by a renowned furniture designer.  We are moving to a new flagship store in Paris this autumn and in the AGA Divertimenti store in Brompton Road, London the new La Cornue store layout has been introduced. 

 

Collaboration with Vatti

 

As announced in July, the Group has entered into a bilateral collaboration agreement with the Chinese gas burner appliance group 'Vatti'.  This will see AGA, La Cornue and Rangemaster products sold in China with a first 'Image Shop' opening in the next six months and a roll out programme for Rangemaster products in 500 shops to be implemented over the next two years.  In addition, we are working to develop with Vatti a new range of built-in oven products to be made by Vatti for their own Chinese markets and for European markets which we will distribute.  The collaboration was launched immediately prior to the Olympics where Vatti showcased the 2008 torch which they designed and made.

 

Pension funding

 

During the first half of 2012, the surplus on the accounting basis in the Group's main pension scheme at the end of 2011 of £6.8 million moved to a deficit of £41.9 million.  Assets totalled £759.7 million at 30th June 2012, compared with £758.3 million at 31st December 2011.  The yield on 'AA' corporate bonds used to value liabilities fell, reducing the discount rate from 4.8% to 4.4%.

 

The Group is close to finalising discussions with the trustee of the Group's main pension scheme about the scheme's triennial actuarial valuation as at 31st December 2011 which is substantially complete.  The funding deficit at this date is likely to be higher than the deficit of £161 million disclosed by the previous triennial actuarial valuation undertaken as at 31st December 2008 and the deficit of £62 million indicated in the subsequent actuarial update report prepared on a rolled forward basis as at 31st December 2010.  The movement primarily results from the sharp fall in gilt yields over the second half of 2011.  The movement in gilt yields has adversely impacted the funding position of most UK pension schemes. 

 

Agreement has been reached in principle with the trustee regarding deficit recovery contributions which would mean that a total deficit recovery contribution of £16 million will be made in the calendar year 2012, with the next deficit recovery contribution, amounting to £4 million, being made in the second half of 2015 prior to the expected completion of the next triennial actuarial valuation, to be undertaken as at 31st December 2014.  As part of this agreement, guarantees currently provided to the pension scheme would reduce from £50 million to £30 million. The return expected by the scheme is higher than the return on cash held by the Group to back the guarantee. Trustee consent would be needed for dividend payments through to the practical completion of the 2014 actuarial valuation.  Under the agreement, deficit recovery contributions thereafter would be £10 million per annum from 2016 to 2021 inclusive, with a lump sum contribution of £30 million equating to the remaining guarantees to be paid at the end of 2020.

 

The objective of the agreement is to provide a clear, stable framework within which both the pension scheme and the Group can operate in the coming years.  The long-term objective of reaching self-sufficiency when reasonably practicable under the existing arrangements remains for the scheme.  A further update will be provided when the requisite documentation has been finalised. 

 

Current trading and outlook

 

The Group has tremendous brands, the best generation of products it has ever had and capacity available in most of its factories.  With the established UK and Irish markets likely to remain weak for some time in the current economic environment, the onus is on new markets such as China and on raising market penetration in markets like North America, where our market position is not yet fully developed. 

 

In relation to the business, the pension scheme is large in scale although it is reasonably well funded for most scenarios.  This is a key factor in assessing the resources available for the development of the Group.  The medium-term financing framework for the scheme includes constraints on dividend payments as resources need to be available to build the intrinsic strengths of the business.  The board is focused on achieving outcomes which are in the best interests of all stakeholders given these constraints.

 

In trading terms the Group has seen the usual quiet summer period and is galvanised for a strong autumn sales push with lines like AGA Total Control and a resurgent Fired Earth in the forefront even if markets remain subdued.  We are focusing on home movers who are likely to find our newer models and lines particularly relevant to their needs and on export markets.  As a result of these and other initiatives the Group expects to make up the revenue shortfall of the first half to show growth in the full year.

 

 

 

 

Financial review

 

Revenue - The revenue of £119.2 million was slightly lower than last half year's £121.4 million reflecting the quieter markets witnessed during the period and the £1.4 million impact of exchange rate movements.

 

Operating profit - The operating profit was £1.5 million compared to a profit of £2.1 million in the first half of 2011 (excluding the £0.8 million profit on disposal of assets held for sale).  The £0.6 million decrease in operating profit reflected the revenue fall and lower margin on sales in Ireland.

 

Net pension credit - The half year pension credit of £1.5 million (half year 2011: £1.5 million) was the net of the current service costs of £1.9 million (half year 2011: £1.7 million) and investment returns of £3.4 million (half year 2011: £3.2 million).

