Weaker second quarter revenues in difficult market conditions; Strategy review underway
McBride, the leading European manufacturer and supplier of Contract Manufactured and Private Label products for the domestic household and professional cleaning/hygiene markets, announces its results for the six months ended
During the prior financial year, the Group successfully completed the sale of the European Personal Care (PC) Liquids business. The financial results of this business have been treated as discontinued operations in the half-year financial statements. The remaining activities within the Group are referred to as continuing operations.
£m unless otherwise stated |
Half-year to 31 Dec 2019 |
Half-year to 31 Dec 2018 |
Reported % Change |
Constant Currency % Change2 |
Continuing operations |
|
|
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|
Household revenue |
334.4 |
341.6 |
(2.1)% |
(1.4)% |
Group revenue |
350.4 |
369.2 |
(5.1)% |
(4.4)% |
Adjusted operating profit3 |
11.6 |
16.8 |
(31.0)% |
(30.1)% |
Operating profit |
8.5 |
15.6 |
(45.5)% |
|
Adjusted profit before taxation |
9.7 |
14.5 |
(33.1)% |
(32.2)% |
Profit before taxation |
6.6 |
13.3 |
(50.4)% |
|
Adjusted diluted earnings per share4 |
3.7p |
5.6p |
(33.9)% |
|
Diluted earnings per share |
2.0p |
5.0p |
(60.0)% |
|
Total operations |
|
|
|
|
Revenue |
350.4 |
391.1 |
(10.4)% |
(9.8)% |
Adjusted operating profit3 |
11.6 |
16.5 |
(29.7)% |
(28.8)% |
Operating profit |
8.2 |
13.5 |
(39.3)% |
|
Adjusted profit before taxation |
9.7 |
14.2 |
(31.7)% |
(30.7)% |
Profit before taxation |
6.3 |
11.2 |
(43.8)% |
|
Adjusted diluted earnings per share4 |
3.7p |
5.5p |
(32.7)% |
|
Diluted earnings per share |
1.9p |
4.9p |
(61.2)% |
|
Net debt1,5 |
121.7 |
130.3 |
|
|
Net debt pre-IFRS 161,6 |
113.5 |
120.9 |
|
|
Return on capital employed7 |
13.4% |
20.8% |
|
|
Interim payment to shareholders (per ordinary share) |
0.8p |
1.5p |
|
|
Headlines
Business
·
· Revenue growth in South, East and
· Further delivery against key business improvement objectives:
o logistics improvement study nearing conclusion
o new Malaysian factory expected to be operational by end 2020
o
o Aerosols standalone business established, operating at targeted break even position
o sale of land and buildings at former Aerosols site at
· Review of strategy, organisation and operations underway, output expected
Financial
Continuing Operations
· Household reported revenues of
· Marked revenues slowdown in last two months of the period
· Group reported revenues
· Adjusted operating profit(3) of
· Operating profit of
· Finance costs down to
· Adjusted profit before tax of
· Profit before tax
· Adjusted diluted EPS 33.9% lower at 3.7p (2018: 5.6p)
· Net debt at
· Excluding IFRS 16, net debt
· Interim payment to shareholders 0.8p (2018: 1.5p)
"Since joining McBride in November I have visited all of our sites and met many of our people and been impressed by their commitment to making McBride a successful business. McBride has a strong market position but the Group's recent performance has been disappointing. Accordingly, as announced last month, I have initiated a review of the Group's strategy, organisation and operations which I expect to report on at the time of our year end results announcement in September.
Our third quarter revenue run rates are as expected. Our revenue outlook remains in line with our expectations despite our markets remaining challenging. Material costs are tracking consistently with the first half year. The Board's expectations for the full year remain in line with our January trading update."
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020 3642 1587 |
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020 3642 1587 |
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FTI Consulting |
020 3727 1017 |
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The Analyst presentation meeting at
Standard International Access: +44 (0)330 336 9411 Password: McBride
The results presentation will be available on the |
1Net debt is at
2Comparatives translated at
3Adjustments were made for the amortisation of intangible assets and exceptional items.
4Adjustments were made for the amortisation of intangible assets, exceptional items, unwind of discount on provisions, exceptional tax charges and any related tax.
5Net debt comprises cash and cash equivalents, overdraft, bank and other loans and lease liabilities.
6Net debt excluding IFRS 16 comprises cash and cash equivalents, overdraft, bank and other loans, excluding lease liabilities.
7Rolling twelve months adjusted operating profit to
Business Progress
During the six months to
Logistics network
o The Group is at an advanced stage in its externally supported study to identify savings and operational improvements in its warehousing network and is complete in the review of improvement options for transport management activities. It is expected that the final roadmap will be concluded in the third quarter and the implementation will be aligned with the outcome of the strategy review. The annualised benefits will accrue over a number of years as warehouse locations change in line with existing contractual arrangements.
o As previously announced, the Group is expanding its Asian operations, including the introduction of a new production facility in
Business process improvement - Segmentation
o The Group identified benefits from implementing a segmentation approach to managing its customer and product ranges. As well as supporting improved and differentiated customer service and inventory levels, this initiative determines priorities over development projects and complexity management. This initiative is considered a key component supporting the Group's future strategic direction.
Factory Footprint
o In light of continuing reducing levels of demand for laundry powders, the Group announced the proposed closure of its
Aerosols
o Following the decision last financial year to consolidate the Group's two aerosols operations to a single factory, the former
Group Operating Results
The financial results of the PC Liquids business, which was sold in the prior financial year, have been treated as discontinued operations in the half-year financial statements. The remaining activities within the Group are referred to as continuing operations.
Continuing Operations - Income Statement
The Group's first half Household revenues at constant currency were 1.4% lower compared to the prior year. Following a steady performance in the first four months of the period, the Group experienced a marked slowdown in the last two months of the period, especially in the
Reflecting the decision to exit
Half-year adjusted operating profit of
Half-year operating profit was
Continuing Operations - Exceptional items
Total exceptional items incurred in relation to the continuing business of
·
·
·
In
Discontinued Operations - Income Statement and Exceptional items
In the first half-year there was no revenue or operating profit/loss related to the PC Liquids business. In the prior period, the PC Liquids business generated revenues of
Following the sale of our PC Liquids business in the previous financial year, liabilities for specific future redundancy remained with McBride. These were implemented in the first half-year by
This project is now closed with no further costs expected.
Finance Costs
Finance costs of
Profit Before Tax and Tax Rate
Reported profit before taxation from continuing operations was
Earnings per Share
On an adjusted basis, diluted earnings per share (EPS) from continuing operations fell versus prior year to
Payments to Shareholders
The Group's current policy on payments to shareholders is to distribute adjusted earnings to shareholders based on a dividend cover range of 2x-3x progressive with earnings of the Group, taking into account funding availability. As a result, a payment to shareholders of
The Board has initiated a dividend policy review as part of the overall strategy review, which will include consultation with major shareholders, on which we expect to report in
Continuing Operations - Segmental Performance
As previously advised, our
Household
Reported revenues decreased 2.1% to
Adjusted operating profit for the Household business was
|
Half-year to |
Half-year to |
|
|
|
31 Dec |
31 Dec |
|
|
|
2019 |
2018 |
Reported |
Constant |
Revenue |
£m |
£m |
change |
currency1 |
|
82.3 |
89.4 |
(7.9)% |
(7.9)% |
|
59.4 |
64.3 |
(7.6)% |
(6.8)% |
North |
52.7 |
55.3 |
(4.7)% |
(3.8)% |
South |
45.2 |
39.5 |
14.4% |
15.6% |
East |
82.7 |
82.2 |
0.6% |
1.6% |
|
12.1 |
10.9 |
11.0% |
11.0% |
|
334.4 |
341.6 |
(2.1)% |
(1.4)% |
1Comparatives translated at
In the
In the
In the North region, revenues of
Our South region reported revenues of
The East region, covering
Across the half-year to
Logistics costs as a percentage of revenues continued to increase, reflecting the higher distribution costs associated with our growing business in
In the first half-year, administrative overheads excluding exceptional items increased
Aerosols
Aerosols is now managed as a stand-alone business unit and is reported as a separate segment. This financial half-year saw the sale of the
Reported revenues were
Balance Sheet and Net Debt
Net debt excluding IFRS 16 decreased from
Trading working capital efficiencya has increased slightly to 12.4% (
Cash generated from operations before exceptional items was lower at
During the period, capital expenditure on property, plant and equipment increased by
Net assets reduced to
Return on capital employed (excluding IFRS 16) decreased to 13.4% compared to 15.3% at
a Trading working capital efficiency defined as inventories, trade receivables and trade payables as a percentage of sales.
b Gearing defined as the ratio of equity to net debt excluding IFRS 16.
