TIDMAVON
RNS Number : 1960F
Avon Rubber PLC
16 May 2017
News Release
Strictly embargoed until 07:00 16 May 2017
AVON RUBBER p.l.c.
("Avon", the "Group" or the "Company")
Unaudited interim results for the six months ended 31 March
2017
31 March 31 March % Increase % Increase
2017 2016 Reported CC*
--------------------------------- --------- ---------- ----------- -----------
Orders received GBP90.7m GBP73.4m 24% 9%
Revenue GBP81.1m GBP66.3m 22% 7%
Underlying operating profit
(**) GBP10.9m GBP9.0m 21% 6%
Underlying profit before
tax (**) GBP10.7m GBP8.8m 22% 7%
Statutory operating profit GBP9.6m GBP6.6m 45% 24%
Statutory profit before
tax GBP8.9m GBP6.1m 46% 24%
Underlying cash from operations
(**) GBP17.0m GBP14.7m 16%
Net cash/(debt) GBP12.6m (GBP8.4m)
Earnings per share:
Underlying basic (**) 28.7p 28.7p -
Statutory basic 24.6p 21.6p 14%
Interim dividend 4.11p 3.16p 30%
--------------------------------- --------- ---------- ----------- -----------
Highlights
-- Revenue and underlying operating profit up 22% and 21%
-- Constant currency revenue and underlying operating profit up
7% and 6%
-- Underlying cash from operations GBP17.0m (2016: GBP14.7m)
-- Strong growth in dividend up 30% to 4.11p (2016: 3.16p)
-- In Protection, significant opportunities for M53A1
respirators and aircrew XM69 programme in FY18
-- Dairy outlook remains positive and Pulsator Exchange Service
will be launched in the second half
Paul McDonald, Chief Executive Officer, commented:
"The Group has performed well in improved market conditions and
I am delighted to present a good set of results which confirm the
progress the Group has made over the last six months.
I am confident the business is well positioned to deliver
further growth and that there are additional opportunities to build
a stronger business for the future."
(*) CC: Constant currency
(**) Note:
The Directors believe that underlying measures provide a more
useful comparison of business trends and performance. Underlying
results exclude exceptional items, defined benefit pension scheme
costs and the amortisation of acquired intangibles. The term
underlying is not defined under IFRS and may not be comparable with
similarly-titled measures used by other companies.
All profit and earnings per share figures in these interim
results relate to underlying business performance (as defined
above) unless otherwise stated. A reconciliation of underlying
numbers to statutory numbers is provided in note 4 to the interim
financial statements.
Avon Rubber p.l.c.
-----------------------------------------------------------
Paul McDonald, Chief Executive Officer: 07887 971 582
-----------------------------------------------------------
Paul Rayner, Interim Group Finance Director: 07730 895 389
-----------------------------------------------------------
Weber Shandwick Financial
-----------------------------------------------------------
Nick Oborne: 020 7067 0000
-----------------------------------------------------------
An analyst meeting will be held at 9.00am this morning at the
offices of Weber Shandwick Financial, 2 Waterhouse Square, 140
Holborn, London, EC1N 2AE.
NOTES TO EDITORS:
The Group is an innovative design and engineering group,
specialising in two core markets, Protection & Defence and
Dairy. With a strong emphasis on research and development, we
design, test and manufacture specialist products from a number of
sites in the US and Europe, serving markets around the world. We
achieve this through nurturing the talent and aspirations of our
employees to realise their highest potential.
Avon Protection Systems is the recognised global market leader
in advanced Chemical, Biological, Radiological and Nuclear (CBRN)
respiratory protection systems for the world's military, homeland
security, first responder, fire and industrial markets.
With an unrivalled pedigree in mask design dating back to the
1920's, Avon Protection Systems' advanced products are the first
choice for Personal Protective Equipment (PPE) users worldwide and
are placed at the heart of many international defence and tactical
PPE deployment strategies. Our expanding global customer base now
includes military forces, civil and first line defence troops,
emergency service teams and industrial, marine, mineral and oil
extraction site personnel. All put their trust in Avon's advanced
respiratory solutions to shield them from every possible threat
whether land, air or sea based.
Our world-leading Dairy supplies business and its
milkrite|InterPuls brand has a global market presence. With a long
history of manufacturing liners and tubing for the dairy industry,
we have become the leading innovator and designer for products and
services right at the heart of milking. The acquisition of
InterPuls in 2015, a specialist in electro-mechanical milking
components, such as pulsators, milk meters, automatic cluster
removers and milking clusters, has significantly expanded our
product portfolio, making us the complete milking point solutions
provider, to allow us to improve every farm we touch.
Working with leading scientists and health specialists in the
global dairy industry, we continue to invest in technology to
further improve the milking process and animal welfare. Our
products provide exceptional results for both the animal and the
milker, making the milk extraction process more efficient. As our
market share and milking experience continue to improve, so does
our global presence.
For further information please visit the Group's website:
www.avon-rubber.com
Interim Management Report
Introduction
The Group has delivered a good first half performance with
revenue and underlying operating profit increasing by 22% and 21%
respectively. At constant currency, revenue and underlying
operating profit increased by 7% and 6%. The impact of foreign
exchange on revenue was an increase of GBP9.7m and on underlying
operating profit an increase of GBP1.3m.
Cash flow has been particularly strong and the Group has ended
the first half with net cash of GBP12.6m.
Against this backdrop, the Board has increased its interim
dividend by 30% to 4.11p reflecting confidence in the full
year.
Group Results
Group revenue at GBP81.1m (2016: GBP66.3m) increased by 22% and
underlying operating profit of GBP10.9m (2016: GBP9.0m) increased
by 21%. Underlying operating profit margins were 13% (2016: 14%).
Underlying earnings before interest, tax, depreciation and
amortisation ('EBITDA') increased by 25% to GBP16.5m (2016:
GBP13.2m). EBITDA margins were 20% (2016: 20%).
