TIDMFENR
RNS Number : 4981W
Fenner PLC
15 November 2017
15 November 2017
Fenner PLC
2017 Full Year Results
Highlights
Year ended 31 August 2017 2016 Change
----------------------------------- ---------- ----------- -----------
Revenue GBP655.4m GBP572.5m + 14%
Underlying operating profit GBP59.1m GBP37.1m + 59%
Operating profit/(loss) GBP53.4m GBP(14.7)m + GBP68.1m
Underlying profit before taxation GBP45.3m GBP23.2m + 95%
Profit/(loss) before taxation GBP38.1m GBP(30.3)m + GBP68.4m
Underlying earnings per share 17.7p 8.4p + 111%
Earnings/(loss) per share 17.6p (13.6)p + 31.2p
Dividend per share 4.2p 3.0p + 40%
Free cash flow GBP69.0m GBP38.8m + 78%
----------------------------------- ---------- ----------- -----------
Alternative performance measures
Underlying and non-GAAP measures (including constant currency and
like-for-like revenue) have been presented to provide a more meaningful
measure of the underlying performance of the business. Reconciliations
of these amounts from the most directly comparable measures recognised
under International Financial Reporting Standards can be found in
Alternative Performance Measures in Note 2.
-- Significantly improved results as the Group moves from recovery towards sustainable growth
-- Underlying profit before taxation of GBP45.3m (up 95%) and
underlying earnings per share of 17.7p (up 111%)
-- Free cash flow of GBP69.0m (up 78%); net debt of GBP101.5m
(2016: GBP150.0m), representing 1.2 times EBITDA
-- AEP like-for-like revenue up by 11%; underlying operating
profit of GBP43.9m (up 29% at constant currencies)
-- ECS underlying operating profit of GBP24.1m (up 46% at constant currencies)
-- Significant increases in underlying operating margins; AEP
14.9% (+2.7 pcp), ECS 6.7% (+2.2 pcp) and Group 9.0% (+2.3 pcp)
-- Increased final dividend of 2.8p (up 40%) making total dividend for the year of 4.2p
Mark Abrahams, Chief Executive Officer, commented:
"The Group's results for 2017 show significant improvements over
the previous year on all measures. These improvements illustrate
the strength of the Group's responses to the difficult trading
conditions faced by the Group in many of its principal markets over
recent years and particularly reflect our continuing commitments to
customer service, product development and operating efficiency.
As we enter the new year, the outlook is strengthening. The
Group's momentum is being maintained with each of our businesses
seeing opportunities and encouraging developments.
We believe the coming year will see further progress across the
Group, notwithstanding the significant macro-economic uncertainties
around the world. Overall, given the structural growth
opportunities that the Group has created, the Board anticipates
that the outcome will be above its previous expectations."
A live audio webcast of the analyst presentation, hosted by Mark
Abrahams, Chief Executive Officer, and John Pratt, Group Finance
Director, can be accessed at 9.15 am today on the Group's website
www.fenner.com.
For further information please contact:
Fenner PLC
Mark Abrahams, Chief Executive Officer ) today: 020 7067 0700
John Pratt, Group Finance Director ) thereafter: 01482 626501
Weber Shandwick Financial
Nick Oborne 020 7067 0700
Notes to editors:
Fenner PLC is a world leader in reinforced polymer technology,
providing local engineered solutions for performance-critical
applications. The Group operates through two divisions:
Advanced Engineered Products. AEP is a group of related growth
businesses that use advanced polymeric materials and technical
expertise to provide high value-added solutions to global business
customers; its principal product areas are sealing systems; belts,
hoses and elastomeric solutions; and medical.
Engineered Conveyor Solutions. ECS is an established leader in
the supply of industry-leading heavyweight conveyor belting and
related services to mining and industrial markets. ECS is a global
business with particular strengths in Australia, Europe and North
America.
Forward looking statements
Certain statements contained in this Report, in particular
Outlook, constitute forward looking statements. Such forward
looking statements involve risks, uncertainties and other factors
which may cause the actual results, performance or achievements of
Fenner, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by
such statements. Such risks, uncertainties and other factors
include, among others, exchange rates, the commodity markets,
general economic conditions and the business environment.
Operating review
Introduction
The Group's results for 2017 show significant improvements over
the previous year on all measures and, in particular, in terms of
operating margin, operating cash flow, earnings and return on
capital.
The improvements achieved illustrate the strength of the Group's
responses to the difficult trading conditions faced by the Group in
many of its principal markets over recent years and particularly
reflect our continuing commitments to customer service, product
development and operating efficiency. Whilst there were some
improvements in the markets in which the Group operates, these were
patchy and the earlier months of the year, in particular, saw some
softness.
The Group's results are summarised in the table below.
Advanced Engineered Unallocated
Engineered Conveyor Corporate Total
Products Solutions
-------------- --------------- --------------- ---------------
At constant currencies 2017 2016 2017 2016 2017 2016 2017 2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ ------ ------ ------- ------- ------ ------ -------
Revenue 294.0 279.5 361.4 369.3 - - 655.4 648.8
Underlying operating
profit 43.9 34.1 24.1 16.5 (8.9) (7.1) 59.1 43.5
Underlying operating
margin 14.9% 12.2% 6.7% 4.5% 9.0% 6.7%
Operating profit/(loss)
* 41.1 14.9 22.7 (21.3) (10.4) (8.3) 53.4 (14.7)
* as reported
Revenue for the year was GBP655.4m (2016: GBP572.5m), an
increase of 14%. There were significant increases in profit and
earnings. Underlying profit before taxation was GBP45.3m (2016:
GBP23.2m), an increase of 95%, and underlying earnings per share
was 17.7p (2016: 8.4p), an increase of 111%. Profit before taxation
was GBP38.1m (2016: GBP30.3m loss) and earnings per share was 17.6p
(2016: 13.6p loss).
Both AEP and ECS produced significantly stronger results.
In AEP, revenue rose to GBP294.0m. After taking into account
currency movements and businesses sold or closed, this represents
an increase of 11%. AEP's underlying operating profit was GBP43.9m
(2016: GBP34.1m at constant currencies), an increase of 29%, and
underlying operating margin was 14.9% (2016: 12.2% at constant
currencies), an increase of 2.7 percentage points. Operating profit
was GBP41.1m (2016: GBP14.9m).
All of AEP's product areas showed marked increases but with
particular highlights being the strong performance by its US oil
& gas businesses, which have significantly increased market
shares as a result of investment in new materials and the strength
of their customer relationships, and by AEP's medical businesses,
which have continued to grow and whose future prospects have
further strengthened through customer and product developments.
ECS achieved much higher profitability despite higher raw
material prices and the mining supplies market showing few signs of
sustained recovery. Underlying operating profit was GBP24.1m (2016:
GBP16.5m at constant currencies), an increase of 46%, and
underlying operating margin was 6.7% (2016: 4.5% at constant
currencies), an increase of 2.2 percentage points. Operating profit
was GBP22.7m (2016: GBP21.3m loss).
ECS's American business produced a much higher profit as its
results benefitted from restructuring and its refocusing towards
industrial markets. In Australia, revenue, profit and margin all
improved, reflecting continued efficiency gains and the strength of
our relationships with the mining majors; the final quarter of the
year saw an encouraging trend with increased customer enquiries and
a slowly improving order flow.
Net debt was reduced by GBP48.5m to GBP101.5m, with the ratio of
net debt to EBITDA reduced to 1.2 times (2016: 2.4 times). The
Group's free cash flow was GBP69.0m, up from GBP38.8m in 2016,
benefitting from the higher underlying operating profit and
continued tight control of working capital.
Outlook
As we enter the new year, the outlook is strengthening. The
Group's momentum is being maintained with each of our businesses
seeing opportunities and encouraging developments.
In Advanced Sealing Technologies, the disruption from storms
Harvey and Irma were taken in our stride due to careful planning,
whilst the benefits of market share gains combined with improved
market dynamics should lead to further advancement this year.
Solesis Medical has recently seen the benefit of product
developments advancing from its pipeline towards commercialisation.
This should support our progress over the next two years,
accelerating our growth rate over that period.
Precision Polymers is growing steadily as it sees acceptance of
new product developments as well as the benefits of integrating
Revolution Drives.
In ECS, our customers have seen a steadier background to their
markets. Whilst it will take a little time to feed through into
demand for our products, the need for new mining developments is
increasingly on the agenda, as is the requirement for innovative
ways to reduce our customers' handling costs. Taken together, these
factors lead us to believe that we are through the nadir of the
cycle.
We believe the coming year will see further progress across the
Group, notwithstanding the significant macro-economic uncertainties
around the world. Overall, given the structural growth
opportunities that the Group has created, the Board anticipates
that the outcome will be above its previous expectations.
Divisional reviews
AEP
In 2017, AEP generated sharply improved results in terms of
revenue, profit and margin.
Revenue was GBP294.0m (2016: GBP279.5m at constant currencies).
After adjusting for businesses sold or closed, revenue increased by
11%.
Of AEP's three product groups, Advanced Sealing Technologies
generated 44% of AEP's revenue in 2017; Precision Polymers 37%; and
Solesis Medical 19%.
Underlying operating profit was GBP43.9m (2016: GBP34.1m at
constant currencies), an increase of 29%. Underlying operating
margin was 14.9% (2016: 12.2% at constant currencies), an increase
of 2.7 percentage points. Operating cash flow also significantly
improved to GBP50.9m (2016: GBP34.2m), an increase of 49% and
representing 116% of underlying operating profit. Operating profit
was GBP41.1m (2016: GBP14.9m).
Advanced Sealing Technologies
Advanced Sealing Technologies ("AST"), the largest product group
within AEP, designs and manufactures performance-critical seals for
use in oil & gas and fluid power applications and precision
machined polymer components. In 2017, like-for-like revenue was
GBP129.0m (2016: GBP109.9m at constant currencies), an increase of
17%.
