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RNS
Devro PLC  -  DVO   

Final Results

Released 07:00 06-Mar-2017

RNS Number : 5295Y
Devro PLC
06 March 2017
 

6 March 2017

Devro plc

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

 

 

Devro plc ("Devro" or the "group"), one of the world's leading manufacturers of collagen products for the food industry, announces its results for the year ended 31 December 2016.

 

Financial highlights

 

2016

Unaudited

2015

 

Revenue

£241.1m

£230.2m

Underlying EBITDA*

£58.8m

£49.7m

Underlying operating profit*

£38.1m

£33.3m

Underlying profit before tax*

£28.9m

£29.2m

Underlying basic earnings per share*

13.3p

15.4p

Total dividend per share

8.8p

8.8p




Statutory reported results



Operating profit

£15.4m

£19.2m

Profit before tax

£6.2m

£15.1m

Basic earnings per share

1.3p

8.8p

 

*     Underlying figures are stated before exceptional items (see Alternative Performance Measures section of Financial Review for definition, explanation and reconciliation to equivalent statutory measures)

Full year highlights

·      Revenue increased 4.7% year on year

Exchange rate benefits offset lower sales volumes

·      Underlying EBITDA £9.1 million ahead of prior year

Lower input prices and exchange rate benefits more than compensated for reduced year-on-year sales volumes

·      Capital investment projects now complete

Old USA plant closed in June 2016 as planned

Commissioning and start-up of new plants in China and USA now complete

Related exceptional costs of £20.7 million for 2016, in line with expectations and now ended

·      Devro 100 programme initiated to accelerate delivery of revenue and profit growth

Focuses on growing revenue through improving our sales capabilities, further improving manufacturing efficiencies to reduce unit costs and introducing the next generation of differentiated products

Related exceptional costs of £2.0 million for 2016; further exceptional costs expected of between £10-12 million over the next two years, plus capital investments of between £7-8 million, with expected returns of between £13-16 million per annum by 2019

 

Peter Page, Chief Executive of Devro, commented

 

"Whilst volumes declined by 6.6% year-on-year, underlying operating profit increased due to lower input prices and exchange rate benefits.  The decline in sales volumes in 2016 was due to a series of region-specific factors. We have taken actions to ensure a return to growth in 2017 and beyond. 

 

"Following the significant capital investments we have made in recent years, we are now focused on using our high-technology assets to supply a growing global market.  Overall demand remains strong and we continue to see many attractive opportunities to grow the business. 

"In 2017, we will focus on increasing revenue to regain market share, achieving cost savings across our global operations and commencing the launch of new, differentiated products, as part of the Devro 100 programme.  The further exceptional costs of this programme are expected to be between £10-12 million over the next two years, plus capital investments of between £7-8 million, with expected benefits of between £13-16 million per annum by 2019. Over this period there will also be a focus on reducing net debt levels.  Combined with our upgraded global manufacturing asset base, we are confident this will deliver long term growth."

 

This announcement contains inside information.

Contacts

Peter Page

Chief Executive

020 3727 1340

Rutger Helbing

Group Finance Director

020 3727 1340

Richard Mountain/Nick Hasell

FTI Consulting

020 3727 1340

 

There will be a presentation today at 9.00am for investors and analysts at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD.  A live audio feed will be available to those unable to attend this meeting in person. To connect to the webcast facility, please go to the following link: http://view-w.tv/943-1289-17842/en approximately 10 minutes before the start of the briefing (8.50am).  The presentation will also be available on the company's website. 

 

CHAIRMAN'S STATEMENT

 

Global demand for collagen casings and related products grew by approximately 4% in 2016. Regional variations led to a range of opportunities and challenges and the higher levels of capacity in the market provided customers with a range of options of varying quality and functionality.

 

Devro's reported revenues were 4.7% above the prior year.  This includes exchange rate movements, which were particularly beneficial in the second half.  As previously guided, Devro's revenues in constant currency declined 6.9% in the year.  Volumes in Latin America, Continental Europe, Russia and China reduced, although China returned to year-on-year growth in the final quarter. The performance in these areas was partially offset by increased volumes, and stable or increasing local currency average sales prices, in Japan, South East Asia and the UK & Ireland.

 

After a three-year transformation period we achieved a major milestone in 2016 with the completion, as planned, of our two capital investment projects in the USA and China. These new plants are now an integral part of our global manufacturing footprint.

 

In our November 2016 trading update we highlighted that our anticipated sales volumes for 2017 will result in an under-utilisation of available global capacity.  As a consequence the Board decided to accelerate and implement more extensively the next stage of the group's strategic development.  This programme, known as Devro 100, focuses on growing revenue through improving our sales capabilities, further improving manufacturing efficiencies to reduce unit costs and introducing the next generation of differentiated products. 

 

To underpin the Devro 100 programme, a significant change in the group's organisation structure was implemented in the fourth quarter, under which we moved from local sales and manufacturing responsibilities to three sales-focused commercial regions, supported by global business development and global supply chain operations. The Board believes this will result in a strong focus on areas of future profit growth, faster development of new products and greater use of local operational expertise for the benefit of Devro worldwide by sharing best practices.

 

Given the extensive nature of this programme there will be a significant level of incremental costs during 2017 and 2018 which will be reported separately as exceptional items.

 

FINANCIAL HIGHLIGHTS

 

Underlying operating profit increased 14% to £38.1 million (2015: £33.3 million), as it benefited from currency movements and lower input prices, which more than offset the effects of lower sales volumes.

 

After including exceptional items, operating profit was £15.4 million (2015: £19.2 million).  A breakdown of exceptional items, together with a more detailed explanation of the group's financial performance, is set out in the Financial Review below.

 

BOARD

 

Rutger Helbing joined the Board in April 2016 as Group Finance Director following Simon Webb's retirement in March 2016.

 

In December 2016, Malcolm Swift agreed to join our Board as a non-executive director with effect from 26 April 2017. At this time, Paul Neep will stand down after 12 years as a non-executive director.  I am extremely grateful for his significant contribution.

 

EMPLOYEES

 

The expertise, experience and commitment of so many people who work in Devro are key to the future success of the business. 2016 was a demanding year for all colleagues as we progressed with the transformation of the business. On behalf of the Board, I thank all employees for their contribution.

 

I am particularly impressed by the way that new employees, in China and elsewhere, have integrated and strengthened our capabilities in many areas.

 

DIVIDEND

 

The Board is proposing to maintain the final dividend at 6.1p per share (2015: 6.1p) bringing the total for the year to 8.8p per share (2015: 8.8p). Subject to shareholder approval at the Annual General Meeting in April, the dividend will be paid on 12 May 2017, to those shareholders on the register at 31 March 2017.