Covenants
The Group's funding arrangements are subject to banking covenants, representations and warranties that are customary for unsecured borrowing facilities, including two financial covenants: Debt Cover (the ratio of net debt to EBITDAc) may not exceed 3:1 and Interest Cover (the ratio of EBITDA to net interest) may not be less than 4:1. For the purpose of these calculations, net debt excludes IFRS 16 leases and amounts drawn under the invoice discounting facilities. The Group remains well within these covenants. As at
c Earnings before interest, tax, depreciation and amortisation.
Pensions
The Group operates a funded defined benefit scheme in the
The Group has other unfunded post-employment benefit obligations outside the
Current Trading and Outlook
Our third quarter revenue run rates are as expected. Our revenue outlook remains in line with our expectations despite our markets remaining challenging. Material costs are tracking consistently with the first half year. The Board's expectations for the full year remain in line with our January trading update.
Principal Risks and Uncertainties
The Group is subject to risk factors both internal and external to its business, and has a well-established set of risk management procedures. The following risks and uncertainties are those that the Directors believe could have the most significant impact on the Group's business:
· Consumer and customer trends;
· Market competitiveness;
· Input costs;
· Legislation;
· Financial risks;
· Breach of IT security;
· Supply chain risk relating to COVID-19; and
· Brexit impacts.
Cautionary Statement
This announcement contains forward-looking statements that are subject to risk factors associated with, among other things the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward-looking statements in this announcement will be realised.
The forward-looking statements reflect the knowledge and information available at the date of preparation of this announcement and the Company undertakes no obligation to update these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
· The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;
· The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7 of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8 of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any material changes in the related party transactions described in the last annual report that could do so.
On behalf of the Board
|
Condensed interim consolidated income statement
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
Continuing operations |
Note |
£m |
£m |
£m |
Revenue |
4 |
350.4 |
369.2 |
721.3 |
Cost of sales |
|
(232.4) |
(248.2) |
(480.9) |
Gross profit |
|
118.0 |
121.0 |
240.4 |
Distribution costs |
|
(28.7) |
(28.0) |
(56.6) |
Administrative expenses |
|
(80.8) |
(77.4) |
(157.2) |
Operating profit |
|
8.5 |
15.6 |
26.6 |
Finance costs |
|
(1.9) |
(2.3) |
(4.6) |
Profit before taxation |
|
6.6 |
13.3 |
22.0 |
Taxation |
5 |
(2.9) |
(4.1) |
(10.0) |
Profit for the period from continuing operations |
|
3.7 |
9.2 |
12.0 |
|
|
|
|
|
Discontinued operations |
|
|
|
|
Loss for the period from discontinued operations |
|
(0.3) |
(0.3) |
(3.9) |
|
|
|
|
|
Profit for the period |
|
3.4 |
8.9 |
8.1 |
|
|
|
|
|
Earnings per ordinary share from continuing and discontinued operations attributable to the owners of the parent during the period
|
|
|
|
|
Basic earnings per share |
6 |
|
|
|
From continuing operations |
|
2.0p |
5.0p |
6.5p |
From discontinued operations |
|
(0.1)p |
(0.1)p |
(2.1)p |
From profit for the period |
|
1.9p |
4.9p |
4.4p |
|
|
|
|
|
Diluted earnings per share |
6 |
|
|
|
From continuing operations |
|
2.0p |
5.0p |
6.5p |
From discontinued operations |
|
(0.1)p |
(0.1)p |
(2.1)p |
From profit for the period |
|
1.9p |
4.9p |
4.4p |
|
|
|
|
|
Continuing operating profit |
|
8.5 |
15.6 |
26.6 |
Adjusted for: |
|
|
|
|
Amortisation of intangible assets |
|
1.0 |
0.9 |
1.9 |
Exceptional items |
7 |
2.1 |
0.3 |
0.4 |
Adjusted operating profit |
|
11.6 |
16.8 |
28.9 |
|
|
|
|
|
Continuing profit before taxation |
|
6.6 |
13.3 |
22.0 |
Adjusted for: |
|
|
|
|
Amortisation of intangible assets |
|
1.0 |
0.9 |
1.9 |
Exceptional items |
7 |
2.1 |
0.3 |
0.4 |
Unwind of discount on provisions |
|
- |
- |
0.2 |
Adjusted profit before taxation |
|
9.7 |
14.5 |
24.5 |
Condensed interim consolidated statement of comprehensive income
|
Unaudited |
Unaudited |
Audited |
|
Half year to |
Half year to |
Year ended |
|
31 Dec |
31 Dec |
30 June |
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
Profit for the period |
3.4 |
8.9 |
8.1 |
Other comprehensive income/(expense) |
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
Currency translation differences on foreign subsidiaries |
(3.4) |
1.2 |
0.6 |
Gain/(loss) on net investment hedges |
2.7 |
(1.4) |
(0.9) |
(Loss)/gain on cash flow hedges |
(0.5) |
0.1 |
(0.2) |
(Loss)/gain on cash flow hedges transferred to profit or loss |
(0.1) |
- |
0.2 |
Taxation relating to items above |
0.2 |
- |
- |
|
(1.1) |
(0.1) |
(0.3) |
Items that will not be reclassified to profit or loss: |
|
|
|
Net actuarial loss on post-employment benefits |
(2.5) |
(0.7) |
(3.5) |
Taxation relating to item above |
0.4 |
0.1 |
0.5 |
|
(2.1) |
(0.6) |
(3.0) |
Total other comprehensive expense |
(3.2) |
(0.7) |
(3.3) |
Total comprehensive income for the period attributable to owners of the Parent |
0.2 |
8.2 |
4.8 |
|
|
|
|
|
|
|
|
Total comprehensive income/(expense) attributable to equity shareholders arises from: |
|
|
|
Continuing operations |
0.5 |
8.5 |
8.7 |
Discontinued operations |
(0.3) |
(0.3) |
(3.9) |
|
0.2 |
8.2 |
4.8 |
Condensed interim consolidated balance sheet
|
|
Unaudited |
Unaudited |
Audited |
|
|
as at |
as at |
as at |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
|
Note |
£m |
£m |
£m |
Non-current assets |
|
|
|
|
|
8 |
20.3 |
20.6 |
20.4 |
Other intangible assets |
8 |
8.8 |
9.4 |
9.1 |
Property, plant and equipment |
8 |
128.1 |
134.9 |
136.0 |
Right-of-use assets |
2 |
6.7 |
- |
- |
Derivative financial instruments |
9 |
0.1 |
- |
0.1 |
Deferred tax assets |
|
11.9 |
12.3 |
10.9 |
Other non-current assets |
|
0.5 |
0.6 |
0.6 |
|
|
176.4 |
177.8 |
177.1 |
Current assets |
|
|
|
|
Inventories |
|
90.2 |
95.2 |
95.0 |
Trade and other receivables |