CDI and EGC supply seals to the oil & gas industry and
together accounted for approximately one-half of AST revenue.
CDI (custom seals for upstream oil & gas) is the Group's
largest oil & gas business, with its principal operation in
Texas, USA. CDI's revenue was significantly ahead of the previous
year, with profit and margin showing even greater proportionate
improvements.
In the USA, CDI has outperformed its competitors and increased
its share of its target markets, as its continued investments in
material sciences and product development enabled it to meet the
more stringent demands of the US fracking industry where changes in
technical specifications for sealing systems have arisen, in
particular as a consequence of wells operating at higher
temperatures and pressures.
As a result, CDI has significantly strengthened its
relationships with its key customers, which include all principal
US oilfield service companies and OEMs. CDI is therefore well
positioned to benefit from further recovery and growth in the
fracking industry in the USA and globally.
CDI's operations in the Far East, headquartered in Singapore,
serve the oil & gas industry in the Middle East and Asia.
General economic and political uncertainties and customer specific
issues have dampened demand and, for the region as a whole,
performance was flat compared with the previous year. In Europe,
CDI completed the restructuring of its operations in February 2017
with the sale of the Norwegian business, a distributor of seals
primarily to the North Sea oil & gas industry.
EGC (seals and other components for fluid handling in
midstream/downstream oil & gas) continued to make progress in
establishing a strong international customer base and
technologically advanced products. Its end markets in downstream
oil & gas have shown early signs of improvement with the US
refining industry adjusting to lower oil & gas prices. Overall,
EGC's revenue was slightly ahead of the previous year.
Towards the end of the financial year, both CDI and EGC
encountered some disruption to their operations in Houston from
Hurricane Harvey, although careful planning substantially mitigated
the impact.
Hallite (seals for fluid power) achieved higher revenue and
markedly higher profit, meaning that its margin was close to the
average for AEP as a whole. Hallite successfully further broadened
its product range and geographical coverage and increased
penetration at targeted OEMs. Stronger sales to customers serving
the construction industry more than offset weaknesses in sales to
other sectors. The increase in margin was also assisted by further
improvements in operating efficiencies and reduced costs within its
supply chain.
AIP (precision machined polymer components) is the smallest
business within AST. AIP recorded modest declines in revenue and
profit as it continued to transition away from its traditional
customer base in the energy industry to newer markets including
medical, aerospace and specialist industrial.
Precision Polymers
Precision Polymers produces a range of specialist belts for
motion control, hoses and other high value-added elastomeric
solutions which are used across a range of industries and
applications.
In 2017, revenue was GBP109.1m (2016: GBP101.8m at constant
currencies), an increase of 7%. Profit was ahead of the previous
year, although the improvement was held back by a lower result in
Mandals. Precision Polymers US and Precision Polymers UK both
generated higher margins and continued to achieve attractive
returns on capital.
In 2017, Precision Polymers US achieved higher profit on revenue
which was in line with the previous year. Financial performance
improved as the year progressed, with the earlier months of the
year being held back by lower sales of bespoke belts to certain key
customers and general economic uncertainty in the USA ahead of the
Presidential election. Subsequently, order intake improved with the
strengthening of the US economy. As expected, there were gains in
operating efficiencies arising from the combination of Fenner
Drives and Fenner Precision which took place in 2016.
Revolution Drives was acquired in August 2017; it is a small
specialist precision polymers business focused on power
transmission and motion control solutions. The business is in the
process of being integrated into Precision Polymers US.
Precision Polymers UK achieved improved revenue and profit,
reflecting in particular a strong performance by the UK elastomeric
solutions business, which has successfully increased its range of
innovative problem-solving polymer products and grown its customer
base amongst OEMs in the UK and Europe. Revenue from hoses for
high-performance diesel engines was ahead of the previous year,
reflecting stronger demand for commercial vehicles used in the
construction industry in the UK and Europe; there was also an
improved performance from the hose operation in China.
Mandals (lay-flat hoses) saw an increase in revenue which arose
mainly from sales of hose for use in agricultural and industrial
applications in Europe and the Americas. Sales of hose into the US
unconventional oil & gas industry for use in fracking increased
from the very low level of the previous year but remain
challenging. Overall, the results remained subdued. With effect
from the start of the new financial year, Mandals was transferred
into AST; this is intended to help drive Mandals' sales in the US
and Latin American fracking markets by leveraging AST's extensive
global network in the oil & gas industry.
Solesis Medical
Solesis Medical comprises Secant Group and Charter Medical, both
of which are located in the USA. The businesses build upon Fenner's
expertise in polymers and textiles to design and manufacture
components with an emphasis on implantable biomedical device
technologies and single-use disposables; the components are
generally used by OEMs in the life sciences industry.
In 2017, Solesis Medical recorded revenue of GBP55.0m (2016:
GBP51.5m on a like-for-like basis at constant currencies), an
increase of 7%. Profit and margin increased strongly during the
year.
Secant Group (biomedical textile components and biomaterials)
had a transformational year in which it completed its move to new,
purpose-built and industry-leading premises which has assisted in
reinforcing Secant Group's position as the leading independent
supplier of implantable medical textiles. During the year, Secant
Group has continued to expand its customer base which includes both
a significant number of medical majors and also early stage
start-up companies. Secant Group has strengthened its product
development pipeline with particular emphasis on advanced
biomaterials for use in regenerative medicine. Secant Technical
Materials has been established to find opportunities for Secant
Group's expertise in applications outside the medical industry,
including space, energy and filtration.
Secant Group's financial performance was strongly ahead in the
year with marked increases in profit and margin. Revenue growth was
weighted towards the second half of the year as various new
products approached the commercialisation stage. The higher
profitability also reflected improved mix and operating
efficiencies.
Charter Medical (single-use products for blood management,
bio-processing and cell therapy) saw solid revenues from its blood
management business and made significant progress in the
development of its range of products for use in cell therapy
applications and in enhancing key customer relationships. Revenue
was in line with the previous year but with an improvement in the
mix of business towards the growing and more profitable areas.
Accordingly, profit was ahead, despite higher investment in product
development.
Xeridiem Medical Devices was sold at the start of the financial
year.
ECS
In 2017, ECS generated sharply higher underlying operating
profit and operating margin, as it benefitted from its continuous
improvement programmes and specific initiatives implemented in
2016. Higher prices for raw materials on world markets have been
managed.
Underlying operating profit was GBP24.1m (2016: GBP16.5m at
constant currencies), an increase of 46%. Underlying operating
margin was 6.7% (2016: 4.5% at constant currencies), an increase of
2.2 percentage points. Operating profit was GBP22.7m (2016:
GBP21.3m loss).
Revenue for the year was GBP361.4m (2016: GBP367.0m on a
like-for-like basis at constant currencies), split approximately
equally between the Northern and Southern Hemispheres. Despite
higher sales to the industrial segment, total revenue fell slightly
as the mining industry remained focused on cost such that
improvements in miners' sentiment have not yet been reflected in
purchases of belt.
Cash flow was again strong. Operating cash flow increased to
GBP38.2m (2016: GBP34.9m), representing 159% of underlying
operating profit, due to the higher underlying operating profit and
continuing disciplined use of capital.
As it enters the new financial year, ECS will benefit further
from its on-going programmes of efficiency and product development;
there are indications that market conditions are improving with
continued growth in industrial production and, within the mining
industry, belt destocking having come to an end together with signs
that expenditure on new mining developments is being more actively
considered.
Northern Hemisphere
Revenue was GBP184.0m (2016: GBP190.2m on a like-for-like basis
at constant currencies), a decrease of 3%. For the year, the
Northern Hemisphere accounted for 51% of ECS's revenue. Profit rose
significantly compared to the previous year due to the recovery in
profits in North America.
Americas
ECS Americas continued to benefit from the refocusing and
restructuring of the business, announced in January 2016. Profit
was much ahead of the previous year, reflecting the increased
efficiency of operations, despite revenue being slightly lower.
The business continues to place high emphasis on growing its
sales to the industrial segments of the belting market which
includes customers engaged in construction, building materials and
agriculture; revenue from these segments increased over the period,
partly offset by lower sales to non-coal mining customers.
ECS has continued to enlarge its product range for industrial
users and to enhance its distributor network through which these
end-users are generally accessed. In July 2017, ECS launched its
"Patriot X" range of belts, which provide ECS's US customers with
domestically manufactured belts for light to medium industrial
applications. The new range of belting offers higher performance in
terms of rip, tear and impact resistance than is available from
other suppliers in that market segment.
During the year, the US coal mining industry experienced a
recovery from the very low levels of the previous year, with both
coal prices and extraction volumes increasing. With their improved
cash flows and prospects, coal mining groups were generally more
able to replace worn-out belts which led to a pick-up in ECS's
order intake; however, the business remains cautious over the
likelihood of further coal mining market recovery in the
future.
Improved efficiencies led to significant reductions in costs
compared with 2016; these were in addition to the annualisation of
the benefit of headcount reductions and other savings arising from
the 2016 restructuring. The on-going programme to increase cost
effectiveness is expected to yield further benefits going
forward.
As it enters the new financial year, there are indications that
ECS Americas is on a sustainable path to return to historic margins
on revenue that will grow more steadily from the current reduced
level.
Europe
ECS's principal European operation, based at Drachten in the
Netherlands, saw on-going subdued levels of demand from its
customer base across Europe, North Africa and the Middle East with
amounts of new project work remaining, by historic standards, at
relatively low levels. ECS's Drachten facility continues to be one
of the most productive plants in ECS and, in the prevailing market
conditions, the result achieved was satisfactory and compares well
with other European belt manufacturers.
The UK business produced revenues in line with the previous
year, despite the difficult conditions in a number of the export
markets which it serves.
Southern Hemisphere
In 2017, revenue was virtually unchanged at GBP177.4m (2016:
GBP176.8m at constant currencies), which represented 49% of ECS's
revenue. Profit and margin were ahead of the previous year.