 

RETURN ON INVESTMENTS

 

Having completed the transformation of our global manufacturing footprint, we are now focused on the need to deliver a return on our investments at the same time as generating strong cash flow for the reduction of debt. The actions planned under the Devro 100 programme will accelerate these returns.  However we do recognise that the further exceptional items in 2017 and 2018 represent an additional investment from our investors.  We are convinced that, with the quality of our new production facilities and strengthened senior management capability across the group, combined with a new global organisation structure, Devro is well-positioned to grow sales and reduce costs over the coming years. Our markets are dynamic and continue to grow, providing good opportunities for Devro to create long-term value for our shareholders.

 

 

Gerard Hoetmer

Chairman

 

 

CHIEF EXECUTIVE'S REVIEW

 

Following the significant capital investments we have made in recent years, our objective is to use our high-technology assets to supply a growing global market with differentiated quality products, whilst reducing costs to levels substantially lower than has historically been possible with legacy facilities.

 

MARKETS OVERVIEW

 

Devro supplies collagen casings, gel and film to over 100 countries worldwide. Current estimates are that this market is growing by 2-4% per annum. After a period of contraction in China in 2015, demand in this market returned to growth in 2016.

 

Markets have become increasingly competitive and customers are ever more demanding. Our markets are dynamic, presenting real opportunities for growth and development.

 

STRATEGY

 

Devro's three-part strategy focuses on revenue growth, manufacturing efficiency and product differentiation.  The Devro 100 programme will accelerate progress across all three elements, as outlined below.

 

Revenue growth

 

Reported revenue increased 4.7%, strongly impacted by movements in exchange rates, particularly during the second half. Revenue in constant currency reduced 6.9%, reflecting lower sales volumes. 

 

Over 80% of the group's sales come from edible collagen casings, for which total volumes declined 8.2% compared to prior year. This was due to a series of region-specific factors and actions have been taken to ensure a return to growth during 2017 and 2018. 

 

Volumes in the UK & Ireland increased by 1.3% accompanied by continued progress in pricing. There have been some significant transfers of volume between UK sausage manufacturers during 2016, which has enabled Devro to increase its market share.

 

In Continental Europe, volumes declined 7.5% in an environment of increased competition over recent years. In order to compete more effectively in this market we are in the process of significantly upgrading our sales capabilities, as part of the Devro 100 programme. Volumes in Germany grew 2.1% as a result of working closely with customers to address their needs through our extensive product portfolio.

 

Volumes in Russia and surrounding markets were down 13.0% for the year reflecting the extremely competitive nature of the market in Russia that has been further exacerbated by the weak rouble. Our sales run-rate improved in the second half following the launch of a new product offering in Russia that was specifically developed to meet these market conditions.  Other markets in the region, including Ukraine, Kazakhstan and Belarus, maintained similar volumes to prior year.

 

North America volumes declined 4.8% over the year, with most of the decline in the final quarter, particularly as one key account reduced inventories to manage working capital. We expect our volumes in this market to return to growth in 2017.

 

Our Latin America business was impacted by the change in sourcing away from the old USA plant, as part of the transformation of our global manufacturing operations. Despite extensive development and testing, when manufactured on a commercial scale it was found that the redesigned products were not able to meet customer needs, given their unique and demanding applications, resulting in a 33.5% volume reduction. Whilst many technical challenges have now been resolved, the process of scaling up testing and requalifying products will take time and we do not expect a major recovery in Latin America volumes until 2018.  This remains a key area of focus for the group.

 

Volume growth remained strong in Japan (+4.5%), where Devro casings have been used to develop a successful application in the confectionery market, sales of which have continued to expand. Volumes in South East Asia increased 5.9%, principally due to a strong recovery in Korea related to sales growth in the food service sector and a new product developed to meet local requirements. Volumes in Australia declined 7.8%, including the impact of one significant customer who moved to dual sourcing.

 

Devro's volumes in China for the year as a whole were 31.4% below prior year, but were strong in the final quarter as volumes came on-stream from the new plant in Nantong.  In 2016 there was an oversupply of product at the lower end of the market, which resulted in significant price-led promotional activity.  Devro decided not to participate in this activity, particularly given the higher costs of importing products before the new plant became operational. Devro is now in a period of testing products from the new plant with existing and potential customers.  The new casings are performing well, which is reflected in the return to year-on-year sales growth in the final quarter.

 

Total volumes of gel sold across the group increased over 30% through a combination of further growth in the US, as our existing customers increased their market share, and new volumes in Europe, as a result of the acquisition of Devro BV in 2015 plus the development of an additional key account.

 

Devro 100 - Revenue growth

 

A key element of the Devro 100 programme is to significantly upgrade our sales capabilities.  An extensive, structured plan is being implemented, with particular focus on 'key account management' processes.  Several new senior sales managers joined the business, strengthening our presence in key markets. This programme has progressed well in 2016 and will continue during 2017.

 

Manufacturing efficiency

 

Over the past three years, the business has undergone a significant programme of investment and restructuring, to ensure that we have modern production capacity capable of supplying future demand efficiently. This investment has been completed and all operations are now managed by the new global supply chain function.

 

As the new China plant started up in the first half, 160 new colleagues joined the business in Nantong and, through the training and commissioning process, rapidly developed an impressive capability to manufacture high quality products. The plant is approved for sales inside China and for exports, has been accredited for FS22000 (the global food safety standard) and has recently achieved full Halal certification.

 

In the US, as well as bringing the new plant into operation, the closure of the old plant was completed at the end of the first half with the number of employees reduced by 200.

 

Devro 100 - Improving manufacturing efficiency

 

With the global manufacturing footprint now complete, the Devro 100 programme will focus efforts on delivering significant further cost savings to improve the unit cost of production. The establishment of the global supply chain function will support this improvement through identifying and applying best practice across the global operations to achieve better efficiency and cost savings.

 

As the new plants have been completed, engineering teams have returned to regular operations, enabling them to support this programme.  In addition we are engaging external support, alongside our experienced employees, to assist with improving our existing processes through external benchmarking. 

 

Product differentiation

 

Effective research and development is key to product differentiation.  An experienced group research team was established in 2015, which actively collaborates with external research projects to extend knowledge and identify opportunities.  These capabilities were further enhanced through the acquisition of Devro BV, which had built a strong technical skills base in coextrusion gel.

 

Devro 100 - Next generation of differentiated products

 

The third element of Devro 100 is the development of next generation products, which will deliver casings offering a step change in attributes and performance.  During 2016 significant progress was made on this development and in 2017 we plan to commence the launch of some of these new products in certain regions, reflecting the specific requirements of these markets.