 

Non-recurring costs - Non-recurring costs were £1.4 million in the period (half year 2011: £0.3 million).  They mainly relate to the reorganisation of our AGA Rangemaster retail and distribution operations as explained in the 2011 financial statements.  The total cost in 2012 is expected to be around £1.6 million with annualised savings of £1.8 million targeted.

 

Finance income / costs - The net finance income was £nil (half year 2011: net finance income £0.1 million) reflecting the interest earned on cash deposits, offset by interest payable on the Group's EUR and USD hedging loans.

 

Taxation - The effective tax rate for the year is forecast at 25.0% compared to 28.6% in the first half of 2011.  UK deferred tax balances have been accounted for at a rate of 24.0% at 30th June 2012.  Tax thereafter in the UK should track the UK standard rate, although foreign tax rates may vary.  Cash tax payments will be negligible.

 

Earnings per share - Basic earnings per share for continuing operations were 1.9 pence (half year 2011: 4.3 pence).  The average number of shares in issue was 69.3 million (the same as the previous half year and year end). Underlying earnings per share which excludes non-recurring costs were 3.9 pence (half year 2011: 4.8 pence).

 

Dividends - The board has decided not to pay an interim dividend as part of the agreement in principle reached over future pension contributions (half year 2011: 0.8 pence).  The 2011 final dividend of 1.1 pence per share was paid during the period at a cash cost of £0.8 million.

 

Discontinued operations - Payments made during the first half of 2012 amounting to £1.4 million were fully provided for at 31st December 2011 and expected future settlements are fully provided at 30th June 2012.  In the half year to 2011 £0.9 million was incurred during the period in relation to subsidiaries sold in 2007.

 

Balance sheet - The balance sheet continues to remain strong with net cash of £11.9 million (30th June 2011: £25.2 million).  Working capital at the period end was £24.3 million (30th June 2011: £20.9 million).

 

The IAS 19 net pension deficit was £44.6 million and compares to a net surplus of £5.3 million at 31st December 2011 and a surplus of £22.7 million at 30th June 2011.  The reduction is primarily a result of the lower discount rate used - down from 4.8% at 31st December 2011 to 4.4% - which increased the scheme liabilities.

 

Net assets of the Group at 30th June 2012 were £123.1 million, down from the £167.7 million at the end of last year.

 

Cashflow - The cash used in operating activities saw a small improvement at £11.1 million in the period (half year 2011: £11.9 million outflow).  The business plan assumed growth driven by new products which, along with normal seasonality, resulted in a working capital outflow of £13.1 million (half year 2011: £15.6 million outflow) and followed a full year outflow in 2011 of £5.5 million. £1.4 million was paid during the period in respect of the German minority interest settlement and other discontinued claims. Further claims are expected to be paid in the second half of the year.

 

Capital expenditure in the period was tightly managed at £0.8 million (half year 2011: £2.5 million) and compares to a depreciation charge of £2.8 million (half year 2011: £3.0 million). Expenditure on intangibles, in particular development costs, was £1.1 million (half year 2011: £1.3 million) and compares to an amortisation charge of £0.9 million (half year 2011: £0.9 million).

 

By order of the board:

 

 

 

J Coleman
Chairman
23rd August 2012

W B McGrath
Chief Executive


 

AGA RANGEMASTER GROUP PLC

 

2012 HALF-YEARLY FINANCIAL REPORT

 

CONSOLIDATED INCOME STATEMENT

 


Note

Half year
to June
2012
Unaudited

Half year
to June
2011
Unaudited

Year to
December
2011
Audited








£m

£m

£m

Continuing operations





Revenue


119.2

121.4

250.9

Net operating costs


(117.7)

(118.5)

(244.8)






Group operating profit


1.5

2.9

6.1






Net pension credit

11

1.5

1.5

3.1

Non-recurring costs

4

(1.4)

(0.3)

(2.1)






Profit before finance income / (costs) and tax


1.6

4.1

7.1

Finance income


0.2

0.4

1.0

Finance costs


(0.2)

(0.3)

(0.6)






Profit before tax


1.6

4.2

7.5

Tax (expense) / credit

6

(0.4)

(1.2)

5.4






Profit for the period from continuing operations


1.2

3.0

12.9











Discontinued operations





(Loss) / profit for the year from discontinued operations

7

-

(0.9)

2.7






Profit for the period


1.2

2.1

15.6











Profit attributable to:





Equity holders of the parent


1.3

2.1

15.7

Non-controlling interests


(0.1)

-

(0.1)






Profit for the period


1.2

2.1

15.6











Earnings per share attributable to equity holders of the parent - continuing operations

8

p

p

p

Basic


1.9

4.3

18.8

Diluted


1.9

4.3

18.8






Earnings per share attributable to equity holders of the parent - total operations