Australia
ECS's business in Australia is by far the largest part of ECS
Southern Hemisphere in terms of revenue and profit; the business is
focused on the metallurgical and thermal coal and iron ore mining
industries.
During the year, ECS Australia increased revenue, profit and
margin. Sentiment in the Australian mining industry improved as
commodity prices rose sharply over the year and extraction volumes
remained on upward growth trajectories, albeit at reduced rates
compared with earlier years. However, mining groups generally
remained highly focused on costs and cash flows, with the principal
upward pressure on belt volumes coming from the progressive ending
of de-stocking.
Revenue arising from new mining projects remained at relatively
low levels although, by the end of the year, customer enquiries
were increasing.
As in recent years, competitive pressure on belt supply and
service contracts remained strong; however, ECS Australia
successfully maintained its clear market leadership, assisted by
its local manufacturing presence, high standards of customer
service and on-going measures to increase operational efficiencies.
Relationships with mining customers were strengthened by the
business's ability to respond flexibly to shortened order lead
times and various periods of intense weather.
During the year, the Group acquired the outstanding
non-controlling interests in Belle Banne Conveyor Services and
Leading Edge Conveyor Services ("BBCS and LECS"), both conveyor
service businesses located in Australia.
As the year ended, continued strength in the seaborne markets
for Australian iron ore and coal (in particular, metallurgical
coal) were being increasingly reflected in the level of enquiries
received, including in relation to new mining developments.
RSA
ECS's business in RSA achieved results ahead of the previous
year due to a recovery in the domestic mining industry; however,
the return generated was held back by nationwide labour disruption
across the mining industry in RSA and by higher raw material
costs.
In July 2017, the business signed a long-term supply agreement
under which Fenner conveyor belt will be distributed in RSA and
other sub-Saharan countries by a partner which has a
well-established branch and distributor network throughout the
region. Under this agreement, Fenner will transfer its sales
branches and service operations in the region to its partner. The
agreement presently remains conditional on the approval of
competition authorities.
China
With the coal industry in China going through a significant
restructuring, ECS recorded volumes and revenues which were below
the previous year. In response, the business has implemented
programmes to effect significant cost reductions.
Financial review
Revenue and operating profit
The Group reported a much improved operating performance. Growth
in the AEP division has been encouraging and the margin improvement
in the ECS division, notwithstanding generally lacklustre market
conditions, has exceeded initial expectations.
Group revenue increased by 14% to GBP655.4m (2016: GBP572.5m).
The favourable translation impact from movements in foreign
exchange rates, which includes the effect of the devaluation of
sterling following the UK's vote to leave the European Union, was
GBP76.3m. Revenue on a like-for-like basis, excluding businesses
which have been sold or closed, and measured at constant
currencies, increased by 4%.
In the AEP division, revenue was GBP294.0m (2016: GBP279.5m at
constant currencies). After adjusting for businesses sold or closed
(the former CDI operations in the UK and Norway and Xeridiem
Medical Devices), revenue grew by 11%. The results from our
Advanced Sealing Technologies business improved significantly,
benefiting from the recovery in oil & gas markets, market share
gains and some re-stocking in the supply chain. Other notable
growth was achieved by Solesis Medical, where a stronger second
half benefitted from the timing of project demand for biomedical
textiles.
In the ECS division, revenue was GBP361.4m (2016: GBP369.3m at
constant currencies). Revenue reduced, despite gains in bulk
material handling markets in North America and some improvement in
the trading environment in Australia, due to lower demand from the
Chinese coal industry, which continues to restructure, and from
Africa, where non-coal mining project work remained scarce.
The Group's underlying operating profit increased by 59% to
GBP59.1m (2016: GBP37.1m) or by 36% at constant currencies.
The AEP division's underlying operating profit increased by 29%
to GBP43.9m (2016: GBP34.1m at constant currencies), benefitting
from operational gearing on the incremental revenue and from
management actions taken in the previous year. In the ECS division,
underlying operating profit increased by 46% to GBP24.1m (2016:
GBP16.5m at constant currencies) largely as a result of self-help
measures implemented in the prior year.
Amortisation of intangible assets acquired fell to GBP8.3m
(2016: GBP11.0m) due to impairments made in the previous financial
year, principally in ECS Conveyor Services (Americas). The
exceptional credit amounted to GBP2.6m (2016: GBP40.8m charge),
comprising a profit on disposal of businesses of GBP4.1m less
employment costs relating to the former Chief Executive Officer of
GBP1.5m. Further details of exceptional items are provided in note
4.
The resultant operating profit was GBP41.1m (2016: GBP14.9m) in
the AEP division, GBP22.7m (2016: GBP21.3m loss) in the ECS
division and GBP53.4m (2016: GBP14.7m loss) for the Group.
Cash flow and net debt
The table below summarises the cash flows giving rise to the
movement in net debt.
2017 2016
GBPm GBPm
--------------------------------------- -------- --------
Underlying operating profit 59.1 37.1
Depreciation 26.5 24.2
--------------------------------------- -------- --------
EBITDA 85.6 61.3
Capital expenditure (12.4) (16.1)
Capital disposals 1.2 1.9
Working capital 7.5 15.1
--------------------------------------- -------- --------
Operating cash flow 81.9 62.2
Taxation 4.1 (6.2)
Interest (14.7) (13.2)
Other movements (2.3) (4.0)
--------------------------------------- -------- --------
Free cash flow 69.0 38.8
Restructuring costs (2.2) (10.4)
Acquisition of businesses (15.2) (5.6)
Disposal of businesses 5.8 -
Dividends - Fenner shareholders (5.8) (23.3)
Dividends - non-controlling interests (1.0) (1.3)
Movement in net debt before currency 50.6 (1.8)
Settlement of derivatives - 10.5
Currency movements (2.1) (20.7)
--------------------------------------- -------- --------
Movement in net debt 48.5 (12.0)
Net debt at start of year (150.0) (138.0)
Net debt at end of year (101.5) (150.0)
--------------------------------------- -------- --------
Free cash flow was exceptionally strong, increasing by 78% to
GBP69.0m. The main contributory factors within operating cash flow
were the significant increase in underlying operating profit
combined with modest levels of capital expenditure (which was
weighted towards the AEP division given the well invested ECS
division) and the careful control of working capital. The inflow
from taxation includes a one-off repayment in the USA of GBP7.8m
from the carry back of prior year losses which arose principally
from restructuring activities; excluding this amount, there was a
tax outflow of GBP3.7m.
Restructuring costs incurred in the year relate to the payment
of exceptional amounts provided in the previous year. Acquisition
payments predominantly relate to acquiring the remaining
non-controlling interests in BBCS and LECS plus a small amount for
the initial payment for Revolution Drives. Disposal of businesses
relates to Xeridiem Medical Devices and CDI Energy Products in
Norway.
Overall, net debt reduced markedly during the year, closing at
GBP101.5m, resulting in a much reduced net debt to EBITDA of 1.2
times (2016: 2.4 times).
Net finance costs
Finance costs, net of finance income, decreased by GBP0.3m to
GBP15.3m (2016: GBP15.6m).
2017 2016
GBPm GBPm
--------------------------- ------ ------
Fixed rate debt 11.6 10.9
Floating rate debt 2.0 2.7
Loan and commitment
fees 0.8 0.8
Less: interest receivable (0.6) (0.5)
--------------------------- ------ ------
Net interest payable 13.8 13.9
Notional interest 1.5 1.7
--------------------------- ------ ------
Net finance costs 15.3 15.6
--------------------------- ------ ------
The majority of the Group's net interest payable is at fixed
interest rates, principally arising from the US dollar private
placement loan notes. The remaining borrowings and cash deposits
are at floating interest rates.
Whilst the underlying interest cost fell year on year,
principally as a result of the repayment of $90m of private
placement borrowings in June 2017, the part year impact is masked
by less favourable exchange rate movements.
Notional interest comprises the net interest cost of defined
benefit post-retirement schemes of GBP0.8m (2016: GBP0.8m) and, in
relation to BBCS and LECS, the unwinding of the discount on
deferred payments on acquiring the remaining non-controlling
interests of GBP0.2m (2016: GBP0.8m) and a finance charge relating
to the redemption liability of GBP0.5m (2016: GBP0.1m).
Taxation
The total tax charge for the Group is GBP3.8m (2016: GBP5.0m
credit) on a profit before taxation of GBP38.1m (2016: GBP30.3m
loss).
The net tax charge is split into:
-- an underlying tax charge of GBP10.7m on underlying profit
before taxation of GBP45.3m;
-- a tax credit of GBP3.1m on exceptional items, amortisation of
intangible assets acquired and notional interest; and
-- an exceptional tax credit of GBP3.8m relating to current tax
relief on prior year restructuring costs.
The underlying tax rate for the Group was 24% (2016: 25%). The
underlying rate is a combination of the varying tax rates
applicable in the countries in which the Group operates and, in any
year, will depend on the mix of profits made in different
countries. Whilst a large proportion of the Group's profits are
generated in the USA, where the federal tax rate is currently 35%,
the underlying rate is lower than this because tax losses not
previously recognised have been utilised or recognised in the year.
Moving forward, the Group's underlying tax rate is likely to
increase towards 30%.
Earnings per share
Underlying basic earnings per share was 17.7p (2016: 8.4p) and
basic earnings per share was 17.6p (2016: 13.6p loss). Further
details are given in note 9.
Return on gross capital employed
The return on gross capital employed has increased to 12.7%
(2016: 7.9%) due to a much improved underlying operating profit in
both the AEP and ECS divisions.
Dividends
The interim dividend of 1.4p per share (2016: 1.0p) was paid on
7 September 2017. The Board is recommending a final dividend of
2.8p per share (2016: 2.0p) to make a total dividend for the year
of 4.2p per share (2016: 3.0p). Dividend cover, defined as the
ratio of underlying earnings per share to dividend per share, was
4.2 times (2016: 2.8 times). If approved by shareholders, the final
dividend will be paid on 8 March 2018 to shareholders on the
register on 26 January 2018.
