TIDMELM
RNS Number : 6682M
Elementis PLC
01 August 2017
1 August 2017
ELEMENTIS plc
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2017
Elementis plc (ELM.L) ("Elementis", the "Company" or the
"Group"), a Global Specialty Chemicals Company, announces its
results for the six months ended 30 June 2017.
Reignite Growth strategy gaining momentum
-- Operating profit up across all three segments.
-- Group adjusted operating profit(1) up 26% with short term
favourable conditions in Surfactants and the inclusion of the
acquired SummitReheis business. Excluding these two items, the
adjusted operating profit is stable.
-- Specialty Products adjusted operating profit(1) up 18%, with
strong growth in Personal Care and Energy, and steady revenue in
Coatings.
-- Chromium gross revenue(2) up 18% with the US resilient and
stronger demand in the rest of the world. Adjusted operating
profit(1) up 3% as higher sales offset by higher maintenance costs
and lower rest of the world unit margins.
-- Surfactants boosted by favourable pricing conditions that
will not sustain in H2 and beyond. Now pursuing the potential sale
of the business.
-- SummitReheis integration on track, $3m cost synergies
underpinned and acquisition proving highly complementary - creating
a Personal Care business of scale.
-- Operating cash flow(3) up 52%.
-- Outlook unchanged - on track to grow operating profit across all three segments in 2017.
FINANCIAL SUMMARY
Six months Six months % Change
ended 30 ended 30
June 2017 June 2016
Sales $414.8m $334.1m +24%
Statutory profit for
the period $43.2m $37.4m +16%
Statutory basic earnings
per share 9.3c 8.1c +15%
Adjusted operating
profit(1) $67.6m $53.6m +26%
Profit before tax $54.1m $46.3m +17%
Diluted adjusted earnings
per share(4) 10.4c 8.8c +18%
Operating cash flow(3) $52.0m $34.3m +52%
Net (debt)/cash(5) $(313.3)m $37.5m
Interim dividend to
shareholders 2.70c 2.70c
- Restated see note 17
1 - See note 5
2 - See note 4
3 - See cash flow within Finance report
4 - See note 9
5 - See note 12
Commenting on the results, CEO, Paul Waterman said:
"The first six months of 2017 have been positive for Elementis.
Operating profit has grown across all our business segments, our
Reignite Growth strategy is showing early signs of delivery and the
integration of SummitReheis is on track.
"Trading for the Group in the first half was underpinned by
stronger sales across our end markets. In Specialty Products, we
made significant progress in Personal Care and Energy. In Coatings
we have been taking pricing action to address margin compression.
In Chromium our performance benefited from more robust demand and
we have implemented price increases in response to higher raw
material costs. In Surfactants results were exceptionally strong
due to short term favourable conditions.
"Our Reignite Growth strategy is gaining momentum. As part of
our supply chain transformation we announced the disposal of our US
colourants business and the closure of the Jersey City site. We are
also pursuing the potential sale of our Surfactants business. Our
innovation pipeline is showing promise and new product launches are
driving sales growth across business lines and geographies. New
product and capital investment processes, combined with enhanced
and standardised management information and reporting, is improving
the efficiency and effectiveness of resource allocation.
"The integration of SummitReheis, the global market leader for
anti-perspirant and deodorant actives, is progressing very well and
is on track to conclude by the end of 2017. As expected the
business has already improved the returns profile of Elementis and,
having had the opportunity to fully engage with its management
team, we are excited about the opportunities for a material
Personal Care segment that combines SummitReheis with our existing
fast growing Personal Care operations.
"Looking forward we see significant potential for Elementis as
we focus on delivery of our Reignite Growth strategy. We remain
confident in our ability to make progress in 2017 and beyond."
Enquiries
Elementis plc Tel: 020 7067 2994
James Curran, Investor Relations
FTI Consulting Tel: 020 3727 1000
Deborah Scott
Matthew Cole
-S -
Business review
CEO's report
This has been a positive start to the year for Elementis.
Operating profit has grown across all our business segments, our
Reignite Growth strategy is starting to deliver and the full
integration of SummitReheis is on track to complete by the end of
2017.
Group performance
Where we refer to adjusted performance measures (e.g. adjusted
operating profit) see note 5
Where we refer to constant currency see Finance report
Specialty Products
Specialty Products is a high quality business offering
distinctive products to customers in three different markets:
Coatings, Personal Care and Energy. Sales for the first half of
2017 were $294.5 million, compared with $238.8 million in the same
period last year, representing an increase of 26% on a constant
currency basis driven by strong volume growth and a first
contribution from SummitReheis. Unless stated otherwise, the
remainder of this commentary refers to constant currency
movements.
-- Excluding the impact of the US colourants business disposal,
Global Coatings sales rose 2% to $188.0 million, with growth in
Asia and the Americas offset by lower EMEA sales. Coatings Americas
(excluding colourants) finished 4% above last year with good North
America industrial demand and improved conditions in Latin America.
Coatings Asia improved by 3% with solid growth in our largest
market of China and improved demand in Australasia and South East
Asia. In EMEA, Coatings finished down 3% with strong performance in
Southern Europe offset by soft demand in Central Europe and the
Middle East.
-- In Personal Care, sales rose by 147% to $77.2 million, driven
by our existing operations and the initial contribution from
SummitReheis. Our existing Personal Care business grew 25% in the
period with rapid sales growth in our Bentone(R) Gels product
range, strong performance in Asia and double digit growth at the
majority of our key global accounts. SummitReheis contributed $38.1
million of sales in the period following the acquisition completion
in March 2017.
-- In Energy, customer wins and a marked increase in drilling
activity, most notably in North America, saw sales increase by 78%
to $29.3 million. Moving into the second half of the year we expect
to see an improvement on prior year results.
Adjusted operating profit for the first six months of 2017 was
$51.6 million, compared with $43.7 million in the previous year,
representing an 18% increase on a constant currency basis. Adjusted
operating margin for the period was 17.5%, down on 18.3% in the
previous period, due to raw material cost inflation in Coatings and
investment in our sales and marketing talent to support and deliver
our Reignite Growth strategy. Pricing action has been implemented
in response to raw material increases.
Chromium
Our strategy for Chromium remains focused on structurally
advantaged US assets. Gross sales in the period were $95.4 million
compared to $80.9 million in the previous year, an increase of 18%
on a constant currency basis. Strong volume growth due to increased
demand levels outside of North America was partly offset by the
exit rate of pricing from 2016.
Adjusted operating profit for the first six months of the year
was $15.8 million compared to $15.4 million in the previous year.
Operating margins declined from 19.0% to 16.6% due to a stronger
rest of the world sales mix and higher unplanned maintenance costs.
Pricing responses implemented during the first half in response to
raw material cost inflation should contribute to an improved full
year outcome versus 2016.
Surfactants
Sales in the first six months of 2017 rose significantly on the
same period last year as a result of favourable pricing conditions
that are not expected to be sustained. The adjusted operating
profit for the period was $9.1 million compared to a loss of $0.2
million in the comparable period last year.
Tax
The adjusted tax rate of 20.6% represents an increase from the
13.0% for full year 2016, reflecting geographic profit mix, one off
impacts in 2016 and the effect of funding arrangements. For the
full year 2017 we currently estimate a tax range of 21 - 23%.
