TIDMTSW
RNS Number : 3570M
Titan Europe PLC
14 September 2012
Issued by TooleyStreet Communications
Date: Friday 14 September 2012
Immediate Release
Titan Europe Plc
('Titan Europe' or the 'Group')
"Manufacturers of 'off-highway' wheels and undercarriages
for the global construction, agricultural and mining
markets"
Summary of Interim Financial Results
Titan Europe's unaudited summary results relating to the first
half 2012 and 2011, expressed under IFRS, are as follows:
Six months ended
30 June 30 June
2012 2011
Unaudited Unaudited Variance
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ---------- ---------
Revenue 252,586 253,161 (575)
-------------------------------- ---------
Trading profit 14,750 18,005 (3,255)
Profit from operations 12,866 17,854 (4,988)
Profit before income tax 8,577 15,838 (7,261)
-------------------------------- ---------- ---------- ---------
Profit for the period 4,983 11,571 (6,588)
-------------------------------- ---------- ---------- ---------
Net debt 121,309 138,791 (17,482)
-------------------------------- ---------- ---------- ---------
Cash generated from operations 11,779 16,758 (4,979)
-------------------------------- ---------- ---------- ---------
Basic earnings per share 5.71p 13.73p (8.02p)
Basic earnings per share
excluding exceptional
items* 7.26p 11.65p (4.39p)
-------------------------------- ---------- ---------- ---------
* This excludes, net of tax, restructuring and rationalisation
costs, significant legal costs, net impact of earthquake and gain
on previously held interest in joint venture.
-- Group revenue for the first half of 2012 was GBP252.6m
(2011:GBP253.2m) virtually unchanged from 2011 which in itself was
a record reported level of revenue for the Group
-- Trading profit in the period was GBP14.8m (2011:GBP18.0m)
representing 5.8% of revenue (2011:7.1%)
-- Trading profit affected by weakening in the Far East markets,
the earthquake in Finale Emilia, Italy, and the depreciation of the
Euro against sterling
-- Offer received from Titan International Inc. post period end
of 1 Titan International Inc. share for every 11 Titan Europe
shares
Commenting on these results Mike Akers, Chief Executive
said:
"During the first half of 2012, the Group's order book generally
remained firm. However, after the half-year period end, the Group
began to see clear signs of a decline or postponement in customer
order schedules for the second half of the year.
Our view is consistent with the overall commentary being made by
a number of our major customers across both areas of our business
and consistent with more uncertainty in end markets and the general
macro-economic factors being faced across businesses and
territories.
This being said, the pattern is by no means uniform; as a
business we continue to expect some growth in Brazil and North
America, with the mining sector remaining reasonably firm.
The Board strategy for the Group has been to develop two broadly
separate, but overlapping divisions, Wheels and Undercarriage.
Within the two divisions, we have developed a strategy to match the
'footprint' of our core clients and markets."
Enquiries to:
Titan Europe Plc Arden Partners TooleyStreet Communications
Mike Akers, Chief plc Investor & Media
Executive Nominated Adviser Relations Consultant
Gary Chesterton, Steve Douglas Fiona Tooley
Group Finance Director Director, Corporate Mobile: +44 (0)
Tel: +44 (0) 1562 Finance 7785 703 523
850561 Tel: +44 (0) Tel:+44 (0) 121
www.titaneurope.com 20 7614 5900 309 0099
Ticker AIM: TSW.L Tel: +44 (0)
121 423 8900
Titan Europe Plc
Interim results for the six months ended 30 June 2012
Statement by the Chief Executive, Mike Akers
Titan Europe Plc
is a world leading engineering group designing, developing,
manufacturing and distributing products and services for the global
mining, construction and agricultural machinery markets. The Group
currently has two distinct product ranges, organised into two
divisions, Wheels and Undercarriage.
Introduction
Group revenue for the first half of 2012 was GBP252.6m (2011:
GBP253.2m), virtually unchanged from 2011.
This revenue level combined a GBP9.0m increase in the sales from
the Wheels division and a GBP9.6m fall in the Undercarriage
division.
The strong growth seen in 2011 continued in mining markets, with
overall growth in the sector of 8.6%. Agriculture and construction
both remained stable.
Profit levels were affected by specific localised factors which
are dealt with in other parts of this report and which have
previously been advised to shareholders through our announcements
earlier this year.
Trading profit in the period was GBP14.8m (2011: GBP18.0m)
representing 5.8% of revenue compared to 2011of 7.1%. The profit
from operations was affected by exceptional items, including the
Finale Emilia earthquake, the gross impact of this to date is
GBP5.3m (net impact GBP1.2m) and is detailed in note 3. Cash
generated from operations was GBP11.8m (2011: GBP16.8m) and net
debt reduced to GBP121.3m compared with GBP138.7m at June 2011.
Basic earnings per share, excluding exceptional items, was 7.26p
(2011: 11.65p).
Adjusted performance
Management consider the adjusted performance of the Group to be
trading profit, defined as profit from operations excluding
exceptional items which by definition are individually significant
either by size or nature (restructuring and rationalisation costs,
significant legal costs and net impact of earthquake), adjusted for
any gain on previously held interest in joint venture and movement
on fair value of forward exchange contracts and any gain/(loss) on
trading foreign exchange, which in the main relates to
retranslation of non-local currency balances in the Group's
companies.