The Board intends to continue to pursue a progressive dividend
policy, reflective of the Group's earnings, prospects and financial
strength.
When declaring or recommending future dividends, the Board will
pay particular attention to maintaining appropriate levels of
dividend cover based on the Group's earnings and cash flow. Other
factors that will be taken into account include: the Group's
indebtedness, cash reserves and available financing facilities;
future cash commitments and investment plans; the principal risks
and uncertainties facing the Group; and the level of distributable
reserves in the parent company.
Acquisitions and disposals
In November 2016, the remaining non-controlling interests in
BBCS and LECS, both based in Australia, were acquired for GBP14.4m.
In August 2017, Revolution Drives, a small precision polymers
business based in the USA, was acquired for GBP2.0m, comprising an
initial payment of GBP0.8m and deferred payments of GBP1.2m.
The momentum gained in transforming the Group's profitability
and cash conversion will assist the Group in pursuing further
growth initiatives. Future acquisitions are more likely to be
focused towards the AEP division although opportunities will be
evaluated on their respective merits, financial returns and
strategic fit.
In September 2016, Xeridiem Medical Devices, located in Arizona,
USA, which manufactures minimally invasive catheter and other
single-use medical devices, was sold. The sale enables greater
focus on the growth opportunities in the Secant Group and Charter
Medical businesses. In February 2017, CDI Energy Products, a
Norwegian distributor of seals to the North Sea oil & gas
industry, was sold.
Further details of acquisitions and disposals are disclosed in
notes 19 and 20 respectively.
Financing
The Group is financed by a mix of equity, retained earnings, US
dollar private placement loan notes and committed and uncommitted
bank facilities. The principal loan facilities are raised
centrally; operating companies supplement this funding with local
overdraft and working capital facilities.
The Group's principal committed loan facilities consist of US
dollar private placement loan notes and bank facilities. The US
dollar private placement loan notes total $200.0m (GBP155.0m).
These mature between 2021 and 2023 and bear fixed interest rates
averaging 5.26%. As scheduled, on 1 June 2017, $90.0m of US dollar
private placements were repaid, principally from existing cash
balances.
The committed bank facilities, which total GBP125.0m, are
multi-currency revolving credit agreements. They comprise a
GBP100.0m club facility with four major UK-based banks and a
further bilateral facility of GBP25.0m with one of the club
facility banks. Both facilities have been in place for the whole of
the financial year and both mature in July 2019.
The Group's total committed loan facilities at 31 August 2017
were GBP280.3m (2016: GBP346.7m). At 31 August 2017, GBP112.8m
(2016: GBP111.5m) of these facilities were not drawn down. In
addition, the Group has uncommitted facilities of GBP43.2m (2016:
GBP36.5m). The private placement loan notes are fully drawn down
and used to fund or hedge Group operations.
The principal financial covenants relating to the committed loan
facilities are: the ratio of net debt to EBITDA (net debt must be
less than 3.5 times adjusted EBITDA); and the ratio of EBITDA to
interest (adjusted EBITDA must be at least 3 times the net interest
charge).
Throughout the year under review, the Group complied with all of
its loan covenants, with significant headroom available. At 31
August 2017, the reported net debt to EBITDA was 1.2 times (2016:
2.4 times). Reported EBITDA interest cover was 6.2 times (2016: 4.4
times). For the purpose of testing the Group's compliance with its
loan covenants, reported EBITDA is adjusted for, inter alia,
acquisitions and exceptional and certain non-cash items. In
addition, for covenant purposes, net debt may also be translated at
average exchange rates for the financial year rather than at year
end exchange rates. Translating net debt at average exchange rates,
the net debt to EBITDA ratio at 31 August 2017 is unchanged at 1.2
times (2016: 2.2 times).
In normal circumstances, the Group aims to maintain significant
headroom in its net debt to EBITDA ratio. The Board has indicated
that it will allow reduced headroom for short periods when organic
or acquisitive growth opportunities arise which are expected to
enhance shareholder value.
The Group remains well placed to fund and support its
operations, including further investment, with a diversified range
of committed loan facilities with a medium-term maturity profile,
cash resources and, where necessary, shorter-term facilities.
Financial risk management
In the normal course of business, the Group is exposed to
certain financial risks, principally foreign exchange risk,
interest rate risk, liquidity risk and credit risk. These risks are
managed by the central treasury function in conjunction with the
operating units in accordance with risk management policies that
are designed to minimise the potential adverse effects of these
risks on financial performance. The policies are reviewed and
approved by the Board.
The exposures are managed through the use of borrowings,
derivatives and credit management procedures. The use of
derivatives is undertaken only where the underlying interest or
foreign exchange risk arises from the Group's operations or sources
of finance. No speculative trading in derivatives is permitted.
Further information on foreign exchange risk management is given
below.
Foreign exchange translation risk
The Group has operations around the world which report in their
respective functional currencies.
The Group is exposed to translation risk in respect of its
income statement. Principal average exchange rates applied on
translation of the income statement for 2017 and 2016 were as
follows:
2017 2016
-------------------- ------ ------
US dollars 1.27 1.44
Australian dollars 1.67 1.97
Euros 1.15 1.29
-------------------- ------ ------
The Group is also exposed to translation risk in respect of its
net assets in foreign operations. Where cost effective, the Group
hedges a proportion of its exposures through a combination of
borrowings, cross-currency swaps and forward foreign currency
contracts, principally in respect of net assets denominated in US
dollars, Euros, Norwegian krone and Chinese renminbi.
The Group continues to manage its exposure to the translation of
debt denominated in foreign currencies in order to align the net
debt to EBITDA for all currencies, particularly the US dollar, with
the Group ratio. The effect is that exchange rate movements, whilst
changing the value of net debt, will not materially affect the
Group net debt to EBITDA ratio.
Foreign exchange transaction risk
Transaction exposures arise where an operation sells or
purchases goods or services in a non-functional currency. These
transaction exposures are reduced by many of the Group's global
operations serving local markets.
Material transaction exposures are hedged, principally with
forward foreign currency contracts, once cash flows can be
identified with sufficient certainty. Where derivatives are used to
hedge transaction exposures, the Group does not hedge account for
such transactions under the requirements of IAS 39 'Financial
Instruments: Recognition and Measurement', recognising that cash
flows through to the maturity of the derivative are unaffected. In
compliance with IAS 39, all financial instruments have been
measured at their fair value as at the balance sheet date. A charge
or credit to the income statement has been recognised for the loss
or gain on these instruments. In addition, in accordance with IAS
21 'The Effects of Changes in Foreign Exchange Rates', all foreign
currency monetary items have been retranslated at the closing rate,
with changes in value charged or credited to the income
statement.
Post-retirement benefits
The Group operates a number of defined benefit post-retirement
schemes for qualifying employees in operations around the world.
The UK scheme, which was closed to new entrants in 1997, and the
scheme in the Netherlands, which is a career average plan, together
represent 96% of both total assets and total liabilities of the
schemes.
During the year, the fair value of assets of the schemes
increased to GBP224.2m (2016: GBP219.7m), principally generated by
gains in the UK scheme's investments and additional Group
contributions paid to reduce the deficit. The present value of
obligations decreased to GBP251.7m (2016: GBP268.7m) largely due to
an increase in corporate bond yields used to determine the discount
rate and the updating of mortality assumptions to the latest data
available for the UK scheme.
The total defined benefit post-retirement deficit, as calculated
by the schemes' actuaries and recorded on the balance sheet at 31
August 2017, decreased to GBP27.5m (2016: GBP49.0m).
Further details of post-retirement benefits are disclosed in
note 12.
Long-term viability statement
The Board has assessed the viability of the Group over a three
year period to 31 August 2020, taking account of the Group's
position at 31 August 2017 and the potential impacts of the
principal risks over the review period. Based on this assessment,
the directors have a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities as they
fall due during the period to 31 August 2020.
In making this statement, the Board has considered the
resilience of the Group, taking account of its current position,
the principal risks facing the business in severe but reasonable
scenarios and the effectiveness of any mitigating actions. This
assessment has considered the potential impacts of these risks on
the business model, future performance, solvency and liquidity over
the period. The stress testing of the financial model has also
taken into account the principal risks and uncertainties of the
Group.
The Board has determined that the three year period to 31 August
2020 is an appropriate period over which to provide its viability
statement since this represents the period over which financial
forecasts are prepared each year. This period also gives the Board
a reasonable degree of visibility with regard to the Group's
business cycle. The financial forecasts were prepared by individual
business units and were subject to a robust review during the
annual budget approval process.
In making its assessment of long-term viability, the Board has
taken account of the Group's balance sheet strength, the maturity
profile of its current debt funding and its ability to raise new
finance in most market conditions.
Going concern review
After making enquiries, the Board has formed a judgement that
there is a reasonable expectation the Group has adequate resources
to continue in operational existence for the foreseeable future and
for a period of at least 12 months from the date of this report.
Accordingly, the Board has assessed that the going concern basis of
accounting is appropriate in preparing the financial statements. In
forming this view, the Board has reviewed the Group's budget and
cash flow forecasts against availability of financing, including an
assessment of sensitivities to changes in market conditions in
conjunction with its long-term viability assessment.