Balance sheet
As a result of the completion of the SummitReheis acquisition
the Group moved from a net cash position of $37.5 million to net
debt of $313.3 million, representing a net debt to adjusted EBITDA
ratio of 2.3x. As previously indicated, we expect pro-forma net
debt to adjusted EBITDA of below 2x at the year end with further
deleveraging thereafter.
The IAS 19 deficit, on the Group's post retirement benefit
plans, declined from $30.1 million at the end of 2016 to $24.1
million partly due to the benefit from good investment returns. The
UK pension plan accounts for the majority of the Group's pension
obligations.
Interim dividend
The Board is declaring an interim dividend of 2.70 cents per
share, the same as in the previous year, which will be paid on 29
September 2017, in pounds sterling at an exchange rate of
$1.3177:GBP1.00 to shareholders on the register on 8 September
2017.
Strategic progress
Though we are at an early stage of our strategic journey, since
the launch of our Reignite Growth strategy in November 2016 the
business has made considerable progress across its four key
strategic pillars.
1. Pursue the best growth opportunities
Global key account management is about accelerating how we work
and grow with our major customers. In the first six months of 2017
we implemented key account processes with our six largest Coatings
customers. This has had a positive impact on our customer
relationships and as a result Elementis is realising new business
opportunities.
In Asia the opportunity is clear: expanding our Coatings
presence, including building our decorative coatings activities in
China and beyond. We have appointed a new Managing Director in
India who will lead our business development in India and South
Asia.
In Personal Care we have a unique competitive position through
our hectorite mine. A small amount of hectorite organoclay in a
cosmetic product gives it exceptional performance, look and feel.
We believe the existing Personal Care business has major
opportunities to grow as demonstrated in the first half of the year
when it delivered constant currency growth of 25%, with notably
strong performance in Asia.
The acquisition of SummitReheis, a high quality personal care
business, is already having a positive impact on the returns
profile of Elementis. Having had the opportunity to fully engage
with its management team we are excited about the potential of
SummitReheis combined with our fast growing existing Personal Care
business, and the complementary nature of the two operations.
Integration of SummitReheis is on track for the end of 2017 and
will help transform the scale and growth prospects of our Personal
Care activities. Our cost synergies target of up to $3 million run
rate is on track.
2. Pursue supply chain transformation
Elementis has a high quality set of manufacturing sites. We are
developing advantaged sites and are progressing further investment
in Livingston, Scotland, to support global Personal Care growth and
we are planning to reposition our site in Palmital, Brazil. However
some of our plants are disadvantaged. As a result we announced in
March 2017 the disposal of our US colourants business and closure
of the Jersey City site. We are also looking to optimise our
organoclay operations in Asia and the US.
In Surfactants we are pursuing the potential sale of the
business and continue to expect resolution by early 2018.
3. Innovate for high margins and distinctiveness
Innovation is at the heart of what we do and is what our
customers expect from us. To sustain our innovation leadership
position we have introduced new pipeline management tools which
offer cross functional transparency. The integration of our
research and development functions into our customer facing teams
and alignment with our key account management initiatives is
delivering innovation that adds value for our customers.
SummitReheis also brings a new, market leading technology and
innovation opportunity to Elementis.
As a result, the quality of our innovation pipeline is improving
and we have launched several new products that are driving sales.
In Asia we launched new rheology and colour dispersant products
with roll out into further geographies expected to follow, and our
organic thixotropes are gaining momentum in both the US and
Europe.
4. Create a culture of high performance
Beyond the structural changes implemented in 2016 we have also
made several process changes in how we run the business to foster a
high performance culture. New product development and capital
investment processes mean we are now more effectively deploying
capital to the highest return opportunities. This combined with the
implementation of enhanced and standardised management information
and reporting, and clear lines of individual accountability, is
improving the efficiency and effectiveness of resource
allocation.
Outlook
Looking forward we see significant potential for Elementis. Our
management team is focused on the delivery of our Reignite Growth
strategy and we are already seeing early benefits from its
implementation. Whilst we remain very much at the early stage of
this strategic journey the first six months of the year have
reinforced the Board's confidence in the prospects for Elementis
and our expectation is for further progress in 2017 and beyond.
Management expectations for full year earnings remain
unchanged.
Finance report
Revenue for the six Revenue Effect
months of
ended 30 June 2016 restated exchange Increase Revenue
$million rates 2017 2017
$million $million $million
Specialty Products 238.8 (4.2) 59.9 294.5
Chromium 80.9 - 14.5 95.4
Surfactants 21.8 (0.6) 10.2 31.4
Inter-segment (7.4) - 0.9 (6.5)
---------------------- --------------- ---------- ----------- -----------
334.1 (4.8) 85.5 414.8
--------------------- --------------- ---------- ----------- -----------
Adjusted operating Adjusted
profit for the six operating
months ended 30 June profit*
2016
restated
$million
----------- ---------- ------------ -----------
Effect
of Increase/
Adjusted
operating
exchange (decrease) profit*
rates 2017 2017
$million $million $million
--------------------- --- ----------- ---------- ------------ -----------
Specialty Products 43.7 (0.1) 8.0 51.6
Chromium 15.4 - 0.4 15.8
Surfactants (0.2) (0.2) 9.5 9.1
Central costs (5.3) 0.3 (3.9) (8.9)
-------------------------- ----------- ---------- ------------ -----------
53.6 - 14.0 67.6
------------------------- ----------- ---------- ------------ -----------
* See note 5
Group results
Group sales for the first six months of 2017 was $414.8 million,
compared to $334.1 million in the same period last year,
representing an increase of 24%, or 26% excluding currency
movements. Whilst much of the additional sales came from the
SummitReheis acquisition increased sales in Chromium outside of
North America, Surfactants and Personal Care and Energy in
Specialty Products contributed to the improvement. Group adjusted
operating profit was $67.6 million, compared to $53.6 million in
the same period last year, which is an increase of 26%, and the
same percentage excluding currency movements. Increased operating
profit was primarily the result of the addition of SummitReheis to
the Group, adding $6.0 million in the period since acquisition to
30 June 2017, and the result of favourable pricing conditions in
Surfactants.
The Group continues to enter into hedging transactions in order
to reduce the impact of currency movements on earnings. In 2017
these transactions added a gain of $0.1 million (2016: cost of $1.8
million) to the Specialty Products business.
Central costs
Central costs are costs that are not identifiable as expenses of
a particular business and comprise the Board of Directors and
corporate offices in the UK and US. Adjusted costs for the first
half of 2017 were higher at $8.9 million, compared to $5.3 million
in the same period last year due to building of capability to
support and deliver our Reignite Growth strategy.
Adjusting items
In calculating the profitability measures by which management
assesses the performance of the Group a number of items are
excluded from operating profit as reported in accordance with IFRS.
The Board believes that the adjusted measures assist shareholders
in better understanding the underlying performance of the
business.