IAS 28 requires that the investor's share of the profit or loss
of associate is presented as a single line in the Income Statement.
The directors consider the movement on the fair value of forward
exchange contracts to be an exceptional item for the purpose of
reporting the results of Titan Europe Plc. Therefore, to reflect
the underlying results of the business, the Group's share of the
movement in the fair value of forward exchange contracts held by
its associate company, Wheels India Limited, should be excluded
from the underlying results.
Further information on the movement in exchange rates can be
found in note 9.
2012 at
30 June 30 June 30 June
2012 2011 rates 2011
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
--------------------------------- --------- ----------- ---------
Revenue 252,586 261,647 253,161
--------------------------------- --------- ----------- ---------
Trading profit 14,750 15,377 18,005
--------------------------------- --------- ----------- ---------
Trading foreign exchange (gain)/
loss (386) (374) 88
--------------------------------- --------- ----------- ---------
Trading profit before trading
foreign exchange (gain)/loss 14,364 15,003 18,093
Share of profit of associate
and joint venture (excluding
exceptional items)* 453 512 1,124
--------------------------------- --------- ----------- ---------
Adjusted EBIT 14,817 15,515 19,217
Net financing costs (5,561) (5,820) (5,241)
--------------------------------- --------- ----------- ---------
Adjusted PBT 9,256 9,695 13,976
--------------------------------- --------- ----------- ---------
Adjusted EBIT % 5.9% 5.9% 7.6%
Adjusted PBT% 3.7% 3.7% 5.5%
--------------------------------- --------- ----------- ---------
* A reconciliation of share of profit of associate and joint
venture is outlined below:
2012 at
30 June 30 June 30 June
2012 2011 rates 2011
Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000
----------------------------------- --------- ----------- ---------
Share of profit of associate
and joint venture (excluding
exceptional gains) 453 512 1,124
Gain on revaluation of previously
held interest - - 1,826
Share of movement on fair value
of forward exchange contracts 819 925 275
----------------------------------- --------- ----------- ---------
Total share of profit of associate
and joint venture 1,272 1,437 3,225
----------------------------------- --------- ----------- ---------
The share of profit of associate and joint venture (excluding
exceptional gains) of GBP0.5m is a reduction from 2011 of GBP0.7m.
This is as a result of uncertainty around the recognition of
deferred tax assets with a negative impact of GBP0.3m in 2012 and
the inclusion in 2011 of GBP0.2m relating to the share of the joint
venture profit prior to its acquisition as a full subsidiary.
Wheels division
At constant exchange rates, first half revenue was GBP103.2m
(2011 GBP91.8m), an increase of GBP11.4m or 12.4 % compared with
the same period in 2011.
The principal source of this growth was mining which increased
by approximately GBP5.0m or 49.0%, with construction up by 12.6%
and agriculture up by 5.4%.
Agriculture remains the largest element of our Wheels business
accounting for 50% of the total. This figure now includes 100% of
the Group's Turkish operation.
Our agricultural wheels business includes manufacturing plants
in Italy (Crespellano and Finale Emilia), France and Turkey. As we
have already reported the Finale Emilia plant was damaged by an
earthquake in May and following approval from the local
authorities, we were able to recommence some manufacturing in July.
The factory is expected to be in full production during October
2012. During this time, we have been able to use facilities in
other factories to assist with the Finale Emilia event and this has
had a financial impact in all of these locations. One result of
this is a delay in, and change to, the restructuring plans for our
Crespellano plant where we have had to utilise facilities normally
used to produce idlers for welding and assembly of wheels. A
separate section in this report (Note 3) deals with the financial
and insurance treatment of this event.
Our facilities serving the mining industry in Australia, Chile
and Peru have all seen revenue growth as reported above.
The largest single increase was in sales of 'Quick - change'
wheels for Caterpillar.
The construction wheels business, principally located in the UK,
has also continued to see growth with revenue up by GBP3.8m, a
12.6% improvement. The main markets for this type of product are
material handling, particularly docks; road and infrastructure;
construction and mobile cranes; all with customers mostly based in
Europe.
At constant exchange rates, trading profit in the Wheels
division has fallen to GBP7.2m (7.0%) from GBP8.4m (9.1%). The main
contributory factor is the reduction from 2011 in other income of
GBP1.2m, relating to the agreement with Caterpillar for the phase
out of idlers which the Group has already reported in our
2011financial statements.
There have been significant improvements in margin in
construction wheels in our UK business leveraged off strong
volumes.
Volumes remain at acceptable levels for the construction and
mining businesses but there are signs of some tapering-off of
earlier high order book levels. It is difficult to predict the
on-going volume in the agricultural wheels business until the full
impact of the Italian earthquake has "worked through" the supply
chain. At the moment, we have produced through August to catch back
some of the volume lost from Finale Emilia in May, June and
July.
Undercarriage division ("Titan ITM")
At constant exchange rates, the Undercarriage divisions' first
half revenue was GBP158.4m (2011 GBP161.4m), a decrease of GBP3.0m
or 1.9% compared with the same period in 2011.
The main elements of this change were reductions in sales to
Asia down GBP4.7m (11.5%) and Europe down GBP3.5m (5.1%)
compensated by an increase of GBP5.3m (25.0%) in North America.