 

OUTLOOK

 

Overall demand remains strong and we continue to see many attractive opportunities to grow the business. 

 

In 2017, we will focus on increasing revenue to regain market share, achieving cost savings across our global operations and commencing the launch of new, differentiated products, as part of the Devro 100 programme.  The further exceptional costs of this programme are expected to be between £10-12 million over the next two years, plus capital investments of between £7-8 million, with expected benefits of between £13-16 million per annum by 2019. Over this period there will also be a focus on reducing net debt levels.

 

Combined with the upgraded global manufacturing asset base, we are confident this will deliver long term growth.

 

 

Peter Page

Chief Executive

 

FINANCIAL REVIEW

 

The financial results for 2016 comprised a number of significant moving parts. In terms of operating profit for the year the adverse impact from lower sales volumes was offset by lower input prices and exchange rate benefits.

 

Cash flow in the year continued to be impacted by the completion of the capital investment projects in 2016 which required further planned capital expenditure as well as exceptional cash costs. The total cash outflow related to completion of these projects was material at £40 million, although £17 million below 2015. Due to these cash investments net debt increased as expected during the year, but was further impacted by the significant weakening of sterling. With underlying EBITDA for the year of £58.8 million and covenant net debt (including derivative financial liabilities) of £156.2 million at year end, the net debt to EBITDA covenant ratio was 2.7 times at 31 December 2016.

 

There will be no further exceptional charges related to the capital investment projects. As highlighted in our November 2016 trading update the Devro 100 programme will result in additional exceptional costs until 2018, together with some related capital expenditure.  However, the amounts will be at lower levels than those we have seen in each of the last three years.

 

Going forward the continued strong underlying cash generation from the business, combined with lower cash requirements for capital expenditure and exceptional items, will enable further reduction in net debt.

 

REVENUE

 


2016

£m

2015

£m

Change

Change

Constant

currency

Revenue

241.1

230.2

+4.7%

-6.9%

 

Revenue for the year was ahead of 2015, with the benefits of exchange rate movements more than offsetting the reduction in sales volumes.  Year-on-year revenue growth can be analysed as follows:

 


2016 vs 2015

2015 vs 2014

Volume

-6.6%

+0.9%

Price/mix

-0.3%

+0.3%

Foreign exchange

+11.6%

-2.1%

Total

+4.7%

-0.9%

 

The reduction in sales volumes primarily related to China, Continental Europe, Russia and Latin America. Volumes in China, Continental Europe and Russia were impacted by region-specific competitive pressures, although performance improved significantly in the second half of the year in China and Russia. In Latin America the lower volumes resulted from product performance issues related to the change in sourcing away from the old USA plant as part of the transformation of the global manufacturing operations.  Sales volumes grew in Japan, South East Asia and the UK & Ireland.

 

Sales of gel continued to grow well in the USA, as customers transferred from cellulose applications to collagen co-extrusion. There was a full year of gel sales in Continental Europe following the acquisition of PV Industries B.V. (now renamed Devro BV) in October 2015, which contributed 1.7% to volume growth.

 

Price/mix was slightly adverse, through a combination of changes in the geographical mix of sales and an investment in pricing in a number of competitive markets, where tactical pricing was applied. The geographical mix impact primarily related to the reduction in volumes in the Americas where market prices are above the global average, partially offset by the reduced volumes in China where the prices are lower.

 

OPERATING PROFIT

 

Operating profit for the year can be analysed as follows:

 


2016

£m

2015

£m

Change

Underlying EBITDA

58.8

49.7

+18.3%

Underlying depreciation & amortisation

-20.7

-16.4

-26.2%

Underlying operating profit

38.1

33.3

+14.4%

Exceptional items

-22.7

-14.1


Operating profit

15.4

19.2


 

 

Underlying operating profit

 

Underlying operating profit increased £4.8 million between 2015 and 2016, as a result of a number of factors which are described below. 

 

The reduction in sales volumes by 6.6% reduced underlying operating profit by £6.5 million, and price/mix by a further £0.8 million as explained above.

 

Input prices were £4.5 million lower than prior year, which increased underlying operating profit, following further reductions in raw materials prices, particularly in the USA and Australia, combined with lower energy prices.

 

Overall manufacturing costs increased by £0.7 million, incorporating a number of factors.  Production efficiency improved in Scotland and Australia compared with the first half of the prior year, which had been temporarily affected by the restructuring actions implemented in late 2014.  With the new plants completing in 2016, there were changes in the fixed costs associated with the global manufacturing operation, comprising savings from the closure of the old USA plant and additional costs associated with the new plant in China.  Given that capacity from the new plants was only available for a restricted period in 2016 these additional costs had a limited impact on underlying operating profit in 2016.  However there will be a full year impact in 2017. 

 

As highlighted in our November 2016 trading update, the lower sales volumes in 2016, which will result in a lower starting point for sales in 2017, combined with the full year availability of the capacity from our new plants will result in an under-utilisation of available global capacity in 2017.  This will adversely affect underlying operating profit in 2017, although it is expected to be partially offset by the full year impact of the savings from the closure of the old USA plant, together with global manufacturing efficiency savings from the Devro 100 programme.

 

Devro has operations around the world in multiple currencies. Net movements in exchange rates had a favourable impact on underlying operating profit of £5.3 million, reflecting the weakening of sterling against most other key trading currencies of the group compared to 2015, particularly during the second half of the year.

 

Underlying operating profit also included the effects of a full year contribution from Devro BV of £0.6 million, which was acquired in October 2015, and other movements of £2.4 million including reduced bonus payments.

 

Depreciation & amortisation

 

The increase in underlying depreciation and amortisation of £4.3 million comprises the commencement of depreciation of the new plants in 2016 (£2.3 million) and foreign exchange movements (£2.0 million). 

 

Exceptional items

 


2016

£m

2015

£m

Capital investment projects

20.7

14.4

Devro 100 programme

2.0

-

Restructuring and other

-

(0.3)

Total exceptional items

22.7

14.1

Cash

20.4

12.7

Non-cash

2.3

1.4


22.7

14.1

 

During 2016 exceptional costs were incurred in completing the capital investment projects and on the implementation of the Devro 100 programme.  Further details of these costs is set out in note 4 to the financial statements. 

 

For the Devro 100 programme, further exceptional costs are expected of between £10-12 million over the next two years, plus capital investments of between £7-8 million, with expected returns of between £13-16 million per annum by 2019.