2016 2016
------------
Six months Year
ended ended
30 June 31 December
restated restated
2017 $million $million
Six months
ended
30 June
$million
------------------------------ ------------ ----------- ------------
Reported operating profit 60.4 48.7 84.5
------------------------------ ------------ ----------- ------------
Adjusting items:
Acquisition costs 6.0 - 0.8
Restructuring 0.7 1.7 3.0
Business review 0.9 1.9 2.4
Amortisation of intangibles
arising on acquisition 3.1 1.3 2.7
Colourants disposal and (3.5) - -
Jersey City site closure
Other - - 3.5
------------------------------ ------------ ----------- ------------
Net adjusting items 7.2 4.9 12.4
------------------------------ ------------ ----------- ------------
Adjusted operating profit 67.6 53.6 96.9
------------------------------ ------------ ----------- ------------
Acquisition costs primarily relate to the fees for legal and
advisory work incurred in the acquisition of SummitReheis. In the
first half of 2016 a business review was undertaken by a third
party to support development of the long term strategy and internal
transformation for Elementis. The one time cost of this exercise
was $1.9m however subsequent costs have been incurred for delivery
of this transformation. In previous years Elementis has not
adjusted operating profit for the amortisation of intangibles
arising on acquisition. Following the acquisition of SummitReheis,
the Directors reviewed this policy and concluded that excluding
such a charge from the operating profit will provide readers of the
accounts with a better understanding of the Group's results on its
operating activities and, as such, this charge is now included
within adjusting items. In March 2017 Elementis announced the sale
of its US Colourants business to Chromaflo Technology Corp, and
closure of the Jersey City site. The net profit on this disposal
and closure was $3.5 million and, given the one time nature of the
transaction, has been treated as an adjusting item.
Other expenses
Other expenses are administration costs incurred and paid by the
Group's pension schemes, which relate primarily to former employees
of legacy businesses, and were $1.4 million in the period compared
to $0.8 million in the previous year.
Net finance costs
30 June 30 June
2017 2016
$million $million
----------------------------- --------- ---------
Finance income 0.1 0.1
Finance cost of borrowings (4.3) (0.6)
----------------------------- --------- ---------
(4.2) (0.5)
Net pension finance expense (0.1) (0.4)
Discount on provisions (0.6) (0.7)
----------------------------- --------- ---------
Net Finance costs (4.9) (1.6)
----------------------------- --------- ---------
Net finance costs for the first six months of the year were $3.3
million higher at $4.9 million. Net interest costs were higher than
the same period last year at $4.2 million and consist mostly of
interest on the Group's increased borrowings following the
acquisition of SummitReheis. Net pension finance costs in the
period were $0.3 million lower at $0.1 million, in line with the
decline in the Group's net IAS 19 pension deficit. Discount on
provisions relates to the time value cost of certain environmental
provisions, which are calculated on a discounted cash flow basis.
The charge for the period was slightly lower than the same period
last year due to a reduction in the discount rate at the end of
2016.
Tax
The provision for tax on profits after adjusting items was $12.7
million, or 20.6%, in the first half of 2017 (2016: $10.3 million ,
or 20.1% ) and is based on the probable tax payable in those
jurisdictions where taxable profits arise and deferred tax
provisions where these are applicable. The estimated rate for the
full year is 21% - 23% including $1.0 million of prior year
adjustments. The rate is sensitive to the mix of profits from
different jurisdictions. The inclusion of a tax credit of $1.8m on
adjusting items results in a reported tax charge for the period of
$10.9 million (2016: $8.9 million ).
Earnings per share
Basic and diluted adjusted earnings per share for the first half
of 2017, calculated on the adjusted earnings of $48.6 million
(2016: $40.9 million ), were 10.5 cents and 10.4 cents respectively
compared to 8.8 cents and 8.8 cents respectively in the same period
last year.
Cash flow
Cash flow is summarised below:
30 June 2016
restated
-------------
30 June 2017 $million
$million
------------------------------------------- ------------- -------------
Profit before interest, tax, depreciation
and
amortisation (EBITDA) 77.6 62.7
Change in working capital (9.7) (11.1)
Capital expenditure (14.9) (15.7)
Other (1.0) (1.6)
------------------------------------------- ------------- -------------
Operating cash flow 52.0 34.3
Pension deficit payments (6.5) (3.1)
Interest and tax (7.3) (3.2)
Other (2.1) 0.1
------------------------------------------- ------------- -------------
Free cash flow 36.1 28.1
Dividends (65.3) (63.7)
Acquisitions (361.2) -
Currency fluctuations (0.4) (0.9)
------------------------------------------- ------------- -------------
Movement in net cash (390.8) (36.5)
Net cash at start of period 77.5 74.0
------------------------------------------- ------------- -------------
Net (debt)/cash at end of period (313.3) 37.5
------------------------------------------- ------------- -------------
Net cash expended in the first six months of 2017 of $390.8
million includes a net outflow of $361.2 million for SummitReheis
(purchase price of $360.0 million for the business and $10.3
million for working capital less $9.1 million of cash acquired with
the business). Excluding this item, net cash expended was $6.9
million lower than the same period last year, at $29.6 million.
Operating cash flow in the period rose from $34.3 million to
$52.0 million driven by earnings growth and reduced working capital
outflow. EBITDA in the period was $14.9 million higher, in line
with the changes in operating profit and increased depreciation and
amortisation following the SummitReheis acquisition, while working
capital outflows were $1.4 million lower than the same period last
year. This reduction in working capital flows was largely a result
of lower inventories of chrome ore at 30 June 2017 compared to 30
June 2016 and increased creditor days outstanding within Specialty
Products.
Capital expenditure in the period was $0.8 million lower than
the previous year at $14.9 million. Of this, spending in Specialty
Products was $9.0 million, compared to $7.1 million in the previous
year, and included growth investments in product expansions in the
UK and investments in health and safety in Asia Pacific and Europe.
Capital spending for the year as a whole is expected to be
approximately $40 million (2016: $35.3 million).
Pension deficit payments in the period were $3.4 million higher
than the previous year, at $6.5 million, as a deficit funding
payment relating to 2016 was deferred from December 2016 to January
2017. Total contributions for the year as a whole are expected to
be below $10.0 million as a result of progressive improvements in
the UK plan deficit. Interest and tax payments in the period were
$4.1 million higher than the previous year, mostly due to interest
on the Group's increased borrowings following the acquisition of
SummitReheis.
Dividend payments were $65.3 million compared to $63.7 million
in the first six months of 2016, with the increase being the result
of an increase in the special dividend for 2016, as announced in
March 2017. Overall, the Group had a net debt position on its
balance sheet of $313.3 million at the end of the period.
Working capital
Working capital days 30 June
restated
2016
----------
30 June 31 December
2017 2016
---------------------------- -------- ---------- ------------
Inventory 99 109 97
----------------------------- -------- ---------- ------------
Debtors 49 47 44
----------------------------- -------- ---------- ------------
Creditors 65 62 64
----------------------------- -------- ---------- ------------
Average working capital to
sales (%) 19.9 24.4 22.1
----------------------------- -------- ---------- ------------
Total working capital for the Group was $19.6 million higher at
the end of June 2017 than at the same time last year primarily due
to an additional $32.1 million on the acquisition of SummitReheis
offset by reductions in inventories. Creditor days showed a minor
increase at 65 days, compared to 62 days last year, somewhat
offsetting a minor worsening in debtor days from 47 days to 49
days. Inventory levels were $5.0 million higher compared to the end
of June 2016 with much of the increase due to SummitReheis offset
by reductions in chrome ore inventory. Average working capital
levels as a percentage of sales have declined steadily over the 12
month period from 24.4% to 19.9% due to this improvement in
inventory management.