By market, the mining sector continued to grow, and in the
period increased by 4.7%, with revenues now representing 33% of the
total Undercarriage division.
The agricultural sector was constant at 7% of revenues. This is
almost entirely the Brazilian Sugar Cane market, an area which,
whilst still performing well, in 2012 has not yet shown the growth
that we had expected.
Construction sales have remained constant half year on half
year.
Other sales have fallen dramatically to GBP2.8m, a decrease of
63.6% from GBP7.7m in 2011. This reflects the almost complete halt
in the development of Highspeed2 trains in China for which Titan
Europe were to supply brake discs from our Spanish factory. This is
recorded as a reduction in sales in Europe but reflects the overall
economic weakness in China.
At constant exchange rates, trading profit in the Undercarriage
division has fallen to GBP8.2m (5.2%) from GBP9.6m (6.0%).
Margin improved in the 'core' business but not in line with
expectations, however, overall margin was impacted by difficult
circumstances elsewhere, particularly the loss on trading in China
where we re-exported product previously imported from Europe and by
a reduction in margin in the Spanish foundry caused by the halt in
development of Highspeed2 trains mentioned above. There are now
signs of a return to life in the high speed train market which
could aid a return to higher margins in Spain, but we are cautious
of the overall Chinese economic situation.
The difficult trading environment in China has increased
pressure in the world market for Undercarriage component spares,
with cheap product being offered by Asian suppliers who were
previously supplying their domestic market. As a result, we expect
our aftermarket/original equipment manufacturer (OEM) split to
change year-on-year from 30/70 to 20/80, which creates a negative
impact on overall margins as a result of this mix change. In
addition the aftermarket itself has been under pressure from low
costs sources.
Our move into 'engineering solutions' with complete
undercarriages and into large mining equipment is directly designed
to compensate for this development and to give Titan ITM protection
from predatory actions from low-cost suppliers.
Divisional review
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'm GBP'm GBP'm
----------------------------- ---------- ---------- ------------
Division
Revenue
Wheels (including share
of joint venture) 100.8 93.1 185.7
Undercarriage 151.8 161.4 308.1
----------------------------- ---------- ---------- ------------
Revenue including share
of joint venture 252.6 254.5 493.8
Less share of joint venture - (1.3) (1.3)
----------------------------- ---------- ---------- ------------
Group revenue 252.6 253.2 492.5
----------------------------- ---------- ---------- ------------
Trading profit
Wheels (excluding share
of joint venture) 7.1 8.4 17.2
As a percentage of revenue 7.0% 9.1% 9.3%
Undercarriage 7.7 9.6 15.8
As a percentage of revenue 5.1% 6.0% 5.1%
----------------------------- ---------- ---------- ------------
14.8 18.0 33.0
----------------------------- ---------- ---------- ------------
Note: Divisional review table is shown at actual exchange rates
and has not been restated at constant rates.
Revenue by geographical destination and market
Revenue has grown strongly in Oceania, North America and the UK,
with increases of 25.4%, 16.9% and 16.4% respectively. The
principal area of reduction is Asia, down 5.5%. The Asian figure
contains a mix of increase in sales to Japan of mining product and
reduction in China as previously highlighted.
Note: All narrative comparisons above are shown at constant
exchange rates, June 2011 average rates.
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------- ---------- ---------- ------------
Destination
UK 12.1 10.6 21.7
Europe 123.6 127.8 241.7
North America 32.5 27.3 58.9
South America 21.2 22.7 42.9
Asia 42.2 46.6 90.9
Africa 2.3 3.6 4.9
Oceania 18.7 14.6 31.5
--------------- ---------- ---------- ------------
Total revenue 252.6 253.2 492.5
--------------- ---------- ---------- ------------
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------- ---------- ---------- ------------
Market
Agricultural 59.8 60.8 116.2
Construction 122.8 122.5 239.3
Mining 65.1 59.9 120.8
Other 4.9 10.0 16.2
--------------- ---------- ---------- ------------
Total revenue 252.6 253.2 492.5
--------------- ---------- ---------- ------------
Note: Revenue by destination and market tables are shown at
actual exchange rates and have not been restated at constant
rates.
Business development
The Board strategy for the Group has been to develop two broadly
separate, but overlapping divisions, Wheels and Undercarriage.
Within the two divisions, we have developed a strategy to match the
'footprint' of our core clients and markets.
In the Wheels division, this has led to exposure into the mining
sector in Australia, Chile, Peru and, this year, South Africa.
Within our Wheels division we have a low-cost facility in
Turkey. As reported earlier this year, we have purchased land to
establish an additional facility in Turkey. Recent events in Italy
may lead us to refocus this investment to support the Agricultural
wheels business.
In the Undercarriage division, our focus has been both product
and geography-led with the additional emphasis of developing
engineering links with OEMs, particularly on larger product; this
will enable us to sell intellectual property as well as product.
This distinguishes us from the Asian and other imports into Western
undercarriage markets. As a result, we have been successful in
continuing to win important contracts for large specialised
products, for example, we have recently developed a new "in pit
crusher machine" this project involves 24 frames each weighing 70
tons.
The Board continues to believe that this strategy is appropriate
for the ongoing successful development of the business.