Underlying profit before tax was GBP10.7m (2016: GBP8.8m) and
after a tax charge of GBP2.0m (2016: GBP0.1m), an effective rate of
19% (2016: 1%), the Group recorded an underlying profit for the
period after tax of GBP8.7m (2016: GBP8.7m).
The increased tax rate of 19% (2016: 1%) has resulted in
underlying basic earnings per share being in line with prior year
at 28.7p (2016: 28.7p). Basic earnings per share were 24.6p (2016:
21.6p), up 14% on 2016.
Segmental Information
Half Half
year year Year
to to to
31 Mar 31 Mar 30 Sep
2017 2016 2016
Revenue
Protection & Defence GBP55.9m GBP45.7m GBP100.9m
Dairy GBP25.2m GBP20.6m GBP42.0m
----------------------- ----------- ------- ---------- ------- ---------- -------
Total GBP81.1m GBP66.3m GBP142.9m
----------------------- ----------- ------- ---------- ------- ---------- -------
Underlying operating Margin
profit Margin Margin
Protection & Defence GBP8.0m 14% GBP6.6m 14% GBP16.0m 16%
Dairy GBP4.0m 16% GBP3.4m 16% GBP7.2m 17%
Unallocated corporate -
costs (GBP1.1m) - (GBP1.0m) - (GBP1.4m)
----------------------- ----------- ------- ---------- ------- ---------- -------
Total GBP10.9m 13% GBP9.0m 14% GBP21.8m 15%
----------------------- ----------- ------- ---------- ------- ---------- -------
Protection & Defence
Revenue for the division was 22% higher at GBP55.9m (2016:
GBP45.7m) and underlying operating profit was GBP8.0m (2016:
GBP6.6m) at a margin of 14%. Underlying EBITDA was up 25% at
GBP12.1m (2016: GBP9.7m) with margins of 22% (2016: 21%).
M50 respirator sales to the DOD were, as expected, slightly
lower at 93,000 (2016: 107,000) mask systems. During the period we
received a further order for 131,000 mask systems providing good
visibility of revenue under this sole source long-term
contract.
Higher volumes of M61 filter pairs (107,000 pairs) were secured
allowing us to deliver 95,000 M61 filter pairs during the period
(2016: 36,000). We continue to believe the end user demand for this
consumable product will grow as the deployment continues to expand
and we anticipate further orders in the second half.
Sales to foreign military, law enforcement and first responder
customers increased year on year as the portfolio continues to
grow.
The acquisition of Argus has been a success and the Mi-TIC
product range has contributed to the sales growth in the Fire
market, where we have also seen organic growth in sales of our
Deltair Self Contained Breathing Apparatus.
AEF has experienced a first half in line with prior year,
reflecting the variability in timing of certain DOD procurement
programmes.
Order intake for the division totalled GBP67.1m (2016:
GBP55.0m). Of the closing order book of GBP32.5m, GBP19.0m is for
delivery in the second half of our financial year, giving good
visibility for the remainder of the year.
Negotiations with Middle East customers continue to make
progress, and we expect to receive orders in this financial
year.
Significant military opportunities for high value sales of M53A1
respirators and the aircrew XM69 programme are materialising to
offset the expected reduction of the JSGPM M50 respirator mask
programme.
Dairy
The market environment for Dairy has been positive and revenue
for the division was 22% higher at GBP25.2m (2016: GBP20.6m)
following the improvement in milk prices. Underlying operating
profit was GBP4.0m (2016: GBP3.4m) at a margin of 16%. Underlying
EBITDA grew 22% to GBP5.5m (2016: GBP4.5m) with a margin of 22%
(2016: 22%).
Following an extended period of market weakness, conditions for
dairy farmers, particularly in Europe, have improved as milk prices
have increased. The economic justification for investment in
capital is stronger resulting in further growth from the InterPuls
range of products.
Our Dairy business has become less dependent on original
equipment manufacturers (OEMs) as we continue to grow sales of our
own higher margin milkrite|InterPuls branded products and services.
We are encouraged that market share continues to increase, meaning
that we exit this cyclical downturn with a more robust business,
with greater strategic independence and a pipeline of R&D
investments.
Following our strategy to expand Farm Services, the growth of
our innovative Cluster Exchange Service remains at encouraging
levels in both North America and Europe. We completed successful
farm pilots for the Pulsator Exchange Service and will launch in
North America during the second half of the year. The pilot farms
for the Tag Exchange Service will be installed during the second
half. The Farm Services model should lead to a more robust and
sustainable business model with the potential to grow a significant
recurring revenue stream, which is less susceptible to a cyclical
milk price.
We are pleased with the integration of InterPuls into the wider
Dairy business and are on track to realise the long-term strategic
benefits that have been identified, in particular the sales
synergies available in the North American market. InterPuls
products are already being rolled out through Milkrite distribution
channels with a pipeline of opportunities being developed.
In emerging markets, including China, Brazil and India, the
number of dairy cows being milked using automated milking processes
is growing rapidly. This is adding to the market potential for the
products we sell. The sales and distribution operations we have
opened in China and Brazil are progressing as we expand our dealer
and distributor networks in these regions.
Research & Development expenditure
We continue to invest for the future and our total investment in
research and development (capitalised and expensed), as shown
below, amounted to GBP3.9m.
Half year to 31 March 2017
Half year Half year Year to
to to 30 Sep
31 Mar 2017 31 Mar 2016 2016
-------------------------------- ------------- ------------- ----------
Total research and development
expenditure GBP3.9m GBP3.8m GBP8.3m
Less customer funded (GBP2.0m) (GBP2.2m) (GBP4.3m)
-------------------------------- ------------- ------------- ----------
Group expenditure GBP1.9m GBP1.6m GBP4.0m
Capitalised (GBP0.9m) (GBP1.7m) (GBP3.1m)
-------------------------------- ------------- ------------- ----------
Income statement impact GBP1.0m (GBP0.1m) GBP0.9m
Amortisation GBP2.0m GBP1.2m GBP2.5m
-------------------------------- ------------- ------------- ----------
Total income statement impact GBP3.0m GBP1.1m GBP3.4m
-------------------------------- ------------- ------------- ----------
Revenue GBP81.1m GBP66.3m GBP142.9m
R&D spend as % of revenue 4.8% 5.7% 5.8%
-------------------------------- ------------- ------------- ----------
In the period, increased amortisation charges of GBP0.3m have
been taken against certain previously capitalised development costs
to better reflect their future potential. In addition, impairment
charges of GBP0.3m have been taken against projects the management
have decided to curtail.