Balance sheet
30 June
2016
restated
-------------
30 June 2017 $million
$million
------------------------------- ------------- ----------
Property, plant and equipment 241.3 213.7
Other net assets 701.1 373.1
Net (debt)/cash (313.3) 37.5
------------------------------- ------------- ----------
Equity 629.1 624.3
------------------------------- ------------- ----------
Property, plant and equipment increased by $27.6 million
compared to the previous period end due to $18.8 million being
acquired on the acquisition of SummitReheis and net capital
spending of $34.0 million exceeding depreciation of $26.2 million.
The remainder of the movement is due to the impact of FX
movements.
Other net assets increased by $328.0 million due to $342.4
million on the acquisition of SummitReheis but also due to working
capital reductions (excluding balances acquired with the
SummitReheis acquisition) of $13.7 million, net tax liabilities
increasing by $8.0 million, a net reduction in pensions and
provisions liabilities of $2.1 million and increases in valuation
of goodwill and other intangibles of $5.2 million due to the impact
of FX revaluation.
Equity increased by $4.8 million as a result of profit for the
intervening period of $73.9 million offset by dividends paid of
$77.8 million, actuarial losses net of tax of $2.8 million and
positive exchange movements of $9.1 million.
The main dollar currency exchange rates as at 30 June 2017 and
average rates in the period were:
2017 2017 2016 2016
30 June Average 30 June Average
---------- -------- -------- -------- --------
Sterling 0.77 0.79 0.75 0.69
---------- -------- -------- -------- --------
Euro 0.88 0.93 0.90 0.90
---------- -------- -------- -------- --------
Pensions and post retirement plans
UK US Other Total
$million $million $million $million
--------------------------------- --------- --------- --------- ---------
Movement in net deficit
Net asset/(deficit) in
schemes at 1 January
2017 4.3 (29.4) (5.0) (30.1)
Deficit acquired on acquisition
of SummitReheis - - (4.3) (4.3)
Current service cost (0.3) (0.1) (0.4) (0.8)
Contributions 7.1 0.2 0.1 7.4
Administration costs (0.8) (0.2) (0.1) (1.1)
Net interest expense 0.1 (0.5) (0.1) (0.5)
Actuarial gain 0.9 4.5 - 5.4
Currency translation
differences 0.6 - (0.7) (0.1)
--------------------------------- --------- --------- --------- ---------
Net asset/(deficit) in
schemes at 30 June 2017 11.9 (25.5) (10.5) (24.1)
--------------------------------- --------- --------- --------- ---------
During the period the deficit, under IAS 19, on the Group's
pension and post retirement medical plans improved by $6.0 million
to $24.1 million. During the first six months of 2017 the UK
scheme, which represent 83% of total liabilities, had an annualised
return of 5% (2016: 25%), while the liabilities increased by 4%
(2016: increased by 22%) on the same basis. The US schemes, which
represent the majority of the remainder of liabilities, also had an
annualised return of 16% which was well above the liability growth
of 7%. The net impact is represented by the actuarial gain of $5.4
million (2016: $4.3 million) shown in the above table.
Contributions in the period totalled $7.4 million (2016: $3.8
million) and were mostly made to the UK plan. Included in this
amount was $0.8 million (2016: $0.7 million) to fund current
service costs and $6.6 million (2016: $3.1 million) for deficit
reduction. Deficit contributions are higher than for the same
period last year as a deficit funding payment relating to 2016 was
deferred from December 2016 to January 2017
Cautionary statement
The Elementis plc interim results announcement for the half year
ended 30 June 2017, which comprises the CEO's report, Finance
report and the Directors' responsibility statement (which taken
together constitute the Interim management report) and the interim
financial statements and accompanying notes (incorporating a
Condensed consolidated balance sheet at 30 June 2017, Condensed
consolidated income statement, Condensed consolidated statement of
comprehensive income, Condensed consolidated cash flow statement
and Condensed consolidated statement of changes in equity, each for
the six months ended 30 June 2017) (altogether 'Half yearly
financial report'), contains information which viewers or readers
might consider to be forward looking statements relating to or in
respect of the financial condition, results, operations or
businesses of Elementis plc. Any such statements involve risk and
uncertainty because they relate to future events and circumstances.
There are many factors that could cause actual results or
developments to differ materially from those expressed or implied
by any such forward looking statements. Nothing in this Half yearly
financial report should be construed as a profit forecast.
Related party transactions
There were no material related party transactions entered into
during the first half of the year and there have been no material
changes to the related party transactions disclosed in the
Company's 2016 Annual report and accounts on page 107.
Directors' responsibility statement
A full list of the Directors can be found on the Elementis
corporate website at: www.elementisplc.com.
The Directors confirm that to the best of their knowledge:
-- The condensed set of financial statements set out in this
half-yearly financial report has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU.
-- The condensed set of consolidated financial statements, which
has been prepared in accordance with the applicable set of
accounting standards, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the issuer,
or the undertakings included in the consolidation as a whole as
required by DTR 4.2.4R; and
-- The interim management report contained in this half-yearly
financial report includes a fair review of the information required
by:
o DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of the important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year.
o DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in related party transactions
described in the 2016 Annual report and accounts that could have a
material effect on the financial position or performance of the
entity during the first six months of the current financial
year.
