Full-year results for period ended 31 Dec 2017
Full-year results for the period ended 31 December 2017
|
£ million unless otherwise stated
|
2017 |
2016 |
As Reported change % |
Organic Constant Currency(1) change % |
|
Headline results Revenue |
1,021.5 |
989.2 |
3.3% |
1.4% |
|
Group headline operating profit(1) |
119.7 |
116.9 |
2.4% |
3.5% |
|
Group headline operating profit margin(1) |
11.7% |
11.8% |
|
|
|
Headline EPS (1) |
22.5p |
22.7p |
(0.9)% |
|
|
Total dividend per share |
11.0p |
11.0p |
|
|
|
Free cash flow before acquisitions, disposals, dividends, and additional US pension payments(1) |
54.0
|
48.0
|
|
|
|
|
|
|
|
|
|
Statutory results |
|
|
|
|
|
Operating profit |
158.1 |
107.3 |
|
|
|
Profit before tax |
135.8 |
87.9 |
|
|
|
Basic EPS |
37.8p |
18.4p |
|
|
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted measures can be found on pages 9 to 13.
Group highlights
· Improving momentum in the business with organic constant-currency growth* of 2.8% in the second half of the year
· Continued progress on strategy implementation, with two divestments completed. These reduce complexity and strengthen the balance sheet, with net debt / EBITDA* at 1.2 times (FY 2016: 1.6 times)
· Increased investment of £7 million in research and development and sales capability funded by improvements in operating efficiency
· Group headline operating profit margin* at 11.7% (2016: 11.8%) with dilutive impact of divestments largely offset by underlying improvements
· Additional funding of US$36 million to the Group's US pension scheme reduced the Group's pension deficit and reduces future pension contributions
Commenting on the results for Morgan Advanced Materials, Chief Executive Officer, Pete Raby said:
'I am pleased to see the return to organic growth in the year as a result of the early benefits of our strategy implementation and improving market conditions. Strategy implementation is progressing well with further investment in research and development and sales completed in the year, and capability development ongoing across the Group. We are on track to meet our goal of growing in line with our markets in 2019, and expect to grow at closer to our market rates in 2018.'
Strategy implementation firmly on track
We have made good progress with the implementation of our strategy, against the execution priorities we defined in February 2016:
1. Move to a global structure. We completed the move to a global business structure in March 2016. The change in structure has improved global co-ordination across the Group and has sharpened accountability within each of our global business units. This is an important change to enable the wider changes we need to make and we completed this without any loss of business momentum.
2. Extend our technology leadership. Our objective is to strengthen our technical teams and increase our investment in research and development to around 4% of sales (from 2.8% of sales in 2015) over the next two to three years.
We have increased our investment in technology development in 2017 to £34.3 million, representing 3.4% of sales. We have expanded the technical teams in our new Carbon Science Centre of Excellence and in our new Metals and Joining Centre of Excellence. We have also added technical resources to our Structural Ceramics Centre of Excellence to develop new products and processes for the structural ceramics business, and added engineering resources across the business to drive the growth of the business.
3. Improve operational execution. Our objective is to strengthen our operational capabilities, reduce operational costs to fund reinvestment in the business, and improve delivery and quality performance.
We made very good progress with our operational improvements in 2017 with a net £8.5 million of savings generated to fund reinvestment in the business in the year (against our target of £6 million). These were generated from a wide range of improvement projects across the businesses including larger lean projects looking at end-to-end waste elimination, smaller scale continuous improvement projects, procurement projects and further use of automation. We made a number of changes to strengthen our operational teams and continuous improvement capabilities during the year and we are well positioned to deliver the further £8 million of improvements we are targeting in 2018.
4. Drive sales effectiveness and market focus. Our objective is to strengthen our sales capability, and increase the intensity of effort with new customers and in new markets.
We have completed a number of changes to the structure and alignment of our sales teams following the assessments of our sales teams. We have defined roles and responsibilities clearly, and matched the skills of our sales teams more closely to their roles.
We carried out five intensive pilot projects to test new techniques and tools and to build our understanding of the best approaches for us to use across the group. Through these pilots we delivered significant improvements in local capabilities and approaches, and we also developed our understanding of the tools and techniques we should apply across the Group. We will continue with that deployment during 2018.
We also completed the design of our framework for sales incentive plans and prepared for the deployment of new sales incentives to four different sales teams in the first quarter of 2018. We will test these new approaches and make adjustments before deploying across the majority of our sales
5. Increase investment in people management and development. We are aiming to strengthen our leadership capability and deepen functional capabilities across the business, including in sales and engineering.
We launched our new leadership behaviours to our senior leaders during the year. These are now built into our performance management process and during 2018 our leaders will be measured both on what they achieve and how they achieve it to ensure we drive the behaviours we need to support the delivery of our strategy. In addition to the work on sales incentives, we have also made a range of changes to incentive schemes for the wider leadership population to provide a clearer line of sight from the performance of the individual and the impact on their compensation. As part of this we have introduced greater balance between short-term (in-year) and long- term (multi-year) incentives. Finally, we have strengthened our leadership population, in particular with the introduction of more capability in finance, HR, operations and EHS functions.
6. Simplify the business. We have completed two divestments, Rotary Transfer Systems in Electrical Carbon and Electro-ceramics in Technical Ceramics, which have materially simplified the global business units as a result. Through these divestments we have exited businesses where we were sub-scale and where there was limited synergy with the remainder of the Group. We have sharpened the focus on the core business and reduced overhead costs. We received proceeds of £79.5 million from the sale and have used that to reduce our net debt* position, creating funds for reinvestment in the business in due course.
Enquiries
|
|
|
|
|
Pete Raby |
Morgan Advanced Materials |
01753 837 000 |
|
Peter Turner
|
Morgan Advanced Materials |
|
|
Alison Kay |
Brunswick |
0207 404 5959 |
Results presentation today
There will be an analyst and investor presentation at 10.45 (UK time) today at The London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS.
A live video webcast and slide presentation of this event will be available on www.morganadvancedmaterials.com. We recommend you register by 10:30 (UK time).
|
Basis of preparation
Non-GAAP measures Throughout this report adjusted measures are used to describe the Group's financial performance. These are not recognised under IFRS or other generally accepted accounting principles (GAAP).
The Executive Committee and the Board manage and assess the performance of the business on these measures and believe that they are more representative of ongoing trading, facilitate meaningful year-on-year comparisons, and hence provide additional useful information to shareholders.
Throughout this report these non-GAAP measures are clearly identified by an asterisk (*) where they appear in text, and by a footnote when they appear in tables and charts. Definitions of these non-GAAP measures can be found in the glossary of terms on page 32, reconciliations of the statutory results to the adjusted measures can be found on page 9 to 13.
Operating review
|
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1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted measures can be found on pages 9 to 13.
2. Details of Specific adjusting items can be found in Note 4 to the financial statements
Thermal Products
Revenue for Thermal Products for the year was £473.1 million, representing an increase of 3.6% compared with £456.8 million in 2016. On an organic constant-currency* basis, year-on-year revenue decreased by 1.4%. Divisional EBITA* for Thermal Products was £63.9 million (2016: £61.7 million) with a Divisional EBITA* margin of 13.5% (2016: 13.5%).
Revenue for Thermal Ceramics for the year was £426.2 million, representing an increase of 3.1% compared with £413.3 million in 2016. On an organic constant-currency* basis, year-on-year revenue decreased by 1.6%. Both North America and Europe declined organically reflecting the late-cycle nature of the business. Growth in Asia was primarily driven by growth in China and India.
Thermal Ceramics 2017 EBITA* was £56.9 million (2016: £55.0 million) with EBITA margin* improving to 13.4% (2016: 13.3%), with benefits resulting from operational improvements and mix impacts, from lower project activity, and increasing Superwool® sales.
Revenue for Molten Metals Systems for the year was £46.9 million, representing an increase of 7.8% compared with £43.5 million in 2016. On an organic constant-currency* basis, year-on-year revenue increased by 0.9%, with growth driven by performance in fire assay equipment and consumables resulting from the strength in the global precious metals (gold) market.
Molten Metal Systems 2017 EBITA* was £7.0 million (2016: £6.7 million) with EBITA margin* of 14.9% (2016: 15.4%), reflecting the year-on-year investment in technology and product development, partially offset by continued operational efficiency.
Carbon and Technical Ceramics
Revenue for the Carbon and Technical Ceramics Division for the year was £527.4 million, representing an increase of 5.1% compared with £502.0 million in 2016. On an organic constant-currency* basis, year-on-year revenue increased 6.2%.
Divisional EBITA* for the Carbon and Technical Ceramics Division was £62.5 million (2016: £60.5 million) with Divisional EBITA margin* of 11.9% (2016: 12.1%).
Revenue for Electrical Carbon for the year was £157.1 million, representing an increase of 0.6% compared with £156.2 million in 2016. On an organic constant-currency* basis, year-on-year revenue increased by 3.1% as the rail, wind, mining and industrial segments all reflected year-on-year growth. Regionally, growth was primarily seen in Asia from strong sales of specialty graphite products, in particular due to sales of machined graphite in Korea supporting the semiconductor industry and carbon fibre felt materials in China for solar energy applications, and also the European markets. The North American market remained flat overall.
Electrical Carbon EBITA* was £16.7 million (2016: £19.7 million) with an EBITA margin* of 10.6% (2016: 12.6%). Margin decline from the dilutive impact of the divestment of the Rotary business, and investment in sales and technology resources was partially offset by operational efficiency improvements.
Revenue for Seals and Bearings for the year was £113.2 million, representing an increase of 15.9% compared with £97.7 million in 2016. On an organic constant-currency* basis year-on-year revenue increased by 10.9%. Organic growth was driven by the water market and chemical and process industry pump seal and bearing demand. The business also experienced a stronger year for ceramic armour material in North America, with armour sales reflecting an increase of £3.6 million from 2016. The growth in these markets offset a decline in the Korean automotive market during the year.
