TIDMVSVS
RNS Number : 3314H
Vesuvius plc
27 July 2023
27 July 2023
Half Year Results for the six months ended 30 June 2023
Resilient results ahead of our expectations, despite difficult
market conditions
Modest increase to full year expectations
Vesuvius plc, a global leader in molten metal flow engineering
and technology, announces its unaudited results for the six months
ended 30 June 2023.
Financial summary H1 2023 H1 2022 Year-on-year Underlying
change change(1)
(GBPm) (GBPm)
--------------------------------- ---- --------- --------- -------------- ------------
Headline (non-statutory)
Revenue 995 1,016 (2%) (3%)
Trading Profit (2) (adjusted
EBITA) 105 127 (18%) (18%)
Return on Sales (2) 10.5% 12.5% (200 bps) (190 bps)
Headline basic EPS (2)
(pence) 24.5p 31.4p (22%)
Adjusted operating cash-flow(2) 71 33 114%
Net Debt (2) 268 328 (18%)
--------------------------------------- --------- --------- -------------- ------------
Statutory
--------------------------------- ---- --------- --------- -------------- ------------
Operating Profit 100 122 (18%)
Profit Before Tax 95 117 (19%)
Statutory basic EPS (pence) 23.2p 30.0p (23%)
Cash generated from operations 107 69 55%
Dividend (pence per share) 6.8p 6.5p 5%
--------------------------------------- --------- --------- -------------- ------------
(1) Underlying basis is at constant currency and excludes
separately reported items and the impact of acquisitions and
disposals.
(2) For definitions of non-GAAP measures, refer to Note 15 in
the Condensed Group Financial Statements.
NB. The above table and other tables in this results statement
contains amounts and percentages derived from source data which was
then rounded. The margins and percentage change figures are based
on source data, not the rounded figures.
Half Year 2023 Highlights
-- Group trading profit down 18% v. H1 2022 but improved against H2 2022
o Subdued market conditions in Steel have led to volume declines
vs. H1 2022 . This was partly mitigated by good pricing
performance
-- Steel business performed well, ahead of our expectations, due to pricing resilience in our technologically differentiated products and solutions
o Pricing has partially offset the impact of lower volumes
o Return on Sales down 310 bps vs. H1 2022 (underlying) due to
volume declines, but improved by 160bps against H2 2022
-- Good recovery of the Foundry business
o Divisional trading profit up 18% and return on sales up 130bps (underlying) vs. H1 2022
o Trading Profit and RoS have grown sequentially between H1 2022, H2 2022 and H1 2023
-- All Strategic initiatives progressing and on track
o Growth capex in India to support expansion of Steel businesses in this fast-growing region
o 14 new product launches supported by sustained effort in R&D
-- Strong progression in adjusted operating cash-flow despite significant growth capex
o Cash conversion improving to 67%
-- Strong balance sheet with net debt / EBITDA at 1.0x
-- Dividend per share +5% reflecting confidence in the long-term prospects for the business
-- Further progress in sustainability, reducing our CO(2)
footprint and supporting our customers' sustainability efforts
-- Lost-time injury rate down to 0.7 in the period, our best performance on record
Comment from Patrick André, CEO:
"Despite difficult market conditions, especially in the steel
sector, we have performed well in the first half of the year,
exceeding expectations, thanks, in particular, to a very resilient
pricing performance.
The Foundry division has confirmed its recovery, which should
continue in 2024 when the destocking movement in the Foundry sector
will have come to an end.
We expect to maintain pricing discipline in the second half of
the year, and we are progressing our efforts to gain market share
through technological differentiation. As a consequence, noting
typical seasonality and despite remaining macro-economic
uncertainties, we feel confident to modestly increase our full year
expectations."
Presentation of Half Year 2023 Results
Vesuvius management will make a presentation to analysts and
investors on 27 July 2023 at 08:30 UK time at the London Stock
Exchange, 10 Paternoster Square, London EC4M 7LS. For those unable
to attend, the event will be livestreamed and can be accessed by
clicking here . Participants can also join via an audio conference
call. Please click here to register. Once registered, you will be
provided with the information needed to join the conference,
including dial-in numbers and passcodes. Be sure to save this
information in your calendar.
For further information, please contact:
Shareholder/analyst
enquiries:
Patrick Andr é , Chief +44 (0) 207 822
Vesuvius plc Executive 0000
Mark Collis, Chief Financial +44 (0) 207 822
Officer 0000
Rachel Stevens, Head of +44 (0) 7387 545
Investor Relations 271
Media enquiries:
Rachel Farrington/Ollie +44 (0) 203 128
MHP Communications Hoare 8570
Save the date: Capital markets event - afternoon of Thursday 16
November 2023
About Vesuvius plc
Vesuvius is a global leader in molten metal flow engineering and
technology principally serving process industries operating in
challenging high--temperature conditions.
We develop innovative and customised solutions, often used in
extremely demanding industrial environments, which enable our
customers to make their manufacturing processes safer, more
efficient and more sustainable. These include flow control
solutions, advanced refractories and other consumable products and
increasingly, related technical services including data
capture.
We have a worldwide presence. We serve our customers through a
network of cost-efficient manufacturing plants located close to
their own facilities, and embed our industry experts within their
operations, who are all supported by our global technology
centres.
Our core competitive strengths are our market and technology
leadership, strong customer relationships, well established
presence in developing markets and our global reach, all of which
facilitate the expansion of our addressable markets.
Our ultimate goal is to create value for our customers, and to
deliver sustainable, profitable growth for our shareholders giving
a superior return on their investment whilst providing each of our
employees with a safe workplace where they are recognised,
developed and properly rewarded.
We think beyond today to create solutions that will shape the
future for everyone.
Forward looking statements
This announcement contains certain forward looking statements
which may include reference to one or more of the following: the
Group's financial condition, results of operations, cash flows,
dividends, financing plans, business strategies, operating
efficiencies or synergies, budgets, capital and other expenditures,
competitive positions, growth opportunities for existing products,
plans and objectives of management and other matters.
Statements in this announcement that are not historical facts
are hereby identified as "forward looking statements". Such forward
looking statements, including, without limitation, those relating
to the future business prospects, revenue, working capital,
liquidity, capital needs, interest costs and income, in each case
relating to Vesuvius, wherever they occur in this announcement, are
necessarily based on assumptions reflecting the views of Vesuvius
and involve a number of known and unknown risks, uncertainties and
other factors that could cause actual results, performance or
achievements to differ materially from those expressed or implied
by the forward looking statements. Such forward looking statements
should, therefore, be considered in light of various important
factors that could cause actual results to differ materially from
estimates or projections contained in the forward looking
statements. These include without limitation: economic and business
cycles; the terms and conditions of Vesuvius' financing
arrangements; foreign currency rate fluctuations; competition in
Vesuvius' principal markets; acquisitions or disposals of
businesses or assets; and trends in Vesuvius' principal
industries.
The foregoing list of important factors is not exhaustive. When
considering forward looking statements, careful consideration
should be given to the foregoing factors and other uncertainties
and events, as well as factors described in documents the Company
files with the UK regulator from time to time including its annual
reports and accounts.
You should not place undue reliance on such forward looking
statements which speak only as of the date on which they are made.
Except as required by the Rules of the UK Listing Authority and the
London Stock Exchange and applicable law, Vesuvius undertakes no
obligation to update publicly or revise any forward looking
statements, whether as a result of new information, future events
or otherwise. In light of these risks, uncertainties and
assumptions, the forward looking events discussed in this
announcement might not occur.
Vesuvius plc, 165 Fleet Street, London EC4A 2AE
Registered in England and Wales No. 8217766
LEI: 213800ORZ521W585SY02
www.vesuvius.com
Vesuvius plc
Half Year Results for the six months ended 30 June 2023
Resilient results despite difficult market conditions, ahead of
our expectations
GBPm H1 2023 Acquisitions H1 2023 H1 2022 Currency Acquisitions H1 2022 Reported Underlying
Reported / Disposals Underlying Reported / Disposals Underlying % Change % Change
--------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Revenue 995 - 995 1,016 14 - 1030 (2%) (3%)
Trading
Profit 105 - 105 127 1 - 128 (18%) (18%)
Return
on (200 (190
Sales 10.5% 10.5% 12.5% 12.5% bps) bps)
--------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Group trading performance ahead of our initial expectations
In H1 2023, the Group generated revenues of GBP995m, a slight
decrease of 2% compared to H1 2022, on a reported basis and a 3%
decrease on an underlying basis, reflecting the effects of currency
translation. The negative impact of declining volumes (-8%,
principally due to the declining steel production markets and to
some destocking of refractories and foundry products) has been
partially mitigated by sales price increases.
Trading profit (adjusted EBITA) was ahead of our expectations at
GBP105m. It represents a drop of 18% on both a reported and
underlying basis as compared with H1 2022, reflecting the
drop-through impact of declining volumes, partially offset by a
small positive balance between the increase in sales price and
rising costs. Consequently, the Group achieved a return on sales of
10.5% in H1 2023, a decrease of 200 bps compared to H1 2022 on a
reported basis but an increase of 130 bps versus H2 2022.
Adjusted operating cashflow has been good in the period and
significantly ahead of that in H1 2022, up 114%, with cash
conversion of 67% despite significant capex (GBP45m) including
growth capex to support our expansion and development plans.
The pace of recovery of our end markets remains uncertain
Steel production in the world excluding China and Iran, which
accounts for approximately 90% of Vesuvius' Steel division sales,
has started to recover in Q2 2023 from the low levels of the
previous 6 months but the pace of this recovery is uncertain, in
particular in the long steel sector, affected by the general
weakness of the construction sector. As compared with H1 2022,
steel production in H1 2023 decreased by 4.5% year-on-year to the
end of June (Source: the World Steel Association), with most major
geographies recording volume declines in the period except for
India and China.