 

OPERATING MARGIN

 


2016

2015

Underlying operating margin

15.8%

14.5%

 

The underlying operating margin for the year improved by 1.3 percentage points, with underlying operating profit growth outstripping revenue growth.

 

The reported operating margin reduced from 8.3% to 6.4%, with the improvement in underlying operating margin being offset by the increase in exceptional items.

 

CAPITAL INVESTMENT

 


2016

£m

2015

£m

Capital investment

22.2

55.4

 

The group has invested £110 million on the two capital investment projects to build new plants in China and the USA over the last three years, and the majority of the group's capital investment during the year was related to the final phase of these projects.  Both new plants are now in operation and the capital investment is complete, subject to approximately £3 million of capital retention payments which will be paid in 2017 once the associated criteria have been met.

 

WORKING CAPITAL

 


2016

2015


£m

Number of

days

£m

Number of

days

Inventories

34

60

29

45

Trade and other receivables

35

39

38

50

Trade and other payables

(38)

40

(34)

30


31


33


 

Working capital improved by £2 million during the year with the benefits of lower receivables and higher payables being partially offset by increased inventories.

 

The movements in receivables and payables reflected improved working capital management, and the increase in inventories resulted from movements in foreign exchange (+£4 million) combined with some effects from the reduced sales volumes.

 

CASH FLOW AND NET DEBT

                             

Devro continues to be a highly cash generative business.  In order to fund the significant investments made as part of the transformation of the manufacturing footprint, additional long term facilities were put in place in 2014 to supplement the shorter term facilities.

 

The three year investment programme came to an end in 2016 and as expected net debt increased, to £153.6 million at 31 December 2016 (or £156.2 million including derivative financial liabilities) compared with £125.5 million at year end 2015. This includes the effect of a significant weakening of sterling during 2016 (given that a part of the group's debt is denominated in US dollars), in particular following the result of the EU Referendum vote on 23 June 2016, which increased the reported net debt figure at 31 December 2016 by approximately £19 million (including the effect on derivative financial liabilities).

 

Key financial measures are as follows:

 


2016

2015

Net debt

£153.6m

£125.5m

Covenant net debt / underlying EBITDA ratio

2.7 times

2.6 times

Underlying operating cash flow

£64.4m

£53.1m

Return on capital employed (ROCE)

11.5%

11.5%

 

At 31 December 2016 the covenant net debt / underlying EBITDA ratio was 2.7 times.  As expected this was a reduction from the 2.9 times ratio reported at 30 June 2016.  The underlying EBITDA to net interest payable ratio was 7.6 times at 31 December 2016, meaning that both ratios were within their limits despite the changes in exchange rates during the year. 

 

Now that the capital investment projects are complete, cash generated from the business will enable net debt levels to be reduced, which will ultimately result in the covenant ratios returning nearer to historic levels.

 

The group remained within its funding facilities throughout the year, which include the US$100 million US private placement that took place in the first half of 2014, and the £110 million revolving credit facility which was negotiated in December 2014 and will be in place until 2019.

 

Underlying operating cash flow (before pension deficit funding) was £64.4 million (2015: £53.1 million), an increase of £11.3 million relating to higher EBITDA and lower net working capital.

 

Cash outflow from exceptional items was £22.9 million (2015: £15.5 million) and from pension deficit funding was £2.5 million (2015: £3.2 million), resulting in operating cash flow of £39.0 million (2015: £34.4 million).

 

FINANCE COSTS

 


Net finance cost

6.9

2.0

Net finance cost on pensions

2.3

2.1

Total net finance cost

9.2

4.1

 

As expected the net finance cost for the year was higher than 2015 due to the increased level of net debt in 2016, which also attracts a higher rate of interest, and the ceasing of capitalisation of interest during the first half once the new plants became available for use. Capitalisation of interest in 2016 was £0.5 million (2015: £2.7 million).

 

The small increase in net finance cost on pensions over 2015 reflects the higher discount rates assumed at the end of last year compared to the year before.

 

PENSION SCHEMES

 

Devro operates a number of defined benefit schemes around the group, although all of these are now closed to new entrants. The net pension liabilities of these schemes can be analysed as follows:

 


2016

£m

2015

£m

Fair value of scheme assets

254.8

225.4

Present value of scheme liabilities

(350.8)

(281.8)

Net pension liabilities

(96.0)

(56.4)

 

The increase in net pension liabilities during the year largely reflects the lower discount rates at the end of 2016, compared with the end of last year, especially in the UK. Further analysis of the movement in net pension liabilities is set out in note 6 to the financial statements.

 

TAX

 


2016

£m

2015

£m

Tax charge on underlying profit before tax

6.7

3.6

Tax credit on exceptional items

(2.7)

(3.1)

Tax charge in income statement

4.0

0.5

 

The group operates around the world and earns profits which are subject to tax at differing rates in different tax jurisdictions.  The investment incentives the group had previously benefited from in the Czech Republic became fully utilised in 2015 and as a result the group's underlying tax rate increased this year to 23% (2015: 12%).

 

EARNINGS PER SHARE

                       


2016

2015

Underlying basic earnings per share

13.3p

15.4p

Basic earnings per share

1.3p

8.8p

 

We have again presented an adjusted earnings per share (EPS) measure, which excludes exceptional items, to provide a better indication of our underlying performance of the group.  Underlying basic EPS reduced by 2.1 pence with the improvement in underlying EPS due to increased underlying operating profit (+2.9p) being more than offset by the effects of increased interest (-3.1p) and the higher effective tax rate (-1.9p).

 

The change in reported basic EPS reflects the lower underlying basic EPS plus higher exceptional costs in 2016.

 

DIVIDEND

 


Interim per share

2.7p

2.7p

Final per share

6.1p

6.1p

Total

8.8p

8.8p

 

The Board is recommending an unchanged final dividend of 6.1 pence per share, which will be payable on 12 May 2017 to shareholders on the register at 31 March 2017.

 

ALTERNATIVE PERFORMANCE MEASURES

 

In addition to statutory financial measures, management uses certain alternative performance measures (which are not defined by IFRS) to assess the operating performance and financial position of the group.  The alternative performance measures that Devro uses are 'constant exchanges rates', 'underlying', 'earnings before interest, tax, depreciation and amortisation (EBITDA)', 'net debt', 'covenant net debt' and 'return on capital employed'.

 

Constant exchange rates

 

The group has operations across the world in multiple currencies, and is exposed to translation risk on fluctuations in foreign exchange rates.  As a result the group's reported revenue will be impacted by movements in actual exchange rates.  The group presents revenue growth on a constant currency basis in order to eliminate the translation effect of foreign exchange rate movements, enabling investors to better understand the operational performance of the group.