Consolidated income statement
for the year ended 31 August 2017
2017 2016
Notes GBPm GBPm
---------------------------------------------------- ------ -------- --------
Revenue 655.4 572.5
Cost of sales (451.1) (410.3)
Gross profit 204.3 162.2
Distribution costs (57.5) (52.3)
Administrative expenses (93.4) (124.6)
Operating profit before amortisation of intangible
assets acquired and exceptional items 59.1 37.1
Amortisation of intangible assets acquired (8.3) (11.0)
Exceptional items 4 2.6 (40.8)
Operating profit/(loss) 53.4 (14.7)
Finance income 5 0.6 0.5
Finance costs 6 (15.9) (16.1)
Profit/(loss) before taxation 38.1 (30.3)
Taxation 7 (3.8) 5.0
Profit/(loss) for the year 34.3 (25.3)
Attributable to:
Owners of the parent 34.1 (26.3)
Non-controlling interests 0.2 1.0
34.3 (25.3)
Earnings/(loss) per share
Basic 9 17.6p (13.6)p
Diluted 9 17.5p (13.6)p
Consolidated statement of comprehensive income
for the year ended 31 August 2017
2017 2016
GBPm GBPm
------------------------------------------------------- ------ -------
Profit/(loss) for the year 34.3 (25.3)
Other comprehensive income/(expense)
Items that will not be reclassified subsequently
to profit or loss
Remeasurements on defined benefit post-retirement
schemes 20.4 (24.5)
Tax on items that will not be reclassified (4.5) 3.7
15.9 (20.8)
Items that may be reclassified subsequently to profit
or loss
Currency translation differences 18.1 80.6
Net investment hedges (5.1) (30.8)
Tax on items that may be reclassified 4.6 (2.3)
17.6 47.5
Total other comprehensive income for the year 33.5 26.7
Total comprehensive income for the year 67.8 1.4
Attributable to:
Owners of the parent 67.2 (1.8)
Non-controlling interests 0.6 3.2
67.8 1.4
Consolidated balance sheet
at 31 August 2017
2017 2016
Notes GBPm GBPm
--------------------------------------------- ------ -------- --------
Non-current assets
Property, plant and equipment 10 224.2 228.8
Intangible assets 11 175.3 178.3
Deferred tax assets 24.7 28.1
424.2 435.2
Current assets
Inventories 90.1 75.3
Trade and other receivables 113.7 104.9
Assets held for sale 21 0.9 2.2
Current tax assets 1.2 7.2
Derivative financial assets 15 0.3 0.6
Cash and cash equivalents 14 79.7 94.9
285.9 285.1
Total assets 710.1 720.3
Current liabilities
Borrowings 14 (11.8) (76.7)
Trade and other payables (145.8) (117.5)
Liabilities held for sale 21 - (1.0)
Current tax liabilities (4.4) (1.9)
Derivative financial liabilities 15 (1.6) (1.1)
Provisions 13 (4.7) (17.9)
(168.3) (216.1)
Non-current liabilities
Borrowings 14 (169.4) (168.2)
Trade and other payables (0.7) (0.8)
Retirement benefit obligations 12 (27.5) (49.0)
Provisions 13 (0.5) -
Deferred tax liabilities (2.8) (7.5)
(200.9) (225.5)
Total liabilities (369.2) (441.6)
Net assets 340.9 278.7
Equity
Share capital 48.5 48.5
Retained earnings 216.4 159.2
Exchange reserve 98.8 76.8
Hedging reserve (21.8) (16.9)
Equity attributable to owners of the parent 341.9 267.6
Non-controlling interests (1.0) 11.1
Total equity 340.9 278.7
The financial statements were approved by the Board of Directors
and authorised for issue on 15 November 2017 and signed on its
behalf by:
V Murray OBE W J Pratt
Chairman Group Finance Director Registered Number: 329377
Consolidated cash flow statement for the year ended 31 August
2017
2017 2016
Notes GBPm GBPm
------------------------------------------------------- ------ -------- -------
Profit/(loss) before taxation 38.1 (30.3)
Adjustments for:
Depreciation of property, plant and equipment
and amortisation of intangible assets 34.8 35.2
Impairment of property, plant and equipment - 2.9
Impairment of intangible assets - 25.0
Other exceptional non-cash movements (2.6) 4.8
Cash payments in respect of prior year exceptional
items (2.2) (2.3)
Defined benefit post-retirement costs charged
to operating profit 2.9 0.8
Cash contributions to defined benefit post-retirement
schemes (5.8) (5.2)
Movement in provisions (0.1) (0.8)
Finance income (0.6) (0.5)
Finance costs 15.9 16.1
Other non-cash movements 0.7 1.2
Operating cash flow before movement in working
capital 81.1 46.9
Movement in inventories (11.8) 11.1
Movement in trade and other receivables (4.8) 13.6
Movement in trade and other payables 24.1 (9.6)
Net cash from operations 88.6 62.0
Taxation received/(paid) 4.1 (6.2)
Net cash from operating activities 92.7 55.8
Investing activities
Purchase of property, plant and equipment (11.2) (14.2)
Disposal of property, plant and equipment 1.2 1.9
Purchase of intangible assets (1.0) (1.1)
Acquisition of businesses 19 (0.8) (5.6)
Disposal of businesses 20 5.8 -
Interest received 0.6 0.5
Net cash used in investing activities (5.4) (18.5)
Financing activities
Dividends paid to Company's shareholders 8 (5.8) (23.3)
Dividends paid to non-controlling interests (1.0) (1.3)
Options exercised on acquisition of non-controlling
interests in subsidiary undertakings 19 (14.4) -
Settlement of derivative financial instruments - 10.5
Interest paid (15.3) (13.7)
Repayment of borrowings (68.1) (29.7)
New borrowings 0.3 0.6
Net cash used in financing activities (104.3) (56.9)
Net decrease in cash and cash equivalents (17.0) (19.6)
Cash and cash equivalents at start of year 90.0 93.1
Exchange movements (1.1) 16.5
Cash and cash equivalents at end of year 71.9 90.0
Cash and cash equivalents comprises:
Cash and cash equivalents 79.7 94.9
Bank overdrafts (7.8) (4.9)
71.9 90.0
Consolidated statement of changes in equity
for the year ended 31 August 2017
Attributable to owners of the
parent
----------------------------------------------------------------------
Share Share Retained Exchange Hedging Merger Non-controlling Total
capital premium earnings reserve reserve reserve Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- --------- -------- --------- --------- -------- -------- ------- ---------------- -----------
At 1 September 2015 48.5 51.7 111.4 (7.8) 22.3 65.9 292.0 9.2 301.2
(Loss)/profit for the
year - - (26.3) - - - (26.3) 1.0 (25.3)
Other comprehensive
(expense)/income - - (20.9) 84.6 (39.2) - 24.5 2.2 26.7
Total comprehensive
(expense)/income
for the year - - (47.2) 84.6 (39.2) - (1.8) 3.2 1.4
Transactions with owners
Dividends paid in the
year - - (23.3) - - - (23.3) (1.3) (24.6)
Share-based payments - - 0.7 - - - 0.7 - 0.7
Capital reduction - (51.7) 117.6 - - (65.9) - - -
----------------------- --------- -------- --------- --------- -------- -------- ------- ---------------- -----------
Total transactions
with
owners - (51.7) 95.0 - - (65.9) (22.6) (1.3) (23.9)
----------------------- --------- -------- --------- --------- -------- -------- ------- ---------------- -----------
At 1 September 2016 48.5 - 159.2 76.8 (16.9) - 267.6 11.1 278.7
Profit for the year - - 34.1 - - - 34.1 0.2 34.3
Other comprehensive
income/(expense) - - 16.0 22.0 (4.9) - 33.1 0.4 33.5
Total comprehensive
income/(expense)
for the year - - 50.1 22.0 (4.9) - 67.2 0.6 67.8
Transactions with owners
Dividends paid in the
year - - (5.8) - - - (5.8) (1.0) (6.8)
Share-based payments - - 1.2 - - - 1.2 - 1.2
Transfer of
non-controlling
interests - - 11.7 - - - 11.7 (11.7) -
Total transactions
with
owners - - 7.1 - - - 7.1 (12.7) (5.6)
At 31 August 2017 48.5 - 216.4 98.8 (21.8) - 341.9 (1.0) 340.9
Notes
1. Basis of preparation
The full year results for the year ended 31 August 2017 were
approved by the Board of Directors on 15 November 2017. They are
abridged from the Group's audited financial statements and do not
constitute the statutory accounts of the Company within the meaning
of section 434 of the Companies Act 2006. The auditors, Deloitte
LLP, have reported on the Group financial statements for the year
ended 31 August 2017 and the Company's previous auditors,
PricewaterhouseCoopers LLP, have reported on the Group financial
statements for the year ended 31 August 2016; both have given
unqualified opinions, which did not include a statement under
Section 498 of the Companies Act 2006. The Group financial
statements for 2016 have been delivered to the Registrar of
Companies and the Group financial statements for 2017 will be filed
with the Registrar of Companies in due course.
The Group financial statements from which these results have
been extracted have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. They are prepared under the
historical cost convention, as modified by the revaluation of land
and buildings and financial assets and financial liabilities
(including derivative instruments) at fair value through profit or
loss.
After making enquiries, the Board has formed a judgement that
there is a reasonable expectation the Group has adequate resources
to continue in operational existence for the foreseeable future and
for a period of at least 12 months from the date of this report.
Accordingly, the Board has assessed that the going concern basis of
accounting is appropriate in preparing the financial statements. In
forming this view, the Board has reviewed the Group's budget and
cash flow forecasts against the availability of financing,
including an assessment of sensitivities to changes in market
conditions in conjunction with its long-term viability
assessment.
2. Accounting policies
The accounting policies adopted are consistent with those for
2016.
There were no new standards, amendments or interpretations
adopted by the Group and effective for the first time for the year
ended 31 August 2017 that have had a material impact on the
Group.
A number of new standards, amendments or interpretations have
been published but are not mandatory for the year ended 31
August
2017 and consequently have not yet been applied in preparing the
financial statements. The principal standards for the Group are
detailed below.
IFRS 9 'Financial Instruments'
IFRS 9 covers the requirements for classification, measurement,
impairment and hedge accounting. The standard is effective for the
accounting period beginning 1 September 2018. The Group is
currently assessing the impact of this standard but it is not
expected to have a material impact on the financial statements. The
Group will update its hedging documentation as appropriate, in
accordance with the requirements of IFRS 9.