8

p

p

p

Basic


1.9

3.0

22.7

Diluted


1.9

3.0

22.7






 


 

AGA RANGEMASTER GROUP PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 



Half year
to June
2012
Unaudited

Half year
to June
2011
Unaudited

Year to
December
2011
Audited








£m

£m

£m

Profit for the period


1.2

2.1

15.6











Exchange adjustments on hedge of net investments


0.3

(0.1)

-

Exchange differences on translation of foreign operations


(2.2)

1.8

(0.8)

Actuarial (losses) / gains on defined benefit pension schemes


(56.8)

12.7

(10.5)

Deferred tax on actuarial losses / (gains)  


13.6

(3.3)

2.3






Other comprehensive (losses) / income for the period


(45.1)

11.1

(9.0)






Total comprehensive (losses) / income for the period


(43.9)

13.2

6.6
















Attributable to:





Equity holders of the parent


(43.8)

13.3

6.8

Non-controlling interests


(0.1)

(0.1)

(0.2)






Total comprehensive (losses) / income for the period


(43.9)

13.2

6.6






 


AGA RANGEMASTER GROUP PLC

 

CONSOLIDATED BALANCE SHEET


Note

30th June 2012
Unaudited

30th June 2011
Unaudited
Restated (note 6)

31st December
2011
Audited








£m

£m

£m

Non-current assets





Goodwill


65.8

67.6

66.7

Intangible assets


23.5

24.4

23.9

Property, plant and equipment

10

38.5

40.3

40.8

Retirement benefit surplus

11

-

24.4

6.8

Other receivables


0.5

0.8

0.7

Deferred tax assets


15.6

5.4

4.1








143.9

162.9

143.0






Current assets





Inventories


48.9

47.5

45.5

Trade and other receivables


34.9

36.2

30.8

Current tax assets


1.0

1.8

1.0

Cash and cash equivalents

12

29.7

42.2

48.1








114.5

127.7

125.4






Assets held for sale


2.6

3.5

2.6






Total assets


261.0

294.1

271.0






Current liabilities





Borrowings

12

(2.8)

(1.5)

(1.4)

Trade and other payables


(59.5)

(62.8)

(65.4)

Current tax liabilities


(2.9)

(21.5)

(2.9)

Provisions

13

(7.9)

(8.5)

(10.2)








(73.1)

(94.3)

(79.9)






Net current assets


41.4

33.4

45.5






Non-current liabilities





Borrowings

12

(15.0)

(15.5)

(15.4)

Retirement benefit obligation

11

(44.6)

(1.7)

(1.5)

Deferred tax liabilities


(3.3)

(5.7)

(5.0)

Provisions

13

(1.9)

(2.0)

(1.5)








(64.8)

(24.9)

(23.4)






Total liabilities


(137.9)

(119.2)

(103.3)






Net assets


123.1

174.9

167.7











Equity





Share capital

14

32.5

32.5

32.5

Share premium account


29.6

29.6

29.6

Other reserves


82.1

86.5

84.0

Retained (loss) / earnings


(21.2)

26.0

21.4






Equity attributable to equity holders of the parent


123.0

174.6

167.5

Non-controlling interests


0.1

0.3

0.2






Total equity


123.1

174.9

167.7








 

AGA RANGEMASTER GROUP PLC

 

CONSOLIDATED CASH FLOW STATEMENT

 


Note

Half year
to June
2012
Unaudited

Half year
to June
2011
Unaudited

Year to
December
2011
Audited








£m

£m

£m

Operating activities





Profit / (loss) before tax





Continuing operations


1.6

4.2

7.5

Discontinued operations


-

(0.9)

(3.0)

Reconciliation of profit / (loss) before tax to net cash flows:





Net finance costs


-

(0.1)

(0.4)

Depreciation of property, plant and equipment

10

2.8

3.0

5.4

Impairment of assets held for sale


-

-

0.9

Amortisation of intangible assets


0.9

0.9

1.9

Profit on disposal of property, plant and equipment, intangibles and assets held for sale


-

(0.8)

(0.6)

Share based payments expense


0.1

0.1

-

Increase in inventories


(3.8)

(4.4)

(2.8)

Increase in receivables


(4.1)

(5.8)

(0.8)

Decrease in payables


(5.2)

(5.4)

(1.9)

(Decrease) / increase in provisions


(0.5)

0.2

2.6

Pension credit and normal contributions


(2.9)

(2.9)

(6.7)






Cash (used in) / generated from operating activities


(11.1)

(11.9)

2.1

Deficit recovery pension contributions


(4.0)

-

(2.0)

Cashflows related to discontinued operations


(1.4)

-

(1.2)