Outlook
During the first half of 2012, the Group's order book generally
remained firm. However, after the half-year period end, the Group
began to see clear signs of a decline or postponement in customer
order schedules for the second half of the year.
Our view is consistent with the overall commentary being made by
a number of our major customers across both areas of our business
and consistent with more uncertainty in end markets and the general
macro-economic factors being faced across businesses and
territories.
This being said, the pattern is by no means uniform; as a
business we continue to expect some growth in Brazil and North
America, with the mining sector remaining reasonably firm.
Although we do not anticipate a collapse in markets similar to
that experienced in 2008/2009 and no matter how effective the
Group's strategy, Titan Europe will not be isolated from the
general economic malaise now apparent in Europe and the wider
world.
Post balance sheet event
The Board has received an offer from Titan International Inc.
(21.7% shareholder) to acquire the issued share capital of Titan
Europe Plc that it does not currently own. The offer is to exchange
each 11 Titan Europe shares for one share in Titan International
Inc.
An independent committee of the Board has considered this offer,
and in the light of current trading, future market expectations and
the view of the improved security and opportunity which this offer
affords Titan Europe shareholders, the committee has unanimously
recommended its acceptance and have irrevocably committed to accept
the offer for all shares held by them, (representing 1.00%) as have
other members of the Board (representing an additional 0.75% of the
issued share capital of the company).
Shareholders will receive details contained in a Circular to be
published by Titan International Inc. shortly.
14 September 2012
This interim statement and trading update may contain
forward-looking statements with respect to the financial condition,
results, operations and businesses of Titan Europe Plc. Such
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed
or implied by forward-looking statements and forecasts.
Forward-looking statements and forecasts are based on the
directors' current view and information known to them at the date
of this statement. Nothing in this statement should be construed as
a profit forecast.
Titan Europe Plc
Consolidated Income Statement
For the six months ended 30 June 2012
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
----------------------------------- ------ ---------- ---------- ------------
Revenue 252,586 253,161 492,521
Trading profit 14,750 18,005 33,047
Restructuring and rationalisation
costs 2 (376) (151) (3,165)
Net impact of earthquake 3 (1,194) - -
Significant legal costs (314) - (153)
----------------------------------- ------ ---------- ---------- ------------
Profit from operations 12,866 17,854 29,729
Net finance costs 4 (4,977) (4,394) (10,333)
Finance income/(charges) 5 108 (117) 45
Other finance charges 6 (692) (730) (1,460)
----------------------------------- ------ ---------- ---------- ------------
Net financing costs (5,561) (5,241) (11,748)
Share of profit of
associate and joint
venture 8 1,272 1,399 1,800
Gain on previously
held interest in joint
venture 8 - 1,826 1,863
----------------------------------- ------ ---------- ---------- ------------
Profit before income
tax 8,577 15,838 21,644
Income tax charge 7 (3,594) (4,267) (4,012)
----------------------------------- ------ ---------- ---------- ------------
Profit for the period
attributable to equity
shareholders 4,983 11,571 17,632
----------------------------------- ------ ---------- ---------- ------------
Earnings per 40p ordinary
share
Basic 10 5.71p 13.73p 20.56p
Diluted 10 5.50p 13.30p 19.89p
----------------------------------- ------ ---------- ---------- ------------
Basic excluding exceptional
items* 10 7.26p 11.65p 21.01p
Diluted excluding exceptional
items* 10 7.00p 11.29p 20.33p
----------------------------------- ------ ---------- ---------- ------------
* This excludes, net of tax, restructuring and rationalisation
costs, significant legal costs, net impact of earthquake and gain
on previously held interest in joint venture.
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2012
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- ------------
Profit for the period 4,983 11,571 17,632
Other comprehensive
income
Hedge accounting on
financial instruments
- current year (losses)/gains (67) 1,334 257
- reclassification to
income statement (321) 131 (527)
Tax credit/(charge)
on hedge accounting
on financial instruments 107 (403) 74
Net actuarial (losses)/gains
on pension liabilities (1,128) 296 205
Tax on net actuarial
(losses)/gains on pension
liabilities 319 (84) (62)
Movement in translation
adjustment (4,777) (32) (8,057)
------------------------------- ---------- ---------- ------------
Other comprehensive
(expense)/income, net
of tax (5,867) 1,242 (8,110)
------------------------------- ---------- ---------- ------------
Total comprehensive
(expense)/income for
the period attributable
to equity shareholders (884) 12,813 9,522
------------------------------- ---------- ---------- ------------
Consolidated Balance Sheet
At 30 June 2012
As at As at As at
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- -------------
ASSETS
Non-current assets
Property, plant and
equipment 132,185 150,711 142,546
Intangible assets 56,539 57,923 56,999
Investments 12,889 13,619 12,237
Deferred taxes 30,042 36,716 31,634
Trade and other receivables 807 610 767
----------------------------- ---------- ---------- -------------
Total non-current
assets 232,462 259,579 244,183
----------------------------- ---------- ---------- -------------
Current assets
Inventories 110,061 116,981 111,537
Trade and other receivables 102,644 107,411 85,682
Income tax recoverable 86 133 146
Cash and cash equivalents 34,155 29,901 40,262
Held for sale assets - 2,457 1,210
----------------------------- ---------- ---------- -------------
Total current assets 246,946 256,883 238,837
----------------------------- ---------- ---------- -------------
Total assets 479,408 516,462 483,020
