TIDMTYMN
RNS Number : 2271U
Tyman PLC
28 July 2020
TYMAN PLC
RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
Tyman plc (TYMN.L) announces results for the six months ended 30
June 2020.
Summary Group results
LFL(1)
GBPm unless stated H1 2020 H1 2019 Change (adj*)
---------------------------------- -------- -------- -------- --------
Revenue 254.1 301.9 -16% -17%
Adjusted operating profit* 31.3 41.9 -25% -26%
Adjusted operating margin* 12.3% 13.9% -160bps
Operating profit 21.0 18.5 +14%
Adjusted profit before taxation* 24.7 34.7 -29%
Profit before taxation 14.7 11.0 +34%
Adjusted EPS* 9.9p 13.1p -25%
Basic EPS 6.4p 4.1p +57%
Dividend per share - 3.9p -100%
Leverage* (2) 1.8x 2.2x -0.4x
Return on capital employed* 10.8% 12.7% -190bps
---------------------------------- -------- -------- -------- --------
* Alternative performance measures. These "Adjusted" metrics are
before amortisation of acquired intangible assets, impairment of
acquired intangible assets, impairment of goodwill, and exceptional
items. These measures provide additional information to
shareholders on the underlying performance of the business and are
used consistently through the statement. Further details can be
found on page 48
(1) LFL = constant currency like-for-Like (see APMs on page
48)
(2) Leverage is calculated in accordance with the debt covenant
methodology
Highlights:
-- COVID-19 impact contained to 17% LFL revenue decline
-- Solid performance at start of 2020
-- Better than expected recovery since operations resumed; June
recovered to 92% of prior year, with further momentum continuing
into July
-- LFL adjusted operating profit down 26% due to revenue
shortfall largely mitigated by cost reduction resulting in only
modest margin deterioration
-- Decisive action taken to preserve cash leading to strong cash conversion of 106%
-- Robust balance sheet with leverage of 1.8x and liquidity
headroom of GBP159m; covenant relaxation agreed at Dec 2020 and Jun
2021
-- Good progress on self-help measures:
-- Encouraging level of North American customer wins
-- Operational improvements at Statesville site
-- Successful execution of planned footprint realignments
-- Reduction in safety incidents of 72% indicative of operational excellence progress
Jo Hallas, Chief Executive Officer, commented :
"COVID-19 had a significant impact on the Group in the period. I
would like to thank our people who have done an exceptional job of
managing through the intensity of the COVID-19 crisis, with
diligent focus on safeguarding our colleagues and communities and
servicing our customers. We have taken action to maintain a robust
balance sheet and we believe that the crisis has demonstrated the
resilience of the Tyman business model. I am encouraged by the
better than expected recovery since the easing of restrictions,
although much uncertainty remains.
"Despite the crisis, we have continued to strengthen our base
and progress our strategic growth initiatives. Our demonstrated
resilience and inherent strengths, including market-leading brands,
innovation capabilities and deep customer relationships, continue
to position the Group well to capitalise on opportunities arising
as the global economy recovers and as we progressively emerge from
a period of intense operational focus."
28 July 2020
Enquiries
Tyman plc investor.relations@tymanplc.com
Jo Hallas - Chief Executive Officer
Jason Ashton - Chief Financial Officer
MHP Communications 020 3128 8100
Reg Hoare / Rachel Mann / Ailsa Prestige tyman@mhpc.com
Analyst and investor presentation
Tyman will host an analyst and investor presentation at 9.30
a.m. today, Tuesday 28 July 2020, which will be webcast at:
https://webcasting.brrmedia.co.uk/broadcast/5f16bdc74c167c12157980b0
The audio conference call details are:
Number +44 (0) 330 336 9126
Confirmation code 7997871
Notes to editors
Tyman (TYMN: LSE) is a leading international supplier of
engineered fenestration components and access solutions to the
construction industry. The company designs and manufactures
products that enhance the comfort, sustainability, security, safety
and aesthetics of residential homes and commercial buildings.
Tyman's portfolio of leading brands serve their markets through
three divisions: North America (AmesburyTruth), UK and Ireland
(ERA) and International (SchlegelGiesse). Headquartered in London,
the Group employs approximately 3,900 people with facilities in 18
countries worldwide. Further information is available at
www.tymanplc.com .
OVERVIEW OF RESULTS
Performance in H1 2020
The Group's performance in H1 2020 was inevitably impacted by
COVID-19. Revenue for the period was GBP254.1 million (H1 2019:
GBP301.9 million), a decrease of 16% on a reported basis, and 17%
on a LFL basis. Reported revenue benefitted from the relative
weakness of Sterling compared with H1 2019.
The Group had a solid start to the year before the impact of
COVID-19 took effect, achieving LFL growth in Q1 in North America,
where markets continued to be buoyant in line with the momentum
experienced in Q4 2019. The UK reported LFL sales growth across
January and February following the decisive election result in
December 2019. The International division had a more challenging
start to the year, with markets continuing to be weak as expected
coming into the year, and China and Italy impacted by COVID-19
earlier than other territories.
From mid-March until early May, trading was progressively
impacted as increasingly stringent lockdowns took effect in our
core markets. We responded accordingly, temporarily closing our
facilities in Italy from the middle of March until the middle of
April and in the UK from late March until early May. Apart from the
two facilities in Juarez which were closed for most of May, the
North American sites continued to operate throughout the period but
saw a marked reduction in order intake through April and May. Most
of the International division distribution and sales office sites
were closed for various time periods in accordance with local
guidelines. All operating facilities across the Group are now
currently open.
As can be seen in the table below, April was the most severely
impacted month, with LFL revenue 41% lower than 2019. Since
operations began to resume from late April, trading has been better
than expected and we have outperformed our base case scenario in
each month. June recovered to 92% of 2019 and this recovery trend
has continued into July, with average sales per day currently 3%
ahead of 2019, although some of this improvement is likely to be
driven by customer restocking and pent-up demand.
LFL Q1 April May June H1 July*
revenue 2020
vs
2019
North
America +2% -25% -37% -8% -12% +4%
UK
&
Ireland -1% -93% -58% -15% -28% +8%
International -17% -50% -28% -2% -22% -8%
Group -2% -41% -38% -8% -17% +3%
=============== ===== ====== ===== ===== ====== ======
* Month to date average sales per day
The swift cost management actions taken, as well as the
self-help initiatives which were already in progress or completed
in 2019, partially mitigated the impact of the sales shortfall and
additional COVID-19 related bad debt charges of GBP0.5m, resulting
in a decrease in LFL adjusted operating profit of 26% to GBP31.3
million. Reported adjusted operating profit decreased 25%,
benefiting from the favourable impact of exchange. Adjusted
operating margin fell from 13.9% to 12.3%, a credible performance
in light of the impact of COVID-19.
Supporting our stakeholders through COVID-19
The Group's first priority has been ensuring the health and
safety of our employees, their families and our communities. We
acted quickly to implement enhanced hygiene and social distancing
measures across the Group. Hygiene measures included reinforcing
good personal hygiene practices; installing hand sanitiser
dispensers; enhanced workplace cleaning regimes; and temperature
monitoring for all people arriving to site. Where possible,
infrastructure was put in place and employees were transitioned to
remote homeworking. Social distancing measures included amending
shift patterns as necessary and installing plastic screens or
providing PPE where appropriate. Regular communications with all
employees were established throughout the crisis, including
reminding employees of mental wellbeing assistance available to
them. In certain locations, the Group has provided or expanded
company transportation to avoid employees being exposed to public
transport and ensure social distancing.
An employee survey was conducted in early June to get feedback
on the Company's handling of the pandemic. Two-thirds (over 2,500
employees) of the global workforce responded, and it was pleasing
that over 80% of employees agreed that the Company has put in place
the right safety protocols, cared about their well-being, kept
employees informed, and that leaders have acted proactively and
decisively during the crisis.
The Group has supported customers through the crisis, with
enhanced communication to understand changes in demand and manage
service levels, implementing paperless and non-contact delivery
services, providing advice on implementing hygiene and social
distancing measures, and agreeing payment plans to help customers
trade through where needed. In the absence of being able to visit
customers, technology was used to maintain engagement , with
webinars and virtual workshops being held.
Even during the early part of the crisis in China, our supply
chain has not been a constraint to the business. Close contact has
been maintained with suppliers throughout to assist in managing
demand. Initial relaxations of payment terms were agreed with some
suppliers; however, all suppliers are now being paid in line with
terms.
The Group has also supported the fight against COVID-19, with
one of the UK seals plants resuming operations early to produce
Q-Lon seals for the partitions used in emergency hospital builds
around the world, including London and Istanbul. Donations of face
masks were also made to local hospitals.
Decisive actions taken to reduce costs and preserve cash
Swift and decisive action was taken to put in place a broad
range of measures with focus on optimisation of cashflow via cost
savings, working capital reduction, tight management of capital
expenditure and cancellation of the final 2019 dividend (worth
GBP16.3 million).
The Group made use of available government employee job
retention schemes in its countries of operation, with usage
diminishing as operations resumed and demand returned. The total
benefit received across all markets in the period was GBP3.3
million, of which GBP2.0 million was in the UK. Whilst there may be
selective redundancies in areas where opportunities have been
identified to improve efficiency, such as through greater use of
technology, use of these schemes has allowed the Group to protect
more jobs than would otherwise have been possible. The Group does
not foresee further use of government job retention schemes beyond
the end of July and does not expect to make use of the UK
government's job retention bonus.
As part of the leadership's response, the Board and senior
management elected to take a temporary base salary reduction of 25%
and 20% respectively from 1 April. The 2020 management bonus scheme
was also cancelled. Many of our employees also took temporary
salary and benefit reductions, tapered according to seniority. The
amount sacrificed through salary reductions was approximately
GBP2.1 million, with further savings from reduced bonus accruals.
The Board fully recognises the impact of these decisions and
appreciates the support and dedication of our people in this
difficult time. With employee salaries progressively reinstated
across June and July, senior management and Board salaries will be
reinstated at full pay from 1 August.
Balance sheet and funding
Net debt at the period end was GBP219.8 million (H1 2019:
GBP289.8 million). Adjusted net debt, which excludes lease
liabilities and unamortised finance arrangement fees was GBP160.5
million (H1 2019: GBP230.0 million). The Group had cash of GBP79.9
million and an undrawn RCF available of GBP78.6 million. In
addition, the Group has potential access to an uncommitted
accordion facility of GBP70 million and has obtained eligibility to
draw up to GBP100 million under the Bank of England's Covid
Corporate Financing Facility (CCFF). The Group does not currently
intend to use this facility, but it provides further assurance in
the event of a severe deterioration in market conditions. The Group
generated GBP33.2 million of operational cash flow in the period
and achieved operating cash conversion of 106%. The Group had
significant headroom on its banking covenants at 30 June 2020, with
leverage of 1.8x and interest cover of 8.4x.
The Group has conducted ongoing scenario planning as the
COVID-19 situation has evolved. The Group has modelled a base case
scenario and a severe but plausible downside scenario. In both
scenarios modelled, the Group would retain significant liquidity
headroom. Although covenant headroom would be maintained under the
base case scenario, in order to provide increased headroom during
the period of uncertainty, the Group has agreed a relaxation of the
leverage covenant from 3.0x adjusted EBITDA to 3.5x at 31 December
2020 and 4.0x at 30 June 2021. The Group continues to monitor the
evolution of the crisis and will adjust plans accordingly to
maintain balance sheet strength.
Dividend
As significant uncertainty remains, the Board is adopting a
prudent approach to shareholder distributions and is not declaring
an interim dividend payment. The Board will determine the timing
for the resumption of dividends once the ongoing impact of COVID-19
becomes clearer. Once dividend payments are restored, t he Board
intends to revert to a progressive dividend policy.
Chair search
As previously announced, progress is being made recruiting a new
chair; this process was inevitably slowed by the UK social
distancing measures but is well underway and we hope to appoint a
successor in the coming months.
Strategic progress
Tyman's strategy of focus, define, grow will strengthen the
Group and further enhance our portfolio of world class brands and
differentiated products to deliver meaningful value to our
customers and thereby create shareholder value. Although the
primary focus since February has inevitably been intensive
management of the COVID-19 crisis, good progress has also been made
on these strategic priorities. The Group believes the strategy
continues to be the right one in the context of COVID-19 and that
there are opportunities to accelerate aspects of the strategy as we
emerge from the crisis.
Focus
The activities to focus our operations through streamlining and
strengthening the base for future growth have progressed as
planned. The strengthening of operational and leadership resources
and continuous improvement activities at the Statesville facility
have delivered improvements in metrics compared to H1 2019,
although the benefits have been masked by COVID-19 in the period.
An accelerated rate of improvement for the second half is expected
based on accomplishments in the first half and continued lean
excellence work.
The various initiatives to streamline operations, including
closure of the Fremont (Nebraska) and Singapore facilities, and
ceasing of manufacturing in Australia and China, have been executed
as planned with no customer disruption. Other continuous
improvement activities have included inter-site line transfers as
the North American manufacturing "centres of excellence" are
further optimised.
Integration of acquisitions has also continued to progress.
Product portfolio harmonisation across the Amesbury, Truth and
Ashland brands is underway and Ashland is on track to deliver the
$5 million annualised synergy target this year. Ashland and Zoo
have both significantly exceeded the 14% return on acquisition
target after two years of ownership.
