TIDMPLP
RNS Number : 7861I
Polypipe Group PLC
13 August 2019
Polypipe Group plc
Interim financial statements for the six months ended 30
June 2019
13 August 2019
Polypipe Group plc
Interim results for the six months ended 30 June 2019
Strong first half performance
Polypipe Group plc ("Polypipe", the "Company" or the "Group"), a
leading provider of sustainable water and climate management
solutions for the built environment, today announces its unaudited
interim results for the six months ended 30 June 2019.
Financial Results
2019(4) 2018 Change
Statutory Measures
Revenue GBP223.3m GBP210.2m +6.2%
Operating Profit GBP35.2m GBP33.5m +5.1%
Profit before tax GBP31.4m GBP30.1m +4.3%
Earnings per share (basic) 12.9p 12.4p +4.0%
Cash generated from operations GBP21.7m GBP22.3m -2.7%
Dividends per share (pence) 4.0p 3.7p +8.1%
Alternative Performance
Measures(1)
Underlying operating profit GBP39.3m GBP36.3m +8.3%
Underlying operating margin 17.6% 17.3% +30bps
Underlying profit before
tax GBP35.6m GBP32.9m +8.2%
Underlying earnings per
share (basic) 14.7p 13.5p +8.9%
Leverage (times pro forma
EBITDA(2) ) 1.8 1.7 +0.1
Financial Highlights
-- Revenue 6.2% higher at GBP223.3m with strong contribution from recent acquisitions
-- Underlying operating profit 8.3% higher at GBP39.3m
-- Continued focus on returns with underlying operating margin 30 basis points higher at 17.6%
-- Underlying basic earnings per share 8.9% higher at 14.7 pence
-- Cash generated at GBP21.7m reflecting the normal first half increase in working capital
-- Net debt(3) of 1.8 times pro forma EBITDA(2) in line with expectations
-- Interim dividend increased 8.1% to 4.0 pence per share
Operational Highlights
-- Residential Systems revenue growth of 8.4%, with a strong contribution from Manthorpe
-- Commercial and Infrastructure Systems revenue 3.4% higher despite challenging markets
-- Integration of 2018 acquisitions progressing well
-- Resolution of H2 2018 operating inefficiencies and selective cost reductions implemented
-- Product launches in both Residential Systems and Commercial
and Infrastructure Systems continue to exploit strategic growth
drivers
Martin Payne, Chief Executive Officer, commented
"The business has performed well in the first half with good
revenue growth and improved margins through selective cost
reductions and acquisitions. The medium-term fundamentals of our
markets remain strong. Whilst we are mindful of current political
and economic uncertainty, management continues to focus on
self-help measures and together with an encouraging start to the
second half, the Board's profit expectations for the year remain
unchanged."
(1) Underlying profit and earnings measures are from continuing
operations and exclude certain non-underlying items (see note 6)
and where relevant, the tax effect of these items. The Directors
consider that these measures provide a better and more consistent
indication of the Group's underlying financial performance and more
meaningful comparison with prior and future periods to assess
trends in our financial performance.
(2) Pro forma EBITDA is defined as underlying operating profit
before depreciation for the twelve months preceding the balance
sheet date,
excluding operating profit before depreciation from discontinued
operations, adjusted where relevant to include a full year of
EBITDA from acquisitions made during those twelve months.
(3) Net debt is defined as loans and borrowings net of
unamortised issue costs less cash excluding the effects of
IFRS16.
(4) The results for the six months ended 30 June 2019 have been
prepared in accordance with IFRS16. As we have adopted the
simplified
approach on transition, we have not restated prior year
comparatives.
(5) Leverage is defined as Net Debt divided by pro forma
EBITDA.
For further information please contact:
Polypipe
Martin Payne, Chief Executive
Officer
Paul James, Chief Financial
Officer +44 (0) 1709 770 000
Brunswick
Nina Coad
Sophia Lazarus +44 (0) 20 7404 5959
A copy of this report will be available on our website
www.polypipe.com today from 0700hrs (BST).
An analyst and investor presentation will be held today at
Brunswick's offices at 16 Lincolns Inn Fields, London, WC2A 3ED at
0900hrs (BST) with registration from 0830hrs.
For those unable to attend, a live conference call will be
available at 0900hrs (BST).
UK Freephone Dial-In Number 0800 376 7922
Standard International Dial-In number +44 (0) 2071 928000
Conference ID 7082278
Access to the slide presentation during this live event is
available at: this link.
Notes to Editors:
Polypipe Group plc ("Polypipe", the "Company" or the "Group"), a
leading provider of sustainable water and climate management
solutions for the built environment, is the largest manufacturer in
the UK, and among the ten largest manufacturers in Europe, of
plastic piping systems for the residential, commercial, civils and
infrastructure sectors by revenue. It is also a leading designer
and manufacturer of energy efficient ventilation systems in the
UK.
The Group operates from 18 facilities in total, and with over
20,000 product lines, manufactures the UK's widest range of plastic
piping systems for heating, plumbing, drainage and ventilation. The
Group primarily targets the UK and European building and
construction markets with a presence in Italy, the Netherlands and
the Middle East and sales to specific niches in the rest of the
world.
Group Results
Revenue from continuing operations for the six months ended 30
June 2019 was 6.2% higher than the prior year at GBP223.3m (2018:
GBP210.2m). On a like-for-like basis excluding the impact of
acquisitions, revenue was 1.0% higher. This result was after the
effects of the pull forward of some demand into the fourth quarter
of 2018 ahead of an early 2019 price increase, and some further
merchant destocking towards the end of the period. Our underlying
performance is driven by our focus on our strategic pillars of
growth of legacy material substitution, exploiting the continuing
legislative tailwinds in water management and carbon efficiency, as
well as providing our customers with a "one stop shop" product
range.
Underlying operating profit was 8.3% higher than the prior year
at GBP39.3m (2018: GBP36.3m). This represents an underlying
operating margin of 17.6% (2018: 17.3%) with the dilutive effects
of price increases to recover inflation being more than offset by
cost improvement initiatives undertaken progressively through the
period and the accretive effect of acquisitions.