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 establishes a single, comprehensive framework for
revenue recognition, focusing on the identification and
satisfaction of performance obligations. The standard is effective
for the accounting period beginning 1 September 2018. The Group has
evaluated the effect of adopting IFRS 15 and this is not expected
to have a material impact on the financial statements although may
have some impact on the Group's disclosures. The Group will adopt
the modified retrospective approach in implementing IFRS 15.
IFRS 16 'Leases'
IFRS 16 covers the requirements for the recognition,
measurement, presentation and disclosure of leases. The standard
provides a single lessee accounting model, requiring lessees to
recognise assets and liabilities for all leases unless the lease
term is 12 months or less or the underlying asset has a low value.
The standard is effective for the accounting period beginning 1
September 2019. The Group is in the process of assessing the impact
of this standard.
No other standards, amendments or interpretations are expected
to have a material impact on the Group.
Exceptional items
Certain items of income and expense are classified as
exceptional items due to their nature or size. These are presented
separately on the face of the income statement in order to provide
a better understanding of the Group's financial performance. Such
exceptional items may include impairments of intangible or tangible
assets, business restructuring costs, profits or losses arising
from the disposal or closure of a business and adjustments to fair
values in respect of acquisitions, such as changes to contingent
consideration, together with the associated taxation.
Alternative performance measures
The results of the Group include measures presented on an
"underlying" basis, which excludes exceptional items, amortisation
of intangible assets acquired and notional interest, as applicable.
In addition, certain financial performance measures that are not
defined under IFRS ("non-GAAP measures") are presented.
The underlying and non-GAAP measures are presented in order to
provide a more meaningful measure of the underlying financial
performance of the business, allowing users of financial statements
to compare these measures with our peers, as well as being more
consistent with the way that financial information is measured
internally by management and presented to the Board.
Reconciliations of these amounts from the most directly
comparable measures recognised under IFRS are detailed below.
Revenue: like-for-like and constant currencies *
Advanced
Sealing Precision Solesis Total Northern Southern Total
Technologies Polymers Medical AEP Hemisphere Hemisphere ECS Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------------- ---------- --------- ------- ------------ ------------ ------ -------
2017
Revenue as reported 129.9 109.1 55.0 294.0 184.0 177.4 361.4 655.4
Impact of businesses
sold or closed (0.9) - - (0.9) - - - (0.9)
Like-for-like revenue 129.0 109.1 55.0 293.1 184.0 177.4 361.4 654.5
2016
Revenue as reported 105.1 92.7 52.9 250.7 171.4 150.4 321.8 572.5
Currency impact 12.6 9.1 7.1 28.8 21.1 26.4 47.5 76.3
Revenue at constant
currencies 117.7 101.8 60.0 279.5 192.5 176.8 369.3 648.8
Impact of businesses
sold or closed (7.8) - (8.5) (16.3) (2.3) - (2.3) (18.6)
Like-for-like revenue 109.9 101.8 51.5 263.2 190.2 176.8 367.0 630.2
Underlying operating profit: constant currencies *
AEP ECS Corporate Group
GBPm GBPm GBPm GBPm
-------------------------------------------------------- ------ ---------- ------
2016
Underlying operating profit (as reconciled
below) as reported 29.9 14.2 (7.0) 37.1
Currency impact 4.2 2.3 (0.1) 6.4
Underlying operating profit at constant
currencies 34.1 16.5 (7.1) 43.5
* 2016 amounts stated at constant currencies are reported
amounts retranslated at 2017 exchange rates.
Underlying operating profit
2017 2016
GBPm GBPm
--------------------------------------------------------- -------
Operating profit/(loss) 53.4 (14.7)
Amortisation of intangible assets acquired 8.3 11.0
Exceptional items (2.6) 40.8
Underlying operating profit 59.1 37.1
Underlying profit before taxation
2017 2016
GBPm GBPm
--------------------------------------------------------- -------
Profit/(loss) before taxation 38.1 (30.3)
Amortisation of intangible assets acquired 8.3 11.0
Exceptional items (2.6) 40.8
Notional interest 1.5 1.7
Underlying profit before taxation 45.3 23.2
Underlying earnings per share
A reconciliation is provided in note 9.
Operating cash flow
2017 2016
GBPm GBPm
-------------------------------------------------------------------------- -------
Net cash from operations 88.6 62.0
Add back:
Defined benefit post-retirement costs charged to operating
profit (2.9) (0.8)
Cash contributions to defined benefit post-retirement
schemes 5.8 5.2
Movement in provisions 0.1 0.8
Cash outflow on exceptional items (current year and
prior year) 2.2 10.4
Other non-cash movements (0.7) (1.2)
Investing activities:
Purchase of property, plant and equipment (11.2) (14.2)
Disposal of property, plant and equipment 1.2 1.9
Purchase of intangible assets (1.0) (1.1)
Finance leases (0.2) (0.8)
Operating cash flow 81.9 62.2
Free cash flow
2017 2016
GBPm GBPm
------------------------------------------------------------------- -------
Net cash from operating activities 92.7 55.8
Add back:
Cash outflow on exceptional items (current year and
prior year) 2.2 10.4
Investing activities:
Purchase of property, plant and equipment (11.2) (14.2)
Disposal of property, plant and equipment 1.2 1.9
Purchase of intangible assets (1.0) (1.1)
Finance leases (0.2) (0.8)
Interest received 0.6 0.5
Financing activities:
Interest paid (15.3) (13.7)
Free cash flow 69.0 38.8
EBITDA
2017 2016
GBPm GBPm
---------------------------------------------------------------- -------
Operating profit/(loss) 53.4 (14.7)
Depreciation, amortisation and impairment charges 34.8 63.1
Exceptional items (excluding impairment charges) (2.6) 12.9
EBITDA 85.6 61.3
Net debt
A reconciliation is provided in note 14.
Return on gross capital employed
Underlying operating profit divided by the average of opening
and closing gross capital employed.
2017 2016 2015
GBPm GBPm GBPm
----------------------------------------------------------- -------- --------
Underlying operating profit (as reconciled
above) 59.1 37.1
Property, plant and equipment 224.2 228.8 208.4
Intangible assets 175.3 178.3 188.5
Inventories 90.1 75.3 76.0
Trade and other receivables 113.7 104.9 105.2
Assets held for sale 0.9 2.2 -
Trade and other payables (146.5) (118.3) (114.6)
Liabilities held for sale - (1.0) -
Gross capital employed at year end date 457.7 470.2 463.5
Average gross capital employed 464.0 466.9
Return on gross capital employed 12.7% 7.9%
3. Segment information
IFRS 8 'Operating Segments' requires segment information to be
presented on the same basis as that used for internal management
reporting.
For the purposes of managing the business, the Group is
organised into two reportable segments: Advanced Engineered
Products and Engineered Conveyor Solutions.
Advanced Engineered Products
AEP provides high value-added solutions using advanced polymeric
materials in three related products areas:
* Advanced Sealing Technologies (seals for
upstream/midstream oil & gas and petrochemicals; and
seals for fluid power);
* Precision Polymers (precision belts for power
transmission and motion control; elastomeric
solutions; and specialist hoses); and
* Solesis Medical (biomedical textile components and
biomaterials; and single-use products for blood
management, bioprocessing and cell therapy).
----------------------------------------------------------------------
Engineered Conveyor Solutions
ECS manufactures rubber ply, solid woven and steel cord heavyweight
conveyor belt for the mining, industrial and bulk handling markets.
ECS also provides related conveyor services such as maintenance,
design and installation.
----------------------------------------------------------------------
Operating segments within these reportable segments have been
aggregated where they have similar economic characteristics with
similar
products and services, production processes, methods of
distribution and customer types.
The Chief Operating Decision Maker ("CODM") for the purpose of
IFRS 8 is the Board of Directors. The financial position of the
segments is
reported to the CODM on a monthly basis and this information is
used to assess the performance of the Group and to allocate
resources on an appropriate basis.
Segment performance is reviewed down to the operating profit
level. Financing costs and taxation are managed on a Group basis so
these costs are not allocated to operating segments.
Segment information for the years ended 31 August 2017 and 31
August 2016 is as follows:
Advanced Engineered
Engineered Conveyor Unallocated
Products Solutions Corporate Total
-------------- --------------- --------------- ----------------
2017 2016 2017 2016 2017 2016 2017 2016
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Segment result
Segment revenue 294.0 250.7 361.4 321.8 - - 655.4 572.5
Operating profit before
amortisation of intangible
assets acquired and exceptional
items 43.9 29.9 24.1 14.2 (8.9) (7.0) 59.1 37.1
Amortisation of intangible
assets acquired (6.9) (6.3) (1.4) (4.7) - - (8.3) (11.0)
Exceptional items 4.1 (8.7) - (30.8) (1.5) (1.3) 2.6 (40.8)
Operating profit/(loss) 41.1 14.9 22.7 (21.3) (10.4) (8.3) 53.4 (14.7)
Net finance costs (15.3) (15.6)
Taxation (3.8) 5.0
Profit/(loss) for the year 34.3 (25.3)
Segment assets
Property, plant and equipment 81.0 81.8 142.4 146.0 0.8 1.0 224.2 228.8
Intangible assets 130.1 134.3 45.2 44.0 - - 175.3 178.3
Inventories 34.7 32.2 55.4 43.1 - - 90.1 75.3
Trade and other receivables 46.6 40.3 66.4 61.8 0.7 2.8 113.7 104.9
Assets held for sale - 2.2 0.9 - - - 0.9 2.2
Intra-group receivables 0.1 0.1 0.1 0.1 (0.2) (0.2) - -
Total segment assets 292.5 290.9 310.4 295.0 1.3 3.6 604.2 589.5
Unallocated assets 105.9 130.8
Total assets 710.1 720.3
Segment liabilities
Trade and other payables 44.3 35.4 93.4 75.1 8.8 7.8 146.5 118.3
Liabilities held for sale - 1.0 - - - - - 1.0
Intra-group payables 2.1 1.4 1.9 1.5 (4.0) (2.9) - -
Total segment liabilities 46.4 37.8 95.3 76.6 4.8 4.9 146.5 119.3
Unallocated liabilities 222.7 322.3
Total liabilities 369.2 441.6
Unallocated assets comprise deferred tax assets, derivative
financial assets, current tax assets and cash and cash equivalents.
