TIDMPZC
RNS Number : 1229B
PZ CUSSONS PLC
28 January 2020
PZ CUSSONS PLC
28 January 2020
INTERIM ANNOUNCEMENT OF RESULTS
FOR THE HALF YEAR TO 30 NOVEMBER 2019
Progress against new strategy in challenging market
conditions
PZ Cussons Plc, a leading consumer products group, announces its
interim results for the six months ended 30 November 2019.
Half year Half year Constant
to 30 November to Reported currency
2019 30 November % change % change(2)
Adjusted(1) results (before exceptional 2018
items)
Revenue from continuing operations GBP293.3m GBP302.8m (3.1%) (4.3%)
Adjusted operating profit from
continuing operations GBP30.3m GBP34.3m (11.7%) (13.0%)
Adjusted profit before tax from
continuing operations GBP28.0m GBP31.8m (11.9%) (13.1%)
Adjusted profit for the period GBP21.4m GBP24.0m (10.8%)
Adjusted basic earnings per share 5.33p 5.67p
Net debt(3) (GBP136.2m) (GBP177.2m)
Reported results (IFRS) (after
exceptional items)
Revenue from continuing operations GBP293.3m GBP302.8m (3.1%)
Operating profit from continuing
operations GBP37.0m GBP28.3m 30.7%
Profit before tax from continuing
operations GBP34.7m GBP25.8m 34.5%
Profit for the period GBP28.8m GBP19.2m 50.0%
Basic earnings per share 7.10p 4.57p
Interim dividend per share 2.67p 2.67p
(1) Exceptional items before tax (2019: income GBP6.7m; 2018:
cost GBP6.1m) are detailed in note 4.
(2) Constant currency comparison. See page 3 for values of
currency impact.
(3) Net debt, above and hereafter, is defined as cash,
short-term deposits and current asset investments, less bank
overdrafts and borrowings. It does not include IFRS 16 lease
liabilities of GBP9.9m (refer to note 11).
IFRS 16 was adopted on 1 June 2019 for statutory reporting using
the modified approach and therefore prior year figures have not
been restated.
Commentary refers to adjusted results of continuing operations
on a constant currency basis unless otherwise noted.
Group highlights
-- Challenging market conditions across key geographies led to a
decline in Group revenue of 4.3%.
-- Adjusted operating profit of GBP30.3m, 13.0% lower, resulting
from losses in Nigeria and lower profits in the UK and Australia
offset by growth in Indonesia.
-- Adjusted profit before tax of GBP28.0m, a reduction of 13.1%
reflecting reduced operating profit.
-- Reported profit before tax grew to GBP34.7m or +34.5%, driven
by exceptional profit on disposal of our business in Greece and
lower exceptional charges than in the prior period.
-- Strategy announced in July 2019 delivering initial progress -
two disposals announced, stable revenue in Focus Brands and initial
action to reduce overhead costs.
-- As a result, balance sheet further strengthened, with net debt of 1.5x EBITDA.
-- Interim dividend maintained at 2.67p per share.
Europe & the Americas Highlights
-- UK share growth in washing and bathing category despite difficult trading environment.
-- 4.7% decline in revenue, reflecting continuing consumer
uncertainty, trading down to private label in hand wash and
well-documented challenges in the UK high street.
-- Modest decline in operating profit of 4.3%, with UK weakness
partially offset by a stable performance in Beauty.
-- Continued growth in US Beauty retail sales and category market share.
Asia Pacific Highlights
-- Continued growth in revenue and market share in Indonesia.
-- Leadership maintained in Australia Home Care, but lower share in Food & Nutrition.
-- 3.8% decline in revenue, with increased promotional activity
and lower consumer confidence in Australia, partly offset by growth
in Indonesia.
-- Operating profit declined by 17.5% due to performance in
Australia, together with increased marketing investment and higher
manufacturing costs in the supply chain, more than offsetting
increased profit in Indonesia.
Africa Highlights
-- Challenging Nigerian economy resulted in continued weakness
in mass market Home and Personal Care sales, with regional revenue
4.4% lower.
-- Good revenue growth in Electricals, with profit growth in
Kenya, Ghana and the joint venture food business, PZ Wilmar.
-- Together with ongoing costs related to the Lagos port
congestion, this led to an operating loss of GBP0.6m.
Outlook
A stronger second half profit before tax is expected subject to
no further worsening of the economic and trading environments
across our key geographies. The key areas of improvement for the
business are expected to be:
-- Return to stability in the UK primarily due to recovery in
hand wash driven by environmentally friendly range and marketing
plans at trade level;
-- Increased revenue in the US Beauty business supported by significant marketing investment;
-- Return to more stable results in Australia driven by
marketing plans in Home Care and Food & Nutrition categories;
and
-- Stability in Africa largely driven by marketing investment in
our Focus Brands and restructuring benefits.
Assuming these initiatives are successful, full year revenue and
profit before tax from continuing operations is expected to be
modestly below prior year.
Commenting today, Caroline Silver (Chair) said:
"The Group's adjusted results for the first half of the year
were impacted by challenging market conditions across our key
geographies.
We were pleased to see that the performance of our Focus Brands
was stable overall compared to prior year. Our investment remains
targeted towards these Focus Brands and this will continue in the
second half of the year. We have started to restructure our
portfolio of activities, disposing of our business in Greece and
agreeing the sale of our Polish brand. Further portfolio reshaping
is underway and initiatives to improve our operating efficiency are
being implemented at pace.
The Board has maintained the interim dividend in line with last
year at 2.67p per share.
On 12(th) December 2019 we announced that Chief Executive
Officer Alex Kanellis will retire on 31(st) January 2020 after 26
years with the Group. Plans to appoint his successor are well
advanced".
Press Enquiries
PZ Cussons Alan Bergin (Interim Chief Financial Officer)
Instinctif Tim Linacre / Guy Scarborough
On 28, 29, 30 January c/o Instinctif on 020 7457 2047 or 07917
178 920
After 30 January to Alan Bergin on 0161 435 1027
Investor and Analyst conference call
Management will be hosting a conference call for investors and
analysts at 9:30am (UK Time) today. Please call Guy Scarborough at
Instinctif Partners for dial-in details on 020 7457 2047 or email
Guy.Scarborough@instinctif.com.
The presentation slides to accompany the conference call are
available to download from the Company's website at
www.pzcussons.com.
Basis of Preparation
In our financial statements we use alternative performance
measures that are not recognised under IFRS. These metrics are used
to allow the readers of the financial statements to obtain a more
meaningful comparison of the underlying performance of the Group by
adjusting for certain items which, if included, could distort the
understanding of the Group's performance and comparability between
periods. The same measures are used by management for planning,
budgeting and reporting purposes and for the internal assessment of
operating performance across the Group. The adjusted presentation
is adopted on a consistent basis for the purposes of the half year
and full year reporting. Where relevant, comparative IFRS measures
have also been presented.
Adjusted results are presented before exceptional items which in
the current period include costs relating to the Group Strategy
project as well as the continuation of costs associated with the
Group Structure and Systems project, offset by the profit on the
sale of the business in Greece.
The adjusted and reported results for the current period are
presented with variances to prior period results and also as
variances between the current and prior period on a constant
currency basis. The constant currency impact has been derived by
retranslating the 2018 result using 2019 foreign currency exchange
rates. The favourable translational impact on revenue, adjusted
operating profit and adjusted profit before tax was GBP3.6 million,
GBP0.5 million and GBP0.5 million respectively.
Progress against strategy
Our strategy announced in July 2019 articulates three key
success factors: Focus, Scale and Accelerate. Within that, we
identified a number of Focus Brands where successful application of
these principles will be key to our success. In addition, we have
commenced simplification of our Nigerian activities ready for the
market recovery. To better focus on our core business, we started
to dispose of non-core brands and activities.
1) Focused investment on core Personal Care and Beauty brands in
geographies that can scale growth
Key to delivering our strategy remains returning the Group to
sustainable growth. Our Focus Brands' revenue was stable in the
first half of the year, notwithstanding very challenging
competitive conditions. Our Focus Brands receive the majority of
our marketing investment and account for roughly two-thirds of our
revenue. By region they are:
-- Europe & the Americas: Imperial Leather, Carex, Original Source, St Tropez and Sanctuary
-- Asia Pacific: Cussons Baby, Morning Fresh and Rafferty's Garden
-- Africa: Premier, Cussons Baby, Morning Fresh and Electricals
In the first half of the year our marketing investment remained
in line with prior year despite the drop in revenue and profit.
Consistent with our strategy, we will increase investment across
our Focus Brands in the second half.
2) Simplification of our Nigerian activities ready for market
recovery and continued investment in our partnerships with Haier
and Wilmar
Progress continues on the simplification of our Nigeria business
with plans implemented in the first half to reduce our structural
operating cost in the market, including portfolio changes where
appropriate. This will both contribute to improved results in the
second half, and allow the business to tighten its focus on
understanding and serving its key consumers. We continue to invest
in our partnerships with Haier and Wilmar. The Electricals category
grew revenue, but was impacted by higher costs associated with the
continuing Lagos Port issues. PZ Wilmar contributed a higher share
of profit compared to the prior year.
3) Disposal of non-core brands and activities
Progress was made on the reshaping of our activities with the
disposal of the business in Greece for GBP40.9m and the agreement
to sell our Polish Personal Care brand Luksja for GBP9.2m. We are
currently in discussions regarding reshaping in selected other
brands and activities.
The following Group and Regional performance commentary is
presented on a continuing operations basis. All growth percentages
are stated in constant currency and operating profit is stated and
discussed on an adjusted basis unless otherwise noted.
Business Review: Group Performance
Revenue at GBP293.3m declined by 4.3% due to a weaker
performance across all three regions. In Europe & the Americas,
US Beauty continued to grow in retail sales and category market
share. UK performance was impacted by low levels of consumer
confidence and down trading. Asia Pacific declined as a result of
performance in Australia largely due to lower consumer confidence
and increased promotional activity. This offset a good performance
in Indonesia where share, sales and profit all grew. In Africa, the
Nigerian economy remained challenging leading to further decline in
Home and Personal Care.