Net finance (costs) / income


(0.2)

0.1

0.1

Tax (payment) / receipt


-

(0.1)

0.6






Net cash used in operating activities


(16.7)

(11.9)

(0.4)











Investing activities





Acquisition of business


-

(0.6)

(0.7)

Purchase of property, plant and equipment

10

(0.8)

(2.5)

(5.5)

Expenditure on intangibles


(1.1)

(1.3)

(2.9)

Proceeds from disposal of property, plant and equipment


-

0.1

-

Proceeds from disposal of assets held for sale

10

-

7.6

7.5






Net cash (used in) / generated from investing activities


(1.9)

3.3

(1.6)











Financing activities





Dividends paid

9

(0.8)

(0.7)

(1.2)

Repayment of borrowings


-

(0.2)

(0.3)

New bank loans raised


1.0

-

-






Net cash generated from / (used in) financing activities


0.2

(0.9)

(1.5)






Effects of exchange rate changes


-

-

(0.1)






Net decrease in cash and cash equivalents


(18.4)

(9.5)

(3.6)

Cash and cash equivalents at beginning of period


48.1

51.7

51.7






Cash and cash equivalents at end of period

12

29.7

42.2

48.1






 

 

 

 


AGA RANGEMASTER GROUP PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

Half year to 30th June 2012


Equity attributable to equity holders of the parent





Share
capital


Share
premium


Other
reserves


Retained
earnings



Total

Non-
controlling
interests


Total
equity










£m

£m

£m

£m

£m

£m

£m

At 1st January 2012

32.5

29.6

84.0

21.4

167.5

0.2

167.7

Comprehensive income








Profit for the period

-

-

-

1.3

1.3

(0.1)

1.2

Other comprehensive income:








Exchange adjustments on hedge of net investments

-

-

0.3

-

0.3

-

0.3

Exchange differences on translation of foreign operations

-

-

(2.2)

-

(2.2)

-

(2.2)

Actuarial losses on defined benefit pension schemes

-

-

-

(56.8)

(56.8)

-

(56.8)

Deferred tax on actuarial losses

-

-

-

13.6

13.6

-

13.6









Total comprehensive income for the period ended 30th June 2012

-

-

(1.9)

(41.9)

(43.8)

(0.1)

(43.9)

Dividends paid

-

-

-

(0.8)

(0.8)

-

(0.8)

Share based payments

-

-

-

0.1

0.1

-

0.1









At 30th June 2012

32.5

29.6

82.1

(21.2)

123.0

0.1

123.1









 

 

 

Half year to 30th June 2011


Equity attributable to equity holders of the parent





Share
capital


Share
premium


Other
reserves


Retained
earnings

(Restated note 6)



Total

Non-
controlling
interests


Total
equity










£m

£m

£m

£m

£m

£m

£m

At 1st January 2011

32.5

29.6

84.7

15.1

161.9

0.4

162.3

Comprehensive income








Profit for the period

-

-

-

2.1

2.1

-

2.1

Other comprehensive income:








Exchange adjustments on hedge of net investments

-

-

(0.1)

-

(0.1)

-

(0.1)

Exchange differences on translation of foreign operations

-

-

1.9

-

1.9

(0.1)

1.8

Actuarial gains on defined benefit pension schemes

-

-

-

12.7

12.7

-

12.7

Deferred tax on actuarial gains

-

-

-

(3.3)

(3.3)

-

(3.3)









Total comprehensive income for the period ended 30th June 2011

-

-

1.8

11.5

13.3

(0.1)

13.2

Dividends paid

-

-

-

(0.7)

(0.7)

-

(0.7)

Share based payments

-

-

-

0.1

0.1

-

0.1









At 30th June 2011

32.5

29.6

86.5

26.0

174.6

0.3

174.9









 

 


 

AGA RANGEMASTER GROUP PLC

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. CORPORATE INFORMATION

 

The interim condensed consolidated financial statements of the Group for the six months ended 30th June 2012 were authorised for issue in accordance with a resolution of the directors on 23rd August 2012.

 

AGA Rangemaster Group is a public limited company incorporated and domiciled in the UK whose shares are publicly traded on the London Stock Exchange.

 

The principal activities of the Group are the manufacture and sale of range cookers, kitchen and related home fashions products.

 

The interim condensed consolidated financial statements do not comprise the Group's statutory accounts as defined by section 434 of the Companies Act 2006. Statutory accounts for the year ended 31st December 2011 were approved by the board of directors on 9th March 2012 and were delivered to the Registrar of Companies.  The auditors' report on those accounts was unqualified, it did not contain an emphasis of matter paragraph and did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

 

The financial information presented here is unaudited but has been reviewed by the Group's auditor, Ernst & Young LLP.  Its review opinion appears at the end of these notes.  