----------------------------- ---------- ---------- -------------
LIABILITIES
Non-current liabilities
Borrowings 99,884 109,621 109,663
Trade and other payables 2,049 2,260 2,213
Derivative financial
instruments 3,976 1,047 4,068
Deferred taxes 11,894 20,390 12,527
Employee benefits 9,042 9,492 8,764
Provisions 1,955 859 2,495
Total non-current
liabilities 128,800 143,669 139,730
----------------------------- ---------- ---------- -------------
Current liabilities
Borrowings 55,960 59,791 55,261
Trade and other payables 122,543 137,033 116,510
Current income tax
liability 3,470 1,605 2,202
Derivative financial
instruments 970 3,009 1,009
Employee benefits 1,932 1,650 1,484
Provisions 1,708 2,022 2,069
Total current liabilities 186,583 205,110 178,535
----------------------------- ---------- ---------- -------------
Total liabilities 315,383 348,779 318,265
----------------------------- ---------- ---------- -------------
Net assets 164,025 167,683 164,755
----------------------------- ---------- ---------- -------------
Equity
Issued share capital 35,057 34,852 34,921
Share premium account 79,241 79,241 79,241
Other reserves 6,458 6,458 6,458
Retained earnings 43,269 47,132 44,135
----------------------------- ---------- ---------- -------------
Total attributable
to equity shareholders 164,025 167,683 164,755
----------------------------- ---------- ---------- -------------
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2012
Attributable to Equity holders
of the Company
--------------------------------------------------------------------------------
Retained earnings
------------------------------------
Share Retained Currency
Share premium Other earnings Hedging translation
capital account reserves reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Six months ended
30 June 2011
Unaudited
At 1 January
2011 33,192 77,248 6,458 8,523 (2,961) 28,704 151,164
Transactions
with owners:
Proceeds from
shares issued 1,660 - - - - - 1,660
Premium on shares
issued - 2,074 - - - - 2,074
Costs associated
with shares
issued - (81) - - - - (81)
Credit in respect
of employee
share schemes - - - 53 - - 53
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
1,660 1,993 - 53 - - 3,706
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Profit for the
period - - - 11,571 - - 11,571
Other comprehensive
income:
Movement in
translation
adjustment - - - - 247 (279) (32)
Hedge accounting
on financial
instruments - - - - 1,465 - 1,465
Tax on hedge
accounting on
financial instruments - - - - (403) - (403)
Actuarial losses
on pension liabilities - - - 296 - - 296
Tax on actuarial
losses for the
period - - - (84) - - (84)
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Total comprehensive
income for the
period - - - 11,783 1,309 (279) 12,813
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
At 30 June 2011 34,852 79,241 6,458 20,359 (1,652) 28,425 167,683
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Consolidated Statement of Changes in Equity (continued)
For the six months ended 30 June 2012
Attributable to Equity holders
of the Company
--------------------------------------------------------------------------------
Retained earnings
------------------------------------
Share Retained Currency
Share premium Other earnings Hedging translation
capital account reserves reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Year ended 31
December 2011
Audited
At 1 January
2011 33,192 77,248 6,458 8,523 (2,961) 28,704 151,164
Transactions
with owners:
Proceeds from
shares issued 1,729 - - - - - 1,729
Premium on shares
issued - 2,074 - - - - 2,074
Costs associated
with share issue - (81) - - - - (81)
Credit in respect
of employee
share schemes - - - 122 - - 122
Deferred tax
in respect of
employee share
schemes - - - 225 - - 225
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
1,729 1,993 - 347 - - 4,069
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Profit for the
year - - - 17,632 - - 17,632
Other comprehensive
income:
Movement in
translation
adjustment - - - - 403 (8,460) (8,057)
Hedge accounting
on financial
instruments - - - - (270) - (270)
Tax on hedge
accounting on
financial instruments - - - - 74 - 74
Actuarial gains
on pension liabilities - - - 205 - - 205
Tax on actuarial
gains for the
year - - - (62) - - (62)
Total comprehensive
income for the
period - - - 17,775 207 (8,460) 9,522
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
At 31 December
2011 34,921 79,241 6,458 26,645 (2,754) 20,244 164,755
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Consolidated Statement of Changes in Equity (continued)
For the six months ended 30 June 2012
Attributable to Equity holders
of the Company
--------------------------------------------------------------------------------
Retained earnings
------------------------------------
Issued Share Retained Currency
share premium Other earnings Hedging translation
capital account reserves reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Six months ended
30 June 2012
Unaudited
At 1 January
2012 34,921 79,241 6,458 26,645 (2,754) 20,244 164,755
Transactions
with owners:
Proceeds from
shares issued 136 - - - - - 136
Credit in respect
of employee
share schemes - - - 60 - - 60
Deferred tax
in respect of
employee share
schemes - - - (42) - - (42)
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
136 - - 18 - - 154
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Profit for the
period - - - 4,983 - - 4,983
Other comprehensive
income:
Movement in
translation
adjustment - - - - 113 (4,890) (4,777)
Hedge accounting
on financial
instruments - - - - (388) - (388)
Tax on hedge
accounting on
financial instruments - - - - 107 - 107
Actuarial losses
on pension liabilities - - - (1,128) - - (1,128)
Tax on actuarial
losses for the
period - - - 319 - - 319
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Total comprehensive
income for the
period - - - 4,174 (168) (4,890) (884)
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
At 30 June 2012 35,057 79,241 6,458 30,837 (2,922) 15,354 164,025
------------------------- --------- --------- ---------- ---------- --------- ------------- --------
Other reserves represent a capital contribution reserve which in
the opinion of the directors is not distributable.