Operating profit at GBP30.3m was 13.0% lower than prior year
largely reflecting the challenges to revenue in the UK, Australia
and Nigeria. In addition our Indonesian and Australian markets
faced increased product costs. Reduced margins and additional
expenses associated with the port issue in Lagos continued to weigh
on our Nigerian business.
On an IFRS basis, reported operating profit was GBP37.0m (2018:
GBP28.3m), with the improvement versus adjusted profit largely
reflecting an exceptional profit on disposal of our business in
Greece and lower exceptional costs than the prior year.
BUSINESS PERFORMANCE: REGIONAL PERFORMANCE
Continuing operations
Constant
Reported currency
Revenue (GBPm) 2019 2018 % change % change(1)
Europe & the Americas 91.6 95.8 (4.4%) (4.7%)
Asia Pacific 94.2 95.6 (1.5%) (3.8%)
Africa 107.5 111.3 (3.4%) (4.4%)
------ ------ ---------- -------------
293.3 302.8 (3.1%) (4.3%)
------ ------ ---------- -------------
Constant
Adjusted operating profit/(loss) Reported currency
before exceptional items(2) (GBPm) 2019 2018 % change % change(1)
Europe & the Americas 22.7 23.5 (3.4%) (4.3%)
Asia Pacific 8.2 9.6 (14.6%) (17.5%)
Africa (0.6) 1.2 (150.0%) (148.6%)
------ ------ ---------- -------------
30.3 34.3 (11.7%) (13.0%)
------ ------ ---------- -------------
Constant
Reported (IFRS) operating profit/(loss) Reported currency
after exceptional items(2) (GBPm) 2019 2018 % change % change(1)
Europe & the Americas 29.6 19.4 52.6% 51.4%
Asia Pacific 8.0 8.7 (8.0%) (11.3%)
Africa (0.6) 0.2 (400.0%) (561.2%)
------ ------ ---------- -------------
37.0 28.3 30.7% 28.8%
------ ------ ---------- -------------
(1) Constant currency comparison.
(2) Exceptional items before tax (2019: income GBP6.7m; 2018:
cost GBP6.1m) are detailed in note 4.
EUROPE & THE AMERICAS
Revenue at GBP91.6m (2018: GBP95.8m) declined by 4.7% versus
prior year with operating profit at GBP22.7m (2018: GBP23.5m) a
reduction of 4.3%.
In the UK, consumer confidence declined amid Brexit and general
economic and political uncertainty. This led to an increase in
promotional activity in the first half of the year, with consumers
trading down to private label and hard discounters.
As a result, revenue in UK Personal Care was lower, with
Imperial Leather and Original Source in moderate decline while
Carex was more severely impacted by growth in private label.
However, our market share in washing and bathing grew as PZ Cussons
became the volume market leader for the first time in the UK
(Kantar, Dec 2019).
In the first half, we launched the Mr Men variant in Carex and
the Mummy Diaries partnership. These activities were well received
by the consumer and helped offset some of the impact from
aggressive low price private label competition. In Imperial Leather
we saw a better performance in the second quarter driven by overall
core trading.
Beauty revenue was below last year. Sanctuary posted a robust
set of results driven both by an increase in footprint online and
growth in the multiples and specialist trade. St Tropez was
impacted by the market conditions in the UK in the first half.
While sell-out in the US remained strong, US shipments were
impacted by trade stock policy in the first half of the year. St
Tropez continue to grow its market share in the mass and premium
categories, while in the UK the brand was impacted by strong
promotional activity by lower price competitors.
Operating profit declined due to the revenue performance in the
UK, partially offset by a robust Beauty performance. The region
also benefited from a small profit on the disposal of a non-core
brand.
On an IFRS basis, reported operating profit was GBP29.6m (2018:
GBP19.4m), the improvement versus adjusted profit being mainly
driven by a profit on disposal of our business in Greece. See note
16 for further details.
ASIA PACIFIC
Revenue at GBP94.2m (2018: GBP95.6m) declined by 3.8% versus
prior year, with operating profit at GBP8.2m (2018: GBP9.6m), a
reduction of 17.5%.
In Indonesia revenue continued to grow, and Cussons Baby market
share increased by 1% to over 30%. There was an excellent
performance in the hair care, wash and baby gift pack categories
which were strongly supported by our trade partners. In the first
half of the year we also delivered a successful restage for Cussons
Baby of our hair care, cologne and body wash products.
In Australia revenue declined in the 6 months to 30 November
2019 due to increased promotional activity across all our
categories. Morning Fresh maintained market share with over 40%,
and revenue was slightly higher, while Rafferty's Garden suffered
share loss leading to lower revenue. A restage of the brand was
launched towards the end of the period. Our Personal Care and
Beauty category was adversely impacted by price competition and
discounting.
Operating profit was impacted by the performance in Australia
and higher product costs partly driven by adverse currency
movement. Marketing investment was higher than the comparative
period in the prior year. This offset good operating profit growth
in Indonesia.
On an IFRS basis, reported operating profit was GBP8.0m (2018:
GBP8.7m) due to lower adjusted operating profit, partially offset
by a reduction in exceptional costs.
Our manufacturing site in Indonesia was impacted by the severe
flooding in Jakarta on 31 December 2019 and a magnificent response
by our employees led to full operational status being restored by 8
January 2020. Initial indications are that costs associated with
this disruption will not material.
AFRICA
Revenue at GBP107.5m (2018: GBP111.3m) declined by 4.4% versus
prior year with an operating loss of GBP0.6m (2018: profit
GBP1.2m).
Revenue in Nigeria was impacted by adverse economic conditions
with the further contraction of mass market Home and Personal Care
sales amid increased competition. This led to a reduction in prices
and an increase in promotional spend.
Our Focus Brands of Cussons Baby and Morning Fresh grew in the
first half of the year. Cussons Baby grew on the back of a
well-received 'Moments' campaign which saw a significant increase
in sales of our gift packs. Morning Fresh grew revenue due to
increased pricing and availability in the market. Premier Cool was
relaunched, but Premier overall declined due to a weaker core
performance. The core Premier brand will be relaunched in the
second half of the year.
Electricals revenue continued to grow strongly compared to last
year, supported by the strong energy saving proposition, although
this was partially offset by price reductions.
Overall operating profit declined due to Nigeria revenue
performance in our Home and Personal Care categories, reduced
margins due to pricing and promotional pressure and increased
operating costs, including those associated with the Lagos port
issues.
This offset growth in operating profits in Kenya supported by a
good revenue performance. Cost savings were achieved in Ghana and
our joint venture PZ Wilmar produced higher operating profit
reflecting increased availability of palm oil to process. Our Food
& Nutrition business operating results were in line with the
comparative period last year.
On an IFRS basis, the reported operating loss was GBP0.6m (2018:
reported operating profit of GBP0.2m). There were no exceptional
items recognised in this region in the first half year.
FINANCIAL REVIEW
Group operating margin was 10.3% (2018:11.3%) on adjusted
operating profit of GBP30.3m (2018: GBP34.3m) from revenue of
GBP293.3m (2018: GBP302.8m).
In Europe & the Americas operating margin was 24.8% (2018:
24.5%), a good result given market conditions. The region was
impacted by increased promotional spend and a poorer mix due to
Carex performance, but this was offset by improved margins across
our Beauty business and a small profit from the sale of a non-core
brand. In Asia Pacific operating margin was 8.7% (2018: 10.0%),
with the reduction driven by results in Australia and an increase
in regional supply chain costs. In Africa, operating margin
declined to a loss of 0.6% (2018: 1.1% profit) as a result of
increased promotional spend, reduced pricing and higher operating
costs.
Net finance costs of GBP2.3m (2018: GBP2.5m) were lower than
last year reflecting higher cash balances and lower borrowings as a
result of the proceeds from the disposals and improved working
capital management. The Group is funded by a GBP325 million
Revolving Credit Facility committed until 28 November 2023, of
which GBP178m was drawn down at 30 November 2019.
Adjusted profit before tax at GBP28.0m (2018: GBP31.8m)
reflected the reduced revenue and lower operating margin partially
offset by lower finance costs.
The effective tax rate on adjusted profit was 24.3% (2018:
27.0%). This reflected a lower proportion of profits in the higher
rate jurisdiction of Africa and higher proportion of profit from
the lower rate Europe & the Americas and Asia Pacific. See note
7 for further detail. The 2019 Finance Bill in Nigeria was signed
on 13 January 2020, which will mainly impact minimum tax rules
& VAT. We are currently assessing the impact on our business
but based on our initial review we do not expect it to have a
material impact.
Adjusted earnings per share of 5.33p (2018: 5.67p) decreased by
6.0% as a result of the lower profit, partly offset by the
reduction in tax rate.
Exceptional income of GBP6.7m (2018: costs of GBP6.0m) reflects
the profit on disposal of our Greek business, partly offset by
exceptional costs associated with implementing the Group Strategy
project. In addition, during the period the Group incurred costs
relating to the second year of the Group Structure and Systems
project. We expect these exceptional charges to accelerate in the
second half of the year in line with initiatives to maximise our
operating efficiency and implement our strategy. See note 4 for
further details on exceptional items.
On an IFRS basis, reported profit before tax was GBP34.7m (2018:
GBP25.8m) with earnings per share of 7.10p (2018: 4.57p), growth by
55.4%, largely driven by the impact of exceptional items.
Net debt, defined as cash, short-term deposits and current asset
investments, less bank overdrafts and borrowings, at GBP136.2m
(2018: GBP177.2m) reduced due to proceeds from the disposal and
increased focus across the business on managing working capital and
capital expenditure. Our balance sheet remains strong with a
gearing ratio of 1.5 as at 30(th) November 2019 (2018: 1.5) and net
assets of GBP437.1m as at 30(th) November 2019 (2018:
GBP451.3m).
The Group's three UK pension schemes have an aggregate pension
accounting surplus under IAS 19 of GBP33.8m, after the restriction
due to asset ceiling (2018: GBP22.7m). The overseas schemes
reported a deficit of GBP7.0m (2018:GBP7.4m). (See note 12 for
further details on retirement benefits)
Related parties
Related party disclosures are given in note 14.