Seals and Bearings EBITA* was £17.5 million (2016: £14.2 million) with an EBITA margin* of 15.5% (2016: 14.5%), and reflects continued good progress on operational improvements more than offsetting incremental investment in sales capability and R&D during the year.
Revenue for the Technical Ceramics global business unit was £257.1 million, an increase of 3.6% compared with £248.1 million in 2016. On an organic constant-currency* basis, year-on-year revenue increased by 6.1%, primarily driven by demand for ceramic cores in the aerospace market and supply of ceramic parts into the semiconductor market. This demand offset some of the slow-down in the demand for ceramic cores for the industrial gas turbine market in the last quarter.
Technical Ceramics EBITA* was £28.3 million (2016: £26.6 million) with an EBITA margin* of 11.0% (2016: 10.7%), the dilutive impact of the divestment of the Electro-ceramics business was offset by operational efficiency improvements and streamlining of overheads following the divestment.
Composites and Defence Systems
Revenue for Composites and Defence Systems for the year was £21.0 million, representing a decrease of 30.9% compared with £30.4 million in 2016, on a reported basis, driven primarily by a reduction in activity with the UK MoD and the completion of a Danish vehicle programme.
EBITA* for Composites and Defence Systems was £(1.1) million (2016: £1.1 million) with EBITA margin* of (5.2)% (2016: 3.6%). The EBITA* decline reflects the decline in revenue, partially offset by cost reductions in the business.
Group Financial review
Group revenue was £1,021.5 million (2016: £989.2 million), an increase of 3.3% on a reported basis compared with 2016. Improvements in the underlying business and benefits from the decline in the value of sterling against other currencies, with much of the Group's business being denominated in non-sterling currencies, more than offset the impacts of disposals. On an organic constant-currency* basis revenue increased by 1.4%.
Group headline operating profit was £119.7 million (2016: £116.9 million). Headline operating profit margin was 11.7%, compared to 11.8% for 2016.
Operating profit improved to £158.1 million (2016: £107.3 million) and profit before tax improved to £135.8 million (2016: £87.9 million). Both of these benefited from specific adjusting items of £45.7 million (2016: £(1.7) million), and year-on-year movements in exchange rates.
The net finance charge was £22.5 million (2016: £20.0 million), primarily comprising of net bank interest and similar charges of £15.8 million (2016: £13.2 million), gain from financial instruments of £0.2 million (2016: £0.3 million) and the finance charge under IAS 19 (revised), being the interest charge on pension scheme net liabilities, which was £6.9 million (2016: £7.1 million).
The Group amortisation charge for the full-year was £7.3 million (2016: £7.9 million).
The Group taxation charge, excluding specific adjusting items, was £26.9 million (2016: £26.6 million). The effective tax rate, excluding specific adjusting items, was 29.9% (2016: 29.7%).
Headline earnings per share* was 22.5 pence (2016: 22.7 pence), reflecting the improved operating profit, slightly higher financing charges, and an effective tax rate of 30% in line with recent experience. Basic earnings per share was 37.8 pence (2016: 18.4 pence).
Specific adjusting items
|
|
2017 £m |
2016 £m |
|
Specific adjusting items |
|
|
|
Net pension settlement credit |
- |
6.8 |
|
Impairment of intangible assets |
- |
(8.5) |
|
Net profit on disposal of business |
45.7 |
- |
|
Total specific adjusting items |
45.7 |
(1.7) |
|
Income tax (charge) / credit from specific adjusting items |
0.9 |
(2.8) |
|
Income tax (charge) / credit from US Tax Cuts and Jobs Act |
4.1 |
- |
|
Total specific adjusting items after income tax |
50.7 |
(4.5) |
Specific adjusting items after income tax were £50.7 million (2016: £(4.5) million), and consisted of the following:
Net profit on disposal of business
· On 31 March 2017, the Group completed the sale of its UK Electro-ceramics business, comprising the two sites at Ruabon and Southampton. The Group also announced the closure of its US Electro-C
ceramics business, which formed the remainder of the Group's Electro-ceramics business. This latter site will be closed when delivery of the last time orders from customers have been completed, currently anticipated to be in 2019.
The Group reflected a profit on disposal of £26.8 million associated with this transaction. A deferred tax asset of £1.5 million was recognised in connection with the closure of the US business.
· On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems business. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.
The Group reflected a profit on disposal of £18.9 million associated with this transaction. An income tax charge of £0.6 million was recognised in respect of this disposal.
US Tax Cuts and Jobs Act
As a consequence of the enactment of H.R.1 commonly referred to as the Tax Cuts and Jobs Act in the US a credit of £4.1m was recognised. This comprised of the revaluation of tax balances to reflect the reduction in the federal tax rates offset by an income tax charge for deemed repatriation tax for overseas subsidiaries of US companies.
Cash Flow
|
|
|
|
|
2017 |
2016 |
||
|
|
|
|
|
£m |
£m |
||
|
Cash generated from operations |
101.5 |
121.7 |
|||||
|
Add back cash flows from restructuring costs and other items |
- |
6.6 |
|||||
|
Cash flow from operations(1) |
101.5 |
128.3 |
|||||
|
Net capital expenditure |
|
|
(34.4) |
(38.4) |
|||
|
Net interest paid |
|
|
(16.6) |
(13.1) |
|||
|
Tax paid |
|
|
(24.5) |
(22.2) |
|||
|
Restructuring costs and other items |
|
|
- |
(6.6) |
|||
|
Free cash flow before acquisitions, disposals and dividends(1) |
|
26.0
|
48.0
|
||||
|
Dividends paid to external plc shareholders |
|
|
(31.4) |
(31.4) |
|||
|
Net cash flows from other investing and financing activities |
58.4 |
(15.6) |
|||||
|
Exchange movement |
|
|
8.2 |
(27.5) |
|||
|
Movement in net debt(1) in period |
|
|
61.2 |
(26.5) |
|||
|
Opening net debt(1) |
|
|
(242.5) |
(216.0) |
|||
|
Closing net debt(1) |
|
|
(181.3) |
(242.5) |
|||
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted
measures can be found on pages 9 to 13.
Cash flow from operations was £101.5 million (2016: £128.3 million), lower year-on-year due to the additional US pension payment of £28.0 million.
Free cash flow before acquisitions and dividends was £26.0 million (2016: £48.0 million).
Net debt* at the year-end was £181.3 million (2016: £242.5 million), representing a net debt* to EBITDA* ratio of 1.2x (2016: 1.6x).
Defined benefit pension plans
The Group pension deficit has decreased by £53.1 million since last year-end to £218.0 million from £271.1 million on an IAS 19 (revised basis) due to a significant increase in Company contributions and investment returns being higher than expected.
· The UK schemes deficit decreased by £14.5 million to £166.0 million (2016: increase of £63.1 million), as employer contributions and investment returns more than offset changes in assumptions (including a fall in the discount rate from 2.62% to 2.38%).
· The USA schemes deficit decreased by £37.9 million to £11.1 million (2015: decrease of £6.1 million), primarily as a result of an additional, accelerated employer contribution in December 2017 of £28.0 million (more than offsetting a fall in the discount rate from 4.16% to 3.65%).
· The European schemes deficit decreased by £0.8 million to £36.7 million (2016: increase of £9.2 million), largely due to the disposal of the Rotary business of Morgan Rekofa, principally in Germany (the discount rate remained constant at 1.60%).
· The Rest of World schemes deficit increased by £0.1 million to £4.2 million (2016: increase of £2.4 million), resulting from the increase in the discount rate from 2.90% to 3.20%.
Foreign exchange
The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows:
|
|
2017 |
2016 |
||
|
GBP to: |
Closing rate |
Average rate |
Closing rate |
Average rate |
|
US dollar |
1.35 |
1.29 |
1.23 |
1.35 |
|
Euro |
1.13 |
1.14 |
1.17 |
1.22 |
For illustrative purposes, the table below provides details of the impact on 2017 revenue and Group EBITA* if the actual reported results, calculated using 2017 average exchange rates were restated for GBP weakening by 10 cents against USD in isolation and 10 cents against the Euro in isolation:
|
Increase in 2017 revenue/Group EBITA(1) if: |
Revenue £m |
Group EBITA(1) £m |
|
|
GBP weakens by 10c against the US dollar in isolation |
35.2 |
4.9 |
|
|
GBP weakens by 10c against the Euro in isolation |
20.9 |
3.7 |
|
|
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted measures can be found on pages 9 to 13.
|
|
||
Retranslating the 2017 full year results at the January 2018 closing exchange rates would lead to revenue of £969.7 million and headline operating profit of £112.3 million.
Final dividend
The Board is recommending a final dividend, subject to shareholder approval, of 7.0 pence per share on the Ordinary share capital of the Group, payable on 25 May 2018 to Ordinary shareholders on the register at the close of business on 4 May 2018. Together with the interim dividend of 4.0 pence per share paid on 24 November 2017, this final dividend, if approved by shareholders, brings the total distribution for the year to 11.0 pence per share (2016: 11.0 pence).
A total dividend of 11.0 pence per share represents a dividend cover of headline EPS* 2.0x in 2017 (2016: 2.1x).
The Board has held the dividend flat during 2017 as it looks to rebuild dividend cover in the medium to long term.
Definitions and reconciliations of non-GAAP to GAAP measures
Reference is made to the following non-GAAP measures throughout this document. These measures are shown because the Directors consider they provide useful information to shareholders, including additional insight into ongoing trading and year-on-year comparisons. These non-GAAP measures should be viewed as complementary to, not replacements for, the comparable GAAP measures.
Headline profit and earnings measures
Group headline operating profit is stated before specific adjusting items and amortisation of intangible assets. Specific adjusting items are excluded on the basis that they distort trading performance. Amortisation is excluded as the charge arises primarily on externally acquired intangible assets since the adoption of IFRS and does not therefore reflect all intangible assets consistently.