Foundry end markets have started to recover, with year-on-year
end market growth especially strong in India and China, low single
digit end market growth in NAFTA and EMEA more than offsetting
declines in South America. The Foundry division hasn't however
fully benefited yet from this end market recovery due to a
destocking movement of casting products in some important regions.
We expect this destocking movement to come to an end towards the
end of the year.
Selling price increases have fully offset inflationary
pressures
Our active management of selling prices has successfully offset
continued cost inflation, continuing the pattern of 2022. The
success of our sales price management reflects the importance that
customers attribute to the technological differentiation that we
offer alongside on-site support which ensures the consistent
performance of our products in practice.
Technological differentiation at the heart of our strategy
Technological differentiation is at the heart of our strategy to
grow market share and margin. We have launched 14 new products in
the period and delivered a new product sales ratio (defined as the
percentage of sales derived from products launched in the previous
5 years) of 16%. Examples of new products having been launched
include, in the Steel division, "LTC34", a flow-control product
that integrates with our robotics solutions to minimise contact
between molten steel and atmospheric gases, to maximise the quality
and purity of steel produced and the Tundish Dry Vibratable Robot,
an Advanced Refractory product which is a new automated system to
layer refractories in the tundish. In the Foundry Division, we have
also launched several new products in the period, including Wasco,
for high pressure die casting (HPDC) processes, used by aluminium
foundries. It enables HPDC foundries to manufacture castings with
complex internal structures - facilitating weight saving, assembly
cost reduction and the formation of larger and more complex
shapes.
Capital investment projects continue at pace, to support
growth
Capex, excluding leases, in FY23 is expected to be c. GBP100 -
110m of which approximately half is allocated to growth projects
and customer installations, which drive the use of our
refractories. This is part of a larger growth capex programme which
was initiated in H2 2021 and will be largely completed by June
2024. It will support our long-term growth in the fastest growing
regions of the world in the coming years, especially in India
South-East Asia and Middle East Africa.
Our strategic expansion in Flow Control is progressing well. The
new VISO capacity in Kolkata, India was completed in Q1 as planned,
adding 50% to original capacity, and is now operational, helping
Vesuvius fulfil the strong demand in the region. The investment in
VISO in Skawina, Poland, increasing capacity by 35%, has been
completed and is now operational, and the Slide Gate investment at
the same site, to double EMEA capacity, is on track to be completed
by the end of this year as planned.
In Foundry, we are making good progress on our two major capex
projects. The first is in China in non-ferrous flux production to
support market share gains in Chinese aluminium foundries, and the
second is in the US where we are upgrading our coatings production
line to support market share gains in this important product where
our technological differentiation is significant. Additionally,
there are a number of smaller sustainability-related projects which
will also generate attractive cost savings, such as adding solar
panels at our Ramos Arizpe plant in Mexico, which will become
Foundry's first fully carbon neutral plant.
In totality, the EBITDA benefit of this programme of expansion
capex is expected to be c. GBP40m per annum, achieved in 2026 /
2027.
Working capital
Trade working capital at 30 June 2023 increased by GBP31m versus
31 December 2022 on a constant currency basis as the challenges of
the cyber attack in the first quarter have slowed down our efforts
to reduce inventories. However, working capital as a percentage of
sales is now on a falling trajectory, having peaked in February on
a three-month rolling average basis.
Further improvement in our health and safety performance
Health and safety is of paramount importance and we have an
overall aim of zero accidents. In the half-year, we achieved a Lost
Time Injury Frequency Rate (LTIFR) of 0.72, a substantial reduction
compared to 1.07 in H1 2022 and the best result ever achieved by
the Vesuvius Group.
Progress in our sustainability objectives
Vesuvius is focused on both improving our own sustainability
performance and helping our customers reduce their environmental
footprint. We are continuing to make strong progress in the
reduction of our CO(2) footprint and are proud that our latest
Sustainalytics score was upgraded for the third year in a row. We
are now in the top 14(th) percentile of our peers.
We have also recently received the ecoMetals 2023 award for our
SEMCO coatings products which offer our customers the benefits of
at least 50% faster drying times, at least 20% reductions in
formaldehyde emissions and at least a 90% saving in energy. This is
one of the many products where improved environmental performance
plays a key role in the value that we provide to our customers.
Interim Dividend
The Board has declared an interim dividend of 6.8 pence per
share, which is a 5% increase on the interim dividend for 2022 of
6.5 pence per share.
The interim dividend will be paid on 15 September 2023 to
shareholders on the register at the close of business on 4 August
2023. The ex-dividend date will be 3 August 2023. Any shareholder
wishing to participate in the Vesuvius Dividend Reinvestment Plan
needs to have submitted their election to do so by 24 August
2023.
Outlook
Despite difficult market conditions, especially in the steel
sector, we have performed well in the first half of the year,
exceeding expectations, thanks, in particular, to a very resilient
pricing performance.
We expect to continue to maintain pricing discipline in the
second half of the year and we are progressing our efforts to gain
market share through technological differentiation. As a
consequence, noting typical seasonality and despite remaining
macro-economic uncertainties, we feel confident to modestly
increase our full year expectations.
Operating and Financial Review
Basis of Preparation
All references in this operating and financial review are to
headline performance unless stated otherwise. See Note 15.1 to the
Group Financial Statements for the definition of headline
performance. We also look at underlying performance, adjusting for
effects of currency translation, (restating the previous period's
results at the same foreign exchange (FX) rates used in the current
period), acquisitions and disposals (removing the results of
acquired or disposed-of businesses in both the current and prior
years). See Note 15.2 to the Group Financial Statements for the
definition of underlying performance.
Operating review
Vesuvius comprises two Divisions, Steel and Foundry. The Steel
Division operates as three business lines, Flow Control, Advanced
Refractories and Sensors & Probes.
GBPm H1 2023 Revenue H1 2022 Revenue % change
--------- ---------------------------------------------- --------------------------------------------------------- ----------------------
As As
reported Acquisition/Disposals Underlying reported Currency Acquisition/Disposals Underlying Reported Underlying
--------- --------- ---------------------- --------- --------- ---------------------- ----------- --------- -----------
Steel 711 - 711 744 11 - 755 (4%) (6%)
Foundry 284 - 284 272 3 - 275 4% 3%
--------- --------- ---------------------- ----------- --------- --------- ---------------------- ----------- --------- -----------
Total
Group 995 - 995 1,016 14 - 1030 (2%) (3%)
Group revenue has dropped 2% on a reported basis, reflecting
growth of 4% within Foundry and a fall of 4% in the Steel business
unit, both on a reported basis. Changes in FX, principally the USD
relative strength to GBP, provided a GBP14m tailwind, resulting in
a 3% underlying revenue decline year-on-year. This change comprises
a GBP81m (c.-8%) impact from declining volumes, principally in
Steel, in part due to the reduction in steel production volumes in
the world excluding China and Iran of 4.5% in the half-year and
some market share losses in Advanced Refractories. This has been
partially offset by price rises to offset costs of GBP46m (c.
+4%).
GBPm H1 2023 Trading profit H1 2022 Trading profit % change
--------- ---------------------------------------------- --------------------------------------------------------- ----------------------
As As
reported Acquisition/Disposals Underlying reported Currency Acquisition/Disposals Underlying Reported Underlying
--------- --------- ---------------------- --------- --------- ---------------------- ----------- --------- -----------
Steel 75 - 75 102 1 - 103 (26%) (27%)
Foundry 30 - 30 26 - - 25 17% 18%
--------- --------- ---------------------- ----------- --------- --------- ---------------------- ----------- --------- -----------
Total
Group 105 105 127 1 128 (18%) (18%)
Group trading profit has dropped 18% on both a reported and
underlying basis, reflecting growth of 17% within Foundry and a
fall of 26% in Steel, on a reported basis. The underlying
year-on-year change comprises a GBP32m impact from declining
volumes, as volume reductions had a drop-through impact of c.40%
relative to revenue, reflecting the under-absorption of overhead.
This was partially offset by a net gain of c. GBP11m as the
increase in sales price and the benefit of positive mix modestly
outweighed rising costs in the period. Cyber remediation costs of
GBP3.5m were also included in trading profit in the period.
Return on sales, defined as trading profit divided by revenue,
was 10.5% for the Group, a reduction of 200bps from 12.5% in H1
2022 and of 60 bps versus 11.1% reported for FY22, reflecting the
impact of a 18% drop in trading profit relative to a 2% reduction
in revenue.
Half-year comparison
Underlying on a constant H1 2023 H2 2022 H1 2022
currency basis (GBPm) (GBPm) (GBPm)
---------------------------- -------- -------- --------
Steel revenue 711 722 755
Foundry revenue 284 272 275
Total Group revenue 995 995 1030
----------------------------- -------- -------- --------
Steel trading profit 75 64 103
Foundry trading profit 30 28 25
Total Group trading profit 105 92 128
----------------------------- -------- -------- --------
Steel RoS 10.5% 8.9% 13.6%
Foundry RoS 10.6% 10.1% 9.3%
Group RoS 10.5% 9.20% 12.5%
----------------------------- -------- -------- --------
The table above shows the current and past two half-year periods
all at constant currency.
As shown above, on a sequential basis, Foundry has shown two
successive half-year periods of improvement and Steel is also on an
improving trend versus H2 2022.