 

2. BASIS OF PREPARATION

 

The interim condensed consolidated financial statements for the six months ended 30th June 2012 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard 34 (IAS 34) 'Interim Financial Reporting' as adopted by the European Union.

 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's Annual Report and Accounts as at 31st December 2011 which have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union.

 

GOING CONCERN

The directors have assessed the financial position and the future funding requirements of the Group and compared them to the level of available committed borrowing facilities.  The Group's committed bank facilities mature in 2012 and 2013.  The Group has opened renewal discussions and these have been positive.  The directors' assessment included a review of the Group's financial forecasts, financial instruments and hedging arrangements for the 15 months from 30th June 2012. The directors considered a range of potential scenarios within the key markets the Group serves including future potential arrangements with the trustee on the funding of the Group's main pension scheme and how these may impact on cash flows, facility headroom and banking covenants. The outcome of these pensions discussions are expected to be finalised later this year.  However an agreement has been reached in principle with the trustee as set out in this interim management report. The directors have also taken into consideration current developments in the Eurozone countries and have also considered what mitigating actions the Group could take to limit any adverse consequences. Having undertaken this assessment, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and so it has been determined that it is appropriate for the 2012 interim condensed consolidated financial statements to be prepared on a going concern basis.

 

ESTIMATES

The preparation of the interim condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Future actual results may differ from these estimates.

 

In preparing these interim condensed consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the Group's Annual Report and Accounts for the year ended 31st December 2011.

 

 


 

AGA RANGEMASTER GROUP PLC

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

RISKS & UNCERTAINITIES

There are a number of 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 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 and Accounts for the year ended 31st December 2011, which are summarised below:

 

·         Pension scheme - the Group is the sponsor of a large pension scheme and can be called on to meet funding deficits.

·         Funding - the Group's bank facilities require renewal in 2012 and 2013.

·         General economic conditions - the Group's operations are sensitive to the global economic conditions and to developments in Eurozone countries. The Group has an operating subsidiary in Ireland.  The Group has little exposure to Greece and Spain.

·         Financial instruments - the Group is exposed to foreign exchange risks, particularly, movements in the Euro and interest rate risks.

·         Competition / margin erosion.

·         Intellectual property - failure to protect our brands.

·         Over reliance on any individual customer or supplier.

·         People - the potential loss of key personnel.

·         Legal, regulatory and litigation.

·         Health, safety and environmental.

 

 

3. ACCOUNTING POLICIES

 

The interim condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Group's Annual Report and Accounts for the year ended 31st December 2011 except for the adoption of new amendments, noted below. The adoption of these amendments did not have any material impact on the financial position or performance of the Group.

·      IFRS 7 Financial Instruments: Disclosures

·      IAS 12 Income Tax - Deferred Taxes: Recovery of Underlying Assets

 

Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for the Group's future accounting periods which the Group has not early adopted. The relevant ones effective for the year ended 31st December 2013 are set out below:

·      IFRS 10 Consolidated Financial Statements; IAS 27 Separate Financial Statements

·      IFRS 11 Joint Arrangements; IAS 28 Investments in Associates and Joint Ventures

·      IFRS 12 Disclosure of Interests in Other Entities

·      IFRS 13 Fair Value Measurement

·      IAS 1 Presentation of Items of Other Comprehensive Income

·      IAS 19 Employee Benefits (revised)

 

The Group has considered the above standards, interpretations and amendments. The Group will comply with these from the respective effective dates. The directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements except for the adoption of IAS 19 Employee Benefits which is likely to have an impact on the pension credit in the income statement due to the use of the discount rate instead of a rate of return on assets for calculating the expected return on pension schemes' assets.

 


AGA RANGEMASTER GROUP PLC

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

4. NON-RECURRING COSTS

 

The non-recurring costs during the period to 30th June 2012 of £1.4 million relate to the previously announced redundancy and reorganisation programme for our retail and distribution operations (half year 2011: £0.3 million to cover the completion of our AGA Marvel US and Canadian operations manufacturing and distribution reorganisation).

 

5. SEGMENTAL ANALYSIS

 

The directors consider that there are two operating segments namely AGA (which comprises the brands and operations of AGA Rayburn, Fired Earth, Grange, Redfyre and Waterford Stanley) and Rangemaster (which comprises the brands and operations of AGA Marvel, Divertimenti, Heartland, La Cornue and Rangemaster). Two areas of the business were identified over which the directors allocate resource, plan purchasing and manufacturing, have combined sales targets, incentives and marketing programmes. These areas were determined to be the level at which the chief operating decision maker ('CODM') makes decisions and were deemed to be the operating segments of 'AGA' and 'Rangemaster'. The strategy as set by the board is for the Group to be seen as a Global Consumer Brand which sells range cookers, kitchen and related home fashions products internationally with cross selling opportunities creating appreciable competitive advantage for all our individual brands.