Define
The define element of the strategy, which centres on building
cultural cohesion across the Group to facilitate ongoing synergy
extraction, has continued to gain momentum. A Group conference was
held virtually in June for 85 senior managers, with a significant
focus on building cohesion across the Group through a shared
purpose, set of values and culture.
Safety excellence is our beachhead for driving culture change,
supported by our 'safety is our first language' engagement
programme. The Group-wide two-day safety leadership training
programme launched in January, with 20% of people managers having
completed this prior to lockdown and work underway to transition to
a digital format to continue deployment. Pleasingly, the lost time
incident frequency rate reduced by 72% to 1.5 incidents per million
hours worked (H1 2019: 5.3), indicative of improved operational
excellence and demonstrating the benefits of a Group-wide
excellence system.
Lean excellence activity is also building across the Group, with
several kaizens conducted in H1 at Statesville, value analysis and
value engineering (VAVE) work undertaken in ERA and continued
investment in Industry 4.0 process automation in Budrio. The Group
seeks to embed lean excellence practices to develop 'best in class'
operations and drive margin expansion through improved quality and
productivity.
Grow
The grow element of the strategy will near-term have most impact
from the divisional organic initiatives underway, including share
gain through executing well in serving our customers, accelerating
new product launches and expanding our existing channels to market.
Despite COVID headwinds, the strengthened North American sales team
has achieved net customer wins of c. $3 million annualised revenue
in H1 2020, following net gains in H2 2019. In the UK and Ireland
division, the partnering with online retailers has served the
business well during the COVID crisis and developing e-commerce
routes to market will continue to be a focus area, including
leveraging the existing ERA Everywhere platform.
Innovations that create differentiated value for our customers
have also progressed well in H1, including the smartware range
which addresses the accelerating adoption of connected home
products, a range of anti-microbial coated product to support the
increased focus on surface hygiene, expansion of the minimalist
product range to capitalise on this growing trend, and
sustainability-enhancing products such as those with Cradle to
Cradle Certification and a thermally broken smoke vent.
Cross-divisional teams have been established to investigate
specific opportunities to better leverage the Group's portfolio,
brands and technologies across our markets. As an early win, the
global seals excellence team have collaborated to create a further
$4 million of door seals capacity, which will be used to both
support current customers and win new business for high value,
differentiated applications.
Mid-term, Tyman continues to be the natural consolidator in a
fragmented market and we would intend to supplement our organic
growth with acquisitions that either bring products and
technologies of future strategic importance, or synergistically
balance out our geographic strength across our core markets.
Outlook
Although the recovery has so far exceeded expectations, this has
been driven in part by the abnormally low activity during lockdown
leaving the underlying market trends less clear. Longer term, the
outlook remains uncertain as the macro-economic impact of the
crisis is masked by government support measures, heightened in the
US by support for the economy in the run-up to the presidential
election later this year. The ending of various employment support
schemes is already having a significant impact on unemployment and
accordingly household income levels and consumer confidence. There
are also indications that this is leading to tightening of the
mortgage market, impacting house moves which generally correlate to
refurbishment projects.
On the other hand, structural industry growth drivers remain
positive and emerging from the crisis there are several factors
which could support the housing markets that the Group is exposed
to worldwide. Lockdowns have been noted to increase savings levels,
with consumer spending on travel and entertainment significantly
reduced. This could benefit building products spend, especially
large-ticket items such as windows and doors that tend to have
lagged general RMI spend in recent years . Housing and other
infrastructure construction is also likely to be a priority for
fiscal stimulus, and this has been seen in China and the UK, with
reductions to stamp duty and investment in 'green' schemes recently
announced.
There are also several trends emerging, which the Group is well
placed to capitalise on. The additional time spent at home and
shift to work-from-home creates a likelihood that homeowners will
prioritise investment in the home. A trend towards "urban flight"
is also being noted, particularly in the US as people seek more
space. This favours growth in single-family housing to which the
Group is most exposed as well as generating additional repair and
remodelling work.
Given there remains significant uncertainty over the ongoing
impact that COVID-19 will have on the macro-economic environment,
we are unable to resume guidance at this stage.
Summary
Whilst COVID-19 has had a significant impact on the Group's
results in the period, the hard work of our employees in continuing
to serve our customers under challenging circumstances has helped
our performance consistently exceed our base case assumptions. The
Group has also navigated the uncertainty by taking decisive action
to reduce costs and preserve cash.
The crisis has emphasised the strength of the Tyman business
model, with the diversification across geographies and markets
providing resilience, our innovation capabilities allowing us to
quickly adapt to changing trends, and the cash generative nature of
the business supporting our balance sheet. Despite the impact of
COVID-19, good progress has been made on self-help measures and
strategic initiatives, with further improvements made at the
Statesville facility, an encouraging level of new business wins
generated in North America, and successful execution of footprint
realignments in both the International and North American
divisions.
In the second half, the focus will continue to be on navigating
through the challenges and opportunities arising from the COVID-19
crisis, implementing self-help measures, and driving share gain
through new product launches and excellent execution. The
resilience of our business model and our inherent strengths
including market-leading brands, innovation capabilities and deep
customer relationships continue to position the Group well for
future growth once the current crisis recedes.
Jo Hallas
Chief Executive Officer
North America (AmesburyTruth)
GBPm except where stated H1 2020 H1 2019(1) Change LFL
--------------------------- -------- ----------- -------- -----
Revenue 168.2 187.0 -10% -12%
Adjusted operating profit 24.8 31.4 -21% -22%
Adjusted operating margin 14.7% 16.8% -210bps
--------------------------- -------- ----------- -------- -----
1. Prior year divisional figures have been amended for
comparability to reflect a change to the presentation of
inter-divisional sales in 2019. For further details, see segment
note on pages 34 to 36.
Q1 April May June H1 2020 July*
---------------- ---- ------ ----- ----- -------- ------
LFL revenue vs
2019 +2% -25% -37% -8% -12% +4%
================ ==== ====== ===== ===== ======== ======
* Month to date average sales per day
Markets
US residential and commercial markets started the year strongly,
with growth until late March when COVID-19 started to take effect.
Even though construction was classed as an essential industry in
most of the United States, lockdown restrictions impacted demand.
Since mid-May, the market has subsequently rebounded as
restrictions were eased. Total housing starts grew +1% in H1 2020
compared to H1 2019, with single family starts, to which the
division has proportionally higher exposure being down -1%, albeit
with single family building permits being up +4% in H1 2020, giving
some indication of likely future growth in housing starts.
Conditions in the US residential repair and remodelling market have
improved, with the NAHB RMI average index significantly higher at
73, having grown from 48 at the end of Q1 2020 (H1 2019: 55).
Commercial construction markets were significantly weaker in the
period, with non-residential building starts down 22% compared to
H1 2019.
In Canada, the construction industry was subject to restrictions
in some provinces and accordingly housing starts were down 5.3%
although single-family homes were up 1.3%.
Business performance and developments
The North America division had a strong start to the year, with
LFL revenue to the end of March 2020 2% ahead of the equivalent
period in 2019, despite the carry-over effect of the H1 2019
customer losses associated with the door seal product line and
footprint-related issues. In April, there was a marked reduction in
demand due to COVID-19, resulting in LFL sales for the month being
25% below 2019. With the exception of the facilities in Juarez,
Mexico, which were closed for the majority of May, all facilities
in North America remained open, albeit running at reduced capacity.
Demand rebounded through May and June, with sales in June
recovering to a level 8% below 2019. Overall for H1 2020, LFL
revenue was 12% below H1 2019, reflecting the carry-over effect of
the H1 2019 customer losses, partially offset by new business wins,
and the impact of COVID-19. The favourable impact of exchange
resulted in reported revenue of GBP168.2 million, which was 10%
below H1 2019.
Swift action was taken to manage production levels and costs in
line with demand, including temporary lay-offs, salary reductions
and tight control of discretionary spend. However, additional costs
of c.$1 million were incurred as a result of COVID-19. These costs
included additional PPE, installation of protective screens,
enhanced sanitation, employee transport costs, as well as costs of
temporarily transferring production of certain products from Juarez
to other facilities to ensure continued supply through the
shutdown. In line with government requirements, in Mexico these
costs also included the division continued paying salaries both for
employees deemed vulnerable and unable to work through the crisis,
and for all employees during the shutdown period. Overall, adjusted
operating profit declined 22% on a LFL basis to GBP24.8
million.
Further progress has been made in resolving the operational
inefficiencies at the Statesville facility. Operational and
leadership resources have been further strengthened in the period
and continuous improvement activities, including a series of kaizen
events, have driven improvements in margin compared to H1 2019.
However, the disruption arising from COVID-19 has meant that the
benefits of the actions taken have not been realised at the
expected levels to date. An accelerated rate of improvement for the
second half is expected based on accomplishments in the first
half.
The strengthening and refocussing of the sales team, as well as
improvements in customer service levels has resulted in an
encouraging level of new business wins. The momentum generated in
late 2019 and early 2020 accelerated through the COVID crisis, in
part due to the strength of service provided through the crisis
relative to peers. This enabled the division to capture share,
generating net wins of c. $3 million annualised revenue in H1 2020.
In addition, capacity of urethane door seals was expanded by c. $4
million annualised revenue through incremental production as well
as partnering with the Tyman International division. This is being
used to both support current door seals customers and win new
business for high value, differentiated applications.
Other self-help initiatives, including footprint realignments
covering $20 million of revenue, were successfully executed with no
customer disruption. This included the closure of the Fremont,
Nebraska facility, through which c. $3m of low margin,
non-fenestration business was also exited. In addition, planned
transfers of manufacturing activities between four facilities were
accelerated due to COVID-19, as the North American "centres of
excellence" are further optimised. These initiatives will generate
cost-savings in the second half of c. $1 million.
The division's access solutions business, Bilco, was more
resilient in the period as commercial construction has largely
continued through the COVID-19 crisis, although sales have been
slightly impacted due to some destocking by our distributors. LFL
revenue declined 9% in H1 2020.
New product development
The division continues to achieve success in bringing new
products to market, with products launched in 2019 performing well,
including the SafeGard(TM) child safety device, which has exceeded
expected sales since launch. During H1 2020, two commercial access
products were introduced, including an enhanced acoustical smoke
vent, which has an industry-leading sound rating, and a new
thermally broken smoke vent which is designed to comply with a new
energy efficiency code. The Quad Roller product which provides easy
and smooth gliding of large sliding doors was also brought to
market. These products have been well-received and there is a
healthy pipeline for further launches in the second half.
Good progress has also been made on the product rationalisation
and repositioning initiative, particularly in the sash window
hardware category which will be complete by the end of 2020.
Outlook
There is significant uncertainty over the ongoing impact
COVID-19 and the resulting high unemployment rates will have on
demand through the second half, albeit that this unemployment is
disproportionately concentrated amongst house-renters rather than
owners. The rebound in housing demand in May and June provides some
optimism, with low interest rates and a long-term supply shortfall
driving both new housing construction and repair and remodelling
activity.
The US commercial construction market is expected to contract
due to a slow-down in commercial building starts and planning
activity, with the Dodge Momentum Index down 22% to 121.5 at 30
June 2020 compared to 31 December 2019.
With the market better supplied at the start of the crisis, the
Canadian housing market is expected to recover slowly, with the
CMHC predicting housing starts will only begin to recover towards
the end of 2020.
The division's main areas of focus in the second half will
continue to be strengthening operational excellence to expand
margin, re-building customer trust to drive share gain, and
completion of the first phase of the product portfolio
harmonisation initiative.
UK and Ireland (ERA)
GBPm except where stated H1 2020 H1 2019(1) Change LFL
--------------------------- -------- ----------- -------- -----
Revenue 39.1 54.0 -28% -28%
Adjusted Operating Profit 3.8 7.0 -46% -46%
Adjusted Operating Margin 9.7% 13.0% -330bps
--------------------------- -------- ----------- -------- -----
1 Prior year divisional figures have been amended for
comparability to reflect a change to the presentation of
inter-divisional sales in 2019. For further details, see segment
note on pages 34 to 36.
Q1 April May June H1 2020 July*
---------------- ---- ------ ----- ----- -------- ------
LFL revenue vs
2019 -1% -93% -58% -15% -28% +8%
================ ==== ====== ===== ===== ======== ======
* Month to date average sales per day
Markets
The UK market for doors and windows started the year positively,
with the IHS Markit/CIPS UK Construction PMI rising to a reading of
53 in February 2020 and residential property transactions up 4%
over the first two months of the year. The lockdown measures
introduced in late March by the UK government in response to
COVID-19 led to the temporary closure of the majority of
construction sites and prevented all but essential repair RMI
activity. In early May, construction activity began to resume with
social-distancing measures in place, and good momentum built across
June as pent-up demand from the lockdown period was released.
Nevertheless, COVID-19 has led to a significant contraction in the
UK and Ireland market in H1 2020 compared to H1 2019.
Business performance and developments
The UK and Ireland division had a strong start to the year,
achieving LFL revenue growth of 8% to the end of February, with
March also starting strongly. This reflected increased consumer
confidence driving the Hardware business, as well as strong project
activity in the Access 360 business. From late March, all sites
were temporarily closed until early May. Activity gradually resumed
throughout May and June as lockdown measures were eased.
Consequently, LFL revenue declined 28% compared to H1 2019.
Encouragingly, there has been a steady recovery in sales and orders
since early May, with June sales for the division 15% below
2019.
In addition to the significant sales shortfall, profitability
was impacted by additional bad debt charges of GBP0.5 million as a
result of three customers falling into administration, as well as
continued strategic investments in smartware. This was partially
mitigated by tight cost control measures, including salary
reductions, elimination of discretionary spend and use of the UK
Government's Coronavirus Job Retention Scheme.