|
132.5 |
140.8 |
145.9 |
Current tax asset |
|
8.3 |
0.8 |
2.1 |
Derivative financial instruments |
9 |
0.2 |
0.7 |
0.6 |
Cash and cash equivalents |
10 |
13.5 |
15.3 |
14.4 |
|
|
244.7 |
252.8 |
258.0 |
Total assets |
|
421.1 |
430.6 |
435.1 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
165.1 |
194.0 |
182.3 |
Borrowings |
9 |
31.5 |
39.1 |
43.5 |
Lease liabilities |
2 |
3.0 |
- |
- |
Derivative financial instruments |
9 |
0.7 |
0.2 |
0.3 |
Current tax liabilities |
|
16.6 |
8.6 |
7.4 |
Provisions |
|
1.1 |
3.9 |
3.7 |
|
|
218.0 |
245.8 |
237.2 |
Non-current liabilities |
|
|
|
|
Borrowings |
9 |
95.5 |
74.2 |
91.8 |
Lease liabilities |
2 |
5.2 |
- |
- |
Derivative financial instruments |
9 |
0.3 |
0.3 |
0.4 |
Pensions and other post-employment benefits |
11 |
31.8 |
30.8 |
31.1 |
Provisions |
|
3.7 |
3.8 |
4.2 |
Deferred tax liabilities |
|
5.7 |
5.1 |
6.2 |
|
|
142.2 |
114.2 |
133.7 |
Total liabilities |
|
360.2 |
360.0 |
370.9 |
Net assets |
|
60.9 |
70.6 |
64.2 |
|
|
|
|
|
Equity |
|
|
|
|
Issued share capital |
|
18.3 |
18.3 |
18.3 |
Share premium account |
|
70.6 |
76.7 |
73.9 |
Other reserves |
|
72.1 |
67.2 |
69.9 |
Accumulated loss |
|
(100.1) |
(91.6) |
(97.9) |
Total equity |
|
60.9 |
70.6 |
64.2 |
Condensed interim consolidated cash flow statement
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
|
Note |
£m |
£m |
£m |
Operating activities |
|
|
|
|
Profit before tax |
|
6.3 |
11.2 |
16.2 |
Finance costs |
|
1.9 |
2.3 |
4.6 |
Exceptional items |
7 |
2.4 |
2.1 |
5.4 |
Share-based payments charge/(credit) |
|
0.2 |
0.3 |
(0.2) |
Depreciation of property, plant and equipment |
8 |
8.6 |
9.0 |
18.4 |
Depreciation of right-of-use assets |
2 |
1.7 |
- |
- |
Amortisation of intangible assets |
8 |
1.0 |
0.9 |
1.9 |
Profit on disposal of property, plant and equipment |
|
(0.6) |
- |
- |
Operating cash flow before changes in working capital |
|
21.5 |
25.8 |
46.3 |
Decrease in receivables |
|
9.0 |
16.3 |
8.1 |
Decrease/(increase) in inventories |
|
0.9 |
(5.9) |
(3.6) |
Decrease in payables |
|
(11.6) |
(9.4) |
(20.9) |
Operating cash flow after changes in working capital |
|
19.8 |
26.8 |
29.9 |
Additional cash funding of pension schemes |
|
(2.0) |
(1.5) |
(4.2) |
Cash flow from operations before exceptional items |
|
17.8 |
25.3 |
25.7 |
Cash outflow in respect of exceptional items |
|
(3.0) |
(2.1) |
(6.9) |
Cash generated from operations |
|
14.8 |
23.2 |
18.8 |
Interest paid |
|
(1.5) |
(1.7) |
(4.3) |
Taxation paid |
|
(1.4) |
(1.6) |
(7.2) |
Net cash generated from operating activities |
|
11.9 |
19.9 |
7.3 |
|
|
|
|
|
Investing activities |
|
|
|
|
Proceeds from sale of |
|
3.0 |
- |
- |
Proceeds from sale of property, plant and equipment |
|
0.2 |
- |
- |
Proceeds from sale of Solaro |
|
- |
1.6 |
1.6 |
Proceeds from sale of PC Liquids |
|
- |
11.5 |
12.5 |
Purchase of property, plant and equipment |
|
(9.1) |
(7.9) |
(17.1) |
Purchase of intangible assets |
|
(1.0) |
(0.9) |
(1.6) |
Sale of plant and equipment in |
|
- |
- |
0.8 |
Settlement of derivatives used in net investment hedging |
|
2.6 |
(1.4) |
(0.8) |
Net cash (used)/generated in investing activities |
|
(4.3) |
2.9 |
(4.6) |
|
|
|
|
|
Financing activities |
|
|
|
|
Redemption of B Shares |
|
(3.3) |
(5.7) |
(8.6) |
Net (repayment)/drawdown of borrowings |
|
(2.6) |
(13.6) |
8.9 |
Repayment of IFRS 16 lease obligations |
|
(1.9) |
- |
- |
Purchase of own shares |
|
(0.1) |
- |
- |
Capital element of finance lease rentals |
|
- |
(0.1) |
(0.2) |
Net cash (used)/generated in financing activities |
|
(7.9) |
(19.4) |
0.1 |
(Decrease)/increase in net cash and cash equivalents |
|
(0.3) |
3.4 |
2.8 |
Net cash and cash equivalents at the start of the period |
|
14.4 |
11.7 |
11.7 |
Currency translation differences |
|
(0.6) |
0.2 |
(0.1) |
Net cash and cash equivalents at the end of the period |
|
13.5 |
15.3 |
14.4 |
Condensed interim consolidated statement of changes in equity
|
Issued share capital £m |
Share premium account £m |
Other reserves |
Accumulated losses £m |
Total equity £m |
||
Cash flow hedge reserve £m |
Currency translation reserve £m |
Capital redemption reserve £m |
|||||
At |
18.3 |
73.9 |
- |
(0.9) |
70.8 |
(97.9) |
64.2 |
IFRS 16 Transition (note 2) |
- |
- |
- |
- |
- |
0.6 |
0.6 |
IFRIC 23 Transition (note 2) |
- |
- |
- |
- |
- |
(0.9) |
(0.9) |
At |
18.3 |
73.9 |
- |
(0.9) |
70.8 |
(98.2) |
63.9 |
Profit for the period |
- |
- |
- |
- |
- |
3.4 |
3.4 |
Other comprehensive income/(expense) |
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
|
|
|
|
Currency translation differences on foreign subsidiaries |
- |
- |
- |
(3.4) |
- |
- |
(3.4) |
Gain on net investment hedges |
- |
- |
- |
2.7 |
- |
- |
2.7 |
Loss on cash flow hedges in the period |
- |
- |
(0.5) |
- |
- |
- |
(0.5) |
Loss on cash flow hedges transferred to profit or loss |
- |
- |
(0.1) |
- |
- |
- |
(0.1) |
Taxation relating to items above |
- |
- |
0.2 |
- |
- |
- |
0.2 |
|
- |
- |
(0.4) |
(0.7) |
- |
- |
(1.1) |
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
Net actuarial loss on post‑employment benefits |
- |
- |
- |
- |
- |
(2.5) |
(2.5) |
Taxation relating to item above |
- |
- |
- |
- |
- |
0.4 |
0.4 |
|
- |
- |
- |
- |
- |
(2.1) |
(2.1) |
Total other comprehensive expense |
- |
- |
(0.4) |
(0.7) |
- |
(2.1) |
(3.2) |
Total comprehensive (expense)/income |
- |
- |
(0.4) |
(0.7) |
- |
1.3 |
0.2 |
Transactions with owners of the parent |
|
|
|
|
|
|
|
Issue of B Shares |
- |
(3.3) |
- |
- |
- |
- |
(3.3) |
Redemption of B Shares |
- |
- |
- |
- |
3.3 |
(3.3) |
- |
Share-based payments |
- |
- |
- |
- |
- |
0.2 |
0.2 |
Purchase of own shares |
- |
- |
- |
- |
- |
(0.1) |
(0.1) |
At |
18.3 |
70.6 |
(0.4) |
(1.6) |
74.1 |
(100.1) |
60.9 |
|
Issued share capital £m |
Share premium account £m |
Other reserves |
Accumulated losses £m |
Total equity £m |
||
Cash flow hedge reserve £m |
Currency translation reserve £m |
Capital redemption reserve £m |
|||||
At |
18.3 |
81.8 |
- |
(0.6) |
62.2 |
(94.1) |
67.6 |
IFRS 15 transition |
- |
- |
- |
- |
- |
(0.4) |
(0.4) |
At |
18.3 |
81.8 |
- |
(0.6) |
62.2 |
(94.5) |
67.2 |
Profit for the period |
- |
- |
- |
- |
- |
8.9 |
8.9 |
Other comprehensive income/(expense) |
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
|
|
|
|
Currency translation differences on foreign subsidiaries |