The operating results of the operating segments, for which discrete information is available, are regularly reviewed by the CODM, which consists of the chief executive and his senior management team, to make decisions about the resources to be allocated to the segments and assess their performance. Management's focus is on the cross selling of all consumer products to our customer database - e.g. AGA Marvel is responsible for distributing product manufactured in the UK at our Leamington Spa (range cookers) and Telford (cast iron cookers) factories, which are then sold in North America under the AGA brand. Waterford Stanley is the distributor for Rangemaster and Rayburn products into Ireland and Grange has developed products that are sold under its own brand and the Fired Earth brand.

 

Our customers are substantially of the same demographic. At the heart of our sales strategy we look to sell packages of products to our customer base which, for example, may include AGA, Fired Earth, Rangemaster or AGA Marvel branded products and, in addition, this is how our senior management are now incentivised to achieve Group targets. 

 

The two operating segments are considered to meet the aggregation criteria of IFRS 8 in full and so the directors consider that there is only one aggregated reportable segment. All disclosures required under IFRS 8 and IAS 34 have therefore already been given in these interim condensed consolidated financial statements. The aggregation criteria has been met as the segments have similar economic characteristics, products and services, production processes, types and classes of customer and methods of distribution. The directors consider the aggregated reportable segment to be the manufacture and sale of range cookers, kitchen and related home fashions product, from which the Group derives most of its revenue. All Group companies are subject to similar economic forces and comparable regulatory environments.  The recently announced reorganisation of the retail and distribution operations further integrates our two operating segments, as we continue to enhance our Global Consumer Brand.

 


AGA RANGEMASTER GROUP PLC

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

6. TAXATION

 

Corporation tax for the interim period to 30th June 2012 has been charged at the estimated rates chargeable for the full year in the respective jurisdictions as follows:

 
Half year
to June
2012
Half year
to June
2011
Year to
December
2011
 
 
 
 
 
£m
£m
£m
Current tax
 
 
 
UK corporation tax
-
1.1
(10.9)
Overseas tax
-
-
(0.6)
 
 
 
 
 
-
1.1
(11.5)
Deferred tax
 
 
 
UK deferred tax
0.6
0.1
6.1
Overseas deferred tax
(0.2)
-
-
 
 
 
 
 
0.4
0.1
6.1
 
 
 
 
Total income tax expense / (credit)
0.4
1.2
(5.4)
 
 
 
 
 
 
 
 
Total UK tax
0.6
1.2
(4.8)
Total overseas tax
(0.2)
-
(0.6)
 
 
 
 
Total income tax expense / (credit)
0.4
1.2
(5.4)
 
 
 
 

 

 

The balance sheet at 30th June 2011 has been restated for deferred tax as in resolving a number of prior year deferred tax items, it was identified that the deferred tax balances recorded in prior years needed to be recalculated. The balance sheet presented at 30th June 2011 has been restated to increase deferred tax liabilities by £1.7 million to £5.7 million and reduce deferred tax assets by £3.1 million to £5.4 million, thereby reducing retained earnings by £4.8 million - also see note 21 of the 2011 Annual Report and Accounts.

 

Factors affecting the future tax charge:

 

A reduction in the UK corporation tax rate from 28% to 26% was substantively enacted in March 2011 and was effective from 1stApril 2011. A further reduction from 26% to 25% was substantively enacted in July 2011 with effect from 1st April 2012, however, a subsequent reduction from 25% to 24% was substantively enacted in March 2012 and will now be effective from 1st April 2012. Accordingly a rate of 24% has been applied in the measurement of the Group's deferred tax assets and liabilities as at 30th June 2012. In addition, the Government announced in March 2012 its intention to further reduce the UK corporation tax rate to 23% from 1st April 2013 (which was substantively enacted on 3rd July 2012) and to 22% from 1st April 2014. It is not anticipated that these reductions nor subsequent reductions to 22% once substantively enacted, will have a material effect on the company's future current or deferred tax charges.

 

7. DISCONTINUED OPERATIONS

 

In the period to 30th June 2012 the loss from discontinued operations was nil, as costs paid during the first half of 2012, amounting to £1.4m were fully provided at 31st December 2011 and primarily related to the settlement of the remaining minority litigation - see note 13.  In the period to 30th June 2011, settlements of £0.9 million were made during the period in relation to subsidiaries sold in 2007 which were not fully provided for.  