Approved by the Board on 1 August 2017 and signed on its behalf
by:
Paul Waterman Ralph Hewins
CEO CFO
1 August 2017 1 August 2017
INDEPENT REVIEW REPORT TO ELEMENTIS PLC
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and related notes 1 to
17. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
1 August 2017
Condensed consolidated income statement
for the six months ended 30 June 2017
2016
2017 Six months 2016
Six months ended Year
ended 30 June ended
30 June restated 31 December
Note $million $million $million
-------------------- ----- ------------ ------------ -------------
Revenue 4 414.8 334.1 659.5
Cost of sales (259.2) (209.6) (420.5)
---------------------- ----- ------------ ------------ -------------
Gross profit 155.6 124.5 239.0
Distribution costs (50.2) (39.5) (80.0)
Administrative
expenses (53.5) (36.3) (74.5)
Income on sale 8.5 - -
of business
Operating profit 4 60.4 48.7 84.5
Other expenses (1.4) (0.8) (1.4)
Finance income 6 0.1 0.1 0.1
Finance costs 7 (5.0) (1.7) (7.7)
---------------------- ----- ------------ ------------ -------------
Profit before
income tax 4 54.1 46.3 75.5
---------------------- ----- ------------ ------------ -------------
Tax 8 (10.9) (8.9) (7.4)
---------------------- ----- ------------ ------------ -------------
Profit for the
period 43.2 37.4 68.1
---------------------- ----- ------------ ------------ -------------
Attributable to
equity holders
of the parent 43.2 37.4 68.1
---------------------- ----- ------------ ------------ -------------
Earnings per share
Basic (cents) 9 9.3 8.1 14.7
---------------------- ----- ------------ ------------ -------------
Diluted (cents) 9 9.2 8.0 14.6
---------------------- ----- ------------ ------------ -------------
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2017
2016
2017 Six months 2016
Six months ended Year
ended 30 June ended
30 June resated 31 December
$million $million $million
------------------------------------- ------------ ------------ -------------
Profit for the period 43.2 37.4 68.1
------------------------------------- ------------ ------------ -------------
Other comprehensive income:
Items that will not be reclassified
subsequently to profit or
loss:
Actuarial gain/(loss) on pension
and other post retirement
schemes 5.4 4.3 (2.6)
Deferred tax associated with
pension and other post retirement
schemes 0.1 0.9 (0.5)
------------------------------------- ------------ ------------ -------------
5.5 5.2 (3.1)
Items that may be reclassified
subsequently to profit or
loss:
Exchange differences on translation
of foreign operations 9.7 (6.4) (16.5)
Effective portion of change
in fair value of net investment
hedges 10.3 (1.3) (1.4)
Effective portion of changes
in fair value of cash flow
hedges (1.0) (2.9) (0.3)
Fair value of cash flow hedges
transferred to income statement 0.3 0.9 0.9
Exchange differences on translation
of share options reserves - - (0.7)
19.3 (9.7) (18.0)
------------------------------------- ------------ ------------ -------------
Other comprehensive income,
net of tax 24.8 (4.5) (21.1)
------------------------------------- ------------ ------------ -------------
Total comprehensive income
for the period 68.0 32.9 47.0
------------------------------------- ------------ ------------ -------------
Attributable to:
------------------------------------- ------------ ------------ -------------
Equity holders of the parent 68.0 32.9 47.0
------------------------------------- ------------ ------------ -------------
Total comprehensive income
for the period 68.0 32.9 47.0
------------------------------------- ------------ ------------ -------------
Condensed consolidated balance sheet
at 30 June 2017
2016
---------- -------------
30 June
resated
2017 $million 2016
30 June 31 December
$million $million
------------------------------- --- ---------- --------- -------------
Non-current assets
Goodwill and other intangible
assets 697.8 364.5 359.9
Property, plant and equipment 241.3 213.7 217.3
ACT recoverable 18.0 26.4 23.0
Deferred tax assets 14.7 13.9 16.1
Total non-current assets 971.8 618.5 616.3
------------------------------------ ---------- --------- -------------
Current assets
Inventories 139.8 134.8 121.3
Trade and other receivables 150.2 109.2 96.0
Current tax asset 13.5 - -
Cash and cash equivalents 74.6 56.3 82.6
------------------------------------ ---------- --------- -------------
Total current assets 378.1 300.3 299.9
------------------------------------ ---------- --------- -------------
Total assets 1,349.9 918.8 916.2
------------------------------------ ---------- --------- -------------
Current liabilities
Bank overdrafts and loans (6.5) (3.7) (5.0)
Trade and other payables (128.4) (97.9) (98.9)
Derivatives (0.3) (3.2) (0.4)
Current tax liabilities (6.4) (3.3) (6.7)
Provisions (10.5) (9.3) (9.5)
------------------------------------ ---------- --------- -------------
Total current liabilities (152.1) (117.4) (120.5)
------------------------------------ ---------- --------- -------------
Non-current liabilities
Loans and borrowings (381.4) (15.1) (0.1)
Employee retirement benefits (24.1) (24.6) (30.1)
Deferred tax liabilities (135.0) (111.2) (108.7)
Provisions (28.2) (26.2) (29.7)
Total non-current liabilities (568.7) (177.1) (168.6)
------------------------------------ ---------- --------- -------------
Total liabilities (720.8) (294.5) (289.1)
------------------------------------ ---------- --------- -------------
Net assets 629.1 624.3 627.1
------------------------------------ ---------- --------- -------------
Equity
Share capital 44.4 44.4 44.4
Share premium 21.2 20.7 20.9
Other reserves 95.9 84.5 75.2
Retained earnings 467.6 474.7 486.6
------------------------------------ ---------- --------- -------------
Equity attributable to equity
holders of the parent 629.1 624.3 627.1
Total equity and reserves 629.1 624.3 627.1
------------------------------------ ---------- --------- -------------
Condensed consolidated cash flow statement
for the six months ended 30 June 2017
2016
---------- -------------
Six
months
ended
30 June
restated
2017 $million
Six 2016
months Year
ended ended
30 June 31 December
$million $million
------------------------------------ ---------- ---------- -------------
Operating activities:
Profit for the period 43.2 37.4 68.1
Adjustments for:
Other expenses 1.4 0.8 1.4
Finance income (0.1) (0.1) (0.1)
Finance costs 4.9 1.7 7.7
Tax 10.9 8.9 7.4
Depreciation and amortisation 17.3 13.9 28.0
Decrease in provisions (2.4) (2.8) (3.5)
Pension contributions net
of current service cost (6.5) (3.1) (4.7)
Share based payments 1.4 1.2 2.6
Operating cash flows before
movements in working capital 70.1 57.9 106.9
Decrease/(increase) in inventories 2.1 (9.2) 1.7
Increase in trade and other
receivables (23.4) (19.9) (9.6)
Increase in trade and other
payables 11.6 18.2 22.5
------------------------------------- ---------- ---------- -------------
Cash generated by operations 60.4 47.0 121.5
Income taxes paid (4.2) (2.8) (2.7)
Interest paid (3.2) (0.5) (0.9)
------------------------------------- ---------- ---------- -------------
Net cash flow from operating
activities 53.0 43.7 117.9
------------------------------------- ---------- ---------- -------------
Investing activities:
Interest received 0.1 0.1 0.1
Disposal of property, plant
and equipment 0.2 0.1 0.3
Purchase of property, plant
and equipment (14.7) (14.4) (34.0)
Purchase of business (361.2) - -
Acquisition of intangibles (0.4) (1.4) (1.6)
------------------------------------- ---------- ---------- -------------
Net cash flow from investing
activities (376.0) (15.6) (35.2)
------------------------------------- ---------- ---------- -------------
Financing activities:
Issue of shares 0.3 0.5 0.7
Dividends paid (65.3) (63.7) (76.2)
Purchase of shares by the
ESOT (2.4) (0.4) (0.9)
Increase in borrowings 380.0 13.7 -
------------------------------------- ---------- ---------- -------------
Net cash used in financing
activities 312.6 (49.9) (76.4)
------------------------------------- ---------- ---------- -------------
Net increase/(decrease) in
cash and cash equivalents (10.4) (21.8) 6.3
Cash and cash equivalents
at beginning of period 82.6 79.1 79.1
Foreign exchange on cash
and cash equivalents 2.3 (1.0) (2.8)
------------------------------------- ---------- ---------- -------------
Cash and cash equivalents
at end of period 74.5 56.3 82.6
------------------------------------- ---------- ---------- -------------
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2017
Share capital Share premium Translation Hedging Other Retained Total
reserve reserve reserves earnings equity
$million $million $million $million $million $million $million
--------------- -------------- -------------- -------------- -------------- ---------- -------------- ---------
At 1 January
2017 44.4 20.9 (79.9) (7.3) 162.4 486.6 627.1
Profit for
the period - - - 43.2 43.2
Other
comprehensive
income:
Exchange
differences - - 20.0 - - - 20.0
Movement in
cash flow
hedges - - - (0.7) - - (0.7)
Actuarial
gain on
pension
scheme - - - - - 5.4 5.4
Deferred tax
adjustment
on pension
scheme
deficit - - - - - 0.1 0.1
Transactions
with owners:
Issue of
shares - 0.3 - - - - 0.3
Purchase of
shares - - - - - (2.4) (2.4)
Share based
payments - - - - 1.4 - 1.4
Dividends
paid - - - - - (65.3) (65.3)
At 30 June
2017 44.4 21.2 (59.9) (8.0) 163.8 467.6 629.1
--------------- -------------- -------------- -------------- -------------- ---------- -------------- ---------
Translation Retained
Share reserve Hedging Other earnings
capital Share premium restated reserve reserves restated Total equity
$million $million $million $million $million $million $million
--------------- ------------- -------------- ------------- ------------- ---------- ------------- -------------
At 1 January
2016 44.4 20.2 (62.0) (7.9) 162.9 496.2 653.8
Profit for
the period - - - - - 37.4 37.4
Other
comprehensive
income:
Exchange
differences - - (7.7) - - - (7.7)
Movement in
cash flow
hedges - - - (2.0) - - (2.0)
Actuarial
gain on
pension
scheme - - - - - 4.3 4.3
Deferred tax
adjustment
on pension
scheme
deficit - - - - - 0.9 0.9
Transactions
with owners:
Issue of
shares - 0.5 - - - - 0.5
Purchase of
shares - - - - - (0.4) (0.4)
Share based
payments - - - - 1.2 - 1.2
Dividends
paid - - - - - (63.7) (63.7)
At 30 June
2016 44.4 20.7 (69.7) (9.9) 164.1 474.7 624.3
--------------- ------------- -------------- ------------- ------------- ---------- ------------- -------------
Notes to the interim financial statements for the six months
ended 30 June 2017
1 General Information
Elementis plc (the 'Company') and its subsidiaries (together,
the 'Group') manufactures specialty chemicals. The Group has
operations in the US, UK, Netherlands, Brazil, Germany, China,
Taiwan, Malaysia and India. The Company is a limited liability
company incorporated and domiciled in England, UK and is listed on
the London Stock Exchange.