The Hedging reserve represents the cumulative portion of gains
and losses on hedging instruments deemed effective.
The Currency translation reserve relates to exchange differences
arising on the translation of the net assets of the Group's foreign
operations, from their functional currency into the Parent
Company's functional currency.
Consolidated Cash Flow Statement
For the six months ended 30 June 2012
Six months
ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ---------- ------------
Cash flows from operating
activities
Profit/(loss) for the
period 4,983 11,571 17,632
Adjustments for:
Depreciation, amortisation
and impairment 12,661 9,148 17,347
Profit on sale of property,
plant and equipment and
other intangible assets (102) (137) (187)
Impairment of held for
sale assets - - 1,109
Net financial expense 4,972 5,567 11,100
Foreign exchange (losses)/gains 589 (326) 648
Share of profit of associate
and joint venture (1,272) (1,399) (1,800)
Income tax expense 3,594 4,267 4,012
--------------------------------- ----------- ---------- ------------
Operating cash flow before
changes in working capital,
financial derivatives
and other non-cash changes 25,425 28,691 49,861
(Increase)/decrease in
inventories (2,376) (15,970) (15,256)
Increase in trade and
other receivables (20,583) (20,282) (2,914)
Increase in trade and
other payables 11,976 25,466 11,826
Decrease in provisions
and employee benefits (961) (603) 905
Other non-cash changes (1,702) (544) (3,413)
--------------------------------- ----------- ---------- ------------
Cash generated from operations 11,779 16,758 41,009
Interest paid (3,823) (4,427) (8,722)
Income taxes paid (1,807) (1,746) (4,164)
--------------------------------- ----------- ---------- ------------
Net cash generated from
operating activities 6,149 10,585 28,123
--------------------------------- ----------- ---------- ------------
Proceeds from sales of
property, plant and equipment 102 620 1,438
Proceeds from sale of
held for sale assets 1,235 - 10
Dividends received 174 - 302
Purchase of subsidiary
undertakings net of cash
acquired (756) (4,640) (4,764)
Purchase of property,
plant and equipment (7,757) (7,670) (18,500)
Purchase of intangible
assets (256) (423) (536)
--------------------------------- ----------- ---------- ------------
Net cash used in investing
activities (7,258) (12,113) (22,050)
--------------------------------- ----------- ---------- ------------
Cash flows from financing
activities
Proceeds from issue of
share capital net of
issue costs 136 3,653 3,722
New bank loans raised 514 10,469 14,893
Repayment of borrowings (6,056) (7,863) (8,058)
Payment of finance lease
liabilities (537) (2,730) (3,322)
Net cash (used)/generated
in financing activities (5,943) 3,529 7,235
--------------------------------- ----------- ---------- ------------
Net (decrease)/increase
in cash and cash equivalents (7,052) 2,001 13,308
Cash and cash equivalents
at the beginning of the
period 21,993 9,608 9,608
Effect of exchange rate
fluctuations on cash
held (372) 177 (923)
--------------------------------- ----------- ---------- ------------
Cash and cash equivalents
at period end 14,569 11,786 21,993
--------------------------------- ----------- ---------- ------------
For the purposes of presenting the cash flow statement the
components of cash and cash equivalents are offset, and is stated
net of overdraft.
Reconciliation of Movement in Net Debt
For the six months ended 30 June 2012
At Other At
1 January Cash non-cash Exchange 30 June
2012 flow changes movements 2012
Audited Unaudited Unaudited Unaudited Unaudited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ----------- ---------- ---------- ----------- ----------
Cash and cash
equivalents 40,262 (5,425) - (682) 34,155
Overdrafts (18,269) (1,627) - 310 (19,586)
------------------ ----------- ---------- ---------- ----------- ----------
21,993 (7,052) - (372) 14,569
Borrowings due
after one year
* (108,358) 6,203 (923) 4,425 (98,653)
Borrowings due
within one year
* (36,033) (661) (241) 1,482 (35,453)
Finance leases
due after one
year * (1,305) 134 (111) 51 (1,231)
Finance leases
due within one
year * (959) 403 (403) 38 (921)
Liquid resources 258 127 - (5) 380
------------------ ----------- ---------- ---------- ----------- ----------
Net debt (124,404) (846) (1,678) 5,619 (121,309)
------------------ ----------- ---------- ---------- ----------- ----------
* Included within the Cash flow column is the net cash flow
after taking into consideration changes in ageing of the borrowings
and finance leases.
Titan Europe Plc
Notes to the Interim Financial Statements
For the six months ended 30 June 2012
1. Basis of preparation
The Group reported the results for the year ended 31 December
2011 under International Financial Reporting Standards as adopted
by the European Union ("adopted IFRS"). The interim financial
statements have been prepared in accordance with the accounting
policies adopted in the last Annual financial statements for the
year ended 31 December 2011. The accounting policies applied in the
preparation of this financial information are consistent with those
that will be adopted in the statutory accounts for the year ending
31 December 2012. The full accounting policies of the Group are set
out in the last Annual financial statements.