Steel Division
Steel Division H1 2023 H1 2022 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------- -------- -------- ---------- -----------
Flow Control Revenue 401 402 - (2%)
Advanced Refractories Revenue 290 321 (10%) (11%)
Steel Sensors & Probes
Revenue 20 21 (2%) (4%)
-------------------------------- -------- -------- ---------- -----------
Total Steel Revenue 711 744 (4%) (6%)
Total Steel Trading Profit 75 102 (26%) (27%)
Total Steel Return on Sales 10.5% 13.7% (320 bps) (310 bps)
-------------------------------- -------- -------- ---------- -----------
The Steel Division reported revenues of GBP711m in H1 2023, a
decrease of 4% compared to
H1 2022 on a reported basis and 6% on an underlying basis,
reflecting the declining steel production market which was down
4.5% in H1 (Source: WSA), partially offset by the year-on-year
increase in sales price.
Steel Division trading profit fell 26% to GBP75m driven by the
declining volumes across both the Flow Control and Advanced
Refractories business units. Return on sales compressed 320bps to
10.5% compared to H1 2022 and 100bps compared to the FY22 return on
sales of 11.5%, with the margin impacted by the operational
de-gearing of declining volumes. Compared to H2 2022, trading
profit increased by GBP11m and return on sales increased
160bps.
Flow Control
Flow Control Revenue H1 2023 H1 2022 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------ -------- -------- ------- -----------
Americas 163 155 5% 2%
Europe, Middle East & Africa
(EMEA) 127 142 (11%) (12%)
Asia-Pacific 112 105 7% 8%
------------------------------- -------- -------- ------- -----------
Total Flow Control Revenue 402 402 - (2%)
------------------------------- -------- -------- ------- -----------
Flow Control revenue was broadly flat with a small underlying
decline in sales of 2%, reflecting volumes declines which were
lower than the market declines in the Americas and Asia-Pacific,
and modest under-performance in EMEA , due mostly to refractory
destocking and payment difficulties of some customers.
In the Americas, underlying revenues grew modestly, reflecting
some residual price rises, offset by reductions in volumes as steel
production in both NAFTA and South America fell, albeit slightly
outperforming the market.
In EMEA, revenue fell 12% year-on-year on an underlying basis.
This resulted from a volume decline, principally driven by a
contraction in steel production of c. 8% (EMEA excluding Iran) in
the year to June compounded by some destocking and payment
difficulties described above, and the impact of sharply reduced
revenues from Russia and Ukraine, partially offset by residual
year-on-year price increases.
In Asia Pacific, revenues grew 8% on an underlying basis.
Revenue growth in China was ahead of the market reflecting customer
wins, and India also continued to out-perform the market growth of
c. 7%. Our underlying market share in both North Asia and
South-East Asia was broadly stable. In North Asia, Q1 was impacted
by customer end-product de-stocking, which normalised into Q2.
Advanced Refractories
Advanced Refractories H1 2023 H1 2022 Change Underlying
Revenue (GBPm) (GBPm) (%) change
(%)
------------------------------ -------- -------- ------- -----------
Americas 113 120 (5%) (9%)
Europe, Middle East & Africa
(EMEA) 95 120 (21%) (23%)
Asia-Pacific 82 81 1% 2%
------------------------------- -------- -------- ------- -----------
Total Advanced Refractories
Revenue 290 321 (10%) (11%)
------------------------------- -------- -------- ------- -----------
Advanced Refractories reported revenues of GBP290m in H1 2023, a
decrease of 11% on an underlying basis, driven by reducing steel
production volumes in all regions except India and some market
share reduction, partially mitigated by a dynamic pricing
performance.
Revenue fell 9% in the Americas on an underlying basis, driven
by significant volume declines reflecting both a contracting market
and some market share reduction, in both NAFTA and South
America.
In EMEA, underlying revenues reduced by 23% during the period,
driven by market volume declines of 8% and market share declines in
the Middle East and in Africa.
In Asia Pacific, revenues were broadly flat on an underlying
basis, with strong volume growth and market share gains in
India.
Steel Sensors & Probes
Steel Sensors & Probes H1 2023 H1 2022 Change Underlying
Revenue (GBPm) change
(%)
(GBPm) (%)
------------------------------ --------- --------- -------- ------------
Americas 14 14 1% (1%)
Europe, Middle East & Africa
(EMEA) 6 7 (10%) (13%)
Asia-Pacific 0.3 0.2 31% 30%
------------------------------------ --------- --------- -------- ------------
Total Steel Sensors & Probes
Revenue 20 21 (2%) (4%)
------------------------------------ --------- --------- -------- ------------
In H1 2023 Revenues in Steel Sensors & Probes were GBP20m,
down c. 4% period-on-period on an underlying basis, due to a
slow-down of steel production in our reference customers.
The revenues in EMEA fell 13% in a declining market while in the
Americas the revenue was flat over the period despite particular
challenges in the Mexican market, with an overall market decline of
4%.
Foundry Division
Foundry Division H1 2023 H1 2022 Change Underlying
(GBPm) (GBPm) (%) change
(%)
-------------------------
Foundry Revenue 284 272 4% 3%
Foundry Trading Profit 30 26 17% 18%
Foundry Return on Sales 10.6% 9.5% 110bps 130bps
-------------------------- -------- -------- ------- -----------
The end markets for Foundry were positive in most regions, with
year-on-year end market growth especially strong in the key Asian
Pacific markets of India and China, low single-digit end market
growth in NAFTA and EMEA and declines in South America. The impact
of destocking in the end markets has adversely effected the demand
from our customers, and hence our sales progression in the period
is more muted.
Vesuvius' Foundry Division reported revenues of GBP284m in H1
2023, an increase of 4% compared to H1 2022 on a reported basis. On
an underlying basis, Foundry Division revenue was up 3%. This
increase in revenues was driven by price increases which primarily
took place in 2022 to offset cost inflation, plus market share
growth in key regions including India, China and NAFTA partially
offset by volume decline in EMEA, South America and parts of Asia
versus H1 2022.
The Foundry Division also achieved some margin recovery, with
trading profit growing 17% to GBP30m, as Return on Sales increased
110bps to 10.6%, compared to H1 2022. The Foundry Division also
grew trading profit and return on sales compared to H2 2022.
Foundry Revenue H1 2023 H1 2022 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------
Americas 73 67 9% 4%
Europe, Middle East & Africa
(EMEA) 120 117 3% 2%
Asia-Pacific 90 88 3% 5%
------------------------------- -------- -------- ------- -----------
Total Foundry Revenue 284 272 4% 3%
------------------------------- -------- -------- ------- -----------
Foundry revenues in the Americas grew 4% year-on-year on an
underlying basis, which reflects the positive impact of price
increases, which primarily took place in 2022 to offset cost
inflation, plus market share gains in NAFTA, partially offset by
volume declines in South America versus H1 2022. The challenges in
South America are due to general economic weakness in Brazil, in
addition to a decline of over 20% in truck volumes which were
impacted by a change in emissions standards which came into effect
in early 2023, resulting in a spike in purchases ahead of the
change, followed by a steep decline.
In EMEA, underlying revenues were slightly up compared to 2022
(+2% underlying), reflecting successful commercial initiatives
initiated towards the end of 2022 to regain volume lost in the
region earlier that year, resulting in monthly volumes towards the
end of H1 2023 returning to the level of the same period of
2022.
Foundry revenues in Asia Pacific grew 5% year-on-year on an
underlying basis, which reflects strong end market growth and
market share gains in India, as well as a partial recovery in key
Chinese end markets after a challenging 2022. Our strong
performance in these regions was partially offset by weakness in
North Asia, especially in Taiwan.
Financial Review
H1 2023 performance overview
Income statement
Group revenue of GBP995m is down by 2% on a reported basis to
(H1 22: GBP1016m) and trading profit fell 18% on a reported basis
to GBP105m (H1 22: GBP127m), as set out in the operating review
above.
Operating profit decreased 18% to GBP100m (H1 22: GBP122m),
reflecting the changes in trading profit described above, net of
amortisation of intangible assets of GBP5.2m (H1 22: GBP5.1m). In
H1 2023, we spent GBP18m on R&D activities (H1 22: GBP18m),
which represents 1.8% of our revenue (H1 22: 1.7%).
Headline PBT was GBP100m (H1 22: GBP122m), a reduction of 18%,
reflecting the reduction in operating profit and a slight reduction
in net finance cost. The lower net finance cost of GBP5.5m versus
GBP6.6m in H1 22 is principally due to an increase in the finance
income from deposits held in India and Argentina, offsetting the
rise in finance costs from rising interest rates.
PBT including amortisation of acquired intangibles of GBP5m was
GBP95m (H1 22: GBP117m), 19% lower than the comparable period.
Headline EPS from continuing operations fell 22% to 24.5p (H1
22: 31.4p), reflecting the lower profit described above and the
increase in the minority interest, which principally relates to our
growing business in India.
Taxation
The Group's effective tax rate is the income tax associated with
headline performance of (H1 23: GBP27m, H1 22: GBP33m), divided by
the headline profit before tax and before the Group's share of
post-tax profit of joint ventures. The Group's headline effective
tax rate was 27.5% in H1 2023 as guided (H1 22: 27.5%; full year
26.5%) . The increase in rate versus FY22 is due to a change in
geographic mix of profit. We expect the Group's effective tax rate
to be 27.5% for the full year 2023.
Cash flow
The Group generated adjusted operating cash flows of GBP71m,
representing a 114% increase versus H1 2022 (GBP33m). This implies
a cash conversion rate in H1 2023 of 67% (H1 22: 26%). H1 2023 cash
conversion reflected continued higher levels of investment in capex
of GBP45m (H1 22: GBP39m). Free cash flow from continuing
operations was GBP42m in H1 2022 (H1 22: GBP2m).