2 Accounting policies
Basis of preparation
This condensed set of financial statements (also referred to as
'interim financial statements' in this announcement) has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU.
As required by the Disclosure and Transparency Rules of the
Financial Services Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31
December 2016, except when new or revised accounting standards have
been applied.
The preparation of these interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of income, expense, assets and liabilities. The significant
estimates and judgements made by management were consistent with
those applied to the consolidated financial statements for the year
ended 31 December 2016.
The information for the year ended 31 December 2016 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
3 Going concern
The Directors have assessed the Group as a going concern, having
given consideration to its business plans and financial forecasts,
as well as to the risks and material uncertainties to the Group's
trading performance arising therefrom. The Group is in a net debt
position at the end of 30 June 2017 of $313.3 million but has
facilities available in excess of $100 million.
The Directors are satisfied that, after considering all of the
above, the Group has adequate resources to remain in operational
existence for the foreseeable future, that it is appropriate for
the Group to adopt the going concern basis of accounting in
preparing these interim financial statements, and that there are no
material uncertainties to the ability of the Group and Company to
continue to do so over a period of at least twelve months from the
date of approval of the interim financial statements.
4 Segment reporting
For management purposes the Group is currently organised into
three operating divisions - Specialty Products, Surfactants and
Chromium. Principal activities are as follows:
Specialty Products - production of rheological additives and
compounded products.
Surfactants - production of surface active ingredients.
Chromium - production of chromium chemicals.
Six months ended Six months ended Year ended
30 June 2017 30 June 2016 31 December
2016
Gross Inter-segment External
Gross Inter-segment External restated restated restated Gross Inter-segment External
$million $million $million $million $million $million $million $million $million
------------- --------- -------------- --------- --------- -------------- --------- --------- -------------- ---------
Revenue
Specialty
Products 294.5 - 294.5 238.8 - 238.8 460.4 - 460.4
Surfactants 31.4 (0.1) 31.3 21.8 (0.1) 21.7 43.1 (0.2) 42.9
Chromium 95.4 (6.4) 89.0 80.9 (7.3) 73.6 168.8 (12.6) 156.2
------------- --------- -------------- --------- --------- -------------- --------- --------- -------------- ---------
421.3 (6.5) 414.8 341.5 (7.4) 334.1 672.3 (12.8) 659.5
------------- --------- -------------- --------- --------- -------------- --------- --------- -------------- ---------
All revenues relate to the sale of goods
2016 2016
------------
Six months Year
ended ended
30 June 31 December
restated restated
2017
Six months
ended
30 June
$million $million $million
-------------------- ------------ ----------- ------------
Operating profit
Specialty Products 52.1 41.4 77.5
Surfactants 9.1 (0.2) (0.9)
Chromium 15.7 15.4 23.6
Central costs (16.5) (7.9) (15.7)
-------------------- ------------ ----------- ------------
Operating profit 60.4 48.7 84.5
-------------------- ------------ ----------- ------------
Other expenses (1.4) (0.8) (1.4)
Finance income 0.1 0.1 0.1
Finance costs (5.0) (1.7) (7.7)
-------------------- ------------ ----------- ------------
Profit before tax 54.1 46.3 75.5
-------------------- ------------ ----------- ------------
5 Adjusting items and alternative performance measures
In calculating the profitability measures by which management
assesses the performance of the Group a number of items are
excluded from operating profit as reported in accordance with IFRS.
The Board believes that the adjusted measures assist shareholders
in better understanding the underlying performance of the
business.
2016 2016
------------
Six months Year
ended ended
30 June 31 December
restated restated
2017
Six months
ended
30 June
$million $million $million
------------------------------ ------------ ----------- ------------
Reported operating profit 60.4 48.7 84.5
------------------------------ ------------ ----------- ------------
Adjusting items:
Acquisition costs 6.0 - 0.8
Restructuring 0.7 1.7 3.0
Business review 0.9 1.9 2.4
Amortisation of intangibles
arising on acquisition 3.1 1.3 2.7
Colourants disposal and (3.5) - -
Jersey City site closure
Other - - 3.5
------------------------------ ------------ ----------- ------------
Net adjusting items 7.2 4.9 12.4
------------------------------ ------------ ----------- ------------
Adjusted operating profit 67.6 53.6 96.9
------------------------------ ------------ ----------- ------------
2016 2016
------------
Six months Year
ended ended
30 June 31 December
restated restated
2017 $million $million
Six months
ended
30 June
$million
---------------------------- ------------ ----------- ------------
Adjusted operating profit
Specialty Products 51.6 43.7 81.5
Surfactants 9.1 (0.2) (0.6)
Chromium 15.8 15.4 27.1
Central costs (8.9) (5.3) (11.1)
---------------------------- ------------ ----------- ------------
Adjusted operating profit 67.6 53.6 96.9
Other expenses (1.4) (0.8) (1.4)
Finance income 0.1 0.1 0.1
Finance costs (5.0) (1.7) (7.7)
---------------------------- ------------ ----------- ------------
Adjusted profit before tax 61.3 51.2 87.9
---------------------------- ------------ ----------- ------------
Adjusted operating margin is the ratio of Adjusted operating
profit to sales.
Contribution margin is defined as sales less all variable costs,
divided by sales, expressed as a percentage and is unaffected by
the adjusting items recorded above.