Despite the inevitable focus over the last few months being on
managing through COVID-19, the division has continued to progress
its strategic initiatives.
The stronger market in the first two months of the year resulted
in growth in hardware sales into both the OEM and distribution
channels. In particular, the division benefitted from exposure to
trade distributors who have a strong online presence, given that
lockdown has accelerated the trend to online sales. There was also
benefit from the carry-over of the new product launches in 2019.
Hardware sales in the first two months were 7% above 2019 and sales
in both channels have recovered well, with June hardware sales
being just 13% below 2019. Manufacturing of multi-point locks was
transferred from the Far East to the UK in the period, with
inventory benefits and cost-savings now being realised. Further
opportunities to onshore manufacturing or assembly of certain
products are being explored to reduce stock levels and ensure
robustness of the supply chain.
Access 360, the division's commercial access portfolio, achieved
strong revenue growth of 23% in the first two months of the year,
reflecting the stronger projects pipeline and operational
execution. Since construction activity recommenced in early May,
sales have rebounded well, with sales in the month of June being
slightly ahead of 2019. Progress has been made in resolving the
operational bottlenecks which arose in Profab in H2 2019, with the
management team strengthened, however this activity will continue
in the second half of the year.
The smartware offering continues to gain momentum, with the ERA
Protect(TM) range being selected by a key national distributor to
replace an incumbent competitor range from Q3 2020. Encouraging
early interest has also been received from other key account
customers. Several extensions to the range originally planned for
H1 2020 will now be launched in H2 2020 to benefit from the market
momentum post-lockdown. This includes the WindowSense(TM) product
which is targeted at the OEM market as a pre-installed product and
therefore expected to create further traction for the rest of the
integrated range, all of which can be controlled through a single
smartphone app. The ERA website is in the process of being upgraded
to support homeowners who are seeking the ease and reassurance of
ERA's distinctive accredited installer network to source a leading
home security solution at an affordable price point. The ERA
Protect(TM) range remains the only home security portfolio to
receive the BSI IoT Kitemark.
The division's sash window refurbishment business, Ventrolla,
achieved encouraging growth in residential enquiries prior to the
lockdown and generated several commercial project wins. Given the
nature of its in-home installation, COVID-19 has had a more
significant impact on Ventrolla, with the business only able to
gradually recommence operations during June, albeit with enquiry
levels in last two weeks of June back to long-term historic
levels.
New product development
Several new products are due for launch in the second half of
the year, including the Hydrogen spiral balance and the twin cam
offset window lock. The Hydrogen balance has a lower operating
force and makes opening and closing a sash window easier. The twin
cam offset window lock enhances the speed and ease of installation
for fabricators, while also providing improved security for the
householder through the multiple locking points.
Outlook
Since lockdown measures were eased, demand in the residential
RMI and new housing market has rebounded more quickly than expected
as door and window fabricators and housebuilders have processed
order backlogs. UK government measures to increase the stamp-duty
threshold and incentivise "green homes" investment are expected to
support both housing transactions and RMI spend. However, there
remains significant uncertainty over the impact of COVID-19 on
unemployment, consumer confidence and thereby the housing
market.
In the commercial sector, the value of construction project
awards and new project tender enquiries dropped significantly
during the lockdown, and this could impact demand later in the
year. However, this sector may benefit from government stimulus
targeted at infrastructure projects.
The division's focus in H2 2020 will continue to be driving
momentum with new product launches, optimising the cost base
through continued integration of recent acquisitions and adjusting
the business model to reflect the realities post-COVID including
driving online sales through the e-commerce platform.
International (SchlegelGiesse)
GBPm except where stated H1 2020 H1 2019(1) Change LFL
--------------------------- -------- ----------- -------- -----
Revenue 46.8 60.9 -23% -22%
Adjusted Operating Profit 4.6 7.7 -40% -39%
Adjusted Operating Margin 9.8% 12.6% -280bps
--------------------------- -------- ----------- -------- -----
1. Prior year divisional figures have been amended for
comparability to reflect a change to the presentation of
inter-divisional sales in 2019. For further details, see segment
note on pages 34 to 36.
Q1 April May June H1 2020 July*
---------------- ----- ------ ----- ----- -------- ------
LFL revenue vs
2019 -17% -50% -28% -2% -22% -8%
================ ===== ====== ===== ===== ======== ======
* Month to date average sales per day
Markets
The weakness seen in core markets in the second half of 2019
continued into early 2020, with challenging macroeconomic
conditions in continental Europe, Latin America and Australia, and
ongoing liquidity constraints in the Middle East. As of early
February, all markets were progressively impacted by COVID-19, with
each market being affected at different times as the virus spread.
Construction activity and customer operations were suspended in
most markets for varying time periods in line with the lockdown
measures imposed in each territory. The division's three largest
markets of Italy, Spain, and China were subject to stringent
lockdown measures between February and April.
Since restriction measures have been eased in most territories,
there has been an encouraging improvement in demand. In China,
which was the first market affected, government investment and
growing confidence has already resulted in a strong market recovery
particularly in the commercial sector. Momentum is building in the
other core markets, with the IHS Markit Eurozone Construction PMI
back up to 48 in June from its low of 15 in April.
Business performance and developments
LFL revenue for the international division declined 22% in H1
2020 compared to H1 2019, with slight foreign exchange headwinds
resulting in reported revenue down 23%. The division had a
challenging start to the year due to the weak market conditions.
The division was significantly impacted by COVID-19, with the
division's third largest market, China, being impacted in January,
followed by most other core markets from mid-March. April was the
worst-affected month, with sales being 50% below the prior year.
Since lockdown measures have been eased in each territory, there
has been a steady improvement in sales and order levels, with
revenue in June recovering to just 2% below 2019.
A reduction in overheads, including savings from the reduction
in personnel costs which took effect in the second half of 2019,
combined with additional cost management actions taken and
utilisation of available government schemes partially offset the
impact of the sales shortfall on adjusted operating profit. LFL
adjusted operating profit was 39% below H1 2019 and adjusted
operating margin fell from 12.6% to 9.8%.
Despite some inevitable delays caused by COVID-19, the division
has made good progress on its strategic initiatives. Momentum
continued with the 'all in one' strategy, with the launch of a new
fully-integrated SchlegelGiesse website that brings together all of
the division's brands and products and supports driving further
penetration of the portfolio including showcasing new products.
During the lockdown period, webinars and virtual innovation
workshops were delivered to distributors and window makers to
maintain relationships and further progress the channel expansion
strategic initiative.
Self-help initiatives have progressed as planned. The
restructuring programme to streamline operations in Australia,
China and Singapore has largely been executed with no customer
disruption. Manufacturing was ceased and the business transitioned
to a distribution model in each of Australia and China in H1. As a
result of COVID-19, the move of the China distribution operation to
a new facility was delayed but is now planned for September. The
ASEAN market was migrated to being served as an export territory
during H1, with the lease for the Singapore facility due to be
exited at the end of July. These restructuring activities have
resulted in a reduced fixed cost-base, the avoidance of future
significant capital expenditure and increased management bandwidth
across the region.
The integration of Reguitti, which was acquired in August 2018,
has further progressed, albeit at a slower rate than planned due to
lockdown measures. Cross-selling activities have gained traction
following integration of the sales force, with many customers now
buying both product portfolios. A suite of value-engineered
products was launched in the Italian market, with fully refreshed
marketing materials and product repositioning to address the
specific low-cost competition which arose in 2019. A new mid-price
point brand for the German market is due for launch in H2 2020,
which will provide a full good, better, best range to capture a
growing segment of the market.
New product development
The division continues to focus on innovation, although there
have been delays to the launch of certain products due to COVID-19.
New products launched in the period include the new Brio Evo range
of flat handles which provides fast and simple assembly for
installers, a modern clean design, with an ergonomic handle for
easier manoeuvring for the end user. Further innovative new
solutions for doors and sliding windows are due for launch in the
second half of the year, including a pull and slide door system,
which combines minimalist profiles with high weathertight
performance and ease of use. The value-engineered range of bespoke
products for the Chinese RMI market is also due for launch in early
2021, which supports the division's focus on this growing channel
and will ensure it is well-placed to capture share as this market
recovers. In addition, there are a number of existing products
expected to achieve the environmentally friendly Cradle to Cradle
certification in H2 2020. The division continues to invest in
developing and expanding its range of innovative products as a key
driver of future growth.
Outlook
The recovery that has begun in core markets in Q2 is expected to
continue in Q3, however the ongoing impact of COVID-19 and the
wider macro-economic environment creates significant
uncertainty.
The main priorities of the business in H2 2020 are to drive
share gain in core markets by capitalising on the activities
undertaken to integrate and extend the division's offer; and to
continue to pursue operational efficiencies.
FINANCIAL REVIEW
Income statement
Revenue and profit
Reported revenue in the period decreased by 15.8 % to GBP254.1
million (H1 2019: GBP301.9 million), largely reflecting a
significant reduction in volume of GBP43.8 million driven by the
impact of COVID-19, the drag-through effect of the 2019 North
America footprint consolidation related customer losses of c.
GBP6.8 million, and a reduction in US tariffs of GBP1.6 million,
offset by favourable foreign exchange movements of GBP3.7 million.
On a LFL basis, revenue declined 16.8% compared to the prior
year.
Adjusted administrative expenses decreased to GBP 48.6 million
(H1 2019 restated: GBP61.4 million), due to the benefit of
self-help measures implemented in the second half of 2019 as well
as cost-management actions taken to mitigate the impact of
COVID-19. This included significant curtailment of discretionary
expenditure, salary reductions, cancellation of the senior
management bonus scheme, as well as utilisation of available
government job retention schemes in various territories. The Group
received a total of GBP3.3 million in the period from government
job retention schemes across various territories.
Adjusted operating profit decreased by 25.3 % to GBP 31.3
million (H1 2019: GBP41.9 million) and declined 26.0% on a
like-for-like basis. This was negatively impacted by GBP17.7
million from the reduction in volumes driven by COVID-19 and by c.
GBP2.5 million from the drag-through effect of the 2019 North
America footprint consolidation related customer losses, offset by
receipts from government job retention schemes of GBP3.3 million, a
reduction of GBP5.2 million in input costs due to moderation of
materials costs and cost-management actions, as well as
productivity improvements of GBP1.6 million. The Group's adjusted
operating margin decreased 160 bps to 12.3 % (H1 2019: 13.9%).
Adjusted profit before taxation decreased by 28.8 % to GBP 24.7
million (H1 2019: GBP34.7 million) and declined 29.4 % on a LFL
basis. Reported profit before taxation increased by 33.6 % to GBP
14.7 million (H1 2019: GBP11.0 million), primarily due to a
significant reduction in exceptional items from GBP9.9 million to
GBP0.8 million.
Materials and input costs
GBPm except where stated FY 2019 Materials(1) Average(2) Spot(3)
-------------------------- --------------------- ----------- --------
Aluminium 23.2 (8.4)% (7.4)%
Polypropylene 34.8 (21.0)% (36.6)%
Stainless steel 52.8 +1.2% +4.9%
Zinc 33.4 (17.9)% (15.9)%
Far East components(4) 45.2 (8.0)% (5.4)%
-------------------------- --------------------- ----------- --------
(1) FY 2019 materials cost of sales for raw materials,
components and hardware for overall category. Only major materials
categories are presented
(2) Average H1 2020 tracker price compared with average H1 2019 tracker price
(3) Spot tracker price as at 30 June 2020 compared with spot tracker price at 30 June 2019
(4) Pricing on a representative basket of components sourced
from the Far East by the UK & Ireland division
Raw material costs continued to moderate in H1 2020 with average
prices across all commodity categories except stainless steel lower
than H1 2019. Steel purchases in North America continue to be
impacted by the direct and indirect effect of US tariffs and
surcharges are in place to recover these costs.
Exceptional items
Certain items have been drawn out as exceptional such that the
effect of these items on the Group's results can be better
understood and to enable a clearer analysis of trends in the
Group's underlying performance.
GBPm H1 2020 H1 2019
----------------------------------- -------- --------
Footprint restructuring - costs - (3.3)
Footprint restructuring - credits - 0.6
----------------------------------- -------- --------
Footprint restructuring - net - (2.7)
----------------------------------- -------- --------
M&A and integration - costs (0.5) (1.9)
M&A and integration - net (0.5) (1.9)
Redundancy and restructuring (0.3) -
Impairment charges - (5.3)
(0.8) (9.9)
----------------------------------- -------- --------
Footprint restructuring
The footprint restructuring costs in prior periods related to
directly attributable costs incurred in the multi-year North
American footprint consolidation project, which is now
substantially complete, as well as provisions for costs associated
with the closure of the Fremont, Nebraska facility and streamlining
the international satellite operations which commenced in late
2019. This included the exit of manufacturing in Australia and
China, with these markets transitioned to distribution centres and
closure of our operations in Singapore with this region now served
as an export market.
M&A and integration
M&A and integration costs of GBP0.5 million relate to costs
associated with the integration of businesses acquired in 2018,
predominantly Ashland.
Redundancy and restructuring
Redundancy and restructuring costs of GBP0.3 million relate
primarily to costs associated with a workforce reduction.
Impairment charges
Impairment charges in 2019 relate to the write down of assets
and inventory associated with the slower than expected uptake of
the new door seal product in North America.