Unallocated liabilities comprise borrowings, current tax
liabilities, derivative financial liabilities, provisions,
retirement benefit obligations and deferred tax liabilities.
4. Exceptional items
2017 2016
GBPm GBPm
------------------------------------------------------- ------ ------
(Credited)/charged to operating profit
Profit on disposal of businesses (4.1) -
Employment costs 1.5 -
Restructuring costs - 15.8
Impairment of goodwill and intangible assets acquired - 25.0
Total exceptional (credit)/charge (2.6) 40.8
Credited to taxation
Taxation on exceptional items (credited)/charged to
operating profit (0.3) (7.1)
Exceptional tax credit (3.8) -
Total exceptional credit (4.1) (7.1)
Profit on disposal of businesses relates to the disposals during
the year of Xeridiem Medical Devices, Inc. (GBP5.1m profit) and CDI
Energy Products AS (GBP1.0m loss). Further details can be found in
note 20.
Employment costs relate to contractual death in service costs in
respect of the former Chief Executive Officer, Nicholas Hobson.
The exceptional tax credit relates to tax losses arising from
prior year exceptional restructuring costs which were utilised
following detailed analysis and advice received during the year.
These losses, not previously recognised in deferred tax, have been
carried back against prior period profits resulting in the
exceptional tax credit.
5. Finance income
2017 2016
GBPm GBPm
-------------------------- ------ ------
Bank interest receivable 0.6 0.5
6. Finance costs
2017 2016
GBPm GBPm
--------------------------------------------------------- ------- -------
Interest payable on bank overdrafts and loans 2.8 3.4
Interest payable on other loans 11.6 11.2
14.4 14.6
Less amounts capitalised on qualifying assets - (0.2)
Interest payable 14.4 14.4
Net interest on defined benefit post-retirement schemes 0.8 0.8
Interest on the unwinding of discount on provisions 0.2 0.8
Finance charge on redemption liability 0.5 0.1
Notional interest 1.5 1.7
Total finance costs 15.9 16.1
7. Taxation
2017 2016
GBPm GBPm
---------------------------------------------------- ------ ------
Current taxation
UK corporation tax:
- current year 2.1 0.8
- double tax relief (0.4) (0.4)
1.7 0.4
Overseas tax:
- current year 6.3 (0.2)
- adjustments in respect of prior years (3.5) 0.5
2.8 0.3
4.5 0.7
Deferred taxation
Origination and reversal of temporary differences:
UK:
- current year 0.4 (0.5)
- adjustments in respect of prior years 0.3 (0.3)
Overseas:
- current year (1.4) (4.8)
- adjustments in respect of prior years - (0.1)
(0.7) (5.7)
Total taxation charge/(credit) 3.8 (5.0)
The taxation charge/(credit) includes a credit of GBP4.1m (2016:
GBP7.1m) in respect of exceptional items, GBP2.7m (2016: GBP3.6m)
in respect of the amortisation of intangible assets acquired and
GBP0.1m (2016: GBP0.2m) in respect of notional interest.
UK corporation tax is calculated at an average rate of 19.6%
(2016: 20.0%) of the estimated assessable profit for the year.
Overseas tax is calculated at the rates prevailing in the
respective jurisdictions.
8. Dividends
2017 2016
GBPm GBPm
----------------------------------------------------- ------ ------
Dividends paid or approved in the year
Interim dividend for the year ended 31 August 2016
of 1.0p (2015: 4.0p) per share 1.9 7.8
Final dividend for the year ended 31 August 2016 of
2.0p (2015: 8.0p) per share 3.9 15.5
5.8 23.3
Dividends neither paid nor approved in the year
Interim dividend for the year ended 31 August 2017
of 1.4p (2016: 1.0p) per share 2.7 1.9
Final dividend for the year ended 31 August 2017 of
2.8p (2016: 2.0p) per share 5.4 3.9
8.1 5.8
The interim dividend for the year ended 31 August 2017 was paid
on 7 September 2017. The proposed final dividend for the year ended
31 August 2017 is subject to approval by shareholders at the AGM.
Consequently, neither has been recognised as liabilities at 31
August 2017. If approved, the final dividend will be paid on 8
March 2018 to shareholders on the register on 26 January 2018.
9. Earnings/(loss) per share
2017 2016
GBPm GBPm
Earnings/(loss)
Profit/(loss) for the year attributable to owners
of the parent 34.1 (26.3)
Amortisation of intangible assets acquired 8.3 11.0
Exceptional items (2.6) 40.8
Notional interest 1.5 1.7
Taxation attributable to amortisation of intangible
assets acquired, exceptional items and notional interest
and exceptional tax credit (note 7) (6.9) (10.9)
Profit for the year before amortisation of intangible
assets acquired, exceptional items and notional interest 34.4 16.3
million million
Average number of shares
Weighted average number of shares in issue 194.0 194.0
Weighted average number of shares held by the Employee
Share Ownership Plan Trust (0.1) (0.1)
Weighted average number of shares in issue - basic 193.9 193.9
Effect of contingent long-term incentive plans 0.9 -
Weighted average number of shares in issue - diluted 194.8 193.9
pence pence
Earnings/(loss) per share
Underlying - Basic (before amortisation of intangible
assets acquired, exceptional items and notional interest) 17.7 8.4
Underlying - Diluted (before amortisation of intangible
assets acquired, exceptional items and notional interest) 17.7 8.4
Basic 17.6 (13.6)
Diluted 17.5 (13.6)
Underlying earnings per share measures have been presented to
provide a more meaningful measure of the underlying performance of
the Group.
10. Property, plant and equipment
Movements in the year are as follows:
GBPm
At 1 September 2016 228.8
Additions 11.3
Disposals (1.0)
Transfer to assets held for sale (0.5)
Depreciation (23.7)
Exchange movements 9.3
At 31 August 2017 224.2
11. Intangible assets
Movements in the year are as follows:
GBPm
At 1 September 2016 178.3
Additions 1.0
Acquisition of businesses 1.9
Disposal of businesses (0.1)
Amortisation (11.1)
Exchange movements 5.3
At 31 August 2017 175.3
12. Post-retirement benefits
The Group operates a number of defined benefit post-retirement
schemes for qualifying employees in operations around the world.
The schemes based in the UK and the Netherlands together account
for 96% of both total assets and total liabilities of the schemes.
The assets of the schemes are held in separate trustee-administered
funds. The cost of the schemes is assessed in accordance with the
advice of independent qualified actuaries using the projected unit
credit method.
UK scheme
The Fenner Pension Scheme is a UK funded defined benefit scheme
which was closed to new entrants in 1997. Scheme members accrue an
annual pension, being a proportion of final salary for each year of
pensionable service, increasing in line with inflation whilst in
payment, subject to certain caps and floors. Active members of the
scheme have paid contributions at the rate of 10% of salary and the
Company pays the balance of the cost as determined by regular
actuarial valuations. The Company offers a salary sacrifice
arrangement.
The scheme is subject to regular actuarial valuations, which are
usually carried out every three years. A triennial valuation, as at
31 March 2017, is currently being carried out. The initial results
of the ongoing valuation were rolled forward to 31 August 2017 by
an independent qualified actuary.
Overseas schemes
The principal overseas scheme is the Fenner Dunlop BV scheme,
which is based in the Netherlands. This is a career average pay
scheme with indexation in line with the industry-wide pension fund.
The accrued nominal benefits in this scheme are fully insured with
registered insurance companies, which mitigates the downside risk
to the Group.
The scheme is subject to annual actuarial valuations carried out
this year on 31 August 2017 by an independent qualified
actuary.
The principal assumptions used to determine the assets and
liabilities of the schemes in the UK and the Netherlands are as
follows:
2017 2016
------------------- -------------------
UK Netherlands UK Netherlands
------------------------------------------------- --------- ------------ ----- ------------
Discount rate 2.4% 2.0% 2.0% 1.2%
Inflation rate - RPI 3.4% n/a 2.8% n/a
Inflation rate - CPI 2.4% 2.0% 2.1% 2.0%
Rate of increase in salaries 4.4% 2.5% 3.8% 2.5%
Rate of increase in benefits in payment
subject to Limited Price Indexation increases:
- capped at 5.0% (based on RPI) 3.2% n/a 2.7% n/a
- capped at 2.5% (based on RPI) 2.1% n/a 1.9% n/a
- capped at 3.0% (based on CPI) 2.0% n/a 1.8% n/a
Movements in the year are as follows:
GBPm
At 1 September 2016 49.0
Charged to operating profit 2.9
Notional interest 0.8
Remeasurements (20.4)
Employer contributions (5.8)
Exchange movements 1.0
At 31 August 2017 27.5
The remeasurements principally comprise a decrease in
liabilities of GBP19.8m, largely due to an increase in corporate
bond yields used to determine the discount rate and updated
mortality assumptions for the UK scheme.
13. Provisions
Provisions comprise current liabilities of GBP4.7m (2016:
GBP17.9m) and non-current liabilities of GBP0.5m (2016:
GBPnil).
Movements in the year are as follows:
Property
Employment Restructuring and Deferred Redemption
costs costs environmental consideration liability
1 2 3 4 5 Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----------- -------------- --------------- ------------------- ----------- -------
At 1 September
2016 - 4.0 0.7 - 13.2 17.9
Provisions
created during
the year 1.5 - - - - 1.5
Provisions
utilised during
the year - (2.2) (0.1) - (14.4) (16.7)
Acquisition of
businesses - - - 1.2 - 1.2
Notional
interest on the
unwinding of
discount - - - - 0.2 0.2
Notional finance
charge
on redemption
liability - - - - 0.5 0.5
Exchange
movements - 0.1 - - 0.5 0.6
At 31 August
2017 1.5 1.9 0.6 1.2 - 5.2
1 Contractual death in service costs in respect of the former
Chief Executive Officer, Nicholas Hobson.