AGA RANGEMASTER GROUP PLC

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

8. EARNINGS PER SHARE

 

The calculation of the basic and diluted earnings per share is based on the following data:


Half year
to June
2012

Half year
to June
2011

Year to
December
2011






£m

£m

£m

Earnings for the purpose of the basic and diluted EPS








Profit after tax

1.2

3.0

12.9

Non-controlling interests

0.1

-

0.1





Profit attributable to equity holders of the parent - continuing operations

1.3

3.0

13.0

Profit after tax - discontinued operations

-

(0.9)

2.7





Profit attributable to equity holders of the parent - total

1.3

2.1

15.7









Weighted average number of shares in issue

million

million

million





For basic EPS calculation

69.3

69.3

69.3

Dilutive effect of share options

-

-

-





For diluted EPS calculation

69.3

69.3

69.3









Earnings per share attributable to equity holders of the parent



Continuing operations

p

p

p

Basic

1.9

4.3

18.8

Diluted

1.9

4.3

18.8





Discontinued operations

p

p

p

Basic

-

(1.3)

3.9

Diluted

-

(1.3)

3.9





Total operations

p

p

p

Basic

1.9

3.0

22.7

Diluted

1.9

3.0

22.7





 

9. DIVIDENDS



Half year
to June
2012

Half year
to June
2011

Year to
December
2011








£m

£m

£m

Final dividend paid of 1.1 pence for the year ended 31st December 2011 (2010: 1.0 pence)


0.8

0.7

0.7

Interim dividend paid of 0.8 pence


-

-

0.5






Amounts recognised as distributions to equity holders of the parent in the period


0.8

0.7

1.2

 

The board has decided not to pay an interim dividend (half year to 30th June 2011: 0.8 pence per share).

 


AGA RANGEMASTER GROUP PLC

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

10. PROPERTY, PLANT & EQUIPMENT

 

During the six months to 30th June 2012 the Group purchased £0.8 million of property, plant and equipment (period to 30th June 2011: £2.5 million). Depreciation in the period was £2.8 million (period to 30th June 2011: £3.0 million). Sale proceeds in the period were nil (period to 30th June 2011: £7.6 million in respect of the disposal of certain properties on the exercise of an option and the profit on disposal was £0.8 million).

 

11. RETIREMENT BENEFITS

 

Defined benefit scheme assets have been valued at a market value on 30th June 2012 at £773.4 million (30th June 2011: £762.0 million and 31st December 2011: £774.2 million) and the defined benefit liabilities at £818.0 million (30th June 2011: £739.3 million and 31st December 2011: £768.9 million), giving a net £44.6 million deficit at the interim date (30th June 2011: £22.7 million surplus and 31st December 2011: £5.3 million surplus). The liabilities have been rolled forward from 31st December 2011 and adjusted to take account of lower inflation expectations and the decrease in corporate bond yields, which has decreased the discount rate from 4.8% to 4.4%.

 

The net pension credit for the period was £1.5 million (period to 30th June 2011: £1.5 million and year to 31st December 2011: £3.1 million).

 

12. CASH & BORROWINGS

 

Cash

Cash and cash equivalents at 30th June 2012 was £29.7 million (30th June 2011: £42.2 million and 31st December 2011: £48.1 million) and includes £22.5 million which is collateralised against a bank guarantee that the Group has provided to the AGA Rangemaster Group Pension Scheme.

 

Borrowings


30th June
2012

30th June
2011

31st December
2011






£m

£m

£m

Bank borrowings




Current (unsecured)

2.8

1.5

1.4

Non-current

15.0

15.5

15.4





Total

17.8

17.0

16.8





 

The Group's bank borrowings are primarily loan advances denominated in a number of currencies and have floating interest rates based on LIBOR or foreign equivalents.

 

Of the Group's £75 million committed bank facilities, £25 million mature in November 2012 and the remainder in July and August 2013.

 

At 30th June 2012 the non-current borrowings are split £0.3 million secured (30thJune 2011: £0.3 million) and £14.7 million unsecured (30th June 2011: £15.2 million).


AGA RANGEMASTER GROUP PLC

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

13. PROVISIONS

 

The Group's provisions mainly relate to the remaining costs and claims in relation to the valuation of a minority shareholding in Friatec, a business which the Group acquired in 1998 and sold in 2001, as part of the Pipe Systems disposal. The Group received a judgement from a German court in the first half of 2012. £1.0 million has been paid in the first half of the year relating to Friatec and £0.4 million for other provisions.  These provisions and the majority of the remaining settlement are expected to be made in the foreseeable future. The remaining provision reflects the expected settlements.