Principal risks and uncertainties facing the Group
Our principal risks and uncertainties are explained in more
detail in note 18 and remain as stated on pages 44 to 49 of our
2019 Annual Report and Accounts which is available on our website
at www.pzcussons.com.
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
Half year to Half year to Year to
30 November 2019 30 November 2018 31 May 2019
Before Exceptional Before Exceptional Before Exceptional
exceptional items exceptional items exceptional items
items (note 4) Total items (note 4) Total items (note 4) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
Continuing
operations
Revenue 3 293.3 - 293.3 302.8 - 302.8 626.6 - 626.6
Cost of sales (186.9) - (186.9) (187.9) - (187.9) (388.9) - (388.9)
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
Gross profit 106.4 - 106.4 114.9 - 114.9 237.7 - 237.7
Selling and
distribution
costs (44.6) - (44.6) (45.5) - (45.5) (94.2) - (94.2)
Administrative
expenses (33.3) 6.7 (26.6) (35.7) (6.0) (41.7) (72.4) (32.6) (105.0)
Share of results
of
joint ventures 1.8 - 1.8 0.6 - 0.6 2.3 - 2.3
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
Operating profit 30.3 6.7 37.0 34.3 (6.0) 28.3 73.4 (32.6) 40.8
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
Finance income 0.4 - 0.4 0.2 - 0.2 - - -
Finance costs (2.7) - (2.7) (2.7) - (2.7) (6.7) - (6.7)
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
Net finance
costs 5 (2.3) - (2.3) (2.5) - (2.5) (6.7) - (6.7)
------------- ------------- -------- ------------- ------------- --------
Profit before
taxation 28.0 6.7 34.7 31.8 (6.0) 25.8 66.7 (32.6) 34.1
Taxation 7 (6.8) 0.7 (6.1) (8.6) 1.3 (7.3) (15.6) 4.6 (11.0)
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
Profit for the
period
from continuing
operations 21.2 7.4 28.6 23.2 (4.7) 18.5 51.1 (28.0) 23.1
Discontinued
operations 15
Profit from
discontinued
operations 0.2 - 0.2 0.8 (0.1) 0.7 2.9 (0.2) 2.7
------------- ------------- -------- -------------
Profit for the
period 21.4 7.4 28.8 24.0 (4.8) 19.2 54.0 (28.2) 25.8
Attributable to:
Owners of the
Parent 22.3 7.4 29.7 23.7 (4.6) 19.1 54.4 (28.3) 26.1
Non-controlling
interests (0.9) - (0.9) 0.3 (0.2) 0.1 (0.4) 0.1 (0.3)
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
21.4 7.4 28.8 24.0 (4.8) 19.2 54.0 (28.2) 25.8
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
Basic EPS (p) 9 5.33 1.77 7.10 5.67 (1.10) 4.57 13.01 (6.77) 6.24
Diluted EPS (p) 9 5.33 1.77 7.10 5.67 (1.10) 4.57 13.01 (6.77) 6.24
------------- ------------- -------- ------------- ------------- -------- ------------- ------------- --------
IFRS 16 was adopted on 1 June 2019 for statutory reporting using
the modified approach and therefore prior year figures have not
been restated. As a result the primary statements are shown on an
IFRS 16 basis for half year to 30 November 2019 and IAS 17 basis
for prior periods.
The notes on pages 13 to 30 are an integral part of these
condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
------------- -------------- ---------
Profit for the period / year 28.8 19.2 25.8
Other comprehensive (expense) / income
Items that will not subsequently be
reclassified to profit or loss
Remeasurement of post-employment obligations
(note 12) (1.3) (7.7) (2.4)
Deferred tax on remeasurement of post-employment
obligations 0.2 - 0.4
Tax on items that will not be subsequently
reclassified to profit or loss - - (0.6)
Total items that will not subsequently
be reclassified to profit or loss (1.1) (7.7) (2.6)
------------- -------------- ---------
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation
of foreign operations (8.5) (1.0) (0.9)
Cash flow hedges - fair value (loss)/gain
in period / year (0.2) 0.7 0.6
Cost of hedging reserve - - (0.3)
Recycle of equity reserves on disposal
of subsidiary (8.6) - -
Total items that may subsequently be
reclassified to profit or loss (17.3) (0.3) (0.6)
Other comprehensive expense for the
period / year net of taxation (18.4) (8.0) (3.2)
Total comprehensive income for the period
/ year 10.4 11.2 22.6
------------- -------------- ---------
Attributable to:
Owners of the Parent 12.4 11.6 23.1
Non-controlling interests (2.0) (0.4) (0.5)
------------- -------------- ---------
The notes on pages 13 to 30 are an integral part of these
condensed consolidated interim financial statements.
(Restated)*
CONDENSED CONSOLIDATED BALANCE
SHEET Unaudited Unaudited Audited
30 November 30 November 31 May
2019 2018 2019
Notes GBPm GBPm GBPm
------------ ------------ --------
Assets
Non-current assets
Goodwill, software and other intangible
assets 6 350.9 398.2 369.2
Property, plant and equipment 6 124.1 153.1 148.8
Long term right of use assets 8.1 - -
Other investments - 0.3 -
Net investments in joint ventures 37.5 29.2 35.6
Trade and other receivables - 0.9 -
Deferred taxation assets 9.5 15.0 10.4
Current tax receivable 7 6.4 - -
Retirement benefit surplus 12 38.3 26.8 36.3
------------ ------------ --------
574.8 623.5 600.3
------------ ------------ --------
Current assets
Inventories 118.4 150.7 131.9
Trade and other receivables 139.8 168.6 157.5
Derivative financial asset 13 1.3 0.5 1.6
Current tax receivable 8.0 3.5 2.1
Current asset investments 11 0.3 0.3 0.3
Cash and short term deposits 11 41.5 56.6 53.5
309.3 380.2 346.9
------------ ------------ --------
Assets held for sale 15 2.4 - -
------------ ------------ --------
Total assets 886.5 1,003.7 947.2
------------ ------------ --------
Equity
Share capital 4.3 4.3 4.3
Capital redemption reserve 0.7 0.7 0.7
Hedging reserve 0.1 0.7 0.3
Currency translation reserve (103.8) (93.8) (86.7)
Other reserve (39.0) (39.0) (39.0)
Retained earnings 548.5 550.1 543.8
Attributable to owners of the
Parent 410.8 423.0 423.4
Non-controlling interests 26.3 28.3 28.2
------------ ------------ --------
Total equity 437.1 451.3 451.6
Liabilities
Non-current liabilities
Borrowings 11 178.0 212.2 204.0
Trade and other payables 0.9 1.7 0.6
Long term lease liability 9.9 - -
Deferred taxation liabilities 66.1 80.8 72.1
Retirement benefit obligations 12 11.5 11.5 11.3
266.4 306.2 288.0
------------ ------------ --------
Current liabilities
Borrowings 11 - 21.9 2.0
Trade and other payables 142.7 187.8 170.6
Derivative financial liabilities 13 0.7 0.3 1.0
Current taxation payable 38.2 32.2 32.4
Provisions 1.4 4.0 1.6
------------ ------------ --------
183.0 246.2 207.6
------------ ------------ --------
Total liabilities 449.4 552.4 495.6
------------ ------------ --------
Total equity and liabilities 886.5 1,003.7 947.2
------------ ------------ --------
*See note 2 for details of restatement
The notes on pages 13 to 30 are an integral part of these
condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Parent
------------------------------------------
Currency Capital Non
Share translation redemption Retained Other Hedging controlling
capital reserve reserve Earnings reserve reserve interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 June 2018 (restated)* 4.3 (85.4) 0.7 554.3 (39.0) - 29.0 463.9
------- ----------- ---------- -------- ------- ------- ----------- ------
Profit for the period - - - 19.1 - - 0.1 19.2
Other comprehensive
(expense)/income
for the period (restated)* - (8.4) - 0.2 - 0.7 (0.5) (8.0)
------- ----------- ---------- -------- ------- ------- ----------- ------
Total comprehensive
(expense)/income
for the period - (8.4) - 19.3 - 0.7 (0.4) 11.2
------- ----------- ---------- -------- ------- ------- ----------- ------
Transactions with owners:
Ordinary dividends - - - (23.5) - - - (23.5)
Non-controlling interests
dividend
paid - - - - - - (0.3) (0.3)
------- ----------- ---------- -------- ------- ------- ----------- ------
Total transactions with owners
recognised
directly in equity - - - (23.5) - - (0.3) (23.8)
------- ----------- ---------- -------- ------- ------- ----------- ------
At 30 November 2018 4.3 (93.8) 0.7 550.1 (39.0) 0.7 28.3 451.3
------- ----------- ---------- -------- ------- ------- ----------- ------
At 1 June 2018 (restated)* 4.3 (85.4) 0.7 554.3 (39.0) - 29.0 463.9
------- ----------- ---------- -------- ------- ------- ----------- ------
Profit for the year - - - 26.1 - - (0.3) 25.8
Other comprehensive
(expense)/income
for the year - (1.3) - (2.0) - 0.3 (0.2) (3.2)
------- ----------- ---------- -------- ------- ------- ----------- ------
Total comprehensive
(expense)/income
for the year - (1.3) - 24.1 - 0.3 (0.5) 22.6
------- ----------- ---------- -------- ------- ------- ----------- ------
Transactions with owners:
Ordinary dividends - - - (34.6) - - - (34.6)
Non-controlling interests
dividend
paid - - - - - - (0.3) (0.3)
------- ----------- ---------- -------- ------- ------- ----------- ------
Total transactions with owners
recognised
directly in equity - - - (34.6) - - (0.3) (34.9)
------- ----------- ---------- -------- ------- ------- ----------- ------
At 31 May 2019 4.3 (86.7) 0.7 543.8 (39.0) 0.3 28.2 451.6
------- ----------- ---------- -------- ------- ------- ----------- ------
At 1 June 2019 as originally
presented 4.3 (86.7) 0.7 543.8 (39.0) 0.3 28.2 451.6
------- ----------- ---------- -------- ------- ------- ----------- ------
Transition adjustment upon
adoption
of IFRS 16 Leases (1.5) (1.5)
At 1 June 2019 4.3 (86.7) 0.7 542.3 (39.0) 0.3 28.2 450.1
Profit for the period - - - 29.7 - - (0.9) 28.8
Other comprehensive
(expense)/income
for the period - (17.1) - - - (0.2) (1.1) (18.4)
------- ----------- ---------- -------- ------- ------- ----------- ------
Total comprehensive
(expense)/income
for the period - (17.1) - 29.7 - (0.2) (2.0) 10.4
------- ----------- ---------- -------- ------- ------- ----------- ------
Transactions with owners:
Ordinary dividends - - - (23.5) - - - (23.5)
Non-controlling interests
dividend
paid - - - - - - (0.4) (0.4)
Non-controlling interests
forfeited
dividend - - - - - - 0.5 0.5
------- ----------- ---------- -------- ------- ------- ----------- ------
Total transactions with owners
recognised
directly in equity - - - (23.5) - - 0.1 (23.4)
------- ----------- ---------- -------- ------- ------- ----------- ------
At 30 November 2019 4.3 (103.8) 0.7 548.5 (39.0) 0.1 26.3 437.1
------- ----------- ---------- -------- ------- ------- ----------- ------
*See note 2 for details of restatement
The notes on pages 13 to 30 are an integral part of these
condensed consolidated interim financial statements.