Taxation
The statutory total charge for the period is GBP1.4m (2016:
credit GBP0.5m) representing a rate of 16% (2016: credit 8%). The
tax credit in 2016 arose once certain prior year tax returns had
been finalised. Work is continuing to determine whether further
prudent tax provisions taken in prior years will ultimately be
required.
The underlying tax charge for the period is 19% (2016: 1%).
Net Cash and Cash Flow
Underlying cash generated from operations was GBP17.0m up 16% on
the first half of 2016.
Operating cash conversion from underlying EBITDA continues to be
strong at 103% (2016: 111%) and operating cash conversion from
underlying operating profit was 156% (2016: 163%).
Total capital expenditure was GBP2.7m (2016: GBP3.8m). Dividends
and the purchase of own shares was GBP2.9m (2016: GBP3.3m).
Net cash at the half year was GBP12.6m, GBP10.6m higher than the
2016 year end.
Retirement Benefit Obligations
During the period, the Group and the Trustees agreed the
triennial pension valuation as at 31 March 2016. This shows a
deficit of approximately GBP35.0m.
It was agreed to increase deficit repair contributions to
GBP1.5m per annum from GBP0.7m per annum. The revised contributions
are payable half-yearly commencing 1 April 2017.
The IAS 19 valuation of the Group's UK retirement benefit
obligations has remained relatively similar at a deficit of
GBP40.7m (30 September 2016: deficit GBP39.9m) this is despite
taking a more prudent view of the underlying assumptions used to
calculate the deficit.
Dividends
The final dividend for the 2016 financial year of 6.32p per
ordinary share was paid to shareholders on 17 March 2017 and
absorbed GBP1.9m of shareholders' funds.
For the current financial year the Board has declared an interim
dividend of 4.11p per ordinary share, an increase of 30% on the
2016 interim dividend. This will be paid on 8 September 2017 to
shareholders on the register on 11 August 2017. It is expected to
absorb GBP1.2m of shareholders' funds.
Board changes
During the period Rob Rennie and Andrew Lewis resigned and were
replaced with Paul McDonald as Chief Executive Officer and Paul
Rayner as Interim Group Finance Director.
On 10 May 2017 it was announced that Nick Keveth will be joining
the Board as Group Finance Director on 1 June 2017 when Paul Rayner
will step down from the Board.
The Board would like to express their thanks to Paul Rayner for
his significant contribution as the Interim Group Finance
Director.
Outlook
The first half has been positive and we continue to grow our
order pipeline.
With a continued strong US dollar against sterling we anticipate
a foreign exchange tailwind in 2017 compared to the last fiscal
year.
Against the backdrop of anticipated increases in US defence
spending and continuing improvement in milk prices the Board
remains confident of achieving current year expectations.
Paul McDonald Paul Rayner
Chief Executive Officer Interim Group Finance Director
16 May 2017 16 May 2017
Statement of Directors' Responsibilities
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting'
as adopted by the European Union, and that the interim management
report herein includes a fair review of the information required by
DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed consolidated
interim financial information, and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
Forward-looking statements
Certain statements in this half year report are
forward--looking. Although the Group believes that the expectations
reflected in these forward--looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those
expressed or implied by these forward--looking statements.
We undertake no obligation to update any forward--looking
statements whether as a result of new information, future events or
otherwise.
Company website
The interim statement is available on the Company's website at
www.avon-rubber.com. The maintenance and integrity of the website
is the responsibility of the Directors. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Miles Ingrey-Counter
Company Secretary
16 May 2017
Half year to 31 March 2017 Half year to 31 March 2016 Year to 30 Sep 2016
Underlying Adjustments* Statutory Underlying Adjustments* Statutory Underlying Adjustments* Statutory
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Continuing
operations
Revenue 5 81.1 - 81.1 66.3 - 66.3 142.9 - 142.9
Cost of sales (51.0) - (51.0) (41.9) - (41.9) (90.2) - (90.2)
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Gross profit 30.1 - 30.1 24.4 - 24.4 52.7 - 52.7
Selling and
distribution
costs (10.5) - (10.5) (8.3) - (8.3) (18.0) - (18.0)
General and
administrative
expenses (8.7) (1.3) (10.0) (7.1) (2.4) (9.5) (12.9) (4.1) (17.0)
Operating
profit 5 10.9 (1.3) 9.6 9.0 (2.4) 6.6 21.8 (4.1) 17.7
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Operating
profit is
analysed as:
Before
depreciation
and
amortisation 16.5 0.1 16.6 13.2 (0.7) 12.5 30.8 (0.8) 30.0
Depreciation
and
amortisation (5.6) (1.4) (7.0) (4.2) (1.7) (5.9) (9.0) (3.3) (12.3)
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Operating
profit 10.9 (1.3) 9.6 9.0 (2.4) 6.6 21.8 (4.1) 17.7
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Finance costs 7 (0.1) - (0.1) (0.1) - (0.1) (0.2) - (0.2)
Other finance
expense 7 (0.1) (0.5) (0.6) (0.1) (0.3) (0.4) - (0.7) (0.7)
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Profit before
taxation 10.7 (1.8) 8.9 8.8 (2.7) 6.1 21.6 (4.8) 16.8
Taxation 8 (2.0) 0.6 (1.4) (0.1) 0.6 0.5 0.9 0.9 1.8
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Profit for the
period
from
continuing
operations 8.7 (1.2) 7.5 8.7 (2.1) 6.6 22.5 (3.9) 18.6
Discontinued
operations
- loss for the
period 6 - - - - - - - (0.3) (0.3)
