TIDMLRD
RNS Number : 4004M
Laird PLC
28 July 2017
28 July 2017
Laird PLC
Results for the 6 months ended 30 June 2017 (unaudited)
Much improved first half performance, with encouraging progress
across all three divisions.
6 months 6 months Change
to 30/06/2017 to 30/06/2016
----------------------------- --------------- --------------- -------
Revenue GBP440.5m GBP352.5m +25%
Underlying operating profit GBP29.6m GBP21.1m +40%
Underlying profit before
tax GBP24.1m GBP16.4m +47%
Underlying basic earnings
per share * 4.1p 3.5p +17%
Operating cash flow GBP20.8m GBP25.4m -18%
Net debt GBP175.1m GBP263.1m
Profit before tax GBP19.4m GBP6.2m
Profit after tax GBP14.0m GBP2.3m
Basic earnings per share 3.3p 0.6p
Interim dividend per share 1.13p 4.53p
----------------------------- --------------- --------------- -------
Non-IFRS measures. For the definition and explanation of the use
of this non-IFRS information, which is used throughout, and
reconciliations to the most directly reconcilable IFRS line item,
see the Appendix to this announcement.
*2016 restated for the bonus element of the 2017 rights
issue
Financial Summary
-- Much improved first half performance in line with our
expectations, with encouraging progress across all three
divisions
-- Group revenue up 25% on a reported basis and up 10% on an organic constant currency basis
-- Underlying profit before tax improved by 47% to GBP24.1m
-- Operating cash flow reduced to GBP20.8m, prior year included working capital inflow
-- Net debt to EBITDA was 1.5x compared to 3.2x at the year-end
following successful completion of GBP185m rights issue in
April
-- Profit before tax was GBP19.4m, up from GBP6.2m and profit after tax improved to GBP14.0m
-- Interim dividend of 1.13p declared
Operational Highlights
-- The Group remains on track to deliver the planned cost
savings identified as part of our operating model re-design with
$15m of benefits in 2017
-- Ongoing high levels of investment to support future growth,
particularly in engineering capability
-- New simplified divisional structure and leadership changes delivering benefits
-- Good early progress in improving commercial and operational performance
Tony Quinlan, Chief Executive, commented:
"This is a much improved first half performance. I am encouraged
by the progress in all three divisions, which reinforces our
expectations for the full year, which remain unchanged.
"The recovery has been underpinned by our relentless focus on
driving operational improvements and this remains an ongoing
priority for Laird. We are establishing stronger foundations which
will leave us better placed to take advantage of the significant
future growth opportunities that exist in our end markets."
Divisional Performance
Performance Materials (PM)
-- Good revenue growth of 7% on an organic constant currency basis and 21% on a reported basis
-- Actions taken to stabilise and improve commercial and
operational performance delivering 40bps improvement in operating
margins
-- Strong operational controls established for smartphone cycle in second half of 2017
Connected Vehicle Solutions (CVS)
-- Strong revenue growth of 21% on an organic constant currency
basis and 39% on a reported basis
-- Operating margin continues to be impacted by investments to drive long term growth
-- Encouraging new contract wins year to date with a lifetime
value of over $400m, with revenues expected from 2019 to 2024
Wireless and Thermal Systems (WTS)
-- Revenue flat on an organic constant currency basis, against a
strong comparative in H1 last year, and +13% on a reported
basis
-- Benefits from operating model redesign are contributing to
strong operating margin improvement
-- Synergies from establishing and optimising the new divisional structures are being delivered
This announcement contains inside information
About Laird:
Laird is a global technology company providing systems,
components and solutions that protect electronics from
electromagnetic interference and heat, and that enable connectivity
in mission critical wireless applications and antennae systems. We
are a global leader in the field of innovative radio frequency
("RF") engineering.
Enquiries:
Laird PLC MHP
Tony Quinlan, Chief Executive Reg Hoare Ollie Hoare
Officer Tim Rowntree
Kevin Dangerfield, Chief
Financial Officer
Tel: +44 (0)20 7468 4040 Tel: +44 (0)20 3128
8100
Results presentation & webcast
An analyst presentation will be held today at 8.30am at The
London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. A
live audio webcast of the presentation will be hosted on
www.laird-plc.com. A replay of the webcast will also be available
on our website for two weeks after the event.
GROUP PERFORMANCE REVIEW
Good early progress has been made across the Group in the first
half. The new three-divisional structure has been implemented
successfully along with senior management changes in both
Performance Materials and Wireless & Thermal Systems. The new
structure is already delivering results and there are clear plans
in place to continue driving improved operating and commercial
performance across the Group.
We successfully completed the rights issue in April, enabling
the Group to reduce its borrowings under the existing revolving
credit facilities. This significantly strengthened the Group's
financial position as a result, leaving Laird better placed to take
advantage of the significant growth opportunities that exist in our
end markets.
Revenue
Reported revenue increased by 25% to GBP440.5m (2016:
GBP352.5m), driven by growth in CVS and Performance Materials and
positive currency effects. On an organic constant currency basis,
revenue increased by 10%.
Underlying operating profit /operating margin
Underlying operating profit increased 40% to GBP29.6m (2016:
GBP21.1m) with operating margin increasing to 6.7% (2016: 6.0%).
The revenue and underlying operating profit of the divisions and
the Group as a whole is shown in the table below:
6 months to 30 PM CVS WTS Unallocated Total
June
----------------------- ------ ------ ----- ------------ ------
2017
Revenue (GBPm) 204.7 155.6 80.2 - 440.5
Underlying operating 18.0 7.4 6.4 (2.2) 29.6
profit (GBPm)
Operating margin
(%) 8.8% 4.8% 8.0% (0.5)% 6.7%
----------------------- ------ ------ ----- ------------ ------
2016
Revenue (GBPm) 169.5 112.3 70.7 - 352.5
Underlying operating 14.2 5.6 5.1 (3.8) 21.1
profit (GBPm)
Operating margin
(%) 8.4% 5.0% 7.2% (1.1)% 6.0%
----------------------- ------ ------ ----- ------------ ------
Underlying profit before tax /profit before tax
Underlying profit before tax increased 47% to GBP24.1m (2016:
GBP16.4m). Reported profit before tax was GBP19.4m (2016:
GBP6.2m).
Dividend
The Board believes in balancing returns to shareholders with
investment in the business to support future growth. As stated at
the final results in February 2017, the Board's intention was to
resume dividends in 2017 based on a dividend per share that is
covered approximately three times by full year underlying earnings
per share.
Thereafter, consistent with an improvement in earnings and cash
generation in 2018 and beyond, and subject to prevailing market
conditions, the Board expects to reduce dividend cover towards two
times over the medium term.
In line with this revised dividend policy, an interim dividend
of 1.13p is declared at the half year.
Divisional review
Performance Materials
6 months to 30 2017 2016 Change
June GBPm GBPm
---------------------- ------ ------ -------
Revenue 204.7 169.5 +21%
---------------------- ------ ------ -------
Underlying operating
profit 18.0 14.2 +27%
---------------------- ------ ------ -------
Operating margin 8.8% 8.4%
---------------------- ------ ------ -------
Performance Materials revenue increased 21% to GBP204.7m (2016:
GBP169.5m). Organic constant currency revenue increased by 7%
versus the same period last year with Precision Metals, Magnetic
and Ceramic products and Thermal materials all contributing to the
increase. Underlying operating profit was up 27% at GBP18.0m (2016:
GBP14.2m) and the operating margin increased to 8.8% (2016: 8.4%)
driven principally by Precision Metals. The remaining businesses
within the division also performed in line with expectations.
The actions taken to stabilise and improve the division's
commercial and operational performance are already delivering
positive results. This provides confidence in the improving
delivery of operational performance in the second half of the year
and for the ramp-up in volumes for the smartphone cycle.
Connected Vehicle Solutions
6 months to 30 2017 2016 Change
June GBPm GBPm
---------------------- ------ ------ -------
Revenue 155.6 112.3 +39%
---------------------- ------ ------ -------
Underlying operating
profit 7.4 5.6 +32%
---------------------- ------ ------ -------
Operating margin 4.8% 5.0%
---------------------- ------ ------ -------
Connected Vehicle Solutions revenue increased significantly by
39% to GBP155.6m (2016: GBP112.3m). Organic revenue at constant
currency increased by 21% compared to the same period last year.
This reflects the continued high demand for our products and
solutions in the connected automotive market where content
requirements continue to grow and our technology is well regarded.
Antenna revenues grew in the first half and Smart Device
Integration products (compensers, USB hubs and wireless charging
units) showed strong growth in the period across our major
customers.
The division exited our loss-making business in Brazil in the
first half of 2017. This resulted in a GBP3.0m exceptional charge
which was made up of GBP2.8m of asset write downs and GBP0.2m of
cash cost in the period. Underlying operating profit was up 32% at
GBP7.4m (2016: GBP5.6m) with underlying operating margin falling
slightly given the continued investment in the business,
particularly in engineering capability. Year to date, the division
has won contracts valued at over $400m which are expected to
generate revenue from 2019 to 2024.
