TIDMSMDS
RNS Number : 1840R
Smith (DS) PLC
25 June 2015
25 June 2015
DS Smith Plc - 2014/15 FULL YEAR RESULTS
Continued momentum in performance, scale and quality of the
business
12 months to 30 Change Change
April 2015 (reported) (constant currency)
------------------- --------- ----------- --------------------
Revenue GBP3,820m (5)% +1%
Adjusted operating
profit(1) GBP335m +9% +17%
Profit before tax GBP200m +20% +30%
EPS(1) 24.5p +14% +24%
Dividend per share 11.4p +14% +14%
Return on sales(4) 8.8% +120bps +130bps
ROACE(5) 14.6% +160bps +160bps
------------------- --------- ----------- --------------------
Highlights
-- Strong growth in profits, returns and dividends, despite FX headwinds
-- Organic corrugated box volume growth of +3.1%
o Acceleration in H2
o Market share gains
-- Strengthened the quality of the business portfolio and
continued value creation from acquisitions
o Four acquisitions announced in the year, including Andopack in
Spain and Duropack in south eastern Europe
o Announcing today the proposed acquisition of Grupo Lantero's
corrugated business for EUR190 million, substantially expanding our
position in Iberia
-- Continued delivery against all our medium-term targets
o Significant improvement in return on sales and ROACE
o Strong cashflow and working capital performance
o Net debt reduced to GBP651 million, 1.49x EBITDA
Miles Roberts, Group Chief Executive, commented:
"This has been another good year for DS Smith. In a fast
changing retail and consumer environment, packaging is more
relevant than ever. The progress in the business with customers is
evidenced by accelerating volume growth, together with increased
margins and returns, from our unique and enhanced offering.
We also have momentum behind developing our business portfolio
to improve the quality of our business, and we are pleased to
announce the proposed acquisition of Grupo Lantero's corrugated
business today. We have been delighted with the positive customer
reaction to our recent acquisitions. The progress we continue to
make with global customers, together with the opportunities we see
for growth as we expand our international reach and offering, gives
us confidence to increase our medium-term margin target by 100
basis points, and, notwithstanding the continued challenging market
environment, we remain excited about the prospects for the
business."
Sustainable delivery in line with medium term targets
Medium-term targets Delivery in 2014/15
------------------------------- -------------------
Organic volume growth(2) at
least GDP(3) +1% 3.1%
Return on sales(4) 7% - 9% 8.8%, +130 bps
ROACE(5) 12% - 15% 14.6%, +160 bps
Net Debt / EBITDA(6) <=2.0x 1.49x
Operating cash flow/ operating
profit(7) >= 120% 127%
------------------------------- -------------------
See notes to the financial tables, below
Enquiries
DS Smith Plc +44 (0)20 7756 1800
Hugo Fisher, Group Communications Director
Rachel Stevens, Investor Relations Manager
Bell Pottinger
John Sunnucks +44 (0)20 3772 2549
Ben Woodford +44 (0)20 3772 2566
Presentation and dial-in details
A presentation to investors and analysts will be held at 09:30
today at Allen & Overy, One Bishops Square, London E1 6AD.
Dial-in access for the presentation is available per the details
below. The slides accompanying the presentation will be available
on our website shortly before 09:30. Dial-in participants will have
the opportunity to participate in the Q&A.
+44 (0)20 3003 2666 (standard access) or 0808 109 0700 (UK toll
free) Password:
DS Smith.
A replay of the event is available for seven days, on +44 (0) 20
8196 1998, PIN 2915151#. An audio file and transcript will also be
available on
www.dssmith.com/investors/results-and-presentations.
Notes to the financial tables
(1) Before exceptional items and amortisation
(2) Corrugated box volumes, adjusted for the number of working days
(3) GDP growth (year-on-year) for the countries in which DS
Smith operates, weighted by our sales by country, for the period
April 2014 - March 2015= 1.3%. Source: Eurostat (13/5/15)
(4) Earnings from continuing operations before interest, tax,
amortisation and exceptional items as a percentage of revenue.
Comparative on a constant currency basis
(5) Earnings from continuing operations before interest, tax,
amortisation and exceptional items as a percentage of the average
monthly capital employed over the previous 12 month period. Average
capital employed includes property, plant and equipment, intangible
assets (including goodwill), working capital, provisions, capital
debtors/creditors and assets/liabilities held for sale
(6) EBITDA being earnings from continuing operations before
interest, tax, exceptional items, depreciation and amortisation.
Comparative on a constant currency basis
(7) Free cash flow before tax, net interest, growth capital
expenditure, pension payments and exceptional cash flows as a
percentage of earnings before interest, tax, amortisation and
exceptional items
Cautionary statement: This announcement contains certain
forward-looking statements with respect to the operations,
performance and financial condition of the Group. By their nature,
these statements involve uncertainty since future events and
circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this announcement and DS Smith Plc undertakes no
obligation to update these forward-looking statements. Nothing in
this statement should be construed as a profit forecast.
Overview
In the financial year 2014/15, DS Smith has again delivered
strong underlying growth in volumes, margins, profits, returns and
dividends, with all metrics well in line with our medium-term
financial targets. At the same time as gaining market share through
organic growth, we have delivered a series of acquisitions and
disposals this year which help to focus the business on recycled
packaging, and expand our geographic footprint and customer
offering. We have also delivered against our non-financial key
performance indicators, with further improvements in health and
safety and in our environmental impact, reflecting our strategy of
having a sustainable business model.
Corrugated box volumes have increased by 3.1 per cent
year-on-year, on a like-for-like basis, with an acceleration in H2.
All regions demonstrated positive progress, with particularly good
growth in Central Europe and Italy. This is materially ahead of
both our target of volume growth of GDP +1 per cent and the overall
corrugated market in Europe, demonstrating how customers are
continuing to move to DS Smith, reflecting our strength in
innovation and design and the ability to deliver a pan-European
solution for their packaging requirements.
In a market where the needs of consumers, retailers and our
customers are constantly changing, we continue to focus on
developing innovative solutions for our customers and the roll-out
of our performance packaging programme. This utilises our unique
proprietary technology, in order to provide high quality packaging
for our customers on a consistent basis in the most cost-effective
way.
For the full year period, revenues increased by 1 per cent on a
constant currency basis, despite a slight reduction from the net
impact of acquisitions and disposals. Reported revenues reduced by
5 per cent due to foreign exchange (FX) translation of non-sterling
revenues. Adjusted operating profit increased by 17 per cent on a
constant currency basis to GBP335 million (9 per cent on a reported
basis), driven by the contribution from the volume growth, our
focus on higher value-added product and services to customers,
together with the benefit of synergies from the SCA Packaging
acquisition, where we have delivered the expected, final tranche of
EUR40 million of synergies in the period.
We have continued our strategy to licence certain of our
technologies in a number of geographies worldwide. During the
period, we entered into an agreement with Georgia-Pacific
Corrugated LLC (GP), a major packaging company in North America,
whereby GP licenses our technology for real-time monitoring and
measurement of the quality and performance of packaging.
We have an ongoing programme of opening our Impact and Packright
design centres, where we bring together our innovation and design
expertise to develop the best packaging solutions. The strength of
our business model lies in our scale, as the design centres share
expertise and a database of designs, which means customers receive
the best solutions, while the cost of development is shared. To
date we have rolled out 17 new or refurbished centres, which
combined with existing design centres means we have 30 such centres
across Europe. We expect to extend this to over 40 by the end of
the 2015/16 financial year.
Earnings per share increased by 24 per cent on a constant
currency basis to 24.5 pence (14 per cent on a reported basis)
(2013/14: 21.4 pence). This result follows four prior years of
consistent growth, with the 5-year compound annual growth rate for
reported EPS being 34 per cent.
The Board considers the dividend to be an important component of
shareholder returns and, as such, has a policy to deliver a
progressive dividend, where dividend cover is between 2.0 and 2.5
times, through the cycle. For the year 2014/15, the Board
recommends a final dividend of 7.7 pence, which together with the
interim dividend of 3.7 pence gives a total dividend for the year
of 11.4 pence per share (2013/14: 10.0 pence per share). This
represents an increase of 14 per cent on the prior year and cover
of 2.1 times in relation to earnings per share (before amortisation
and exceptional items).