Working capital
Trade working capital as a percentage of sales in H1 2023 was
24.1% (2022: half year 22.8%; full year 23.8%), measured on a
12-month moving average basis. On a 3-month moving average basis,
this ratio has fallen from 24.7% at 31 December 2022 to 23.3% at 30
June 2023 reflecting the progress made in the half-year, where
debtors which reduced from 80 days to 78 days, inventory days
reduced by one day to 87 days, and creditor days increased by just
under three days.
In absolute terms, on a constant currency basis, trade working
capital increased by GBP31m in H1 2022 to GBP480m compared to the
balance as at 31 December 2022. The increase was due to a rise in
inventory (+GBP18m) and debtors (+GBP31m), partially offset by an
increase in creditors (+GBP18m).
Capital expenditure
Capital expenditure in H1 2022 was GBP45m (H1 22: GBP39m) of
which c. GBP34m was spent in the Steel division and the remainder
in Foundry.
Balance sheet
Financial position
At 30 June 2023, Net Debt was GBP268m, (31 December 2022:
GBP255m), as free cash flow of GBP42m was offset by payment of the
2022 full-year dividend (GBP42m), additional right-of-use assets
(GBP11m) and other factors including FX (GBP2m).
The net debt to EBITDA ratio increased slightly to 1.0x versus
31 December 2022 (0.9x), principally reflecting the drop in
last-12-month EBITDA. EBITDA to interest was 34.0x (2022: 30 June
29.2x; 31 December 29.8x). The Group had committed borrowing
facilities of GBP710m as at 30th June 2023 (2022: 30 June GBP721m;
31 December GBP722m), of which GBP310m was undrawn (2022: 30 June
GBP257m; 31 December GBP323m). Liquidity stood at GBP471m on 30
June 2023 (30 June 2022: GBP416m; 31 December 2022: GBP494m). We
define liquidity as undrawn committed debt facilities plus our cash
on balance sheet, less the cash in China which is used as
collateral against an equivalent bi-lateral loan in the UK.
The Group's debt facilities have two financial covenants: the
ratios of net debt to EBITDA (maximum 3.25x limit) and EBITDA to
interest (minimum 4x limit). Certain adjustments are made to the
net debt calculations for bank covenant purposes, the most
significant of which is to exclude the impact of IFRS 16.
Return on Invested Capital
ROIC is calculated as trading profit less amortisation of
acquired intangibles plus share of post-tax profit of joint
ventures and associates for the previous 12 months after tax,
divided by the average (being the average of the opening and
closing balance sheet) invested capital (defined as: total assets
excluding cash plus non-interest-bearing liabilities), at the
average foreign exchange rate for the year. In the period, ROIC was
8.6%, down from 10.7% at 31 December 2022, reflecting the reduction
in rolling 12-month trading profit.
Pensions
The Group has a limited number of historical defined benefit
plans located mainly in the UK, USA, Germany and Belgium. The main
plans in the UK and USA are largely closed to further benefits
accrual. In the funded UK plan, an insurance asset from PIC matches
the remaining pension liabilities of the UK Plan, with the result
that the Company no longer bears any investment, longevity,
interest rate or inflation risks in respect of this UK Plan. The
Group's net pension liability on 30 June 2023 was GBP50.8m (2022
full year: GBP56.1m deficit). The improvement is principally due to
a GBP3.8m gain from changes to actuarial assumptions which was
mainly due to an increase in bond yields.
Principal Risks and Uncertainties
Risk Management
The Board exercises oversight of the Group's principal risks,
undertaking a specific review of the way in which the Group manages
those risks. The Group undertakes a continuous process to identify
and review risk. This assessment undergoes a formal review at
half-year and at year end. The principal risks identified are
actively managed in order to mitigate exposure. The risks are
analysed in the context of our business structure which gives
protection against a number of principal risks we face with
diversified currencies, a widespread customer base, local
production matching the diversity of our markets and intensive
training of our employees. Additionally, we seek to mitigate risk
through contractual measures. Where cost-effective, the risk is
transferred to insurers. Our processes are not designed to
eliminate risk, but to identify our principal risks and seek to
reduce them to a reasonable level in the context of the delivery of
the Group's strategy.
Principal risks
The Board believes that there has been no material change to the
Group's principal risks and uncertainties during the year to date.
The principal risks and uncertainties faced by the Group therefore
remain those as set out on pages 27 to 33 of our 2022 Annual
Report. The risks identified are those the Board considers to be
the most relevant to the Group in relation to their potential
impact on the achievement of its Strategic Objectives. All of the
risks set out could materially affect the Group, its businesses,
future operations and financial condition, and could cause actual
results to differ materially from expected or historical results.
The Group continues to focus on risk mitigation. These risks are
not the only ones that the Group faces or will face. Some risks are
not yet known and some currently not deemed to be material could
become so.
Risk
End market risks Protectionism and globalisation Product quality failure
Vesuvius suffers an The Vesuvius business Vesuvius staff/contractors
unplanned drop in demand, model cannot adapt or are injured at work
revenue and/or margin respond quickly enough or customers, staff
because of market volatility to threats from protectionism or third parties suffer
beyond its control and globalisation physical injury or
financial loss because
of failures in Vesuvius
products
-------------------------------- --------------------------------
Complex and changing Failure to secure innovation Business interruption
regulatory environment Vesuvius fails to achieve Vesuvius loses production
Vesuvius experiences continuous improvement capacity or experiences
a contracting customer in its products, systems supply chain disruption
base or increased transaction and services due to physical site
and administrative damage (accident, fire,
costs due to compliance natural disaster, terrorism)
with changing regulatory or other events such
requirements as industrial action,
cyber attack or global
health crises
-------------------------------- --------------------------------
People, culture and Health and safety Environmental, Social
performance Vesuvius staff or contractors and Governance (ESG)
Vesuvius is unable are injured at work criteria
to attract and retain because of failures Vesuvius fails to
the right calibre of in Vesuvius' operations, capitalise on the opportunity
staff, fails to instil equipment or processes to help its customers
an appropriate culture significantly reduce
or fails to embed the their carbon emissions
right systems to drive as environmental pressure
personal performance grows on the steel
in pursuit of the Group's industry or Vesuvius
long-term growth fails to meet the expectations
of its various stakeholders
including employees
and investors
-------------------------------- --------------------------------
With regard to the remainder of the year, the Board is
particularly cognisant of the following areas of risk:
End market risk : The Board continues to monitor the
implications of the changing global economic environment, with
short term forecasts for steel volumes and automotive output still
subdued (despite the longer term growth trend continuing). Ongoing
inflationary pressures and interest rate levels also continue to be
closely monitored. Whilst the geographic diversity of our business
and our presence in both mature and developing markets provides
robust mitigation to any regional disruptions or economic decline,
the potential effects of this global economic uncertainty continue
to be watched.
Protectionism and globalisation : The potential impacts of
global political uncertainty are kept under close review, such as
the effects of the Russia-Ukraine war and the international
dialogue ongoing between China and the USA, which challenge the
more recent historical trends towards greater globalisation. T he
Board continues to consider security of supply of raw materials and
access to other resources, including energy, which could impact
both our operations and those of our customers in this context.
Cyber Security
In February 2023, the Group was the subject of a cyber incident
involving unauthorised access to our IT systems. This required the
instigation of the Group's Cyber Incident Plan. Our systems were
shut down to contain the incident on a precautionary basis, and our
sites implemented their business continuity plans to maintain their
operations. The results of the initial investigation have been
considered by the Board and further mitigating actions are being
executed to improve the Group's cyber resilience for the future.
Going forward, consideration will be given to additional strategic
and operational improvements for the Group's systems and processes,
to reduce the potential for future attacks and further improve the
Group's resilience for dealing with such incidents.
Climate Change
The Group's overall risk management processes also incorporate
consideration of the potential impact of climate-related risks on
the Group. The Group does not regard climate change itself to
represent a material stand-alone risk for the Group's operations.
Whilst a significant proportion of the Group's revenue is generated
from Steel manufacture and automotive castings, industries that are
under transition as a result of their focus on improving
environmental performance, we believe these changes will be
positive for the Group. The opportunities in the Group's business
strategy, which is founded on helping our customers to improve
their manufacturing efficiency and the quality of their products -
and therefore reducing their climate impact - will play a critical
part in the development of the Group going forward. We also see
potential benefits for the Group from the acceleration of the
energy transition, as this will create continued demand for the
high quality steel that is produced using Vesuvius' products and
solutions.
The Group continues to recognise that climate change could
present further uncertainty for the Group in terms of increased
regulation, evolution of the geographical distribution of our
customer base and the costs of meeting more onerous disclosure
requirements. The risks we associate with our sustainability
performance and our end customers' sustainability transition -
badged as ESG - are identified as a separate element of the Group
risk register, recognising the work Vesuvius can do to mitigate the
environmental impact of our customers' processes. Other elements of
this risk are incorporated into the appropriate Principal Risk and
Uncertainties that the Group has identified. In 2023, the Group has
continued its focus on the identified environmental sustainability
KPIs. Under the Group's Sustainability initiative we seek to drive
a lower CO(2) e emission intensity, reduce normalised energy usage,
and take the steps necessary to meet the target set of being CO(2)
e emissions net zero by 2050 at the latest.