Wireless and Thermal Systems
6 months to 30 2017 2016 Change
June GBPm GBPm
---------------------- ------ ------ -------
Revenue 80.2 70.7 +13%
---------------------- ------ ------ -------
Underlying operating
profit 6.4 5.1 +25%
---------------------- ------ ------ -------
Operating margin 8.0% 7.2%
---------------------- ------ ------ -------
Wireless and Thermal Systems revenue increased 13% to GBP80.2m
(2016: GBP70.7m). Organic revenue at constant currency was flat
year-on-year. Within this, Connectivity achieved modest growth, but
this was offset by a continuing weak market for the Controls
business which had a strong H1 comparator last year. Underlying
operating profit was up 25% at GBP6.4m (2016: GBP5.1m) and the
operating margin increased to 8.0% (2016: 7.2%), reflecting
benefits from the divisional restructuring and operating model
redesign. The division continues to refocus its efforts on high
growth opportunities where we have strong technology positions.
FINANCE REVIEW
Profit before tax
Statutory profit before tax was GBP19.4m (2016: GBP6.2m) for the
first half of the year. The following sections break down the
movement into its component parts.
Underlying operating profit
The table below provides further analysis of the underlying
operating profit . The gross profit percentage of 33.0% is lower
year on year, reflecting a full period of ownership of Novero this
year along with the recategorisation of certain overheads from
SG&A to cost of sales. SG&A increased year on year
primarily due to translation of costs into sterling offset by the
movement of certain overheads into cost of sales. The increase in
R&D in the first half to GBP37.7m (8.6% of revenue), up from
GBP31.8m in 2016 (9.0% of revenue) is also primarily driven by the
translation of those costs into sterling and partly due to
continued investment in future growth opportunities. Net
capitalised development was lower than last year.
Underlying operating margin increased to 6.7% (2016: 6.0%).
6 months to 30 June 2017 2016
GBPm GBPm
----------------------------- -------- ---------
Revenue 440.5 352.5
----------------------------- -------- ---------
Cost of sales (295.1) (227.0)
----------------------------- -------- ---------
Gross profit 145.4 125.5
----------------------------- -------- ---------
Gross margin % 33.0% 35.6%
----------------------------- -------- ---------
SG&A (82.8) (78.5)
----------------------------- -------- ---------
Gross R&D (37.7) (31.8)
----------------------------- -------- ---------
Net capitalised development 4.7 5.9
----------------------------- -------- ---------
Underlying operating profit 29.6 21.1
----------------------------- -------- ---------
Underlying operating margin 6.7% 6.0%
----------------------------- -------- ---------
Underlying profit before tax
Underlying profit before tax increased 47% to GBP24.1m (2016:
GBP16.4m). This measure excludes exceptional items, amortisation of
acquired intangible assets and fair value movements on financial
instruments.
Exceptional items
There was a net exceptional charge of GBP0.4m (2016: GBP3.4m
charge) in the period as shown in the table below:
6 months to 30 June 2017 2016
GBPm GBPm
-------------------------------- ------ ------
Restructuring costs (2.6) -
-------------------------------- ------ ------
Acquisition related credit 1.4 -
-------------------------------- ------ ------
Change in valuation of options
in respect of Model Solution 0.9 (3.4)
-------------------------------- ------ ------
Covenant waiver fees (0.1) -
-------------------------------- ------ ------
Total exceptional items (0.4) (3.4)
-------------------------------- ------ ------
Restructuring costs related to the closure of the CVS site in
Brazil and charges associated with the reorganisation of the
business into three divisions, partially offset by a credit
relating to the re-design of our operating model. The acquisition
related credit relates to a settlement with the previous owner of
Novero.
Amortisation of acquired intangible assets
Total amortisation of acquired intangible assets was GBP7.0m, up
from GBP6.6m in the first half of 2016.
Finance costs
Finance costs, before fair value movements, were GBP5.5m (2016:
GBP4.7m). Interest cover was 7.4 times (2016: 8.6 times). Fair
value movements on financial instruments resulted in a gain of
GBP2.7m (2016: loss of GBP0.2m).
Taxation
The underlying tax charge on underlying profit before tax is
equivalent to an average tax rate of 27.4% (2016: 19.9%), which is
our best estimate of the outcome for the 2017 full year. The
increase versus last year is due to a different mix of profits,
with less profit in lower tax jurisdictions.
Profit after tax
The profit after tax for the period was GBP14.0m (2016: GBP2.3m)
reflecting the movements above.
Underlying earnings per share
Continuing underlying basic earnings per share increased 17% to
4.1p (2016: 3.5p). Underlying earnings are based on underlying
profit less underlying tax and exclude deferred tax on acquired
intangible assets, goodwill and US capitalised development costs.
The average number of shares in issue in the first half of 2017 was
417.1m, compared with 350.6m in the first half of 2016 (restated
for the bonus element of the rights issue).
Basic earnings per share
Basic earnings per share increased to 3.3p, up from 0.6p last
year.
Cash flow
In the first half of 2017, Laird produced an operating cash flow
of GBP20.8m (2016: GBP25.4m), representing cash conversion of 70%
(2016: 120%). Cash conversion is defined as operating cash flow as
a proportion of underlying operating profit. Reported cash
generated from operations was GBP31.8m (2016: GBP44.8m).
H1 2017 H1 2016
GBPm GBPm
---------------------------------------- -------- --------
Underlying EBITDA 49.8 38.3
---------------------------------------- -------- --------
(Increase)/decrease in working capital (1.5) 13.1
---------------------------------------- -------- --------
Capitalised development costs (10.6) (10.0)
---------------------------------------- -------- --------
Capital expenditure less disposals (16.9) (16.0)
---------------------------------------- -------- --------
Operating cash flow 20.8 25.4
---------------------------------------- -------- --------
Exceptional costs (16.5) (6.6)
---------------------------------------- -------- --------
Net finance costs (6.0) (4.5)
---------------------------------------- -------- --------
Taxation (7.4) (7.9)
---------------------------------------- -------- --------
Free cash flow pre dividend (9.1) 6.4
---------------------------------------- -------- --------
Dividends - -
---------------------------------------- -------- --------
Free cash flow post dividend (9.1) 6.4
---------------------------------------- -------- --------
Acquisitions - (40.2)
---------------------------------------- -------- --------
Net proceeds from issue of equity 175.8 0.2
---------------------------------------- -------- --------
Other (1.0) (3.1)
---------------------------------------- -------- --------
Decrease/(increase) in net borrowings
before exchange movement 165.7 (36.7)
---------------------------------------- -------- --------
Exchange translation movement 3.8 (26.4)
---------------------------------------- -------- --------
Decrease/(increase) in net borrowings
since 31 December 2016/2015 169.5 (63.1)
---------------------------------------- -------- --------
Underlying EBITDA improved to GBP49.8m in the period, up from
GBP38.3m. However, this was more than offset by a small working
capital outflow in the period against the benefit of an inflow in
the first half last year. The small outflow was driven by an
increase in inventory as the divisions build stock ahead of the
higher revenue in the second half of the year. In addition, there
were small increases in investment in both capital expenditure and
capitalised development in the period, in order to drive future
growth. As a result, operating cash flow reduced by 18% to
GBP20.8m.
Cash outflows from exceptional costs at GBP16.5m relate to the
costs of exiting sites as part of the redesign of the operating
model, costs associated with the reorganisation into three
divisions and the closure of the business in Brazil. In addition,
the fees associated with the covenant waiver were paid in the first
half. The vast majority of these exceptional cash flows had been
provided for in prior years.
Net borrowings and debt facilities
Overall, net borrowings decreased during the half year by
GBP169m to GBP175m, largely due to the proceeds from the successful
completion of the rights issue. This, combined with the improvement
in operating profit, led to a reduction in the net debt to EBITDA
ratio of 1.5 times compared to 3.2 times at the year-end 31
December 2016.
A cornerstone of our financial planning is to ensure that we
maintain committed loan finance which provides sufficient headroom
above expected borrowing requirements and has a significant
proportion with terms that exceed one year. Our committed bilateral
revolving credit facilities total GBP195m, and will not expire
until 2019. In addition, we have total US Private Placement notes
and Schuldschein loans of US Dollar $140m and Euro EUR77m
outstanding.
Covenants
A key consideration for financial planning is to maintain
sufficient headroom between borrowings and the ceiling set by the
associated covenants. Our bank facilities, Schuldschein and US
Private Placement loan notes contain two principal financial
covenants: net debt / EBITDA (earnings before exceptional items,
interest, tax, depreciation and amortisation) and interest
cover.
We are operating comfortably within our covenants. For the
period ended 30 June 2017, net debt was 1.5 times EBITDA, against
the maximum permitted of 3.5 times. Interest cover was 7.4 times,
against the minimum requirement of 3.0 times.