Improving the quality of the business by investment and
reshaping the asset portfolio
DS Smith is ambitious to improve the quality and scale of our
business. Scale is important as it allows us to invest in
innovation and design, with the benefit shared throughout the
business and across our customers. This results in a business that
is able to lead the market in quality and innovation while
remaining competitive on price and providing a full geographic
reach, which together underpin our improvement in driving margins
and returns. Allied to this is a focus on increasing the
value-added products and services to our customers.
We have made significant further steps this year to expand our
scale and improve the quality of the business through organic
investment, acquisitions, and disposals.
We increased our interest in Italmaceri, a recycling business in
Italy, from 50 to 100 per cent in July 2014, and bought a plastics
manufacturing site in Croatia in September 2014.
In November 2014 we acquired Andopack, a corrugated packaging
business in Spain. We have been delighted with the customer
reaction and the performance of the business, with volume growth
significantly ahead of the Group average.
Since the year end we have completed our acquisition of
Duropack, a corrugated packaging business with a market leading
position in south eastern Europe. The reaction from customers and
employees has been very positive and we look forward to integrating
the business into the Group.
During the year we have also acquired a small packaging
consultancy business, serving global customers with operations in
Europe, US and Asia. This expands our global reach and increases
our capabilities in the analysis of packaging and its interaction
with supply chains. We are adding additional capability in the US
to offer greater packaging design consultancy and procurement
services, on the back of existing customer contracts and strong
demand for our services beyond Europe. We are very pleased with the
positive reaction from our global customers to this new
initiative.
We have made a number of disposals of businesses that were not
core to the Group's strategy, including a Foams business in
Scandinavia, in September 2014, and StePac, a specialist modified
atmosphere packaging business, in May 2015, after the year end. We
have also disposed of a paper mill at Nantes, France, in line with
our strategy to reduce non-integrated paper manufacturing.
We have continued to invest in our assets ahead of depreciation,
with net capex of GBP149 million (2013/14: GBP156 million).
Approximately three quarters of this expenditure has been in the
corrugated packaging business, with growth expenditure focused on
the regions where there is the greatest opportunity. For example,
in the year, approximately a third of the growth capex in the
packaging business was spent in Central Europe, with investment in
our sites in Poland, Hungary, Czech Republic and Romania.
Operating review
Unless otherwise stated, any commentary and comparable analysis
in the operating review is based on constant currency
performance.
UK
Year ended Year ended Change
30 April 30 April
2015 2014
Revenue GBP905m GBP929m (3%)
Operating profit* GBP81m GBP64m 27%
Return on sales* 9.0% 6.9% +210bps
*Adjusted, before amortisation and exceptional items
The UK has seen modest volume growth in a competitive market
environment and challenging retail landscape. Revenues have fallen
by 3 per cent, in part reflecting reduced external sales from
recycling.
The UK business has been leading the development of our
performance packaging processes, requiring close collaboration
between our paper and our packaging operations, with this rolled
out throughout the UK. Profitability has improved by GBP17 million
through a combination of improvements in both the packaging and the
paper operations, resulting in a significant uplift of 210 basis
points to our margin. In packaging, we have focused on higher
value-added contracts, driving the performance packaging
initiatives, and the delivery of cost initiatives. In our paper
operations, we saw an improved performance from the Kemsley mill in
Kent in the first half of the year, where applying best practice
from our European mills has resulted in an improvement in
efficiency and profitability of this site. In the second half of
the year there was some adverse impact to the business from the
increased strength of sterling on trading from the UK to
continental Europe.
Western Europe
Year ended Year ended Change- Change-
30 April 30 April reported constant
2015 2014 currency
Revenue GBP941m GBP1,017m (7%) 0%
Operating profit* GBP65m GBP67m (3%) 7%
Return on sales* 6.9% 6.6% +30bps +40 bps
*Adjusted, before amortisation and exceptional items
Like-for-like volumes in the region have been around the market
average, with France outperforming that average, offset by tougher
conditions in the Benelux region. We have been particularly pleased
with the initial performance from the Andopack site, which has
significantly outperformed the market. On a constant currency basis
revenue was broadly flat, with the benefit from the acquisition of
Andopack part way through the year offset by declines in other
parts of the business.
Adjusted operating profit on a constant currency basis increased
by 7 per cent, reflecting a focus on higher value-added business,
operating leverage and synergies. Return on sales has improved by
40 basis points.
DACH and Northern Europe
Year ended Year ended Change-reported Change
30 April 30 April - constant
2015 2014 currency
Revenue GBP922m GBP1,029m (10%) (2)%
Operating profit* GBP96m GBP96m 0% 10%
Return on sales* 10.4% 9.3% +110bps +120bps
*Adjusted, before amortisation and exceptional items
Volumes in this region have grown well, in particular in DACH,
where we have been gaining market share. Constant currency revenues
declined by 2 per cent, as a result of the disposal of the
Scandinavian foams business near the start of the year. The
underlying business delivered stable revenues, with the revenues
from pan-European customers increasing substantially.
Constant currency operating profit increased by 10 per cent,
despite a modest reduction from the disposed business, driven by
operating leverage benefits and synergy delivery. Return on sales
improved 120 basis points to 10.4 per cent, the highest margin of
all regions.
Central Europe and Italy
Year ended Year ended Change Change
30 April 30 April - reported - constant
2015 2014 currency
Revenue GBP750m GBP739m 1% 11%
Operating profit* GBP65m GBP53m 23% 33%
Return on sales* 8.7% 7.2% +150bps +150bps
* Adjusted, before amortisation and exceptional items
Volumes in this region have been excellent, with both the
business in Italy and in Central Europe substantially outperforming
the market. Constant currency revenue growth of 11 per cent
reflects the volume performance, delivered through above average
market growth and significant market share development, plus a
modest contribution from the acquired recycling business in
Italy.
Adjusted operating profit grew by 33 per cent, with
approximately half of the revenue growth in the region from
pan-European customers with the remainder from the local markets.
The region has seen significant investment in its plants over the
period and we are continuing to invest in this exciting region.
Plastics
Year ended Year ended Change Change
30 April 30 April - reported - constant
2015 2014 currency
Revenue GBP302m GBP321m (6%) (2%)
Operating profit* GBP28m GBP27m 4% 8%
Return on sales* 9.3% 8.4% +90bps +90bps
* Adjusted, before amortisation and exceptional items
Constant currency revenue declined slightly, reflecting growth
in the underlying business, offset by the disposal of two small
non-core businesses. Adjusted operating profit grew by 8 per cent
on a constant currency basis with a 90 basis point increase in
margin, reflecting organic profit development as the investments
made in the business in 2013/14 were put into service. In the
flexible packaging segment of the business, continued double digit
growth of the beverage dispensing tap business in the USA was
partially offset by the gradual start-up of new facilities in
Europe. Demand for flexible packaging continues to grow through new
product offerings and new markets served, in addition to a better
service offering in Europe.
The rigid transit packaging segment, based in Europe, had a very
strong year. Revenue increased by 8 per cent over the prior year on
increased demand for most product lines and adjusted operating
profit increased by 26 per cent as plant improvements and a
favourable raw materials market increased the impact of the
additional sales and more than offset the negative FX effects.
Delivering on our medium-term targets and key performance
indicators
We have made progress against our key performance indicators
over the full-year with substantial improvement in our metrics. As
set out above, corrugated box volumes grew by 3.1 per cent. This
exceeded our target of GDP+1 per cent, with year-on-year GDP
growth, weighted by our sales in the markets in which we operate,
estimated at 1.3 per cent (Source: Eurostat) resulting in a target
of 2.3 per cent. We have delivered this growth across all our
regions with a particularly strong contribution from Central Europe
and Italy, which has benefited from our investment in the region as
well as good growth in the markets. This performance reinforces our
confidence in our investment in the Duropack business, which
expands our geographic reach in the region, with the new business
expected to increase our corrugated volumes in the region by circa
one third. As a consequence of our strong volume growth, DS Smith
has gained market share across Europe, where the overall corrugated
packaging market has shown volume growth of 1.5 per cent (Source:
FEFCO, May 2014 - April 2015).
Adjusted return on sales has increased by 130 basis points on a
constant currency basis to 8.8 per cent, at the upper end of our
target range of 7 to 9 per cent, reflecting the improvement in
profitability from our focus on higher value-added products and
services, operational gearing and the final year of cost synergies
from the acquisition of SCA Packaging, that have been achieved over
the year as anticipated.