- |
- |
- |
1.2 |
- |
- |
1.2 |
Loss on net investment hedges |
- |
- |
- |
(1.4) |
- |
- |
(1.4) |
Gain on cash flow hedges in the period |
- |
- |
0.1 |
- |
- |
- |
0.1 |
|
- |
- |
0.1 |
(0.2) |
- |
- |
(0.1) |
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
Net actuarial loss on post‑employment benefits |
- |
- |
- |
- |
- |
(0.7) |
(0.7) |
Taxation relating to item above |
- |
- |
- |
- |
- |
0.1 |
0.1 |
|
- |
- |
- |
- |
- |
(0.6) |
(0.6) |
Total other comprehensive income/(expense) |
- |
- |
0.1 |
(0.2) |
- |
(0.6) |
(0.7) |
Total comprehensive income/(expense) |
- |
- |
0.1 |
(0.2) |
- |
8.3 |
8.2 |
Transactions with owners of the parent |
|
|
|
|
|
|
|
Issue of B Shares |
- |
(5.1) |
- |
- |
- |
- |
(5.1) |
Redemption of B Shares |
- |
- |
- |
- |
5.7 |
(5.7) |
- |
Share-based payments |
- |
- |
- |
- |
- |
0.3 |
0.3 |
At 31 December 2018 |
18.3 |
76.7 |
0.1 |
(0.8) |
67.9 |
(91.6) |
70.6 |
|
Issued share capital £m |
Share premium account £m |
Other reserves |
Accumulated losses £m |
Total equity £m |
||
Cash flow hedge reserve £m |
Currency translation reserve £m |
Capital redemption reserve £m |
|||||
At 30 June 2018 |
18.3 |
81.8 |
- |
(0.6) |
62.2 |
(94.1) |
67.6 |
IFRS 15 transition |
- |
- |
- |
- |
- |
(0.4) |
(0.4) |
At 1 July 2018 |
18.3 |
81.8 |
- |
(0.6) |
62.2 |
(94.5) |
67.2 |
Profit for the year |
- |
- |
- |
- |
- |
8.1 |
8.1 |
Other comprehensive |
|
|
|
|
|
|
|
income/(expense) |
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
|
|
|
|
Currency translation differences on foreign subsidiaries |
- |
- |
- |
0.6 |
- |
- |
0.6 |
Loss on net investment hedges |
- |
- |
- |
(0.9) |
- |
- |
(0.9) |
Loss on cash flow hedges in the year |
- |
- |
(0.2) |
- |
- |
- |
(0.2) |
Gain on cash flow hedges transferred to profit or loss |
- |
- |
0.2 |
- |
- |
- |
0.2 |
Taxation relating to items above |
- |
- |
- |
- |
- |
- |
- |
|
- |
- |
- |
(0.3) |
- |
- |
(0.3) |
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
Net actuarial loss on post-employment benefits |
- |
- |
- |
- |
- |
(3.5) |
(3.5) |
Taxation relating to item above |
- |
- |
- |
- |
- |
0.5 |
0.5 |
|
- |
- |
- |
- |
- |
(3.0) |
(3.0) |
Total other comprehensive expense |
- |
- |
- |
(0.3) |
- |
(3.0) |
(3.3) |
Total comprehensive income/(expense) |
- |
- |
- |
(0.3) |
- |
5.1 |
4.8 |
Transactions with owners of the parent |
|
|
|
|
|
|
|
Issue of B Shares |
- |
(7.9) |
- |
- |
- |
- |
(7.9) |
Redemption of B Shares |
- |
- |
- |
- |
8.6 |
(8.6) |
- |
Share-based payments |
- |
- |
- |
- |
- |
0.1 |
0.1 |
At 30 June 2019 |
18.3 |
73.9 |
- |
(0.9) |
70.8 |
(97.9) |
64.2 |
Notes to the condensed interim financial statements
1. Basis of preparation
The Company and its subsidiaries (together, 'the Group') is
This half-year report has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority; IAS 34 'Interim Financial Reporting' as adopted by the
The results for each half year are unaudited and do not represent the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006. The interim financial information has been reviewed, not audited. The Group's statutory accounts were approved by the Directors on 5 September 2019 and have been reported on by
Going concern basis
The Group meets its funding requirements through internal cash generation and bank credit facilities, most of which are committed until June 2022.
At 31 December 2019, committed undrawn facilities and net cash position amounted to £62.3 million. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate well within its current bank facilities.
The Group has a reasonable level of debt compared to earnings. As a result, the Directors believe that the Group is well placed to manage its business risks successfully. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis.
The condensed interim consolidated financial statements were approved by the Board on 20 February 2020.
2. Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 June 2019 except for the following described below.
The Group has applied the following standards and amendments for the first time for the annual reporting period commencing 1 July 2019:
· IFRS 16, 'Leases' (effective 1 January 2019, not yet endorsed by EU); and
· IFRIC 23, 'Uncertainty over Income Tax Treatments'.
IFRS 16 'Leases'
The Group has adopted this new standard with the modified retrospective approach from 1 July 2019 with the cumulative net effect of initial application being an adjustment to the opening balance of retained earnings as at 1 July 2019. Comparative information has not been restated and is presented, as previously reported, under IAS 17 and therefore may not be directly comparable.
The Group currently leases both properties and vehicles, comprising cars and commercial vehicles, which under IAS 17, were classified as a series of operating lease contracts with payments made (net of any incentives received from the lessor) charged to profit or loss on a straight-line basis over the period of the lease.
From 1 July 2019, under IFRS 16, leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.
For leases, the liabilities were measured at the present value of the remaining lease payments, discounted, in the absence of a rate implicit in the lease, at the Group's incremental borrowing rate on the current facility as of 1 July 2019, adjusted for risk weighting by country, currency, size of asset and credit risk. The discount rate applied therefore differs by lease and ranges from 1.6% to 4.9%.
The associated right-of-use assets were measured using the approach set out in IFRS 16.C8(b)(ii), whereby right-of-use assets are equal to the lease liabilities, adjusted by the amount of onerous lease contracts that required an adjustment to the right-of-use assets at the date of initial application.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period using the effective interest method. The right-of-use asset is depreciated on a straight-line basis over the shorter of the asset's useful life and the lease term.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
· In determining whether existing contracts meet the definition of a lease, the Group will not reassess those contracts previously identified as leases and will not apply the standard to those contracts not previously assessed as leases.