Finance costs
Net finance costs decreased to GBP6.3 million (H1 2019: GBP7.5
million).
Interest payable on bank loans, private placement notes and
overdrafts decreased to GBP5.0 million (H1 2019: GBP5.6 million),
predominantly reflecting lower interest rates following reductions
in the US federal interest rate and UK official bank rate. Interest
on lease liabilities of GBP1.5 was flat against the prior period
(H1 2019: GBP1.5 million).
Non-cash movements charged to net finance costs in the period
include amortisation of capitalised borrowing costs of GBP0.3
million (H1 2019: GBP0.3 million) and pension interest cost of
GBP0.1 million (H1 2019: GBP0.1 million).
Taxation
The Group reported an income tax charge of GBP2.3 million (H1
2019: GBP3.1 million), comprising a current tax charge of GBP2.9
million (H1 2019: GBP3.3 million) and a deferred tax credit of
GBP0.6 million (H1 2019: GBP0.2 million).
The adjusted tax charge was GBP5.4 million (H1 2019: GBP9.1
million) representing an effective adjusted tax rate of 21.7% (H1
2019: 26.2%). The reduction in the adjusted effective tax rate of
450bps reflects, the release of an excess provision and utilisation
of available tax credits. This is the Group's current best estimate
of the adjusted tax rate for the 2020 full year.
During the period, the Group paid corporation tax of GBP1.3
million (H1 2019:
GBP7.1 million), with the reduction largely relating to payment
deferrals granted by the US and Italian governments in light of the
COVID-19 pandemic.
Earnings per share
Basic earnings per share increased by 56.6% to 6.4 pence (H1
2019: 4.1 pence). Adjusted earnings per share decreased to 9.9
pence (H1 2019: 13.1 pence).
There is no material difference between these calculations and
the fully diluted earnings per share calculations.
Cash generation, funding and liquidity
Cash and cash conversion
H1 2019
(restated(1)
GBPm H1 2020 )
----------------------------------------- -------- --------------
Net cash generated from operations 33.6 16.3
Add: Pension contributions 0.2 0.5
Add: Income tax paid 1.3 7.1
Less: Purchases of property, plant and
equipment (3.7) (5.5)
Less: Purchases of intangible assets (0.4) (0.4)
Add: Proceeds on disposal of PPE - 1.2
----------------------------------------- -------- --------------
Operational cash flow after exceptional
cash costs 31.0 19.2
Exceptional cash costs 2.2 6.9
----------------------------------------- -------- --------------
Operational cash flow 33.2 26.1
Less: Pension contributions (0.2) (0.5)
Less: Income tax paid (1.3) (7.1)
Less: Net interest paid(1) (6.6) (7.4)
Less: Exceptional cash costs (2.2) (6.9)
----------------------------------------- -------- --------------
Free cash flow 22.9 4.2
----------------------------------------- -------- --------------
(1) Net interest paid in H1 2019 has been restated to include
interest paid on lease liabilities to align with the current period
calculation of free cash flow
Operational cash flow in the period increased by 27.2% to
GBP33.2 million, predominantly due to tight management of working
capital and capital expenditure. This is after adding back GBP2.2
million (H1 2019: GBP6.9 million) of exceptional costs cash settled
in the period, which related to settlement of costs associated with
the footprint realignments provided for in 2019 and costs
associated with the integration of Ashland. Operating cash
conversion in H1 2020 was very strong at 106.0% (H1 2019:
62.3%).
Free cash flow in the period was significantly higher than H1
2019 at GBP22.9 million (H1 2019 restated: GBP4.2 million) as a
result of the higher operational cash flow, lower levels of income
tax payments on account, lower interest payments and lower levels
of exceptional cash flows.
Debt facilities
Bank and US private placement facilities available to the Group,
as at 30 June 2020, were as follows:
Facility Maturity Currency Committed Uncommitted
----------------- --------- -------------- ---------- ------------
2018 Facility Feb 2024 Multicurrency GBP240.0m GBP70.0m
4.97 % USPP Nov 2021 US$ US$55.0m -
5.37 % USPP Nov 2024 US$ US$45.0m -
Other facilities Various EUR EUR0.6m -
----------------- --------- -------------- ---------- ------------
In addition to this, the Group has received eligibility to draw
up to GBP100 million through the Bank of England CCFF.
Liquidity
At 30 June 2020 the Group had gross outstanding borrowings of
GBP240.4 million (H1 2019: GBP279.6 million), cash balances of
GBP79.9 million (H1 2019: GBP49.6 million) and committed but
undrawn facilities of GBP78.6 million (H1 2019: GBP56.1 million).
This provides immediately available liquidity of GBP158.5 million.
The Group also has potential access to the uncommitted GBP70.0
million accordion facility and the GBP100 million CCFF facility,
albeit the intention is not to draw down on this.
Net debt at the period end was GBP219.8 million (H1 2019:
GBP289.8 million). Adjusted net debt, which excludes lease
liabilities and unamortised finance arrangement fees was GBP160.5
million (H1 2019: GBP230.0 million), reflecting the strong
operational cash generation and cancellation of the final 2019
dividend. There was also a benefit from deferred government
payments of c. GBP4 million.
Covenant performance
Performance Headroom Headroom
At 30 June 2020 Test (1) (2) (2)
----------------- -------- ------------ --------- ---------
Leverage < 3.0x 1.8x 36.4m 41.3%
Interest Cover > 4.0x 8.4x 46.2m 52.3%
----------------- -------- ------------ --------- ---------
(1) Calculated covenant performance consistent with the Group's
banking covenant test (banking covenants set on a frozen GAAP basis
and not impacted by IFRS 16)
(2) The approximate amount by which adjusted EBITDA would need
to decline before the relevant covenant is breached
At the half year, the Group retained significant headroom on its
banking covenants. Leverage at the period end was 1.8x (H1 2019:
2.2x), reflecting the lower level of net debt. Interest cover at
the period end was 8.4x (H1 2019: 8.9x), reflecting the lower
interest expense offset by a reduction in adjusted EBITDA.
Subsequent to the period end, in order to provide additional
headroom during the period of uncertainty, the Group agreed a
temporary relaxation of the leverage covenant with its lenders from
3.0x adjusted EBITDA to 3.5x at December 2020 and 4.0x at 30 June
2021.
Balance sheet - assets and liabilities
Working capital
GBPm FY 2019 Mvt FX H1 2020
----------------------- -------- ------ ------ --------
Inventories 88.6 2.0 4.5 95.1
Trade receivables 60.5 (0.8) 2.8 62.5
Trade payables (46.6) 5.7 (2.3) (43.2)
----------------------- -------- ------ ------ --------
Trade working capital 102.5 6.9 5.0 114.4
----------------------- -------- ------ ------ --------
Trade working capital at the half year, net of provisions, was
GBP114.4 million (H1 2019: GBP148.1 million; FY 2019: GBP102.5
million). The trade working capital build to the half year at
average exchange rates was GBP6.9 million (H1 2019: GBP23.2
million).
The inventory build to the half year at average exchange rates
was GBP2.0 million
(H1 2019: GBP10.2 million). The much lower than normal seasonal
inventory build largely reflects tight management of inventory
levels in light of the impact of COVID-19 on demand. Production
levels began to ramp up in June as demand returned.
Trade receivables and trade payables reduced in the period due
to lower levels of trading in the first half of 2020.
Of the year to date increase in trade working capital, GBP5.0
million related to exchange.
Capital expenditure
Gross capital expenditure decreased to GBP4.1 million (H1 2019:
GBP5.9 million) or 0.6x depreciation (H1 2019: 0.8x), as a result
of deferring most non-essential expenditure in light of COVID-19.
Investment is planned to increase in the second half to support
future growth.
Balance sheet - equity
Shares in issue
At 30 June 2020, the total number of shares in issue was 196.8
million (H1 2019: 196.8 million) of which 0.5 million shares were
held in treasury (H1 2019: 0.5 million).
Employee Benefit Trust purchases
At 30 June 2020, the EBT held 1.1 million shares (H1 2019: 1.4
million). During the period, the EBT purchased 0.1 million shares
in Tyman plc at a total cost of GBP0.3 million to satisfy vested
share awards as well as future obligations under the Group's
various share plans.
Other financial matters
Return on capital employed
ROCE fell by 190 bps to 10.8% (H1 2019: 12.7%) as a result of
the reduction in LFL adjusted operating profit in light of
COVID-19.
Returns on Acquisition Investment
Original ROAI at
Acquisition Acquisition H1 2020
Date Investment (1)
----------------- ------------- ------------- ---------
Ashland(2) March 2018 US$102.4m 17.9%
Zoo Hardware(2) May 2018 GBP18.7m 19.7%
Profab July 2018 GBP4.1m 8.1%
Reguitti August 2018 EUR16.2m 4.9%
----------------- ------------- ------------- ---------
(1) See Alternative Performance Measures on page 48
(2) Ashland and Zoo Hardware reached the end of the two-year
ROAI measurement period in March and May respectively. Ashland ROAI
is measured over the last twelve months to the end of February 2020
and Zoo ROAI is measured over the last twelve months to the end of
April 2020.
Ashland and Zoo Hardware have continued to perform well, with
both exceeding the 14% minimum target return threshold after two
years of ownership. Ashland exceeded the expected US$5m of
annualised synergy benefits from 2020.
Profab suffered from operational bottlenecks in the second half
of 2019, impacting productivity and was significantly impacted in
H1 2020 by COVID-19 lockdown measures. The ROAI is therefore
significantly below the target threshold. Improvements in
productivity are being achieved and sales and orders have rebounded
well since re-opening. The ROAI is therefore expected to improve in
the second half.
The performance of Reguitti has been significantly impacted by
COVID-19, as well as being impacted by some specific low-cost
competition in Italy, resulting in an ROAI significantly below the
target threshold. A suite of value-engineered products was launched
in the Italian market, with a full marketing refresh and product
repositioning to address the low-cost competition. The benefit of
these measures and improving demand following easing of lockdown
measures are expected to improve the ROAI in the second half.
Currency
Currency in the consolidated income statement
The principal foreign currencies that impact the Group's results
are the US Dollar, the Euro, the Australian Dollar and the Canadian
Dollar. In H1 2020, the Sterling was slightly weaker against the US
dollar, essentially flat against the Euro and Canadian dollar, and
stronger against the Australian Dollar when compared with the
average exchange rates in H1 2019.
Translational exposure
Currency US$ Euro AUS$ CA$ Other Total
----------------------- -------- ------- ------ ------- ------ ------
% mvt in average rate (2.6)% (0.1)% 4.8% (0.4)%
GBPm Revenue impact 4.2 - (0.2) - (1.1) 3.0
GBPm Profit impact
(1) 1.4 - - - (0.1) 1.3
1c decrease impact GBP173k GBP24k GBP2k GBP5k
(2)
----------------------- -------- ------- ------ ------- ------ ------
(1) Adjusted Operating Profit impact
(2) Defined as the approximate favourable translation impact of
a 1c decrease in the Sterling exchange rate
of the respective currency on the Group's Adjusted Operating
Profit
The net effect of currency translation caused revenue and
adjusted operating profit from ongoing operations to increase by
GBP3.0 million and GBP1.3 million respectively compared with H1
2019.
Transactional exposure
Foreign exchange hedges have resulted in a gain on revaluation
in H1 2020 of GBP0.6 million (H1 2019: GBPnil).
The Group's other transactional exposures generally benefit from
the existence of natural hedges and are immaterial.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's principal risks and uncertainties, which could
impact the Group for the remainder of the current financial year,
are identified on pages 38 to 45 of the Group's Report and Accounts
for the year ended 31 December 2019, which is available at the
Group's website. These risks are as follows: market conditions,
competitors, loss of major customers, financial risks, liquidity
and credit risks, information security, raw material costs and
supply chain failures, footprint rationalisation and key executives
and personnel.
The Directors have reviewed these principal risks and
uncertainties and have made the following amendments for the period
ended 30 June 2020:
Major pandemic
COVID-19 was identified as an emerging risk in the 2019 annual
report and the main threat was seen to be to our supply chain in
China. Since then COVID-19 has evolved rapidly into a global crisis
and has resulted in heightened risk to the health, safety and
wellbeing of our employees as well as reduced demand for our
products, particularly during the second quarter of 2020. The Group
was able to respond rapidly to safeguard our employees, protect our
operations, reduce costs and preserve cash. The Group has further
expanded its liquidity headroom by establishing eligibility for the
Bank of England Covid Corporate Financing Facility ("CCFF").
Further details of the impact of this and the mitigation actions
taken are set out within the overview of results on pages 3 to
8.
Major pandemic is now recognised as a principal risk and
uncertainty for the Group and is expected to remain so for the
remainder of 2020 and for 2021, due to the potential for further
waves of the pandemic and need for additional lockdowns.
Markets
COVID-19 has had a serious impact on demand in our markets in
2020. Current recovery trends are encouraging but risk remains as
to the size and length of this recovery and the danger of further
waves of infection. This, combined with the end of the Brexit
transition deal with the EU and the potential for a no deal
scenario at the end of 2020, has heightened the risk in respect of
the UK market. The risk trend since December 2019 is seen as
increasing.
Information security
Information security remains an increasing risk for the Group.
Cyber threats have an increased potency when combined with the
disruptions of remote working in a COVID-19 environment. Remote
working practices have been reviewed to ensure internal controls
have not been compromised and phishing testing and awareness
training has been increased.
Risk watchlist
Climate change and sustainability remains on our risk watchlist
as an emerging source of risk as well as opportunity in the future.