Earnings before interest, tax and amortisation (EBITA) is stated before specific adjusting items, amortisation of intangible assets, restructuring costs and other items. Segment EBITA is stated before unallocated corporate costs.
|
2017 |
Thermal Ceramics
£m |
Molten Metal Systems
£m |
Thermal Products Division
£m |
Electrical Carbon
£m |
Seals and Bearings
£m |
Technical Ceramics
£m |
Carbon and Technical Ceramics Division £m |
Composites and Defence Systems
£m |
Segment total
£m |
Corporate costs(1)
£m |
Group
£m |
|
Operating profit/(loss) |
55.1 |
6.8 |
61.9 |
16.2 |
17.2 |
23.8 |
57.2 |
(1.1) |
118.0 |
40.1 |
158.1 |
|
Add back specific adjusting items included in operating profit |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(45.7) |
(45.7) |
|
Add back amortisation of intangible assets |
1.8 |
0.2 |
2.0 |
0.5 |
0.3 |
4.5 |
5.3 |
- |
7.3 |
- |
7.3 |
|
Group headline operating profit |
|
|
|
|
|
|
|
|
|
|
119.7 |
|
Add back restructuring costs and other items |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Group EBITA |
|
|
|
|
|
|
|
|
|
|
119.7 |
|
Corporate costs(1) |
|
|
|
|
|
|
|
|
|
5.6 |
5.6 |
|
Divisional EBITA/global business unit EBITA |
56.9 |
7.0 |
63.9 |
16.7 |
17.5 |
28.3 |
62.5 |
(1.1) |
125.3 |
|
|
1.Corporate costs consist of the specific adjusting items and the cost of the central head office.
|
2016 |
Thermal Ceramics
£m |
Molten Metal Systems
£m |
Thermal Products Division
£m |
Electrical Carbon
£m |
Seals and Bearings
£m |
Technical Ceramics
£m |
Carbon and Technical Ceramics Division £m |
Composites and Defence Systems
£m |
Segment total
£m |
Corporate costs(1)
£m |
Group
£m |
|
Operating profit/(loss) |
53.6 |
6.6 |
60.2 |
19.2 |
14.0 |
22.4 |
55.6 |
(8.7) |
107.1 |
0.2 |
107.3 |
|
Add back specific adjusting items included in operating profit |
- |
- |
- |
- |
- |
- |
- |
8.5 |
8.5 |
(6.8) |
1.7 |
|
Add back amortisation of intangible assets |
1.5 |
0.1 |
1.6 |
0.4 |
0.3 |
4.2 |
4.9 |
1.4 |
7.9 |
- |
7.9 |
|
Group headline operating profit |
|
|
|
|
|
|
|
|
|
|
116.9 |
|
Add back restructuring costs and other items |
(0.1) |
- |
(0.1) |
0.1 |
(0.1) |
- |
- |
(0.1) |
(0.2) |
1.2 |
1.0 |
|
Group EBITA |
|
|
|
|
|
|
|
|
|
|
117.9 |
|
Corporate costs(1) |
|
|
|
|
|
|
|
|
|
5.4 |
5.4 |
|
Divisional EBITA/global business unit EBITA |
55.0 |
6.7 |
61.7 |
19.7 |
14.2 |
26.6 |
60.5 |
1.1 |
123.3 |
|
|
1.Corporate costs consist of the specific adjusting items and the cost of the central head office.
Group Organic Growth
Group organic growth is the growth of the business excluding the impacts of acquisitions, divestments and foreign currency impacts. This measure is used as it allows revenue and EBITA to be compared on a like-for-like basis.
Commentary on the underlying business performance is included as part of the Operational review on pages 5 to 6.
Year-on-year movements in Segment Revenue
|
|
Thermal Ceramics |
Molten Metal Systems |
Thermal Products Division |
Electrical Carbon |
Seals and Bearings |
Technical Ceramics |
Carbon and Technical Ceramics Division |
Composites and Defence Systems |
Segment Total |
|
|
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
2016 Revenue |
413.3 |
43.5 |
456.8 |
156.2 |
97.7 |
248.1 |
502.0 |
30.4 |
989.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Impact of foreign currency movements |
19.9 |
3.0 |
22.9 |
8.4 |
4.4 |
11.0 |
23.8 |
0.1 |
46.8 |
|
Impacts of disposals |
- |
- |
- |
(12.2) |
- |
(16.8) |
(29.0) |
- |
(29.0) |
|
Impact of underlying business |
(7.0) |
0.4 |
(6.6) |
4.7 |
11.1 |
14.8 |
30.6 |
(9.5) |
14.6 |
|
Underlying % |
(1.6)% |
0.9% |
(1.4)% |
3.1% |
10.9% |
6.1% |
6.2% |
(31.2%) |
1.4% |
|
|
|
|
|
|
|
|
|
|
|
|
2017 Revenue |
426.2 |
46.9 |
473.1 |
157.1 |
113.2 |
257.1 |
527.4 |
21.0 |
1,021.5 |
|
Memo: 2017 - 2018 impact of divestments |
|
|
|
(4.6) |
|
(5.5) |
(10.1) |
|
(10.1) |
Year-on-year movements in Segment and Group EBITA
|
|
Thermal Ceramics |
Molten Metal Systems |
Thermal Products Division |
Electrical Carbon |
Seals and Bearings |
Technical Ceramics |
Carbon and Technical Ceramics Division |
Composites and Defence Systems |
Segment Total |
Corporate Costs |
Group |
|
|
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
2016 versus 2017 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Segment & Group EBITA |
55.0 |
6.7 |
61.7 |
19.7 |
14.2 |
26.6 |
60.5 |
1.1 |
123.3 |
(6.4) |
116.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of foreign currency movements |
2.5 |
0.6 |
3.0 |
1.5 |
0.8 |
1.4 |
3.7 |
- |
6.8 |
- |
6.8 |
|
Impacts of disposals |
- |
- |
- |
(3.5) |
- |
(4.6) |
(8.1) |
- |
(8.1) |
- |
(8.1) |
|
Impact of underlying business |
(0.6) |
(0.3) |
(0.9) |
(1.0) |
2.5 |
4.9 |
6.4 |
(2.2) |
3.3 |
0.8 |
4.1 |
|
Underlying % |
(1.0)% |
(4.1)% |
(1.4)% |
(5.6)% |
16.7% |
20.9% |
11.4% |
- |
3.7% |
- |
3.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Segment & Group EBITA |
56.9 |
7.0 |
63.9 |
16.7 |
17.5 |
28.3 |
62.5 |
(1.1) |
125.3 |
(5.6) |
119.7 |
|
Memo: 2017 - 2018 impact of divestments |
|
|
|
(1.3) |
|
(1.2) |
(2.5) |
|
(2.5) |
|
(2.5) |
Group EBITDA
Group EBITDA is defined as operating profit before specific adjusting items, restructuring costs, other items, depreciation and amortisation of intangible assets. The Group uses this measure as it is a key metric in covenants over debt facilities. A reconciliation of operating profit to Group EBITDA is as follows:
|
|
2017 £m |
2016 £m |
|
Operating Profit |
158.1 |
107.3 |
|
Add back: specific adjusting items included in operating profit |
(45.7) |
1.7 |
|
Add back: restructuring costs and other items |
- |
1.0 |
|
Add back: depreciation |
30.6 |
29.5 |
|
Add back: amortisation of intangible assets |
7.3 |
7.9 |
|
Group EBITDA |
150.3 |
147.4 |
Cash flow from operations and free cash flow before acquisitions, disposals and dividends
Cash flow from operations excludes the cash flows associated with restructuring activities and is shown because it illustrates the timing of the outflows relating to restructuring charges that may be incurred over more than one reporting period.
Free cash flow before acquisitions and disposals is defined as cash generated from operations less net capital expenditure, net interest paid and tax paid.
The Group discloses this measure of free cash flow as this provides readers of the financial statements with a measure of the cash flows from the business before corporate level cash flows (acquisitions, disposals and dividends).
A reconciliation of cash generated from operations to cash flow from operations and free cash flow before acquisitions, disposals and dividends is as follows:
|
|
2017 £m |
2016 £m |
|
Cash generated from operations |
101.5 |
121.7 |
|
Add back: cash flows from restructuring costs and other items |
- |
6.6 |
|
Cash flow from operations |
101.5 |
128.3 |
|
Net capital expenditure |
(34.4) |
(38.4) |
|
Net interest paid |
(16.6) |
(13.1) |
|
Tax paid |
(24.5) |
(22.2) |
|
Restructuring costs and other items |
- |
(6.6) |
|
Free cash flow before acquisitions, disposals and dividends |
26.0 |
48.0 |
|
Free cash flow before acquisitions, dividends and one-off US pension payment |
54.0 |
48.0 |
1. In 2017 cash generated from operations includes a one off payment to the US pension scheme of £28.0 million. Free cash flow is presented
both before and after this payment.
Net debt
Net debt is defined as interest-bearing loans and borrowings and bank overdrafts less cash and cash equivalents. The Group discloses this metric as it is a key metric in covenants over debt facilities.
|
|
2017 £m |
2016 £m |
|
Cash and cash equivalents |
50.4 |
122.4 |
|
Non-current interest-bearing loans and borrowings |
(192.7) |
(204.0) |
|
Current interest-bearing loans and borrowings and bank overdrafts |
(39.0) |
(160.9) |
|
Net debt |
(181.3) |
(242.5) |
Return on invested capital
Return on invested capital (ROIC) is defined as the 12-month Group headline operating profit (operating profit excluding specific adjusting items and amortisation of intangible assets) divided by the 12-month average adjusted net assets (third-party working capital, property, plant and equipment, land and buildings, intangible assets and other balance sheet items).
|
|
2017 £m |
2016 £m |
|
Operating profit |
158.1 |
107.3 |
|
Add back: specific adjusting items included in operating profit |
(45.7) |
1.7 |
|
Add back: amortisation of intangible assets |
7.3 |
7.9 |
|
Group headline operating profit (12-month rolling) |
119.7 |
116.9 |
|
|
|
|
|
12-month average adjusted net assets: |
|
|
|
Third-party working capital |
172.4 |
168.2 |
|
Property, plant and equipment |
176.6 |
175.7 |
|
Land and buildings |
115.3 |
105.5 |
|
Intangible assets |
222.4 |
240.8 |
|
Other assets (net) |
16.4 |
9.2 |
|
12-month average adjusted net assets |
703.1 |
699.4 |
|
|
|
|
|
ROIC |
17.0% |
16.7% |
Headline earnings per share
Headline earnings per share is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax expense and non-controlling interests, divided by the weighted average number of ordinary shares during the period. This measure of earnings is shown because the Directors consider it provides a better indication of headline performance.