The expected headroom is routinely estimated against the
covenants and the sensitivity to a number of scenarios is tested to
ensure ongoing compliance. We do not anticipate approaching our
covenant limits in the foreseeable future.
Currencies in 2017
The average and period-end exchange rates are set out in note
4.
As a global business the Group is exposed to a number of foreign
currencies.
Whilst a significant proportion of our revenue is denominated in
US Dollars, our costs are often in the local currency of the
countries in which we operate. This leads to a mismatch and
therefore an exposure to currency movements on a transactional
basis. The table below shows the breakdown of our principal
currency exposures for the 6 months ended 30 June 2017.
Currency Sales Costs
---------- ------ ------
RMB 10% 30%
---------- ------ ------
EUR 20% 22%
---------- ------ ------
GBP 0% 3%
---------- ------ ------
KRW 2% 2%
---------- ------ ------
USD 66% 37%
---------- ------ ------
Other 2% 6%
---------- ------ ------
Total 100% 100%
---------- ------ ------
There is also the translation impact in converting profits into
the Group's reporting currency (sterling); each 1 cent appreciation
of the US Dollar against sterling approximates to an annual
increase in operating profit of GBP0.4m.
Principal Risks
We operate globally in varied markets. The principal risks and
uncertainties that are or may be faced are disclosed in the 2016
Annual Report, and we expect them to continue to be relevant for
the remaining six months of the year.
The risks set out in the 2016 Annual Report include the
competitive markets in which we operate, macroeconomic and
political factors, exposure to increases in labour costs in China,
world commodity prices, and currency fluctuations, the requirement
to meet increasingly stringent environmental laws and regulations,
and risks related to brand management, our products, the supply
chain and operational continuity.
Total Equity
Total equity at 30 June 2017 was GBP533.9m (30 June 2016:
GBP450.9m). The reconciliation of total equity is set out in the
Group statement of changes in equity.
Statement of directors' responsibilities
The directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union, and that
the interim management report set out on pages 1-9 herein includes
a fair review of the information required by DTR 4.2.7R and DTR
4.2.8R of the Disclosure and Transparency Rules. The Board of
Directors of Laird PLC that served during the six months to 30 June
2017 and their respective responsibilities are set out in the Laird
PLC 2016 Annual Report.
By Order of the Board:
Tony Quinlan Chief Executive Officer
Kevin Dangerfield Chief Financial Officer
28 July 2017
INDEPENT REVIEW REPORT TO LAIRD PLC
We have been engaged by the Company to review the condensed set
of financial statements in the interim report for the six months
ended 30 June 2017 which comprises the Group income statement,
Group statement of comprehensive income, Group statement of changes
in equity, Group statement of financial position, Group cash flow
statement and the related notes 1 to 11 and appendix. We have read
the other information contained in the interim 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
guidance contained in 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 work, for
this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the interim report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1, 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 interim 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 interim report
based on our review.
Scope of review
We conducted our review in accordance with ISRE (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 enquiries, 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 Ireland) 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 interim 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
28 July 2017
Condensed consolidated income statement
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Note
Continuing operations
2 Revenue
Performance Materials 204.7 169.5 395.0
Connected Vehicle Solutions 155.6 112.3 252.1
Wireless and Thermal Systems 80.2 70.7 154.5
-------- --------------- ---------------
440.5 352.5 801.6
-------- --------------- ---------------
Operating profit before amortisation
of acquired intangible assets
and exceptional items 29.6 21.1 61.9
Impairment of goodwill - - (155.5)
Amortisation of acquired
intangible assets (7.0) (6.6) (17.2)
3 Exceptional items (0.4) (3.4) 1.2
-------- --------------- ---------------
Operating profit / (loss) 22.2 11.1 (109.6)
Finance revenue 0.1 0.1 0.1
Finance costs (5.7) (4.9) (11.1)
Financial instruments - fair
value movements 2.7 (0.2) (1.9)
Other net finance revenue
- pension 0.1 0.1 0.2
-------- --------------- ---------------
Profit / (loss) before tax 19.4 6.2 (122.3)
6 Taxation (5.4) (3.9) 11.5
-------- --------------- ---------------
Profit / (loss) for the period 14.0 2.3 (110.8)
Attributable to:
Equity shareholders of the
parent company 14.0 2.0 (111.7)
Non-controlling interests - 0.3 0.9
-------- --------------- ---------------
14.0 2.3 (110.8)
-------- --------------- ---------------
(restated***) (restated***)
5 Earnings / (loss) per share
Basic on profit / (loss)
for the period* 3.3p 0.6p (31.8)p
Diluted on profit / (loss)
for the period* 3.3p 0.6p (31.8)p
6 Underlying profit before
tax**
Continuing 24.1 16.4 51.1
Underlying earnings per share**
Basic from continuing operations* 4.1p 3.5p 10.5p
Diluted from continuing operations* 4.1p 3.5p 10.5p
* attributable to equity shareholders of the parent company
** before impairment of goodwill, amortisation of acquired
intangible assets, exceptional items, the gain or loss on disposal
of businesses, the impact arising from the fair valuing of
financial instruments and deferred tax on the amortisation and
impairment of acquired intangible assets, goodwill and US
capitalised development costs.
*** Earnings / (loss) per share has been restated for the 2017
rights issue.
Condensed consolidated statement of comprehensive income
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Profit / (loss) for the period 14.0 2.3 (110.8)
Items that will not be reclassified
subsequently to
profit or loss:
Net re-measurement gains /
(losses) on retirement benefit
obligations 1.4 (0.7) 0.1
Items that may be reclassified
subsequently to
profit or loss:
Exchange differences on retranslation
of overseas net investments (15.7) 73.9 131.7
Exchange differences on net
investment hedges 5.1 (30.0) (57.6)
--------- --------- ------------
(10.6) 43.9 74.1
--------- --------- ------------
Other comprehensive (expense)
/ income for the period (9.2) 43.2 74.2
--------- --------- ----------
Total comprehensive income
/ (expense) for the period 4.8 45.5 (36.6)
--------- --------- ------------
Attributable to:
Equity shareholders of the
parent company 4.7 43.5 (39.8)
Non-controlling interests 0.1 2.0 3.2
--------- --------- ------------
4.8 45.5 (36.6)
--------- --------- ------------
Condensed consolidated statement of changes in equity
Attributable to equity shareholders
of the parent company
-------------------------------------------------------------------------
Equity Non-
share Share Retained Translation Treasury Other controlling Total
capital premium earnings reserve shares reserves Total Interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- -------- --------- ------------ --------- --------- ------ ------------ -------
for the 6 months to 30 June 2017
At 1 January 2017 76.3 281.9 (161.8) 183.4 (2.7) (33.3) 343.8 8.7 352.5
Profit for the
period - - 14.0 - - - 14.0 - 14.0
Other comprehensive
income / (expense) - - 1.4 (10.7) - - (9.3) 0.1 (9.2)
------ ------ -------- ------- ------ ------- ------ ------ ------
Total comprehensive
income /
(expense) - - 15.4 (10.7) - - 4.7 0.1 4.8
Exercise of share
options 0.1 0.2 - - - - 0.3 - 0.3
Net proceeds from
rights issue 61.1 - - - - 115.1 176.2 - 176.2
Share based payments - - 1.1 - - - 1.1 - 1.1
Purchase of own
shares of Employee
Benefit Trust - - - - (0.5) - (0.5) - (0.5)
Non-controlling
interests - dividend - - - - - - - (0.5) (0.5)
At 30 June 2017 137.5 282.1 (145.3) 172.7 (3.2) 81.8 525.6 8.3 533.9
------ ------ -------- ------- ------ ------- ------ ------ ------
for the 6 months to 30 June 2016
At 1 January 2016 75.4 272.1 (13.7) 111.7 (2.7) (33.3) 409.5 8.5 418.0
Profit for the
period - - 2.0 - - - 2.0 0.3 2.3
Other comprehensive
(expense) / income - - (0.7) 42.2 - - 41.5 1.7 43.2
----- ------ -------- ------- ------ ------- ------- ------ -------
Total comprehensive
income - - 1.3 42.2 - - 43.5 2.0 45.5
Issue of shares 0.9 10.6 - - - - 11.5 - 11.5
Share based payments - - 2.3 - - - 2.3 - 2.3
Treasury shares - - - - (2.3) - (2.3) - (2.3)
Vesting of LTIPs/Restricted
shares - - (2.3) - 2.3 - - - -
Non-controlling
interests - dividend - - - - - - - (0.8) (0.8)
Dividends payable - - (23.3) - - - (23.3) - (23.3)
----- ------ -------- ------- ------ ------- ------- ------ -------
At 30 June 2016 76.3 282.7 (35.7) 153.9 (2.7) (33.3) 441.2 9.7 450.9
----- ------ -------- ------- ------ ------- ------- ------ -------
for the 12 months to 31 December 2016
At 1 January 2016 75.4 272.1 (13.7) 111.7 (2.7) (33.3) 409.5 8.5 418.0
(Loss) / profit
for the year - - (111.7) - - - (111.7) 0.9 (110.8)
Other comprehensive
income - - 0.2 71.7 - - 71.9 2.3 74.2
----- ------ ---------- ------- ------ ------- --------- ------ --------
Total comprehensive
(expense) / income - - (111.5) 71.7 - - (39.8) 3.2 36.6
Exercise of share
options - 0.3 - - - - 0.3 - 0.3
Issue of shares
for acquisition 0.9 9.5 - - - - 10.4 - 10.4
Share based payments - - 1.1 - - - 1.1 - 1.1
Treasury shares - - - - (2.2) - (2.2) - (2.2)
Vesting of LTIPs/Restricted
shares - - (2.2) - 2.2 - - - -
Non-controlling
interests - dividend - - - - - - - (3.0) (3.0)
Dividends paid - - (35.5) - - - (35.5) - (35.5)
----- ------ ---------- ------- ------ ------- --------- ------ --------
At 31 December
2016 76.3 281.9 (161.8) 183.4 (2.7) (33.3) 343.8 8.7 352.5
----- ------ ---------- ------- ------ ------- --------- ------ --------
In the period to 30 June 2017, the Group raised net proceeds of
GBP174.9m via a rights issue. A cash box structure was used in such
a way that merger relief was available under the Companies Act
2006, section 612. In this circumstance no share premium can be
recorded and the excess of the net proceeds over the nominal value
of the share capital issued is shown in Other reserves.