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Profit for the
period 8.7 (1.2) 7.5 8.7 (2.1) 6.6 22.5 (4.2) 18.3
---------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Consolidated Statement of Comprehensive Income
*See note 6 for further details of adjustments
Half year to 31 March 2017 Half year to 31 March 2016 Year to 30 Sep 2016
Underlying Adjustments* Statutory Underlying Adjustments* Statutory Underlying Adjustments* Statutory
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Other
comprehensive
income
Actuarial loss
recognised
in retirement
benefit
scheme
(**) (0.4) - (0.4) (1.8) - (1.8) (23.1) - (23.1)
Deferred tax
relating to
retirement
benefit
scheme
(**) 0.1 - 0.1 0.4 - 0.4 3.5 - 3.5
Net exchange
differences
offset in
reserves
(***) 1.1 - 1.1 3.7 - 3.7 7.9 - 7.9
Cash flow
hedges (***) 0.5 - 0.5 - - - (0.9) - (0.9)
Tax relating
to exchange
differences
offset in
reserves
(***) - - - - - - (1.7) - (1.7)
--------------- ----- ----------- ------------- ---------- ----------- ------------- ----------
Other
comprehensive
income
for the
period, net
of
taxation 1.3 - 1.3 2.3 - 2.3 (14.3) - (14.3)
--------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Profit for the
period 8.7 (1.2) 7.5 8.7 (2.1) 6.6 22.5 (4.2) 18.3
Total
comprehensive
income
for the
period 10.0 (1.2) 8.8 11.0 (2.1) 8.9 8.2 (4.2) 4.0
--------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Earnings per
share
Basic 10 28.7p 24.6p 28.7p 21.6p 74.2p 60.4p
Diluted 10 28.3p 24.3p 28.1p 21.2p 72.8p 59.2p
--------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
Earnings per
share from
continuing
operations
Basic 10 28.7p 24.6p 28.7p 21.6p 74.2p 61.5p
Diluted 10 28.3p 24.3p 28.1p 21.2p 72.8p 60.3p
--------------- ----- ----------- ------------- ---------- ----------- ------------- ---------- ----------- ------------- ----------
* See note 6 for further details of adjustments
** Items that are not subsequently reclassified to the income
statement
***Items that may be subsequently reclassified to the income
statement
Consolidated Balance Sheet
As at As at As at
31 Mar 31 Mar 30 Sep
2017 2016 2016
Note GBPm GBPm GBPm
---------------------------------------- ----- -------- -------- --------
Assets
Non-current assets
Goodwill and acquired intangibles 23.7 23.3 26.0
Development expenditure and computer
software 21.7 22.2 21.3
Property, plant and equipment 29.1 29.1 30.1
Deferred tax assets 7.8 4.6 7.8
---------------------------------------- ----- -------- -------- --------
82.3 79.2 85.2
Current assets
Inventories 21.8 20.8 20.6
Trade and other receivables 19.8 15.1 20.0
Cash and cash equivalents 14 14.8 0.8 4.5
---------------------------------------- ----- -------- -------- --------
56.4 36.7 45.1
---------------------------------------- ----- -------- -------- --------
Liabilities
Current liabilities
Borrowings 14 2.2 0.4 2.5
Trade and other payables 26.1 18.0 24.2
Derivative financial instruments 0.3 0.3 0.9
Provisions for liabilities and charges 11 0.7 1.4 0.7
Current tax liabilities 9.9 8.7 8.3
---------------------------------------- ----- -------- -------- --------
39.2 28.8 36.6
---------------------------------------- ----- -------- -------- --------
Net current assets 17.2 7.9 8.5
---------------------------------------- ----- -------- -------- --------
Non-current liabilities
Borrowings 14 - 8.8 -
Deferred tax liabilities 9.2 10.0 10.0
Retirement benefit obligations 40.7 18.8 39.9
Provisions for liabilities and charges 11 1.6 1.6 1.8
---------------------------------------- ----- -------- -------- --------
51.5 39.2 51.7
---------------------------------------- ----- -------- -------- --------
Net assets 48.0 47.9 42.0
---------------------------------------- ----- -------- -------- --------
Shareholders' equity
Ordinary shares 12 31.0 31.0 31.0
Share premium account 12 34.7 34.7 34.7
Capital redemption reserve 0.5 0.5 0.5
Translation reserve 9.7 6.1 8.6
Accumulated losses (27.9) (24.4) (32.8)
---------------------------------------- ----- -------- -------- --------
Total equity 48.0 47.9 42.0
---------------------------------------- ----- -------- -------- --------
Consolidated Cash Flow Statement
Half year Half year Year to
to 31 Mar to 31 Mar 30 Sep
2017 2016 2016
Note GBPm GBPm GBPm
---------------------------------------- ----- ----------- ----------- --------
Cash flows from operating activities
---------------------------------------- ----- ----------- ----------- --------
Cash generated from continuing
operating activities before the
impact of exceptional items 13 17.0 14.7 33.1
Cash impact of exceptional items 0.3 (0.3) (0.4)
---------------------------------------- ----- ----------- ----------- --------
Cash generated from continuing
operations 17.3 14.4 32.7
Cash used in discontinued operations - - (0.3)
---------------------------------------- ----- ----------- ----------- --------
Cash generated from operations 13 17.3 14.4 32.4
Finance costs paid (0.1) (0.2) (0.4)
Retirement benefit deficit recovery
contributions (0.4) (0.3) (0.7)
Tax (paid)/received (0.7) 1.7 (1.0)
---------------------------------------- ----- ----------- ----------- --------
Net cash generated from operating
activities 16.1 15.6 30.3
---------------------------------------- ----- ----------- ----------- --------
Cash flows from investing activities
Purchase of property, plant and
equipment (1.7) (2.0) (3.5)
Capitalised development costs (0.9) (1.7) (3.2)
Purchase of computer software (0.1) (0.1) (0.1)
---------------------------------------- ----- ----------- ----------- --------
Capital expenditure (2.7) (3.8) (6.8)
---------------------------------------- ----- ----------- ----------- --------
Acquisition of subsidiaries and
businesses - (3.5) (3.3)
---------------------------------------- ----- ----------- ----------- --------