Work continues to better understand the likely scale, impact and
velocity of this area of risk.
Risks and uncertainties facing the Group
In the opinion of the Directors, the principal risks and
uncertainties as at the date of this report, consist of the
principal risks and uncertainties set out in the 2019 Report and
Accounts, together with the risk associated with the impact of
COVID-19 and the increased unmitigated risk level associated with
information security.
28 July 2020
Tyman plc
Condensed consolidated income statement
Six months
ended
Six months 30 June 2019
ended (unaudited) Year ended
30 June (Restated(2) 31 December
2020 (unaudited) ) 2019 (audited)
Note GBPm GBPm GBPm
------------------------------------- ----- ------------------ -------------- ----------------
Revenue 3 254.1 301.9 613.7
Cost of sales (174.2) (198.6) (408.1)
------------------------------------- ----- ------------------ -------------- ----------------
Gross profit 79.9 103.3 205.6
Administrative expenses (58.9) (84.8) (165.1)
------------------------------------- ----- ------------------ -------------- ----------------
Operating profit 21.0 18.5 40.5
Analysed as:
------------------------------------- ----- ------------------ -------------- ----------------
Adjusted(1) operating profit 3 31.3 41.9 85.4
Exceptional items 4 (0.8) (9.9) (18.9)
Amortisation of acquired intangible
assets 9 (9.5) (13.5) (23.5)
Impairment of acquired goodwill 9 - - (2.5)
------------------------------------- ----- ------------------ -------------- ----------------
Operating profit 21.0 18.5 40.5
Finance income 5 0.6 - -
Finance costs 5 (6.9) (7.5) (15.7)
------------------------------------- ----- ------------------ -------------- ----------------
Net finance costs 5 (6.3) (7.5) (15.7)
------------------------------------- ----- ------------------ -------------- ----------------
Profit before taxation 14.7 11.0 24.8
Income tax charge 6 (2.3) (3.1) (7.1)
Profit for the period 12.4 7.9 17.7
------------------------------------- ----- ------------------ -------------- ----------------
Basic earnings per share 7 6.36p 4.06p 9.08p
Diluted earnings per share 7 6.35p 4.04p 9.05p
------------------------------------- ----- ------------------ -------------- ----------------
Non-GAAP alternative performance
measures(1)
Adjusted(1) operating profit 31.3 41.9 85.4
------------------------------------- ----- ------------------ -------------- ----------------
Adjusted(1) profit before
taxation 24.7 34.7 71.0
------------------------------------- ----- ------------------ -------------- ----------------
Basic Adjusted earnings per
share 7 9.91p 13.14p 27.46p
------------------------------------- ----- ----------------
Diluted Adjusted earnings
per share 7 9.89p 13.10p 27.35p
------------------------------------- ----- ------------------ -------------- ----------------
(1) Before amortisation of acquired intangible assets, deferred
taxation on amortisation of acquired intangible assets, impairment
of goodwill, exceptional items, gains and losses on the fair value
of derivative financial instruments, amortisation of borrowing
costs, and the associated tax effect. See definitions on page 48
for non-GAAP alternative performance measures.
(2) Depreciation on manufacturing assets was reclassified from
administrative expenses to cost of sales for year end 2019 to
better reflect the nature of this charge. For comparability, the
comparatives for the six months ended 30 June 2019 have been
amended to reflect the new classification. See note 2.2.3.
Tyman plc
Condensed consolidated statement of comprehensive income
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
------------------------------------------- ------------------ ------------------ ----------------
Profit for the period 12.4 7.9 17.7
------------------------------------------- ------------------ ------------------ ----------------
Other comprehensive (expense)/income
Items that will not be reclassified
to profit or loss
Remeasurements of post-employment
benefit obligations (0.8) (0.4) (1.0)
Total items that will not be reclassified
to profit or loss (0.8) (0.4) (1.0)
------------------------------------------- ------------------ ------------------ ----------------
Items that may be reclassified
subsequently to profit or loss
Exchange differences on translation
of foreign operations 19.9 1.0 (11.9)
Effective portion of changes in
value of cash flow hedges 0.2 0.2 -
Total items that may be reclassified
to profit or loss 20.1 1.2 (11.9)
------------------------------------------- ------------------ ------------------ ----------------
Other comprehensive income for
the period 19.3 0.8 (12.9)
------------------------------------------- ------------------ ------------------ ----------------
Total comprehensive income for
the period 31.7 8.7 4.8
------------------------------------------- ------------------ ------------------ ----------------
Tyman plc
Condensed consolidated statement of changes in equity
Share Share Treasury Hedging Translation Retained Total
capital premium reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
At 1 January 2019
(audited) 9.8 132.2 (4.9) (0.3) 71.4 225.5 433.7
Change in accounting
policy(1) - - - - - 2.4 2.4
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
At 1 January 2019
(audited) 9.8 132.2 (4.9) (0.3) 71.4 227.9 436.1
Total comprehensive
income/(expense) - - - 0.2 1.0 7.5 8.7
Profit for the period - - - - - 7.9 7.9
Other comprehensive
income/(expense) - - - 0.2 1.0 (0.4) 0.8
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
Transactions with
owners - (132.2) 0.6 - - 114.1 (17.5)
Share-based payments(2) - - - - - 0.6 0.6
Dividends paid - - - - - (16.1) (16.1)
Capital reduction - (132.2) - - - 132.2 -
Issue of own shares
from EBT - - 2.6 - - (2.6) -
Purchase of own shares
for EBT - - (2.0) - - - (2.0)
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
At 30 June 2019 (unaudited) 9.8 - (4.3) (0.1) 72.4 349.5 427.3
Total comprehensive
income - - - (0.2) (12.9) 9.2 (3.9)
Profit for the period - - - - - 9.8 9.8
Other comprehensive
(expense) - - - (0.2) (12.9) (0.6) (13.7)
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
Transactions with
owners - - - - - (7.1) (7.1)
Share-based payments(2) - - - - - 0.4 0.4
Dividends paid - - - - - (7.5) (7.5)
At 31 December 2019
(audited) 9.8 - (4.3) (0.3) 59.5 351.6 416.3
Total comprehensive
income - - - 0.2 19.9 11.6 31.7
Profit for the period - - - - - 12.4 12.4
Other comprehensive
income/(expense) - - - 0.2 19.9 (0.8) 19.3
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
Transactions with
owners - - 0.8 - - (0.7) 0.1
Share-based payments(2) - - - - - 0.4 0.4
Issue of own shares
from EBT - - 1.1 - - (1.1) -
Purchase of own shares
for EBT - - (0.3) - - - (0.3)
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
At 30 June 2020 (unaudited) 9.8 - (3.5) (0.1) 79.4 362.5 448.1
----------------------------- --------- --------- --------- --------- ------------ ---------- --------
(1) The change in accounting policy at 1 January 2019 related to
adoption of new accounting standard IFRS 16.
(2) Share-based payments include a tax debit of GBPNil (six
months ended 30 June 2019: GBPNil; year ended 31 December 2019:
GBP0.1 million)
Tyman plc
Condensed consolidated balance sheet
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
----------------------------------- ----- ------------------ ------------------ ----------------
TOTAL ASSETS
Non-current assets
Goodwill 8 393.2 385.9 371.3
Intangible assets 9 100.4 123.4 104.0
Property, plant and equipment 10 66.4 70.3 65.8
Right of use assets 59.5 62.0 59.4
Financial assets at fair value
through profit or loss 13 1.1 1.2 1.1
Deferred tax assets 17.2 17.1 17.2
----------------------------------- ----- ------------------ ------------------ ----------------
637.8 659.9 618.8
Current assets
Inventories 95.1 116.1 88.6
Trade and other receivables 79.0 100.8 76.3
Cash and cash equivalents 79.9 49.6 49.0
Derivative financial instruments 13 0.1 0.4 -
----------------------------------- ----- ------------------ ------------------ ----------------
254.1 266.9 213.9
TOTAL ASSETS 891.9 926.8 832.7
----------------------------------- ----- ------------------ ------------------ ----------------
LIABILITIES
Current liabilities
Trade and other payables (81.4) (91.2) (84.9)
Derivative financial instruments 13 - - (0.7)
Borrowings 11 - - (0.3)
Lease liabilities (6.3) (5.9) (6.0)
Current tax liabilities (8.3) (4.0) (6.5)
Provisions (1.3) (2.4) (2.5)
----------------------------------- ----- ------------------ ------------------ ----------------
(97.3) (103.5) (100.9)
Non-current liabilities
Borrowings 11 (238.9) (277.6) (211.5)
Lease liabilities (54.5) (55.9) (54.0)
Derivative financial instruments 13 - (0.1) -
Deferred tax liabilities (31.6) (38.6) (31.3)
Retirement benefit obligations (12.9) (11.1) (11.2)
Provisions (8.1) (8.1) (7.1)
Other payables (0.5) (4.6) (0.4)
----------------------------------- ----- ------------------ ------------------ ----------------
(346.5) (396.0) (315.5)
TOTAL LIABILITIES (443.8) (499.5) (416.4)
----------------------------------- ----- ------------------ ------------------ ----------------
NET ASSETS 448.1 427.3 416.3
----------------------------------- ----- ------------------ ------------------ ----------------
EQUITY
Capital and reserves attributable
to owners of the Company
Share capital 12 9.8 9.8 9.8
Treasury reserve (3.5) (4.3) (4.3)
Hedging reserve (0.1) (0.1) (0.3)
Translation reserve 79.4 72.4 59.5
Retained earnings 362.5 349.5 351.6
TOTAL EQUITY 448.1 427.3 416.3
----------------------------------- ----- ------------------ ------------------ ----------------
Tyman plc
Condensed consolidated cash flow statement
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
-------------------------------------------- ----- ------------------ ------------------ ----------------
Cash flow from operating activities
Profit before taxation 3 14.7 11.0 24.8
Adjustments 14 27.9 36.4 71.9
Changes in working capital(1)
:
Inventories (2.0) (10.2) 13.7
Trade and other receivables (0.5) (13.3) 7.7
Trade and other payables (4.8) 4.7 0.7
Provisions utilised (0.2) (4.7) (6.5)
Pension contributions (0.2) (0.5) (1.0)
Income tax paid (1.3) (7.1) (14.2)
Net cash generated from operations 33.6 16.3 97.1
-------------------------------------------- ----- ------------------ ------------------ ----------------
Cash flow from investing activities
Purchases of property, plant
and equipment 10 (3.7) (5.5) (10.7)
Purchases of intangible assets 9 (0.4) (0.4) (0.8)
Proceeds on disposal of PPE - 1.2 0.8
Acquisitions of subsidiary undertakings(2) (1.5) (0.8) (0.9)
Net cash used in investing activities (5.6) (5.5) (11.6)
-------------------------------------------- ----- ------------------ ------------------ ----------------
Cash flow from financing activities
Interest paid (6.6) (7.4) (15.0)
Dividends paid - (16.1) (23.6)
Purchase of own shares for EBT (0.3) (2.0) (2.0)
Refinancing costs paid - (0.3) (0.3)
Drawdown of revolving credit
facility 83.4 25.4 33.5
Repayments of revolving credit
facility (71.6) (8.7) (73.4)
Principal element of lease payments (3.3) (3.2) (5.6)
Net cash generated from/(used
in) financing activities 1.6 (12.3) (86.4)
-------------------------------------------- ----- ------------------ ------------------ ----------------
Net increase/(decrease) in cash
and cash equivalents 29.6 (1.5) (0.9)
Exchange gains/(losses) on cash 1.3 (0.8) (2.0)
Cash and cash equivalents at
start of period 49.0 51.9 51.9
Cash and cash equivalents at
the end of period 79.9 49.6 49.0
-------------------------------------------- ----- ------------------ ------------------ ----------------
(1) Excluding the effects of acquisition and exchange differences on consolidation.
(2) Net of cash acquired.
Tyman plc
Notes to the condensed consolidated financial statements
1. General information
Tyman plc is a leading international supplier of engineered
fenestration and access solutions to the construction industry. The
Group designs and manufactures products that enhance the comfort,
sustainability, security, safety and aesthetics of residential
homes and commercial buildings. Tyman serves its markets through
three regional divisions. Headquartered in London, the Group
employs approximately 3,900 people with facilities in 18 countries
worldwide.
Tyman is a public limited company listed on the London Stock
Exchange, incorporated and domiciled in England and Wales. The
address of the Company's registered office is 29 Queen Anne's Gate,
London, SW1H 9BU.
These Interim Financial Statements were approved for issue on 28
July 2020 and have been reviewed, not audited, by PwC, the Group's
auditors.
These Interim Financial Statements do not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2019 were
approved by the Board of Directors on 3 March 2020 and delivered to
the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 of
the Companies Act 2006.
The financial information for the year ended 31 December 2019 is
extracted from the Group's consolidated financial statements for
that year.
2. Accounting policies and basis of preparation
2.1 Basis of preparation
The Interim Financial Statements have been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union. The Interim Financial Statements should be read in
conjunction with the annual financial statements for the year ended
31 December 2019, which have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union.
2.2 Changes in accounting policies and disclosures
2.2.1 New accounting standards effective in period
The accounting standards that became applicable in the period
did not impact on the Group's accounting policies and did not
require retrospective adjustments.
2.2.2 New, revised and amended accounting standards not yet
effective
None of the standards which have been issued by the IASB but are
not yet effective are expected to have a material impact on the
Group.