Condensed consolidated statement of financial position
As at As at As at
30 June 30 June 31 Dec
2017 2016 2016
(restated)
Note GBPm GBPm GBPm
Assets
Non-current assets
Property, plant and equipment 127.1 101.7 123.2
Intangible assets 617.1 751.7 635.1
Deferred tax assets 4.2 4.4 4.6
8 Derivative financial instruments 2.7 0.3 1.5
Retirement benefit assets 13.4 11.7 12.5
Other non-current assets 2.0 1.5 1.9
-------- ----------- --------
766.5 871.3 778.8
-------- ----------- --------
Current assets
Inventories 103.2 88.0 99.4
Trade and other receivables 178.1 155.6 209.8
Income tax receivable 0.4 0.3 0.3
8 Derivative financial instruments 0.8 0.4 -
10(a) Cash and cash equivalents 51.2 84.8 64.5
-------- ----------- --------
333.7 329.1 374.0
-------- ----------- --------
Liabilities
Current liabilities
10 Borrowings (3.7) (32.1) (0.3)
8 Derivative financial instruments (0.3) (0.6) (2.1)
Trade and other payables (164.7) (173.4) (192.0)
Current tax liabilities (31.6) (33.6) (33.9)
Provisions (14.8) (29.4) (26.8)
-------- ----------- --------
(215.1) (269.1) (255.1)
-------- ----------- --------
Net current assets 118.6 60.0 118.9
-------- ----------- --------
Non-current liabilities
10 Borrowings (222.6) (315.8) (408.8)
8 Derivative financial instruments (31.3) (37.4) (31.0)
Deferred tax liabilities (73.4) (84.1) (76.8)
Retirement benefit obligations (13.0) (13.3) (13.7)
Other non-current liabilities (0.6) (0.7) (0.8)
Provisions (10.3) (29.1) (14.1)
-------- ----------- --------
(351.2) (480.4) (545.2)
-------- ----------- --------
Net assets 533.9 450.9 352.5
-------- ----------- --------
Capital and reserves
11 Equity share capital 137.5 76.3 76.3
Share premium 282.1 282.7 281.9
Retained loss (145.3) (35.7) (161.8)
Translation reserve 172.7 153.9 183.4
Treasury shares (3.2) (2.7) (2.7)
Other reserves 81.8 (33.3) (33.3)
-------- ----------- --------
Equity attributable to owners
of the parent company 525.6 441.2 343.8
-------- ----------- --------
Non-controlling interests 8.3 9.7 8.7
-------- ----------- --------
Total equity 533.9 450.9 352.5
-------- ----------- --------
30 June 2016 has been restated to reclassify GBP31.2m of income
tax creditors from non-current liabilities to current liabilities
and for changes to the fair value of identifiable assets and
liabilities of LSR acquired (GBP4.2 million increase in deferred
tax liabilities and GBP4.2 million decrease in intangible
assets).
Condensed consolidated cash flow statement
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
Note GBPm GBPm GBPm
9 Cash flows from operating
activities
Cash generated from operations 31.8 44.8 75.9
Tax paid (7.4) (7.9) (14.4)
--------- --------- ----------
Net cash flows from operating
activities 24.4 36.9 61.5
--------- --------- ----------
Cash flow from investing
activities
Interest received 0.1 0.1 0.1
Acquisition of businesses
9 (net of cash acquired) - (38.8) (39.7)
Purchase of property, plant
and equipment (16.6) (15.3) (41.4)
Purchase of software (0.3) (0.7) (3.3)
Purchase of intangible assets
(internally developed) (10.6) (10.0) (19.9)
Net outflow from sale of - (0.1) -
businesses
Net cash flows from investing
activities (27.4) (64.8) (104.2)
--------- --------- ----------
Cash flows from financing
activities
Interest and other finance
costs paid (6.1) (4.6) (10.5)
Net proceeds from issue
of ordinary share capital 175.8 0.2 0.3
Purchase of treasury shares (0.5) (2.3) (2.2)
Proceeds from borrowings - 44.9 114.4
Repayments of borrowings (177.9) - (35.0)
Dividends paid to equity
shareholders of the parent - - (35.5)
Dividends paid to non-controlling
interests (0.5) (0.8) (3.0)
--------- --------- ----------
Net cash flows from financing
activities (9.2) 37.4 28.5
--------- --------- ----------
Effects of movements in
foreign exchange rates (1.1) 6.5 9.9
--------- --------- ----------
(Decrease)/increase in cash
and cash equivalents for
10(a) the period (13.3) 16.0 (4.3)
Cash and cash equivalents
brought forward 64.5 68.8 68.8
--------- --------- ----------
Cash and cash equivalents
carried forward 51.2 84.8 64.5
--------- --------- ----------
Notes to the condensed consolidated interim financial
statements
1 Basis of preparation
Explanatory note:
These notes provide additional detail and explanations on the
disclosures within our Interim Report.
Laird PLC is a public limited company incorporated and domiciled
in England and Wales and its ordinary shares are traded on the
London Stock Exchange. The condensed consolidated interim financial
statements for the period ended 30 June 2017 were authorised for
issue by the Board of Directors on 27 July 2017.
The condensed consolidated financial statements included in this
Interim Report have been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the EU.
Laird PLC prepares its Annual Report and Accounts on the basis
of IFRS as adopted for use by the EU. The financial information
presented in this Interim Report has been prepared in accordance
with the accounting policies expected to be used in preparing the
2017 Annual Report and Accounts which do not differ significantly
from those used in the preparation of the 2016 Annual Report and
Accounts.
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the financial statements of the Group.
These interim results are unaudited but have been reviewed by
the Group's auditor, Deloitte LLP. The information for the year
ended 31 December 2016 does not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006. The statutory
accounts for the year ended 31 December 2016 have been reported on
and delivered to the registrar of companies. The report of the
auditor was unqualified and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
Further copies of the Interim Announcement may be obtained from
Laird PLC's registered office at 100 Pall Mall, London, SW1Y
5NQ.
2 Segmental analysis
Explanatory note:
The Group's reportable segments are the operating businesses
overseen by distinct divisional management and reported to the
Group Executive Committee (which performs the function of the chief
operating decision maker).
The Group moved to a three division structure effective from 1
January 2017. The segmental results for comparative periods have
been restated for the purposes of comparability.
Performance Materials designs and supplies precision metals, EMI
shielding materials, thermal materials and magnetic and ceramic
products.
Connected Vehicle Solutions designs, manufactures and sells a
range of products into the vehicle connectivity market.
Wireless and Thermal Systems designs and manufactures products
that enable connectivity across a range of end markets including
antennae, industrial control systems and active engineered thermal
management systems.