2 Costs associated with the restructuring and closure of
operations.
3 Obligations in respect of property costs or environmental
matters.
4 Deferred payments in respect of acquired businesses.
5 Obligations in respect of put and call options in relation to
the purchase of non-controlling interests in acquisitions. The put
and call options were exercised in November 2016 on completion of
the acquisition of the remaining non-controlling interests in Belle
Banne Conveyor Services Pty Limited and Leading Edge Conveyor
Services Pty Limited.
Non-current provisions are expected to be utilised within two
years.
Provisions represent the best estimate of obligations at the
balance sheet date. Where the effect of discounting is material,
provisions have been discounted at a suitable pre-tax rate based on
borrowings that match the maturity of the amounts being discounted,
to reflect the risks associated with future cash flows.
14. Reconciliation of net cash flow to movement in net debt
2017 2016
GBPm GBPm
------------------------------------------------------ -------- --------
Net decrease in cash and cash equivalents (17.0) (19.6)
Net decrease in borrowings resulting from cash flows 67.8 29.1
Movement in net debt resulting from cash flows 50.8 9.5
Finance leases (0.2) (0.8)
Exchange movements (2.1) (20.7)
Movement in net debt in the year 48.5 (12.0)
Net debt at start of year (150.0) (138.0)
Net debt at end of year (101.5) (150.0)
Net debt comprises cash and cash equivalents of GBP79.7m (2016:
GBP94.9m), current borrowings of GBP11.8m (2016: GBP76.7m) and
non-current borrowings of GBP169.4m (2016: GBP168.2m).
15. Derivative financial instruments
Derivative financial instruments comprise current assets of
GBP0.3m (2016: GBP0.6m) and current liabilities of GBP1.6m (2016:
GBP1.1m).
Movements in assets/(liabilities) in the year are as
follows:
Forward
foreign Currency Currency
currency swaps - swaps -
contracts cash flow net investment
and options hedges hedges Total
GBPm GBPm GBPm GBPm
----------------------------------- ------------- ----------- ---------------- ------
At 1 September 2016 (1.1) 0.1 0.5 (0.5)
Credited to income statement 0.5 - - 0.5
Charged to other comprehensive
income - - (1.3) (1.3)
At 31 August 2017 (0.6) 0.1 (0.8) (1.3)
16. Hedging
Group financial instruments denominated principally in US
dollars and euros are designated as hedges of the net investment in
overseas subsidiaries. The overall loss on translation to sterling
of GBP5.1m (2016: GBP30.8m) is recognised in the hedging reserve
and charged to other comprehensive income. This comprises a loss of
GBP1.3m (2016: GBPnil) in respect of derivative financial
instruments (note 15) and a loss of GBP3.8m (2016: GBP30.8m) in
respect of borrowings.
No ineffectiveness in respect of cash flow hedges or net
investment hedges has been recognised in the Consolidated income
statement.
17. Contingent liabilities
In the normal course of business the Group has given guarantees
and counter indemnities in respect of commercial transactions.
The Group is involved as defendant in a small number of
potential and actual litigation cases in connection with its
business. The directors believe that the likelihood of a material
liability arising from these cases is remote.
18. Related party transactions
Related party transactions comprise remuneration of the Group's
executive and non-executive directors and members of the Executive
Committee of GBP5.2m (2016: GBP3.8m) and administrative expenses
paid on behalf of defined benefit post-retirement schemes of
GBP0.5m (2016: GBP0.5m).
19. Acquisitions
On 1 November 2016, the Group acquired the remaining
non-controlling interests in Belle Banne Conveyor Services Pty
Limited and Leading Edge Conveyor Services Pty Limited
("BBCS/LECS"), both located in Australia, following the vendors
exercising their put options granted in November 2010 (the date the
Group acquired its controlling interest) for a cash consideration
of GBP14.4m.
On 25 August 2017, the Group completed the acquisition of
certain assets and liabilities of Revolution Drives, Inc.
("Revolution Drives"), a small specialist precision polymers
business focussed on power transmission and motion control
solutions, located in Pennsylvania, USA. Revolution Drives has been
integrated into the Precision Polymers business in the AEP
division. The total consideration was GBP2.0m, of which GBP1.2m is
deferred (non-contingent); this comprises GBP0.8m due within one
year and GBP0.4m due in more than one but less than two years.
Acquisition expenses of less than GBP0.1m were included within
administrative expenses in the Consolidated income statement.
Details of the provisional aggregate assets and liabilities
acquired, based on exchange rates at the date of completion, are
given below.
Revolution
BBCS/LECS Drives Total
--------------- ------------ ------------
Contingent Provisional Provisional
and deferred fair fair
consideration value value
GBPm GBPm GBPm
--------------------------------------- --------------- ------------ ------------
Goodwill - 0.5 0.5
Intangible assets acquired:
- customer relationships - 1.3 1.3
- non-compete agreements - 0.1 0.1
Trade and other receivables - 0.1 0.1
- 2.0 2.0
Consideration:
Cash consideration per cash
flow statement 14.4 0.8 15.2
Contingent and deferred consideration (14.4) 1.2 (13.2)
- 2.0 2.0
Provisional fair values of assets and liabilities represent the
best estimate of the fair values at the date of acquisition. As
permitted by IFRS 3 (Revised) 'Business Combinations', these
provisional amounts can be amended for a period of up to 12 months
following acquisition if subsequent information becomes available
which changes the estimates of fair values at the date of
acquisition.
Goodwill arising on acquisition principally represents the
workforce and anticipated synergies gained through the acquisition;
this is deductible for tax purposes.
From the date of acquisition, Revolution Drives contributed less
than GBP0.1m to Group revenue, Group operating profit before
amortisation of intangible assets acquired and exceptional items
and Group operating profit as the acquisition date was shortly
before the year end. If the acquisition had occurred on 1 September
2016, it is estimated that Group revenue would have been GBP656.1m,
Group operating profit before amortisation of intangible assets
acquired and exceptional items would have been GBP59.2m and Group
operating profit would have been GBP53.5m. These amounts have been
calculated by adjusting the results of the acquired business to
reflect the effect of the Group's accounting policies as if they
had been in effect from 1 September 2016.
20. Disposals
On 1 September 2016, the Group disposed of Xeridiem Medical
Devices, Inc., a manufacturer of minimally invasive
catheter and other single-use medical devices, located in Arizona, USA.
On 13 February 2017, the Group disposed of CDI Energy Products
AS, a distributor of seals, principally to the North Sea oil &
gas industry, located in Norway.
The results of neither Xeridiem Medical Devices nor CDI Energy
Products have been disclosed as discontinued operations since
neither represented a separate major line of business or
geographical area of operation, did not form part of a single
coordinated plan to dispose of such operations and were not
acquired exclusively with a view to resale. In 2016, the assets and
liabilities of Xeridiem Medical Devices were classified within
assets/(liabilities) held for sale (note 21).
Details of the assets and liabilities disposed of are given
below.
Xeridiem CDI
Medical Energy
Devices Products Total
GBPm GBPm GBPm
Property, plant and equipment 0.2 - 0.2
Intangible assets - 0.1 0.1
Inventories 0.8 0.4 1.2
Trade and other receivables 1.2 0.4 1.6
Cash and cash equivalents - 0.6 0.6
Trade and other payables (1.0) (0.4) (1.4)
Total net assets disposed of 1.2 1.1 2.3
Cash proceeds net of expenses 6.3 0.1 6.4
Profit/(loss) on disposal of businesses 5.1 (1.0) 4.1
The effect on the cash flow statement is as follows:
Xeridiem
Medical CDI Energy
Devices Products Total
GBPm GBPm GBPm
Cash proceeds net of expenses 6.3 0.1 6.4
Cash and cash equivalents disposed of - (0.6) (0.6)
Net cash flow 6.3 (0.5) 5.8
21. Assets/(liabilities) held for sale
During the year, the Group announced that its ECS business in
South Africa signed a long-term agreement with Bearing Man Group
(Pty) Ltd ("BMG") for BMG to distribute Fenner conveyor belting
products in specified territories in Sub-Saharan Africa. As part of
this arrangement, BMG is acquiring the ECS service operations and
related assets in South Africa. Fenner will supply BMG with
conveyor belting for South Africa and other specified territories.
The transaction is conditional on clearance from the South African
competition authorities. It is expected to complete after the
approval of the Group financial statements, but within 12 months of
the balance sheet date; consequently, the relevant assets have been
separately disclosed as assets held for sale.
On 1 September 2016, the Group disposed of Xeridiem Medical
Devices, Inc.
The following assets and liabilities of BMG (2017) and Xeridiem
Medical Devices (2016) are classified as held for sale in the
Consolidated balance sheet.
2017 2016
GBPm GBPm
------------------------------- ------ ------
Assets held for sale
Property, plant and equipment 0.5 0.2
Inventories 0.4 0.8
Trade and other receivables - 1.2
0.9 2.2
Liabilities held for sale
Trade and other payables - 1.0
22. Principal risks
Fenner's operations around the world are exposed to a number of
risks which could, either on their own, or in combination with
others, have an adverse effect on the Group's results, strategy,
business performance and reputation which, in turn, could impact
upon shareholder returns. The principal risks are detailed in the
Strategic Report in Fenner's Annual Report. Additional risks and
uncertainties not presently known to Fenner, or that Fenner
currently consider immaterial, may also have an adverse effect on
its business.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FFAFMLFWSEDF
(END) Dow Jones Newswires
November 15, 2017 02:00 ET (07:00 GMT)
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