Finance costs of GBP3.8m (2018: GBP3.4m) were driven by higher
borrowing levels following the acquisitions of late 2018, partly
mitigated by lower interest rates from the refinanced revolving
credit facility.
Non-underlying operating costs of GBP4.2m are driven by
amortisation of intangible assets arising from acquisitions,
including the acquisition of Manthorpe and Permavoid in 2018.
The total tax charge for the period was GBP5.7m (2018: GBP5.5m).
The underlying tax charge of GBP6.3m (2018: GBP6.0m) represents an
effective underlying tax rate of 17.7% (2018: 15.6%).
Underlying profit after tax was 8.9% higher at GBP29.3m (2018:
GBP26.9m), with underlying earnings per share 8.9% higher at 14.7
pence (2018: 13.5 pence).
Including non-underlying items, profit after tax from continuing
operations was 4.5% higher at GBP25.7m (2018: GBP24.6m) with basic
earnings per share also 4.0% higher at 12.9 pence (2018: 12.4
pence).
The Board has declared an interim dividend of 4.0 pence per
share, an 8.1% increase on the 2018 interim dividend. This dividend
will be paid on 20 September 2019 to shareholders on the register
at the close of business on 30 August 2019.
Business Review
Revenue from continuing operations Like-for-like
2019 2018 Change Change
GBPm GBPm % %
------------------------------------ ------ ------ ------- --------------
Residential Systems 129.0 119.0 8.4 0.8
Commercial and Infrastructure
Systems 94.3 91.2 3.4 1.1
------------------------------------ ------ ------ ------- --------------
Revenue from continuing operations 223.3 210.2 6.2 1.0
------------------------------------ ------ ------ ------- --------------
Underlying operating profit 2019 2018 Change
GBPm % GBPm % %
------------------------------- ------ ----- ------ ----- -------
Residential Systems 26.6 20.6 23.8 20.0 11.8
Commercial and Infrastructure
Systems 12.7 13.5 12.5 13.7 1.6
------------------------------- ------ ----- ------ ----- -------
Underlying operating profit 39.3 17.6 36.3 17.3 8.3
------------------------------- ------ ----- ------ ----- -------
Further progress has been made in the period despite challenging
market conditions, with the strategic initiatives of legacy
material substitution and exploiting legislative tailwinds in water
and climate management together with providing a "one-stop-shop"
for customers in the UK driving growth.
During the period we have continued to focus on integrating our
newly acquired businesses of Manthorpe Building Products and
Permavoid. The Permavoid integration is now complete and the
Manthorpe integration progresses well and is currently on track to
be completed by the end of the year. Both businesses are performing
in line with expectations.
The Group continues to evaluate further opportunities with its
twin track approach to M&A, focussing firstly on providing the
"one-stop-shop", by filling product gaps and adjacencies in water
and climate management, and secondly looking to leverage its
skills, technology and IP across wider geographic markets.
Revenue growth of 6.2% in the period is pleasing, with both
Residential Systems and Commercial and Infrastructure Systems
recording like-for-like revenue growth. Margin improvement from
17.3% to 17.6% has driven underlying operating profit 8.3% higher,
with selective cost reduction measures taken progressively through
the period and the accretive effect of acquisitions on margin more
than offsetting the dilutive effect of price increases implemented
to recover inflation.
An encouraging start to the year saw revenue 8.0% higher for the
four months to April 2019, and 3.0% higher on a like-for-like
basis, with weaker comparatives due to the adverse weather in 2018
offset partially by the post-price increase destocking following
our early 2019 price increase. Performance in May and June was
impacted by merchant destocking in the lead up to half year,
although the second half of the year has started encouragingly,
with merchants rebuilding stock levels ahead of the next EU
Withdrawal date of 31 October 2019.
Residential Systems
Despite continuing political and economic uncertainty, both new
house building and Repair, Maintenance, and Improvement (RMI)
market activity has been reasonably robust. The CPA summer forecast
suggests that both markets will be marginally lower for 2019 with
new house starts running marginally below completions and the
consumer remaining cautious.
Against this background, revenue in our Residential Systems
segment, which is almost exclusively derived from the UK market,
was 8.4% higher than the prior year at GBP129.0m (2018: GBP119.0m).
The key driver of growth has been the acquisition of Manthorpe on
25 October 2018, which continues to perform in line with
expectations. Like-for-like revenue growth at 0.8% for the period
is a creditable performance given market conditions particularly
towards the end of the period. With price increases of
approximately 3% in the period, this represents a volume decline of
2.2% on a like-for-like basis, with the weaker comparables being
more than offset by merchant destocking in the period.
In January we commissioned the fourth high output multilayer
extrusion line at our Broomhouse Lane plant for the manufacture of
110mm and 160mm PVC pipe with a recycled core, underpinning our
commitment to increasing the recycled content of our products and
reinforcing our ESG credentials. Towards the end of the period, we
also completed the investment in developing land for additional
storage at our Broomhouse Lane facility. Both of these projects are
helping to resolve the capacity constraints encountered in the
second half of 2018.
Our innovative product design has gained industry recognition in
the period. Manthorpe was successful at the 2019 Housebuilder
Product Awards, winning the category for 'Best Building Fabric
Product' with their innovative Dual Extended Telescopic Underfloor
Vent. In ventilation, Nuaire has won the prestigious H&V News
award for Air Movement Product of the Year, recognising its efforts
in developing the innovative Noxmaster air filtration system. The
product was praised by the judges for the attention paid to indoor
air quality and to the testing and validation of the unit.
Residential Systems delivered an underlying operating profit
11.8% higher than the prior year at GBP26.6m (2018: GBP23.8m)
representing a 20.6% margin (2018: 20.0%) with cost reduction
activities in the period, notably the resolution in the second
quarter of logistics inefficiencies encountered towards the end of
2018 at our Broomhouse Lane plant, and the accretive effect of
acquisitions on margins more than offsetting the dilutive effect of
price increases.