The adjusted tax rate is defined as the provision for tax on
profits after adjusting items, divided by the adjusted profit
before income tax.
EBITDA is defined as Operating profit excluding the charge for
depreciation and amortisation. Adjusted EBITDA is defined as the
Operating profit after adjusting items (except where those
adjusting items relate to interest, depreciation or amortisation)
excluding the charge for depreciation and amortisation.
Acquisition costs primarily relate to the fees for legal and
advisory work incurred in the acquisition of SummitReheis. In the
first half of 2016 a business review was undertaken by a third
party to support development of the long term strategy and internal
transformation for Elementis. The one time cost of this exercise
was $1.9m however subsequent costs have been incurred for delivery
of this transformation. In previous years Elementis has not
adjusted operating profit for the amortisation of intangibles
arising on acquisition. Following the acquisition of SummitReheis,
the Directors reviewed this policy and concluded that excluding
such a charge from the operating profit will provide readers of the
accounts with a better understanding of the Group's results on its
operating activities and, as such, this charge is now included
within adjusting items. In March 2017 Elementis announced the sale
of its US Colourants business to Chromaflo Technology Corp, and
closure of the Jersey City site. The net profit on this disposal
and closure was $3.5 million and, given the one time nature of the
transaction, has been treated as an adjusting item.
6 Finance income
2017 2016 2016
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$million $million $million
--------------------------- ----------- ----------- ------------
Interest on bank deposits 0.1 0.1 0.1
--------------------------- ----------- ----------- ------------
7 Finance costs
2017 2016 2016
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$million $million $million
----------------------------------- ----------- ----------- ------------
Interest on bank loans 4.3 0.6 0.8
Unwind of discount on provisions 0.6 0.7 1.4
Increase in environmental
provisions due to change in
discount rate - - 4.5
Pension and other post-retirement
liabilities 0.1 0.4 1.0
----------------------------------- ----------- ----------- ------------
5.0 1.7 7.7
----------------------------------- ----------- ----------- ------------
8 Tax
The provision for tax on profits of $10.9 million, or 20.1%
(2016: $8.9 million , or 19.2% ) is based on the probable tax
charge in those jurisdictions where profits arise. Within this
figure is a tax credit of $1.8m in respect of adjusting items.
9 Earnings per share
2016 2016
Six months Year
------------
ended ended
30 June 31 December
restated restated
2017
Six months
ended
30 June
$million $million $million
------------------------------------- ------------ ------------ -----------------
Earnings for the purposes of
basic earnings per share 43.2 37.4 68.1
Adjusting items net of tax 5.4 3.5 12.4
------------------------------------- ------------ ------------ -----------------
Adjusted earnings 48.6 40.9 80.5
------------------------------------- ------------ ------------ -----------------
Number(m) Number(m) Number(m)
------------------------------------- ------------ ------------ -----------------
Weighted average number of shares
for the purposes of basic earnings
per share 463.6 463.1 462.8
Effect of dilutive share options 5.4 2.6 3.9
------------------------------------- ------------ ------------ -----------------
Weighted average number of shares
for the purposes of diluted
earnings per share 469.0 465.7 466.7
------------------------------------- ------------ ------------ -----------------
2016 2016
2017 Six months Year
Six months ended ended
ended 30 June 31 December
30 June restated restated
cents cents cents
------------------------------ ------------ ------------ -------------
Earnings per share:
Basic 9.3 8.1 14.7
------------------------------ ------------ ------------ -------------
Diluted 9.2 8.0 14.6
------------------------------ ------------ ------------ -------------
Adjusted earnings per share:
------------------------------ ------------ ------------ -------------
Basic 10.5 8.8 17.4
------------------------------ ------------ ------------ -------------
Diluted 10.4 8.8 17.2
------------------------------ ------------ ------------ -------------
10 Dividends
The following dividends were declared and paid by the Group:
2017
Six 2016 2016
months Six months Year
ended ended ended
30 June 30 June 31 December
$million $million $million
----------------------------------- --------- ------------ -----------------
Dividends paid on ordinary shares 65.3 63.7 76.2
----------------------------------- --------- ------------ -----------------
An interim dividend of 2.70 cents per share (2016: 2.70 cents)
has been declared by the Board of Directors and will be paid on 29
September 2017 to shareholders on the register at 8 September 2017.
The interim dividend will be paid in sterling at an exchange rate
of $1.3177:GBP1.00.
11 Pension
Valuations for IAS 19 purposes were conducted as of 30 June
2017. The Group is reporting a deficit on its combined retirement
benefit obligations of $24.1 million at the end of June 2017,
compared to balances of $24.6 million at the same time last year
and $30.1 million at the end of December 2016. Additional
commentary is included in the Finance report.
12 Movement in net cash/(borrowings)
2017 2016 2016
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
$million $million $million
----------------------------------- --------- --------- ------------
Change in net cash/(borrowings)
resulting from cash flows
(Decrease)/increase in cash and
cash equivalents (10.4) (21.8) 6.3
(Increase)/decrease in borrowings (380.0) (13.7) -
----------------------------------- --------- --------- ------------
(390.4) (35.5) 6.3
Currency translation differences (0.4) (1.0) (2.8)
----------------------------------- --------- --------- ------------
(Decrease)/increase in net cash (390.8) (36.5) 3.5
Net cash at beginning of period 77.5 74.0 74.0
----------------------------------- --------- --------- ------------
Net (debt)/cash at end of period (313.3) 37.5 77.5
----------------------------------- --------- --------- ------------
13 Principal risks and uncertainties
The Group has policies, processes and systems in place to help
identify, evaluate and manage risks at all levels throughout the
organisation. Certain key risks, because of their size, likelihood
and/or severity, are reviewed regularly by the senior leadership
team and the Board, to ensure that appropriate action is taken to
eliminate, reduce or mitigate, wherever practicable, significant
risks that can lead to financial loss, harm to reputation, business
failure or which threaten the safety of our employees.
The following is a summary of the principal risks faced by the
Group that could impact the second half of the year: (i) uncertain
global economic conditions and competitive pressures in the
marketplace (including from currency movement); (ii) business
interruption as a result of a major event (e.g. operations/HSE, IT,
transport or workplace incident caused by process/system failure,
human error, terrorist incident or by fire, storm and/or flood), or
a natural catastrophe (e.g. hurricane and/or pandemic); (iii)
business interruption as a result of supply chain failure of key
raw materials and/or third party service provision (e.g.
infrastructure, transport or IT failure); (iv) increasing
regulatory and product stewardship challenges; (v) major regulatory
enforcement action, litigation and/or other claims arising from
products and/or historical and ongoing operations; (vi) talent
management and succession planning: failure to attract, manage,
develop and/or retain key talent; (vii) cyber security incident:
systems security breach and loss of network connectivity and
integrity, and/or loss of business and personal data; (viii)
industrial espionage, workplace security and loss/theft of
intellectual property; (ix) disruptive technology advances: failure
to identify and mitigate the threat posed by new or imitation
technology; and (x) changes in international tax policy. A full
description of these risks and the mitigating actions taken by the
Company can be found in the 2016 Annual report and accounts on
pages 17 to 21.
14 Financial risk management
The Group has exposure to the following financial risks:
-- credit risk;
-- liquidity risk; and
-- market risk.