Return on average capital employed has improved by 160 basis
points to 14.6 per cent (2013/14: 13.0 per cent), toward the upper
end of our medium-term target range of 12 to 15 per cent and
significantly above our cost of capital. The improvement is driven
by our improved profitability and our continual focus on tight
capital allocation and management within the business, including
working capital, which has shown further improvement this year.
Return on average capital employed is our primary financial measure
of success, and is measured and calculated on a monthly basis. All
senior management have part of their remuneration package linked to
this measure.
Net debt has decreased to GBP651 million (2013/14: GBP827
million) while net debt / EBITDA (calculated in accordance with our
banking covenant requirements) was 1.49 times (2013/14: 1.96
times), in line with our medium-term financial KPI of a ratio of
2.0 times or below and reflecting ongoing tight cash management and
control throughout the business.
During the year the Group generated free cash flow of GBP307
million (2013/14: GBP140 million). Cash conversion was 127 per
cent, in line with our target.
DS Smith is committed to providing all employees with a safe and
productive working environment. We are pleased to report a further
substantial improvement in our safety record, with our accident
frequency rate reduced a further 13 per cent from 4.79 to 4.16,
reflecting our ongoing commitment to best practice in health and
safety. Our target is for zero accidents, which we are pleased to
report that 182 sites achieved this year, up from 138 in 2013/14.
We continue to strive to achieve zero accidents for the Group as a
whole.
The Group has a target for customer service of 97 per cent
on-time, in-full deliveries. In the year we achieved 92 per cent,
broadly similar to the level achieved in the prior year. Standards
of service, quality and innovation are key to our differentiation
in the market. We are investing significantly in these areas, from
design centres throughout Europe, to the roll-out of our
performance packaging methodology, in order to continue to lead the
industry in this field.
DS Smith is part of the sustainable economy, with our principal
product of corrugated packaging fully recyclable, and substantially
constructed from recycled material, as are many of our plastic
packaging products. Our Recycling business works with customers
across Europe to improve their recycling operations and overall
environmental performance. We have invested in improved
environmental tracking systems with far more detail now available,
as set out in greater detail in our Sustainability Report 2015.
CO(2) equivalent emissions, relative to production, have reduced by
2 per cent, and we are on target to achieve our 2010 commitment to
a 20 per cent reduction by 2020.
Updated medium term targets and financial key performance
indicators
We believe that scale brings benefits for customers and for our
shareholders. Five years ago, for the year ended 30 April 2010, DS
Smith reported a return on sales of 4.5 per cent. In December 2010
the Board set a medium term target of 6 - 8 per cent, and raised
that to 7 - 9 per cent following the disposal of Spicers in 2011.
Having achieved a full-year return on sales of 8.8 per cent this
year, near the top of that range, the Board consider it appropriate
to raise this sustainable medium-term target by an additional 100
basis points.
In relation to cash conversion, the target level of 120 per cent
was also set in 2010 when, inter alia, working capital was a
substantially higher proportion of revenue than its current level
of 2.7 per cent. The Board therefore believes that the appropriate
cash conversion ratio for the business going forward, having
achieved the target of 120 per cent or above for the prior five
years, is 100 per cent or above. This reflects the structural
working capital reductions achieved and the maturity of the current
business.
Outlook
The current year has started well, with momentum in volumes
continuing. We also have momentum behind developing our business
portfolio to improve the quality of our business. We have been
delighted with the positive customer reaction to our recent
acquisitions. The progress we continue to make with global
customers, together with the opportunities we see for growth as we
expand our international reach and offering, gives us confidence to
increase our medium-term margin target by 100 basis points, and,
notwithstanding the continued challenging market environment, we
remain excited about the prospects for the business.
Financial review
All numbers within this review are based on continuing
operations before amortisation and exceptional items, with any
comment and comparable analysis based on constant currency, unless
otherwise stated.
Group revenue of GBP3,820 million was 5 per cent lower than the
prior year (2013/14: GBP4,035 million) with exchange effects,
particularly the weakening of the euro throughout the year, having
a significant impact (GBP236 million). On a like-for-like constant
currency basis, after adjusting for acquisitions and disposals,
underlying revenue grew by GBP29 million, up 1 per cent.
The growth in revenue was underpinned by corrugated box volume
growth across Europe of 3.1 per cent, partially offset by the
effects of lower paper prices, particularly in the first half of
the year. Plastics revenue declined by 2 per cent as the
restructuring of the Flexibles business was implemented and a
platform for future growth was established.
Adjusted operating profit rose by 9 per cent to GBP335 million
(2013/14: GBP307 million), 17 per cent on a constant currency
basis, with exchange effects estimated to have an impact of about
GBP21 million. Whilst the business has benefitted from the balance
of the SCA Packaging synergies of EUR40 million, or GBP31 million,
bringing the total delivered to EUR120 million, as previously
announced, it has also been impacted by deflation in a few markets.
Input cost benefits were balanced by sales price reductions, with
organic growth in corrugated box volumes contributing the majority
of the further improvement in profit.
Amortisation for the year was GBP46 million (2013/14: GBP51
million). Depreciation of GBP117 million is slightly lower than the
prior year (2013/14: GBP123 million) due to the impact of foreign
exchange. New investments in machinery have increased depreciation
and maintenance costs by around GBP13 million; these have been
partially offset by a reduction from the finalisation of the SCA
Packaging fair value work which culminated in a comprehensive
review of asset lives on a consistent basis, which had a c. GBP7
million impact.
The Group's measures of return on sales and return on average
capital employed have seen improvements in the current year and
both are towards the top end of their target ranges. Return on
sales is 8.8 per cent (target range of 7-9 per cent), whilst return
on average capital employed is 14.6 per cent (target range of 12-15
per cent). As noted earlier, return on average capital employed is
significantly above the Group cost of capital. The Board has
reviewed the medium-term targets and has decided to raise the
return on sales target by 100 basis point whilst retaining the
return on average capital employed range as it is, to reflect the
short-term impact which results from the acquisition of new
businesses.
Exceptional items
Exceptional items before tax and share of results of associates
were GBP44 million (2013/14: GBP38 million).
Exceptional items comprise of restructuring initiatives
totalling GBP47 million, which have been concentrated in UK and
German Packaging businesses, and on the infrastructure necessary to
support the Group's growth and development. These costs have been
partially offset by utilisation of provisions made on the SCA
Packaging acquisition.
Acquisition and disposal activity has generated a further GBP4
million of exceptional costs. This charge also includes costs
incurred in respect of the post-balance sheet date acquisition of
Duropack.
Gains on the disposal of the Scandinavian Foam business and the
step-up acquisition of the Italian recycling business amounted to
GBP6 million, and were offset by the loss on disposal of the Nantes
mill of GBP9 million and other costs of GBP2 million.
Unamortised finance costs amounting to GBP4 million relating to
the refinancing of the SCA Packaging acquisition finance.
Exchange losses on the Ukrainian associate of GBP7 million, as
the Hryvian weakened against the US dollar (the currency in which
the associate's debt is denominated), have been recognised as
exceptional.
In 2015/16, exceptional costs of GBP40 million are expected to
be incurred, principally relating to the acquisition and
integration of Duropack and other one-off restructuring projects in
our packaging business.
Interest, tax and earnings per share
Net interest expense before exceptionals has reduced from GBP41
million in 2013/14 to GBP32 million in 2014/15, due both to the
refinancing and to the lower levels of debt as further working
capital initiatives have delivered results. The employment benefit
net finance expense was GBP6 million (2013/14: GBP7 million).
Profit before tax (excluding amortisation, exceptional items and
share of profit of associates) was GBP297 million (2013/14: GBP259
million), an increase of 15 per cent on a reported basis.
The share of the results of equity accounted investments
includes the previously described exceptional exchange loss of GBP7
million on US dollar denominated debt in the Ukrainian
associate.
The Group's effective tax rate, excluding amortisation,
exceptional items and associates was 23 per cent, consistent with
the prior year. The exceptional tax credit was GBP10 million.
Reported profit after tax after amortisation and exceptional
items from continuing operations was GBP156 million (2013/14:
GBP144 million).
Adjusted earnings per share were 24.5 pence (2013/14: 21.4
pence), an increase of 14 per cent. Total earnings per share were
16.6 pence (2013/14: 15.0 pence).