Whilst amortisation of intangible assets is a recurring charge it is excluded from these measures on the basis that it primarily arises on externally acquired intangible assets and therefore does not reflect consistently the benefit that all of Morgan's businesses realise from their intangible assets, which may not be recognised separately.
Constant-currency revenue and Group headline operating profit
Constant-currency revenue and Group headline operating profit are derived by translating the prior year results at current year average exchange rates. These measures are used as they allow revenue to be compared excluding the impact of foreign exchange rates. Page 8 provides further information on the principal foreign currency exchange rates used in the translation of the Group's results to constant-currency at average exchange rates.
Consolidated Income Statement
|
|
|
Year ended 31 December 2017 |
|
|
Year ended 31 December 2016 |
||||
|
|
|
Results before specific adjusting items |
Specific adjusting items1 |
Total |
|
|
Results before specific adjusting items |
Specific adjusting items1 |
Total |
|
|
Note |
£m |
£m |
£m |
|
|
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
3 |
1,021.5 |
- |
1,021.5 |
|
|
989.2 |
- |
989.2 |
|
Operating costs before restructuring costs, other one-off items and amortisation / impairment of intangible assets |
|
(901.8) |
- |
(901.8) |
|
|
(871.3) |
- |
(871.3) |
|
|
|
|
|
|
|
|
|
|
|
|
Profit from operations before restructuring costs, other one-off items and amortisation / impairment of intangible assets |
|
119.7 |
- |
119.7 |
|
|
117.9 |
- |
117.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Retructuring costs and other one-off items: |
4 |
|
|
|
|
|
|
|
|
|
Restructuring costs |
|
- |
- |
- |
|
|
(1.5) |
- |
(1.5) |
|
Net pension settlement credit |
|
- |
- |
- |
|
|
- |
6.8 |
6.8 |
|
Business exit costs |
|
- |
45.7 |
45.7 |
|
|
- |
- |
- |
|
Gain on disposal of properties |
|
- |
- |
- |
|
|
0.5 |
- |
0.5 |
|
Profit from operations before amortisation / impairment of intangible assets |
3 |
119.7 |
45.7 |
165.4 |
|
|
116.9 |
6.8 |
123.7 |
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation of intangible assets |
|
(7.3) |
- |
(7.3) |
|
|
(7.9) |
- |
(7.9) |
|
Impairment of intangible assets |
4 |
- |
- |
- |
|
|
- |
(8.5) |
(8.5) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
3 |
112.4 |
45.7 |
158.1 |
|
|
109.0 |
(1.7) |
107.3 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
1.8 |
- |
1.8 |
|
|
2.3 |
- |
2.3 |
|
Finance expense |
|
(24.3) |
- |
(24.3) |
|
|
(22.3) |
- |
(22.3) |
|
Net financing costs |
5 |
(22.5) |
- |
(22.5) |
|
|
(20.0) |
- |
(20.0) |
|
|
|
|
|
|
|
|
|
|
|
|
Share of profit of associate (net of income tax) |
|
0.2 |
- |
0.2 |
|
|
0.6 |
- |
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation |
|
90.1 |
45.7 |
135.8 |
|
|
89.6 |
(1.7) |
87.9 |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
6 |
(26.9) |
5.0 |
(21.9) |
|
|
(26.6) |
(2.8) |
(29.4) |
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
63.2 |
50.7 |
113.9 |
|
|
63.0 |
(4.5) |
58.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period attributable to: |
|
|
|
|
|
|
|
|
|
|
Owners of the parent |
|
56.9 |
50.7 |
107.6 |
|
|
56.8 |
(4.5) |
52.3 |
|
Non-controlling interests |
|
6.3 |
- |
6.3 |
|
|
6.2 |
- |
6.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
63.2 |
50.7 |
113.9 |
|
|
63.0 |
(4.5) |
58.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Earning per share from continuing operations |
7 |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
37.8p |
|
|
|
|
18.4p |
|
Diluted |
|
|
|
37.5p |
|
|
|
|
18.3p |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends2 |
|
|
|
|
|
|
|
|
|
|
Proposed interim dividend - pence |
|
|
|
4.0p |
|
|
|
|
4.0p |
|
- £m |
|
|
|
11.4 |
|
|
|
|
11.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Approved final dividend - pence |
|
|
|
7.0p |
|
|
|
|
7.0p |
|
- £m |
|
|
|
20.0 |
|
|
|
|
20.0 |
1. Details of 'Specific adjusting items' are given in note 4 to the financial statements.
2. The proposed final dividends are based upon the number of shares outstanding at the balance sheet date.
Consolidated Statement of Comprehensive Income
|
|
Translation reserve |
Hedging reserve |
Retained earnings |
Total parent comprehensive income |
Non- controlling interests |
Total comprehensive income |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
Year ended ended 31 December 2017 |
|
|
|
|
|
|
|
Profit for the period |
- |
- |
107.6 |
107.6 |
6.3 |
113.9 |
|
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
Remeasurement loss on defined benefit plans |
|
- |
10.0 |
10.0 |
- |
10.0 |
|
Tax effect of components of other comprehensive income not reclassified |
- |
- |
(1.8) |
(1.8) |
- |
(1.8) |
|
|
- |
- |
8.2 |
8.2 |
- |
8.2 |
|
Items that may not be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
Foreign exchange transation differences |
(11.0) |
- |
- |
(11.0) |
(1.3) |
(12.3) |
|
Net loss on hedge of net investment in foreign subsidiaries |
- |
- |
- |
- |
- |
- |
|
Cash flow hedges: |
|
|
|
|
|
|
|
Change in fair value |
- |
2.6 |
- |
2.6 |
- |
2.6 |
|
Transferred to profit or loss |
- |
0.4 |
- |
0.4 |
- |
0.4 |
|
|
(11.0) |
3.0 |
- |
(8.0) |
(1.3) |
(9.3) |
|
|
|
|
|
|
|
|
|
Total Comprehensive income, net of tax |
(11.0) |
3.0 |
115.8 |
107.8 |
5.0 |
112.8 |
|
|
|
|
|
|
|
|
|
Year ended 31 December 2016 |
|
|
|
|
|
|
|
Profit for the period |
- |
- |
52.3 |
52.3 |
6.2 |
58.5 |
|
Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
Remeasurement loss on defined benefit plans |
- |
- |
(68.1) |
(68.1) |
- |
(68.1) |
|
Tax effect of components of other comprehensive income not reclassified |
- |
- |
0.6 |
0.6 |
- |
0.6 |
|
|
- |
- |
(67.5) |
(67.5) |
- |
(67.5) |
|
Items that may not be reclassified subsequently to profit or loss: |
|
|
|
|
|
|
|
Foreign exchange transation differences |
37.4 |
- |
- |
37.4 |
5.5 |
42.9 |
|
Net loss on hedge of net investment in foreign subsidiaries |
(17.7) |
- |
- |
(17.7) |
|
(17.7) |
|
Cash flow hedges: |
|
|
|
|
|
|
|
Change in fair value |
- |
(3.7) |
- |
(3.7) |
- |
(3.7) |
|
Transferred to profit or loss |
- |
0.8 |
- |
0.8 |
- |
0.8 |
|
|
19.7 |
(2.9) |
- |
16.8 |
5.5 |
22.3 |
|
|
|
|
|
|
|
|
|
Total Comprehensive income, net of tax |
19.7 |
(2.9) |
(15.2) |
1.6 |
11.7 |
13.3 |
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
|
Note |
Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|
|
£m |
£m |
|
Assets |
|
|
|
|
Property, plant and equipment |
|
297.8 |
303.7 |
|
Intangible assets |
|
217.0 |
240.4 |
|
Investments |
|
6.3 |
6.0 |
|
Other receivables |
|
5.4 |
4.7 |
|
Deferred tax assets |
|
9.1 |
6.1 |
|
Derivitive financial assets |
|
0.3 |
- |
|
Total non-current assets |
|
535.9 |
560.9 |
|
|
|
|
|
|
Inventories |
|
141.8 |
148.2 |
|
Derivative financial assets |
9 |
0.7 |
2.1 |
|
Trade and other receivables |
|
194.2 |
205.7 |
|
Current tax receivable |
|
6.7 |
- |
|
Cash and cash equivalents |
8 |
50.4 |
122.4 |
|
Total current assets |
|
393.8 |
478.4 |
|
Total assets |
|
929.7 |
1,039.3 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Interest-bearing loans and borrowings |
|
192.7 |
204.0 |
|
Employee benefits |
11 |
218.0 |
271.1 |
|
Provisions |
|
6.1 |
2.3 |
|
Derivative financial liabilities |
9 |
3.4 |
1.8 |
|
Non-trade payables |
|
- |
0.3 |
|
Deferred tax liabilities |
|
10.5 |
8.3 |
|
Total non-current liabilities |
|
430.7 |
487.8 |
|
|
|
|
|
|
Interest-bearing loans and borrowings and bank overdrafts |
|
39.0 |
160.9 |
|
Trade and other payables |
|
193.7 |
192.5 |
|
Current tax payable |
|
23.0 |
16.6 |
|
Provisions |
|
8.4 |
5.8 |
|
Derivitative financial liabilities |
9 |
0.6 |
11.0 |
|
Total current liabilities |
|
264.7 |
386.8 |
|
Total liabilities |
|
695.4 |
874.6 |
|
Total net assets |
|
234.3 |
164.7 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
|
71.8 |
71.8 |
|
Share premium |
|
111.7 |
111.7 |
|
Reserves |
|
39.2 |
46.8 |
|
Retained earnings |
|
(27.5) |
(109.5) |
|
Total equity attributable to equity holders of parent Company |
|
195.2 |
120.8 |
|
Non-controlling interests |
|
39.1 |
43.9 |
|
Total equity |
|
234.3 |
164.7 |
Consolidated Statement of Changes in Equity
|
|
Share Capital |
Share premium |
Translation reserve |
Hedging reserve |
Fair value reserve |
Capital redemption reserve |
Other reserves |
Retained earnings (1) |
Total parent equity |
Non-controlling interests |
Total equity |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2016 |
71.8 |
111.7 |
(16.5) |
0.4 |
(1.0) |
35.7 |
11.4 |
(63.7) |
149.8 |
36.6 |
186.4 |
|
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
52.3 |
52.3 |
6.2 |
58.5 |
|
Other comprehensive income |
- |
- |
19.7 |
(2.9) |
- |
- |
- |
(67.5) |
(50.7) |
5.5 |
(45.2) |
|
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
- |
- |
- |
- |
- |
- |