Net cash used in investing activities (2.7) (7.3) (10.1)
---------------------------------------- ----- ----------- ----------- --------
Cash flows from financing activities
Net movements in loans (0.3) (4.6) (12.0)
Dividends paid to shareholders (1.9) (1.5) (2.4)
Purchase of own shares (1.0) (1.8) (1.8)
---------------------------------------- ----- ----------- ----------- --------
Net cash used in financing activities (3.2) (7.9) (16.2)
---------------------------------------- ----- ----------- ----------- --------
Net increase in cash, cash equivalents
and bank overdrafts 10.2 0.4 4.0
Cash, cash equivalents and bank
overdrafts at beginning of the
period 4.5 0.3 0.3
Effects of exchange rate changes 0.1 0.1 0.2
---------------------------------------- ----- ----------- ----------- --------
Cash, cash equivalents and bank
overdrafts at end of the period 14 14.8 0.8 4.5
---------------------------------------- ----- ----------- ----------- --------
Consolidated Statement of Changes in Equity
Share Share Other Accumulated Total
capital premium reserves* losses equity
GBPm GBPm GBPm GBPm GBPm
----------------------------------------- --------- --------- ----------- ------------ --------
At 30 September 2015 31.0 34.7 2.9 (26.4) 42.2
Profit for the period - - - 6.6 6.6
Net exchange differences offset
in reserves - - 3.7 - 3.7
Actuarial loss recognised on retirement
benefit scheme - - - (1.8) (1.8)
Deferred tax relating to retirement
benefit scheme - - - 0.4 0.4
----------------------------------------- --------- --------- ----------- ------------ --------
Total comprehensive income for the
period - - 3.7 5.2 8.9
Dividends paid - - - (1.5) (1.5)
Movement in shares held by the employee
benefit trust - - - (1.7) (1.7)
At 31 March 2016 31.0 34.7 6.6 (24.4) 47.9
Profit for the period - - - 11.7 11.7
Net exchange differences offset
in reserves - - 4.2 - 4.2
Tax relating to exchange differences
offset in reserves - - (1.7) - (1.7)
Cash flow hedges - - - (0.9) (0.9)
Actuarial loss recognised on retirement
benefit scheme - - - (21.3) (21.3)
Deferred tax relating to retirement
benefit scheme - - - 3.1 3.1
----------------------------------------- --------- --------- ----------- ------------ --------
Total comprehensive income for the
period - - 2.5 (7.4) (4.9)
Dividends paid - - - (1.0) (1.0)
At 30 September 2016 31.0 34.7 9.1 (32.8) 42.0
Profit for the period - - 7.5 7.5
Net exchange differences offset
in reserves - - 1.1 - 1.1
Cash flow hedges - - - 0.5 0.5
Actuarial loss recognised on retirement
benefit scheme - - - (0.4) (0.4)
Deferred tax relating to retirement
benefit scheme - - - 0.1 0.1
----------------------------------------- --------- --------- ----------- ------------ --------
Total comprehensive income for the
period - - 1.1 7.7 8.8
Dividends paid - - - (1.9) (1.9)
Movement in shares held by the employee
benefit trust - - - (1.0) (1.0)
Movement in respect of employee
share schemes - - - 0.1 0.1
At 31 March 2017 31.0 34.7 10.2 (27.9) 48.0
----------------------------------------- --------- --------- ----------- ------------ --------
*Other reserves consist of the capital redemption reserve of
GBP0.5m (31 March 2016: GBP0.5m, 30 September 2016: GBP0.5m) and
the translation reserve of GBP9.7m (31 March 2016: GBP6.1m,
30 September 2016: GBP8.6m).
Notes to the Interim Financial Statements
1. General information
The company is a limited liability company incorporated in
England and domiciled in the UK. The address of its registered
office is Hampton Park West, Semington Road, Melksham, Wiltshire,
SN12 6NB. The company has its primary listing on the London Stock
Exchange.
This unaudited condensed consolidated interim financial
information was approved for issue on 16 May 2017.
These interim financial results do not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 30 September 2016 were
approved by the Board of Directors on 16 November 2016 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under Section
498 of the Companies Act 2006.
2. Basis of preparation
This condensed consolidated interim financial information for
the half year ended 31 March 2017 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting' as adopted
by the European Union. These interim financial results should be
read in conjunction with the annual financial statements for the
year ended 30 September 2016, which have been prepared in
accordance with IFRSs as adopted by the European Union.
Having considered the Group's funding position, budgets for 2017
and three year plan, the Directors have formed a judgement that
there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason the Directors continue to adopt the going
concern basis in preparing the condensed consolidated interim
financial information.
3. Accounting policies
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 September 2016,
as described in those financial statements.
Recent accounting developments
There have been no new standards or amendments which became
effective for the current reporting period.
Certain changes to IFRS will be applicable to the consolidated
financial statements in future years. IFRS 15 Revenue from
Contracts with Customers which is effective for the Group for its
2019 financial statements and is not expected to have a material
impact on Group financial statements.
IFRS 9 Financial Instruments is also effective for the Group for
its 2019 financial statements and IFRS 16 Leases will be effective
for the Group for its 2020 financial statements, both of which are
not expected to have a material impact on the Group financial
statements.
There are no other standards or interpretations that are
expected to have a material effect on the Group's net assets or
results.