The Group interim financial statements have been prepared on a
going concern basis. The directors have reviewed the funding
position of the Group. In doing so, the directors have considered
and forecast the cash flow requirements and continued compliance
with covenants of the Group arising from operational, investment
and financing activities, and the continued availability of
committed and non-committed facilities. They believe it is
appropriate to prepare these interim financial statements on a
going concern basis.
The information relating to the six months ended 30 June 2012
and 30 June 2011 is unaudited and does not constitute statutory
financial statements within the meaning of section 434 of the
Companies Act 2006. The statutory financial statements for the year
ended 31 December 2011, prepared under adopted IFRS, have been
reported on by the Group's auditors and delivered to the Registrar
of Companies. The auditors' report was unqualified and did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
2. Restructuring and rationalisation costs
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- -----------
Redundancy costs 123 132 1,604
Restructuring of manufacturing
plants 253 19 452
Impairment of held for
sale assets - - 1,109
------------------------------- --------- --------- -----------
376 151 3,165
------------------------------- --------- --------- -----------
3. Earthquake impact
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- -----------
Extra cost of sales 1,441 - -
Impairment of building 3,868 - -
Insurance advance payment
to date (4,115) - -
1,194 - -
-------------------------- --------- --------- -----------
The impact of the earthquake accounted for as at 30 June 2012,
is split in to three main categories as follows:
-- Extra costs of sales includes all the additional costs
incurred to produce and sell the products to our customers
following the earthquake at the Finale Emilia facility;
-- Impairment of the building following a preliminary assessment
of the building damage and remedial works required;
-- Insurance advance payment to date does not represent the full
expected insurance reimbursement but simply the initial payment
agreed with the insurers based on costs of remedial works and extra
costs of sales incurred to limit business interruption.
The final rebuilding cost and full extent of the business
interruption costs are yet to be determined.
Titan's Italian operations at Finale Emilia recommenced limited
production on the 16 July 2012 following the extensive building
remedial work. We continue to manage customer supplies with the use
of extensive internal and third party resources, giving rise to
these extra costs of sales, and we are working closely with our
insurance and loss recovery partners to ensure that the financial
impact of this earthquake on the business is minimised. Despite
this excellent recovery work, we cannot realistically anticipate
that there will be no volume loss in the short term.
As indicated in the Trading update on 27 June 2012, further
remedial work is underway to ensure the structural stability of the
building occupied by the paint plant; the Board anticipates that
production will recommence in October 2012; until then, the
alternate painting arrangements will remain in use.
4. Net finance costs
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------- ---------- ---------- ------------
Net interest expenses (4,388) (4,720) (9,685)
Finance foreign exchange
(expense)/income (589) 326 (648)
-------------------------- ---------- ---------- ------------
(4,977) (4,394) (10,333)
-------------------------- ---------- ---------- ------------
5. Finance income/(charges)
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ---------- ------------
Interest on defined
benefit pension plan
and long-term employee
benefits (213) (248) (482)
Net gains/(loss) on
re-measurement of derivatives
to fair value 321 131 527
-------------------------------- ---------- ---------- ------------
108 (117) 45
-------------------------------- ---------- ---------- ------------
6. Other finance charges
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------- ---------- ---------- ------------
Unwinding of the fair
value adjustment on
the Accordo Quadro loans (692) (730) (1,460)
--------------------------- ---------- ---------- ------------
7. Taxation
The June 2012 tax charge on profit on ordinary activities
excluding share of associate and joint venture and gain on
previously held interest in joint venture, reflects an effective
rate of 49.2% (June 2011:34.0%, December 2011:23.0%) due to the
impact of local Italian taxes, particularly IRAP which is
increasing the effective tax rate by 12.0 percentage points. For
the full year 2012 the final effective tax rate remains uncertain
particularly in Italy as the full impact of the earthquake is yet
to be determined.
During the period the main rate of UK corporation tax was
reduced from 26% to 24%, this change was effective from 1 April
2012. Further reductions to the main rate of corporation tax were
announced in the March 2012 Budget. These changes propose to reduce
the main rate of UK corporation tax by 1% per annum to 22% by 1
April 2014. These changes had not been substantively enacted at the
balance sheet date, and therefore are not recognised in these
financial statements.
8. Share of profit of associate and joint venture
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------ ---------- ---------- ------------
Share of profit of joint
venture * - 220 220
Share of profit of associate 1,272 1,179 1,580
Share of profit of associate
and joint venture 1,272 1,399 1,800
Gain on previously held
interest in joint venture - 1,826 1,863
------------------------------ ---------- ---------- ------------
Total share of profit
of associate and joint
venture 1,272 3,225 3,663
------------------------------ ---------- ---------- ------------
*On 19 April 2011, the remaining 50% of Titan Jantsa was
acquired, the share of profit of joint venture reflects the period
up to the date of acquisition.