Commercial and Infrastructure Systems
UK Commercial and Infrastructure markets have been challenging
in the period. Whilst the number of registered projects remains
reasonably buoyant, UK commercial construction activity has been
increasingly affected by project delays, particularly in the South
East, reflecting the political and economic uncertainty. Roads
Infrastructure has performed somewhat better, with smart motorway
upgrades gathering pace, and the A14 project now in full flow.
Revenue in our Commercial and Infrastructure Systems segment,
approximately 80% of which was generated in the UK market, was 3.4%
higher than the prior period at GBP94.3m (2018: GBP91.2m), and 1.1%
higher on a like for like basis, which was a solid performance. UK
revenue was 2.7% higher on a like for like basis, and with a price
increase of 3%, implies volumes were broadly flat in the UK, with
weaker comparatives being offset by merchant destocking. Overseas
revenue was 5.3% lower on a like for like basis, reflecting some
challenges in our Middle East markets, particularly in the United
Arab Emirates.
Excellent progress has been made on product launches and
projects in the period. Our Polystorm range was extended with the
launch of the PSM5 "Polystorm Deep" product, to address performance
levels in the forthcoming CIRIA 737 Regulations and to improve
burial depth performance overall. In June, the world's first fully
portable international standard hockey pitch was installed at The
Twickenham Stoop ahead of the Pro League matches between Team GB
and New Zealand. Laid in under a week, the unique modular pitch
system uses Permavoid for both structural support and irrigation
management. In March we launched our 'Inspiring Green Urbanisation'
design guide at the Future Build exhibition, showing how our next
generation sustainable water management solutions will help
re-imagine the urban landscape. Our Fuze range of HDPE
electrofusion jointed soil stacks continue to make inroads into the
market, on projects such as Essex House in Croydon, the world's
tallest prefabricated twin tower with over 540 flats.
Commercial and Infrastructure Systems delivered an underlying
operating profit of GBP12.7m (2018: GBP12.5m) and represents a
13.5% margin (2018: 13.7%), with selective cost reduction measures
partially offsetting the dilutive effects of price increases.
OUTLOOK
The business has performed well in the first half with good
revenue growth and improved margins through selective cost
reductions and acquisitions.
The medium-term fundamentals in our markets remain as strong as
ever. There continues to be a structural housing shortage, the UK
continues to experience historically low interest rates, and near
full employment is driving real wage growth. The Government's Help
to Buy scheme is committed through to 2023 helping drive demand for
new housing, and Road Investment Strategy 2 (RIS2) has committed
GBP25.3bn through to 2025 for road building.
Whilst we continue to be mindful of the current political and
economic uncertainty, management has taken action on costs
progressively through the first half and will continue to benefit
from this in the second half. This, together with an encouraging
start to the second half, leaves the Board's profit expectations
for the year unchanged.
Financial Review
Finance Costs
Net underlying finance costs for the six months ended 30 June
2019 of GBP3.7m were GBP0.3m higher than 2018, with lower interest
rates partially offsetting higher levels of borrowing supporting
the two acquisitions made at the end of 2018. Interest is payable
on the Group's revolving credit facility at LIBOR plus an interest
rate margin ranging from 0.90% to 2.75% depending on leverage. The
interest rate margin at 30 June 2019 was 1.65% (2018: 1.75%).
In order to reduce exposure to future increases in interest
rates the Group has entered into an interest rate swap at a fixed
rate of 1.735% (excluding margin) with notional amounts hedged
ranging from GBP72.2m to GBP82.0m over the period of the interest
rate swap. Details of the swap are set out in Note 12 to these
condensed set of consolidated financial statements.
The unrealised mark to market adjustment on these forward
interest rate swaps at 30 June 2019 was GBP0.9m adverse (31
December 2018: GBP1.0m adverse). The movement of GBP0.1m favourable
in the period is included in the Group Statement of Comprehensive
Income.
Taxation
The Group's tax charge for the six months ended 30 June 2019 was
GBP5.7m (2018: GBP5.5m). The underlying tax rate (underlying tax:
underlying profit) has been provided at the estimated full year
rate of 17.7% (2018 full year: 15.6%).
Dividend
Our dividend policy is to pay a minimum of 40% of the Group's
annual underlying profit after tax. The Directors intend that the
Group will pay the total annual dividend in two tranches, an
interim dividend and a final dividend, to be announced at the time
of announcement of the interim and preliminary results respectively
with the interim dividend being approximately one half of the prior
year's final dividend.
Cash Flow and Net Debt
Cash generated from operations during the period amounted to
GBP21.7m (2018: GBP22.3m). This result includes a working capital
outflow of GBP27.8m (2018: GBP21.0m). A significant first half
working capital outflow is a normal feature of the Group's annual
working capital cycle and arises primarily as a result of the
timing of rebate settlements. The working capital outflow for the
current period is higher than the same period last year as stock
levels have been raised somewhat as a mitigation to potential
disruptions to our supply chain as a result of the United Kingdom's
exit from the European Union.
Capital expenditure of GBP9.0m (2018: GBP10.9m) was GBP0.6m
higher than depreciation and in line with management expectations.
It is somewhat lower than last year as management reduce spend in
anticipation of some of the effects of the UK's exit from the
EU.
Net debt (including unamortised debt issue costs but excluding
the effects of IFRS16 capitalisation) at 30 June 2019 was GBP178.5m
and is after the final dividend of GBP15.7m (2018: GBP14.9m).
Leverage at 1.8 times pro forma EBITDA compares to 1.7 times pro
forma EBITDA at 30 June 2018 and 1.7 times pro forma EBITDA at 31
December 2018. The Group's working capital cycle means cash
generation is significantly stronger in the second half of the year
such that leverage will reduce in line with management expectations
for the year.