Dividend
The proposed final dividend is 7.7 pence (2013/14: 6.8 pence),
giving a total dividend for the year of 11.4 pence (2013/14: 10.0
pence). Dividend cover before amortisation and exceptional items
was 2.1 times in 2014/15 (2013/14: 2.1 times). The final dividend
will be paid on 2 November 2015 to shareholders on the register at
the close of business on 2 October 2015.
Acquisitions and disposals
The Group's strategic aim is to grow its consumer packaging
businesses to meet the requirements of its major customers. The
focus on the overall "short" paper position remains, with ongoing
investment in paper mills which produce high quality lightweight
papers and further reduction in exposure to those that do not.
Acquisition and disposal activity has intensified in the year, with
three acquisitions and two disposals. Since the year end a further
acquisition and disposal have been completed.
On 10 July 2014 the 50 per cent of Italmaceri not previously
owned was acquired. The Italmaceri recycling business operates in
northern Italy with annual volumes of approximately 500k tonnes. On
9 September 2014 Kaplast, an injection-moulding business in
Croatia, was acquired, to expand the returnable transit packaging
element of the Plastics business. On 6 November 2014, the
acquisition of Andopack, a corrugated manufacturing business in
Spain, was completed for GBP39 million (including acquired debt of
GBP28 million). The business operates from a single well-invested
site with considerable scope to grow the business by serving the
Group's pan-European customers based in this large market.
On 2 September 2014 the Scandinavian Foams business, which the
Group had acquired as part of the SCA Packaging acquisition, was
disposed of for GBP22 million, realising a gain of GBP3
million.
Following the binding offer received on 20 November 2014, the
small paper mill in Nantes, France with annual capacity of c. 60k
tonnes of testliner was disposed of, with a loss on disposal of
GBP9 million. This disposal was in-line with our strategy to
increase our "short" paper position.
Subsequent to the year end, on 31 May 2015, the acquisition of
Duropack, a recycled corrugated packaging business with
market-leading positions across south eastern Europe, was completed
for EUR305 million, including debt acquired of EUR100 million,
subject to post-closing working capital adjustments.
On 18 May 2015, the Group completed the sale of StePac, a
specialist modified atmosphere packaging business based in Israel,
for $31 million, subject to post-closing working capital
adjustments.
Cash flow
Net debt ended the year significantly lower than the prior year
at GBP651 million (GBP827 million). Working capital management
continues to be a major focus for the business. The current year
inflow of GBP101 million reflects a continuation of tight working
capital management, particularly of trade receivables and trade
payables. A number of inventory reduction initiatives have
commenced, the results of which should flow through over the next
12 months. The structuring of the Group's debt to be aligned with
the currency of operations benefited net debt by GBP68 million
driven mainly by the weaker euro. The business has continued to
invest in capital expenditure with net costs (after disposal
proceeds of GBP18 million) of GBP149 million (2013/14: GBP156
million). The Group strikes a balance between expenditure on asset
renewal/replacement and investment in growth and efficiency, with
the latter amounting to about 52 per cent of the total expenditure.
Disposals included GBP6 million of surplus property assets
(2013/14: GBP3 million) realising profits of GBP6 million (2013/14:
GBP5 million).
Net interest payments of GBP34 million were GBP9 million lower
than the prior year and were broadly in line with the net finance
expense. Tax paid of GBP28 million was significantly lower than the
prior year (2013/14: GBP55 million) primarily due to refunds
secured in a number of regions and a greater focus on the timing of
payments.
Cash costs of exceptional items amounted to GBP49 million
representing the cash investment in restructuring and
infrastructure. Disposals of businesses realised GBP18 million,
whilst acquisitions of GBP28 million comprised Andopack, Italmaceri
and the Kaplast businesses.
The dividend pay-out was GBP94 million, reflecting the payment
in 2014/15 of the interim and final dividend for 2013/14.
Total Group cash inflow for the year was GBP154 million,
compared to an outflow of GBP27 million in the prior year. Net debt
acquired was GBP30 million. Exchange and other movements reduced
net debt by GBP52 million.
Statement of financial position
Shareholders' funds of GBP1,018 million at 30 April 2015 have
reduced from GBP1,131 million at 30 April 2014, principally due to
exchange losses, actuarial losses and dividends, partially offset
by retained profit for the year. Profit attributable to
shareholders was GBP156 million (2013/14: GBP141 million) and
dividends of GBP94 million (2013/14: GBP74 million) were paid
during the year. In addition, actuarial losses of GBP65 million
from the Group's employee benefit schemes were charged to reserves.
Other items recognised directly in reserves include currency
translation losses of GBP105 million, favourable movements on cash
flow hedges of GBP5 million and the related tax charge of GBP12
million.
At 30 April 2015, the Group's net debt was GBP651 million (30
April 2014: GBP827 million). The Group improved its net debt to
earnings before interest, tax, depreciation and amortisation
(EBITDA) ratio from 1.96 times at 30 April 2014 to 1.49 times at 30
April 2015 and complied with all the covenants in its financing
agreements. The Group's financial covenants for the syndicated
committed bank facilities specify an EBITDA to net interest payable
ratio of not less than 4.5 times, a maximum ratio of net debt to
EBITDA of 3.25 times and net assets to exceed GBP360 million.
The covenant calculations exclude from the income statement
exceptional items and any interest arising from the defined benefit
pension schemes. The calculation of net assets excludes the net
asset or liability arising from the defined benefit pension
schemes. At 30 April 2015, the Group had substantial headroom under
its covenants; the most sensitive covenant is net debt to EBITDA
and this had an EBITDA headroom of GBP243 million.
Energy costs
Energy continued to be a significant cost for the Group in
2014/15. The Group's total costs for gas, electricity and diesel
decreased from GBP241 million in 2013/14 to GBP187 million in
2014/15 a 22 per cent decrease, with the benefits of capital
invested in CHP facilities, currency translation, lower prices and
energy efficiency initiatives all contributing. The Group continues
to manage the risks associated with its purchases of energy through
its Energy Procurement Group. By hedging energy costs with
suppliers and financial institutions we aim to reduce the
volatility of energy costs and to provide the Group with a degree
of certainty over future energy costs. Given the significant
reduction in spot natural gas prices, particularly last summer, the
hedging strategy removed opportunities to benefit from the lowest
possible prices.
Capital structure and treasury management
The Group funds its operations from the following sources of
capital: operating cash flow, borrowings, finance and operating
leases, shareholders' equity and, where appropriate, disposals of
non-core businesses. The Group's objective is to achieve a capital
structure that results in an appropriate cost of capital whilst
providing flexibility in short and medium-term funding so as to
accommodate material investments or acquisitions. The Group also
aims to maintain a strong balance sheet and to provide continuity
of financing by having a range of maturities and borrowings from a
variety of sources, supported by its investment grade credit
rating.
The Group's overall treasury objectives are to ensure that
sufficient funds are available for the Group to carry out its
strategy and to manage certain financial risks to which the Group
is exposed.
The Group regularly reviews the level of cash and debt
facilities required to fund its activities. At 30 April 2015, the
Group's committed borrowing facilities totalled c. GBP1.4 billion
of which GBP649 million were undrawn. Total gross borrowings at 30
April 2015 were GBP783 million. At 30 April 2015, the Group's
committed borrowing facilities had a weighted-average maturity of
4.6 years (30 April 2014: 3.3 years).
During the year the Group refinanced its committed bank
borrowing facilities. The syndicated term loan facility, under
which EUR380 million was outstanding at 30 April 2014, was repaid
on 23 May 2014, and replaced with a EUR300 million syndicated bank
term loan facility maturing in May 2017. In addition, on the same
date, the GBP610 million syndicated revolving credit facility was
repaid and replaced with a GBP800 million syndicated bank revolving
credit facility maturing in 2019, but with options to extend this
facility to 2021. Since the year end the maturity of this facility
has been extended to May 2020. The year-on-year interest saving,
assuming the previous facilities were fully drawn at all times is
GBP5 million.
The Group also obtained an investment grade credit rating from
Standard and Poor's (BBB-Stable) which reflects the strong credit
metrics of the Group and the financial discipline of management.
This credit rating allows the Group to issue investment grade bonds
in the public debt markets.