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Group's risk management policies are established to
identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and
adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the
Group's activities. The Group's Audit Committee, assisted by
Internal Audit, oversees how management monitors compliance with
the Group's risk management policies and procedures and reviews the
adequacy of the risk management framework in relation to the risks
faced by the Group. These interim financial statements do not
include all the financial risk management information and
disclosures that are required in the Annual report and accounts and
should be read in conjunction with the financial statements for the
year ended 31 December 2016. The Group's risk management policies
have not changed since the year end.
The Group measures fair values in respect of financial
instruments in accordance with IFRS 13, using the following fair
value hierarchy that reflects the significance of the inputs used
in making the measurements:
Level 1: Quoted market price (unadjusted) in an active market
for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly or indirectly.
Level 3: Valuation techniques using significant unobservable
inputs.
The Group categorises its trade and other receivables and
payables, excluding derivatives, within level 3 and all other
financial instruments, including cash, loans and derivatives within
level 1. At both 30 June 2017 and 31 December 2016 there was no
difference between the carrying value and fair value of financial
instruments.
15 Contingent liabilities
As is the case with other chemical companies, the Group
occasionally receives notices of litigation relating to regulatory
and legal matters. A provision is recognised when the Group
believes it has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Where
it is deemed that an obligation is merely possible and that the
probability of a material outflow is not remote, the Group would
disclose a contingent liability. No contingent liability was
considered to be reportable at 30 June 2017.
16 Acquisition
On 24 March 2017 the Group acquired 100% of the equity, which
gives control, of SummitReheis for a cash consideration of $370.3m.
Further acquisition related costs to 30 June 2017 of $6.0 million
have been included within administrative expenses in the income
statement but also reflected within adjusting items (note 5).
SummitReheis is a high quality, high margin specialty chemicals
platform that produces a range of critical active ingredients and
materials tailored for use in personal care, pharmaceutical and
dental products. SummitReheis' anti-perspirant actives business
(more than 60% of its sales) is the global leader in the
manufacture and sale of active ingredients for anti-perspirants and
has long standing relationships with key consumer product companies
across the Americas, Europe and Asia.
IFRS 3 "Business Combinations" (revised 2008) requires the
assets acquired to be initially recorded at fair value at the date
of acquisition. Any such fair value adjustments are provisional and
will be finalised within twelve months of the acquisition date. Any
resulting changes in the fair values may have an impact on the
depreciation from the date of acquisition and will be recorded in
the financial statements. An assessment of the fair value of the
assets and liabilities is being performed and will form the basis
of the valuation to be included in the year end accounts.
The acquisition had the following effect on the Group's assets
and liabilities:
Book value
acquisition
$million
------------------------------- ------------
Intangible assets 75.0
Property, plant and equipment 18.8
Inventories 17.7
Trade and other receivables 27.0
Trade and other payables (12.6)
Cash and cash equivalents 9.1
Provisions (0.5)
Employee retirement benefits (4.3)
Corporation tax 14.1
Deferred tax (27.1)
--------------------------------- ------------
117.2
Goodwill 253.1
Consideration paid, satisfied
in cash 370.3
Cash acquired (9.1)
--------------------------------- ------------
Net cash outflow 361.2
--------------------------------- ------------
No preliminary assessment of intangible assets and the Property
Plant and Equipment (PPE) valuation had been completed at the date
of these condensed financial statements as such the Book Value of
the acquired assets has been used in completion of these
statements. When the final valuation work is concluded, an
adjustment in PPE and intangible assets values, and a corresponding
adjustment in goodwill is anticipated. None of the goodwill is
deductable for tax purposes.
In the first half of 2017 the acquisition contributed $38.1m to
the Group's revenue and $6.0m to the adjusted operating profit.
The estimated contribution of SummitReheis to the results of the
Group had the acquisition been made on 1 January 2017 is as
follows:
2017
Six months
ended
30 June
$million
--------------------------- -----------
Revenue 67.0
----------------------------- -----------
Adjusted operating profit 10.0
----------------------------- -----------
17 Prior year restatement
During 2016 the Directors considered the detailed criteria for
the recognition of revenue from the sale of goods set out in IAS 18
Revenue and, in particular, when the Group had transferred the
significant risks and rewards of ownership of the goods. Following
further assessment of the terms of shipment, the Directors have
concluded that international shipments should not be recognised
within revenue until they reach the destination port, as they
believe that this more accurately reflects the commercial substance
of the transaction in that risks and rewards of ownership pass to
the customer at this point. Due to this change in the accounting
policy, the prior year comparatives have therefore been restated to
provide comparable information.
The financial statement line items impacted have been set out
below.
Consolidated income statement
June June June
2016 2016 Adjusting 2016
Adjusted
reported restatement restated items restated
$million $million $million $million $million
---------------------- --------- --------------- -------------- ------------ -------------------
Revenue 334.0 0.1 334.1 - 334.1
Cost of sales (211.1) 1.5 (209.6) - (209.6)
---------------------- --------- --------------- -------------- ------------ -------------------
Gross profit 122.9 1.6 124.5 - 124.5
Operating profit 47.1 1.6 48.7 4.9 53.6
---------------------- --------- --------------- -------------- ------------ -------------------
Profit before income
tax 44.7 1.6 46.3 4.9 51.2
Tax charge (8.3) (0.6) (8.9) (1.4) (10.3)
Profit for the year 36.4 1.0 37.4 3.5 40.9
---------------------- --------- --------------- -------------- ------------ -------------------
2016
2016 Adjusting restated
restated items adjusted
$million $million $million
---------------------- -------------- ------------ -------------------
Revenue 659.5 - 659.5
Cost of sales (420.5) - (420.5)
------------------------ -------------- ------------ -------------------
Gross profit 239.0 - 239.0
Operating profit 84.5 12.4 96.9
------------------------ -------------- ------------ -------------------
Profit before income
tax 75.5 16.9 92.4
Tax charge (7.4) (4.6) (12.0)
Profit for the year 68.1 12.3 80.4
------------------------ -------------- ------------ -------------------
Consolidated statement of comprehensive income
June June
2016 2016
reported Restatement restated
$million $million $million
---------------------------- ------------------------------ ------------ ---------
Profit for the year 36.4 1.0 37.4
Exchange differences on
translation of foreign
operations (7.6) (0.1) (7.7)
---------------------------- ------------------------------ ------------ ---------
Total comprehensive income
for the period 32.0 0.9 32.9
---------------------------- ------------------------------ ------------ ---------
Balance sheet
June June
2016 2016
reported Restatement restated
$million $million $million
----------------------------- --------- ------------ ---------
At 30 June 2016
Inventories 126.3 8.5 134.8
Trade and other receivables 120.7 (11.5) 109.2
Trade and other payables (98.1) 0.2 (97.9)
Current tax liabilities (2.8) (0.5) (3.3)
Retained earnings 477.9 (3.2) 474.7
Translation reserve (69.6) (0.1) (69.7)
----------------------------- --------- ------------ ---------
- ENDS -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAFXFDSPXEAF
(END) Dow Jones Newswires
August 01, 2017 02:01 ET (06:01 GMT)
Elementis (LSE:ELM)
Historical Stock Chart
From Mar 2024 to Apr 2024
Elementis (LSE:ELM)
Historical Stock Chart
From Apr 2023 to Apr 2024