For the 6 months to
30 June 2017
Performance Connected Wireless Central Total
Materials Vehicle and and
Solutions Thermal other
Systems costs
GBPm GBPm GBPm GBPm GBPm
------------ ----------- --------- -------- ------
Revenue from customers 204.7 155.6 80.2 - 440.5
------------ ----------- --------- -------- ------
Segment operating profit
stated before: 18.0 7.4 6.4 (2.2) 29.6
Amortisation of acquired
intangible assets (1.5) (1.9) (3.6) - (7.0)
Exceptional items 0.6 0.4 (1.5) 0.1 (0.4)
------------ ----------- --------- -------- ------
Operating profit 17.1 5.9 1.3 (2.1) 22.2
Finance income 0.1
Finance costs (5.7)
Financial instruments
- fair value movements 2.7
Other net finance income
- pension 0.1
------
Profit before tax 19.4
------
For the 6 months to
30 June 2016 (restated)
Performance Connected Wireless Central Total
Materials Vehicle and and
Solutions Thermal other
Systems costs
GBPm GBPm GBPm GBPm GBPm
------------ ----------- --------- -------- --------
Revenue from customers 169.5 112.3 70.7 - 352.5
------------ ----------- --------- -------- --------
Segment operating profit
stated before: 14.2 5.6 5.1 (3.8) 21.1
Amortisation of acquired
intangible assets (1.9) (0.5) (4.2) - (6.6)
Exceptional items (3.4) - - - (3.4)
------------ ----------- --------- -------- --------
Operating profit 8.9 5.1 0.9 (3.8) 11.1
Finance income 0.1
Finance costs (4.9)
Financial instruments
- fair value movements (0.2)
Other net finance income
- pension 0.1
--------
Profit before tax 6.2
--------
For the 12 months to 31 December 2016 (restated)
Performance Connected Wireless Central Total
Materials Vehicle and and
Solutions Thermal other
Systems costs
GBPm GBPm GBPm GBPm GBPm
------------ ----------- --------- -------- --------
Revenue from customers 395.0 252.1 154.5 - 801.6
------------ ----------- --------- -------- --------
Segment operating profit
stated before: 42.2 13.0 14.3 (7.6) 61.9
Impairment of goodwill - (52.0) (103.5) - (155.5)
Amortisation of acquired
intangible assets (4.1) (3.6) (9.5) - (17.2)
Exceptional items 4.7 (4.1) 2.6 (2.0) 1.2
------------ ----------- --------- -------- --------
Operating profit 42.8 (46.7) (96.1) (9.6) (109.6)
Finance income 0.1
Finance costs (11.1)
Financial instruments
- fair value movements (1.9)
Other net finance income
- pension 0.2
--------
Loss before tax (122.3)
--------
3 Exceptional items
Explanatory note:
Exceptional items are items of income or expense incurred
outside the normal course of business, and are considered to be
material and infrequent in nature. This note provides a detailed
breakdown of the "Exceptional items" line included on the Group
income statement.
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
Note GBPm GBPm GBPm
Continuing operations:
Performance Materials
Change in valuation of put
and call options in respect
a of Model Solution 0.9 (3.4) 3.8
b Restructuring (costs) / credits (0.3) - 0.9
--------- --------- ----------
0.6 (3.4) 4.7
--------- --------- ----------
Connected Vehicle Solutions
Acquisition related credit 1.4 - -
b Restructuring (costs) (1.0) - (4.1)
--------- --------- ----------
0.4 - (4.1)
--------- --------- ----------
Wireless and Thermal Systems
b Restructuring (costs) / credits (1.5) - 2.6
--------- --------- ----------
(1.5) - 2.6
--------- --------- ----------
Unallocated credits / (costs)
(Costs) related to rights
issue and covenant waiver
fees (0.1) - (3.0)
b Restructuring credits 0.2 - 1.0
--------- --------- ----------
0.1 - (2.0)
(0.4) (3.4) 1.2
--------- --------- ----------
Notes
(a) The changes in valuation of put and call options in respect
of Model Solutions are further discussed in note 8.
(b) Restructuring costs relate to the re-design of the Group's
operating model announced in 2015, the reorganisation into a three
division structure announced in February 2017 and the exit of the
CVS business in Brazil.
The total cash outlay for exceptional costs in 2017 half year
was GBP16.5m (June 2016: GBP6.6m).
The tax effect on exceptional items in 2017 half year is
GBP(0.5)m (June 2016: GBPnil).
4 Exchange rates
Explanatory note:
The results and cash flows of overseas subsidiaries are
translated into sterling using the average rates of exchange for
the period as disclosed below.
The principal rates used were as follows:
Average Closing
6 months 6 months 12 months At At At
to to to
30 June 30 June 31 Dec 30 30 31
June June Dec
2017 2016 2016 2017 2016 2016
Czech Koruna 31.17 34.68 33.05 29.84 32.68 31.61
Euros 1.16 1.28 1.22 1.14 1.21 1.17
Japanese Yen 141.53 160.13 147.57 145.13 138.04 144.02
Korean Won 1436.54 1692.21 1572.80 1470.66 1548.22 1488.03
Renminbi ("RMB") 8.65 9.37 8.99 8.79 8.89 8.59
Swedish Krona 11.17 11.94 11.57 11.04 11.35 11.22
US Dollars 1.26 1.43 1.36 1.29 1.34 1.23
5 Earnings per share
Explanatory note:
Earnings per share (EPS) represents the amount of our earnings
(post-tax profits) that are attributable to each ordinary share we
have in issue. The calculation of basic and diluted earnings per
share is based on the profit for the period divided by the daily
average of the number of shares in issue during the period. Diluted
earnings per share is based on the same profit but with the number
of shares increased to reflect the daily average effect of relevant
share options granted but not yet exercised where performance
conditions have been met and shares are contingently issuable.
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Profit*
Profit / (loss) for the period
attributable to equity shareholders
of the parent company 14.0 2.0 (111.7)
---------- ----------- -----------
Number Number Number
of shares of shares of shares
(restated) (restated)
(m) (m) (m)
Weighted average shares
Basic weighted average shares 417.1 350.6 350.9
Options 1.3 3.7 1.6
---------- ----------- -----------
Diluted weighted average shares 418.4 354.3 352.5
---------- ----------- -----------
Pence Pence Pence
Earnings per share* (restated) (restated)
Basic on profit / (loss) for
the period 3.3 0.6 (31.8)
---------- ----------- -----------
Diluted on profit / (loss)
for the period 3.3 0.6 (31.8)
---------- ----------- -----------
* attributable to equity shareholders of the parent company
Weighted average number of shares and earnings / (loss) per
share have been restated for the 2017 rights issue to
allow meaningful comparison with 2017 earnings per share.
6 Underlying results and taxation
Explanatory note:
Underlying profit and earnings per share are shown as the Board
considers them to be relevant guides to the performance of the
Group. See appendix for further details.
Underlying tax is stated before exceptional items, deferred tax
on the amortisation of acquired intangible assets, goodwill and US
capitalised development costs, the gain or loss on disposal of
businesses and the impact arising from the fair valuation of
financial instruments. The deferred tax impact of short-term losses
and current tax on the amortisation of acquired intangible assets
and impairment of goodwill are included in the calculation of
underlying tax.
The tax charge for the period was based on the estimated tax
rate for the full year. The underlying tax charge for the period is
equivalent to 27.4% (June 2016: 19.9%, December 2016: 24.9%) of
underlying profit before tax.
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Profit
Profit before amortisation
of acquired intangible assets
and exceptional items 29.6 21.1 61.9
Finance income 0.1 0.1 0.1
Finance costs (5.7) (4.9) (11.1)
Other finance revenue - pension 0.1 0.1 0.2
--------- ----------- -----------
Underlying profit before tax 24.1 16.4 51.1
--------- ----------- -----------
Tax
The underlying tax charge is
calculated as follows:
Underlying tax 6.6 3.3 12.7
Underlying tax rate 27.4% 19.9% 24.9%
------------------------------------
Tax credit on exceptional items (0.5) - (3.6)
Deferred tax on goodwill, acquired
intangible assets
and US capitalised development
costs (1.1) 1.8 (19.4)
Exceptional US tax loss movement
/(recognition) 0.4 (1.2) (1.2)
Total tax charge 5.4 3.9 (11.5)
--------- ----------- -----------
Pence Pence Pence
(restated) (restated)
Earnings per share*
--------- ----------- -----------
Underlying earnings per share
- basic 4.1 3.5 10.5
--------- ----------- -----------
Underlying earnings per share
- diluted 4.1 3.5 10.5
--------- ----------- -----------
* attributable to equity shareholders of the parent company
Prior period underlying earnings per share has been restated for
the 2017 rights issue.
7 Dividends paid and proposed
Explanatory note:
Dividends are the amounts we return to our shareholders and are
paid as an amount per ordinary share held.
On 27 July 2017 the Board declared an interim dividend of 1.13p
per share (2016: 4.53p). The interim dividend will be paid on 1
December 2017 to shareholders registered on 3 November 2017.
Dividends paid are charged to retained earnings on the earlier of
the date of payment or the date on which they become a liability of
the Company.
Total Dividends Dividends paid Dividends declared
/ proposed*
6 months 6 months 12 months 6 months 6 months 12 months
to to to to to to
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2017 2016 2016 2017 2016 2016
GBPm GBPm GBPm GBPm GBPm GBPm
Final 2015 - 23.3 23.3 - - -
Interim 2016 - - 12.2 - 12.2 12.2
Final 2016 - - - - - -
Interim 2017 - - - 5.5 - -
-------- -------- --------- -------- -------- ---------
- 23.3 35.5 5.5 12.2 12.2
-------- -------- --------- -------- -------- ---------
Dividends Dividends paid Dividends declared
per share / proposed*
6 months 6 months 12 months 6 months 6 months 12 months
to to to to to to
30 June 30 June 31 Dec 30 June 30 June 31 Dec
2017 2016 2016 2017 2016 2016
Pence Pence Pence Pence Pence Pence
Final 2015 - 8.60 8.60 - - -
Interim 2016 - - 4.53 - 4.53 4.53
Final 2016 - - - - - -
Interim 2017 - - - 1.13 - -
-------- -------- --------- -------- -------- ---------
- 8.60 13.13 1.13 4.53 4.53
-------- -------- --------- -------- -------- ---------
* attributable to the period
8 Financial instruments
Explanatory note:
We hold a variety of derivative and non-derivative financial
instruments.