- |
(31.2) |
(31.2) |
(4.4) |
(35.6) |
|
Equity-settled share-based payment transactions |
- |
- |
- |
- |
- |
- |
- |
0.8 |
0.8 |
- |
0.8 |
|
Adjustment arising from change in non-controlling interest |
- |
- |
- |
- |
- |
- |
- |
(0.2) |
(0.2) |
- |
(0.2) |
|
Balance at 31 December 2016 |
71.8 |
111.7 |
3.2 |
(2.5) |
(1.0) |
35.7 |
11.4 |
(109.5) |
120.8 |
43.9 |
164.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2017 |
71.8 |
111.7 |
3.2 |
(2.5) |
(1.0) |
35.7 |
11.4 |
(109.5) |
120.8 |
43.9 |
164.7 |
|
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
107.6 |
107.6 |
6.3 |
113.9 |
|
Other comprehensive income |
- |
- |
(11.0) |
3.0 |
- |
- |
- |
8.2 |
0.2 |
(1.3) |
(4.4) |
|
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
Change in ownership of controlled interest without a change in control |
- |
- |
- |
- |
- |
- |
- |
(3.3) |
(3.3) |
- |
(3.3) |
|
Transfer between reserves |
- |
- |
- |
- |
- |
- |
(0.4) |
(0.4) |
- |
- |
- |
|
Dividends |
- |
- |
- |
- |
- |
- |
- |
(31.4) |
(31.4) |
(9.8) |
(41.2) |
|
Equity-settled share-based payment transactions |
- |
- |
- |
- |
- |
- |
- |
1.7 |
1.7 |
- |
1.7 |
|
Own shares acquired for share incentive schemes |
- |
- |
- |
- |
- |
- |
- |
(0.4) |
(0.4) |
- |
(0.4) |
|
Balance at 31 December 2017 |
71.8 |
111.7 |
(7.8) |
0.5 |
(1.0) |
35.7 |
11.8 |
(27.5) |
195.2 |
39.1 |
234.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows
|
|
Note |
Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|
|
£m |
£m |
|
Operating activities |
|
|
|
|
Profit for the period |
|
113.9
|
58.5 |
|
Adjustments for: |
|
|
|
|
Depreciation |
|
30.6 |
29.5 |
|
Amortisation |
3 |
7.3 |
7.9 |
|
Net financing costs |
5 |
22.5 |
20.0 |
|
Profit on disposal of business |
4 |
(45.7) |
- |
|
Share of profit from associate (net of income tax) |
|
(0.2) |
(0.6) |
|
Profit on sale of property, plant and equipment |
|
0.1 |
(0.4) |
|
Income tax expense |
6 |
21.9 |
29.4 |
|
Non-cash specific adjusting items included in operating profit |
4 |
- |
1.1 |
|
Equity-settled share-based payment expenses |
|
1.7 |
0.8 |
|
Cash generated from operations before changes in working capital and provisions |
|
152.1 |
146.2 |
|
|
|
|
|
|
(Increase)/decrease in trade and other receivables |
|
(0.3) |
(6.1) |
|
(Increase)/decrease in inventories |
|
(4.7) |
1.4 |
|
Increase/(decrease) in trade and other payables |
|
6.3 |
(0.1) |
|
Increase /(decrease) in provisions |
|
(3.0) |
(5.2) |
|
Payments to defined benefit pension plans |
|
(48.9) |
(14.5) |
|
Cash generated from operations |
|
101.5 |
121.7 |
|
|
|
|
|
|
Interest paid |
|
(17.6) |
(15.3) |
|
Income tax paid |
|
(24.5) |
(22.2) |
|
Net cash from operating activities |
|
59.4 |
84.2 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Purchase of property, plant and equipment |
|
(34.4) |
(39.5) |
|
Forward contracts used in net investment hedging |
|
(7.7) |
(12.3) |
|
Purchase of investments |
|
(1.6) |
(1.0) |
|
Proceeds from sale of property, plant and equipment |
|
1.3 |
1.1 |
|
Loan repaid by associate |
|
- |
2.1 |
|
Interest received |
|
1.0 |
2.2 |
|
Disposal of subsidiaries, net of cash disposed |
|
78.1 |
- |
|
Purchase of the stake held by non-controlling interest |
|
(1.5) |
|
|
Net cash from investing activities |
|
35.2 |
(47.4) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Proceeds from exercise of share options |
|
(0.4) |
(0.2) |
|
Increase/(decrease) in borrowings |
8 |
(114.1) |
63.4 |
|
Payment of finance lease liabilities |
8 |
(0.3) |
(0.3) |
|
Dividends paid - to external plc shareholders |
|
(31.4) |
(31.4) |
|
Proceeds from unclaimed dividends |
|
- |
0.2 |
|
Dividends paid to non-controlling interests |
|
(9.8) |
(4.4) |
|
Net cash from financing activities |
|
(156.0) |
27.3 |
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
(61.4) |
64.1 |
|
Cash and cash equivalents at start of period |
|
122.4 |
49.8 |
|
Effect of exchange rate fluctuations on cash held |
|
(10.6) |
8.5 |
|
Cash and cash equivalents at period end(1) |
8 |
50.4 |
122.4 |
1. A reconciliation of cash and cash equivalents to net borrowings is shown in note 8.
Notes to the Consolidated Financial Statements
1. Basis of preparation
The preliminary announcement for the year ended 31 December 2017 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as issued by the International Accounting Standards Board. There has been no significant impact arising from new accounting policies adopted in the year.
The financial information set out in this report does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 31 December 2016. Statutory accounts for the year ended 31 December 2016 have been delivered to the registrar of companies, and those for the year ended 31 December 2017 will be delivered in due course.
The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2017 and 2016.
Going Concern
The Group meets its day-to-day working capital requirements through local banking arrangements underpinned by the Group's £200 million unsecured multi-currency revolving credit facility maturing October 2019. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance and exchange rates, show the Group operating comfortably within its debt financial covenants for the next 12 months.
The current economic climate continues to have an impact on the Group, its customers and suppliers. The Board fully recognises the challenges that lie ahead but, after making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of 18 months from the date of the Annual Report and Accounts. Accordingly, they continue to adopt the going concern basis in preparing the consolidated statements for the year ended 31 December 2017.
Impacts of new accounting standards
IFRS 15 Revenue from Contracts with Customers is effective for periods beginning on or after 1 January 2018 and introduces a new revenue recognition model that requires the transaction price receivable from customers to be allocated between the Group's performance obligations under contracts on a relative stand-alone selling price basis.
The Group has systematically reviewed its customer contracts and its data capture systems capability across the six global business units to assess the impact of the new Standard and ensure compliance.
Based on the Group's review, it is anticipated that there are no significant impacts to the Group as a result of the new Standard. Under IFRS 15 certain arrangements will be presented as reductions in revenue or certain reimbursements from customers currently presented in cost of sales will be presented as revenue. There will be some changes in timing of recognition, however these are not expected to materially impact the profits of the Group. The Group has chosen to apply the Retrospective method to the adoption of the new standard.
The impacts at the Group level based on our preliminary assessment are presented below:
|
|
Revenue as reported |
Revenue restated for IFRS 15 impacts (preliminary assessment) |
||||||
|
|
Six months to 30 June |
Six months to 31 December |
Total 2017 |
Six Months to 30 June |
Six months to 31 December |
Total 2017 |
||
|
£m |
£m |
£m |
£m |
£m |
£m |
|||
|
|
|
|
|
|
|
|
||
|
Third party revenue - total Group |
518.9 |
502.6 |
1,021.5 |
518.8 |
503.6 |
1,022.4 |
||
|
Operating profit - total Group |
61.6 |
58.1 |
119.7 |
61.2 |
58.5 |
119.7 |
||
Non-GAAP measures
Where non-GAAP measures have been referenced these have been identified by an asterisk (*).
2. Disposals
Electro-ceramics:
On 31 March 2017, the Group completed the sale of its UK Electro-ceramics business, comprising the two sites at Ruabon and Southampton. The transaction was structured as a sale of the business, assets and goodwill for a consideration of £47 million on a cash-free, debt-free basis, paid in cash on completion and subject to customary working capital adjustments.
In the year ended 31 December 2016, UK Electro-ceramics generated an operating profit of £6.2 million on revenues of £22.7 million. Gross assets at 31 December 2016 were £6.7 million.
The Group also announced the closure of its US Electro-ceramics business, which formed the remainder of the Group's Electro-ceramics business.
The disposal and closure of the electro-ceramics business reduced the Group's assets and liabilities as follows:
|
|
31 March 2017 |
|
|
£m |
|
Trading net assets of disposal group |
7.4 |
|
Goodwill of disposal group |
5.8 |
|
Transaction costs associated with the disposal |
6.9 |
|
|
|
|
Total consideration |
46.9 |
|
|
|
|
Gain on disposal |
26.8 |
The disposal group was included in the Technical Ceramics operating segment.
Global Rotary Transfer Systems Business:
On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France. The sale valued the business at €40.0 million on a cash-free, debt-free basis, with consideration paid in cash on completion, subject to customary closing working capital adjustments.