Going Concern
The Group continues to meet its day-to-day working capital and
other funding requirements through a combination of long-term
funding and cash deposits. The Group's bank financing facilities
consists of a GBP300m revolving credit facility of which GBP77.0m
was undrawn at 30 June 2019. Cash balances of a further GBP43.0m as
at 30 June 2019 gives total facility headroom of GBP120.0m.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue its
operational existence for the foreseeable future and for a period
of at least twelve months from the date of this report.
Accordingly, the Board continues to adopt and consider appropriate
the going concern basis in preparing these condensed set of
consolidated financial statements.
Principal Risks and Uncertainties
The Board continually assesses and monitors the key risks of the
business and Polypipe has developed a risk management framework to
identify, report, and manage its principal risks and uncertainties.
The principal risks and uncertainties that could have a material
impact on the Group's performance and prospects, and the mitigating
activities which are aimed at reducing the impact or likelihood of
a major risk materialising, have not changed from those which are
set out in detail in the principal risks and uncertainties section
of our 2018 Annual Report and Accounts.
These principal risks and uncertainties cover raw material
prices; business disruption; reliance on key customers; recruitment
and retention of key personnel; economic conditions; Government
action and policies; Government regulations and standards relating
to the manufacture and use of building materials; product
liability; information systems; acquisitions; financial risk
management (foreign currency exchange risk, credit risk, liquidity
risk and interest rate cash flow risk) and the UK departure from
the EU ("Brexit").
As there remains continued uncertainty as to the timing and
exact form of the UK's exit from the EU, the Group will continue to
react proportionately and maintain marginally enhanced stock levels
as a mitigation for possible short-term disruptions in its supply
chain.
A copy of the 2018 Annual Report and Accounts is available on
the Company's website www.polypipe.com.
Forward-Looking Statements
This report contains various forward-looking statements that
reflect management's current views with respect to future events
and financial and operational performance. These forward-looking
statements involve known and unknown risks, uncertainties,
assumptions, estimates and other factors, which may be beyond the
Group's control and which may cause actual results or performance
to differ materially from those expressed or implied from such
forward-looking statements. All statements (including
forward-looking statements) contained herein are made and reflect
knowledge and information available as of the date of preparation
of this report and the Group disclaims any obligation to update any
forward-looking statements, whether as a result of new information,
future events or results or otherwise. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements due to the
inherent uncertainty therein. Nothing in this report should be
construed as a profit forecast.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of consolidated financial statements has
been prepared in accordance with International Accounting Standard
(IAS) 34, Interim Financial Reporting, as adopted by the European
Union; and
-- The Interim Management Report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance 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 consolidated financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last Annual Report and Accounts that
could do so.
This report was approved by the Board of Directors on 13 August
2019 and is available on the Company's website
www.polypipe.com.
The Directors of the Company are:
Ron Marsh Chairman
Martin Payne Chief Executive Officer
Glen Sabin Chief Operating Officer
Paul James Chief Financial Officer
Paul Dean Non-executive Director and Senior Independent Director
Mark Hammond Non-executive Director
Louise Hardy Non-executive Director
Moni Mannings Non-executive Director
By order of the Board:
M K Payne P A James
Chief Executive Officer Chief Financial Officer
INTERIM GROUP INCOME STATEMENT
for the six months ended 30 June 2019 (unaudited)
Notes Six months ended 30 Six months ended 30
June 2019 June 2018
Underlying Non-Underlying Total Underlying Non-Underlying Total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 5 223.3 - 223.3 210.2 - 210.2
Cost of sales (127.9) - (127.9) (121.4) - (121.4)
----------- --------------- -------- ----------- --------------- --------
Gross profit 95.4 - 95.4 88.8 - 88.8
Selling and distribution
costs (35.9) - (35.9) (34.3) - (34.3)
Administration
expenses (20.2) (0.4) (20.6) (18.2) - (18.2)
-----------
Trading profit 39.3 (0.4) 38.9 36.3 - 36.3
Amortisation of
intangible assets - (3.7) (3.7) - (2.8) (2.8)
Operating profit 5 39.3 (4.1) 35.2 36.3 (2.8) 33.5
5,
Finance costs 7 (3.7) (0.1) (3.8) (3.4) - (3.4)
----------- --------------- -------- ----------- --------------- --------
Profit before tax 35.6 (4.2) 31.4 32.9 (2.8) 30.1
3,
Income tax 8 (6.3) 0.6 (5.7) (6.0) 0.5 (5.5)
----------- --------------- -------- ----------- --------------- --------
Profit from continuing
operations 29.3 (3.6) 25.7 26.9 (2.3) 24.6
Profit from discontinued
operations 6 - - - - 0.3 0.3
----------- --------------- -------- ----------- --------------- --------
Profit for the
period attributable
to the owners of
the parent company 29.3 (3.6) 25.7 26.9 (2.0) 24.9
=========== =============== ======== =========== =============== ========
Basic earnings per share (pence)
From continuing
operations 9 12.9 12.4
From discontinued
operations 9 - 0.1
-------- --------
12.9 12.5
======== ========
Diluted earnings per share
(pence)
From continuing
operations 9 12.7 12.3
From discontinued
operations 9 - 0.1
-------- --------
12.7 12.4
======== ========
Dividend per share
(pence) - interim 10 4.0 3.7
======== ========
Non-underlying items are presented separately and are detailed
in Note 6.