Foreign exchange translation
Approximately 63 per cent of the Group's EBITA in 2014/15 was
earned in euros, 17 per cent in Sterling, 6 per cent in US dollar
and the remainder in other European currencies. In addition to the
headwind to operating profit in 2014/15 of GBP21 million, the
results for the year 2015/16 will be influenced by foreign exchange
translation, where the euro is currently weaker than the average
rate over 2014/15 of 1.29. In relation to the euro, an increase of
1c decreases EBITA by approximately GBP1.6 million and profit
before tax by approximately GBP1.0 million.
Consolidated Income Statement
Year ended 30 April 2015
Before Exceptional After Before Exceptional After
exceptional items exceptional exceptional items exceptional
(note (note
items 3) items items 3) items
2015 2015 2015 2014 2014 2014
Continuing operations Note GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Revenue 2 3,820 - 3,820 4,035 - 4,035
Operating costs (3,485) (31) (3,516) (3,728) (35) (3,763)
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Operating profit before
amortisation,
acquisitions and
disposals and SCA
Packaging related
costs 335 (31) 304 307 (35) 272
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Amortisation of intangible
assets
and acquisitions
and disposals (46) (9) (55) (51) - (51)
SCA Packaging related
exceptional costs - - - - (3) (3)
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Operating profit 289 (40) 249 256 (38) 218
Finance income 5 3 - 3 3 - 3
Finance costs 5 (35) (4) (39) (44) - (44)
Employment benefit
net finance expense 4 (6) - (6) (7) - (7)
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Net financing costs (38) (4) (42) (48) - (48)
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Profit after financing
costs 251 (44) 207 208 (38) 170
Share of profit/(loss)
of equity accounted
investments, net
of tax - (7) (7) - (3) (3)
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Profit before income
tax 251 (51) 200 208 (41) 167
Income tax (expense)/credit 6 (54) 10 (44) (45) 22 (23)
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Profit for the year
from continuing operations 197 (41) 156 163 (19) 144
Discontinued operations
Loss for the year
from discontinued
operations - - - (3) - (3)
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Profit for the year 197 (41) 156 160 (19) 141
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Profit for the year
attributable to:
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Owners of the parent 197 (41) 156 159 (19) 140
Non-controlling interests - - - 1 - 1
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Earnings per share
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
Adjusted from continuing
operations (1)
Basic 7 24.5p 21.4p
Diluted 7 24.3p 21.1p
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
From continuing operations
Basic 7 16.6p 15.3p
Diluted 7 16.4p 15.2p
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
From continuing and
discontinued operations
Basic 16.6p 15.0p
Diluted 16.4p 14.9p
---------------------------- ---- ------------- ----------- ------------ ------------- ----------- ------------
1 Adjusted for amortisation and exceptional items.
Notes
(a) Subject to approval of shareholders at the Annual General
Meeting to be held on 8 September 2015, the final dividend of 7.7p
will be paid on 2 November 2015 to ordinary shareholders on the
register on 2 October 2015.
(b) The financial information presented in this preliminary
announcement is extracted from, and is consistent with, the Group's
audited financial statements for the year ended 30 April 2015. The
financial information set out above does not constitute the
Company's statutory financial statements for the years ended 30
April 2015 or 30 April 2014 but is derived from those financial
statements. Statutory accounts for the year ended 30 April 2014
have been delivered to the Registrar of Companies. Statutory
accounts for the year ended 30 April 2015 will be delivered
following the Company's Annual General Meeting. The auditors'
report on these accounts was not qualified or modified and did not
contain any statement under Sections 498(2) or (3) of the Companies
Act 2006.
(c) The Group's audited financial statements have been prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU. The preliminary announcement has been
agreed with the Company's Auditor for release.
(d) Items are presented as exceptional in the accounts where
they are significant items of financial performance that the
Directors consider should be separately disclosed, to assist in the
understanding of the trading and financial results achieved by the
Group (note 3).
Consolidated Statement of Comprehensive Income
Year ended 30 April 2015
2015 2014
GBPm GBPm
------------------------------------------------------ ----- -----
Profit for the year 156 141
Items which will not be reclassified subsequently
to profit or loss
Actuarial (losses)/gains on employee benefits (65) 57
Income tax on items which will not be reclassified
subsequently to profit or loss 10 (18)
Items which may be reclassified subsequently
to profit or loss
Foreign currency translation differences (105) (55)
Movements in cash flow hedges 5 (16)
Income tax on items which may be reclassified
subsequently to profit or loss (22) (4)
------------------------------------------------------- ----- -----
Other comprehensive expense for the year,
net of tax (177) (36)
------------------------------------------------------- ----- -----
Total comprehensive (expense)/income for
the year (21) 105
------------------------------------------------------- ----- -----
Total comprehensive (expense)/income attributable
to:
------------------------------------------------------ ----- -----
Owners of the parent (21) 104
Non-controlling interests - 1
------------------------------------------------------- ----- -----
Consolidated Statement of Financial Position
At 30 April 2015
2015 2014
Note GBPm GBPm
--------------------------------------- ---- ------- -------
Assets
Non-current assets
Intangible assets 855 961
Property, plant and equipment 1,342 1,372
Equity accounted investments 17 24
Other investments 3 8
Deferred tax assets 58 84
Other receivables 5 3
Derivative financial instruments 24 4
--------------------------------------- ---- ------- -------
Total non-current assets 2,304 2,456
--------------------------------------- ---- ------- -------
Current assets
Inventories 256 272
Other investments 1 1
Income tax receivable 38 11
Trade and other receivables 548 650
Cash and cash equivalents 95 98
Derivative financial instruments 13 2
Assets held for sale 46 45
--------------------------------------- ---- ------- -------
Total current assets 997 1,079
--------------------------------------- ---- ------- -------
Total assets 3,301 3,535
--------------------------------------- ---- ------- -------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings (781) (786)
Employee benefits 4 (200) (151)
Other payables (5) (4)
Provisions (7) (23)
Deferred tax liabilities (121) (163)
Derivative financial instruments (13) (40)
--------------------------------------- ---- ------- -------
Total non-current liabilities (1,127) (1,167)
--------------------------------------- ---- ------- -------
Current liabilities
Bank overdrafts (13) (34)
Interest-bearing loans and borrowings (2) (96)
Trade and other payables (927) (930)
Income tax liabilities (147) (90)
Provisions (34) (49)
Derivative financial instruments (18) (20)
Liabilities held for sale (15) (18)
--------------------------------------- ---- ------- -------
Total current liabilities (1,156) (1,237)
--------------------------------------- ---- ------- -------
Total liabilities (2,283) (2,404)
--------------------------------------- ---- ------- -------
Net assets 1,018 1,131
--------------------------------------- ---- ------- -------
Equity
Issued capital 94 94
Share premium 715 715
Reserves 210 323
--------------------------------------- ---- ------- -------
Total equity attributable to owners of
the parent 1,019 1,132
Non-controlling interests (1) (1)
--------------------------------------- ---- ------- -------
Total equity 1,018 1,131
--------------------------------------- ---- ------- -------
Consolidated Statement of Changes in Equity
Year ended 30 April 2015
Total
reserves
attributable
to
owners
Share Share Hedging Translation Own Retained of the Non-controlling Total
capital premium reserve reserve shares earnings parent interests equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
At 1 May 2013 93 710 (17) 65 (2) 238 1,087 (2) 1,085
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Profit for the
year - - - - - 140 140 1 141
Actuarial
gains
on employee
benefits - - - - - 57 57 - 57
Foreign
currency
translation
differences - - - (55) - - (55) - (55)
Cash flow
hedges
fair value
changes - - (16) - - - (16) - (16)
Income tax on
other
comprehensive
income - - 2 (6) - (18) (22) - (22)
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Total comprehensive
income/(expense) - - (14) (61) - 179 104 1 105
-------------------- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Issue of share
capital 1 5 - - - - 6 - 6
Employee share
trust - - - - 2 (2) - - -
Share-based
payment
expense (net
of tax) - - - - - 9 9 - 9
Dividends paid 8 - - - - - (74) (74) - (74)
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Other changes in
equity in the year 1 5 - - 2 (67) (59) - (59)
-------------------- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
At 30 April
2014 94 715 (31) 4 - 350 1,132 (1) 1,131
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Profit for the
year - - - - - 156 156 - 156
Actuarial
losses
on employee
benefits - - - - - (65) (65) - (65)
Foreign
currency
translation
differences - - - (105) - - (105) - (105)
Cash flow
hedges
fair value
changes - - 5 - - - 5 - 5
Income tax on
other
comprehensive
income - - (1) (21) - 10 (12) - (12)