4. Reconciliation of underlying numbers to statutory numbers for
the period ending 31 March 2017
Underlying Adjustments Statutory
------------------------------------------- ----------- ------------ ----------
Group EBITDA (GBPm) 16.5 0.1 16.6
Group operating profit (GBPm) 10.9 (1.3) 9.6
Other finance expense (GBPm) 0.1 0.5 0.6
Group profit before taxation (GBPm) 10.7 (1.8) 8.9
Tax charge (GBPm) 2.0 (0.6) 1.4
Group profit for the period (GBPm) 8.7 (1.2) 7.5
Basic earnings per share (pence) 28.7 (4.1) 24.6
Diluted earnings per share (pence) 28.3 (4.0) 24.3
Protection & Defence operating profit
(GBPm) 8.0 (0.4) 7.6
Dairy operating profit (GBPm) 4.0 (0.7) 3.3
Cash generated from continuing operations
(GBPm) 17.0 0.3 17.3
------------------------------------------- ----------- ------------ ----------
The adjustments comprise:
-- Amortisation of acquired intangibles of GBP1.4m (2016: GBP1.7m).
-- Net defined benefit pension scheme cost of GBP0.2m (2016:
GBP0.2m), which relates to a scheme closed to future accrual and
therefore does not relate to current operations.
-- Exceptional item credit of GBP0.3m relating to a working
capital adjustment on a business acquired in 2015 (2016: charge
GBP0.5m relating to acquisition integration costs).
-- Other finance expenses of GBP0.5m (2016: GBP0.3m) relating to
the defined benefit pension scheme.
5. Segment information
The Group has two clearly defined business segments, Protection
& Defence and Dairy, and operates out of Europe and the US.
Half year to 31 March 2017
Protection Corporate
& Defence Dairy costs Group
GBPm GBPm GBPm GBPm
------------------------------------- ----------- ------ ---------- ------
Revenue 55.9 25.2 - 81.1
------------------------------------- ----------- ------ ---------- ------
Segment result before depreciation,
amortisation, exceptional
items and defined benefit
pension scheme costs 12.1 5.5 (1.1) 16.5
Depreciation of property,
plant and equipment (2.0) (1.1) - (3.1)
Amortisation of development
expenditure (1.8) (0.2) - (2.0)
Amortisation of computer
software (0.3) (0.2) - (0.5)
------------------------------------- ----------- ------ ---------- ------
Segment result before amortisation
of acquired intangibles,
exceptional items and defined
benefit pension scheme costs 8.0 4.0 (1.1) 10.9
Amortisation of acquired
intangibles (0.4) (1.0) - (1.4)
Exceptional items - 0.3 - 0.3
Defined benefit pension scheme
costs - - (0.2) (0.2)
------------------------------------- ----------- ------ ---------- ------
Segment result 7.6 3.3 (1.3) 9.6
Finance costs - - (0.1) (0.1)
Other finance expense - - (0.6) (0.6)
------------------------------------- ----------- ------ ---------- ------
Profit before taxation 7.6 3.3 (2.0) 8.9
Taxation - - (1.4) (1.4)
------------------------------------- ----------- ------ ---------- ------
Profit for the period 7.6 3.3 (3.4) 7.5
------------------------------------- ----------- ------ ---------- ------
Half year to 31 March 2016
Protection Corporate
& Defence Dairy costs Group
GBPm GBPm GBPm GBPm
------------------------------------- ----------- ------ ---------- ------
Revenue 45.7 20.6 - 66.3
------------------------------------- ----------- ------ ---------- ------
Segment result before depreciation,
amortisation and defined
benefit pension scheme credit 9.7 4.5 (1.0) 13.2
Depreciation of property,
plant and equipment (1.9) (0.9) - (2.8)
Amortisation of development
expenditure (1.1) (0.1) - (1.2)
Amortisation of computer
software (0.1) (0.1) - (0.2)
------------------------------------- ----------- ------ ---------- ------
Segment result before amortisation
of acquired intangibles and
defined benefit pension scheme
credit 6.6 3.4 (1.0) 9.0
Amortisation of acquired
intangibles (0.8) (0.9) - (1.7)
Exceptional items (0.5) - - (0.5)
Defined benefit pension scheme
costs - - (0.2) (0.2)
------------------------------------- ----------- ------ ---------- ------
Segment result 5.3 2.5 (1.2) 6.6
Finance costs - - (0.1) (0.1)
Other finance expense - - (0.4) (0.4)
------------------------------------- ----------- ------ ---------- ------
Profit before taxation 5.3 2.5 (1.7) 6.1
Taxation - - 0.5 0.5
------------------------------------- ----------- ------ ---------- ------
Profit for the period 5.3 2.5 (1.2) 6.6
------------------------------------- ----------- ------ ---------- ------
Year ended 30 September 2016
Protection Corporate
& Defence Dairy costs Group
GBPm GBPm GBPm GBPm
------------------------------------- ----------- ------ ---------- ------
Revenue 100.9 42.0 - 142.9
------------------------------------- ----------- ------ ---------- ------
Segment result before depreciation,
amortisation, exceptional
items, acquisition costs
and defined benefit pension
scheme costs 22.4 9.8 (1.4) 30.8
Depreciation of property,
plant and equipment (3.9) (2.0) - (5.9)
Amortisation of development
expenditure (2.2) (0.3) - (2.5)
Amortisation of computer
software (0.3) (0.3) - (0.6)
------------------------------------- ----------- ------ ---------- ------
Segment result before amortisation
of acquired intangibles,
exceptional items, acquisition
costs and defined benefit
pension scheme costs 16.0 7.2 (1.4) 21.8
Amortisation of acquired
intangibles (1.5) (1.8) - (3.3)
Exceptional items and acquisition
costs (0.5) - - (0.5)
Defined benefit pension scheme
costs - - (0.3) (0.3)
------------------------------------- ----------- ------ ---------- ------
Segment result 14.0 5.4 (1.7) 17.7
Finance costs - - (0.2) (0.2)
Other finance expense - - (0.7) (0.7)
------------------------------------- ----------- ------ ---------- ------
Profit before taxation 14.0 5.4 (2.6) 16.8
Taxation - - 1.8 1.8
------------------------------------- ----------- ------ ---------- ------
Profit for the year from
continuing operations 14.0 5.4 (0.8) 18.6
------------------------------------- ----------- ------ ---------- ------
Discontinued operations -
loss for the year - - (0.3) (0.3)
------------------------------------- ----------- ------ ---------- ------
Profit for the year 14.0 5.4 (1.1) 18.3
------------------------------------- ----------- ------ ---------- ------
Revenue by origin
Half year Half year Year to
to 31 March to 31 March 30 Sep
2017 2016 2016
GBPm GBPm GBPm
-------- ------------- ------------- --------
Europe 17.3 16.6 31.7
US 63.8 49.7 111.2
81.1 66.3 142.9
-------- ------------- ------------- --------
Segment assets in Europe and the US were GBP70.7m and GBP68.0m
respectively (31 March 2016: GBP58.0m and GBP58.0m, 30 September
2016: GBP60.3m and GBP70.0m).