2.2.3 Other changes to accounting policies
In 2019, depreciation on assets used in the manufacturing
process was reclassified from administrative expenses to cost of
sales to better reflect the nature of this charge. For
comparability, the H1 2019 comparatives were amended to reflect the
new classification. The effect of this was to increase cost of
sales by GBP6.9 million and reduce administrative expenses by
GBP6.9 million. There is no net effect on profit and no impact on
the statement of financial position.
In addition, following changes to the information reported to
the Chief Operating Decision Maker in the second half of 2019, an
amendment has been made to the presentation of segment information.
The H1 2019 comparatives have been restated the reflect the new
basis. See note 3 for further information.
The group has utilised available government job retention
schemes across various territories. The amount received in
government support across the Group in the period is GBP3.3
million, and this has been accounted for as a government grant
under IAS 20. As the grant has been intended to cover employee
costs, this has been recognised in the profit or loss within
administrative expenses, offsetting the related expense.
2.3 Going concern
The Group's business activities, financial performance and
position, together with factors likely to affect its future
development and performance including the impact of COVID-19, are
described in the overview of results on pages 3 to 8. Changes to
principal risks and uncertainties are described on pages 25 to
26.
As at 30 June 2020, the Group had cash and cash equivalents of
GBP79.9 million and an undrawn RCF available of GBP78.6 million,
giving liquidity headroom of GBP158.5 million. The Group also has
potential access to an uncommitted accordion facility of GBP70
million and has obtained eligibility to draw up to GBP100 million
under the Bank of England's Covid Corporate Financing Facility
(CCFF).
The Group is subject to leverage and interest cover covenants
tested in June and December and had significant headroom on both
covenants at 30 June 2020. In order to provide increased headroom
during the period of uncertainty, the Group has agreed a relaxation
of the leverage covenant from 3.0x adjusted EBITDA to 3.5x at 31
December 2020 and 4.0x at 30 June 2021.
The Group has conducted ongoing scenario planning as the
COVID-19 situation has evolved and has taken a number of actions to
reduce costs and preserve cash as described on pages 4 to 5. Taking
into account actual sales and order levels through the periods of
lockdown, recovery patterns since restrictions were eased, and
various industry and economic forecasts, the Group has modelled a
cautious base case scenario which assumes a continued gradual
improvement in sales through the second half of 2020 and the course
of 2021, with both years being below the actual 2019 trading
performance.
A severe but plausible downside scenario has also been modelled,
which assumes a deterioration from current trading levels through
the second half of 2020, resulting in revenue for 2020 being 20%
below 2019. This scenario also assumes a deeper and more prolonged
recession lasts throughout 2021, with revenue for 2021 being 17%
below 2019. This scenario could arise if further significant
lockdown measures are introduced in key markets or the global
economy enters a prolonged period of deep recession. This scenario
includes additional cost reduction actions available, mainly in
relation to further reductions in discretionary spend. There are
further cost mitigating actions that could be taken by management
in the event this became necessary. In addition to this downside
scenario, the Group has modelled the impact of a second lockdown
within the next 12 months, commensurate with actual performance
experienced during the initial lockdown period in April and May
2020.
In all scenarios modelled, the Group would retain significant
liquidity and covenant headroom throughout the going concern
period.
Reverse stress-testing has also been performed to model a
scenario which would result in elimination of covenant headroom
within the going concern assessment period. This scenario was
considered highly unlikely.
Having reviewed the various scenario models, availably liquidity
and taking into account current trading, the Directors are
satisfied that the Group has sufficient resources to continue in
operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, the consolidated
financial information has been prepared on a going concern
basis.
2.4 Accounting policies
The accounting policies adopted are consistent with those of the
previous financial year. Taxes on income in the interim periods are
accrued using tax rates that would be applicable to expected total
annual profit or loss.
2.5 Accounting judgements and estimates
The preparation of financial statements requires management to
exercise judgement in applying the Group's accounting policies. It
also requires the use of certain critical accounting estimates and
assumptions that affect the reported amounts of assets,
liabilities, income and expenses. Actual amounts may differ from
these estimates.
In preparing these Interim Financial Statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those applied to the consolidated financial statements for
the year ended 31 December 2019, with the addition of going concern
as described in note 2.3.
3. Segment reporting
Change to segment reporting
In the second half of 2019, an amendment was made to the method
of eliminating inter-segment revenue as well as the allocation of
share-based payment charges in the internal reporting provided to
the Chief Operating Decision Maker. Consequently, for comparability
the H1 2019 comparatives have been restated to reflect the new
method of presentation. The changes were not material and there is
no effect on the total Group. Inter-segment revenue has been
disclosed separately to provide additional information.
Segment information
The reporting segments reflect the manner in which performance
is evaluated and resources are allocated. The Group operates
through three clearly defined divisions: North America
(AmesburyTruth), UK & Ireland (ERA) and International
(SchlegelGiesse).
North America (AmesburyTruth) comprises all the Group's
operations within the US, Canada and Mexico. UK & Ireland (ERA)
comprises the Group's UK and Ireland hardware business, together
with Access 360, Ventrolla, and Tyman Sourcing Asia. International
(SchlegelGiesse) comprises the Group's remaining businesses outside
the US, Canada, Mexico and the UK (although includes the two UK
seal manufacturing plants). Centrally incurred functional costs
that are directly attributable to a Division are allocated or
recharged to the Division. All other centrally incurred costs and
eliminations are disclosed as a separate line item in the segment
analysis.
Each reporting segment broadly represents the Group's
geographical focus, being the North American, UK and international
operations respectively. In the opinion of the Board, there is no
material difference between the Group's operating segments and
segments based on geographical splits. Accordingly, the Board does
not consider geographically defined segments to be reportable. For
completeness, the Group discloses certain financial data for
business carried on in the UK that is not accounted for in ERA in
note 3.1.
The following tables present Group revenue and profit
information for the Group's reporting segments, which have been
generated using the Group accounting policies, with no differences
of measurement applied, other than those noted above.
3.1 Revenue
Six months ended Six months ended
30 June 2020 (unaudited) 30 June 2019 (unaudited)
GBP'm GBP'm
--------------- ------------------------------------ ------------------------------------
Segment Inter-segment External Segment Inter-segment External
revenue revenue revenue revenue revenue revenue
--------------- --------- -------------- --------- --------- -------------- ---------
North America 169.4 (1.2) 168.2 188.3 (1.3) 187.0
UK & Ireland 39.4 (0.3) 39.1 54.1 (0.1) 54.0
International 47.9 (1.1) 46.8 62.1 (1.2) 60.9
Total revenue 256.7 (2.6) 254.1 304.5 (2.6) 301.9
--------------- --------- -------------- --------- --------- -------------- ---------
Year ended
31 December 2019 (audited)
GBP'm
--------------- ------------------------------------
Segment Inter-segment External
revenue revenue revenue
--------------- --------- -------------- ---------
North America 388.3 (2.3) 386.0
UK & Ireland 107.5 (0.3) 107.2
International 122.8 (2.3) 120.5
Total revenue 618.6 (4.9) 613.7
--------------- --------- -------------- ---------
Included within the International segment is revenue
attributable to the UK of GBP7.5 million (six months ended 30 June
2019: GBP10.2 million; year ended 31 December 2019: GBP19.4
million).
3.2 Profit before taxation
Six months Six months
ended ended Year ended
30 June 2020 30 June 2019 31 December
(unaudited) (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
--------------------------- ----- -------------- -------------- ----------------
North America 24.8 31.4 64.5
UK & Ireland 3.8 7.0 13.8
International 4.6 7.7 14.8
--------------------------- ----- -------------- -------------- ----------------
Operating segment result 33.2 46.1 93.1
Centrally incurred costs (1.9) (4.2) (7.7)
--------------------------- ----- -------------- -------------- ----------------
Adjusted operating profit 31.3 41.9 85.4
Exceptional items 4 (0.8) (9.9) (18.9)
Amortisation of acquired
intangible assets 9 (9.5) (13.5) (23.5)
Impairment of acquired
intangibles 9 - - (2.5)
--------------------------- ----- -------------- -------------- ----------------
Operating profit 21.0 18.5 40.5
Net finance costs 5 (6.3) (7.5) (15.7)
Profit before taxation 14.7 11.0 24.8
--------------------------- ----- -------------- -------------- ----------------
4. Exceptional items
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBP'm GBP'm GBP'm
----------------------------------- ------------------ ------------------ ----------------
Footprint restructuring - costs - (3.3) (7.1)
Footprint restructuring - credits - 0.6 0.6
----------------------------------- ------------------ ------------------ ----------------
Footprint restructuring - net - (2.7) (6.5)
M&A and integration - costs (0.5) (1.9) (5.3)
M&A and integration - credits - - -
----------------------------------- ------------------ ------------------ ----------------
M&A and integration - net (0.5) (1.9) (5.3)
Redundancy and restructuring (0.3) - -
Loss on disposal of business - - (1.7)
Impairment charges - (5.3) (5.4)
(0.8) (9.9) (18.9)
----------------------------------- ------------------ ------------------ ----------------
Footprint restructuring
The footprint restructuring costs in prior periods related to
directly attributable costs incurred in the multi-year North
American footprint consolidation project, which is now
substantially complete, as well as provisions for costs associated
with the closure of the Fremont, Nebraska facility and streamlining
the international satellite operations which commenced in late
2019. This included the exit of manufacturing in Australia and
China, with these markets transitioned to distribution centres and
closure of the distribution facility in Singapore with this region
now served as an export market.
M&A and integration
M&A and integration costs of GBP0.5 million relate to costs
associated with the integration of businesses acquired in 2018,
predominantly Ashland.
Redundancy and restructuring
Redundancy and restructuring costs of GBP0.3 million relate
primarily to costs associated with a workforce reduction.
Impairment charges
Impairment charges in 2019 relate to the write down of assets
and inventory associated with the slower than expected uptake of
the new door seal product in North America.
5. Finance income and costs
Six months Six months
ended ended Year ended
30 June 2020 30 June 31 December
(unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
----------------------------------------- -------------- ------------------ ----------------
Finance income
Gain on revaluation of fair value
hedge 0.6 - -
0.6 - -
----------------------------------------- -------------- ------------------ ----------------
Finance costs
Interest payable on bank loans,
private placement notes and overdrafts (5.0) (5.6) (11.1)
Interest on lease liabilities (1.5) (1.5) (3.0)
Amortisation of borrowing costs (0.3) (0.3) (0.5)
Pension interest cost (0.1) (0.1) (0.3)
Loss on revaluation of fair value
hedge - - (0.8)
(6.9) (7.5) (15.7)
----------------------------------------- -------------- ------------------ ----------------
Net finance costs (6.3) (7.5) (15.7)
----------------------------------------- -------------- ------------------ ----------------
6. Taxation
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
--------------------------------------- ------------------ ------------------ ----------------
Current taxation
Current tax on profit for the
period (4.4) (3.5) (15.0)
Prior year adjustments 1.5 0.2 1.6
Total current taxation (2.9) (3.3) (13.4)
--------------------------------------- ------------------ ------------------ ----------------
Deferred taxation
Origination and reversal of temporary
differences 0.6 0.2 6.8
US Federal tax rate change adjustment - - (0.1)
Prior year adjustments - - (0.4)
Total deferred taxation 0.6 0.2 6.3
--------------------------------------- ------------------ ------------------ ----------------
Income tax charge in the income
statement (2.3) (3.1) (7.1)
--------------------------------------- ------------------ ------------------ ----------------
Income tax credit in the statement
of other comprehensive income - - 0.7
--------------------------------------- ------------------ ------------------ ----------------
Total current taxation (2.9) (3.3) (13.2)
Total deferred taxation 0.6 0.2 6.8
Total taxation (2.3) (3.1) (6.4)
--------------------------------------- ------------------ ------------------ ----------------
On 25 April 2019, the European Commission published its final
decision regarding its investigation into the UK CFC rules,
concluding that the exemption applied to income derived from UK
activities constituted a breach of EU State Aid rules. On 12 June
2019, the UK government applied to the EU General Court to annul
this decision. Like many other multinational Groups that have acted
in accordance with UK legislation, the Group may be affected by the
final outcome of this case. The Group estimates the potential range
of exposure is between GBPnil and GBP4 million. The Group does not
consider that a provision is required at this stage based on the
level of uncertainty that exists over the potential liability. This
is considered to be a contingent liability at 30 June 2020.
7. Earnings per share
7.1 Basic and diluted earnings per share
Six months Six months
ended ended Year ended
30 June 2020 30 June 31 December
(unaudited) 2019 (unaudited) 2019 (audited)
---------------------------- -------------- ------------------ ----------------
Basic earnings per share 6.36p 4.06p 9.08p
Diluted earnings per share 6.35p 4.04p 9.05p
----------------------------- -------------- ------------------ ----------------
Basic earnings per share amounts are calculated by dividing net
profit for the period attributable to ordinary equity holders by
the weighted average number of ordinary shares outstanding during
the period.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the
period plus the weighted average number of ordinary shares that
would be issued on the conversion of all the diluted potential
ordinary shares into ordinary shares.