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Total comprehensive
(expense)/income - - 4 (126) - 101 (21) - (21)
-------------------- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Share-based
payment
expense (net
of tax) - - - - - 2 2 - 2
Dividends paid 8 - - - - - (94) (94) - (94)
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Other changes in
equity in the year - - - - - (92) (92) - (92)
-------------------- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
At 30 April
2015 94 715 (27) (122) - 359 1,019 (1) 1,018
-------------- ---- ------- ------- ------- ----------- ------ -------- ------------ --------------- -------
Consolidated Statement of Cash Flows
Year ended 30 April 2015
2015 2014
Continuing operations Note GBPm GBPm
------------------------------------------------- ---- ----- -----
Operating activities
Cash generated from operations 9 463 309
Interest received 3 3
Interest paid (37) (46)
Tax paid (28) (55)
------------------------------------------------- ---- ----- -----
Cash flows from operating activities 401 211
------------------------------------------------- ---- ----- -----
Investing activities
Acquisition of subsidiary businesses, net
of cash and cash equivalents 12 (28) (27)
Divestment of subsidiary and equity accounted
businesses, net of cash and cash equivalents 12 18 12
Capital expenditure (167) (174)
Proceeds from sale of property, plant and
equipment and intangible assets 18 18
Decrease in restricted cash 3 16
Loan to associate (2) -
------------------------------------------------- ---- ----- -----
Cash flows used in investing activities (158) (155)
------------------------------------------------- ---- ----- -----
Financing activities
Proceeds from issue of share capital - 6
Decrease in borrowings (352) -
Increase in borrowings 233 8
Repayment of finance lease obligations - (2)
Dividends paid to Group shareholders 8 (94) (74)
------------------------------------------------- ---- ----- -----
Cash flows used in financing activities (213) (62)
------------------------------------------------- ---- ----- -----
Increase/(decrease) in cash and cash equivalents
from continuing operations 30 (6)
Discontinued operations:
Cash used in discontinued operations - (4)
------------------------------------------------- ---- ----- -----
Increase/(decrease) in cash and cash equivalents 30 (10)
Net cash and cash equivalents at 1 May 64 78
Reclassification to held for sale (6) -
Exchange losses on cash and cash equivalents (6) (4)
------------------------------------------------- ---- ----- -----
Net cash and cash equivalents at 30 April 82 64
------------------------------------------------- ---- ----- -----
Notes to the financial statements
1. Basis of preparation
The consolidated financial statements have been prepared and
approved by the Directors in accordance with International
Financial Reporting Standards as adopted by the EU ('adopted
IFRSs'), and have also applied IFRSs as issued by the International
Accounting Standards Board (IASB).
The consolidated financial statements are prepared on the
historical cost basis with the exception of assets and liabilities
of certain financial instruments, employee benefit plans and
share-based payments that are stated at their fair value.
The consolidated financial statements have been prepared on a
going concern basis.
The preparation of consolidated financial statements requires
management to make judgements, estimates and assumptions that
affect whether and how policies are applied and the reported
amounts of assets and liabilities, income and expenses.
No changes have been made to the Group's accounting policies in
the year ended 30 April 2015.
The accounting policies, presentation methods and methods of
computation followed are the same as those detailed in the 2014
Annual Report and Accounts, which is available on the Group's
website (www.dssmith.com/investors/results-and-presentations).
Whilst the financial information included in the preliminary
announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS.
Notes to the financial statements continued
2. Segment reporting
Operating segments
DACH Central
and Europe Total
Western Northern and Continuing
UK Europe Europe Italy Plastics Operations
Year ended 30 April 2015 Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
External revenue 905 941 922 750 302 3,820
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
EBITDA 107 99 119 89 38 452
Depreciation (26) (34) (23) (24) (10) (117)
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Operating profit (1) 81 65 96 65 28 335
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Unallocated items:
Amortisation (46)
Exceptional items 3 (40)
-----------
Total operating profit
(continuing operations) 249
-----------
Analysis of total assets
and total liabilities
Segment assets 709 728 829 612 174 3,052
----- ------- --------- ------- -------- -----------
Unallocated items:
Equity accounted investments
and other investments 21
Derivative financial instruments 37
Cash and cash equivalents 95
Tax 96
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Total assets 3,301
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Segment liabilities (250) (314) (166) (188) (61) (979)
----- ------- --------- ------- -------- -----------
Unallocated items:
Borrowings and accrued
interest (805)
Derivative financial instruments (31)
Tax (268)
Employee benefits (200)
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Total liabilities (2,283)
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Capital expenditure 42 35 39 41 10 167
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
1 Adjusted for amortisation and exceptional items.
DACH Central
and Europe Total
Western Northern and Continuing
UK Europe Europe Italy Plastics Operations
Year ended 30 April 2014 Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
External revenue 929 1,017 1,029 739 321 4,035
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
EBITDA 92 102 126 73 37 430
Depreciation (28) (35) (30) (20) (10) (123)
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Operating profit (1) 64 67 96 53 27 307
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Unallocated items:
Amortisation (51)
Exceptional items 3 (38)
-----------
Total operating profit
(continuing operations) 218
-----------
Analysis of total assets
and total liabilities
Segment assets 708 790 981 641 183 3,303
----- ------- --------- ------- -------- -----------
Unallocated items:
Equity accounted investments
and other investments 33
Derivative financial instruments 6
Cash and cash equivalents 98
Tax 95
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Total assets 3,535
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Segment liabilities (230) (319) (192) (196) (76) (1,013)
----- ------- --------- ------- -------- -----------
Unallocated items:
Borrowings and accrued
interest (927)
Derivative financial instruments (60)
Tax (253)
Employee benefits (151)
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Total liabilities (2,404)
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
Capital expenditure 40 41 47 35 11 174
------------------------------------ ---- ----- ------- --------- ------- -------- -----------
1 Adjusted for amortisation and exceptional items.
Notes to the financial statements continued
2. Segment reporting CONTINUED
Geographical areas
In presenting information by geographical area, external revenue
is based on the geographical location of customers.
External revenue
------------------
2015 2014
Continuing operations GBPm GBPm
---------------------- -------- --------
UK 865 933
France 623 688
Germany 578 613
Italy 429 433
Rest of the World 1,325 1,368
-------------------------- -------- --------
3,820 4,035
---------------------- -------- --------
3. Exceptional items
Items are presented as exceptional in the financial statements
where they are significant items of financial performance that the
Directors consider should be separately disclosed to assist in the
understanding of the trading and financial results of the Group.
Such items include business disposals, restructuring and
optimisation, acquisition related and integration costs, and
impairments.
2015 2014
Continuing operations GBPm GBPm
-------------------------------------------- ----- -----
SCA Packaging integration costs - (42)
SCA Packaging acquisition finalisation - 39
SCA Packaging related exceptional costs - (3)
Acquisition related costs (4) (4)
Other restructuring costs (31) (29)
Impairment of assets (4) (5)
Rebranding - (4)
(Loss)/gain on divestments (5) 4
Other 4 3
-------------------------------------------- ----- -----
Total pre-tax exceptional items (recognised
in operating profit) (40) (38)
Income tax credit on exceptional items 10 22
Share of exceptional loss of associate,
net of tax (7) (3)
Exceptional finance costs (4) -
-------------------------------------------- ----- -----
Total post-tax exceptional items (41) (19)
-------------------------------------------- ----- -----
2014/15
Acquisition costs of GBP4m relate to professional advisory,
legal and consultancy fees relating to the review of potential
deals, and deals completed during the year.
Of the GBP31m other restructuring costs, GBP10m relates to UK
site closures and reorganisations, GBP11m relates to restructuring
of businesses in the DACH and Northern Europe region and GBP3m
relates to restructuring of businesses in the Recycling
division.
Impairment of assets of GBP4m relate to the impairment of assets
in UK Packaging and France Packaging.
The loss on divestments of GBP5m comprises a GBP3m gain on the
disposal of the Foam business in Denmark and Sweden in September
2014, a gain of GBP2m on the step acquisition of the Italian
Recycling business from 50% to 100% in July 2014, offset by a loss
of GBP9m on the divestment of the Nantes paper mill in France in
January 2015 and other losses on divestment of GBP1m.