 

Revenue growth at constant currency is calculated by translating both the current and prior year local currency amounts using the prior period average exchange rates.

 

Underlying

 

Underlying figures are stated before exceptional items.  Devro is undergoing a major transformation including the construction and start-up of two new plants in China and the US which completed in 2016, a restructuring of operations in Scotland and Australia initiated in 2014 and the Devro 100 programme which will continue until 2018.  The incremental costs associated with implementing this transformation are significant, and as a result have been classified as exceptional items. 

 

Reported operating profit reflects the costs associated with the transformation without the benefits of the additional volumes expected to be generated in 2017 and beyond.  The underlying measures have been adjusted to exclude exceptional items in order to give a more accurate representation of the costs incurred to manufacture the volumes produced in 2016.  This treatment is consistent with the internal reporting used to manage the business. 

 

A reconciliation from the underlying figures to the equivalent reported figures is presented below:

 


2016

2015


Underlying

Exceptional

items

Reported

Underlying

Exceptional

items

Reported

Operating profit (£m)

38.1

(22.7)

15.4

33.3

(14.1)

19.2

Operating margin (%)

15.8%

(9.4%)

6.4%

14.5%

(6.2%)

8.3%

Profit before tax (£m)

28.9

(22.7)

6.2

29.2

(14.1)

15.1

Basic earnings per share (p)

13.3p

(12.0p)

1.3p

15.4p

(6.6p)

8.8p

 

Earnings before interest, tax, depreciation and amortisation (EBITDA)

 

EBITDA is defined as operating profit excluding depreciation and amortisation.  This measure is used by management to assess operational efficiency and, given that it excludes non-cash depreciation and amortisation, it is a useful approximation for cash generation from operations.  This measure is in common use elsewhere and a reconciliation from reported figures is shown below:

 


2016

2015


Underlying

Exceptional

items

Reported

Underlying

Exceptional

items

Reported

Operating profit (£m)

38.1

(22.7)

15.4

33.3

(14.1)

19.2

Depreciation & amortisation (£m)

20.7

2.3

23.0

16.4

1.2

17.6

EBITDA (£m)

58.8

(20.4)

38.4

49.7

(12.9)

36.8

 

Net debt

 

Net debt is defined as the excess of total borrowings over cash and cash equivalents.  It is a measure that provides additional information on the group's financial position and is a measure in common use elsewhere.  A reconciliation from reported figures is presented below:

 


2016

2015


£m

£m

Current borrowings

(1.9)

(1.9)

Non-current borrowings

(161.6)

(133.2)

Total borrowings

(163.5)

(135.1)

Cash and cash equivalents

9.9

9.6

Net debt

(153.6)

(125.5)

 

Furthermore, the definition of net debt used to calculate one of the group's banking covenant ratios also includes derivative financial liabilities, as shown below:

 


2016

2015


£m

£m

Net debt

(153.6)

(125.5)

Derivative financial liabilities

(2.6)

(2.3)

Covenant net debt

(156.2)

(127.8)

 

Return on capital employed

 

Return on capital employed (ROCE) is used as a measure of how well the group is utilising its available capital, and is a measure in common use elsewhere.  ROCE is calculated by presenting underlying operating profit as a proportion of average capital employed.

 

Capital employed for this purpose is defined as net assets excluding interest-bearing assets and liabilities, derivative financial instruments, current and deferred tax balances, pension obligations and provisions for liabilities and other charges.

 

A reconciliation from reported figures for 2016 and 2015 is presented below:

 


2016

2015

2014


£m

£m

£m

Goodwill

3.1

3.1

-

Intangible assets

7.3

6.1

4.0

Property, plant and equipment

308.6

270.1

230.3

Trade and other receivables

35.2

38.4

33.7

Inventories

33.8

28.5

33.4

Trade and other payables

(37.8)

(33.7)

(34.1)

Capital employed

350.2

312.5

267.3

Average capital employed*

331.4

289.9


Underlying operating profit

38.1

33.3


Return on capital employed

11.5%

11.5%


 

* Average capital employed is calculated as the average between the balances as at the start of the year and as at the end of the year.

 

GOING CONCERN

 

At 31 December 2016 the group was operating within the banking covenants related to its revolving credit facility and US private placement facilities. The group's detailed financial forecasts indicate that there is sufficient headroom in the facilities for the foreseeable future and that they can be repaid in line with the expected terms.

 

After making enquiries, the directors have a reasonable expectation that the group have adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

 

 

 

 

Rutger Helbing

Group Finance Director

 

Consolidated income statement (unaudited)

for the year ended 31 December 2016

 



 

2016

 

2016

 

2016

 

2015

 

2015

 

2015



Underlying

Exceptional

items

Reported

Underlying

Exceptional

items

Reported


Note

£'m

£'m

£'m

£'m

£'m

£'m









Revenue

2

241.1

-

241.1

230.2

-

230.2



---------

---------

---------

---------

---------

---------









Operating profit

3,4

38.1

(22.7)

15.4

33.3

(14.1)

19.2

















Finance income


0.1

-

0.1

-

-

-

Finance cost


(7.0)

-

(7.0)

(2.0)

-

(2.0)

Net finance cost on pensions


 

(2.3)

 

-

 

(2.3)

 

(2.1)

 

-

 

(2.1)



---------

---------

---------

---------

---------

---------

Profit before tax


28.9

(22.7)

6.2

29.2

(14.1)

15.1

Tax


(6.7)

2.7

(4.0)

(3.6)

3.1

(0.5)



---------

---------

---------

---------

---------

---------

Profit for the year attributable to owners of the parent


 

 

22.2

 

 

(20.0)

 

 

2.2

 

 

25.6

 

 

(11.0)

 

 

14.6



---------

---------

---------

---------

---------

---------









Earnings per share








Basic

5



1.3p



8.8p

Diluted

5



1.3p



8.7p

 

 

 

All results relate to continuing operations.