Of the GBP548.5m in retained earnings, GBP22.0m (2018: GBP22.0m)
relates to revaluation reserve and is therefore
non-distributable.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
------------- ------------- --------
Cash flows from operating activities
Cash generated from operations (note 10) 24.4 33.6 82.9
Taxation paid (11.9) (4.8) (10.3)
Interest paid (note 5) (2.8) (3.0) (7.2)
------------- ------------- --------
Net cash generated from operating activities 9.7 25.8 65.4
------------- ------------- --------
Cash flows from investing activities
Interest income (note 5) 0.5 0.4 0.5
Purchase of property, plant and equipment
and software (note 6) (2.8) (7.1) (14.1)
Proceeds from sale of assets 0.2 - 4.1
Cash flow from disposal of companies &
businesses 35.2 - -
Advance of short term deposits to joint
venture (0.5) (6.1) (6.8)
Net cash used in investing activities 32.6 (12.8) (16.3)
------------- ------------- --------
Cash flows from financing activities
Dividends paid to non-controlling interests (0.4) (0.3) (0.3)
Purchase of shares for ESOT - - -
Dividends paid to Company shareholders
(note 8) (23.5) (23.5) (34.6)
IFRS 16 Finance Lease Payments (1.4) - -
(Decrease) / increase in borrowings (note
11) (28.0) (24.8) 204.0
Repayment of loan facility - - (250.0)
Net cash used in financing activities (53.3) (48.6) (80.9)
Net decrease in cash and cash equivalents
(note 11) (11.0) (35.6) (31.8)
Cash and cash equivalents at the beginning
of the period (note 11) 53.5 86.2 86.2
Effect of foreign exchange rates (note
11) (1.0) (0.9) (0.9)
------------- ------------- --------
Cash and cash equivalents at the end of
the period (note 11) 41.5 49.7 53.5
------------- ------------- --------
The notes on pages 13 to 30 are an integral part of these
condensed consolidated interim financial statements.
1. Basis of preparation
The Company is a public limited company incorporated and
domiciled in England. It has a primary listing on the London Stock
Exchange. The address of its registered office is shown on page
32.
These condensed consolidated interim financial statements for
the six months ended 30 November 2019, which have been neither
audited nor reviewed, have been prepared in accordance with the
Disclosure and Transparency Rules (DTR) of the Financial Conduct
Authority and in accordance with IAS 34, 'Interim Financial
Reporting' as adopted by the European Union (EU). The condensed
consolidated interim financial statements should be read in
conjunction with the annual financial statements for the year ended
31 May 2019 which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted for
use in the EU, including International Accounting Standards (IAS)
and interpretations issued by the International Financial Reporting
Standard Interpretations Committee (IFRS IC).
The condensed consolidated interim financial statements for the
period ended 30 November 2019 do not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006.
The financial information set out in this statement relating to
the year ended 31 May 2019 does not constitute statutory accounts
for that year. Full audited statutory accounts of the Group in
respect of that financial year were approved by the Board of
Directors on 26 July 2019 and have been delivered to the Registrar
of Companies. The report of the auditors on these statutory
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain a statement under section 498 of the
Companies Act 2006.
These condensed consolidated interim financial statements were
approved for issue on 28 January 2020.
Judgements and estimates
The preparation of condensed consolidated 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 consolidated 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 that applied to the
annual financial statements for the year ended 31 May 2019.
Going concern basis
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Business Review. The financial position of the
Group and liquidity position are also described within the
Financial Position section of that review.
After making enquiries and having considered the availability of
resources, the Directors consider it appropriate to continue to
adopt the going concern basis in preparing the condensed
consolidated interim financial statements.
2. Accounting policies
The accounting policies are consistent with those of the annual
financial statements for the year ended 31 May 2019 except for as
described below. Taxes on income in the interim periods are accrued
using the tax rate that would be applicable to expected total
annual profit or loss before tax.
The Group has applied the following standards and amendments for
the first time for the annual reporting period commencing 1 June
2019:
-- IFRS 16 Leases;
-- IFRIC 23 - Uncertainty over Income Tax Treatments;
-- Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures;
-- Annual improvements to IFRSs: 2015-17 Cycle (Dec 2017); and
-- Amendments to IFRS 10 and IAS 28 - Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture.
Only IFRS 16 Leases, and IFRIC 23 - Uncertainty over Income Tax
Treatments have had any impact on the Group.
Changes in accounting policies - IFRS 16
In the current year, the Group, for the first time, has applied
IFRS 16 Leases (as issued by the IASB in January 2016) that is
effective for annual periods that begin on or after 1 January 2019.
The date of initial application of IFRS 16 for the Group is 1 June
2019.
The group has adopted IFRS 16 retrospectively from 1 June 2019,
but has not restated comparatives for the 2019 reporting period, as
permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising from
the new leasing rules are therefore recognised in the opening
balance sheet on 1 June 2019.
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to the lessee
accounting by removing the distinction between operating and
finance lease, requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases, except for
short-term leases and leases of low value assets.
The Group is not party to any leases where it acts as a lessor,
but the Group does have a number of property and equipment
leases.
Details of the Group's accounting policies under IFRS 16 are set
out below, followed by a description of the impact of adopting IFRS
16. Significant judgements applied in the adoption of IFRS 16
included determining the lease term for those leases with
termination or extension options, and determining an incremental
borrowing rate where the rate implicit in a lease could not be
readily determined.
The Group's leasing activities and its accounting policies under
IFRS 16 Leases
The nature of the Group's leasing activities is mainly
properties, with small elements of equipment and cars. Rental
contracts are typically made for fixed periods of 1 to 15 years but
may have extension options as described in (i) below.
(i) Extension and termination options
Extension and termination options are included in a number of
property leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts. The
majority of extension and termination options held are exercisable
only by the Group and not by the respective lessor.
Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. Until the FY20
financial year, leases of property, plant and equipment were
classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were
charged to profit or loss on a straight-line basis over the period
of the lease.
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the Group's incremental borrowing rate.
Lease payments included in the measurement of the lease
liability comprise:
-- fixed lease payments (including in substance fixed payments), less any lease incentives;
-- variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date; and
-- payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the
consolidated statement of financial position.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The Group measures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
-- the lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the
lease liability is measured by discounting the revised lease
payments using a revised discount rate.
-- the lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is measured by discounting the
revised lease payments using the initial discount rate (unless the
lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used).
-- a lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is measured by discounting the revised lease payments
using a revised discount rate.
The Group did not make any such adjustments during the period
presented.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located
or restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and
measured under IAS 37. The costs are included in the related
right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease. The Group does not have any
leases that include purchase options or transfer ownership of the
underlying asset.
Variable rents that do not depend on an index or rate are not
included in the measurement of the lease liability and the
right-of-use asset.
The related payments are recognised as an expense in the period
in which the event or condition that triggers those payments occurs
and are included in the line "Other operating expenses" in the
income statement.
For short-term leases (lease term of 12 months or less) and
leases of low-value assets, the Group has opted to recognise a
lease expense on a straight-line basis as permitted by IFRS 16.
This expense is presented within administrative expenses in the
consolidated income statement.
As a practical expedient, IFRS 16 permits a lessee not to
separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The
Group has not used this practical expedient.
Approach to transition
The Group has applied IFRS 16 using the modified retrospective
approach, without restatement of the comparative information. In
respect of those leases the Group previously treated as operating
leases, the Group has elected to measure its right-of-use assets
arising from property leases using the approach set out in IFRS
16.C8(b)(i). Under IFRS 16.C8(b)(i) right-of-use assets are
calculated as if the Standard applied at lease commencement, but
discounted using the borrowing rate at the date of initial
application.
Other leases previously treated as operating leases have been
measured following the approach in IFRS 16.C8(b)(ii), whereby
right-of-use assets are set equal to the lease liability, adjusted
for prepaid or accrued lease payments, including un-amortised lease
incentives.
Practical expedients adopted on transition
The Group has made use of the practical expedient available on
transition to IFRS 16 not to reassess whether a contract is or
contains a lease. Accordingly, the definition of a lease in
accordance with IAS 17 and IFRIC 4 will continue to be applied to
those leases entered into or modified before 1 June 2019.
As part of the Group's adoption of IFRS 16 and application of
the modified retrospective approach to transition, the Group also
elected to use the following practical expedients:
-- a single discount rate has been applied to portfolios of
leases with reasonably similar characteristics;
-- right-of-use assets have been adjusted by the carrying amount
of onerous lease provisions at 31 May 2019 instead of performing
impairment reviews under IAS 36;
-- reliance on the previous identification of a lease (under IAS
17) for all contracts that existed on 1 June 2019;
-- exclusion of indirect costs from the measurement of the right to use asset at 1 June 2019;
-- the accounting for operating leases with a remaining term of
less than 12 months as a 1 June 2019 as short term leases: and
-- the use of hindsight in determining the lease term if the
contract contains options to extend or terminate the lease.