Other exceptional items of GBP4m principally relate to the
release of acquisition related provisions of GBP16m, partially
offset by the costs of continuing UK centralisation projects of
GBP9m.
The share of exceptional loss of associate relates to the
Group's share of post-tax foreign exchange losses recognised in the
Group's Ukrainian associate Rubezhansk as a result of the
significant decline in the value of the Ukrainian currency,
Hryvnia, during the local geopolitical crisis.
Exceptional finance costs of GBP4m relate to the write-off of
unamortised finance costs relating to the SCA Packaging acquisition
following the refinancing of borrowings in May 2014.
The above items give rise to a net income tax credit at the
local applicable tax rate with the exception of gains and losses on
some of the divestments which are not subject to tax under local
rules, impairments not deductible for tax purposes, and non-tax
deductible deal related advisory fees in relation to acquisitions
and disposals.
Notes to the financial statements continued
3. Exceptional items CONTINUED
2013/14
SCA Packaging integration costs relate to the completion of
integration projects which began in 2012/13.
The SCA Packaging completion process concluded in December 2013.
Together with the effects of the subsequent acquisition of the
power plant adjacent to the paper mill in Italy, and the release of
an onerous contract provision recognised in the statement of
financial position on acquisition of SCA Packaging, the Group has
recorded a gain of GBP39m.
Acquisition costs of GBP4m primarily relate to professional
advisory, legal and consultancy fees relating to the finalisation
of the completion accounts process of the acquisition of SCA
Packaging.
In November 2013, the Group announced a major rebranding,
bringing the businesses together under one unified corporate
identity. Of the GBP4m cost in the year, the majority related to
signage, internal and external communication and marketing
costs.
Of the GBP29m other restructuring costs, GBP12m relates to
restructuring and rationalisation in the Plastics businesses, GBP7m
relates to UK site closures and reorganisations, and GBP4m relates
to restructuring of businesses in the DACH region.
The income tax credit on exceptional items includes the reversal
of prior year provisions for exceptional tax and the tax effect of
exceptional items that are subject to tax.
4. Employee benefits
Movements in the net employee benefit deficit recognised in the
statement of financial position
2015 2014
GBPm GBPm
-------------------------------------------------- ----- -----
Employee benefit deficit 1 May (151) (214)
Expense recognised in operating profit (4) (7)
Employment benefit net finance expense (excluding
Pension Protection Fund levy) (4) (7)
Employer contributions 17 19
Other payments and contributions 6 -
Actuarial (losses)/gains (65) 57
Currency translation 10 1
Reclassification (9) -
-------------------------------------------------- ----- -----
Employee benefit deficit at 30 April (200) (151)
Deferred tax asset 48 40
-------------------------------------------------- ----- -----
Net employee benefit deficit at 30 April (152) (111)
-------------------------------------------------- ----- -----
The table above is the aggregate value of all Group employee
benefit schemes including both overseas and UK schemes. The Group's
principal funded, defined benefit pension scheme, the DS Smith
Group Pension scheme ('the Group scheme'), is in the UK and is now
closed to future accrual.
The Group also operates various local post-retirement
arrangements for overseas operations, pre-retirement benefits and
long-service awards and a small UK unfunded scheme.
5. Finance income and costs
2015 2014
Continuing operations GBPm GBPm
-------------------------------------- ----- -----
Interest income from financial assets (1) (1)
Other (2) (2)
-------------------------------------- ----- -----
Finance income (3) (3)
-------------------------------------- ----- -----
Interest on loans and overdrafts 37 41
Other 2 3
-------------------------------------- ----- -----
Finance costs 39 44
-------------------------------------- ----- -----
Notes to the financial statements continued
6. Income tax expense
2015 2014
Continuing operations GBPm GBPm
-------------------------------------------------- ----- -----
Current tax expense
Current year (73) (61)
Adjustment in respect of prior years 1 6
-------------------------------------------------- ----- -----
(72) (55)
-------------------------------------------------- ----- -----
Deferred tax expense
Origination and reversal of temporary differences 10 1
Reduction in UK tax rate - 2
Adjustment in respect of prior years 8 7
-------------------------------------------------- ----- -----
18 10
Total income tax expense before exceptional
items (54) (45)
Tax relating to exceptional items (note 3) 10 22
-------------------------------------------------- ----- -----
Total income tax expense in the income statement
from continuing operations (44) (23)
-------------------------------------------------- ----- -----
Discontinued operations
Current tax expense adjustment in respect of
prior years - (3)
-------------------------------------------------- ----- -----
Total income tax expense in the income statement
from discontinued operations - (3)
-------------------------------------------------- ----- -----
The reconciliation of the actual tax charge to that at the
domestic corporation tax rate is as follows:
2015 2014
GBPm GBPm
------------------------------------------------ ----- -----
Profit before income tax 200 167
Share of (profit)/loss of associates 7 3
------------------------------------------------ ----- -----
Profit before tax and share of (profit)/loss
of associates 207 170
------------------------------------------------ ----- -----
Income tax at the domestic corporation tax
rate of 20.92% (2013/14: 22.83%) (43) (39)
Effect of additional taxes and tax rates in
overseas jurisdictions (19) (14)
Additional items deductible for tax purposes 18 35
Non-deductible expenses (17) (25)
Non-taxable gains 3 -
Release of prior year provisions in relation
to acquired businesses 2 -
Change in unrecognised deferred tax assets
in relation to acquired businesses 6 -
Adjustment in respect of prior years 9 15
Effect of change in UK corporation tax rate (3) 2
------------------------------------------------ ----- -----
Income tax expense - total Group (44) (26)
------------------------------------------------ ----- -----
Income tax expense from continuing operations (44) (23)
Income tax expense from discontinued operations - (3)
------------------------------------------------ ----- -----
Notes to the financial statements continued
7. Earnings per share
Basic earnings per share from continuing operations
2015 2014
----------------------------------------------- ------- -------
Profit from continuing operations attributable
to ordinary shareholders GBP156m GBP143m
----------------------------------------------- ------- -------
Weighted average number of ordinary shares 941m 932m
----------------------------------------------- ------- -------
Basic earnings per share 16.6p 15.3p
----------------------------------------------- ------- -------
Diluted earnings per share from continuing operations
2015 2014
----------------------------------------------- ------- -------
Profit from continuing operations attributable
to ordinary shareholders GBP156m GBP143m
----------------------------------------------- ------- -------
Weighted average number of ordinary shares 941m 932m
Potentially dilutive shares issuable under
share-based payment arrangements 9m 8m
----------------------------------------------- ------- -------
Weighted average number of ordinary shares
(diluted) 950m 940m
----------------------------------------------- ------- -------
Diluted earnings per share 16.4p 15.2p
----------------------------------------------- ------- -------
Basic earnings per share from discontinued operations
2015 2014
------------------------------------------- ---- -------
Loss attributable to ordinary shareholders - (GBP3m)
------------------------------------------- ---- -------
Weighted average number of ordinary shares 941m 932m
------------------------------------------- ---- -------
Basic earnings per share - (0.3p)
------------------------------------------- ---- -------
Diluted earnings per share from discontinued operations
2015 2014
------------------------------------------- ---- -------
Loss attributable to ordinary shareholders - (GBP3m)
------------------------------------------- ---- -------
Weighted average number of ordinary shares 941m 932m
Potentially dilutive shares issuable under
share-based payment arrangements n/a n/a
------------------------------------------- ---- -------
Weighted average number of ordinary shares
(diluted) 941m 932m
------------------------------------------- ---- -------
Diluted earnings per share - (0.3p)
------------------------------------------- ---- -------
The number of shares excludes the weighted average number of the
Company's own shares held as treasury shares during the year of nil
(2013/14: 1m).