Half Year Results for the six months ended 30 June 2023
Directors' responsibility statement
The Directors confirm that these condensed interim financial
statements have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and that the
interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
1) an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
2) material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The names and functions of the Directors of Vesuvius plc are as
follows:
Carl-Peter Forster Chairman
Patrick André Chief Executive
Mark Collis Chief Financial Officer
Douglas Hurt Non-executive Director,
Senior Independent Director
and
Chair of the Audit Committee
Kath Durrant Non-executive Director
and
Chair of the Remuneration
Committee
Carla Bailo Non-executive Director
Dinggui Gao Non-executive Director
Friederike Helfer Non-executive Director
On behalf of the Board
Mark Collis
Chief Financial Officer
26 July 2023
Independent review report to Vesuvius plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Vesuvius plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
Half Year Results of Vesuvius plc for the 6-month period ended 30
June 2023 (the "period").
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 UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed Group Balance Sheet as at 30 June 2023;
-- the Condensed Group Income Statement and Condensed Group
Statement of Comprehensive Income for the period then ended;
-- the Condensed Group Statement of Cash Flows for the period then ended;
-- the Condensed Group Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Results of Vesuvius plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). 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 Half Year
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Half
Year Results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Half Year Results, including
the interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Results based on our review.
Our conclusion, including our Conclusion relating to going concern,
is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
26 July 2023
Condensed Group Income Statement
For the six months ended 30 June 2023
Half year 2023 (Unaudited) Half year 2022 (Unaudited) Full year 2022
----------------------------------- ----------------------------------- ---------------------------------------
Separately Separately Separately
Headline reported Headline reported Headline reported
performance(1) items(1) Total performance(1) items(1) Total performance(1) items(1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- -----------
Revenue 2 995.3 - 995.3 1,015.9 - 1,015.9 2,047.4 - 2,047.4
Manufacturing costs (712.7) - (712.7) (718.0) - (718.0) (1,475.9) - (1,475.9)
Administration, selling
& distribution costs (177.7) - (177.7) (170.5) - (170.5) (344.3) - (344.3)
Trading profit(2) 2 104.9 - 104.9 127.4 - 127.4 227.2 - 227.2
Amortisation of acquired
intangible assets - (5.2) (5.2) - (5.1) (5.1) - (10.4) (10.4)
Operating profit/(loss) 2 104.9 (5.2) 99.7 127.4 (5.1) 122.3 227.2 (10.4) 216.8
-------------- ---------- ------- -------------- ---------- ------- -------------- ---------- -----------
Finance expense (12.7) - (12.7) (9.2) - (9.2) (20.8) - (20.8)
Finance income 7.2 - 7.2 2.6 - 2.6 9.4 - 9.4
-------------- ---------- ------- -------------- ---------- ------- -------------- ---------- -----------
Net finance costs 3 (5.5) - (5.5) (6.6) - (6.6) (11.4) - (11.4)
Share of post-tax profit
of joint ventures and
associates 0.5 - 0.5 1.0 - 1.0 1.2 - 1.2
Profit/(loss) before
tax 2 99.9 (5.2) 94.7 121.8 (5.1) 116.7 217.0 (10.4) 206.6
Income tax (charge)/credits 4 (27.3) 1.5 (25.8) (33.2) 1.4 (31.8) (57.2) 39.1 (18.1)
---------------------------------------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- -----------
Profit/(loss) 72.6 (3.7) 68.9 88.6 (3.7) 84.9 159.8 28.7 188.5
============================================== ===== ============== ========== ======= ============== ========== ======= ============== ========== ===========
Profit/(loss) attributable
to:
Owners of the parent 66.0 (3.7) 62.3 84.7 (3.7) 81.0 152.4 28.7 181.1
Non-controlling interests 6.6 - 6.6 3.9 - 3.9 7.4 - 7.4
---------------------------------------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- -----------
Profit/(loss) 72.6 (3.7) 68.9 88.6 (3.7) 84.9 159.8 28.7 188.5
============================================== ===== ============== ========== ======= ============== ========== ======= ============== ========== ===========
Earnings per share
- pence 5
Total operations - basic 24.5 (1) 23.2 31.4 (1) 30.0 56.5 (1) 67.2
-
diluted 24.3 (1) 23.0 31.2 (1) 29.8 56.1 (1) 66.7
============================================== ===== ============== ========== ======= ============== ========== ======= ============== ========== =========
(1) Headline performance and separately reported items are
non-GAAP measures. Headline performance is defined in Note 15.1 and
separately reported items are defined in Note 1.5.
(2) Trading profit is a non-GAAP measure and is defined in Note 15.4.
The above results were derived from continuing operations.
Manufacturing costs are costs of goods sold. The pre-tax separately
reported items would form part of Administration, selling &
distribution costs if classified within headline performance, which
including these amounts would total GBP182.9m (2022 half year: GBP
175.6 m, 2022 full year: GBP354.7m) .
Condensed Group Statement of Comprehensive Income
For the six months ended 30 June 2023
Unaudited Unaudited
Half
year Half year Full year
2023 2022 2022
Notes GBPm GBPm GBPm
---------------------------------------------------- ----- --------- --------- ---------
Profit 68.9 84.9 188.5
Items that will not subsequently be
reclassified to income statement:
--------- --------- ---------
Remeasurement of defined benefit assets/liabilities 3.8 27.9 27.4
Income tax relating to items not reclassified 4 (1.1) (7.9) (8.2)
Items that may subsequently be reclassified
to income statement:
Exchange differences on translation of the
net assets of foreign
Operations (82.6) 100.4 96.7
Exchange differences arising on translation
of net investment hedges 10.4 (11.6) (20.7)
Net change in costs of hedging (1.2) - -
Change in the fair value of the hedging
instrument (2.0) 6.8 8.3
Amounts reclassified from the income
statement 3.4 (7.1) (7.5)
---------
Other comprehensive (loss)/ income,
net of income tax (69.3) 108.5 96.0
Total comprehensive (loss)/ income (0.4) 193.4 284.5
==================================================== ===== ========= ========= =========
Total comprehensive income attributable
to:
Owners of the parent (4.5) 186.9 276.5
Non-controlling interests 4.1 6.5 8.0
Total comprehensive (loss)/ income (0.4) 193.4 284.5
---------------------------------------------------- ----- --------- --------- ---------
The above results were derived from continuing operations.
Condensed Group Statement of Cash Flows
For the six months ended 30 June 2023
Unaudited Unaudited
Half
year Half year Full year
2023 2022 2022
Notes GBPm GBPm GBPm
----------------------------------------------- ----- --------- --------- ---------
Cash flows from operating activities
Cash generated from operations 8 106.8 69.0 268.3
Interest paid (8.4) (7.4) (15.6)
Interest received 6.0 2.1 6.3
Income taxes paid (23.2) (23.6) (47.9)
Net cash inflow from operating activities 81.2 40.1 211.1
Cash flows from investing activities
--------- --------- ---------
Capital expenditure (41.9) (38.6) (89.2)
Proceeds from the sale of property,
plant and equipment 4.2 1.3 3.1
Acquisition of subsidiaries and joint
ventures, net of cash acquired - 0.5 (3.5)
Dividends received from joint ventures - - 1.3
Net cash outflow from investing activities (37.7) (36.8) (88.3)
Net cash inflow before financing activities 43.5 3.3 122.8
Cash flows from financing activities
--------- --------- ---------
Proceeds from borrowings 7 16.0 50.1 18.7
Repayment of borrowings 7 (10.8) (9.1) (55.7)
Purchase of ESOP Shares (1.1) (1.9) (6.9)
Dividends paid to equity shareholders 6 (42.4) (40.5) (58.1)
Dividends paid to non-controlling shareholders (1.4) (1.3) (3.2)
--------- --------- ---------
Net cash outflow from financing activities (39.7) (2.7) (105.2)
----------------------------------------------- ----- --------- --------- ---------
Net increase in cash and cash equivalents 7 3.8 0.6 17.6
Cash and cash equivalents at 1 January 179.8 162.4 162.4
Effect of exchange rate fluctuations
on cash and cash equivalents (13.3) 9.2 (0.2)
Cash and cash equivalents at the end
of the reporting period 170.3 172.2 179.8
=============================================== ===== ========= ========= =========
Free cash flow 15.11
Net cash inflow from operating activities 81.2 40.1 211.1
Capital expenditure (41.9) (38.6) (89.2)
Proceeds from the sale of property,
plant and equipment 4.2 1.3 3.1
Dividends received from joint ventures - - 1.3
Dividends paid to non-controlling shareholders (1.4) (1.3) (3.2)
----------------------------------------------- ----- --------- --------- ---------
Free cash flow(1) 15.11 42.1 1.5 123.1
----------------------------------------------- ----- --------- --------- ---------
(1) For definitions of alternative
performance measures, refer to Note
15
----------------------------------------------- ----- --------- --------- ---------
Condensed Group Balance Sheet
As at 30 June 2023
Unaudited Unaudited
Half
year Half year Full year
2023 2022 2022
Notes GBPm GBPm GBPm
------------------------------------------- ----- --------- ---------- ---------
Assets
--------- ---------- ---------
Property, plant and equipment 414.1 380.2 417.6
Intangible assets 703.3 732.6 737.5
Employee benefits - surpluses 9 28.3 24.5 26.2
Interests in joint ventures and associates 12.3 14.5 13.0
Investments 0.7 0.8 0.5
Deferred tax assets 112.3 94.8 110.6
Other receivables 32.4 18.8 33.7
Derivative financial instruments 14 1.2 3.1 2.7
Total non-current assets 1,304.6 1,269.3 1,341.8
Cash and short-term deposits 7 173.2 177.2 184.2
Inventories 318.4 360.7 316.0
Trade and other receivables 485.3 547.1 476.9
Income tax receivable 8.7 2.3 15.3
Derivative financial instruments 14 0.1 0.2 0.1
Total current assets 985.7 1,087.5 992.5
Total assets 2,290.3 2,356.8 2,334.3
=========================================== ===== ========= ========== =========