6. Adjustments and discontinued operations
Half year Half year Year to
to 31 March to 31 March 30 Sep
2017 2016 2016
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- --------
Amortisation of acquired intangible
assets (1.4) (1.7) (3.3)
Acquisition integration costs - (0.5) (0.5)
Post-acquisition working capital
adjustment 0.3 - -
Defined benefit pension scheme administration
costs (0.2) (0.2) (0.3)
(1.3) (2.4) (4.1)
----------------------------------------------- ------------- ------------- --------
The deferred tax impact gives rise to a credit to the income
statement of GBP0.6m (31 March 2016: GBP0.6m, 30 September 2016:
GBP0.9m).
The integration costs in 2016 relate to the acquisition of the
Argus thermal imaging camera business and the relocation of the
manufacturing to our Melksham, UK site.
Defined benefit pension scheme costs relate to administrative
expenses of the scheme which is closed to future accrual. GBP0.5m
of other finance expense relating to the pension scheme is also
treated as an adjustment (31 March 2016: GBP0.3m, 30 September
2016: GBP0.7m).
The 2016 loss for the year from discontinued operations related
to dilapidations costs of former leased premises of a business
which was disposed of in 2006.
7. Finance income and costs
Half year Half year Year to
to to 30 Sep
31 Mar 2017 31 Mar 2016 2016
GBPm GBPm GBPm
------------------------------------ ------------- ------------- --------
Interest payable on bank loans and
overdrafts (0.1) (0.1) (0.2)
------------------------------------ ------------- ------------- --------
Other finance expense
Half year Half year Year to
to to 30 Sep
31 Mar 2017 31 Mar 2016 2016
GBPm GBPm GBPm
--------------------------------------- ------------- ------------- --------
Net interest cost: UK defined benefit
pension scheme (0.5) (0.3) (0.7)
Provisions: Unwinding of discount (0.1) (0.1) -
--------------------------------------- ------------- ------------- --------
(0.6) (0.4) (0.7)
--------------------------------------- ------------- ------------- --------
8. Taxation
Half year Half year Year to
to to 30 Sep
31 Mar 2017 31 Mar 2016 2016
GBPm GBPm GBPm
-------------------------------- ------------- ------------- --------
United Kingdom (1.3) (1.3) (2.7)
Overseas (0.7) 1.2 3.6
-------------------------------- ------------- ------------- --------
Underlying tax (charge)/credit (2.0) (0.1) 0.9
Effect of exceptional items 0.6 0.6 0.9
-------------------------------- ------------- ------------- --------
Statutory tax (charge)/credit (1.4) 0.5 1.8
-------------------------------- ------------- ------------- --------
The statutory effective tax rate for the period is a charge of
16% (31 March 2016: credit of 8%, 30 September 2016: credit of
11%).
The underlying effective tax rate, where the tax charge and the
profit before taxation are adjusted for exceptional items, the
amortisation of acquired intangibles and defined benefit pension
scheme costs is 19% (31 March 2016: 1%, 30 September 2016: 4%
credit).
9. Dividends
On 2 February 2017, the shareholders approved a final dividend
of 6.32p per qualifying ordinary share in respect of the year ended
30 September 2016. This was paid on 17 March 2017 absorbing GBP1.9m
of shareholders' funds.
The Board of Directors has declared an interim dividend of 4.11p
(2016: 3.16p) per qualifying ordinary share in respect of the year
ended 30 September 2017. This will be paid on 8 September 2017 to
shareholders on the register at the close of business on 11 August
2017. In accordance with accounting standards, this dividend has
not been provided for. It will be recognised in shareholders' funds
in the year to 30 September 2017 and is expected to absorb GBP1.2m
(2016: GBP1.0m) of shareholders' funds.
10. Earnings per share
Basic earnings per share is based on a profit attributable to
ordinary shareholders of GBP7.5m (2016: GBP6.6m) and 30,410,000
(2016: 30,248,000) ordinary shares being the weighted average
number of shares in issue during the period.
Underlying earnings per share is based on a profit attributable
to ordinary shareholders of GBP8.7m (2016: GBP8.7m) after adding
back amortisation of acquired intangible assets, exceptional items
and defined benefit pension scheme costs.
The Company has 463,000 (1.5%) (2016: 587,000 (1.9%))
potentially dilutive ordinary shares in respect of the Performance
Share Plan.
11. Provisions for liabilities and charges
Property obligations
GBPm
------------------------------ ---------------------
Balance at 30 September 2016 2.5
Payments in the period (0.3)
Unwinding of discount 0.1
------------------------------ ---------------------
Balance at 31 March 2017 2.3
------------------------------ ---------------------
Property obligations include an onerous lease provision and
obligations relating to former premises of the Group which are
subject to dilapidation risks. Property provisions are subject to
uncertainty in respect of the utilisation, non-utilisation, or
subletting of surplus leasehold property and the final negotiated
settlement of any dilapidation claims with landlords.