Adjusted earnings per share from continuing operations
The Directors believe that the presentation of an adjusted
earnings per share, being the basic earnings per share adjusted for
exceptional items and amortisation of intangible assets, better
explains the underlying performance of the Group. A reconciliation
of basic to adjusted earnings per share is as follows:
2015 2014
---------------------- ---------------------
Basic Basic Diluted
- Diluted - -
pence - pence pence pence
per per per per
GBPm share share GBPm share share
----------------------------- ---- ------ -------- ---- ------ -------
Basic earnings 156 16.6p 16.4p 143 15.3p 15.2p
Add back amortisation, after
tax 34 3.6p 3.6p 37 4.1p 4.0p
Add back exceptional items,
after tax 41 4.3p 4.3p 19 2.0p 1.9p
----------------------------- ---- ------ -------- ---- ------ -------
Adjusted earnings 231 24.5p 24.3p 199 21.4p 21.1p
----------------------------- ---- ------ -------- ---- ------ -------
8. Dividends proposed and paid
2015 2014
------------ ------------
Pence Pence
per per
share GBPm share GBPm
---------------------------------- ------ ---- ------ ----
2013/14 interim dividend - paid - - 3.2p 30
2013/14 final dividend - paid - - 6.8p 64
2014/15 interim dividend - paid 3.7p 35 - -
2014/15 final dividend - proposed 7.7p 73 - -
---------------------------------- ------ ---- ------ ----
2015 2014
GBPm GBPm
--------------------- ----- -----
Paid during the year 94 74
--------------------- ----- -----
The interim dividend in respect of 2014/15 of 3.7 pence per
share (GBP35m) was paid after the year end on 1 May 2015. The
2013/14 interim and final dividends were paid during the 2014/15
financial year. A final dividend in respect of 2014/15 of 7.7 pence
per share (GBP73m) has been proposed by the Directors after the
reporting date.
Notes to the financial statements continued
9. Cash generated from operations
2015 2014
Continuing operations GBPm GBPm
------------------------------------------------------ ----- -----
Profit for the year 156 144
Adjustments for:
Pre-tax SCA Packaging integration costs and
other exceptional items 31 38
Amortisation of intangible assets and acquisitions
and disposals 55 51
Cash outflow for exceptional items (49) (78)
Depreciation 117 123
Profit on sale of non-current assets* (8) (8)
Share of (profit)/loss of equity accounted
investments, net of tax 7 3
Employment benefit net finance expense 6 7
Share-based payment expense 5 4
Finance income (3) (3)
Finance costs 39 44
Other non-cash items (including other deposits) (7) (8)
Income tax expense 44 23
Change in provisions (15) (21)
Change in employee benefits (16) (13)
------------------------------------------------------ ----- -----
Cash generation before working capital movements 362 306
------------------------------------------------------ ----- -----
Changes in:
Inventories (13) (6)
Trade and other receivables 65 (25)
Trade and other payables 49 34
------------------------------------------------------ ----- -----
Working capital movement 101 3
------------------------------------------------------ ----- -----
Cash generated from continuing operations 463 309
------------------------------------------------------ ----- -----
*Includes gains on the sale of surplus property assets total
GBP6m (2013/2014: GBP5m).
10. analysis of Net debt
2015 2014
GBPm GBPm
------------------------------ ----- -----
Cash and cash equivalents 95 98
Overdrafts (13) (34)
------------------------------- ----- -----
Net cash and cash equivalents 82 64
------------------------------- ----- -----
Restricted cash - receivable
after one year - 5
Restricted cash - receivable
within one year - 1
Other deposits 33 25
Interest-bearing loans
and borrowings due
- after one year (776) (782)
Interest-bearing loans
and borrowings due
- within one year (1) (96)
Finance leases (6) (4)
Derivative financial
instruments
- assets 21 4
- liabilities (4) (44)
------------------------------- ----- -----
(733) (891)
------------------------------ ----- -----
Net debt (651) (827)
------------------------------- ----- -----
Derivative financial instruments above relate to interest rate
and cross-currency swaps used to hedge the Group's borrowings. The
difference between the amounts shown above and the total derivative
financial instrument assets and liabilities in the Group's
statement of financial position relates to derivative financial
instruments that hedge forecast foreign currency transactions and
the Group's purchases of energy.
Certain other deposit balances are included, as these short-term
receivables have the characteristics of net debt.
Notes to the financial statements continued
11. Reconciliation of net cash flow to movement in net debt
2015 2014
GBPm GBPm
----------------------------------------------------- ----- -----
Continuing operations
Operating profit before amortisation and exceptional
items 335 307
Depreciation 117 123
----------------------------------------------------- ----- -----
Adjusted EBITDA 452 430
Working capital movement 101 3
Change in provisions (15) (21)
Change in employee benefits (16) (13)
Other (4) (5)
----------------------------------------------------- ----- -----
Cash generated from operations before exceptional
cash items 518 394
Capital expenditure (167) (174)
Proceeds from sale of property, plant and equipment
and other investments 18 18
Tax paid (28) (55)
Net interest paid (34) (43)
----------------------------------------------------- ----- -----
Free cash flow 307 140
Cash outflow for exceptional items (49) (78)
Dividends paid to Group shareholders (94) (74)
Acquisition of subsidiary businesses, net of
cash and cash equivalents (28) (27)
Divestment of subsidiary and equity accounted
businesses, net of cash and cash equivalents 18 12
----------------------------------------------------- ----- -----
Net cash flow 154 (27)
Proceeds from issue of share capital - 6
Reclassification (9) -
Loans and borrowings acquired (30) -
----------------------------------------------------- ----- -----
Net movement on debt 115 (21)
Foreign exchange, fair value and other non-cash
movements 61 15
----------------------------------------------------- ----- -----
Net debt movement - continuing operations 176 (6)
Net debt movement - discontinued operations - (4)
Opening net debt (827) (817)
----------------------------------------------------- ----- -----
Closing net debt (651) (827)
----------------------------------------------------- ----- -----
12. Acquisitions and divestments
(a) 2014/15 acquisitions and disposals
During the year ended 30 April 2015, the Group completed various
business combination transactions with total cash consideration of
GBP28m (including GBP1m bank overdraft acquired), and various
business disposals with total cash consideration of GBP18m which
are not considered material to the Group individually or in
aggregate.
(b) 2013/14 acquisitions and disposals
During the year ended 30 April 2014, the Group completed various
business combination transactions with total cash consideration of
GBP27m, and various business disposals with total cash
consideration of GBP12m which are not considered material to the
Group individually or in aggregate.
(c) Acquisition related costs
The Group incurred acquisition related costs of GBP4m in 2014/15
(2013/14: GBP4m). In 2014/15 these primarily related to the
acquisition of the Andopack Group, the Duropack Group and
Italmaceri, as well as other deal costs relating to reviewing
potential acquisitions. These costs have been included in
administrative expenses in the Group's income statement within
exceptional items.
Notes to the financial statements continued
13. subsequent Events
(a) Acquisition of Duropack
On 31 May 2015, the Group acquired the Duropack business. The
acquisition was effected by the purchase of equity of the Duropack
business for EUR305m on a cash, debt and, to the extent legally
possible and commercially practicable, pension free basis. This is
subject to customary post-completion adjustments.
Duropack, a recycled corrugated board packaging business, has
market-leading positions across south eastern Europe, holding the
number one or two position in many of the geographies in which it
operates. It is well invested with high quality assets and operates
a "short paper, long fibre" model similar to that of the Group.
The Group expects that this acquisition will improve its
position in higher-growth south eastern European geographies,
further strengthening pan-European capabilities to our existing
customer base in addition to providing access to new customers.
The following table summarises the consideration paid for the
Duropack business and provisional carrying values of identifiable
assets and liabilities. The below values will be subject to a fair
value review and finalised within a year of the acquisition date
and retrospectively applied.
Provisional
carrying
values
at acquisition
GBPm
--------------------------------------- ---------------
Property, plant and equipment 103
Other non-current assets 10
Current assets 91
Non-current liabilities (62)
Current liabilities (46)
Total identifiable net assets acquired 96
Goodwill 50
--------------------------------------- ---------------
Total consideration 146
--------------------------------------- ---------------
Satisfied by:
Cash consideration 146
--------------------------------------- ---------------
Net cash flow arising on acquisition
Cash consideration 146
Cash and cash equivalents acquired (18)
--------------------------------------- ---------------
Total cash outflow 128
--------------------------------------- ---------------
(b) Disposal of StePac
On 18 May 2015 the Group completed the sale of StePac,
classified as held for sale at 30 April 2015, for $31m, subject to
customary working capital adjustments. This disposal is consistent
with the Group's focus on investment and growth in consumer based
packaging in strategic markets and will result in an exceptional
gain in the forthcoming year.
(c) Other subsequent events
There are no further events after the reporting date which
require disclosure.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ZMGZVKKNGKZG
Smith (ds) (LSE:SMDS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Smith (ds) (LSE:SMDS)
Historical Stock Chart
From Apr 2023 to Apr 2024