7.2 Weighted average number of shares
Six months Six months
ended ended Year ended
30 June 2020 30 June 31 December
(unaudited) 2019 (unaudited) 2019 (audited)
m m m
--------------------------------------- -------------- ------------------ ----------------
Weighted average number of shares
(1) 196.8 196.8 196.8
Treasury and Employee Benefit
Trust shares (1.8) (1.9) (1.9)
--------------------------------------- -------------- ------------------ ----------------
Weighted average number of shares
- basic 195.0 194.9 194.9
Effect of dilutive potential ordinary
shares (2) 0.4 0.6 0.8
Weighted average number of shares
- diluted 195.4 195.5 195.7
--------------------------------------- -------------- ------------------ ----------------
(1) Including treasury shares
(2) LTIP awards and options
7.3 Non-GAAP alternative performance measure: Adjusted earnings
per share
The Group presents an adjusted earnings per share measure which
excludes the impact of exceptional items, certain non-cash finance
costs, amortisation of acquired intangible assets and certain
non-recurring items. Adjusted earnings per share has been
calculated using the Adjusted profit before taxation and using the
same weighted average number of shares in issue as the earnings per
share calculation. See Alternative Performance Measures on page
48.
Six months Six months
ended ended Year ended
30 June 2020 30 June 31 December
(unaudited) 2019 (unaudited) 2019 (audited)
----------------------------------- -------------- ------------------ ----------------
Basic adjusted earnings per share 9.91p 13.14p 27.46p
Diluted adjusted earnings per
share 9.89p 13.10p 27.35p
----------------------------------- -------------- ------------------ ----------------
8. Goodwill
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
----------------------------------- ------------------ ------------------ ----------------
Net book amount at the beginning
of the period 371.3 382.1 382.1
Acquisitions of subsidiaries - 2.3 0.9
Exchange difference 21.9 1.5 (11.7)
Net book amount at the end of the
period 393.2 385.9 371.3
------------------------------------ ------------------ ------------------ ----------------
Goodwill resulting from the acquisitions of subsidiaries in 2019
relates to the acquisition of Y-cam in February 2019.
Goodwill is monitored principally on an operating segment basis
and the net book value of goodwill is allocated by CGU as
follows:
30 June 31 December
2020 (unaudited) 2019 (audited)
GBPm GBPm
----------------------------------- ------------------ ----------------
North America 296.4 275.7
ERA 60.2 60.2
International 36.6 35.4
Net book amount at the end of the
period 393.2 371.3
------------------------------------ ------------------ ----------------
Impairment assessment
Intangible assets are tested annually for impairment or whenever
events or circumstances indicate that the carrying amount may not
be recoverable. In light of the significant impact COVID-19 has had
on performance in the period and forecast financial information, a
full impairment assessment using a value in use calculation has
been performed for each CGU at 30 June 2020.
As at 30 June 2020, the Group had goodwill of GBP393.2 million
with intangible assets amounting in total to GBP100.4 million.
There is significant judgement involved in determining the
appropriate assumptions to use in the calculations, including the
forecasted cash flows of each CGU and appropriate discount rates
relative to the Company's cost of capital.
The Group's CGUs have been defined as each of the Group's three
operating divisions. In the opinion of the Directors, the divisions
represent the smallest groups of assets that independently generate
cash flows for the Group. This conclusion is consistent with the
approach adopted in previous years. The recoverable amounts of CGUs
are determined from VIU calculations. VIU is determined by
discounting the future pre-tax cash flows generated from the
continuing use of the CGU, using a pre-tax discount rate.
Cash flows used in the impairment test for 2020 and 2021 are
based on the base case scenario model presented to the Board in
June 2020. This reflects the Group's current best estimate taking
into account the expected impact of COVID-19 which has been
discussed further in the overview of results from page 3. Cash
flows from 2022 to 2024 have been estimated by taking into account
the expected medium-term recovery trajectory and strategic
initiatives. The five-year cash flows were extrapolated using a
long term growth rate of 1.5% in order to calculate the terminal
recoverable amount.
Discount rates are estimated using pre-tax rates that reflect
current market assessments of the time value of money and the risk
profiles of the CGUs.
Average EBITDA
Average pre-tax margin: years
discount rate one to five
----------------- ----------------
H1 2020 FY 2019 H1 2020 FY 2019
-------------- -------- ------- ------- -------
North America 12.6% 12.0% 21.6% 22.3%
UK & Ireland 12.4% 11.9% 15.0% 15.5%
International 14.7% 12.8% 19.2% 19.6%
-------------- -------- ------- ------- -------
The key assumptions used in the VIU calculations in each of the
Group's CGUs at 30 June 2020 are as follows:
The impairment review did not result in any impairment losses
being recognised in the period. The assumptions have been subjected
to sensitivity analyses, including sensitising revenue, gross
margin, and the discount rate. Results are summarised as
follows:
-- UK & Ireland: Revenue would need to decline by almost 4%
on average in each of the five years from 2020 to 2024 to eliminate
VIU headroom, or the average EBITDA margin for the next five years
would need to decrease from 15.0% to 12.6%, to reduce VIU headroom
to zero. This scenario is considered unlikely to occur given
historic rates and strategic initiatives in progress.
-- North America: Revenue would need to decline by almost 7% on
average in each of the five years from 2020 to 2024 to eliminate
VIU headroom, or the average EBITDA margin for the next five years
would need to decrease from 21.6% to 17.7%, to reduce VIU headroom
to zero. Given that the EBITDA margin achieved in 2019 was 20.5%
and considering the margin uplift potential of operational
improvement at the Statesville facility and the full benefit of
synergies from the Ashland acquisition, this scenario is felt
unlikely to occur.
-- International: Revenue would need to decline by almost 7% on
average in each of the five years from 2020 to 2024 to eliminate
VIU headroom, or the average EBITDA margin for the next five years
would need to decrease from to 19.2% to 16.5%, to reduce the VIU
headroom to zero. Given the expected benefits from the streamlining
of International operations and growth from new product
introductions, this is felt unlikely to occur.
9. Intangible assets
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
------------------------------------ ------- ------------------ ------------------ ----------------
Net book amount at the beginning
of the period 104.0 134.8 134.8
Additions 0.4 0.4 0.8
Acquisitions of subsidiaries - 2.5 0.6
Disposals - - (1.3)
Amortisation charge for the period (10.2) (14.2) (25.0)
Software impairment charge - - (2.5)
Transfers to property, plant and
equipment - - 0.3
Exchange difference 6.2 (0.1) (3.7)
Net book amount at the end of
the period 100.4 123.4 104.0
--------------------------------------------- ------------------ ------------------ ----------------
The amortisation charge for the period includes GBP9.5 million
relating to amortisation of acquired intangible assets (six months
ended 30 June 2019: GBP13.5 million; year ended 31 December 2019:
GBP23.5 million) and GBP0.7 million relating to amortisation of
other intangible assets (six months ended 30 June 2019: GBP0.7
million; year ended 31 December 2019: GBP1.5 million). The
amortisation charge for the period is included in administrative
expenses in the income statement.
10. Property, plant and equipment
30 June 2020 30 June 31 December
(unaudited) 2019 (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
------------------------------------ ------ ------------- ------------------ ----------------
Net book amount at the beginning
of the period 65.8 77.0 77.0
Change in accounting policy - (0.8) (0.8)
-------------------------------------------- ------------- ------------------ ----------------
Restated amount at the beginning
of the period 65.8 76.2 76.1
Additions 3.7 5.5 10.7
Acquisitions of subsidiaries - (0.1) -
Disposals - (1.1) (1.0)
Depreciation charge for the period (6.6) (6.4) (13.1)
Impairment charge for the period (0.2) (3.9) (4.3)
Transfers from intangible assets - - (0.3)
Exchange difference 3.7 0.1 (2.4)
Net book amount at the end of
the period 66.4 70.3 65.8
-------------------------------------------- ------------- ------------------ ----------------
The change in accounting policy in 2019 of GBP0.8 million
related to the reclassification of dilapidation assets on adoption
of IFRS 16 'leases'. The GBP0.1 million relating to acquisition of
subsidiaries relates to the Y-cam acquisition in 2019.
The depreciation charge for the period is included in
administrative expenses in the income statement.
11. Interest-bearing loans and borrowings
31 December
30 June 30 June 2019
2020 (unaudited) 2019 (unaudited) (audited)
GBPm GBPm GBPm
------------- ---- ------------------ ------------------ ------------
Current - - (0.3)
Non-current (238.9) (277.6) (211.5)
(238.9) (277.6) (211.8)
------------------ ------------------ ------------------ ------------
Movements in interest-bearing loans and borrowings are analysed
as follows:
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
----------------------------------- ------ ------------------ ------------------ ----------------
Balance at the beginning of the
period (211.8) (260.7) (260.5)
Change in accounting policy - 0.2 -
----------------------------------- ------ ------------------ ------------------ ----------------
Restated balance at the beginning
of the period (211.8) (260.5) (260.5)
Refinancing costs paid - 0.3 -
Drawdown of revolving credit
facility (83.4) (25.4) (33.5)
Repayment of revolving credit
facility 71.6 8.7 73.4
Amortisation of borrowing costs (0.3) (0.3) (0.5)
Exchange difference (15.0) (0.4) 9.3
Balance at the end of the period (238.9) (277.6) (211.8)
------------------------------------------- ------------------ ------------------ ----------------
There were no defaults in interest payments in the period under
the terms of existing loan agreements. Subsequent to the period
end, in order to provide additional headroom during the period of
uncertainty caused by COVID-19, the Group agreed a temporary
relaxation of the leverage covenant with its lenders from 3.0x
adjusted EBITDA to 3.5x at December 2020 and 4.0x at 30 June
2021.
The Group has the following undrawn committed multi-currency
revolving credit facility:
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
------------------------- ------------------ ------------------ ----------------
Floating rate
Expiry beyond 12 months (81.1) (56.1) (102.8)
-------------------------- ------------------ ------------------ ----------------
The Group also has access to the uncommitted GBP70.0 million
accordion facility and at 30 June 2020 held aggregate cash balances
of GBP79.9 million (30 June 2019: GBP49.6 million; 31 December
2019: GBP49.0 million).
The group has also obtained eligibility to draw up to GBP100
million under the Bank of England Covid Corporate Financing
Facility, none of which has been drawn.
12. Share capital
Number of Ordinary
shares shares Share premium
'000 GBPm GBPm
------------------------------ ---------- --------- --------------
At 1 January 2019 196.8 9.8 132.2
Capital reduction - - (132.2)
------------------------------- ---------- --------- --------------
At 30 June 2019, 31 December
2019 and 30 June 2020 196.8 9.8 -
------------------------------- ---------- --------- --------------
13. Financial risk management and financial instruments
13.1 Financial risk factors and fair value estimation
The Group is exposed to risks arising from the international
nature of its operations and the financial instruments which fund
them, in particular to foreign currency, interest rate and
liquidity risks. Full details of the Group's policies for managing
these risks are disclosed in the Group's annual financial
statements for the year ended 31 December 2019.
Since the date of that report there have been no significant
changes in:
-- the nature of the financial risks to which the Group is exposed;
-- the nature of the financial instruments which the Group uses;
-- the Group's contractual cash outflows and the committed
facilities available to fund them; or
-- difference between book value and fair value of any financial instruments.
During the period the Group held no level 1 financial
instruments, there were no transfers between levels and no changes
were made to valuation techniques.
Derivatives shown at fair value in the Group's balance sheet
comprise level 2 interest rate swaps fair valued using forward
interest rates extracted from observable yield curves. The effects
of discounting are generally insignificant for level 2
derivatives.
The Group's other financial instruments are measured on bases
other than fair value.
13.2 Level 2 and level 3 fair values
The Group has the following financial assets and liabilities
categorised at levels 2 and 3:
31 December
2019
30 June 2020 30 June
(unaudited) 2019 (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------- ------------- ------------------ ------------
Level 2
Derivative financial assets 0.1 0.4 -
Derivative financial liabilities - (0.1) (0.7)
Level 3
Financial assets at fair value
through profit or loss 1.1 1.2 1.1
---------------------------------- ------------- ------------------ ------------
13.3 Fair value of financial assets and liabilities measured at
amortised cost
The fair values of borrowings are as follows:
31 December
2019
30 June 30 June
2020 (unaudited) 2019 (unaudited) (audited)
GBPm GBPm GBPm
------------- ---- ------------------ ------------------ ------------
Non-current - - (6.2)
Current (238.2) (276.8) (265.4)
(238.2) (276.8) (271.6)
------------------ ------------------ ------------------ ------------
The fair values of trade and other receivables, cash and cash
equivalents, and trade and other payables approximate their
carrying amounts.
14. Adjustments to cash flows from operating activities
The following non-cash and financing adjustments have been made
to profit before taxation to arrive at operating cash flow:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
------------------------------------ ----- ------------------ ------------------ ----------------
Net finance costs 5 6.3 7.5 15.7
Depreciation of PPE 10 6.6 6.4 13.1
Depreciation of right of use
assets 3.9 3.5 7.5
Amortisation of intangible
assets 9 10.2 14.2 25.0
Impairment of intangible assets 9 - - 2.5
Impairment of PPE 10 0.2 3.9 4.3
Profit on disposal of PPE - (0.1) 1.4
Pension service costs and expected
administration costs 0.2 0.2 0.3
Non-cash provision movements 0.1 0.2 1.1
Share-based payments 0.4 0.6 1.0
27.9 36.4 71.9
------------------------------------ ----- ------------------ ------------------ ----------------
15. Capital commitments
At 30 June 2020 the Group has capital commitments of GBP0.2
million for the purchase of property, plant and equipment (30 June
2019: GBP1.0 million; 31 December 2019: GBP0.2 million).
16. Related party transactions
There were no material related party transactions requiring
disclosure, other than compensation of key management personnel
which will be disclosed in the Group's Annual Report and Accounts
for the year ending 31 December 2020.