Impact on lessee accounting
Former operating leases
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were off-balance
sheet.
Applying IFRS 16, for all leases (except as noted above), the
Group now recognises right-of-use assets and lease liabilities in
the consolidated balance sheet, initially measured at the present
value of the future lease payments as described above.
Lease incentives (e.g. rent free periods) are recognised as part
of the measurement of the right-of-use assets and lease liabilities
whereas under IAS 17 they resulted in the recognition of a lease
incentive liability, amortised as a reduction of rental expenses on
a straight line basis.
Under IFRS 16, right-of-use assets will be tested for impairment
in accordance with IAS 36 Impairment of Assets. This replaces the
previous requirement to recognise a provision for onerous lease
contracts.
Under IFRS 16 the Group recognises depreciation of right-of-use
assets and interest on lease liabilities in the consolidated income
statement, whereas under IAS 17 operating leases previously gave
rise to a straight-line expense in other operating expenses.
Under IFRS 16 the Group separates the total amount of cash paid
for leases that are on balance sheet into a principal portion
(presented within financing activities) and interest (presented
within operating activities) in the consolidated cash flow
statement. Under IAS 17 operating lease payments were presented as
operating cash outflows.
The Group's weighted average incremental borrowing rate applied
to lease liabilities as at 1 June 2019 is 4.6%.
Financial impact on adoption of IFRS 16
The application of IFRS 16 to leases previously classified as
operating leases under IAS 17 resulted in the recognition of
right-of-use assets and lease liabilities.
The Group has chosen to use the table below to set out the
adjustments recognised at the date of initial application of IFRS
16.
As previously Impact of As restated
reported at IFRS 16 at 1 June
31 May 2019 GBPm 2019
GBPm GBPm
Non-current assets
Right-of-use asset - 9.5 9.5
Deferred tax asset - 0.4 0.4
-------------- ---------- ------------
Total impact on assets - 9.9 9.9
-------------- ---------- ------------
Non-current liabilities
Lease liabilities - 11.4 11.4
Total impact on liabilities - 11.4 11.4
-------------- ---------- ------------
Retained earnings
As previously reported 543.8 - 543.8
Impact of IFRS 16 - (1.9) (1.9)
Deferred tax - 0.4 0.4
-------------- ---------- ------------
Restated retained
earnings 543.8 (1.5) 542.3
-------------- ---------- ------------
Of the total right-of-use assets of GBP9.5 million recognised at
1 June 2019, GBP8.2 million related to leases of property, GBP1.0
million to leases of vehicles and GBP0.3 related to machinery.
The table below presents a reconciliation from operating lease
commitments disclosed at 31 May 2019 to lease liabilities
recognised at 1 June 2019.
GBPm
Operating lease commitments disclosed under IAS 17 at 31 May
2019 13.5
Short-term and low value lease commitments straight-line expensed
under IFRS 16 (0.2)
Effect of discounting (1.9)
Lease liabilities recognised at 1 June 2019 11.4
------
In terms of the income statement impact, the application of IFRS
16 resulted in a decrease in other operating expenses and an
increase in depreciation and interest expense compared to IAS 17.
During the six months ended 30 November 2019, in relation to leases
under IFRS 16 the Group recognised the following amounts in the
consolidated income statement:
GBPm
Depreciation 1.2
Interest expense 0.2
Variable lease payments (not depending on an index or rate) (1.6)
(0.2)
------
Change in Accounting Policies - IFRIC 23
From 1 June 2019, the Group has adopted IFRIC 23 which clarifies
the application of recognition and measurement requirements in IAS
12 Income Taxes when there is uncertainty over income tax
treatments. Upon adoption of IFRIC 23, there have been no material
adjustments to the uncertain tax positions held on the balance
sheet as at 30 November 2019. The Group have also reviewed the most
appropriate methodology for the uncertain tax positions held at the
balance sheet date. Based on the current facts and circumstances in
each case, the Group have determined the most likely outcome method
to be the most appropriate methodology to use, where applicable.
This methodology will be reviewed upon the receipt of any new
information.
Changes in accounting policies
Certain new accounting standards and interpretations have been
published that are not mandatory for the 31 May 2020 reporting
period and have not been early adopted by the Group. The Group will
undertake an assessment of the impact of these new standards and
interpretations in due course.
Restatement due to prior year adjustments
As documented in the 2019 annual financial statements, during
the year ended 31 May 2019, management identified a number of
errors relating to prior periods. Accordingly, prior year
adjustments were made, details of which can be found in note 1 of
the 2019 Annual Report and Accounts Financial Statements.
The impacts of these prior year adjustments have been reflected
and results restated for the period ended 30 November 2018.
See tables below for details:
Consolidated Balance Sheet
30 November 2018
GBPm
------------------------------------------
As previously Adjustment As published
reported
--------------
Goodwill, software and other
intangible assets 403.9 (5.7) 398.2
Currency translation reserve (80.5) (13.3) (93.8)
Hedging reserve 1.3 (0.6) 0.7
Other reserve - (39.0) (39.0)
Retained earnings 524.4 25.7 550.1
Total Equity 478.5 (27.2) 451.3
Deferred taxation assets - 15.0 15.0
Deferred taxation liabilities 44.3 36.5 80.8
Consolidated Statement of Changes in Equity
30 November 2018
GBPm
As previously Adjustment As published
reported
--------------
Currency translation reserve
At 1 June 2018 (79.8) (5.6) (85.4)
Other comprehensive expense for
the period (0.7) (7.7) (8.4)
At 30 November 2018 (80.5) (13.3) (93.8)
Retained earnings
At 1 June 2018 536.4 17.9 554.3
Profit for the period 19.1 - 19.1
Other comprehensive (expense)/income
for the period (7.6) 7.8 0.2
Ordinary dividends (23.5) - (23.5)
At 30 November 2018 524.4 25.7 550.1
Other Reserve
At 1 June 2018 - (39.0) (39.0)
Other comprehensive expense for
the period - - -
At 30 November 2018 - (39.0) (39.0)
Hedging Reserve
At 1 June 2018 0.6 (0.6) -
Other comprehensive expense for
the period 0.7 - 0.7
At 30 November 2018 1.3 (0.6) 0.7
The prior year adjustments have had no impact on the
Consolidated Income Statement or Consolidated Statement of
Comprehensive Income for the period to 30 November 2018 and
therefore have had no impact on basic EPS and adjusted EPS.
3. Segmental analysis
The Chief Operating Decision Maker (CODM) has been identified as
the Executive Board which comprises the Chief Executive Officer.
The CODM reviews the Group's internal reporting in order to assess
performance and allocate resources. The CODM has determined the
operating segments based on these reports which include an
allocation of central revenue and costs as appropriate. For
reporting purposes, in accordance with IFRS 8 'Operating segments',
the Board aggregates operating segments with similar economic
characteristics and conditions into reporting segments, which form
the basis of the reporting in the condensed consolidated interim
financial statements.
The CODM considers the business from a geographic perspective,
with Africa, Asia and Europe being the operating segments. The CODM
assesses the performance based on operating profit before any
exceptional items. Other information provided, except as noted
below, to the CODM is measured in a manner consistent with that of
the Financial Statements.
Revenues and operating profit of the Europe and Asia segments
arise from the sale of Personal Care, Home Care and Food &
Nutrition products. Revenue and operating profit from the Africa
segment arise from the sale of Personal Care, Home Care, Food &
Nutrition and Electrical products. Sales between segments are
carried out on an arm's length basis.
Business segments
Half year to 30 November Europe & Asia Africa Eliminations Total
2019 the Americas Pacific
GBPm GBPm GBPm GBPm GBPm
-------------- --------- ------- -------------
Gross segment revenue 144.4 98.7 107.5 (57.3) 293.3
Inter segment revenue (52.8) (4.5) - 57.3 -
---------------------------- -------------- --------- ------- ------------- ------
Revenue 91.6 94.2 107.5 - 293.3
---------------------------- -------------- --------- ------- ------------- ------
Segmental operating profit
before exceptional items
and share of results of
joint ventures 22.7 8.2 (2.4) - 28.5
Share of results of joint
ventures - - 1.8 - 1.8
---------------------------- -------------- --------- ------- ------------- ------
Segmental operating profit
before exceptional items 22.7 8.2 (0.6) - 30.3
---------------------------- -------------- --------- ------- ------------- ------
Exceptional Items 6.9 (0.2) - - 6.7
---------------------------- -------------- --------- ------- ------------- ------
Segmental operating profit 29.6 8.0 (0.6) - 37.0
---------------------------- -------------- --------- ------- ------------- ------
Finance income 0.4
Finance cost (2.7)
---------------------------- -------------- --------- ------- ------------- ------
Profit before taxation 34.7
---------------------------- -------------- --------- ------- ------------- ------
Half year to 30 November Europe & Asia Africa Eliminations Total
2018 the Americas Pacific
GBPm GBPm GBPm GBPm GBPm
-------------- --------- ------- -------------
Gross segment revenue 159.8 100.8 111.3 (69.1) 302.8
Inter segment revenue (63.9) (5.2) - 69.1 -
---------------------------- -------------- --------- ------- ------------- ------
Revenue 95.9 95.6 111.3 - 302.8
---------------------------- -------------- --------- ------- ------------- ------
Segmental operating profit
before exceptional items
and share of results of
joint ventures 23.5 9.6 0.6 - 33.7
Share of results of joint
ventures - - 0.6 - 0.6
---------------------------- -------------- --------- ------- ------------- ------
Segmental operating profit
before exceptional items 23.5 9.6 1.2 - 34.3
---------------------------- -------------- --------- ------- ------------- ------
Exceptional Items (4.1) (0.9) (1.0) - (6.0)
---------------------------- -------------- --------- ------- ------------- ------
Segmental operating profit 19.4 8.7 0.2 - 28.3
---------------------------- -------------- --------- ------- ------------- ------
Finance income 0.2
Finance cost (2.7)
---------------------------- -------------- --------- ------- ------------- ------
Profit before taxation 25.8
---------------------------- -------------- --------- ------- ------------- ------
Year to 31 May 2019 Europe & Asia Africa Eliminations Total
the Americas Pacific
GBPm GBPm GBPm GBPm GBPm
-------------- --------- ------- -------------
Gross segment revenue 319.2 204.1 232.4 (129.1) 626.6
Inter segment revenue (118.0) (11.1) - 129.1 -
---------------------------- -------------- --------- ------- ------------- -------
Revenue 201.2 193.0 232.4 - 626.6
---------------------------- -------------- --------- ------- ------------- -------
Segmental operating profit
before exceptional items
and share of results of
joint ventures 54.1 20.4 (3.4) - 71.1
Share of results of joint
ventures - - 2.3 - 2.3
---------------------------- -------------- --------- ------- ------------- -------
Segmental operating profit
before exceptional items 54.1 20.4 (1.1) - 73.4
---------------------------- -------------- --------- ------- ------------- -------
Exceptional Items (7.3) (23.6) (1.7) - (32.6)
---------------------------- -------------- --------- ------- ------------- -------
Segmental operating profit 46.8 (3.2) (2.8) - 40.8
---------------------------- -------------- --------- ------- ------------- -------
Finance income 0.0
Finance cost (6.7)
---------------------------- -------------- --------- ------- ------------- -------
Profit before taxation 34.1
---------------------------- -------------- --------- ------- ------------- -------
There are no differences from the last annual financial
statements in the basis of segmentation or in the basis of
measurement of segment profit.