Condensed Group Balance Sheet (continued)
As at 30 June 2023
Unaudited Unaudited
Half
year Half year Full year
2023 2022 2022
Notes GBPm GBPm GBPm
---------------------------------- ----- --------- ---------- ---------
Equity
--------- ---------- ---------
Issued share capital 27.8 27.8 27.8
Retained earnings 2,649.6 2,545.5 2,623.8
Other reserves (1,460.9) (1,381.7) (1,391.4)
--------- ---------- ---------
Equity attributable to the owners
of the parent 1,216.5 1,191.6 1,260.2
Non-controlling interests 62.1 59.8 59.4
---------------------------------- ----- --------- ---------- ---------
Total equity 1,278.6 1,251.4 1,319.6
---------------------------------- ----- --------- ---------- ---------
Liabilities
--------- ---------- ---------
Interest-bearing borrowings 7 320.2 348.2 327.2
Employee benefits - liabilities 9 79.1 78.5 82.3
Other payables 10.5 7.8 13.8
Provisions 13 47.7 36.0 49.3
Deferred tax liabilities 21.9 28.9 11.9
Total non-current liabilities 479.4 499.4 484.5
Interest-bearing borrowings 7 122.1 159.8 114.7
Trade and other payables 383.8 416.8 378.4
Income tax payable 11.3 11.9 19.6
Provisions 13 14.9 17.3 17.4
Derivative financial instruments 14 0.2 0.2 0.1
---------
Total current liabilities 532.3 606.0 530.2
---------------------------------- ----- --------- ----------
Total liabilities 1,011.7 1,105.4 1,014.7
---------------------------------- ----- ---------
Total equity and liabilities 2,290.3 2,356.8 2,334.3
================================== ===== ========= ========== =========
Condensed Group Statement of Changes in Equity
For the six months ended 30 June 2023
Issued Owners
share Other Retained of the Non-controlling Total
capital reserves earnings parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January 2023 27.8 (1,391.4) 2,623.8 1,260.2 59.4 1,319.6
Profit - - 62.3 62.3 6.6 68.9
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
assets/liabilities - - 3.8 3.8 - 3.8
Income tax relating to items
not reclassified - - (1.1) (1.1) - (1.1)
Exchange differences on translation
of the net assets of foreign
operations - (80.1) - (80.1) (2.5) (82.6)
Exchange differences arising
on translation of net investment
hedges - 10.4 - 10.4 - 10.4
Net change in costs of hedging - (1.2) - (1.2) - (1.2)
Change in the fair value of
the hedging instrument - (2.0) - (2.0) - (2.0)
Amounts reclassified from the
income statement - 3.4 - 3.4 - 3.4
Other comprehensive income/(loss),
net of income tax - (69.5) 2.7 (66.8) (2.5) (69.3)
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income/(loss) - (69.5) 65.0 (4.5) 4.1 (0.4)
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 4.3 4.3 - 4.3
Purchase of ESOP shares - - (1.1) (1.1) - (1.1)
Dividends paid (Note 6) - - (42.4) (42.4) (1.4) (43.8)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - (39.2) (39.2) (1.4) (40.6)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2023 27.8 (1,460.9) 2,649.6 1,216.5 62.1 1,278.6
------------------------------------ -------- --------- --------- ------- --------------- -------
Condensed Group Statement of Changes in Equity (continued)
For the six months ended 30 June 2023
Issued Owners
share Other Retained of the Non-controlling Total
capital reserves earnings parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January 2022 27.8 (1,467.6) 2,483.4 1,043.6 54.6 1,098.2
Profit - - 81.0 81.0 3.9 84.9
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
liabilities/assets - - 27.9 27.9 - 27.9
Income tax relating to items
not reclassified - - (7.9) (7.9) - (7.9)
Exchange differences on translation
of the net assets of foreign
operations - 97.8 - 97.8 2.6 100.4
Exchange differences arising
on translation of net investment
hedges - (11.6) - (11.6) - (11.6)
Net change in costs of hedging - - - - - -
Change in the fair value of
the hedging instrument - 6.8 - 6.8 - 6.8
Amounts reclassified from the
Income Statement - (7.1) - (7.1) - (7.1)
-------- --------- --------- ------- --------------- -------
Other comprehensive income/(loss),
net of income tax - 85.9 20.0 105.9 2.6 108.5
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income/(loss) - 85.9 101.0 186.9 6.5 193.4
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 3.5 3.5 - 3.5
Purchase of ESOP shares - - (1.9) (1.9) - (1.9)
Dividends paid (Note 6) - - (40.5) (40.5) (1.3) (41.8)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - (38.9) (38.9) (1.3) (40.2)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2022 27.8 (1,381.7) 2,545.5 1,191.6 59.8 1,251.4
Within other reserves as at 30 June 2023 is GBP1,499.0m (2022:
30 June and 31 December, GBP1,499.0m) arising from the demerger of
Cookson Group plc, being the excess of the Vesuvius plc share
capital of GBP1,777.9m over the total share capital and share
premium of Cookson Group plc as at 14 December 2012 of
GBP278.9m
Notes to the Condensed Group Financial Statements
1. Basis of preparation
1.1 Basis of accounting
These Condensed Group Financial Statements of Vesuvius plc
("Vesuvius" or the "Company") and its subsidiary and joint venture
companies (the "Group") have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
These Condensed Group Financial Statements have been prepared
using the same accounting policies as used in the preparation of
the Group's Annual financial statements for the year ended 31
December 2022, except for taxes on income in the interim period
which are accrued using the tax rate that would be applicable to
the expected total annual profit or loss. The assessment of the
Group's critical accounting estimates and judgements remain
consistent with the 2022 Annual Report and Financial Statements .
The Group's Annual report and financial statements for the year
ended 31 December 2022 were prepared in accordance with UK-adopted
international accounting standards (IFRS) and the requirements of
the Companies Act 2006.
The Condensed Group Financial Statements do not include all of
the information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements of the Group for the year-ended 31 December 2022. The
financial information presented in this document is unaudited but
has been reviewed by the Company's auditor.
The comparative figures for the financial year ended 31 December
2022 have been extracted from the Group's Annual Report and
Financial Statements for that financial year. Those accounts have
been reported on by the Company's auditor and delivered to
Companies House. The report of the auditor was unqualified, did not
include reference to any matters to which the auditor drew
attention by way of emphasis without qualifying its report and did
not contain a statement under section 498(2) or (3) of the
Companies Act 2006. These sections address whether proper
accounting records have been kept, whether the Company's accounts
are in agreement with those records and whether the auditor has
obtained all the information and explanations necessary for the
purposes of its audit.
1.2 Basis of consolidation
The Condensed Group Financial Statements incorporate the
financial statements of the Company and entities controlled by the
Company (its "subsidiaries"). Control exists when the Company has
the power to direct the relevant activities of an entity that
significantly affect the entity's return so as to have rights to
the variable return from its activities. In assessing whether
control exists, potential voting rights that are currently
exercisable are taken into account. The results of subsidiaries
acquired or disposed of during the year are included in the
Condensed Group Income Statement from the effective date of
acquisition or up to the effective date of disposal, as
appropriate.
The principal accounting policies applied in the preparation of
these Condensed Group Financial Statements are set out in the
Notes. These policies have been consistently applied to all of the
years presented, unless otherwise stated. Where necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with those detailed
herein to ensure that the Condensed Group Financial Statements are
prepared on a consistent basis. All intra-Group transactions,
balances, income and expenses are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's interest
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination together
with the non-controlling interests' share of profit or loss and
each component of other comprehensive income less their dividends
since the date of the combination. Their share of comprehensive
income/(loss) is attributed to the non-controlling interests even
if this results in the non-controlling interests having a deficit
balance.
1.3 Going concern
The Directors have prepared cash flow scenarios for the Group
for a period of at least 12 months from the date of approval of the
2023 Interim Condensed Financial Statements. These forecasts
reflect an assessment of current and future end market conditions,
and their impact on the Group's future trading performance.
The analysis undertaken includes a severe but plausible downside
scenario which assumes a decline in business activity and
profitability in H2 2023 (which it is assumed does not increase in
2024) to the level achieved in H2 2020, when the business
performance was most impacted by COVID. This down-side scenario
considered cost saving measures, in line with those implemented
during the actual H2 2020 period. Debt maturing during the period
is assumed to be re-financed and a normal continuation of dividend
payments was assumed. H2 2020 considered for the down-side scenario
simulation reflects the lowest half year performance in the last
five years. Relative to H1 2023, this downside scenario implies a
c.26% decline in sales and a c.46% decline in Trading Profit, with
no improvement from this level assumed in 2024.
Even in this downside scenario, the forecasts show that the
Group maintains considerable headroom against its covenants. Net
debt / EBITDA (pre-IFRS 16 in-line with the covenant calculation)
never exceeds 0.9x in the forecast period considered, compared to a
maximum acceptable leverage per covenant of 3.25x. Equally,
significant headroom is maintained in the down-side case for the
interest coverage covenant (EBITDA / interest, pre-IFRS16 in line
with covenant calculation): the lowest interest coverage in the
period is 20.8x compared to the minimum required by the covenant of
4.0x.