In the year to 31 December 2016, the Rotary business generated £3.2 million of operating profit on £15.5 million of sales. Gross assets at 31 December 2016 were £5.9 million.
The disposal and closure of the rotary transfer systems business reduced the Group's assets and liabilities as follows:
|
|
31 March 2017 |
|
|
£m |
|
Trading net assets of disposal group |
3.5 |
|
Goodwill of disposal group |
7.1 |
|
Transaction costs associated with the disposal |
3.1 |
|
|
|
|
Total consideration |
32.6 |
|
|
|
|
Gain on disposal |
18.9 |
The disposal group was included in the Electrical Carbon operating segment.
2016
During 2016 the Group disposed of its remaining 28.77% shareholding in Assam Carbon Products Limited for nil consideration. This shareholding was held at nil value and, as a result, there is no profit or loss on disposal. There were no other acquisitions or disposals during 2016.
3. Segment information
The Group reports as two Divisions and six global business units, which have been identified as the Group's reportable operating segments. These have been identified on the basis of internal management reporting information that is regularly reviewed by the Group's Board of Directors (the Chief Operating Decision Maker) in order to allocate resources and assess performance.
The information presented below represents the operating segments of the Group.
|
|
Thermal Ceramics |
Molten Metal Systems |
Thermal Products Division |
Electrical Carbon |
Seals and Bearings |
Technical Ceramics |
Carbon and Technical Ceramics Division |
Composites and Defence Systems |
Segment totals |
Corporate costs |
Group |
|
|
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
Year ended 31 December 2017 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers |
426.2 |
46.9 |
473.1 |
157.1 |
113.2 |
257.1 |
527.4 |
21.0 |
1,021.5 |
- |
1,021.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisional EBITA2 |
56.9 |
7.0 |
63.9 |
16.7 |
17.5 |
28.3 |
62.5 |
(1.1) |
125.3 |
|
125.3 |
|
Corporate costs |
|
|
|
|
|
|
|
|
|
(5.6) |
(5.6) |
|
Group EBITA2 |
|
|
|
|
|
|
|
|
|
|
119.7 |
|
Restructuring costs and other items |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Group headline operating profit2 |
|
|
|
|
|
|
|
|
|
|
119.7 |
|
Amortisation of intangible assets |
(1.8) |
(0.2) |
(2.0) |
(0.5) |
(0.3) |
(4.5) |
(5.3) |
|
(7.3) |
- |
(7.3) |
|
Operating profit before specific adjusting items |
|
|
|
|
|
|
|
|
|
|
112.4 |
|
Specific adjusting items included in operating profit 1 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
45.7 |
45.7 |
|
Operating profit/(loss) |
55.1 |
6.8 |
61.9 |
16.2 |
17.2 |
23.8 |
57.2 |
(1.1) |
118.0 |
40.1 |
158.1 |
|
Finance income |
|
|
|
|
|
|
|
|
|
|
1.8 |
|
Finance expense |
|
|
|
|
|
|
|
|
|
|
(24.3) |
|
Share of profit of associate (net of income tax) |
|
|
|
|
|
|
|
|
|
|
0.2 |
|
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
135.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
392.1 |
40.0 |
432.1 |
147.1 |
86.7 |
178.0 |
411.8 |
9.8 |
853.7 |
76.1 |
929.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
86.7 |
7.0 |
93.7 |
31.3 |
19.7 |
43.2 |
94.2 |
5.1 |
193.0 |
502.4 |
695.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment capital expenditure |
10.5 |
1.8 |
12.3 |
6.9 |
3.5 |
11.0 |
21.4 |
0.7 |
34.4 |
- |
34.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment depreciation |
12.3 |
1.9 |
14.2 |
4.7 |
4.5 |
6.6 |
15.8 |
0.6 |
30.6 |
- |
30.6 |
1. Details of specific adjusting items are given in note 4 to the financial statements.
2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted measures can be found on pages 9 to 13.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thermal Ceramics |
Molten Metal Systems |
Thermal Products Division |
Electrical Carbon |
Seals and Bearings |
Technical Ceramics |
Carbon and Technical Ceramics Division |
Composites and Defence Systems |
Segment totals |
Corporate costs |
Group |
|
|
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
Year ended 31 December 2016 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers |
413.3 |
43.5 |
456.8 |
156.2 |
97.7 |
248.1 |
502.0 |
30.4 |
989.2 |
- |
989.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisional EBITA2 |
55.0 |
6.7 |
61.7 |
19.7 |
14.2 |
26.6 |
60.5 |
1.1 |
123.3 |
- |
123.3 |
|
Corporate costs |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(5.4) |
(5.4) |
|
Group EBITA2 |
|
|
|
|
|
|
|
|
|
|
117.9 |
|
Restructuring costs and other items |
0.1 |
- |
0.1 |
(0.1) |
0.1 |
- |
- |
0.1 |
0.2 |
(1.2) |
(1.0) |
|
Group headline operating profit2 |
|
|
|
|
|
|
|
|
|
|
116.9 |
|
Amortisation of intangible assets |
(1.5) |
(0.1) |
(1.6) |
(0.4) |
(0.3) |
(4.2) |
(4.9) |
(1.4) |
(7.9) |
- |
(7.9) |
|
Operating profit before specific adjusting items |
|
|
|
|
|
|
|
|
|
|
109.0 |
|
Specific adjusting items included in operating profit 1 |
- |
- |
- |
- |
- |
- |
- |
(8.5) |
(8.5) |
6.8 |
(1.7) |
|
Operating profit/(loss) |
53.6 |
6.6 |
60.2 |
19.2 |
14.0 |
22.4 |
55.6 |
(8.7) |
107.1 |
0.2 |
107.3 |
|
Finance income |
|
|
|
|
|
|
|
|
|
|
2.3 |
|
Finance expense |
|
|
|
|
|
|
|
|
|
|
(22.3) |
|
Loss on disposal of business |
|
|
|
|
|
|
|
|
|
|
- |
|
Share of profit of associate (net of income tax) |
|
|
|
|
|
|
|
|
|
|
0.6 |
|
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
87.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
417.8 |
42.2 |
460.0 |
154.9 |
86.1 |
188.1 |
429.1 |
15.8 |
904.9 |
134.4 |
1,039.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
88.5 |
7.5 |
96.0 |
30.0 |
18.2 |
37.0 |
85.2 |
7.9 |
189.1 |
685.5 |
874.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment capital expenditure |
17.7 |
2.1 |
19.8 |
8.3 |
4.4 |
6.5 |
19.2 |
0.5 |
39.5 |
- |
39.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment depreciation |
10.8 |
1.7 |
12.5 |
4.9 |
4.3 |
7.3 |
16.5 |
0.5 |
29.5 |
- |
29.5 |
1. Details of specific adjusting items are given in note 4 to the financial statements.
2. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted measures can be found on pages 9 to 13.
Segment revenue by geography
|
|
Revenue from |
Non-current assets (excluding |
||
|
|
2017 £m |
|||
|
USA |
369.5 |
342.5 |
198.0 |
215.0 |
|
China |
92.8 |
82.9 |
64.5 |
66.1 |
|
Germany |
70.0 |
74.5 |
42.0 |
50.5 |
|
UK (the Group's country of domicile) |
57.7 |
67.6 |
117.1 |
120.6 |
|
France |
29.1 |
31.2 |
17.0 |
14.9 |
|
Other Asia, Australasia, Middle East and Africa |
193.0 |
186.2 |
49.3 |
50.8 |
|
Other Europe |
141.7 |
140.8 |
23.5 |
21.3 |
|
Other North America |
33.7 |
31.6 |
5.6 |
5.6 |
|
South America |
34.0 |
31.9 |
9.5 |
10.0 |
|
|
1,021.5 |
989.2 |
526.5 |
554.8 |
Revenue from external customers is based on geographic location of the end-customer. Segment assets are based on geographical location of the assets. No customer represents greater than 10% of revenue.
Segment revenue by end market
|
|
|
|
||
|
Industrial |
|
|
491.1 |
449.2 |
|
Transportation |
|
|
222.9 |
214.3 |
|
Petrochemical |
|
|
85.5 |
84.2 |
|
Energy |
|
|
63.2 |
66.2 |
|
Security and defence |
|
|
51.4 |
62.6 |
|
Electronics |
|
|
57.2 |
57.2 |
|
Healthcare |
|
|
50.2 |
55.5 |
|
|
|
|
1,021.5 |
989.2 |
Intercompany sales to other segments
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Intercompany sales to other segments |
0.5 |
0.1 |
0.1 |
0.1 |
0.6 |
0.2 |
1.3 |
1.0 |
1.4 |
0.4 |
0.2 |
0.2 |
2.9 |
1.6 |
- |
- |
|
|
||||||||||||||||
4. Specific adjusting items
In the consolidated Income statement the Group presents specific adjusting items separately. In the judgment of the Directors, due to the nature and value of these items they should be disclosed separately from the underlying results of the Group to allow the reader to obtain a proper understanding of the financial information and the best indication of underlying performance of the Group.
|
|
Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|
£m |
£m |
|
Specific adjusting items: |
|
|
|
Net pension settlement credit |
- |
6.8 |
|
Impairment of intangible assets |
- |
(8.5) |
|
Net profit on disposal of business |
45.7 |
- |
|
Total specific adjusting items before income tax |
45.7 |
(1.7) |
|
Income tax (charge)/credit from specific adjusting items |
0.9 |
(2.8) |
|
Income tax (charge)/credit resulting from US tax reform rate change and mandatory repatriation charge |
4.1 |
- |
|
Total specific adjusting items after income tax |
50.7 |
(4.5) |
2017:
Net profit on disposal of business:
On 31 March 2017, the Group completed the sale of its UK Electro-Ceramics business, comprising the two sites at Ruabon and Southampton. The Group also announced the closure of its US Electro-Ceramics business, which formed the remainder of the Group's Electro-Ceramics business.