The Group's derivative financial instruments are forward foreign
exchange contracts to manage foreign exchange exposures and both
put and call options relating to the non-controlling interest (NCI)
in Model Solution (acquired April 2014). The put option is a
liability that may become payable in relation to the NCI in Model
Solution. The call option is a financial asset that the Group has
over the NCI in Model Solution.
Non-derivative financial instruments include cash and cash
equivalents, and non-current and current trade and other
receivables, borrowings and trade and other payables.
The tables below set out a comparison between book values and
fair values of financial instruments as at 30 June 2017 and 31
December 2016:
Financial assets
The financial assets of the
Group comprised:
As at 30 As at 31
June 2017 December
2016
Book values Book values
GBPm GBPm
Current
Trade and other receivables 174.1 186.7
Derivative financial instruments 0.8 -
Cash and cash equivalents 51.2 64.5
226.1 251.2
------------ ------------
Non-current
Derivative financial instruments
- call option 2.7 1.5
Other non-current receivables 2.0 1.9
4.7 3.4
------------ ------------
Financial liabilities
The financial liabilities of
the Group comprised:
As at 30 As at 31
June 2017 December
2016
Book values Book values
GBPm GBPm
Current
Borrowings and overdrafts 3.7 0.3
Derivative financial instruments 0.3 2.1
Trade and other payables 162.4 187.4
166.4 189.8
------------ ------------
Non-current
Borrowings 222.6 408.8
Other non-current liabilities 0.6 0.8
Derivative financial instruments
- put option 31.3 31.0
254.5 440.6
------------ ------------
US Private Placement loans with a book value of GBP94.4m
(December 2016: GBP97.8m) have an estimated fair value of GBP95.7m
(December 2016: GBP98.5m) which has been calculated by discounting
cash flows at prevailing coupon rates as at 30 June 2017. The
change in balance since December 2016 consists of the gain on
retranslation to 30 June 2017 exchange rates, which has been
recognised in the Group statement of comprehensive income.
There are no material differences between fair value and book
value on any of the other financial instruments.
Derivative financial instruments
The Group holds forward foreign exchange contracts to manage
foreign exchange exposures. The forward contracts have a principal
value of GBP41.1m (June 2016: GBP53.9m, December 2016: GBP92.8m)
and are mainly denominated in US dollars and Chinese Renminbi. They
are revalued at the balance sheet date using closing exchange
rates. These contracts have not been designated as cash flow hedges
and the increase in fair value during 2017 of GBP2.7m (June 2016:
GBP0.2m decrease, December 2016: GBP1.9m decrease) has been taken
to the income statement. These are Level 2 derivative financial
instruments and there has been no movement between levels during
the period. Fair values are calculated using mark-to-market
methodology.
Financial liability - put option
The financial liability that may become payable under a put
option in respect of the non-controlling interest in Model Solution
is recognised at a fair value of GBP31.3m (June 2016: GBP37.4m,
December 2016: GBP31.0m) within non-current liabilities. The
increase in fair value during 2017 of GBP0.3m (June 2016: GBP3.4m
increase, December 2016: GBP3.0m decrease) has been taken to the
income statement.
The exercise price for the put option will be calculated by
dividing the EBITDA of Model Solution for the year to 31 March 2019
by EBITDA for the year ended 31 December 2015 and applying this
factor against a base price of KRW 42.2bn (GBP28.7m). The key
assumptions in estimating the fair value are an EBITDA projection
for Model Solution for the year to 31 December 2019 and a discount
rate of 3.22% applied at 30 June 2017 (June 2016: 2.67%, December
2016: 2.6%).
The financial liability is sensitive to changes in these
assumptions. For example a 10% increase in EBITDA for the year to
31 December 2019 would result in an increase in the financial
liability of GBP3.1m, while a 10% decrease would result in a
decrease in the financial liability of GBP3.2m. An increase in the
discount rate by 1% would result in a decrease in the financial
liability of GBP0.9m, while a decrease in the discount rate by 1%
would result in an increase in the financial liability of GBP0.9m.
In accordance with the fair value hierarchy under IFRS 13, the put
option is classified as a Level 3 derivative financial instrument.
The fair value of the put option is determined by reference to the
terms in the underlying agreement. It is calculated at each period
end by estimating a range of potential exercise prices for the
option and applying our estimate of the weighted average
probabilities to each.
Financial asset - call option
There is a financial asset recognised of GBP2.7m (June 2016:
GBP0.7m, December 2016: GBP1.5m) within non-current assets in
respect of the call option that the Group has over the
non-controlling interest in Model Solution. The increase in the
fair value of GBP1.2m (June 2016, GBPnil, December 2016: GBP0.8m
increase) has been taken to the income statement.
The call option can be exercised by the Group on 31 May 2018,
2019 or 2020. The exercise price for the call option will be
calculated by dividing the EBITDA of Model Solution for the year to
31 December prior to the date of exercise of the call option by
EBITDA for the year ended 31 December 2015 and applying this factor
against a base price of KRW 42.2bn (GBP28.7m). The key assumptions
in estimating the fair value are a range of EBITDA projections for
Model Solution for the years to the end of the financial month
prior to the date of exercise of the call option and a discount
rate being a Korean risk free rate over the period to exercise,
determined at 30 June 2017.
Financial asset - call option (continued)
The financial asset is sensitive to changes in this assumption.
For example a 10% increase in the base EBITDA scenario would result
in a decrease in the financial asset of GBP0.5m, while a 10%
decrease would result in an increase in the financial asset of
GBP0.5m. In accordance with the fair value hierarchy under IFRS 13,
the call option is classified as a Level 3 derivative financial
instrument. The fair value of the call option is determined by
reference to the terms in the underlying agreement. It is
calculated at each period end using a Black-Scholes option-pricing
model based on the share price and expected exercise price, and our
estimate of the likelihood of exercising the option at each
date.
9 Additional cash flow information
Explanatory note:
Cash generated from operations is the starting point of our cash
flow statement. This table makes adjustments for any non-cash
accounting items to reconcile our result for the year to the amount
of physical cash we have generated from our continuing
operations.
Cash generation from operations
Continuing operations 6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Profit/(loss) after taxation 14.0 2.3 (110.8)
Depreciation and other non-cash
items
Depreciation 11.6 9.0 22.9
Amortisation of software 1.6 1.8 3.9
Amortisation of capitalised
development costs 5.9 4.1 8.2
Impairment of capitalised
development costs - - 4.9
Amortisation of acquired intangible
assets 7.0 6.6 17.2
Impairment of goodwill - - 155.5
Exceptional property, plant (0.1) - -
and equipment write downs
Exceptional pension curtailment
gain - - (1.1)
Exceptional change in valuation
of put and call options (0.9) 3.4 (3.8)
Share based payments 1.1 2.3 1.1
Financial instruments - fair
value movements (2.7) 0.2 1.9
Other net finance costs 5.5 4.7 10.8
Taxation 5.4 3.9 (11.5)
Changes in working capital
Inventories (4.2) (7.0) (13.5)
Trade and other receivables 31.2 12.9 (28.8)
Trade, other payables and
provisions (43.6) 0.6 19.0
--------- --------- ----------
Total change in working capital (16.6) 6.5 (23.3)
--------- --------- ----------
Cash generated from continuing
operations 31.8 44.8 75.9
--------- --------- ----------
Changes in working capital from continuing operations are after
creditor decreases of GBP15.1m (June 2016: GBP6.6m) in respect of
exceptional costs.
Net cash outflow on acquisitions and disposals
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
Acquisition of businesses
Consideration:
Cash consideration - (38.5) (39.4)
Net overdraft acquired - (0.3) (0.3)
---------- --------- ----------
Net cash outflow on acquisition
of businesses - (38.8) (39.7)
---------- --------- ----------
Borrowings acquired - (1.3) -
---------- --------- ----------
10 Borrowings
(a) Reconciliation of net borrowings
At At At
30 June 30 June 31 Dec
2017 2016 2016
GBPm GBPm GBPm
(Decrease)/increase in cash
and cash equivalents (13.3) 16.0 (4.3)
Movement in borrowings 177.9 (44.9) (79.4)
Borrowings of businesses acquired - (1.3) -
Differences on exchange on
borrowings 4.9 (32.9) (60.9)
-------- -------- ----------
Movement in net borrowings
during the period 169.5 (63.1) (144.6)
Net borrowings brought forward (344.6) (200.0) (200.0)
-------- -------- ----------
Net borrowings carried forward (175.1) (263.1) (344.6)
-------- -------- ----------
Cash and cash equivalents 51.2 84.8 64.5
Current borrowings (3.7) (32.1) (0.3)
Non-current borrowings (222.6) (315.8) (408.8)
-------- -------- --------
Net borrowings carried forward (175.1) (263.1) (344.6)
-------- -------- --------
During the period to 30 June 2017, the Group used proceeds of
its rights issue to reduce the amount drawn under its bilateral
revolving bank loan facilities.