Based on the exercise described above and the Group's available
committed liquidity which currently stands at GBP471m, the
Directors consider that the Group and the Company have adequate
resources to continue in operational existence for a period of at
least 12 months from the date of signing of these Interim Condensed
Financial Statements. Accordingly, they continue to adopt a going
concern basis in preparing the Condensed Financial statements of
the Group and the Company.
1.4 Functional and presentational currency
The financial statements are presented in millions of pounds
sterling, which is the functional currency of the Company, and
rounded to one decimal place.
1.5 Disclosure of "separately reported items"
Columnar presentation
The Group has adopted a columnar presentation for its Condensed
Group Income Statement, to separately identify headline performance
results, as the Directors consider that this gives a useful view of
the underlying results of the ongoing business. As part of this
presentation format, the Group has adopted a policy of disclosing
separately on the face of its Group Income Statement, within the
column entitled 'Separately reported items', the effect of any
components of financial performance for which the Directors
consider separate disclosure would assist users both in a useful
understanding of the financial performance achieved for a given
year and in making projections of future results.
1.6 Disclosure of "separately reported items" (continued)
Separately reported items
Both materiality and the nature of the components of income and
expense are considered in deciding upon such presentation. Such
items may include, inter alia, the financial effect of exceptional
items which occur infrequently, such as major restructuring
activity (which may require more than one year to complete),
significant movement in the Group's deferred tax balances, items
reported separately for consistency, such as amortisation charges
relating to acquired intangible assets, profits or losses arising
on the disposal of continuing or discontinued operations and the
taxation impact of the aforementioned items reported
separately.
The amortisation charge in respect of intangible assets
recognised on business combinations is excluded from the trading
results of the Group since they are non-cash charges and are not
considered reflective of the core trading performance of the
Group.
In its adoption of this policy, the Company applies an
even-handed approach to both gains and losses and aims to be both
consistent and clear in its accounting and disclosure of such
items.
1.7 New and revised IFRS
Certain new accounting standards and interpretations have been
published that are applicable for periods commencing 1 January 2023
and others that are not mandatory for reporting periods commencing
on 1 January 2023 and have not been early adopted by the Group.
The Group is finalising its assessment of the impact of IFRS 17
Insurance Contracts and other new standards applicable for periods
commencing 1 January 2023 to ensure compliance. These are not
expected to have a significant impact on the Group's financial
position, performance, cash flows and disclosures.
Benchmark reform
The replacement of Libor with alternative interest rate
benchmarks is now well progressed and the Group has reviewed the
impact of this on its financial statements. The GBP385m central
bank facility signed on 5 July 2021 provides for the use of SONIA
and EURIBOR for GBP and EUR drawdowns respectively. As provided for
within the terms of the facility, SOFR was agreed as a replacement
reference rate for USD Libor in May 2023.
The Group's US Private Placement Notes, bilateral loan agreement
and cross-currency interest rate swaps are not exposed to Libor
rates and as a result are unaffected by the benchmark reform. The
Group concludes that benchmark reform has no material impact on its
financial statements. The Group also confirms it has made no
changes to its risk management strategy as a result of benchmark
reform.
OECD Pillar two model
The group is within the scope of the OECD Pillar two model
rules. Pillar two legislation was recently substantively enacted in
some of the territories in which the group operates and will come
into effect in these territories from 1 January 2024. At the
interim reporting date, none of the Pillar two legislation is
effective and so the group has no related current tax exposure.
On 20 June 2023, Finance (No.2) Act 2023 was substantively
enacted in the UK, introducing a global minimum effective tax rate
of 15%. The legislation implements a domestic top-up tax and a
multinational top-up tax, effective for accounting periods starting
on or after 31 December 2023. The Group does not account for
deferred tax on top-up taxes and therefore, there was no impact on
the recognition and measurement of deferred tax balances as a
result of the legislation being substantively enacted.
2 Segment information
Operating segments for continuing operations
The Group's operating segments are determined taking into
consideration how the Group's components are reported to the
Group's Chief Executive Officer, who makes the key operating
decisions and is responsible for allocating resources and assessing
performance of the components. Taking into account the Group's
management and internal reporting structure, the operating segments
are Steel Flow Control, Steel Advanced Refractories, Steel Sensors
& Probes and the Foundry Division. The principal activities of
each of these segments are described in the Operational Review.
Steel Flow Control, Steel Advanced Refractories and Steel
Sensors & Probes operating segments are aggregated into the
Steel reportable segment. In determining that aggregation is
appropriate, judgement is applied which takes into account the
economic characteristics of these operating segments which include
a similar nature of products, customers, production processes and
margins.
Revenue from contracts with customers
Revenue comprises the fair value of the consideration received
or receivable for goods supplied and services rendered to customers
after deducting rebates, discounts and value-added taxes, and after
eliminating sales within the Group. Revenue from contracts with
customers is recognised when control of the goods or services are
transferred to the customer, upon the completion of specified
performance obligations, at an amount that reflects the
considerations to which the Group expects to be entitled to in
exchange for these consumable products and associated services.
The revenue recognition policy applicable to the current and
comparative periods and information about the Group's performance
obligations was disclosed in Note 5 of the 2022 Annual Report and
Financial Statements.
Segmental analysis
Unaudited Half Year 2023
-------------------------------------------------------------------
Flow Advanced Sensors
Control Refractories & Probes Steel Foundry Total
--------- -------------- ---------- --------
GBPm GBPm GBPm
------------------------------- --------- -------------- ---------- -------- -------- --------
Segment revenue 401.8 289.6 20.1 711.5 283.8 995.3
at a point in time 710.7 283.8 994.5
Over time 0.8 - 0.8
-------------------------------- --------- -------------- ---------- -------- -------- --------
Segment adjusted EBITDA
* 94.3 38.6 132.9
Segment depreciation (19.5) (8.5) (28.0)
-------------------------------- --------- -------------- ---------- -------- -------- --------
Segment trading profit 74.8 30.1 104.9
-------------------------------- --------- -------------- ---------- -------- --------
Return on sales # 10.5% 10.6% 10.5%
Amortisation of acquired
intangible assets (5.2)
Operating profit 99.7
Net finance costs (5.5)
Share of post-tax profit
of joint ventures 0.5
-------------------------------- --------- -------------- ---------- -------- -------- --------
Profit before tax 94.7
-------------------------------- --------- -------------- ---------- -------- -------- --------
Capital expenditure additions 33.5 11.7 45.2
Inventory 259.5 58.9 318.4
Trade debtors 286.4 103.0 389.4
Trade creditors (183.5) (62.3) (245.8)
-------------------------------- --------- -------------- ---------- -------- -------- --------
2 Segment information (continued)
Unaudited Half Year 2022
-------------------------------------------------------------
Flow Advanced Sensors
Control Refractories & Probes Steel Foundry Total
-------- ------------- --------- -------
GBPm GBPm GBPm
------------------------------ -------- ------------- --------- ------- ------- -------
Segment revenue 402.6 320.8 20.6 744.0 271.9 1,015.9
at a point in time 743.3 271.9 1,015.2
Over time 0.7 - 0.7
------------------------------- -------- ------------- --------- ------- ------- -------
Segment adjusted EBITDA
* 119.5 34.1 153.6
Segment depreciation (17.8) (8.4) (26.2)
------------------------------- -------- ------------- --------- ------- ------- -------
Segment trading profit 101.7 25.7 127.4
------------------------------- -------- ------------- --------- ------- -------
Return on sales # 13.7% 9.5% 12.5%
Amortisation of acquired
intangible assets (5.1)
Operating profit 122.3
Net finance costs (6.6)
Share of post-tax profit
of joint ventures 1.0
------------------------------- -------- ------------- --------- ------- ------- -------
Profit before tax 116.7
------------------------------- -------- ------------- --------- ------- ------- -------
Capital expenditure additions 33.2 5.0 38.2
Inventory 296.7 64.0 360.7
Trade debtors 334.2 103.9 438.1
Trade creditors (210.3) (68.6) (278.9)
------------------------------- -------- ------------- --------- ------- ------- -------
Full Year 2022
---------------------------------------------------------------
Flow Advanced Sensors
Control Refractories & Probes Steel Foundry Total
-------- ------------- --------- --------
GBPm GBPm GBPm
------------------------------ -------- ------------- --------- -------- ------- --------
Segment revenue 810.9 645.3 40.2 1,496.4 551.0 2,047.4
at a point in time 1,493.7 551.0 2,044.7
Over time 2.7 - 2.7
------------------------------- -------- ------------- --------- -------- ------- --------
Segment adjusted EBITDA
* 210.6 72.1 282.7
Segment depreciation (37.9) (17.6) (55.5)
------------------------------- -------- ------------- --------- -------- ------- --------
Segment trading profit 172.7 54.5 227.2
------------------------------- -------- ------------- --------- -------- -------
Return on sales # 11.5% 9.9% 11.1%
Amortisation of acquired
intangible assets (10.4)
Operating profit 216.8
Net finance costs (11.4)
Share of post-tax profit
of joint ventures 1.2
------------------------------- -------- ------------- --------- -------- ------- --------
Profit before tax 206.6
------------------------------- -------- ------------- --------- -------- ------- --------
Capital expenditure additions 85.2 18.7 103.9
Inventory 259.6 56.4 316.0
Trade debtors 288.0 92.8 380.8
Trade creditors (177.2) (62.3) (239.5)
------------------------------- -------- ------------- --------- -------- ------- --------
# Return on sales is defined in note 15.3
* Adjusted EBITDA is defined in note 15.13
2 Segment information (continued)
External revenue Non-current assets
------------------------------------------- -------------------------------------------
Unaudited Half Unaudited Half Unaudited Half Unaudited Half
year year Full year year year Full year
2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------------- --------------- --------- --------------- --------------- ---------
EMEA 347.5 385.8 741.6 486.0 467.6 500.0
Asia 284.2 273.6 565.2 216.7 231.4 237.0
North America 277.9 265.3 549.1 410.0 405.0 384.3
South America 85.7 91.2 191.5 50.1 42.8 44.3
Continuing
operations 995.3 1,015.9 2,047.4 1,162.8 1,146.8 1,165.6
---------------- --------------- --------------- --------- --------------- --------------- ---------
External revenue disclosed in the table above is based upon the
geographical location from which the products and services are
invoiced. Non-current assets exclude employee benefits net
surpluses and deferred tax assets. Information relating to the
Group's products and services is given in the Strategic Report as
disclosed in the 2022 Annual Report and Financial Statements. The
Group is not dependent on any single customer for its revenue and
no single customer, for the years presented in the tables above,
accounts for more than 10% of the Group's total external revenue.