The Group reflected a profit on disposal of £26.8 million associated with this transaction. A deferred tax asset of £1.5 million was recognised in connection with the closure of the US business.
On 31 March 2017, the Group completed the sale of its global Rotary Transfer Systems. The business is principally located at two manufacturing sites; Antweiler, Germany and Chalon, France.
The Group reflected a profit on disposal of £18.9 million associated with this transaction. An income tax charge of £0.6 million was recognised in respect of this disposal.
US Tax Cuts and Jobs Act:
As a consequence of the enactment of H.R.1 commonly referred to as the Tax Cuts and Jobs Act in the US a credit of £4.1 million was recognised. This comprised of the revaluation of tax balances to reflect the reduction in the federal tax rates offset by an income tax charge for mandatory repatriation tax for overseas subsidiaries of US companies.
2016:
Net pension settlement credit
The Group has completed the final termination and payment of all earned benefits for one of its North American defined benefit plans.
The Group has also completed a one-time lump-sum cash out payment to certain former, deferred and vested employees of the Morgan US Employees' Retirement Plan in settlement of the benefits promised by the Group.
As a result of these changes the Group has recognised a net pension settlement credit of £6.8 million, after deduction of transaction costs. An income tax charge of £2.8 million was recognised in respect of the net pension settlement credit.
Impairment of intangible assets
As a result of the continued reduction in demand in the defence market, a review of the carrying value of the remaining intangible assets of Composites and Defence Systems resulted in an impairment charge of £8.5 million, relating to a full impairment of the Composites and Defence Systems technology intangible asset. This impairment was calculated by looking at the fair value of the assets less cost of disposal.
5. Net finance and income expense
|
|
Year ended 31 December 2017 |
Year ended 31 December 2016 |
|
|
£m |
£m |
|
Recognised in profit or loss |
|
|
|
Amounts derived from financial instruments |
0.2 |
0.3 |
|
Interest income on bank deposits measured at amortised cost |
1.6 |
2.0 |
|
Finance income |
1.8 |
2.3 |
|
|
|
|
|
Interest expense on financial liabilities measured at amortised cost |
(17.4) |
(15.2) |
|
Net interest on IAS 19 obligations |
(6.9) |
(7.1) |
|
Finance expense |
(24.3) |
(22.3) |
|
Net financing costs recognised in profit or loss |
(22.5) |
(20.0) |
|
|
|
|
|
Recognised directly in equity |
|
|
|
Cash flow hedges: |
|
|
|
Effective portion of changes in fair value of cash flow hedges |
2.6 |
(3.7) |
|
Transferred to profit or loss |
0.4 |
0.8 |
|
|
|
|
|
Effective portion of change in fair value of net investment hedge |
- |
(17.7) |
|
Foreign currency translation differences for foreign operations |
(11.0) |
37.4 |
|
|
(8.0) |
16.8 |
|
|
|
|
6. Taxation - Income tax expense
Taxation - Income tax expense
Recognised in the Income statement
|
|
|
|
Year ended 31 December 2017
£m |
Year ended 31 December 2016
£m |
|
Current tax |
|
|
|
|
|
Current year |
|
|
23.5 |
27.8 |
|
Adjustments for prior years |
|
|
0.1 |
(3.3) |
|
|
|
|
23.6 |
24.5 |
|
Deferred tax |
|
|
|
|
|
Current year |
|
|
(1.7) |
1.6 |
|
Adjustments for prior years |
|
|
- |
3.3 |
|
|
|
|
(1.7) |
4.9 |
|
|
|
|
|
|
|
Total income tax expense in income statement |
|
|
21.9 |
29.4 |
Reconciliation of effective tax rate
|
|
||||
|
Profit before tax |
135.8 |
|
87.9 |
|
|
|
|
|
|
|
|
Income tax using the domestic corporation tax rate |
26.1 |
19.2 |
17.6 |
20.0 |
|
Effect of different tax rates in other jurisdictions |
8.2 |
6.0 |
8.8 |
10.0 |
|
Local taxes including withholding tax suffered |
4.5 |
3.3 |
3.3 |
3.7 |
|
Impact of US Tax Cuts and Jobs Act |
(4.1) |
(3.0) |
|
|
|
Permanent differences |
0.8 |
0.6 |
1.5 |
1.7 |
|
Non taxable disposals |
(2.9) |
(2.1) |
|
|
|
Utilisation of UK unrecognised capital losses on disposal of UK Electro Ceramics business |
(6.2) |
(4.6) |
|
|
|
Movements related to unrecognised temporary differences |
(3.9) |
(2.9) |
(1.5) |
(1.7) |
|
Adjustments in respect of prior years |
0.1 |
0.1 |
- |
- |
|
Other |
(0.7) |
(0.5) |
(0.3) |
(0.3) |
|
|
21.9 |
16.1 |
29.4 |
33.4 |
|
|
|
|
|
|
|
Income tax recognised directly in equity |
|
|
|
|
|
Tax effect on components of other comprehensive income: |
|
|
|
|
|
Deferred tax associated with defined benefit schemes |
1.8 |
|
(0.6) |
|
|
Total tax recognised directly in equity |
1.8 |
|
(0.6) |
|
The effective rate of tax before specific adjusting items is 29.9% (2016: 29.7%).
7. Earnings per share
The calculation of basic/diluted earnings per share from continuing operations at 31 December 2017 was based on the net profit attributable to equity shareholders of £107.6 million (2016: £52.3 million, 2015: £33.9 million), and a weighted average number of shares outstanding during the year of 285.0 million (2016: 284.9 million, 2015: 285.1 million). The calculation of the weighted average number of shares excludes the shares held by The Morgan General Employee Benefit Trust, on which the dividends are waived.
Headline earnings per ordinary share* is defined as operating profit adjusted to exclude specific adjusting items and amortisation of intangible assets, plus share of profit of associate less net financing costs, income tax expense and non-controlling interests, divided by the weighted average number of ordinary shares during the period. This measure of earnings is shown because the Directors consider that it gives a better indication of headline performance.
The diluted earnings per share calculation takes into account the dilutive effect of share incentives. The diluted, weighted average number of shares is 286.7 million (2016: 285.1 million). Diluted earnings per share is 37.5 pence (2016: 18.3 pence).
|
|
Year ended 31 December 2017
|
Year ended 31 December 2016
|
|
|
£m |
£m |
|
|
|
|
|
Profit for the period attributable to equity shareholders |
107.6 |
52.3 |
|
Specific adjusting items |
(45.7) |
1.7 |
|
Amortisation of intangible assets |
7.3 |
7.9 |
|
Tax effect of the above |
(5.0) |
2.8 |
|
Non-controlling interests' share of the above adjustments |
- |
- |
|
Adjusted profit for the period |
64.2 |
64.7 |
|
|
|
|
|
|
|
|
|
|
Year ended 31 December 2017
|
Year ended 31 December 2016
|
|
|
Pence |
Pence |
|
|
|
|
|
Earnings per Ordinary share |
37.8p |
18.4p |
|
Specific adjusting items |
(16.0)p |
0.6p |
|
Amortisation of intangible assets |
2.5p |
2.7p |
|
Tax effect of the above |
(1.8)p |
1.0p |
|
Non-controlling interests' share of the above adjustments |
- |
- |
|
Headline earnings per share(1) |
22.5p |
22.7p |
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted measures can be
found on pages 9 to 13.
8. Cash and cash equivalents reconciled to net debt
|
|
Year ended 31 December 2017
|
Year ended 31 December 2016
|
|
|
£m |
£m |
|
|
|
|
|
Bank balances |
44.7 |
61.4 |
|
Cash deposits |
5.7 |
61.0 |
|
Cash and cash equivalents |
50.4 |
122.4 |
|
|
|
|
|
Reconciliation of cash and cash equivalents to net debt(1)
|
|
|
|
|
Year ended December 2017
|
Year ended 30 December 2016
|
|
|
£m |
£m |
|
|
|
|
|
Opening borrowings |
(364.9) |
(265.8) |
|
(Increase)/decrease in borrowings |
114.1 |
(63.4) |
|
Payment of finance lease liabilities |
0.3 |
0.3 |
|
Effect of movements in foreign exchange on borrowings |
18.8 |
(36.0) |
|
Closing borrowings |
(231.7) |
(364.9) |
|
Cash and cash equivalents |
50.4 |
122.4 |
|
Closing net debt(1) |
(181.3) |
(242.5) |
1. Definitions of these non-GAAP measures can be found in the glossary of terms on page 33, reconciliations of the statutory results to the adjusted measures can be
found on pages 9 to 13.
9. Financial risk management
|
Fair Values |
|
|
|
|
|
|
|
|
The fair values of financial assets and liabilities, together with the carrying amounts shown in the Balance sheet, are as follows: |
|||||||
|
|
Year ended 31 December 2017 |
|
|
Year ended 31 December 2016 |
||
|
|
Carrying Amount |
Fair value
|
|
|
Carrying Amount |
Fair value
|
|
|
£m |
£m |
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
Financial assets and liabilities at amortised cost |
|
|
|
|
|
|
|
4.32% Euro Senior Notes 2017 |
- |
- |
|
|
(17.3) |
(17.5) |
|
6.12% US Dollar Senior Notes 2017 |
- |
- |
|
|
(142.1) |
(146.3) |
|
6.26% US Dollar Senior Notes 2019 |
(55.6) |
(57.9) |
|
|
(60.8) |
(65.4) |
|
1.18% Euro Senior Notes 2023 |
(22.2) |
(21.8) |
|
|
(21.3) |
(21.0) |
|
3.17% US Dollar Senior Notes 2023 |
(11.2) |
(10.7) |
|
|
(12.2) |
(11.7) |
|
1.55% Euro Senior Notes 2026 |
(22.3) |
(21.5) |
|
|
(21.4) |
(20.8) |
|
3.37% US Dollar Senior Notes 2026 |
(72.1) |
(67.4) |
|
|
(79.0) |
(73.1) |
|
1.74% Euro Senior Notes 2028 |
(8.9) |
(8.5) |
|
|
(8.6) |
(8.3) |
|
Bank and other loans |
(38.8) |
(38.8) |
|
|
(1.3) |
(1.3) |
|
Obligations under finance leases |
(0.6) |
(0.6) |
|
|
(0.9) |
(0.9) |
|
Trade and other payables |
(97.9) |
(97.9) |
|
|
(100.5) |
(100.5) |
|
Loans and receivables |
174.7 |
174.7 |
|
|
184.5 |
184.5 |
|
Cash and cash equivalents |
50.4 |
50.4 |
|
|
122.4 |
122.4 |
|
|
(104.5) |
(100.0) |
|
|
(158.5) |
(159.9) |
|
|
|
|
|
|
|
|
|
Available-for-sale financial instruments |
|
|
|
|
|
|
|
Available-for-sale financial assets |
0.9 |
0.9 |
|
|
0.5 |
0.5 |
|
|
|
|
|
|
|
|
|
Derivatives and other items at fair value |
|
|
|
|
|
|
|
Forward exchange contracts used for hedging |
0.4 |
0.4 |
|
|
(2.0) |
(2.0) |
|
Cross currency swaps |
- |
- |
|
|
(7.2) |
(7.2) |
|
|
(103.2) |
(98.7) |
|
|
(167.2) |
(168.6) |
The 4.32% Senior notes were repaid on 30 June 2017, the 6.12% Senior notes were repaid in December 2017.