INTERIM GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2019 (unaudited)
Six months Six months
ended 30 ended 30
June 2019 June 2018
GBPm GBPm
Profit for the period attributable
to the owners of the parent company 25.7 24.9
----------- -----------
Other comprehensive income:
Items which will be reclassified subsequently
to the income statement:
Exchange differences on translation
of foreign operations - (0.1)
Recycling of foreign exchange differences
to the income statement - (0.3)
Effective portion of changes in fair
value of interest rate swaps 0.2 0.9
Effective portion of changes in fair
value of forward foreign currency derivatives 0.1 -
Tax relating to items that will be
reclassified to the income statement (0.1) (0.2)
----------- -----------
Other comprehensive income for the
period net of tax 0.2 0.3
----------- -----------
Total comprehensive income for the
period attributable to the owners of
the parent company 25.9 25.2
=========== ===========
Attributable to the owners of the parent
company from:
Continuing operations 25.9 25.3
Discontinued operations - (0.1)
----- ------
25.9 25.2
===== ======
INTERIM GROUP BALANCE SHEET
at 30 June 2019 (unaudited)
30 June 30 June 31 December
2019 2018 2018
(Restated)
GBPm GBPm GBPm
Non-current assets
Property, plant and
equipment 119.0 101.3 118.4
Right-of-use assets 12.7 - -
Intangible assets 398.2 353.7 401.9
--------- ------------- ------------
Total non-current assets 529.9 455.0 520.3
Current assets
Assets classified as - 0.7 -
held-for-sale
Inventories 61.9 52.7 58.1
Trade and other receivables 57.7 54.8 37.4
Cash and cash equivalents 43.0 38.5 46.2
--------- ------------- ------------
Total current assets 162.6 146.7 141.7
--------- ------------- ------------
Total assets 692.5 601.7 662.0
========= ============= ============
Current liabilities
Trade and other payables (95.4) (87.3) (99.6)
Lease liabilities (3.2) - -
Provisions - (1.0) -
Contingent consideration (1.5) - (1.7)
Derivative financial
instruments (0.8) (1.7) (1.1)
Income tax payable (6.8) (7.0) (6.3)
--------- ------------- ------------
Total current liabilities (107.7) (97.0) (108.7)
--------- ------------- ------------
Non-current liabilities
Loans and borrowings (221.5) (184.3) (210.4)
Lease liabilities (9.5) - -
Contingent consideration (0.6) - -
Other liabilities (0.7) (0.8) (0.7)
Deferred income tax
liabilities (9.9) (6.5) (11.0)
--------- ------------- ------------
Total non-current liabilities (242.2) (191.6) (222.1)
Total liabilities (349.9) (288.6) (330.8)
--------- ------------- ------------
Net assets 342.6 313.1 331.2
========= ============= ============
Capital and reserves
Equity share capital 0.2 0.2 0.2
Capital redemption reserve 1.1 1.1 1.1
Own shares (3.2) (3.8) (3.8)
Hedging reserve (0.7) (1.4) (0.9)
Foreign currency retranslation
reserve 0.5 0.3 0.5
Retained earnings 344.7 316.7 334.1
--------- ------------- ------------
Total equity 342.6 313.1 331.2
========= ============= ============
Trade and other receivables and trade and other payables have
been restated at 30 June 2018, with receivables balances of
GBP10.6m reclassified from trade and other payables to better
reflect the Group's contractual right to offset.
INTERIM GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2019 (unaudited)
Foreign
Equity Capital currency
share redemption Own shares Hedging retranslation Retained Total
capital reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Six months ended 30
June 2019
Opening balance 0.2 1.1 (3.8) (0.9) 0.5 334.1 331.2
---------- ------------- ------------- ---------- --------------- ----------- ---------
Profit for the
period - - - - - 25.7 25.7
Other comprehensive
income - - - 0.2 - - 0.2
---------- ------------- ------------- ---------- --------------- ----------- ---------
Total comprehensive
income for the
period - - - 0.2 - 25.7 25.9
Dividends paid - - - - - (15.7) (15.7)
Share-based payments
charge - - - - - 0.8 0.8
Share-based payments
settled - - 0.6 - - (0.6) -
Deferred tax
impact - - - - - 0.4 0.4
Closing balance 0.2 1.1 (3.2) (0.7) 0.5 344.7 342.6
========== ============= ============= ========== =============== =========== =========
Six months ended 30
June 2018
Opening balance 0.2 1.1 (4.3) (2.1) 0.7 306.4 302.0
---------- ------------- ------------- ---------- --------------- ----------- ---------
Profit for the
period - - - - - 24.9 24.9
Other comprehensive
income - - - 0.7 (0.4) - 0.3
---------- ------------- ------------- ---------- --------------- ----------- ---------
Total comprehensive
income for the
period - - - 0.7 (0.4) 24.9 25.2
Dividends paid - - - - - (14.9) (14.9)
Share-based payments
charge - - - - - 0.5 0.5
Share-based payments
settled - - 0.5 - - (0.2) 0.3
---------- ------------- ------------- ---------- --------------- ----------- ---------
Closing balance 0.2 1.1 (3.8) (1.4) 0.3 316.7 313.1
========== ============= ============= ========== =============== =========== =========
INTERIM CASH FLOW STATEMENT
for the six months ended 30 June 2019
Six months Six months Year ended
ended 30 June ended 30 31 December
2019 June 2018 2018
(Restated)
GBPm GBPm GBPm
Operating activities
Profit before tax 31.4 30.1 58.2
Finance costs 3.8 3.4 7.6
--------------- ------------ -------------
Operating profit 35.2 33.5 65.8
Profit before tax from discontinued
operations - 0.3 0.3
Non-cash items:
Profit on disposal of property,
plant and equipment (0.2) (0.2) (0.3)
Non-underlying items:
- amortisation of intangible assets 3.7 2.8 5.9
- provision for acquisition costs 0.4 - 2.2
- loss on disposal of assets classified
as held-for-sale - - 0.1
Depreciation: property plant and
equipment 8.4 7.9 15.6
Depreciation: right-of-use assets 1.7 - -
Share-based payments 0.8 0.5 1.0
Cash items:
- settlement of restructuring
costs - (1.3) (2.3)
- settlement of aborted acquisition
costs - (0.2) (0.2)
- settlement of acquisition costs (0.5) - (1.9)
Operating cash flows before movement
in working capital 49.5 43.3 86.2
Movement in working capital:
Receivables (20.2) (25.5) (2.9)
Payables (3.8) 4.4 10.8
Inventories (3.8) 0.1 (4.1)
--------------- ------------ -------------
Cash generated from operations 21.7 22.3 90.0
Income tax paid (6.0) (4.8) (11.2)
--------------- ------------ -------------
Net cash flows from operating
activities 15.7 17.5 78.8
--------------- ------------ -------------
Investing activities
Acquisition of businesses net
of cash at acquisition - - (56.1)
Proceeds from disposal of property,
plant and equipment 0.3 0.2 0.9
Purchase of property, plant and
equipment (9.0) (10.9) (24.1)
Disposal of subsidiary undertaking
net of overdraft divested - 13.8 13.6
--------------- ------------ -------------
Net cash flows from investing
activities (8.7) 3.1 (65.7)
--------------- ------------ -------------
Financing activities
Drawdown of bank loan 11.0 - 226.1
Repayment of bank loan - - (199.1)
Interest paid (3.6) (3.2) (6.1)
Dividends paid (15.7) (14.9) (22.3)
Proceeds from exercise of share
options - 0.3 0.3
Debt issue costs (0.1) - (1.6)
Settlement of lease liabilities (1.8) - -
Net cash flows from financing
activities (10.2) (17.8) (2.7)
--------------- ------------ -------------
Net change in cash and cash equivalents (3.2) 2.8 10.4
Cash and cash equivalents - opening
balance 46.2 35.7 35.7
Net foreign exchange difference - - 0.1
--------------- ------------ -------------
Cash and cash equivalents - closing
balance 43.0 38.5 46.2
=============== ============ =============
The net decrease in cash and cash equivalents in the period from
discontinued operations included in the above was GBPnil (six
months ended June 2018: GBP4.2m decrease).