 

14. SHARE CAPITAL AND OPTIONS

 

The number of 46 7/8 pence ordinary shares in issue amounted to 69.3 million on 30th June 2012 (30th June 2011 and 31st December 2011: 69.3 million). This represents £32.5 million of share capital.

 

On 11th May 2011, it was announced that the management of Fired Earth Limited had been granted an option to acquire up to 28% of the equity of Fired Earth Limited. The transaction has been treated as an employee share option and the charge for the first half of 2012 was not material.

 

During the period, the 51,500 Senior Executive Share Options granted in March 2002 and 95,962 Sharesave Plan Options granted in September 2008 were lapsed.

 

On 16th April 2012, 826,077 share options were issued under the 2012 Company Share Option Plan ('CSOP') at an exercise price of 84.5 pence. The fair value of the TSR element is 55.41 pence and the fair value of the EPS element is 79.58 pence.

 

Details of the share option schemes were given on pages 32 and 33 of the Annual Report and Accounts as at 31st December 2011 although the CSOP performance conditions have been amended so the options will only become exercisable on the achievement of EPS growth above RPI and TSR targets.

 

 

15. FINANCIAL INSTRUMENTS

 

Included in borrowings at 30th June 2012 were loans of EUR 7.5 million and USD 13.7 million, which have been designated as hedges of net investments in operations based in Europe and the United States.  The loans are held as a hedge against the Group's exposure to foreign exchange risk on these investments.

 

During the six month period ended 30th June 2012, the gain of £0.2 million on the retranslation of the EUR loan and the gain of £0.1 million on the retranslation of the USD loan have been transferred to equity to offset gains and losses on translation of the net investments in subsidiaries.

 

16. CONTINGENT LIABILITIES AND COMMITMENTS

 

The Group had no material contingent liabilities arising in the normal course of business at 30th June 2012.

 

The Group has arranged £50.0 million of bank guarantees to guarantee the obligations of the Group to the AGA Rangemaster Group Pension Scheme which may arise in the period up to 2020.

 

The Group had capital commitments of £0.6 million at 30th June 2012 (31st December 2011: £0.1 million).

 

17. RELATED PARTY TRANSACTIONS

 

The Group currently recharges the Group pension scheme with part of the cost of administration. The total amount recharged in the period was £0.1 million (half year to 30th June 2011: £0.1 million). The amount outstanding at 30th June 2012 was £nil (30th June 2011: £nil).

 

18. SEASONALITY OF OPERATIONS

 

The normal seasonal nature of our range cooker, kitchen and home fashions product business is to see higher revenues and operating profits in the second half of the year than in the first six months.

 


AGA RANGEMASTER GROUP PLC

 

 

CAUTIONARY STATEMENT

 

These condensed consolidated interim financial statements contain certain forward-looking statements. These are made by the directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. The directors undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

 

The Interim Management Report ('IMR') has been prepared solely to provide additional information to shareholders to enable them to assess the Group's strategies and the potential for those strategies to succeed.  The IMR should not be relied on by any other party or for any other purpose.

 

The IMR has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to AGA Rangemaster Group plc and its subsidiary undertakings when viewed as a whole.

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The directors confirm that these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the IMR includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

 

-     an indication of important events that have occurred during the first six months and their impact on the condensed consolidated financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

-     material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

 

The directors of AGA Rangemaster Group plc are listed in the Annual Report and Accounts for 31st December 2011, a copy of which is available at www.agarangemaster.com.

 

 

By order of the board

 

 

 

W B McGrath
Chief Executive

 

 

 

S M Smith
Finance Director


AGA RANGEMASTER GROUP PLC

 

INDEPENDENT REVIEW REPORT TO THE MEMBERS OF AGA RANGEMASTER GROUP PLC

 

 

Introduction

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30th June 2012 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes 1 to 18.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the 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 Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30th June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

 

Ernst & Young LLP
Birmingham

 

23rd August 2012

 


 

AGA RANGEMASTER GROUP PLC

 

MAIN ADDRESSES AND ADVISERS

 

 

Head office and registered office

 

AGA Rangemaster Group plc
Juno Drive
Leamington Spa
Warwickshire
CV31 3RG
Telephone:  +44 (0)1926 455 755
Fax: +44 (0)1926 455 749
e-mail:  info@agarangemaster.com
Website: 
www.agarangemaster.com

 

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Registered in England No. 354715

 

Registrars

 

Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone (Helpline): 0871 384 2355
(Calls to this number are charged at 8p per minute from a BT landline.
Other telephone providers' costs may vary).
International (Helpline): +44 121 415 7047

 

Auditors

 

Ernst & Young LLP

 

 

Joint financial advisers and stockbrokers

 

Numis Securities Limited
Espirito Santo Investment Bank

 

 

 

 

 


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