Statement of Directors' responsibilities
Each of the Directors of Tyman plc confirms, to the best of his
or her knowledge, that:
-- the Interim Financial Statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as issued by
the IASB and endorsed and adopted by the EU and give a true and
fair view of the assets, liabilities, financial position and profit
and loss of Tyman plc;
-- the interim report includes a fair review of the information required by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
interim financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
-- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the Group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The Directors of Tyman plc are listed in the Group's Annual
Report and Accounts for the year ending 31 December 2019.
A list of the current Directors is maintained at the Tyman
website: www.tymanplc.com.
By order of the Board
Jo Hallas Jason Ashton
Chief Executive Officer Chief Financial Officer
28 July 2020
Independent review report to Tyman Plc
Report on the interim financial statements
Our conclusion
We have reviewed Tyman Plc's interim financial statements (the
"interim financial statements") in the interim report of Tyman Plc
for the 6 months period ended 30 June 2020. Based on our review,
nothing has come to our attention that causes us to believe that
the interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed consolidated balance sheet as at 30 June 2020;
-- the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income for the period then
ended;
-- the Condensed consolidated cash flow statement for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the Notes to the condensed consolidated financial statements .
The interim financial statements included in the interim report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim report, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim report in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim report based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
28 July 2020
Alternative Performance Measures
The Group uses a number of Alternative Performance Measures.
APMs provide additional useful information to shareholders on the
underlying performance of the business. These APMs are consistent
with how business performance is measured internally by the Group,
align with the Group's strategy, and remuneration policies. These
measures are not recognised under IFRS and may not be comparable
with similar measures used by other companies. APMs are not
intended to be superior to or a substitute for GAAP measures.
The following table summarises the key APMs used, why they are
used by the Group, and how they are calculated. Where appropriate,
a reconciliation to the nearest GAAP number is presented. Details
of other APMs are included on the Group's website. Measures
formerly referred to as 'Underlying' are now referred to as
'Adjusted'.
Adjusted operating profit and adjusted operating margin
Definition
Operating profit before amortisation of acquired intangible
assets, impairment of acquired intangible assets, impairment of
goodwill, and exceptional items.
Adjusted operating margin is calculated as adjusted operating
profit divided by revenue, expressed as a percentage.
Purpose
This measure is used to evaluate the trading operating
performance of the Group.
Exceptional items are excluded from this measure as they are
largely one off and non-trading in nature and therefore create
volatility in reported earnings.
Amortisation of acquired intangible assets is excluded from this
measure as this is a significant non-cash fixed charge that is not
affected by the trading performance of the business.
Impairment of acquired intangible assets and goodwill is
excluded, as this is a significant non-cash charge.
Reconciliation/calculation
Adjusted operating profit is reconciled on the face of the
income statement on page 27.
Like-for-like or LFL revenue and adjusted operating profit
Definition
The comparison of revenue or operating profit, as appropriate,
excluding the impact of any acquisitions made during the current
year and, for acquisitions made in the comparative year, excluding
from the current year result the impact of the equivalent current
year pre-acquisition period. For disposals, results are excluded
for the whole of the current and prior period. The prior period
comparative is retranslated at the current period average exchange
rate. The result of Y-cam is not adjusted as it is not
material.
Purpose
This measure is used by management to evaluate the Group's
organic growth in revenue and adjusted operating profit, excluding
the impact of M&A and currency movements.
Reconciliation/calculation
Six months Six months
ended ended
30 June 30 June
2020 (unaudited) 2019 (unaudited)
GBP'm GBP'm
---------------------------------- ------------------ ------------------
Reported revenue 254.1 301.9
Effect of exchange rates - 3.7
Like-for-like revenue 254.1 305.6
------------------------------------ ------------------ ------------------
Adjusted operating profit 31.3 41.9
Effect of exchange rates - 0.4
Like-for-like adjusted operating
profit 31.3 42.3
------------------------------------ ------------------ ------------------
Adjusted profit before and after tax
Definition
Profit before amortisation of acquired intangible assets,
deferred tax on amortisation of acquired intangible assets,
impairment of acquired intangible assets, impairment of goodwill,
exceptional items, gains and losses on the fair value of derivative
financial instruments, amortisation of borrowing costs and
associated tax effects.
Purpose
This measure is used to evaluate the profit generated by the
Group through trading activities. In addition to the items excluded
from operating profit above, the gains and losses on the fair value
of derivative financial instruments, amortisation of borrowing
costs, and the associated tax effect are excluded. These items are
excluded as they are of a non-trading nature.
Reconciliation/calculation
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
------------------------------------- ------------------ ------------------ ----------------
Profit before taxation 14.7 11.0 24.8
Exceptional items 0.8 9.9 18.9
(Gain)/Loss on revaluation
of fair value hedge (0.6) - 0.8
Amortisation of borrowing costs 0.3 0.3 0.5
Amortisation of acquired intangible
assets 9.5 13.5 23.5
Impairment of acquired intangible
assets - - 2.5
-------------------------------------- ------------------ ------------------ ----------------
Adjusted profit before taxation 24.7 34.7 71.0
Income tax charge (2.3) (3.1) (7.1)
Add back: Adjusted tax effect(1) (3.1) (6.0) (10.4)
Adjusted profit after taxation 19.3 25.6 53.5
-------------------------------------- ------------------ ------------------ ----------------
(1) Tax effect of exceptional items, amortisation of borrowing
costs, amortisation of acquired intangible assets, and gain or loss
on revaluation of fair value hedge.
Adjusted earnings per share
Definition
Adjusted profit after tax divided by the basic weighted average
number of ordinary shares in issue during the year, excluding those
held as treasury shares.
Purpose
This measure is used to assess the trading operating performance
per share in issue. This is used as the basis of the Group's
long-term incentive plan targets and is the measure used in
determining the level of dividend to be paid under the Group's
dividend policy.
Reconciliation/calculation
Adjusted profit after tax is reconciled above and the number of
shares can be found in note 7.
Leverage
Definition
Adjusted net debt translated at the average exchange rate for
the year divided by adjusted EBITDA, calculated using the
prevailing GAAP at February 2018 (excluding the impact of IFRS 15,
9, and 16). This calculation is the covenant calculation defined in
the Group's banking facility and private placement debt
documents.
Purpose
This measure is used to evaluate the ability of the Group to
generate sufficient cash flows to cover its contractual debt
servicing obligations and to provide users of the accounts with
details of whether the Group remains in compliance with its lending
covenants.
Reconciliation/calculation
Six months Six months
ended ended
30 June 30 June
2020 (unaudited) 2019 (unaudited)
GBP'm GBP'm
--------------------------------------------- ----------------- -----------------
Adjusted Net Debt (at average exchange rate) 155.6 225.6
Adjusted EBITDA 88.3 102.3
--------------------------------------------- ----------------- -----------------
Leverage 1.8x 2.2x
--------------------------------------------- ----------------- -----------------
Net debt and adjusted net debt
Definition
Interest-bearing loans and borrowings, net of cash and cash
equivalents, plus unamortised borrowing costs added back.
Purpose
This gives a measure of the gross amount owed to lenders,
without the effect of unamortised borrowing costs.
Reconciliation/calculation
6 months 6 months
ended ended
30 June 30 June
2020 (unaudited) 2019 (unaudited)
GBP'm GBP'm
---------------------------- ----------------- -----------------
Borrowings (301.2) (341.3)
Cash 79.9 49.6
Unamortised borrowing costs 1.5 1.9
---------------------------- ----------------- -----------------
Net debt (219.8) (289.8)
---------------------------- ----------------- -----------------
Lease liabilities 60.8 61.7
Unamortised borrowing costs (1.5) (1.9)
---------------------------- ----------------- -----------------
Adjusted net debt (160.5) (230.0)
---------------------------- ----------------- -----------------
Return on Capital Employed (ROCE)
Definition
LTM adjusted operating profit as a percentage of the LTM average
capital employed (expressed as a 13 point average).
Purpose
This measure is used to evaluate how efficiently the Group's
capital is being employed to improve profitability.
Reconciliation/calculation
12 months 12 months
ended ended
30 June 30 June
2020 (unaudited) 2019 (unaudited)
GBP'm GBP'm
------------------------------ ----------------- -----------------
LTM adjusted Operating Profit 74.8 87.3
LTM average capital employed 694.8 688.3
------------------------------ ----------------- -----------------
ROCE 10.8% 12.7%
------------------------------ ----------------- -----------------
Return on acquisition investment (ROAI)
Definition
Adjusted operating profit attributable to the acquired business
divided by the gross cost of investment (original cost plus
acquisition and integration costs), plus the change in fair value
of controllable capital employed between the date of acquisition
and the date of measurement. The denominator is adjusted for
seasonality where appropriate.
For acquisitions made within the last 12 months, adjusted
operating profit is an annualised measure. For acquisitions made
more than 12 months ago, adjusted operating profit is measured over
the last 12 months. ROAI is measured for 2 years following
acquisition.
Purpose
This measure is used to evaluate the efficiency and returns
achieved by the Group from its investments in recent material
business acquisitions and allows users of the accounts to compare
the relative performance of each acquisition made by the Group.
ROAI is measured over a two year period following acquisition.
Reconciliation/calculation
Ashland Zoo Profab Reguitti
$m GBPm GBPm EURm
-------------------------------- -------- ------ ------- ---------
Adjusted operating profit 18.8 3.6 0.3 0.9
Gross cost of investment 106.7 19.1 4.4 16.6
Change in controllable capital
employed (1.9) (0.8) (0.3) 2.3
-------------------------------- -------- ------ ------- ---------
104.8 18.2 4.1 18.8
--------------------------------
ROAI 17.9% 19.7% 8.1% 4.9%
-------------------------------- -------- ------ ------- ---------
Operating cash conversion and operational cash flow
Definition
Operational cash flow
Net cash generated from operations before Income tax paid,
exceptional costs cash settled in the year and Pension
contributions, and after proceeds on disposal of property, plant
and equipment, payments to acquire property, plant and equipment
and payments to acquire intangible assets.
Adjusted operational cash flow
Operational cash flow, less lease payments.
Operating cash conversion
Operational cash flow divided by adjusted operating profit.
Purpose
These measures are used to evaluate the cash flow generated by
the business operations in order to pay down debt, return cash to
shareholders and invest in acquisitions. Cash conversion provides
users of the accounts with a measure of the extent that the Group's
profitability converts into cash.
Reconciliation/calculation
A reconciliation is included in the financial review on page
20.
DEFINITIONS AND GLOSSARY OF TERMS
Access 360 The Access Solutions business of ERA, constituting
Bilco UK, Profab and Howe Green
APM Alternative Performance Measure
ASEAN Association of Southeast Asian Nations
Ashland or Ashland Ashland Hardware Holdings Inc, acquired by
Hardware AmesburyTruth on 15 March 2018
Bilco The Bilco Company acquired by the Group's AmesburyTruth
Division on 1 July 2016
bps Basis points
CGU Cash Generating Unit
CIPS Chartered Institute of Purchasing and Supply
CMHC Canada Mortgage and Housing Corporation
Dodge Momentum Monthly measure of the initial report for non-residential
Index building projects in planning
EBITDA Earnings before Interest, Taxation, Depreciation
and Amortisation
EBT Employee Benefit Trust
EPS Earnings per Share
IASB International Accounting Standards Board
IFRS International Financial Reporting Standards
Interim Financial The condensed consolidated interim financial
Statements statements of Tyman plc for the six months
ended 30 June 2019
Interim Report The interim report of Tyman plc for the six
months ended 30 June 2019
IoT Internet of Things
LTM Last twelve months
M&A Mergers and acquisitions
NAHB The National Association of Home Builders
NPD New product development
OEM Original equipment manufacturer
PMI Purchasing Managers' Index
PPE Personal protective equipment
Profab Profab Access Solutions Limited acquired by
ERA on 31 July 2018
Reguitti Reguitti S.P.A acquired by SchlegelGiesse on
31 August 2018
RMI Renovation, maintenance and improvement
Tyman Any references to Tyman, the Group, or the
Company refer to Tyman plc and its subsidiaries
USPP US private placement
Y-cam Y-cam Solutions Limited acquired by ERA on
18 February 2019
Zoo or Zoo Hardware Zoo Hardware Limited acquired by ERA on 10
May 2018
EXCHANGE RATES
The following foreign exchange rates have been used in the
financial information to translate amounts into Sterling:
Closing Rates: H1 2020 H1 2019 FY 2019
-------------------- -------- -------- --------
US Dollars 1.2327 1.2697 1.3186
Euros 1.0978 1.1167 1.1757
Australian Dollars 1.7925 1.8082 1.8801
Canadian Dollars 1.6817 1.6622 1.7164
Brazilian Real 6.6954 4.8865 5.3005
-------------------- -------- -------- --------
Average Rates: H1 2020 H1 2019 FY 2019
-------------------- -------- -------- --------
US Dollars 1.2607 1.2938 1.2770
Euros 1.1441 1.1453 1.1406
Australian Dollars 1.9192 1.8319 1.8365
Canadian Dollars 1.7189 1.7255 1.6943
Brazilian Real 6.1795 4.9757 5.0371
-------------------- -------- -------- --------
ROUNDINGS
Percentage numbers have been calculated using unrounded figures,
which may lead to small differences in some figures and percentages
quoted.
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 BDLLLBDLLBBQ
(END) Dow Jones Newswires
July 28, 2020 02:00 ET (06:00 GMT)
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