The Group analyses its net revenue by the following
categories:
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
------------------ ------------- ------------- --------
Personal Care 179.7 188.5 387.5
Home Care 42.6 43.7 91.1
Food & Nutrition 28.7 33.3 65.8
Electricals 38.3 33.7 76.8
Other 4.0 3.6 5.4
------------------ ------------- ------------- --------
293.3 302.8 626.6
------------------ ------------- ------------- --------
4. Exceptional items
Half year to 30 November 2019
The Group generated net exceptional income before tax of GBP6.7
million as follows:
- Income of GBP8.3 million relating to the disposal of the
Group's Greece business (see note 16 for further details)
- Costs of GBP1.1 million relating to the Group Strategy Project
regarding the disposal of non-core brands and activities. The
majority of these costs are professional fees incurred on planned
disposals; and
- Costs of GBP0.5 million relating to the Group structure and
systems project to realign the organisation design to create a more
effective operating model in line with our strategy launched in
July 2019 to support the organisation to deliver on three success
factors: Focus, Scale and Accelerate. These costs include
initiatives underway to improve our operating efficiency across
Head Office and all three Regions.
- These exceptional costs are expected to impact the current and
next financial years and to be material in nature, and so are
disclosed separately.
Half year to 30 November 2018
The Group generated net exceptional expenditure before tax of
GBP6.1 million as follows:
- Costs of GBP4.1 million relating to the Group structure and
systems project to realign the organisation design to create a more
effective operating model. These represented a continuation of the
same project on which exceptional costs were recognised in previous
periods and mainly consist of restructuring, advisory and IT system
related costs; and
- Costs of GBP2.0 million relating to estimated past service
pension costs following a recent UK High Court judgement confirming
that defined benefit pension schemes are required to equalise male
and female members' benefits for the effect of guaranteed minimum
pensions (GMPs). This estimate was trued up following completion of
detailed analysis by the Group's third party actuary prior to 31
May 2019.
Year to 31 May 2019
The Group incurred net exceptional expenditure before tax of
GBP32.8 million (GBP32.6m from continued operations, GBP0.2m from
discontinued) as follows:
- Group structure and systems project costs (cost of GBP5.0 million);
- Group Strategy project costs (cost of GBP4.2 million);
- Sale of Norpalm investment in Ghana (income of GBP3.3 million);
- Guaranteed Minimum Pension (GMP) past service cost (cost of GBP0.7 million); and
- Impairment of Australian and Nigerian assets (cost of GBP26.2 million).
5. Net finance costs
Continued Operations Unaudited Unaudited Audited
Half year Half year Year to
to to 31 May
30 November 30 November 2019
2019 2018
GBPm GBPm GBPm
------------------------------------------- ------------- ------------- --------
Interest receivable on cash deposits 0.4 0.2 -
Interest income 0.4 0.2 -
Interest payable on bank loans and
overdrafts (1.9) (2.7) (5.2)
Interest payable to external third
parties (0.2) - (0.4)
Interest expense on the lease liabilities
recognised on transition to IFRS 16 (0.2) - -
Finance costs incurred on revolving
credit facility renewal (0.4) - (1.1)
------------------------------------------- ------------- ------------- --------
Net finance costs (2.3) (2.5) (6.7)
------------------------------------------- ------------- ------------- --------
Discontinued Operations Unaudited Unaudited Audited
Half year Half year Year to
to to 31 May
30 November 30 November 2019
2019 2018
GBPm GBPm GBPm
Interest income 0.1 0.2 0.5
Interest payable (0.1) (0.3) (0.5)
------------------------- ------------- ------------- --------
Net finance costs - (0.1) -
------------------------- ------------- ------------- --------
6. Property, plant and equipment and intangible assets
Goodwill, software Property,
and other plant and
intangible assets equipment
GBPm GBPm
Opening net book amount as at 1 June
2018 (restated)* 400.2 156.6
Additions 0.1 7.0
Disposals (0.1)
Transfers between asset classification 0.7 (0.7)
Depreciation - (8.7)
Amortisation (3.1) -
Currency retranslation (restated)* 0.3 (1.0)
------------------------------------------- ------------------- -----------
Closing net book amount as at 30 November
2018 398.2 153.1
------------------------------------------- ------------------- -----------
Opening net book amount as at 1 June
2019 369.2 148.8
Additions 0.7 2.1
Disposals in relation to disposed
entity (10.2) (15.3)
Impairment of software in relation
to disposed entity (3.1) -
Transfers between asset classification 1.2 (1.2)
Depreciation - (8.0)
Amortisation (3.2) -
Currency retranslation (3.7) (2.3)
------------------------------------------- ------- -------
Closing net book amount as at 30 November
2019 350.9 124.1
------------------------------------------- ------- -------
*See note 2 for details of restatement
Goodwill, software and other intangible assets comprise goodwill
of GBP45.2 million (30 November 2018 restated: GBP63.7 million),
software of GBP40.0million (30 November 2018: GBP45.2 million), the
majority of which relates to the implementation and associated
costs of the SAP project and other intangible assets of GBP265.7
million (30 November 2018 restated: GBP289.3 million) relating to
the Group's acquired brands.
Goodwill and other intangible assets (which include the Group's
acquired brands), have all arisen from previous business
combinations and all have indefinite useful lives and, in
accordance with IAS36, are subject to annual impairment testing, or
more frequent testing if there are indicators of impairment. The
method used is as follows:
-- intangible assets (including goodwill) are allocated to
appropriate cash-generating units (CGUs) based on the smallest
identifiable group of assets that generate cash inflows
independently in relation to the specific intangible/goodwill.
-- the recoverable amounts of the CGUs are estimated as the
higher of an asset's fair value less costs of disposal and its
value in use. Value in use is determined through calculations that
use cash flow projections from approved budgets and plans over a
period of five years which are then extrapolated beyond the five
year period based on estimated long-term growth rates.
Key assumptions in the budgets and plans include future revenue
volume/price growth rates, associated future levels of marketing
support, cost base of manufacture and supply and directly
associated overheads. These assumptions are based on historical
trends and future market expectations specific to each CGU and the
markets and geographies in which each CGU operates.
Other key assumptions applied in determining value-in-use
are:
-- growth rates - short term growth rates are based on the
latest approved management forecasts. Cash flows beyond the five
year forecast period are extrapolated using the estimated long-term
growth rate applicable for the geographies in which the CGUs
operate;
-- terminal growth rates; and
-- discount rate - the discount rate is based on a pre-tax
Weighted Average Cost of Capital (WACC) for comparable companies
operating in similar markets and geographies as the Group as the
base discount rate, adjusted for risks specific to each CGU.
These assumptions are based on historical trends and future
market expectations specific to each CGU and the markets and
geographies in which it operates.
As at 30 November 2019, management identified impairment
triggers, namely a revision to the expected future cash flows as a
result of current trading performance and wider economic factors,
in relation to the Rafferty's Garden, five:am and Nutricima CGUs.
As a result, detailed impairment reviews were performed in respect
of these three CGUs as at 30 November 2019.
The key assumptions applied in determining value-in-use for the
purposes of the impairment reviews are growth rates; terminal
growth rates; and discount rate. Management's models are highly
sensitive to these assumptions, and in respect of all three of the
CGUs reviewed for impairment as at 30 November 2019, reasonably
possible changes in these assumptions, and in particular in the
discount rates applied to the forecast cash flows in the value in
use models, would give rise to impairment.
For the Rafferty's Garden CGU, the recoverable amount determined
by the Directors was GBP53.3m. As the CGU had a carrying value of
GBP40.5m, the Directors concluded that no impairment was necessary
at this point in time. Whilst the FY20 performance has been broadly
in line with previous expectations, management have revisited the
forecasts for this CGU in the outer years i.e. FY21 - 24 and
revised the forecasts accordingly based on the latest view of the
market in which Rafferty's Garden operates. In assessing
sensitivity of assumption, management noted that the discount rate
had reduced since last measured. If the discount rate were to
increase from 6.5% to 7.8%, a reasonably possible change, then the
current headroom would be eliminated.
For the five:am CGU, the recoverable amount determined by the
Directors was GBP33.5m. As the CGU had a carrying value of
GBP22.3m, the Directors concluded that no impairment was necessary
at this point in time. Whilst the FY20 performance has been broadly
in line with previous expectations, management have revisited the
forecasts for this CGU in the outer years i.e. FY21 - 24 and
revised the forecasts accordingly based on the latest view of the
market in which five:am operates which is extremely fragmented and
has high levels of competition. The Directors believe that it is
currently inappropriate to reverse the previously recorded
impairment of five:am because the model used is sensitive to
changes in key assumptions, volatility in the longer term economic
forecasts for Australia and hence, whilst the discount rate applied
has substantially reduced since the impairment, it is not yet clear
that this will be a sustained reduction and therefore that the
economic circumstances in which the CGU operates have materially
improved. Were the current discount of 6.5% to increase to 8.5%, a
reasonably possible change, the headroom would be eliminated.