 

 

Consolidated statement of comprehensive income (unaudited)

for the year ended 31 December 2016

 



 

2016

 

2015



£'m

 

£'m

 

Profit for the year


2.2

14.6



---------

---------

Other comprehensive (expense)/income for the year








Items that will not be reclassified to profit or loss




Pension obligations:




-       re-measurements


(33.0)

4.0

-       movement in deferred tax


5.2

(2.6)



----------

----------

Total items that will not be reclassified to profit or loss


(27.8)

1.4





Items that may be reclassified subsequently to profit or loss




Cash flow hedges:




 - net fair value (losses)/gains


(0.1)

1.1

 - reclassified and reported in profit


(1.0)

0.1

 - tax on fair value movements


0.2

(0.2)

Net investment hedges:




 - fair value (losses)/gains


(1.6)

0.9

 - tax on fair value movements


0.3

(0.2)

Net exchange adjustments


19.8

(6.0)



----------

----------

Total items that may be reclassified subsequently to profit or loss


17.6

(4.3)





Other comprehensive expense for the year, net of tax


(10.2)

(2.9)



----------

----------

Total comprehensive (expense)/income for the year attributable to owners of the parent


 

(8.0)

 

11.7

 

 


======

======





 

 

Consolidated Balance sheets (unaudited)

at 31 December 2016



2016

2015


Note

£'m

£'m

ASSETS




Non-current assets




Goodwill


3.1

3.1

Intangible assets


7.3

6.1

Property, plant and equipment


308.6

270.1

Deferred tax assets


40.3

25.5

Trade and other receivables


4.7

3.2



--------

--------



364.0

308.0



--------

--------

Current assets




Inventories


33.8

28.5

Current tax assets


0.1

-

Trade and other receivables


30.5

35.2

Derivative financial instruments


1.4

3.5

Cash and cash equivalents


9.9

9.6



--------

--------



75.7

76.8



--------

--------

Total assets


439.7

=====

384.8

=====





LIABILITIES




Current liabilities




Borrowings


1.9

1.9

Derivative financial instruments


2.6

2.3

Trade and other payables


34.4

31.1

Current tax liabilities


7.0

5.4

Provisions for other liabilities and charges


0.8

5.5



--------

--------



46.7

46.2



--------

--------

Non-current liabilities




Borrowings


161.6

133.2

Deferred tax liabilities


19.4

14.8

Pension obligations

6

96.0

56.4

Other payables


3.4

2.6

Provisions for other liabilities and charges


3.6

0.5



--------

--------



284.0

207.5



--------

--------

Total liabilities


330.7

=====

253.7

=====

Net assets


109.0

131.1



=====

=====

EQUITY




Capital and reserves attributable to owners of the parent




Ordinary shares


16.7

16.7

Share premium


9.3

9.3

Other reserves


70.8

52.9

Retained earnings


12.2

52.2



---------

---------

Total equity


109.0

131.1



=====

=====

 

 

Consolidated statement of changes in equity (unaudited)

for the year ended 31 December 2016

 

 

 

Ordinary

shares

Share

premium

Other

reserves

Retained

earnings

Total equity

Attributable

to owners of

the parent


£'m

£'m

£'m

£'m

£'m

Balance at 1 January 2016

16.7

9.3

52.9

52.2

131.1


--------

-------

--------

--------

----------

Comprehensive income/(expense)






Profit for the year

-

-

-

2.2

2.2


--------

-------

--------

--------

----------

Other comprehensive income/(expense)






Cash flow hedges, net of tax

-

-

(0.9)

-

(0.9)

Net investment hedges, net of tax

-

-

(1.3)

-

(1.3)

Pension obligations, net of tax

-

-

-

(27.8)

(27.8)

Exchange adjustments

-

-

19.8

-

19.8


--------

-------

--------

--------

----------

Total other comprehensive income/( expense)

-

-

17.6

(27.8)

(10.2)


--------

-------

--------

--------

----------

Total comprehensive income/(expense)

-

-

17.6

(25.6)

(8.0)


--------

-------

--------

--------

----------

Transactions with owners






Performance Share Plan charge, net of tax

-

-

0.6

-

0.6

Performance Share Plan credit in respect  of shares vested

-

-

-

-

-

Performance Share Plan credit in respect of awards lapsed

-

-

(0.3)

0.3

-

Issue of share capital

-

-

-

-

-

Dividends paid

-

-

-

(14.7)

(14.7)


--------

-------

--------

--------

----------

Total transactions with owners

-

-

0.3

(14.4)

(14.1)


--------

-------

--------

--------

----------

Balance at 31 December 2016

16.7

9.3

70.8

12.2

109.0


=====

====

=====

=====

======







Balance at 1 January 2015

16.7

9.3

56.5

50.7

133.2


--------

-------

--------

--------

----------

Comprehensive income/(expense)






Profit for the year

-

-

-

14.6

14.6


--------

-------

--------

--------

----------

Other comprehensive income/(expense)






Cash flow hedges, net of tax

-

-

1.0

-

1.0

Net investment hedges, net of tax

-

-

0.7

-

0.7

Pension obligations, net of tax

-

-

-

1.4

1.4

Exchange adjustments

-

-

(6.0)

-

(6.0)


--------

-------

--------

--------

----------

Total other comprehensive income/(expense)

-

-

(4.3)

1.4

(2.9)


--------

-------

--------

--------

----------

Total comprehensive expense

-

-

(4.3)

16.0

11.7


--------

-------

--------

--------

----------

Transactions with owners






Performance Share Plan charge

-

-

0.9

-

0.9

Performance Share Plan credit in respect  of shares vested

-

-

-

-

-

Performance Share Plan credit in respect of awards lapsed

-

-

(0.2)

0.2

-

Issue of share capital

-

-

-

-

-

Dividends paid

-

-

-

(14.7)

(14.7)


--------

-------

--------

--------

----------

Total transactions with owners

-

-

0.7

(14.5)

(13.8)


--------

-------

--------

--------

----------

Balance at 31 December 2015

16.7

9.3

52.9

52.2

131.1


=====

====

=====

=====

======

 

 

Consolidated cash flow statement (unaudited)

for the year ended 31 December 2016



2016

2015


Note

£'m

 

£'m

 

Cash flows from operating activities




 - Cash generated from operations

7

39.0

34.4

 - Interest received


0.1

-

 - Interest paid


(7.8)

(4.4)

 - Tax paid


(5.8)

(4.0)



----------

----------

Net cash generated from operating activities


25.5

26.0



----------

----------

Cash flows from investing activities




 - Purchase of property, plant and equipment


(22.3)

(54.2)

 - Purchase of intangible assets


(1.7)

(1.1)

 - Capital grants received


0.7

0.1

 - Acquisition of subsidiary


-

(6.4)



-----------

-----------

Net cash used in investing activities


(23.3)

(61.6)



-----------

-----------

Cash flows from financing activities




 - Proceeds from the issue of ordinary shares


-

-

 - Borrowing under the loan facilities


8.4

48.6

 - Proceeds from financial instruments


3.4

-

 - Dividends paid


(14.7)

(14.7)



-----------

-----------

Net cash (used in)/generated from financing activities


(2.9)

33.9



-----------

-----------





Net decrease in cash and cash equivalents


(0.7)

(1.7)



======

======





Net cash and cash equivalents at 1 January


7.7

9.4

Net decrease in cash and cash equivalents


(0.7)

(1.7)

Exchange gain on cash and cash equivalents


1.0

-



-----------

----------

Net cash and cash equivalents at 31 December


8.0

7.7



======

======





Cash and cash equivalents


9.9

9.6

Bank overdrafts


(1.9)

(1.9)



-----------

----------

Net cash and cash equivalents at 31 December


8.0

7.7



======

======

 

 

1.  Financial information

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2016 or 2015.