(b) Committed borrowing facilities
The Group had committed bilateral revolving bank loan facilities
of GBP195.0m (30 June 2016: GBP255.0m). Drawings by group companies
under these bilateral facilities were GBP38.4m (30 June 2016:
GBP134.6m).
11 Issued share capital
6 months to 12 months to
30 June 2017 31 Dec 2016
Shares GBPm Shares GBPm
At 1 January 271,445,376 76.3 268,088,884 75.4
Rights issue 217,156,300 61.1 - -
Issued on the exercise of share options 213,768 0.1 128,413 -
Issued as consideration for acquisition - - 3,228,079 0.9
----------- ----- ----------- ----
488,815,444 137.5 271,445,376 76.3
----------- ----- ----------- ----
In April 2017, the Group successfully completed an equity rights
issue raising GBP184.6m of gross proceeds (GBP174.9m net after
expenses of GBP9.7m.).
Appendix
Non-IFRS information
This document contains certain financial measures that are not
defined or recognised under IFRS, including Covenant EBITA and
Covenant EBITDA, net debt, cash interest expense, underlying profit
before tax, underlying basic earnings per share, operating cash
flow, free cash flow and organic constant currency metrics. These
measures are unaudited and are not measures of financial
performance under IFRS and should not be considered as alternatives
to other indicators of the Group's operating performance, cash
flows or any other measure of performance derived in accordance
with IFRS. Accordingly, these non-IFRS measures should be viewed as
supplemental to, but not as a substitute for, measures presented
which are prepared in accordance with IFRS as adopted by the
EU.
Information regarding these measures is sometimes used by
investors to evaluate the efficiency of a company's operations and
its ability to employ its earnings toward repayment of debt,
capital expenditures and working capital requirements. However,
there are no generally accepted principles governing the
calculation of these measures and the criteria upon which these
measures are based can vary from company to company. These
measures, by themselves, do not provide a sufficient basis to
compare the Company's performance with that of other companies and
should not be considered in isolation or as a substitute for
operating profit or any other measure as an indicator of operating
performance, or as an alternative to cash generated from operating
activities as a measure of liquidity.
Covenant EBITA and Covenant EBITDA
The Group is subject to two key financial covenants, which are
tested semi-annually on 30 June and 31 December of each year. These
covenants relate to the leverage ratio, being the ratio between
Covenant EBITDA and net debt, and the interest cover ratio between
Covenant EBITA and cash interest expense. The calculation of these
ratios involves the translation of non-sterling denominated debt
using average, rather than closing, rates of exchange and
adjustments for removal of the 49% of Model Solution that the Group
does not own from the calculation.
Covenant EBITA is defined as operating profit before
amortisation and impairment of acquired intangible assets and
exceptional items, adding back amortisation of software,
amortisation and impairment of capitalised development costs, share
based payments and pre-acquisition losses, less the amounts
attributable to the 49% of Model Solution that the Group does not
own. Covenant EBITDA is defined as Covenant EBITA adding back
depreciation of property, plant and equipment. The Group uses
Covenant EBITA and Covenant EBITDA in the calculation of its
interest cover and leverage ratios under its financing
arrangements, respectively.
Covenant EBITA and Covenant EBITDA eliminate potential
differences in performance caused by variations in capital
structures (affecting net finance costs), tax positions (such as
the availability of net operating losses against which to relieve
taxable profits), the cost and age of tangible assets (affecting
relative depreciation expense), the extent to which intangible
assets are identifiable (affecting relative amortisation expense)
and other specific items that are considered to hinder comparison
of the trading performance of the Group's businesses either
year-on-year or with other businesses. For the periods under
review, other specific items represent items defined by management
and are exceptional items and share based charges.
Covenant EBITA and Covenant EBITDA have limitations as an
analytical tool. Some of these limitations are:
-- they do not reflect the Group's cash expenditures or future
requirements for capital expenditures or contractual
commitments;
-- they do not reflect changes in, or cash requirements for, the Group's working capital needs;
-- they do not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments,
on the Group's indebtedness;
-- although depreciation and amortisation are non-cash charges,
the assets being depreciated and amortised will often have to be
replaced in the future, and Covenant EBITA and Covenant EBITDA do
not reflect any cash requirements for such replacements;
-- it is not adjusted for all non-cash income or expense items
that are reflected in the Group's statements of cash flows; and
-- the further adjustments made in calculating Covenant EBITA
and Covenant EBITDA are those that management consider are not
representative of the underlying operations of the Group and
therefore are subjective in nature.
The table below sets out the reconciliation of the Group's total
Covenant EBITA and Covenant EBITDA from operating profit before
amortisation and impairment of acquired intangible assets and
exceptional items for the periods indicated:
12 Months to 30 June 2017 12 Months to 31 December 2016
-------------------------- ------------------------------
(GBP millions)
Operating profit before amortisation and impairment of
acquired intangible assets and exceptional
items 70.4 61.9
Amortisation of
software..............................................
........................ 3.7 3.9
Amortisation of capitalised development
costs.............................. 10.0 8.2
Impairment of capitalised development
costs................................. 4.9 4.9
Share based
payment...............................................
............................. (0.1) 1.1
Pre-acquisition
losses................................................
........................... - (1.2)
Adjustment for non-controlling
interest............................................. (2.9) (3.2)
-------------------------- ------------------------------
Covenant
EBITA.................................................
......................................... 86.0 75.6
Depreciation of property, plant &
equipment................................... 25.5 22.9
-------------------------- ------------------------------
Covenant
EBITDA................................................
....................................... 111.5 98.5
========================== ==============================
Net debt
The Group uses net debt, defined as total borrowings less cash
and cash equivalents, as a supplemental measure in evaluating its
liquidity, as it indicates the level of the Group's borrowings
after taking account of cash and cash equivalents within the
Group's business that could be utilised to pay down the outstanding
borrowings, as well as in the calculation of the leverage ratio
under its financing arrangements.
The table below sets out the reconciliation of the Group's net
debt from borrowings for the periods indicated:
H1 2017 H1 2016 FY 2016
-------- -------- --------
(GBP millions)
Borrowings - current
liabilities................................................................ 3.7 32.1 0.3
Borrowings - non-current
liabilities........................................................ 222.6 315.8 408.8
-------- -------- --------
Borrowings............................................................................
......................... 226.3 347.9 409.1
Less cash and cash
equivalents.............................................................. (51.2) (84.8) (64.5)
-------- -------- --------
Net
Debt..................................................................................
....................... 175.1 263.1 344.6
======== ======== ========
In calculating its leverage ratio under its financing
arrangements, the Group adjusts net debt to exclude the impact of
foreign exchange movements (GBP0.1 million at 30 June 2017) and the
49% of the external debt of Model Solution that the Group does not
own (GBP3.1 million at 30 June 2017). At 30 June 2017, the Group's
net debt for purposes of covenant calculation was GBP171.9
million.
Cash interest expense
The Group uses cash interest expense, defined as finance costs,
adding back finance income and other net finance income - pension,
in the calculation of its interest cover ratio under its financing
arrangements.
H1 2017 H1 2016 FY 2016
-------- -------- ---------
(GBP millions)
Finance
costs................................................................................
............... (5.7) (4.9) (11.1)
Finance
income...............................................................................
............ 0.1 0.1 0.1
Other net finance income -
pension....................................................... 0.1 0.1 0.2
-------- -------- ---------
Cash interest
expense..............................................................................
...... (5.5) (4.7) (10.8)
======== ======== =========
Underlying profit before tax and underlying operating profit
The Group uses underlying profit before tax (defined as profit
before tax, adding back financial instruments - fair value of
movements, impairment of goodwill, amortisation of acquired
intangible assets and exceptional items) and underlying operating
profit (underlying profit before tax, adding back finance income,
finance costs and other finance revenue - profit) as supplemental
measures of the Group's profitability which the Group considers
useful due to the exclusion of specific items that are considered
to hinder comparison of the underlying profitability of the Group's
businesses either year-on-year or with other businesses.
The table below sets out the reconciliation of the Group's
underlying profit before tax from profit before tax for the periods
indicated:
H1 2017 H1 2016 FY 2016
-------- -------- ----------
(GBP millions)
Profit/(loss) before
tax................................................................................. 19.4 6.2 (122.3)
Financial instruments - fair value of movements............................... (2.7) 0.2 1.9
Impairment of
goodwill............................................................................ - - 155.5
Amortisation of acquired intangible assets........................................ 7.0 6.6 17.2
Exceptional
items...............................................................................