For the Nutricima CGU, given that it is located in Nigeria where
the macroeconomic environment continues to be volatile, management
performed an impairment review to support the carrying value as at
30 November 2019. The recoverable amount determined by the
Directors was marginally in excess of the CGU's carrying value, and
as such the Directors concluded that no impairment was necessary at
this point in time. The discount rate used had increased markedly
from the previous year, which provides support to the decision not
to impair. However, given the minimal headroom, any worsening of
the assumptions would give rise to an impairment in the future.
Capital commitments
At 30 November 2019, the Group had entered into commitments for
the acquisition of property, plant and equipment amounting to
GBP5.1m (30 November 2018: GBP5.1 million). At 30 November 2019,
the Group's share in the capital commitments of joint ventures was
GBPnil (30 November 2018: GBPnil).
7. Tax
Continued Operations
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
---------------- ------------- ------------- --------
United Kingdom 3.2 3.0 4.0
Overseas 2.9 4.3 7.0
---------------- ------------- ------------- --------
6.1 7.3 11.0
---------------- ------------- ------------- --------
Income tax expense on discontinued operations is GBPnil for half
year to 30 November 2019 (30 November 2018: GBP0.2m, 31 May 2019:
GBP0.2m)
Income tax expense is recognised based on management's best
estimate of the annual tax rate expected for the full financial
year. The estimated average annual tax rate to be used for the year
ending 31 May 2020, before exceptional items, is 24.1% (the tax
rate for the half year ended 30 November 2018 was 26.8%) and the
effective tax rate to be used, post-exceptional items, is 17.5% (30
November 2018: 28.1%).
The 2019 Finance Bill in Nigeria was signed on 13 January 2020,
which will mainly impact minimum tax rules & VAT. We are
currently assessing the impact on our business but based on our
initial review we do not expect it to have a material impact.
Gross-Up of Uncertain Tax Positions
The Group holds a number of uncertain tax positions within the
Group's current tax liability which represents the Group's
estimated cash tax outflow should any of these risks crystallise. A
number of these tax liabilities are in fact a net position, made up
of a liability which would be payable to one competent authority
and a corresponding asset which would be recoverable from another
competent authority. For the period ended 30 November 2019, the
Group has reclassified these corresponding assets into non-current
assets. This adjustment has increased non-current assets by GBP6.4m
with a corresponding reduction in current liabilities of the same
amount. This revised presentation better reflects the facts and
circumstances around these specific uncertain tax positions. It
should be noted that this adjustment has had no impact on the
income statement, net assets or cash flow of the Group for the
period ended 30 November 2019.
8. Dividends
An interim dividend of 2.67p per share for the half year to 30
November 2019 (2018: 2.67p) has been declared totalling GBP11.2
million (2018: GBP11.2 million) and is payable on 6 April 2020 to
shareholders on the register at the close of business on 14
February 2020. This interim dividend has not been recognised in
this half yearly report as it was declared after the end of the
reporting period. The proposed final dividend for the year ended 31
May 2019 of 5.61p per share, totalling GBP23.5 million, was
approved by shareholders at the Annual General Meeting of the
Company and paid on 30 September 2019.
9. Earnings per share
Basic earnings per share and diluted earnings per share are
calculated by dividing profit for the period attributable to owners
of the Parent by the following weighted average number of shares in
issue:
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 November 30 November 31 May
2019 2018 2019
Basic weighted average (000) 418,354 418,323 418,332
Diluted weighted average (000) 418,355 418,324 418,332
-------------------------------- ------------- ------------- ---------
The difference between the average number of Ordinary Shares and
the basic weighted average number of Ordinary Shares represents the
shares held by the Employee Share Option Trust, whilst the
difference between the basic and diluted weighted average number of
shares represents the dilutive effect of the Deferred Annual Share
Bonus Scheme, Executive Share Option Schemes and the Performance
Share Plan (together the 'share incentive plans'). The average
number of shares is reconciled to the basic and diluted weighted
average number of shares below:
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 November 30 November 31 May
2019 2018 2019
Average number of Ordinary Shares
in issue during the
period (000) 428,725 428,725 428,725
Less weighted average number of
Ordinary Shares held by the Employee
Share Option Trust (000) (10,371) (10,402) (10,393)
--------------------------------------- ------------- ------------- ---------
Basic weighted average number of
Ordinary Shares in issue during
the period (000) 418,354 418,323 418,332
Dilutive effect of share incentive
plans (000) 1 1 -
Diluted weighted average number
of Ordinary Shares in issue during
the period (000) 418,355 418,324 418,332
--------------------------------------- ------------- ------------- ---------
Adjusted basic and diluted earnings per share are calculated as
follows:
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
Basic earnings per share:
* Adjusted basic earnings per share 5.33p 5.67p 13.01p
* Exceptional items 1.77p (1.10p) (6.77p)
-------------------------------------------- ------------- ------------- --------
Basic earnings per share 7.10p 4.57p 6.24p
-------------------------------------------- ------------- ------------- --------
Diluted earnings per share:
* Adjusted diluted earnings per share 5.33p 5.67p 13.01p
* Exceptional items 1.77p (1.10p) (6.77p)
-------------------------------------------- ------------- ------------- --------
Diluted earnings per share 7.10p 4.57p 6.24p
-------------------------------------------- ------------- ------------- --------
The adjusted profit for the period has been calculated as
follows:
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
Profit attributable to owners of
the Parent 29.7 19.1 26.1
Exceptional items (net of taxation
effect) (7.4) 4.6 28.3
------------------------------------ ------------- ------------- --------
Adjusted profit after tax 22.3 23.7 54.4
------------------------------------ ------------- ------------- --------
10. Reconciliation of profit before tax to cash generated from operations
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
--------------------------------------- ------------- ------------- --------
Profit before tax 34.9 26.7 37.0
Adjustment for net finance costs
(note 5) 2.3 2.6 6.7
--------------------------------------- ------------- ------------- --------
Operating profit 37.2 29.3 43.7
Depreciation (note 2 & 6) 9.2 8.7 16.9
Amortisation (note 6) 3.2 3.1 6.2
Impairment loss on intangible assets 3.1 - 24.8
Impairment loss on tangible assets - - 1.4
Profit on sale of assets 0.1 - (3.5)
Profit on disposal of companies &
businesses (13.1) - -
Difference between pension charge
and cash contributions (3.1) (1.0) (6.2)
Hedge movements (0.2) - -
Share of results from joint ventures (1.8) (0.6) (2.3)
Operating cash flows before movements
in working capital 34.6 39.5 81.0
Movements in working capital:
Inventories (1.2) (18.6) (0.1)
Trade and other receivables 4.2 (2.5) 7.5
Trade and other payables (13.0) 15.2 (4.9)
Provisions (0.2) - (0.6)
--------------------------------------- ------------- ------------- --------
Cash generated from operations 24.4 33.6 82.9
--------------------------------------- ------------- ------------- --------
11. Net debt reconciliation
Group net debt, comprises the following:
Audited Unaudited Unaudited Unaudited
Foreign
1 June exchange 30 November
2019 Cash flow movements 2019
GBPm GBPm GBPm GBPm
--------------------------- -------- ---------- ----------- ------------
Cash at bank and
in hand 50.7 (10.0) (1.0) 39.7
Short term deposits 2.8 (1.0) - 1.8
Cash and cash equivalents 53.5 (11.0) (1.0) 41.5
Current asset investments 0.3 - - 0.3
Loans due within
one year (2.0) 2.0 - -
Loans due over one
year (204.0) 26.0 - (178.0)
Net debt (152.2) 17.0 (1.0) (136.2)
---------------------------- -------- ---------- ----------- ------------
Loans due over one year include the Group's main borrowing
facility which was renewed during the year ended 31 May 2019. This
is provided by a syndicate of lenders in the form of a GBP325
million Revolving Credit Facility committed until 28 November 2023.
The Group also has access to uncommitted working capital facilities
amounting to GBP132.6 million.
Overdrafts do not form part of the Group's main borrowing
facility and only arise as part of the Group's composite banking
arrangements with key banking partners. Under the terms of this
arrangement, cash and overdraft balances recognised by the
Overdraft's Obligor Group are considered as one cash pool with the
net position being monitored by the Directors and Lenders.
Any IFRS16 liabilities have been excluded from the Net Debt
number to support comparison with the prior period.
12. Retirement benefits
The Group operates retirement benefit schemes for its UK and
certain overseas subsidiaries. These obligations have been measured
in accordance with IAS 19 'Employee Benefits (revised)' and are as
follows:
Unaudited Unaudited Audited
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
---------------------------------- ------------ ------------ --------
UK schemes in surplus 93.6 81.5 92.2
UK schemes in deficit (4.5) (4.1) (4.5)
Restriction due to asset ceiling (55.3) (54.7) (55.9)
---------------------------------- ------------ ------------ --------
Net UK position 33.8 22.7 31.8
Overseas schemes (7.0) (7.4) (6.8)
---------------------------------- ------------ ------------ --------
26.8 15.3 25.0
---------------------------------- ------------ ------------ --------
The Group has four main defined benefit schemes which are based
and administered in the UK and are closed to future accrual and new
entrants.