· Leases with less than 12 months remaining as at the date of adoption of the new standard will not be within the scope of IFRS 16.
· The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
· To rely on its assessment of whether leases are onerous applying IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' rather than performing an impairment review.
In addition the Group has elected to make use of the following exemptions in IFRS 16:
· Short-term leases (12 months or less from commencement) will not be within the scope of IFRS 16.
· Leases for which the asset is of low value (IT equipment and small items of office equipment) will not be within the scope of IFRS 16.
The effect of IFRS 16 adoption is as follows:
Impact on the statement of financial position as at 1 July 2019:
|
|
As at 30 June |
IFRS 16 |
As at 1 July |
|
|
2019 |
adjustment |
2019 |
|
|
£m |
£m |
£m |
Non-current assets |
|
|
|
|
Right-of-use assets |
|
- |
7.9 |
7.9 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Lease liabilities |
|
- |
3.0 |
3.0 |
Provisions |
|
3.7 |
(0.5) |
3.2 |
Non-current liabilities |
|
|
|
|
Lease liabilities |
|
- |
6.4 |
6.4 |
Provisions |
|
4.2 |
(1.6) |
2.6 |
Net assets |
|
64.2 |
0.6 |
64.8 |
|
|
|
|
|
Equity |
|
|
|
|
Accumulated loss |
|
(97.9) |
0.6 |
(97.3) |
Total equity |
|
64.2 |
0.6 |
64.8 |
£2.1 million (£0.5m current and £1.6m non-current) of provisions held on the balance sheet for onerous leases at 30 June 2019 have been reversed under the transitional practical expedient and offset to impair the respective right-of-use asset.
A reconciliation of the revised operating lease commitments as disclosed at 30 June 2019 under IAS 17 to the lease liabilities at 1 July 2019 under IFRS 16 is as follows:
|
|
£m |
Operating lease commitments under IAS 17 at 30 June 2019 |
|
8.5 |
Additional contract leases identified as part of ongoing IFRS 16 assessment |
|
2.3 |
Adjusted operating lease commitments under IAS 17 at 30 June 2019 |
|
10.8 |
Discounted using the Group's incremental borrowing rate at 1 July 2019 |
|
(0.5) |
Less: Short-term leases recognised as an expense on a straight-line basis |
|
(0.4) |
Less: Low value leases recognised as an expense on a straight-line basis |
|
(0.5) |
Lease liabilities at 1 July 2019 |
|
9.4 |
For the six months ended 31 December 2019 the application of IFRS 16 resulted in a £0.1 million increase in profit before tax. The table below shows a reconciliation of the impact on profit under IAS 17 and IFRS 16:
|
|
|
|
£m |
Operating lease costs under IAS 17 |
|
|
|
1.9 |
Less: Depreciation of right-of-use assets |
|
|
|
(1.7) |
Less: Finance costs associated with IFRS 16 lease liabilities |
|
|
|
(0.1) |
Profit before tax |
|
|
|
0.1 |
During the six months to 31 December 2019 the movements in the right-of-use assets and lease liabilities are as follows:
|
|
|
|
As at 31 Dec |
|
|
|
|
2019 |
|
|
|
|
£m |
Right-of-use assets |
|
|
|
|
Opening net book value |
|
|
|
7.9 |
New leases recognised |
|
|
|
0.7 |
Exchange movements |
|
|
|
(0.2) |
Depreciation |
|
|
|
(1.7) |
Closing net book value |
|
|
|
6.7 |
|
|
|
|
|
Lease liabilities |
|
|
|
|
Opening liabilities |
|
|
|
9.4 |
New leases recognised |
|
|
|
0.7 |
Lease payments |
|
|
|
(1.9) |
Exchange movements |
|
|
|
(0.1) |
Finance costs |
|
|
|
0.1 |
Closing liabilities |
|
|
|
8.2 |
|
|
|
|
|
IFRIC 23 'Uncertainty over Income Tax Treatments'
IFRIC 23 changes the method of calculating provisions for uncertain tax positions. The Group previously recognised provisions based on the most likely amount of the liability, if any, for each separate uncertain tax position. The interpretation requires a probability weighted average approach to be taken in situations where there is a wide range of possible outcomes. For tax issues with a binary outcome, the most likely amount method remains in use.
The Group has implemented the interpretation using the modified retrospective approach, with the cumulative impact of application recognised at 1 July 2019 without restatement of comparatives. The effect of this was an increase to the provision for uncertain tax positions of £0.9 million. The Group has updated its accounting policy to reflect the requirements of the interpretation.
Use of adjusted measures
The Group believes that adjusted operating profit, adjusted profit before taxation and adjusted earnings per share provide additional useful information to shareholders on the underlying performance achieved by the Group. These measures are used for internal performance analysis and short and long-term incentive arrangements for employees. Adjusting items include amortisation of intangible assets, exceptional items, any non-cash financing costs from the unwinding of the discount on provisions, exceptional tax charges and tax related to those items.
Taxation
Taxation in the interim period is accrued using the tax rate that would be applicable to the expected annual profit or loss.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the condensed interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 30 June 2019.
4. Segment information
Financial information is presented to the Board by product category for the purposes of allocating resources within the Group and assessing the performance of the Group's businesses. It is considered that Household products have different market characteristics to Aerosols in terms of volumes, market share and production requirements. Accordingly, the Group's operating segments are determined by product category, being Household and Personal Care & Aerosols.
Corporate costs, which include the costs associated with the Board and the Executive Leadership Team, governance and listed company costs and certain central functions (mostly associated with financial disciplines such as treasury), are reported separately to Household and Aerosols.
The Board uses adjusted operating profit to measure the profitability of the Group's businesses. Adjusted operating profit is, therefore, the measure of segment profit presented in the Group's segment disclosures. Adjusted operating profit represents operating profit before specific items that are considered to hinder comparison of the trading performance of the Group's businesses either period-on-period or with other businesses. During the periods under review, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangible assets and exceptional items.
Following the disposal of the Group's PC Liquids assets in the prior period, the respective results of this division are disclosed as a discontinued operation.
Analysis by reportable segment
|
|
|
|
|
|
|
Operating segments |
|
|
|
|||||||
|
Household - Regions |
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
Total |
Personal Care & Aerosols(4) |
Total |
|
Total |
||||||
|
|
|
North(1) |
South(2) |
East(3) |
|
Household |
segments |
Corporate(5) |
Group |
|||||||
31 December 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
||||||
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
||||||
Segment revenue |
82.3 |
59.4 |
52.7 |
45.2 |
82.7 |
12.1 |
334.4 |
16.0 |
350.4 |
- |
350.4 |
||||||
Adjusted operating profit/(loss) |
|
|
|
|
|
|
14.9 |
0.4 |
15.3 |
(3.7) |
11.6 |
||||||
Amortisation of intangible assets |
|
|
|
|
|
|
|
|
|
|
(1.0) |
||||||
Exceptional items (see note 7) |
|
|
|
|
|
|
|
|
|
|
(2.1) |
||||||
Operating profit |
|
|
|
|
|
|
|
|
|
|
8.5 |
||||||
Finance costs |
|
|
|
|
|
|
|
|
|
|
(1.9) |
||||||
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
6.6 |
||||||
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
||||||
Segmental revenue |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||
Adjusted operating loss |
|
|
|
|
|
|
- |
- |
- |
- |
- |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Inventories |
|
|
|
|
|
|
85.2 |
5.0 |
90.2 |
- |
90.2 |
||||||
Capital expenditure |
|
|
|
|
|
|
9.5 |
0.2 |
9.7 |
- |
9.7 |
||||||
Amortisation and depreciation* |
|
|
|
|
|
|
11.2 |
0.1 |
11.3 |
- |
11.3 |
||||||
*Depreciation includes £1.7m of depreciation from IFRS 16 right-of-use assets.