 

The financial information for 2015 is derived from the statutory accounts for 2015 which have been delivered to the registrar of companies. The auditor has reported on the 2015 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The statutory accounts for 2016 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.

 

 

2.  Segment information

 

The chief operating decision maker has been identified as the Board. The Board reviews the group's financial results on a geographical segment basis with three identifiable operating segments:

 

·  Americas: which includes North America and Latin America.

·  Asia - Pacific: which includes Australia, New Zealand, Japan, China and the rest of South East Asia.

·  Europe: which includes Continental Europe, UK, Ireland and Africa.

 

The Board assesses the performance of the operating segments based on underlying operating profit. This measurement basis excludes the effects of exceptional income and expenditure from the operating segments. The Board assesses the operating segments based on group profit for external sales in each region, rather than statutory profit for the region which also includes profit on intercompany sales.

 

Finance income and cost, and net finance cost on pensions, are not included in the segment results that are reviewed by the Board.

 


Americas

Asia - Pacific

Europe

Total group


2016

2015

2016

2015

2016

2015

2016

2015


£'m

£'m

£'m

£'m

£'m

£'m

£'m

£'m

Revenue









Sales to external customers

64.0

64.0

75.5

69.6

101.6

96.6

241.1

230.2


---------

---------

---------

---------

---------

---------

---------

----------

Underlying operating profit before corporate overheads

 

7.5

 

2.8

 

14.3

 

13.0

 

18.6

 

21.3

 

40.4

 

37.1










Corporate overheads







(2.3)

(3.8)








--------

--------

Underlying operating profit







38.1

33.3

Exceptional items

(13.0)

(10.7)

(8.7)

(3.7)

(0.9)

0.3

(22.6)

(14.1)










Corporate exceptional items







(0.1)

-








--------

---------

Operating profit







15.4

19.2










Finance income







0.1

-

Finance cost







(7.0)

(2.0)

 

Net finance cost on pensions







(2.3)

(2.1)








---------

---------

Profit before tax







6.2

15.1








======

======

 

 

3.   Operating profit


 

2016

 

2016

 

2016

 

2015

 

2015

 

2015


Underlying

Exceptional

items

Reported

Underlying

Exceptional

items

Reported

 

 

£'m

£'m

£'m

£'m

£'m

£'m

Revenue

241.1

-

241.1

230.2

-

230.2

Cost of sales

(152.1)

(18.5)

(170.6)

(153.0)

(11.1)

(164.1)


----------

----------

----------

----------

----------

----------

Gross profit

89.0

(18.5)

70.5

77.2

(11.1)

66.1


----------

----------

----------

----------

----------

----------

Selling and distribution costs

(19.1)

-

(19.1)

(15.4)

-

(15.4)

Administrative expenses

(19.5)

(4.2)

(23.7)

(20.1)

(3.0)

(23.1)

Research and development expenditure

(7.2)

-

(7.2)

(5.3)

-

(5.3)

Other expenses

(5.3)

-

(5.3)

(3.2)

-

(3.2)


----------

----------

----------

----------

----------

----------

Total operating expenses

(51.1)

(4.2)

(55.3)

(44.0)

(3.0)

(47.0)

Other operating income

0.2

-

0.2

0.1

-

0.1


----------

----------

----------

----------

----------

----------

Net operating expenses

(50.9)

(4.2)

(55.1)

(43.9)

(3.0)

(46.9)


----------

----------

----------

----------

----------

----------

Operating profit/(expense)

38.1

(22.7)

15.4

33.3

(14.1)

19.2


======

======

======

======

======

======

 

An additional £0.8m (2015:£0.8m) of development expenditure has been capitalised within intangible assets

 

 

4.  Exceptional items

 

Exceptional charges included in operating profit were £22.7m (2015: £14.1m).

 





2016

£'m

2015

£'m

Investment projects



Pre-operating costs to establish new manufacturing plants (i)

20.3

10.9

Costs related to the closure of old manufacturing plant (ii)

0.4

3.5


--------

--------


20.7

14.4

Devro 100 programme (iii)

2.0

-

Restructuring and other (iv)

-

(0.3)


---------

--------

Total exceptional items

22.7

14.1


=====

====

 

Exceptional items comprise incremental costs that are directly related to the actions being taken to transform the business.  During 2015 and 2016 these costs principally related to the two capital investment projects to establish new plants in the USA and China and the closure of the old plant in the USA. Exceptional costs were also incurred in 2016 relating to the Devro 100 programme, which is focussed on growing revenue through significantly improving sales capabilities, further improving manufacturing efficiencies to reduce unit costs and introducing the next generation of differentiated products.

 

 

(i)      Costs related to the projects to establish new manufacturing plants in the USA and China, including project management, training, legal and professional fees, and other incremental costs incurred prior to the commencement of normal production that are not eligible for capitalisation.

(ii)     Costs incurred in the USA related to the closure of the old manufacturing plant. 2016 costs comprise redundancy and retention costs. 2015 costs comprise redundancy and retention costs, decommissioning costs, accelerated depreciation and the write off of raw materials which are specific to the old manufacturing process in the USA and cannot be re-used.

(iii)    Redundancy and retention costs and other incremental external cost, including professional fees.

(iv)    Release of excess decommissioning provisions established in prior period net of acquisition related costs, including professional fees.

 

 

5.      Earnings per share


 

2016

 

2015


£'m

£'m




Profit attributable to equity holders

2.2

14.6


--------

--------

Underlying profit attributable to equity holders

22.2

25.6


--------

--------

 

Earnings per share



 - Basic

 - Underlying basic

1.3p

13.3p

8.8p

15.4p

 - Diluted

1.3p

8.7p

 - Underlying diluted

13.2p

15.3p


 

2016

 

2015

Shares in issue



Weighted average number of shares

166,941,137

166,928,534

Adjustments for:



  - Performance Share Plan

1,717,046

1,477,842


-----------------

-----------------

Weighted average number of shares adjusted for potential dilution

168,658,183

168,406,376


==========

==========

 

Basic earnings per share is calculated by dividing the profit for the year attributable to owners of the parent of £2.2m (2015: £14.6m) by 166,941,137 (2015: 166,928,534) shares, being the weighted average number of shares in issue throughout the year.