9. Foreign exchange
The exchange rates used to translate the subsidiaries' accounts
as at 30 June 2012 and as at 30 June 2011 from local currencies to
UK sterling are as follows:
Balance Balance
Income statement Income statement sheet sheet
Average Average 30 June 30 June
2012 2011 2012 2011
----------- ----------------- ----------------- -------- --------
Euro 1.2151 1.1527 1.2415 1.1131
US $ 1.5769 1.6163 1.5615 1.6018
AUS $ 1.5185 1.5638 1.5367 1.5115
Brazilian
Real 2.9327 2.6347 3.2422 2.5108
----------- ----------------- ----------------- -------- --------
The translation effect on the Group's (unaudited) June 2012
Balance sheet and Income statement as a consequence of the movement
in exchange rates are shown in the following table:
At month-end At month-end
30 June 30 June
2012 rates 2011 rates Variance
GBP'000 GBP'000 GBP'000
------------------------------ ------------ ------------ --------
Total non-current assets 232,462 256,232 (23,770)
Total current assets 246,946 268,716 (21,770)
------------------------------ ------------ ------------ --------
Total assets 479,408 524,948 (45,540)
------------------------------ ------------ ------------ --------
Total non-current liabilities (128,800) (144,318) 15,518
Total current liabilities (186,583) (204,028) 17,445
------------------------------ ------------ ------------ --------
Total liabilities (315,383) (348,346) 32,963
------------------------------ ------------ ------------ --------
Net assets 164,025 176,602 (12,577)
------------------------------ ------------ ------------ --------
Total shareholders'
equity 164,025 176,602 (12,577)
------------------------------ ------------ ------------ --------
Net debt (121,309) (135,673) 14,364
------------------------------ ------------ ------------ --------
At average At average
2012 rates 2011 rates Variance
GBP'000 GBP'000 GBP'000
----------------------- ----------- ------------ --------
Revenue 252,586 261,647 (9,061)
Trading profit 14,750 15,377 (627)
Profit from operations 12,866 13,399 (533)
Profit before income
tax 8,577 9,016 (439)
Profit for the period 4,983 5,309 (326)
----------------------- ----------- ------------ --------
The trading profit included GBP386,000 of trading foreign
exchange profit (June 2011: GBP88,000 loss) primarily as a result
of retranslation of balances not held in the subsidiaries'
functional currency.
10. Earnings per share
The weighted average number of shares in issue used in the basic
earnings per share calculation may be reconciled to the number used
in the diluted earnings per ordinary share calculation as
follows:
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
Unaudited Unaudited Audited
Weighted average number Number Number Number
-------------------------- ----------- ----------- ------------
Basic earnings per share
denominator 87,323,425 84,250,273 85,753,393
Issuable on conversion
of options 3,203,231 2,716,516 2,872,550
-------------------------- ----------- ----------- ------------
Diluted earnings per
share denominator 90,526,656 86,966,789 88,625,943
-------------------------- ----------- ----------- ------------
The earnings to which the earnings per share calculation has
been applied are as follows:
GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- --------
Earnings/(loss) attributable
to equity shareholders 4,983 11,571 17,632
Significant one-off
items (net of tax):
Restructuring and rationalisation
costs 259 102 2,168
Significant legal costs 226 - 100
Net impact of earthquake 870
Gain on previously held
interest in joint venture - (1,856) (1,881)
----------------------------------- -------- -------- --------
Earnings/(loss) attributable
to equity shareholders
excluding exceptional
costs 6,338 9,817 18,019
----------------------------------- -------- -------- --------
11. Share capital
Allotted, called up and fully paid:
Number of
40 pence Ordinary
shares shares
(thousands) GBP'000
------------------------- ----------- --------
At 1 January 2012 87,303 34,921
Increase in issued share
capital 340 136
------------------------- ----------- --------
At 30 June 2012 87,643 35,057
------------------------- ----------- --------
Independent Review Report to Titan Europe Plc
Introduction
We have been engaged by the Company to review the Condensed
Interim Financial Statements in the Group Interim Report for the
six months ended 30 June 2012, which comprises the Consolidated
Income Statement, Consolidated Statement of Comprehensive Income,
Consolidated Balance Sheet as at 30 June 2012, Consolidated
Statements of Changes in Equity, Consolidated Cash Flow Statement,
Reconciliation of Movement in Net Debt and related notes. We have
read the other information contained in the Group Interim Report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the Condensed
Interim Financial Statements.
Directors' responsibilities
The Group Interim Report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Group Interim Report in accordance with the AIM Rules
for Companies which require that the Condensed Interim Financial
Statements must be presented and prepared in a form consistent with
that which will be adopted in the Company's Annual financial
statements.
As disclosed in Note 1, the Annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The Condensed Interim Financial Statements included
in this Group Interim Report has been prepared in accordance with
the basis of preparation set out in Note 1.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the Condensed Interim Financial Statements in the Group Interim
Report based on our review. This report, including the conclusion,
has been prepared for and only for the Company for the purpose of
the AIM Rules for Companies and for no other purpose. We do not, in
producing this report, 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.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the 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 Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the Condensed Interim Financial
Statements in the Group Interim Report for the six months ended 30
June 2012 is not prepared, in all material respects, in accordance
with the basis of preparation set out in Note 1 and the AIM Rules
for Companies.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
14 September 2012
Notes:
(a) The maintenance and integrity of the Titan Europe Plc
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the condensed interim financial
statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
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