12. Share capital
Half year Half year Year to
to 31 Mar to 30 Sep
2017 31 Mar 2016 2016
------------------------------ ----------- ------------- --------
Number of shares (thousands) 31,023 31,023 31,023
Ordinary shares (GBPm) 31.0 31.0 31.0
Share premium (GBPm) 34.7 34.7 34.7
------------------------------ ----------- ------------- --------
During the period 100,000 ordinary shares with a nominal value
of GBP1 each were purchased by the Avon Rubber p.l.c. Employer
Share Ownership Trust at a cost of GBP1,027,000 and 253,000
ordinary shares of GBP1 each were awarded in relation to the 2016
annual incentive plan.
13. Cash generated from operations
Half year Half year Year to
to 31 Mar to 31 Mar 30 Sep
2017 2016 2016
GBPm GBPm GBPm
--------------------------------------------- ----------- ----------- --------
Continuing operations
Profit for the period 7.5 6.6 18.6
Adjustments for:
Taxation 1.4 (0.5) (1.8)
Depreciation 3.1 2.8 5.9
Amortisation of intangible assets 3.9 3.1 6.4
Defined benefit pension scheme costs 0.2 0.2 0.3
Finance costs 0.1 0.1 0.2
Other finance expense 0.6 0.4 0.7
Movements in working capital and provisions 0.5 1.6 2.4
Other movements - 0.1 -
--------------------------------------------- ----------- ----------- --------
Cash generated from continuing operations 17.3 14.4 32.7
--------------------------------------------- ----------- ----------- --------
Analysed as:
Cash generated from continuing operations
prior to the effect of exceptional
operating items 17.0 14.7 33.1
Cash effect of exceptional operating
items 0.3 (0.3) (0.4)
--------------------------------------------- ----------- ----------- --------
Cash used in discontinued operations - - (0.3)
--------------------------------------------- ----------- ----------- --------
Cash generated from operations 17.3 14.4 32.4
--------------------------------------------- ----------- ----------- --------
14. Analysis of cash and debt
As at Exchange As at
30 Sep 2016 Cash Flow movements 31 Mar 2017
GBPm GBPm GBPm GBPm
-------------------------- ------------- ---------- ----------- -------------
Cash at bank and in hand 4.5 10.2 0.1 14.8
Debt due in less than 1
year (2.5) 0.3 - (2.2)
2.0 10.5 0.1 12.6
-------------------------- ------------- ---------- ----------- -------------
Borrowing facilities
As at As at As at
31 Mar 2017 31 Mar 2016 30 Sep 2016
GBPm GBPm GBPm
------------------------------------ ------------- ------------- -------------
Total undrawn committed facilities 31.6 21.1 30.6
Bank loans and overdrafts utilised 2.2 8.6 2.5
Utilised in respect of guarantees 0.3 0.3 0.3
------------------------------------ ------------- ------------- -------------
Total Group facilities (excluding
accordion option of $35m) 34.1 30.0 33.4
------------------------------------ ------------- ------------- -------------
All facilities are at floating interest rates.
On 9 June 2014 the Group agreed bank facilities with Barclays
Bank and Comerica Bank. The combined facilities comprise a
revolving credit facility of $40m with a $35m accordion option. The
facilities expire on 30 November 2019. This facility is priced on
the dollar LIBOR plus margin of 1.25% and includes financial
covenants which are measured on a quarterly basis. The Group was in
compliance with its financial covenants during 2017 and 2016.
InterPuls S.p.A has a fixed term loan of EUR2.5m which expires
in August 2020. This facility is priced on EURIBOR plus margin of
0.9%.
15. Exchange rates
The following significant exchange rates applied during the
period.
Average Closing Average Closing Average Closing
rate rate rate rate rate rate
H1 2017 H1 2017 H1 2016 H1 2016 FY 2016 FY 2016
----------- -------- -------- -------- -------- -------- --------
US dollar 1.24 1.25 1.46 1.43 1.42 1.30
Euro 1.16 1.17 1.33 1.25 1.28 1.16
----------- -------- -------- -------- -------- -------- --------
Fair value of financial instruments
The fair value of forward exchange contracts is determined by
using valuation techniques using period end spot rates, adjusted
for the forward points to the value date of the contract.
16. Principal risks and uncertainties
The principal risks and uncertainties impacting the Group are
described on pages 28-31 of our Annual Report 2016 and remain
unchanged at 31 March 2017.
They include: market threat, product development, talent
management, business interruption - supply chain, acquisition
integration, quality risks and product recall, customer dependency
and non-compliance with legislation.
17. Related party transactions
There were no related party transactions during the period or
outstanding at the end of the period (2016: GBPnil).
CORPORATE INFORMATION
REGISTERED OFFICE
Corporate Headquarters
Hampton Park West
Semington Road
Melksham
Wiltshire
SN12 6NB
Registered in England and Wales No. 32965
V.A.T. No. GB 137 575 643
BOARD OF DIRECTORS
David Evans (Chairman)
Pim Vervaat (Non-Executive Director)
Chloe Ponsonby (Non-Executive Director)
Paul McDonald (Chief Executive Officer) - Appointed 15 February
2017
Paul Rayner (Interim Group Finance Director) - Appointed 1
December 2016
COMPANY SECRETARY
Miles Ingrey-Counter
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
REGISTRARS & TRANSFER OFFICE
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
BR3 4TU
Tel: 0871 664 0300
(calls cost 10p per minute plus network extras,
lines are open 8.30am-5.30pm Mon-Fri)
BROKERS
Arden Partners plc
SOLICITORS
TLT LLP
PRINCIPAL BANKERS
Barclays Bank PLC
Comerica Inc.
CORPORATE FINANCIAL ADVISER
Arden Partners plc
CORPORATE WEBSITE
www.avon-rubber.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UVSNRBOAVAAR
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