|
|
|
|
|
|
|
Operating segments |
|
|
|
||||||
|
Household - Regions |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
Total |
Personal Care & Aerosols(4) |
Total |
|
Total |
|||||
|
|
|
North(1) |
South(2) |
East(3) |
|
Household |
segments |
Corporate(5) |
Group |
||||||
31 December 2018(6) |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|||||
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|||||
Segment revenue |
89.4 |
64.3 |
55.3 |
39.5 |
82.2 |
10.9 |
341.6 |
27.6 |
369.2 |
- |
369.2 |
|||||
Adjusted operating profit/(loss) |
|
|
|
|
|
|
22.5 |
(1.9) |
20.6 |
(3.8) |
16.8 |
|||||
Amortisation of intangible assets |
|
|
|
|
|
|
|
|
|
|
(0.9) |
|||||
Exceptional items (see note 7) |
|
|
|
|
|
|
|
|
|
|
(0.3) |
|||||
Operating profit |
|
|
|
|
|
|
|
|
|
|
15.6 |
|||||
Finance costs |
|
|
|
|
|
|
|
|
|
|
(2.3) |
|||||
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
13.3 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|||||
Segmental revenue |
- |
- |
- |
- |
- |
- |
- |
21.9 |
21.9 |
- |
21.9 |
|||||
Adjusted operating loss |
|
|
|
|
|
|
- |
(0.3) |
(0.3) |
- |
(0.3) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Inventories |
|
|
|
|
|
|
90.9 |
4.3 |
95.2 |
- |
95.2 |
|||||
Capital expenditure |
|
|
|
|
|
|
7.9 |
0.9 |
8.8 |
- |
8.8 |
|||||
Amortisation and depreciation |
|
|
|
|
|
|
9.8 |
0.1 |
9.9 |
- |
9.9 |
|||||
|
|
|
|
|
|
|
Operating segments |
|
|
|
|||||||
|
Household - Regions |
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
Total |
Personal Care & Aerosols(4) |
Total |
|
Total |
||||||
|
|
|
North(1) |
South(2) |
East(3) |
|
Household |
segments |
Corporate(5) |
Group |
|||||||
30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
||||||
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
||||||
Segment revenue |
173.1 |
122.0 |
111.3 |
79.4 |
166.4 |
21.4 |
673.6 |
47.7 |
721.3 |
- |
721.3 |
||||||
Adjusted operating |
|
|
|
|
|
|
|
|
|
|
|
||||||
profit/(loss) |
|
|
|
|
|
|
39.9 |
(4.0) |
35.9 |
(7.0) |
28.9 |
||||||
Amortisation of |
|
|
|
|
|
|
|
|
|
|
|
||||||
intangible assets |
|
|
|
|
|
|
|
|
|
|
(1.9) |
||||||
Exceptional items |
|
|
|
|
|
|
|
|
|
|
|
||||||
(see note 7) |
|
|
|
|
|
|
|
|
|
|
(0.4) |
||||||
Operating profit |
|
|
|
|
|
|
|
|
|
|
26.6 |
||||||
Finance costs |
|
|
|
|
|
|
|
|
|
|
(4.6) |
||||||
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
22.0 |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
||||||
Segmental revenue |
- |
- |
- |
- |
- |
- |
- |
21.9 |
21.9 |
- |
21.9 |
||||||
Adjusted operating loss |
|
|
|
|
|
|
- |
(0.8) |
(0.8) |
- |
(0.8) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Inventories |
|
|
|
|
|
|
90.3 |
4.7 |
95.0 |
- |
95.0 |
||||||
Capital expenditure |
|
|
|
|
|
|
17.1 |
1.6 |
18.7 |
- |
18.7 |
||||||
Amortisation and depreciation |
|
|
|
|
|
|
20.1 |
0.2 |
20.3 |
- |
20.3 |
||||||
1.
2.
3.
4. Continuing operations relates to Aerosols activity only.
5. Corporate represents costs related to the Board, the Executive Leadership Team and key supporting functions.
6. 2018 comparatives have been restated to reflect the revised reportable segments.
5. Taxation
The tax charge for the year on the continuing adjusted profit before tax of £2.9 million (30 June 2019: £6.8m) reflects an effective tax rate of 30% (30 June 2019: 28%) on continuing adjusted profit before taxation of £9.7 million (30 June 2019: £24.5m).
6. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit for the period attributable to owners of the Company by the weighted average number of the Company's ordinary shares in issue during the financial period. The weighted average number of the Company's ordinary shares in issue excludes 42,041 shares (2018: 135,630 shares), being the weighted average number of own shares held during the year in relation to employee share schemes.
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
Reference |
2019 |
2018 |
2019 |
Weighted average number of ordinary shares in issue (million) |
a |
182.8 |
182.8 |
182.8 |
Effect of dilutive share incentive plans (million) |
|
0.1 |
0.1 |
0.1 |
Weighted average number of ordinary shares for calculating diluted earnings per share (million) |
b |
182.9 |
182.9 |
182.9 |
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming the conversion of all potentially dilutive ordinary shares. During the period, the Company had both equity-settled Long Term Incentive Plan (LTIP) awards and Deferred Annual Bonus Plan awards (together the "share incentive plans") that are potentially dilutive ordinary shares.
Adjusted earnings per share measures are calculated based on profit for the year attributable to owners of the Company before adjusting items as follows:
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
From continuing operations |
Reference |
£m |
£m |
£m |
Earnings for calculating basic and diluted earnings per share |
c |
3.7 |
9.2 |
12.0 |
Adjusted for: |
|
|
|
|
Amortisation of intangible assets |
|
1.0 |
0.9 |
1.9 |
Exceptional items (see note 7) |
|
2.1 |
0.3 |
0.4 |
Unwind of discount on provisions |
|
- |
- |
0.2 |
Taxation relating to the above items |
|
(0.1) |
(0.1) |
(0.9) |
Exceptional items - taxation |
|
- |
- |
4.1 |
Earnings for calculating adjusted earnings per share |
d |
6.7 |
10.3 |
17.7 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
|
Reference |
pence |
pence |
pence |
Basic earnings per share |
c/a |
2.0 |
5.0 |
6.5 |
Diluted earnings per share |
c/b |
2.0 |
5.0 |
6.5 |
Adjusted basic earnings per share |
d/a |
3.7 |
5.6 |
9.7 |
Adjusted diluted earnings per share |
d/b |
3.7 |
5.6 |
9.7 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
From discontinued operations |
Reference |
£m |
£m |
£m |
Earnings for calculating basic and diluted earnings per share |
c |
(0.3) |
(0.3) |
(3.9) |
Adjusted for: |
|
|
|
|
Exceptional items (see note 7) |
|
0.3 |
1.8 |
5.0 |
Taxation relating to the above items |
|
- |
(1.7) |
(1.7) |
Earnings for calculating adjusted earnings per share |
d |
- |
(0.2) |
(0.6) |
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
|
Reference |
pence |
pence |
pence |
Basic earnings per share |
c/a |
(0.1) |
(0.1) |
(2.1) |
Diluted earnings per share |
c/b |
(0.1) |
(0.1) |
(2.1) |
Adjusted basic earnings per share |
d/a |
- |
(0.1) |
(0.3) |
Adjusted diluted earnings per share |
d/b |
- |
(0.1) |
(0.3) |
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
Total attributable to ordinary shareholders |
Reference |
£m |
£m |
£m |
Earnings for calculating basic and diluted earnings per share |
c |
3.4 |
8.9 |
8.1 |
Adjusted for: |
|
|
|
|
Amortisation of intangible assets |
|
1.0 |
0.9 |
1.9 |
Exceptional items (see note 7) |
|
2.4 |
2.1 |
5.4 |
Unwind of discount on provisions |
|
- |
- |
0.2 |
Taxation relating to the above items |
|
(0.1) |
(1.8) |
(2.6) |
Exceptional items - taxation |
|
- |
- |
4.1 |
Earnings for calculating adjusted earnings per share |
d |
6.7 |
10.1 |
17.1 |
|
|
Unaudited |
Unaudited |
Audited |
|
|
Half year to |
Half year to |
Year ended |
|
|
31 Dec |
31 Dec |
30 June |
|
|
2019 |
2018 |
2019 |
|
Reference |
pence |
pence |
pence |
Basic earnings per share |
c/a |
1.9 |
4.9 |
4.4 |
Diluted earnings per share |
c/b |
1.9 |
4.9 |
4.4 |
Adjusted basic earnings per share |