Shares arising from the Performance Share Plan are only treated as dilutive where the effect is to reduce earnings per share. Diluted earnings per share is calculated by dividing the profit for the year attributable to ordinary shareholders of £2.2m (2015: £14.6m) by the average number of shares, including the effect of all dilutive potential shares, of 168,658,183 (2015: 168,406,376).

Underlying earnings per share is calculated in order to eliminate the effect of exceptional items after tax in 2015 of £20.0m (2015: £11.0m) on the results. Underlying basic earnings per share is calculated by dividing the underlying profit attributable to ordinary shareholders of £22.2m (2015:  £25.6m) by 166,941,137 (2015: 166,928,534) shares, being the weighted average number of shares in issue throughout the year.

 

 

6.      Pension obligations

 

The group operates a number of pension schemes throughout the world.  The major schemes are of the defined benefit type and, with the exception of Germany where book reserves are supported by insurance policies, the assets of the schemes are held in separate trustee-administered funds. The defined benefit schemes are closed to new entrants.  The total pension obligation cost for the group was £8.2m (2015: £7.5m), of which £4.0m (2015: £3.2m) related to the overseas schemes.  On the advice of the actuaries, cash contributions to the group's defined benefit schemes are expected to be £5.2m for the year ending 31 December 2017.

 

The last formal actuarial valuations of the group's material defined benefit schemes have been updated to 31 December 2016 by qualified independent actuaries.  The major assumptions used by the actuaries in the following principal countries were:

 


Australia

United Kingdom

USA


2016

2015

2016

2015

2016

2015


%

%

%

%

%

%

Discount rate

4.05

4.00

2.60

3.75

3.85

3.95

Rate of increase in salaries*

3.50

3.50

1.00

1.00

-

-

General inflation

2.50

2.50

3.25

3.00

-

-

 

* As part of the changes to the United Kingdom plan agreed in 2010, future pensionable salary increases are capped at 1% per annum.  No rate of increase in salaries has been assumed in respect of the USA plan as the plan is now frozen.

 

Net pension assets and liabilities at 31 December 2016 were as follows:

 


Australia

United Kingdom

USA

Other

Total


2016

2015

2016

2015

2016

2015

2016

2015

2016

2015


£'m

£'m

£'m

£'m

£'m

£'m

£'m

£'m

£'m

£'m

Total fair value of scheme assets

 

10.6

 

9.2

 

190.7

 

169.4

 

51.3

 

44.8

 

2.2

 

2.0

 

254.8

 

225.4

Present value of scheme

liabilities

 

(10.6)

 

(9.2)

 

(251.8)

 

(198.7)

 

(84.4)

 

(70.7)

 

(4.0)

 

(3.2)

 

(350.8)

 

(281.8)


--------

--------

---------

---------

---------

---------

--------

--------

---------

---------

Deficit

-

-

(61.1)

(29.3)

(33.1)

(25.9)

(1.8)

(1.2)

(96.0)

(56.4)

Related deferred tax assets

 

-

 

-

 

10.4

 

5.2

 

11.2

 

8.9

 

0.5

 

0.4

 

22.1

 

14.5


--------

--------

--------

--------

--------

--------

--------

--------

--------

--------

Net pension liabilities

-

-

(50.7)

(24.1)

(21.9)

(17.0)

(1.3)

(0.8)

(73.9)

(41.9)


=====

=====

======

======

======

======

=====

=====

======

======

 

 


Australia

United Kingdom

USA

Other

Total


2016

2015

2016

2015

2016

2015

2016

2015

2016

2015


£'m

£'m

£'m

£'m

£'m

£'m

£'m

£'m

£'m

£'m












Deficit in scheme at                                  beginning of year                           

 

-

 

(0.2)

 

(29.3)

 

(33.8)

 

(25.9)

 

(23.5)

 

(1.2)

 

(1.5)

 

(56.4)

 

(59.0)

Movement in year:











Pension charge

(0.6)

(0.6)

(2.7)

(3.2)

(1.8)

(1.4)

(0.1)

0.1

(5.2)

(5.1)

Employer contributions

0.4

0.4

3.8

3.7

-

0.7

-

-

4.2

4.8

Re-measurements

0.1

0.4

(32.9)

4.0

0.1

(0.5)

(0.3)

0.1

(33.0)

4.0

Exchange (losses)/ gains

0.1

-

-

-

(5.5)

(1.2)

(0.2)

0.1

(5.6)

(1.1)


-------

-------

-------

-------

-------

-------

-------

-------

-------

-------

Deficit in scheme at end of year

 

-

 

-

 

(61.1)

 

(29.3)

 

(33.1)

 

(25.9)

 

(1.8)

 

(1.2)

 

(96.0)

 

(56.4)


=====

=====

=====

=====

=====

=====

=====

====

=====

====

 

 

7.        Reconciliation of profit before tax to cash generated from operations


 

2016

 

2015


£'m

£'m




Profit before tax

6.2

15.1

Adjustments for:



Finance income

(0.1)

-

Finance cost

7.0

2.0

Net finance cost on pensions

2.3

2.1

Pension cost adjustment for normal contributions

1.1

1.4

Depreciation of property, plant and equipment - including exceptional items of £2.3m (2015: £1.2m)

 

22.1

 

16.5

Amortisation of intangible assets

0.9

1.1

Release from capital grants balance

(0.2)

(0.1)

Pension deficit funding

(2.5)

(3.2)

Performance Share Plan

0.6

0.8

Changes in working capital:



(Increase)/decrease in inventories

(1.1)

5.2

Decrease/(increase) in trade and other receivables

5.4

(4.2)

(Decrease)/increase in trade and other payables

(0.2)

0.6

Decrease in provisions

(2.5)

(2.9)


--------

--------

Cash generated from operations

39.0

34.4


=====

=====

Of which:



Cash generated from underlying operations before pension deficit funding

 

64.4

 

53.1

Pension deficit funding

(2.5)

(3.2)

Exceptional items

(22.9)

(15.5)


--------

--------

Cash generated from operations

39.0

34.4


=====

=====

 

8.        Analysis of net debt


2016

2015


£'m

£'m




Cash and cash equivalents

9.9

9.6

Bank overdrafts

(1.9)

(1.9)


--------

--------


8.0

7.7

Other bank borrowings

(80.4)

(66.5)

US dollar private placement

(81.2)

(66.7)


----------

----------

Net Debt

(153.6)

(125.5)


======

======

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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