The key financial assumptions (applicable to all UK schemes)
applied in the actuarial review of the pension schemes have been
reviewed in the preparation of these interim condensed consolidated
financial statements and amended where appropriate from those
applied at 31 May 2019. The key assumptions made were:
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
% per annum % per annum % per annum
----------------------------------------- ------------- ------------- ------------
Rate of increase in retirement benefits
in payment 2.80% 3.05% 3.00%
Discount rate 2.00% 3.10% 2.35%
Inflation assumption 2.85% 3.25% 3.15%
----------------------------------------- ------------- ------------- ------------
The movement during the period in the UK schemes is broken down
as follows:
Unaudited Unaudited
30 November 30 November
2019 2018
GBPm GBPm
----------------------------------------------- ------------ ------------
Retirement benefit surplus as at 1 June 31.8 29.1
Net pension interest income 0.4 0.4
Past service cost - (2.0)
Administration expenses paid by the schemes (0.2) (0.2)
Contributions paid 3.0 3.0
Employer direct benefit payments 0.1 0.1
Remeasurement (loss)/gain due to changes
in financial assumptions (7.7) 5.0
Gain/(loss) on scheme assets (excluding
interest income) 5.1 (15.8)
Changes in asset ceiling (including interest) 1.3 3.1
------------------------------------------------- ------------ ------------
Retirement benefit surplus as at 30 November 33.8 22.7
------------------------------------------------- ------------ ------------
13. Financial risk management and financial instruments
The Group's operations expose it to a variety of financial risks
including foreign currency risk, credit risk, liquidity risk and
interest rate risk. The Group's treasury policy addresses issues of
liquidity, funding and investment as well as currency, credit,
liquidity and interest rate risks.
The condensed consolidated interim financial statements do not
include all the financial risk management information and
disclosures required in the annual financial statements. This
information and related disclosures are presented in the Group's
annual financial statements as at 31 May 2019. There have been no
significant changes to risk management policies or processes since
the year end.
i) Fair value estimation
The Group holds a number of financial instruments that are held
at fair value within the condensed consolidated interim financial
statements. In deriving the fair value, the derivative financial
instruments are classified as level 1, level 2 or level 3 dependent
on the valuation method applied in determining their fair
value.
The different levels are defined as follows:
Level
----- ----------------------------------------------------------------------
1 Quoted prices (unadjusted) in active markets for identical assets
or liabilities.
2 Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (prices)
or indirectly (derived from prices).
3 Inputs for the assets and liabilities that are not based on observable
market data (unobservable inputs).
----- ----------------------------------------------------------------------
The financial instruments held at fair value by the Group relate
to foreign currency forward contracts used as derivatives for
hedging. For both the six months ended 30 November 2019 and 30
November 2018 and the year ended 31 May 2019 the assets and
liabilities arising from foreign currency forward contracts have
been classified as level 2. The fair value of these instruments at
each of the period ends was:
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
------------------------------------ ------------- ------------- --------
Assets
Foreign currency forward contracts 1.3 0.5 1.6
------------------------------------ ------------- ------------- --------
Liabilities
Foreign currency forward contracts 0.7 (0.3) 1.0
------------------------------------ ------------- ------------- --------
There have been no transfers between level 1 and 2 in any
period.
The fair value of the following financial assets and liabilities
approximates to their carrying amount:
-- Trade receivables and other receivables
-- Cash and cash equivalents
-- Trade and other payables
-- Borrowings
ii) Fair value measurement
Level 2 trading and hedging derivatives comprise forward foreign
currency exchange contracts. The fair value of forward foreign
currency exchange contracts is determined using forward currency
exchange rates quoted in an active market at the Balance Sheet
date. The Group has considered but deemed the impact of discounting
level 2 derivatives that mature in the next 12 months as generally
insignificant.
14. Related party transactions
PZ Wilmar Limited and PZ Wilmar Food Limited
The following related party transactions were entered into by
subsidiary companies during the year under the terms of a joint
venture agreement with Singapore based Wilmar International
Limited:
- At 30 November 2019 the outstanding loan balance receivable
from PZ Wilmar Limited was GBP33.3 million (30 November 2018:
GBP26.7 million) and from PZ Wilmar Food Limited was GBP7.9 million
(30 November 2018: GBP8.1 million). These receivables relate to
long term loan investments that have been made by both joint
venture partners.
- The value of certain raw materials and services provided by
the Group to PZ Wilmar Limited was GBPnil (30 November 2018:
GBPnil). At 30 November 2019 the outstanding trade receivable
balance from PZ Wilmar Limited was GBP1.0 million (30 November
2018: GBP2.1 million).
- At 30 November 2019 the outstanding other receivable balance
from PZ Wilmar Limited was GBPnil (30 November 2018: GBPnil). These
receivables related to short term loan investments that have been
made by the Group's Nigeria subsidiaries.
All trading balances will be settled in cash. There were no
provisions for doubtful related party receivables at 30 November
2019 (30 November 2018: GBPnil) and no charge to the income
statement in respect of doubtful related party receivables (30
November 2018: GBPnil).
Wilmar PZ International Pte Limited
The following related party transactions were entered into by
subsidiary companies during the year under the terms of a joint
venture agreement with Singapore based Wilmar International
Limited:
- At 30 November 2019 the outstanding other receivable balance
from Wilmar PZ International Pte Limited was GBP0.3 million (30
November 2018: GBP4.3 million). These receivables relate to
services provided by subsidiary companies to Wilmar PZ
International Pte Limited.
15. Discontinued operations
On 28th August 2019, the Group entered into a sale agreement to
dispose of Minerva S.A., which carried out the Group's food and
nutrition operations in Greece as part of the Europe and the
Americas regional segment. The disposal was effected as part of the
Group's strategy to dispose of non-core brands and activities as
part of Focus, Scale and Accelerate. The disposal was completed on
30th September 2019, on which date control of Minerva S.A. passed
to the acquirer.
The Group has also agreed in principal the sale of the Polish
Personal Care brand Luksja. This sale is subject to approval by the
competition authorities. The sale agreement includes the sale of
the inventory holding of PZ Polska SA, which has a value of GBP2.4m
as at 30 November 2019. This asset has therefore been classified as
'held for sale' in accordance with IFRS 5.
The results of the discontinued operations, which have been
included in the consolidated income statement, were as follows:
Unaudited Unaudited Audited
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
Revenue 22.0 32.3 62.8
Expenses (21.8) (31.4) (59.9)
------------ ------------ --------
Profit before tax 0.2 0.9 2.9
Attributable tax expense - (0.2) (0.2)
------------ ------------ --------
0.2 0.7 2.7
Profit on disposal of discontinued
operations 8.3 - -
Attributable tax expense - - -
------------ ------------ --------
Net profit attributable to discontinued
operations
(attributable to owners of the
Company) 8.5 0.7 2.7
------------ ------------ --------
The results of the discontinued operations, which have been
included in the consolidated cash flow statement, were as
follows:
Unaudited Unaudited Audited
30 November 30 November 31 May
2019 2018 2019
GBPm GBPm GBPm
Net cash generated from operating
activities 1.6 1.7 3.6
Net cash used in investing activities 0.1 (1.5) (2.1)
Net cash used in financing activities - - 0.2
------------ ------------ --------
Net increase in cash and cash equivalents 1.7 0.2 1.7
Cash and cash equivalents at the
beginning of the period 5.2 3.5 3.5
Effect of foreign exchange rates - - -
------------ ------------ --------
Cash and cash equivalents at the
end of the period 6.9 3.7 5.2
------------ ------------ --------
16. Disposal of subsidiary
As referred to in Note 15, on 30th September 2019 the Group
disposed of its interest in Minerva S.A.. The net assets of Minerva
S.A. at the date of disposal were as follows:
Unaudited
30 Sept
2019
GBPm
Property, plant and equipment 15.2
Inventories 9.2
Trade receivable 10.2
Bank balances and cash 5.7
Deferred tax liability (3.3)
Trade payables (10.2)
Attributable goodwill and intangibles 10.2
----------
Total net assets 37.0
Impairment of software relating to disposed subsidiary
held by Group Company 3.1
Deal fees incurred by Group Company 1.5
Historical currency reserve crystallised on disposal (9.7)
Historical revaluation reserve crystallised on disposal 0.7
Profit on disposal of discontinued operations 8.3
Total consideration 40.9
----------
Satisfied by:
----------
Cash and cash equivalents 40.9
----------
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents 40.9
Less: Cash and cash equivalents disposed of (5.7)
Deal fees incurred (1.5)
----------
33.7
----------
There were no disposals of subsidiaries made in 2018.
The impact of Minerva S.A. on the Group's results in the current
and prior period is disclosed in note 15.
The gain on disposal is included in the profit for the year from
discontinued operations (note 15).
17. Seasonality
Certain business units have a degree of seasonality with the
biggest factors being the weather and Christmas. However, no
individual reporting segment is seasonal as a whole and therefore
no further analysis is provided.
18. Principal risks and uncertainties
PZ Cussons has over 130 years of trading history with a long
standing tradition of sustainable growth in our key regions of
Europe, Africa and Asia. Our in-depth local understanding, strong
brand position and robust infrastructure within these markets,
allied to a strong Group balance sheet, enable us to withstand
short to medium-term political and financial instabilities that may
adversely impact the Group.
The Group's risk management framework is explained on page 45 of
our 2019 Strategic Report which is available on our website at
www.pzcussons.com. The Board assumes overall accountability for the
management of risk whilst the Audit & Risk Committee continues
to monitor and review the effectiveness of the Group's risk
management and internal control systems. The Executive Leadership
Team ensures that the risk management framework is embedded and
operates throughout the Group and regularly reviews both the
regional and consolidated risk registers, verifying appropriate
mitigation activities are operating effectively.
The identified principal risks are considered largely unchanged
from those outlined on pages 48 to 49 of our 2019 Strategic Report.
These are: consumer, customer and economic trends, IT and
information security, sustainability and environment, legal and
regulatory compliance, talent retention, business transformation,
consumer safety, supply chain and logistics and treasury and
tax.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that these condensed consolidated interim
financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and that the interim
management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months 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 financial year;
and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The Directors of PZ Cussons Plc are listed on page 32. A list of
current Directors is maintained on the PZ Cussons Plc website.
By order of the Board
Mr S Plant
Company Secretary
28 January 2020
Directors
Chair
C Silver * (Executive Chair from 31(st) January 2020)
Chief Executive
G Kanellis (retirement from 31(st) January 2020)
J Maiden *
J Nicolson *
H Owers *
T Minick-Scokalo * (on leave of absence)
D Kucz *
K Bashforth *
P Grimwood *
* Non-executive
Secretary
S Plant
Registered Office
Manchester Business Park
3500 Aviator Way
Manchester
M22 5TG
Registered number
Company registered number 00019457
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Website
www.pzcussons.com
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 BPMFTMTJTMLM
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January 28, 2020 02:01 ET (07:01 GMT)
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