d/a |
3.7 |
5.5 |
9.4 |
Adjusted diluted earnings per share |
d/b |
3.7 |
5.5 |
9.4 |
7. Exceptional items
|
Unaudited |
Unaudited |
Audited |
|
Half year to |
Half year to |
Year ended |
|
31 Dec |
31 Dec |
30 June |
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
Continuing operations |
|
|
|
Reorganisation and restructuring costs: |
|
|
|
Acquisition of Danlind |
- |
0.2 |
0.7 |
|
0.1 |
- |
(1.2) |
Factory footprint review |
1.2 |
- |
- |
Efficiency based restructuring |
0.8 |
- |
0.8 |
Other |
- |
0.1 |
0.1 |
Total charged to operating profit |
2.1 |
0.3 |
0.4 |
Reduction of ACT deferred tax asset |
- |
- |
4.1 |
Total charged to taxation |
- |
- |
4.1 |
Total continuing operations |
2.1 |
0.3 |
4.5 |
|
|
|
|
Discontinued operations |
|
|
|
Sale of PC Liquids business |
0.3 |
1.8 |
5.0 |
Total discontinued operations |
0.3 |
1.8 |
5.0 |
Total |
2.4 |
2.1 |
9.5 |
|
|
|
|
Exceptional items are presented separately as, due to their nature or the infrequency of the events giving rise to them, this allows users of the financial statements to understand better the elements of financial performance for the year, to facilitate comparison with prior periods, and to assess the trends of financial performance.
During the period ended 31 December 2019, the Group recognised total exceptional items of £2.4 million (2018: £2.1m), of which £2.1 million was from continuing operations as follows:
· exceptional charge of £0.1 million from the
· exceptional charge of £1.2 million incurred in respect of professional fees to undertake a review of the Group's factory footprint: and
· exceptional charge of £0.8 million for restructuring activities to reduce the operational cost base in the
The charges in relation to discontinued operations were as follows:
· As part of the sale agreement with
During the prior period ended 31 December 2018, the Group recognised £2.1 million of exceptional charges. The charges were made up of the following items:
· exceptional charge of £0.2 million incurred as part of the further integration of Danlind;
· exceptional gain of £0.1 million following the sale of the former manufacturing site in
· exceptional charge of £0.2 million incurred in respect of the equalisation of male and female Guaranteed Minimum Pension (GMP) entitlement. This is following the
The charges in relation to discontinued operations were as follows:
· £1.8 million of exceptional costs were incurred in relation to discontinued operations from the sale of the Group's PC Liquids activities. This was made up of £1.2 million in relation to termination and consultancy costs, and £0.6 million incurred as a loss on disposal of assets.
8. Property, plant and equipment and intangible assets
|
|
|
|
and other |
Property, |
|
intangible |
plant and |
|
assets |
equipment |
|
£m |
£m |
Net book value at 1 July 2019 (audited) |
29.5 |
136.0 |
Exchange movements |
(0.4) |
(5.5) |
Additions |
1.0 |
8.7 |
Disposal of |
- |
(2.1) |
Disposal of assets |
- |
(0.4) |
Depreciation charge |
- |
(8.6) |
Amortisation charge |
(1.0) |
- |
Net book value at 31 December 2019 (unaudited) |
29.1 |
128.1 |
Capital commitments as at 31 December 2019 amounted to £13.9 million (30 June 2019: £8.8m).
Impairment tests carried out during the period
The impairment review has been performed on the basis of the annual impairment review set out on pages 103 to 104 of the 2019 annual report. Management based its cash flow estimates on the Group's Board-approved forecast for the 2020 financial year. Discount rates applied to the cash flow projections were held in line with the discount rates at June 2019. Having performed the impairment tests, no impairment has been recognised for the period ended 31 December 2019 (year ended 30 June 2019: £nil).
As part of forming this conclusion a sensitivity analysis was performed which focused on the change required in key assumptions (long-term growth and the pre-tax discount rate), both individually and collectively, to give rise to an impairment.
In line with our conclusions at 30 June 2019, management estimates that in the case of all CGUs, a reduction in the perpetual growth rate to 0.0% would not result in an impairment charge. Management estimates that in the case of Household Powders and Tablets, an increase in the pre-tax discount rate from 11.7% to 19% would reduce the headroom in the CGU to nil but would not result in an impairment charge. No reasonable movement in the discount rate applied to the remaining CGUs would result in nil headroom or impairment.
Additionally, due to market conditions at the period end, a sensitivity has been applied to gross margin. A reduction in the forecast gross margin by 1.9 percentage points would reduce the headroom of the Powders and Tablets CGU to nil, but would not result in an impairment charge.
9. Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and they should be read in conjunction with the Group's annual financial statements as at 30 June 2019. There have been no material changes in the risk management policies since the year end.
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
· Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;
· Level 2 - inputs other than Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); and
· Level 3 - inputs that are not based on observable market data (unobservable inputs).
|
Unaudited |
Unaudited |
Audited |
|
as at |
as at |
as at |
|
31 Dec |
31 Dec |
30 June |
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
Assets |
|
|
|
Level 2: |
|
|
|
Derivative financial instruments |
|
|
|
Forward currency contracts |
0.2 |
0.7 |
0.7 |
Interest rate swaps |
0.1 |
- |
- |
Total financial assets |
0.3 |
0.7 |
0.7 |
Liabilities |
|
|
|
Level 2: |
|
|
|
Derivative financial instruments |
|
|
|
Forward currency contracts |
(0.7) |
(0.2) |
(0.3) |
Interest rate swaps |
(0.3) |
(0.3) |
(0.4) |
Total financial liabilities |
(1.0) |
(0.5) |
(0.7) |
Derivative financial instruments
Derivative financial instruments comprise the foreign currency derivatives, non-deliverable commodity derivatives and interest rate derivatives that are held by the Group in designated hedging relationships. Foreign currency forward contracts are measured by reference to prevailing forward exchange rates. Foreign currency options are measured using a variant of the
Valuation levels and techniques
There were no transfers between levels during the period and no changes in valuation techniques.
Financial assets and liabilities measured at amortised cost
The fair value of borrowings are as follows:
|
Unaudited |
Unaudited |
Audited |
|
as at |
as at |
as at |
|
31 Dec |
31 Dec |
30 June |
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
Current |
34.5* |
39.1 |
43.5 |
Non-current |
100.7* |
74.2 |
91.8 |
Total borrowings |
135.2 |
113.3 |
135.3 |
*Current borrowings includes £3.0 million of IFRS 16 lease liabilities due less than one year. Non-current borrowings includes £5.2 million of IFRS 16 lease liabilities due greater than one year.
The fair value of the following financial assets and liabilities approximate to their carrying amount:
· Trade and other receivables;
· Other current financial assets;
· Cash and cash equivalents; and
· Trade and other payables.