Trade and other receivables and trade and other payables have
been restated at 30 June 2018, with receivables balances of
GBP10.6m reclassified from trade and other payables to better
reflect the Group's contractual right to offset.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2019
1. Basis of preparation
Polypipe Group plc is incorporated in the UK. The condensed set
of consolidated financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority and IAS 34, Interim Financial
Reporting, as adopted by the European Union.
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of consolidated
financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the Group's published consolidated financial statements for the
year ended 31 December 2018, except for the adoption of new
standards effective as of 1 January 2019. These statements do not
include all the information required for full annual consolidated
financial statements and should be read in conjunction with the
full Annual Report and Accounts for the year ended 31 December
2018.
The comparative figures for the financial year ended 31 December
2018, where reported, are not the Group's statutory accounts for
that financial year. Those accounts have been reported on by the
Group's auditors and delivered to the Registrar of Companies. The
report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
The accounting standards and interpretations that have become
effective in the current reporting period are as listed below.
International Accounting Standards (IAS/IFRSs) Effective date
IFRS 16 Leases 1 January 2019
---------------------------------- ---------------
IFRIC 23 Uncertain Tax Treatments 1 January 2019
---------------------------------- ---------------
The condensed set of consolidated financial statements are
prepared on a going concern basis. This is considered appropriate
given that the Company and its subsidiaries have adequate resources
to continue in operational existence for the foreseeable
future.
There have been no related party transactions in the period to
30 June 2019.
Three non-statutory measures have been used in preparing the
condensed set of consolidated financial statements:
-- Underlying profit and earnings measures exclude certain
non-underlying items which are provided in Note 6, and where
relevant, the tax effect of these items. The Directors consider
that these measures provide a better and more consistent indication
of the Group's underlying financial performance and more meaningful
comparison with prior and future periods to assess trends in our
financial performance.
-- Pro forma EBITDA is defined as underlying operating profit
before depreciation for the twelve months preceding the balance
sheet date, excluding operating profit before depreciation from
discontinued operations, adjusted where relevant to include a full
year of EBITDA from acquisitions made during those twelve
months
-- Net debt is defined as loans and borrowings net of amortised
issue costs, less cash excluding the effects of IFRS 16.
2. IFRS 16 Leases
IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases-Incentives
and SIC-27 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease. The standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases and
requires lessees to account for most leases under a single
on-balance sheet model.
Lessor accounting under IFRS 16 is substantially unchanged from
IAS 17. Lessors will continue to classify leases as either
operating or finance leases using similar principles as in IAS 17.
Therefore, IFRS 16 did not have an impact for leases where the
Group is the lessor.
The Group adopted IFRS 16 using the modified retrospective
method with the date of initial application of 1 January 2019.
Under this method, the standard is applied retrospectively with the
cumulative effect of initially applying the standard recognised at
the date of initial application. The Group elected to use the
transition practical expedient allowing the standard to be applied
only to contracts that were previously identified as leases
applying IAS 17 and IFRIC 4 at the date of initial application. The
Group also elected to use the recognition exemptions for lease
contracts that, at the commencement date, have a lease term of 12
months or less and do not contain a purchase option ('short-term
leases'), and lease contracts for which the underlying asset is of
low value ('low-value assets').
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2019
The effect of adoption of IFRS 16 as at 1 January 2019 is as
follows:
GBPm
-----
Assets
Right-of-use assets 14.0
Total assets 14.0
Liabilities
Lease liabilities 14.0
Total liabilities 14.0
Total adjustment on equity:
Retained earnings -
Non-controlling interests -
-----
-
-----
a) Nature of the effect of adoption of IFRS 16
The Group has lease contracts for various items of plant,
machinery, vehicles and other equipment. Before the adoption of
IFRS 16, the Group classified its leases as operating leases. In an
operating lease, the leased property was not capitalised and the
lease payments were recognised as rent expense in profit or loss on
a straight-line basis over the lease term. Any prepaid rent and
accrued rent were recognised under prepayments and trade and other
payables, respectively.
Upon adoption of IFRS 16, the Group applied a single recognition
and measurement approach for all leases, except for short-term
leases and leases of low-value assets. The standard provides
specific transition requirements and practical expedients, which
have been applied by the Group.
The Group recognised right-of-use assets and lease liabilities,
except for short-term leases and leases of low-value assets. The
right-of-use assets were recognised based on the amount equal to
the lease liabilities. Lease liabilities were recognised based on
the present value of the remaining lease payments, discounted using
the incremental borrowing rate at the date of initial
application.