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the preceding table.
Equity securities
Fair value is based on quoted market prices at the balance sheet date.
Derivatives
Forward exchange contracts are marked to market either using listed market prices or by discounting the contractual forward price and deducting the current spot rate.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows. The interest rates used to determine the fair value of loans and borrowings are 1.6-4.2% (2016: 1.1-4.2%) and finance leases 4.2% (2016: 4.1%).
Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect changes in interest rates.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value.
Cash and cash equivalents, trade and other payables and loans and receivables
The Group has disclosed the fair value of cash and cash equivalents, current loans and receivables and current payables at their carrying amount, given their notional amount is deemed to be their fair value.
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
|
Year ended 31 December 2017 |
|
Year ended 31 December 2016 |
||||
|
|
Level 1 |
Level 2 |
Level 1 |
|
Level 1 |
Level 2 |
Total |
|
|
£m |
£m |
£m |
|
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets |
0.9 |
- |
0.9 |
|
0.5 |
- |
0.5 |
|
Derivative financial assets |
- |
1.0 |
1.0 |
|
- |
2.1 |
2.1 |
|
|
0.9 |
1.0 |
1.9 |
|
0.5 |
2.1 |
2.6 |
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities |
- |
0.6 |
0.6 |
|
- |
11.3 |
11.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below analyses financial instruments disclosed at fair value, by valuation method: |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December 2017 |
|
Year ended 31 December 2016 |
||||
|
|
Level 1 |
Level 2 |
Total |
|
Level 1 |
Level 2 |
Total |
|
|
£m |
£m |
£m |
|
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
4.32% Euro Senior Notes 2017 |
- |
- |
- |
|
- |
(17.5) |
(17.5) |
|
6.12% US Dollar Senior Notes 2017 |
- |
- |
- |
|
- |
(146.3) |
(146.3) |
|
6.26% US Dollar Senior Notes 2019 |
- |
(57.9) |
(57.9) |
|
- |
(65.4) |
(65.4) |
|
1.18% Euro Senior Notes 2023 |
- |
(21.8) |
(21.8) |
|
- |
(21.0) |
(21.0) |
|
3.17% US Dollar Senior Notes 2023 |
- |
(10.7) |
(10.7) |
|
- |
(11.7) |
(11.7) |
|
1.55% Euro Senior Notes 2026 |
- |
(21.5) |
(21.5) |
|
- |
(20.8) |
(20.8) |
|
3.37% US Dollar Senior Notes 2026 |
- |
(67.4) |
(67.4) |
|
- |
(73.1) |
(73.1) |
|
1.74% Euro Senior Notes 2028 |
- |
(8.5) |
(8.5) |
|
- |
(8.3) |
(8.3) |
|
Obligations under finance leases |
- |
(0.6) |
(0.6) |
|
- |
(0.9) |
(0.9) |
|
|
- |
(188.4) |
(188.4) |
|
- |
(365.0) |
(365.0) |
|
|
|
|
|
|
|
|
|
There have been no transfers between level 1 and level 2 during 2017 and 2016 and there were no level 3 financial instruments in either 2017 or 2016.
10. Employee benefits
|
|
31 December 2017 UK |
31 December 2017 USA
|
31 December 2017 Europe
|
31 December 2017 Rest of World |
31 December 2017 Total
|
|
|
£m |
£m |
£m |
£m |
£m |
|
Pension plans and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of unfunded defined benefit obligations |
- |
(8.3) |
(35.2) |
(2.7) |
(46.2) |
|
Present value of funded defined benefit obligations |
(593.7) |
(138.4) |
(2.0) |
(10.0) |
(744.1) |
|
Fair value of plan assets |
427.7 |
135.6 |
0.5 |
8.5 |
572.3 |
|
Net obligations |
(166.0) |
(11.1) |
(36.7) |
(4.2) |
(218.0) |
|
|
|
|
|
|
|
|
Movements in present value of defined benefit obligation |
|
|
|
|
|
|
At 1 January 2017 |
(588.7) |
(155.9) |
(37.9) |
(12.3) |
(794.8) |
|
Current service cost |
(2.0) |
(0.1) |
(0.7) |
(1.7) |
(4.5) |
|
Interest cost |
(14.9) |
(6.0) |
(0.6) |
(0.2) |
(21.7) |
|
Actuarial gains/(losses) |
|
|
|
|
|
|
Experience gains/(losses) on plan obligations |
(3.0) |
(1.0) |
0.5 |
0.4 |
(3.1) |
|
Changes in financial assumptions - gain/(loss) |
(16.8) |
(7.7) |
0.1 |
0.1 |
(24.3) |
|
Changes in demographic assumptions - gain/(loss) |
9.2 |
1.3 |
- |
- |
10.5 |
|
Benefits paid |
23.0 |
8.9 |
1.3 |
1.0 |
34.2 |
|
Contributions by members |
(0.5) |
- |
- |
- |
(0.5) |
|
Past service costs / (credits) |
- |
- |
- |
- |
- |
|
Curtailments and settlements |
- |
- |
- |
- |
- |
|
Acquisitions/Disposals |
- |
- |
1.6 |
- |
1.6 |
|
Exchange adjustments |
- |
13.8 |
(1.5) |
- |
12.3 |
|
At 31 December 2017 |
(593.7) |
(146.7) |
(37.2) |
(12.7) |
(790.3) |
|
|
|
|
|
|
|
|
Movements in fair value of plan assets |
|
|
|
|
|
|
At 1 January 2017 |
408.2 |
106.9 |
0.4 |
8.2 |
523.7 |
|
Interest on plan assets |
10.4 |
4.2 |
0.1 |
0.1 |
14.8 |
|
Actuarial gains/(losses) |
19.8 |
7.5 |
0.1 |
(0.5) |
26.9 |
|
Contributions by employer |
12.1 |
37.0 |
1.2 |
1.5 |
51.8 |
|
Contributions by members |
0.5 |
- |
- |
- |
0.5 |
|
Administration expenses |
(0.3) |
- |
- |
- |
(0.3) |
|
Benefits paid |
(23.0) |
(8.9) |
(1.3) |
(1.0) |
(34.2) |
|
Curtailments and settlements |
- |
- |
- |
- |
- |
|
Acquisitions/Disposals |
- |
- |
- |
- |
- |
|
Exchange adjustments |
- |
(11.1) |
- |
0.2 |
(10.9) |
|
At 31 December 2017 |
427.7 |
135.6 |
0.5 |
8.5 |
572.3 |
|
Actual return on assets |
30.2 |
11.7 |
0.2 |
(0.4) |
41.7 |
|
|
|
|
|
|
|
|
Principal actuarial assumptions at 31 December 2017 were: |
|
|
|
|
|
|
Discount rate |
2.38 |
3.65 |
1.60 |
3.20 |
|
|
Inflation (UK: RPI/CPI) |
3.12/2.02 |
n/a |
1.70 |
n/a |
|
|
|
|
|
|
|
|
The Group expects to contribute £16.3 million to its pension schemes in 2018.
The fair values of the assets were as follows:
|
|
31 December 2017 UK |
31 December 2017 USA
|
31 December 2017 Europe
|
31 December 2017 Rest of World |
31 December 2017 Total
|
|
|
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
Equities and growth assets |
157.7 |
6.8 |
- |
- |
164.5 |
|
Bonds and LDI |
87.3 |
124.0 |
- |
- |
211.3 |
|
Matching insurance policies |
181.3 |
- |
0.5 |
6.0 |
187.8 |
|
Other |
1.4 |
4.8 |
- |
2.5 |
8.7 |
|
Total |
427.7 |
135.6 |
0.5 |
8.5 |
572.3 |
|
|
31 December 2016 UK |
31 December 2016 USA
|
31 December 2016 Europe
|
31 December 2016 Rest of World |
31 December 2016 Total
|
|
|
£m |
£m |
£m |
£m |
£m |
|
Pension plans and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of unfunded defined benefit obligations |
- |
(9.4) |
(35.9) |
(2.5) |
(47.8) |
|
Present value of funded defined benefit obligations |
(588.7) |
(146.5) |
(2.0) |
(9.8) |
(747.0) |
|
Fair value of plan assets |
408.2 |
106.9 |
0.4 |
8.2 |
523.7 |
|
Net obligations |
(180.5) |
(49.0) |
(37.5) |
(4.1) |
(271.1) |
|
|
|
|
|
|
|
|
Principal actuarial assumptions at 31 December 2016 were: |
% |
% |
% |
% |
|
|
Discount rate |
2.62 |
4.16 |
1.60 |
2.90 |
|
|
Inflation (UK: RPI/CPI) |
3.20/2.10 |
n/a |
1.70 |
n/a |
|
|
Glossary
|
This information is provided by RNS
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