10. Net debt
|
Audited |
|
|
|
Unaudited |
|
as at |
|
|
|
as at |
|
30 June |
|
|
Exchange |
31 Dec |
|
2019 |
IFRS 16 non-cash movements* |
Cash flow |
differences |
2019 |
|
£m |
£m |
£m |
£m |
£m |
Cash and cash equivalents |
14.4 |
- |
(0.3) |
(0.6) |
13.5 |
Overdrafts |
(13.4) |
- |
9.0 |
0.5 |
(3.9) |
Bank and other loans |
(121.9) |
- |
(6.4) |
5.2 |
(123.1) |
Net debt (excluding IFRS 16) |
(120.9) |
- |
2.3 |
5.1 |
(113.5) |
IFRS 16 lease liabilities |
- |
(10.2) |
1.9 |
0.1 |
(8.2) |
Total net debt |
(120.9) |
(10.2) |
4.2 |
5.2 |
(121.7) |
*IFRS 16 non-cash movements includes the initial liability at adoption of the new standard (£9.4m), and additions (£0.7m) and interest charged (£0.1m).
11. Pensions and post-employment benefits
The Group provides a number of post-employment benefit arrangements. In the
At 31 December 2019, the Group recognised a deficit on its
Defined Benefit schemes had the following effect on the Group's results and financial position:
|
Unaudited |
Unaudited |
Audited |
|
Half year to |
Half year to |
Year ended |
|
31 Dec |
31 Dec |
30 June |
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
Profit or loss |
|
|
|
Service cost and administration expenses |
(0.4) |
(0.5) |
(1.3) |
Charge to operating profit |
(0.4) |
(0.5) |
(1.3) |
Net interest cost on defined benefit obligation |
(0.3) |
(0.4) |
(0.7) |
Charge to profit before taxation |
(0.7) |
(0.9) |
(2.0) |
Other comprehensive expense |
|
|
|
Net actuarial loss |
(2.5) |
(0.7) |
(3.5) |
Other comprehensive expense |
(2.5) |
(0.7) |
(3.5) |
|
Unaudited |
Unaudited |
Audited |
|
as at |
as at |
as at |
|
31 Dec |
31 Dec |
30 June |
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
Balance sheet |
|
|
|
Defined benefit obligations: |
|
|
|
|
(155.8) |
(141.0) |
(153.2) |
Other - unfunded |
(2.9) |
(2.5) |
(3.0) |
|
(158.7) |
(143.5) |
(156.2) |
Fair value of scheme assets |
126.9 |
112.7 |
125.1 |
Deficit on the schemes |
(31.8) |
(30.8) |
(31.1) |
For accounting purposes, the
12. Payments to shareholders
Payments to ordinary shareholders are made by way of the issue of B Shares in place of income distributions. Ordinary shareholders are able to redeem any number of the B Shares issued to them for cash. Any B Shares that they retain attract a dividend of 75% of LIBOR on the 0.1 pence nominal value of each share, paid on a twice-yearly basis.
Payments to ordinary shareholders made or proposed in respect of each period were as follows:
|
Unaudited |
Unaudited |
Audited |
|
Half year to |
Half year to |
Year ended |
|
31 Dec |
31 Dec |
30 June |
|
2019(1) |
2018 |
2019 |
Interim |
0.8p |
1.5p |
1.5p |
Final |
n/a |
n/a |
1.8p |
1Interim payment to shareholders that is not recognised within these condensed interim consolidated financial statements.
Movements in the B Shares were as follows:
|
|
Nominal |
|
Number |
value |
|
000 |
£m |
At 30 June 2018 (audited) |
1,560,374 |
1.5 |
Issued |
5,118,351 |
5.1 |
Redeemed |
(5,696,243) |
(5.6) |
At 31 December 2018 (unaudited) |
982,482 |
1.0 |
Issued |
2,741,974 |
2.8 |
Redeemed |
(2,908,825) |
(3.0) |
At 30 June 2019 (audited) |
815,631 |
0.8 |
Issued |
3,290,368 |
(3.3) |
Redeemed |
(3,295,335) |
3.3 |
At 31 December 2019 (unaudited) |
810,664 |
0.8 |
13. Acquisitions and disposals
Sale of Hull Site
On 2 December 2019, the Group completed the sale of the
PC Liquids sale
In the prior period, the Group completed the disposal of its PC Liquids activities on 16 November 2018. The transaction comprised the disposal of the trade and assets of the Group's PC Liquids business for a cash consideration of £12.5 million. In the prior period, the PC Liquids business generated revenues of £21.9 million and had an adjusted trading loss of £0.3 million.
Former manufacturing site in
On 25 July 2018, the Group completed the sale of the Solaro site in
14. Events after the balance sheet date
In November 2019, the Group announced a proposal to close its
15. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and, therefore, are not required to be disclosed in these condensed interim financial statements.
Key management compensation and transactions with the Group's pension and post-employment schemes for the financial year ended 30 June 2019 are detailed in note 28 (page 123) of
Aside from this, there are no other related party transactions.
16. Key performance indicators (KPIs)
Management uses a number of KPIs to measure the Group's performance and progress against its strategic objectives. The most important of these are noted and defined below:
· Adjusted operating profit - operating profit before adjusting items;
· Adjusted operating margin - adjusted operating profit as a percentage of revenue;
·
· Customer Service Level - volume of products delivered in the correct volumes and within agreed timescales as a percentage of total volumes ordered by customers;
· Return on capital employed - adjusted operating profit as a percentage of average period-end net assets excluding net debt;
· Debt/adjusted EBITDA - net debt divided by EBITDA.
Additional information
Financial calendar for the year ending 30 June 2020
Payments to shareholders |
|
|
Interim |
Announcement |
20 February 2020 |
|
Entitlement to B Shares |
24 April 2020 |
|
Redemption of B Shares |
29 May 2020 |
Final |
Announcement |
3 September 2020 |
|
Entitlement to B Shares |
23 October 2020 |
|
Redemption of B Shares |
27 November 2020 |
Results |
|
|
Interim |
Announcement |
20 February 2020 |
Preliminary statement for full year |
Announcement |
3 September 2020 |
Annual Report and Accounts 2020 |
Circulated |
September 2020 |
Annual General Meeting |
To be held |
20 October 2020 |
Exchange rates
The exchange rates used for conversion to Sterling were as follows:
|
Unaudited |
Unaudited |
Audited |
|
Half year to |
Half year to |
Year ended |
|
31 Dec |
31 Dec |
30 June |
|
2019 |
2018 |
2019 |
Average rate: |
|
|
|
Euro |
1.14 |
1.12 |
1.14 |
US Dollar |
1.26 |
1.30 |
1.30 |
Polish Zloty |
4.88 |
4.84 |
4.88 |
Czech Koruna |
29.12 |
28.97 |
29.20 |
|
8.48 |
8.38 |
8.47 |
Hungarian Forint |
374.60 |
363.77 |
365.28 |
Malaysian Ringgit |
5.24 |
5.34 |
5.34 |
Australian Dollar |
1.84 |
1.78 |
1.81 |
Closing rate: |
|
|
|
Euro |
1.18 |
1.12 |
1.12 |
US Dollar |
1.32 |
1.28 |
1.27 |
Polish Zloty |
5.00 |
4.81 |
4.74 |
Czech Koruna |
29.86 |
28.76 |
28.38 |
|
8.78 |
8.35 |
8.33 |
Hungarian Forint |
388.49 |
358.83 |
360.71 |
Malaysian Ringgit |
5.40 |
5.29 |
5.25 |
Australian Dollar |
1.88 |
1.81 |
1.81 |
Note: This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.