The Group also applied the available practical expedients
wherein it:
-- Used a single discount rate on the basis that many of the
Group's lease liabilities possess similar characteristics
-- Relied on its assessment of whether leases are onerous
immediately before the date of initial application
-- Applied the short-term leases exemptions to leases with lease
term that ends within 12 months at the date of initial
application
-- Excluded the initial direct costs from the measurement of the
right-of-use asset at the date of initial application
-- Used hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
Based on the foregoing, as at 1 January 2019:
-- Right-of-use assets of GBP14.0m were recognised and presented
separately in the statement of financial position. Additional lease
liabilities of GBP14.0m (included in interest bearing loans and
borrowings) were recognised.
-- There was no deferred tax impact.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2019
The lease liabilities at 1 January 2019 can be reconciled to the
operating lease commitments as at 31 December 2018 as follows:
GBPm
------
Operating lease commitments as at 31 December
2018 15.6
Weighted average incremental borrowing rate as
at 1 January 2019 2.38%
Discounted operating lease commitments at 1 January
2019 14.0
Lease liabilities as at 1 January 2019 14.0
------
b) Summary of new accounting policies
Set out below are the new accounting policies of the Group upon
adoption of IFRS 16, which have been applied from the date of
initial application:
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset
at the end of the lease term, the recognised right-of-use assets
are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right-of-use assets are
subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to
leases of office equipment that are considered of low value (i.e.
below GBP5,000). Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a straight-line basis
over the lease term.
Significant judgement in determining the lease term of contracts
with renewal options
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the
assets for additional terms. The Group applies judgement in
evaluating whether it is reasonably certain to exercise the option
to renew. That is, it considers all relevant factors that create an
economic incentive for it to exercise the renewal. After the
commencement date, the Group reassesses the lease term if there is
a significant event or change in circumstances that is within its
control and affects its ability to exercise (or not to exercise)
the option to renew (e.g., a change in business strategy).
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2019
c) Amounts recognised in the statement of financial position and
profit or loss
Set out below, are the carrying amounts of the Group's
right-of-use assets and lease liabilities and the movements during
the period:
Right-of-use assets Lease liabilities
------------------------------------------------ ------------------
Land and Plant Motor Total
buildings and machinery vehicles
------------------ ----------- --------------- ---------- ------ ------------------
GBPm GBPm GBPm GBPm GBPm
As at 1 January
2019 8.9 4.7 0.4 14.0 (14.0)
Additions 0.0 0.4 0.0 0.4 (0.4)
Depreciation (0.9) (0.6) (0.2) (1.7) 0.0
Interest expense (0.1)
Payments 1.8
----------- --------------- ---------- ------ ------------------
As at 30 June
2019 8.0 4.5 0.2 12.7 (12.7)
----------- --------------- ---------- ------ ------------------
3. Uncertain tax treatments
IFRIC 23 addresses the accounting for income taxes when tax
treatments involve uncertainty that affects the application of IAS
12 Income Taxes.
Upon adoption of the Interpretation, the Group considered
whether it has any uncertain tax positions and concluded that any
challenge by the tax authorities is unlikely to have a material
impact on the Group.
4. Financial risks, estimates, assumptions and judgements
The preparation of the condensed set of consolidated 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
expenses. Actual results may differ from estimates.
In preparing these condensed set of consolidated 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 that applied to the
consolidated financial statements as at and for the year ended 31
December 2018.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2019
5. Segment information
The Group has two reporting segments - Residential Systems and
Commercial and Infrastructure Systems. The reporting segments are
organised based on the nature of the end markets served. There are
no significant judgements in aggregating operating segments to
arrive at the reporting segments. Inter segment sales are on an
arm's length basis in a manner similar to transactions with third
parties.
* Underlying operating profit is stated before non-underlying
items.
Six months ended 30 Six months ended 30
June 2019 June 2018
------------------------------------- -------------------------------------
Commercial Commercial
Residential & Infrastructure Residential & Infrastructure
Systems Systems Total Systems Systems Total
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Segmental revenue 131.6 99.3 230.9 121.3 95.0 216.3
Inter segment revenue (2.6) (5.0) (7.6) (2.3) (3.8) (6.1)
----------- ----------------- ----- ----------- ----------------- -----
Revenue 129.0 94.3 223.3 119.0 91.2 210.2
Underlying operating
profit* 26.6 12.7 39.3 23.8 12.5 36.3
Non-underlying items
- segmental (1.9) (2.2) (4.1) (1.1) (1.7) (2.8)
----------- ----------------- ----- ----------- ----------------- -----
Segmental operating
profit 24.7 10.5 35.2 22.7 10.8 33.5
Non-underlying items
- finance costs (0.1) -
Finance costs (3.7) (3.4)
----- -----
Profit before tax 31.4 30.1
===== =====
Geographical analysis
Revenue by destination:
Six months Six months
ended 30 ended 30
June 2019 June 2018
Continuing operations GBPm GBPm
UK 199.7 187.3
Rest of Europe 10.9 8.4
Rest of World 12.7 14.5
----------- -----------
Total - Group 223.3 210.2
=========== ===========
6. Non-underlying items
Non-underlying items comprised:
Six months ended Six months ended
30 June 2019 30 June 2018
--------------------- ----------------------
Gross Tax Net Gross Tax Net
GBPm GBPm GBPm GBPm GBPm GBPm
Amortisation of intangible
assets (3.7) 0.6 (3.1) (2.8) 0.5 (2.3)
Administration expenses:
contingent consideration (0.4) - (0.4) - - -
Finance costs: Unwind of
discount on contingent
consideration (0.1) - (0.1) - - -
Discontinued operations:
profit from discontinued
operations - - - 0.3 - 0.3
Total non-underlying items (4.2) 0.6 (3.6) (2.5) 0.5 (2.0)
====== ===== ====== ======= ===== ======
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2019
7. Finance costs
Six months Six months
ended 30 ended 30
June 2019 June 2018
GBPm GBPm
Interest on bank loan 3.3 2.8
Debt issue cost amortisation 0.1 0.2
Unwind of discount on lease liabilities 0.1 -
Other finance costs 0.3 0.4
Finance costs 3.8 3.4
=========== ===========
8. Income tax
Tax has been provided on the profit before tax excluding
discontinued operations, at the estimated effective rate for the
full year of 18.2% (full year 2018: 16.2%). Tax on underlying
profit before tax was 17.7% (full year 2018: 15.6%).
9. Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the period attributable to the owners of the parent
company by the weighted average number of ordinary shares
outstanding during the period. The diluted earnings per share
amounts are calculated by dividing profit for the period
attributable to the owners of the parent company by the weighted
average number of ordinary shares outstanding during the period
plus the weighted average number of potential ordinary shares that
would be issued on the conversion of all the dilutive share options
into ordinary shares.
The calculation of basic and diluted earnings per share is based
on the following:
Six months Six months
ended 30 ended 30
June 2019 June 2018
Weighted average number of ordinary
shares for the purpose of basic earnings
per share 199,068,625 198,952,752
Effect of dilutive potential ordinary
shares 2,704,760 2,060,872
------------ ------------
Weighted average number of ordinary
shares for the purpose of diluted
earnings per share 201,773,385 201,013,624
============ ============
Six months Six months
ended ended
30 June 30 June
2019 2018
Underlying profit for the period attributable
to the owners of the parent company (GBPm) 29.3 26.9
============ ============
Underlying basic earnings per share (pence) 14.7 13.5
============ ============
Underlying diluted earnings per share
(pence) 14.5 13.4
============ ============
Underlying earnings per share is based on the result for the
period after tax excluding the impact of non-underlying items of
GBP3.6m (2018: GBP2.3m). The Directors consider that this measure
provides a better and more consistent indication of the Group's
underlying financial performance and more meaningful comparison
with prior and future periods to assess trends in our financial
performance. The underlying earnings per share is calculated as
follows:
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2019
10. Dividends
The Directors have proposed an interim dividend for the current
year of GBP8.0m which equates to 4.0 pence per share.
11. Analysis of net debt
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
Cash and cash equivalents 43.0 38.5 46.2
-------- -------- ------------
Non-current loans and borrowings:
- Bank loan (223.0) (185.0) (212.0)
- Unamortised debt issue
costs 1.5 0.7 1.6
(221.5) (184.3) (210.4)
-------- -------- ------------
Net debt (178.5) (145.8) (164.2)
======== ======== ============
12. Other financial assets and liabilities
Fair values of financial assets and financial liabilities
The book value of trade and other receivables, trade and other
payables, cash balances, bank loan and other liabilities equates to
fair value.
Carrying Fair value
value GBPm
GBPm
Forward foreign currency derivatives - -
Interest rate swaps (0.8) (0.8)
Interest bearing loans and borrowings
due after more than one year (221.5) (221.5)
Contingent consideration (2.1) (2.1)
Total at 30 June 2019 (224.4) (224.4)
=========== =============
Carrying Fair value
value GBPm
GBPm
Forward foreign currency derivatives (0.1) (0.1)
Interest rate swaps (1.6) (1.6)
Interest bearing loans and borrowings
due after more than one year (184.3) (184.3)
Total at 30 June 2018 (186.0) (186.0)
=========== =============
Carrying Fair value
value GBPm
GBPm
Forward foreign currency derivatives (0.1) (0.1)
Interest rate swaps (1.0) (1.0)
Interest bearing loans and borrowings
due after more than one year (210.4) (210.4)
Contingent consideration (1.7) (1.7)
Total at 31 December 2018 (213.2) (213.2)
=========== =============
The interest rate on the Group's GBP300.0m revolving credit
facility is variable, being payable at LIBOR plus a margin. To
reduce the Group's exposure to future increases in interest rates
the Group has entered into an interest rate swap for the following
notional amounts, with interest payable at a fixed rate return
dependent on the swap at 1.735% (2018: 2.21% and 1.735%) (excluding
margin):
Year ended 31 December Notional amount
- rate of 1.735%
GBPm
2019 82.0
To August 2020 72.2
The fair value of the interest rate swaps was determined by
reference to market values.
Forward foreign currency derivatives fair value was determined
using quoted exchange rates.
Contingent consideration was determined using the Directors'
assessment of the likelihood that financial targets will be
achieved. The fair value of the consideration has been derived by
discounting the estimated cash consideration at 10.0% (being the
Group's estimated risk adjusted cost of capital). The estimated
cash consideration is derived from the budgets and forecasts for
Permavoid.
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
The fair values disclosed above, with the exception of
contingent consideration which is categorised as Level 3, all
relate to items categorised as Level 2.
There have been no transfers in any direction between Levels 1,
2 or 3 in the period.
INDEPENT REVIEW REPORT TO
POLYPIPE GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of consolidated financial statements in the interim financial
report for the six months ended 30 June 2019 which comprises the
Interim Group Income Statement, the Interim Group Statement of
Comprehensive Income, the Interim Group Balance Sheet, the Interim
Group Statement of Changes in Equity, the Interim Group Cash Flow
Statement and the related Notes 1 to 12. We have read the other
information contained in the interim financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of consolidated financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland), Review of Interim Financial Information
Performed by the Independent Auditor of the Entity, issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The interim financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the interim financial report in accordance with the
Disclosure Guidance and Transparency Rules of the UK's Financial
Conduct Authority.
As disclosed in Note 1, the annual consolidated financial
statements of the Group are prepared in accordance with IFRSs as
adopted by the European Union. The condensed set of consolidated
financial statements included in this interim financial report has
been prepared in accordance with IAS 34, Interim Financial
Reporting, as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of consolidated financial statements in the
interim financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity, issued by the Auditing Practices Board for use in
the UK. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the interim financial report for the six
months ended 30 June 2019 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
UK's Financial Conduct Authority.
Ernst & Young LLP
Leeds
13 August 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR CKBDNABKDCFD
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