....... 0.4 3.4 (1.2)
-------- -------- ----------
Underlying profit before
tax......................................................................... 24.1 16.4 51.1
-------- -------- --------
Finance
income..............................................................................
............ (0.1) (0.1) (0.1)
Finance
costs...............................................................................
............... 5.7 4.9 11.1
Other finance revenue -
pension............................................................ (0.1) (0.1) (0.2)
-------- -------- --------
Underlying operating
profit.......................................................................... 29.6 21.1 61.9
======== ======== ========
Underlying basic earnings per share
Underlying basic earnings per share is calculated as underlying
earnings attributable to shareholders of the parent divided by the
weighted average number of shares. Underlying earnings attributable
to the parent is defined as profit/(loss) for the period
attributable to equity shareholders of the parent company, adding
back financial instruments - fair value of movements, impairment of
goodwill, amortisation of acquired intangible assets less
amortisation of acquired intangible assets attributable to
non-controlling interests, exceptional items, tax on exceptional
items, deferred tax on goodwill, acquired intangible assets and US
capitalised development costs, exceptional US tax loss
movement/(recognition), less tax on amortisation of acquired
intangible assets attributable to non-controlling interests. The
Group uses underlying basic earnings per share as a supplemental
measure of the Group's profitability.
The table below sets out the reconciliation of the Group's
underlying basic earnings per share from profit/(loss) attributable
to equity shareholders of the parent company for the periods
indicated:
H1 2017 H1 2016 FY 2016
-------- --------- ---------
restated restated
(GBP millions)
Profit/(loss) for the period attributable to equity shareholders of the parent
company 14.0 2.0 (111.7)
Financial instruments - fair value of movements............................... (2.7) 0.2 1.9
Impairment of
goodwill............................................................................ - - 155.5
Amortisation of acquired intangible assets......................................... 7.0 6.6 17.2
Amortisation of acquired intangible assets attributable to non-controlling interests (0.5) (0.5) (0.9)
Exceptional
items...............................................................................
........ 0.4 3.4 (1.2)
Tax credit on exceptional
items............................................................... (0.5) - (3.6)
Deferred tax on goodwill, acquired intangible assets and US capitalised development
costs (1.1) 1.8 (19.4)
Exceptional US tax loss movement/(recognition) 0.4 (1.2) (1.2)
Tax on amortisation of acquired intangible assets attributable to non-controlling
interests 0.1 0.1 0.2
-------- --------- ---------
Underlying earnings attributable to shareholders of parent 17.1 12.4 36.8
-------- --------- ---------
Weighted average number of shares (in millions)
...................................... 417.1 350.6 350.9
-------- --------- ---------
Underlying basic earnings per share (in pence)
.......................................... 4.1 3.5 10.5
-------- --------- ---------
Operating cash flow and free cash flow pre and post dividend
The Group defines operating cash flow as cash generated from
operations, adding back exceptional items, exceptional pension
curtailment gain, exceptional change in valuation of put and call
options, exceptional property, plant and equipment write downs,
exceptional software write downs, exceptional capitalised
development costs write downs, exceptional inventory write downs,
movements in exceptionals within working capital, purchase of
intangible assets (internally developed), purchase of property,
plant and equipment, purchase of software and other exceptional
cash items. The Group defines free cash flow pre dividend as
operating cash flow less exceptional costs, interest received,
interest and other finance costs paid and tax paid. The Group
defines free cash flow post dividend as free cash flow pre dividend
less dividends.
The Group uses operating cash flow, free cash flow pre dividend
and free cash flow post dividend as supplemental measures of the
Group's trading cash flow.
H1 2017 H1 2016 FY 2016
-------- -------- --------
(GBP millions)
Cash generated from
operations............................................................... 31.8 44.8 75.9
Exceptional
items.................................................................................
......... 0.4 3.4 (1.2)
Exceptional pension curtailment
gain...................................................... - - 1.1
Exceptional change in valuation of put and call options...................... 0.9 (3.4) 3.8
Exceptional property, plant and equipment write downs..................... 0.1 - -
Movement in exceptionals within working capital................................ 15.1 6.6 13.1
Purchase of intangible assets (internally developed).......................... (10.6) (10.0) (19.9)
Purchase of property, plant and equipment............................................ (16.6) (15.3) (41.4)
Purchase of
software..............................................................................
...... (0.3) (0.7) (3.3)
-------- -------- --------
Operating cash flow
......................................................................................
.. 20.8 25.4 28.1
-------- -------- --------
Exceptional
costs.................................................................................
.......... (16.5) (6.6) (16.8)
Interest
received..............................................................................
............. 0.1 0.1 0.1
Interest and other finance costs
paid....................................................... (6.1) (4.6) (10.5)
Tax
paid..................................................................................
......................... (7.4) (7.9) (14.4)
-------- -------- --------
Free cash flow pre
dividend............................................................................. (9.1) 6.4 (13.5)
-------- -------- --------
Dividends.............................................................................
........................... - - (35.5)
-------- -------- --------
Free cash flow post
dividend........................................................................... (9.1) 6.4 (49.0)
-------- -------- --------
H1 2017 H1 2016 FY 2016
-------- -------- --------
(GBP millions)
Operating profit before amortisation and impairment of acquired intangible assets and
exceptional
items 29.6 21.1 61.9
Depreciation of property, plant and equipment..................................... 11.6 9.0 22.9
Amortisation of
software............................................................................. 1.6 1.8 3.9
Amortisation of capitalised development costs..................................... 5.9 4.1 8.2
Impairment of capitalised development costs....................................... - - 4.9
Share based
payments..............................................................................
... 1.1 2.3 1.1
-------- -------- --------
Underlying EBITDA
......................................................................................
.... 49.8 38.3 102.9
-------- -------- --------
(Increase)/decrease in working
capital.................................................... (1.5) 13.1 (10.2)
Capitalised research and development expenditure............................ (10.6) (10.0) (19.9)
Capital expenditure less
disposals.......................................................... (16.9) (16.0) (44.7)
-------- -------- --------
Operating cash flow
......................................................................................
.. 20.8 25.4 28.1
-------- -------- --------
Exceptional
costs.................................................................................
.......... (16.5) (6.6) (16.8)
Interest
received..............................................................................
............. 0.1 0.1 0.1
Interest and other finance costs
paid....................................................... (6.1) (4.6) (10.5)
Tax
paid..................................................................................
......................... (7.4) (7.9) (14.4)
-------- -------- --------
Free cash flow pre
dividend............................................................................. (9.1) 6.4 (13.5)
-------- -------- --------
Dividends.............................................................................
........................... - - (35.5)
-------- -------- --------
Free cash flow post
dividend........................................................................... (9.1) 6.4 (49.0)
-------- -------- --------
The table above sets out a reconciliation of the Group's
operating cash flow and free cash flow pre and post dividend to
operating profit before amortisation and impairment of acquired
intangible assets and exceptional items for the periods indicated,
which the Group considers useful as a supplemental measure in
evaluating the Group's ability to convert profits to cash.
Organic constant currency metrics
The Group uses organic constant currency metrics because the
Directors believe that these measures provide investors with useful
supplemental information regarding the underlying performance of
the Group as they eliminate the effect of acquisitions and the
translation effect of currency exchange movements from period to
period.
The following tables provide reconciliations of Group and
segmental revenue on an actual basis to revenue on an organic
constant currency basis for the periods indicated.
Acquisition Currency Adjustment H1 2017 at organic
H1 2017 as reported Adjustment (1) (2) constant currency
-------------------- ---------------------- ----------------------- ----------------------
(GBP millions)
Revenue..............
.....................
.....................
............ 440.5 (7.4) (48.8) 384.3
-------------------- ---------------------- ----------------------- ----------------------
Performance
Materials............
.....................
........ 204.7 - (23.3) 181.4
Connected Vehicle
Systems..............
................... 155.6 (7.4) (16.0) 132.2
Wireless Thermal
Systems..............
..................... 80.2 - (9.5) 70.7
-------------------- ---------------------- ----------------------- ----------------------
Acquisition Currency Adjustment H1 2016 at organic
H1 2016 as reported Adjustment (1) (2) constant currency
-------------------- ---------------------- ----------------------- ----------------------
(GBP millions)
Revenue..............
.....................
.....................
............ 352.5 (3.1) - 349.4
-------------------- ---------------------- ----------------------- ----------------------
Performance
Materials............
.....................
........ 169.5 - - 169.5
Connected Vehicle
Systems..............
................... 112.3 (3.1) - 109.2
Wireless Thermal
Systems..............
..................... 70.7 - - 70.7
-------------------- ---------------------- ----------------------- ----------------------
(1) Acquisitions are eliminated for a period of twelve months from the acquisition date to
allow a comparison of organic performance
(2) Revenue is converted to constant currency by applying prior period exchange rates to convert
current period revenues to GBP
This information is provided by RNS
The company news service from the London Stock Exchange
END
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