GBP34.8m (2022 half year GBP33.0m; 2022 full year GBP70.9m) of
revenue was generated from the UK, and total non-current assets in
the UK amounted to GBP76.4m (2022 half year GBP91.7m; 2022 full
year GBP93.9m).
3 Net finance costs
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
GBPm GBPm GBPm
---------------------------------------- ---------- ---------- ---------
Interest payable on borrowings
Loans and overdrafts 8.9 6.7 15.4
Interest on lease liabilities 1.0 0.8 1.9
Amortisation of capitalised arrangement
costs 0.5 0.5 1.0
---------------------------------------- ---------- ---------- ---------
Total interest payable on borrowings 10.4 8.0 18.3
Interest on net retirement benefits
obligations 1.1 0.7 1.4
Adjustments to discounts on provisions
and other liabilities 1.2 0.5 1.1
Adjustments to discounts on receivables (0.7) (0.3) (0.6)
Finance income (6.5) (2.3) (8.8)
---------------------------------------- ---------- ---------- ---------
Total net finance costs 5.5 6.6 11.4
---------------------------------------- ---------- ---------- ---------
Within the table above, total finance costs are GBP12.7m (2022
half year: GBP9.2m, 2022 full year: GBP20.8m) and total finance
income is GBP7.2m (2022 half year: GBP2.6m, 2022 full year:
GBP9.4m).
4 Income tax
A key measure of the Group's tax burden is the headline
effective tax rate, which the Group calculates on the income tax
associated with headline performance, divided by the headline
profit before tax excluding the Group's share of post-tax profit of
joint ventures. The Group's headline effective tax rate was in-line
with expectations at 27.5% in H1 2023 (2022 half year 27.5%; 2022
full year 26.5%) based on the income tax charge associated with
headline performance of GBP27.3m (2022 half year GBP33.2m; 2022
full year GBP57.2m).
The Group's total net income tax charge reflected in the
Condensed Group Income Statement include a credit of GBP1.5m (2022
half year GBP1.4m; 2022 full year GBP39.1m) relating to separately
reported items comprising a credit of GBP1.5m (2022 half year
GBP1.4m; 2022 full year GBP2.7m) relating to the amortisation of
intangible assets and a credit of GBPnil (2022 half year GBPnil;
2022 full year GBP36.4m) mainly relating to the recognition of UK
deferred tax assets.
The Group's total net income tax charge reflected in the
Condensed Group Statement of Comprehensive Income was GBP1.1m (2022
half year GBP7.9m; 2022 full year: GBP8.2m). It was in respect of
tax on net actuarial gains and losses on employee benefits.
5 Earnings per share ("EPS")
5.1 Earnings for EPS
Basic and diluted EPS from continuing operations are based upon
the profit attributable to owners of the parent, as reported in the
Condensed Group Income Statement. The table below reconciles these
different profit measures.
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
GBPm GBPm GBPm
------------------------------------ ---------- ---------- ---------
Profit attributable to owners of
the parent 62.3 81.0 181.1
Adjustments for separately reported
items:
Amortisation of acquired intangible
assets 5.2 5.1 10.4
Income tax (credit)/charge (1.5) (1.4) (39.1)
Headline profit attributable to
owners of the parent 66.0 84.7 152.4
-------------------------------------- ---------- ---------- ---------
5.2 Weighted average number of shares
Unaudited Half year Unaudited Half year Full year
2023 2022 2022
millions millions millions
---------------------------------------------------- ------------------- ------------------- ---------
For calculating basic and headline EPS 269.0 270.1 269.6
Adjustment for potentially dilutive ordinary shares 2.1 1.4 1.9
---------------------------------------------------- ------------------- ------------------- ---------
For calculating diluted and diluted headline EPS 271.1 271.5 271.5
---------------------------------------------------- ------------------- ------------------- ---------
For the purposes of calculating diluted and diluted headline
EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would
be issued were all outstanding share options to vest in full,
relating to the Company's share-based payment plans. Potential
ordinary shares are only treated as dilutive when their conversion
to ordinary shares would decrease EPS or increase loss per
share.
5.3 Per share amounts
Unaudited Half year Unaudited Half year Full year 2022
2023 2022
Pence Pence pence
-------------------------------- ------------------- -------------------
Earnings per share - basic 23.2 30.0 67.2
- diluted 23.0 29.8 66.7
- headline (1) 24.5 31.4 56.5
- diluted headline 24.3 31.2 56.1
---------------------------------- ------------------- ------------------- --------------
(1) For definition of headline earnings per share, refer to Note
15.8
6 Dividends
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- ---------
Amounts recognised as dividends and paid to equity
shareholders
during the period
Final dividend for the year-ended 31 December
2021 of 15.0p per ordinary share - 40.5 40.5
Interim dividend for the year-ended 31
December 2022 of 6.5p per ordinary share - - 17.6
Final dividend for the year-ended 31 December
2022 of 15.75p per ordinary share 42.4 - -
42.4 40.5 58.1
---------------------------------------------- ---------- ---------- ---------
The Directors have declared an interim dividend of 6.8p in
respect of the year-ending 31 December 2023.
7 Reconciliation of movement in net debt
Balance Fair
as at Foreign value Balance
1 Jan exchange gains/ Non-cash Cash as at 30
2023 adjustments (losses) movements(*) flow June 2023
GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ------------- --------- ------------- ------ ----------
Cash and cash equivalents
Cash at bank and
in hand 184.2 (13.4) - - 2.4 173.2
Short term deposits - - - - - -
Bank overdrafts (4.4) 0.1 - - 1.4 (2.9)
-------------------------- -------- ------------- --------- ------------- ------ ----------
179.8 (13.3) - - 3.8 170.3
Borrowings, excluding
bank overdrafts (440.2) 14.5 - (10.8) (5.2) (441.7)
Capitalised arrangement
costs 2.7 - - (0.4) - 2.3
Derivative financial
instruments 2.7 - (1.6) - - 1.1
Net debt (255.0) 1.2 (1.6) (11.2) (1.4) (268.0)
-------------------------- -------- ------------- --------- ------------- ------ ----------
(*) GBP10.8m (2022 half year: GBP5.5m) of new leases were
entered into during the year.
Balance Fair
as at Foreign value Balance
1 Jan exchange gains/ Non-cash Cash as at 31
2022 adjustments (losses) movements(*) flow Dec 2022
GBPm GBPm GBPm GBPm GBPm
-------------------------- ------- ------------- --------- ------------- ----- ---------
Cash and cash equivalents
Cash at bank and
in hand 169.1 0.1 - - 15.0 184.2
Short term deposits - - - - - -
Bank overdrafts (6.7) (0.3) - - 2.6 (4.4)
--------------------------- ------- ------------- --------- ------------- ----- ---------
162.4 (0.2) - - 17.6 179.8
Borrowings, excluding
bank overdrafts (440.3) (25.4) - (11.5) 37.0 (440.2)
Capitalised borrowing
costs 3.3 - - (0.6) - 2.7
Derivative financial
instruments (2.5) - 5.2 - - 2.7
Net debt (277.1) (25.6) 5.2 (12.1) 54.6 (255.0)
--------------------------- ------- ------------- --------- ------------- ----- ---------
(*) GBP11.5m (2021: GBP17.1m) of new leases were entered into
during the year.
7 Reconciliation of movement in net debt (continued)
Net debt is a measure of the Group's net indebtedness to banks
and other external financial institutions and comprises the total
of cash and short-term deposits, current and non-current
interest-bearing borrowings, derivative financial instruments and
lease liabilities.
Cash is held both centrally and in operating territories. There
is no restricted cash. For certain territories including Argentina,
China, India and Russia cash is more readily used locally than for
broader group purposes.
8 Cash Generated from Operations
Unaudited
Half Unaudited
year Half year
2023 2022
GBPm GBPm
----------------------------------------- --- --------- ----------
Operating profit 99.7 122.3
Adjustments for:
Amortisation of acquired intangible
assets 5.2 5.1
Trading Profit 104.9 127.4
Profit on disposal of non-current
assets (2.3) (0.1)
Depreciation and amortisation 28.0 26.2
Defined benefit retirement
plans net charge 3.0 3.0
Net increase in inventories (18.1) (40.2)
Net increase in trade receivables (31.3) (62.9)
Net increase in trade payables 18.1 9.8
Net decrease in other working
capital 9.3 10.0
Outflow related to restructuring
charges (1.0) (0.5)
Defined benefit retirement
plans cash outflows (3.2) (2.8)
Vacant site remediation costs
paid (0.6) (0.9)
Cash generated from operations 106.8 69.0
----------------------------------------------- --------- ----------
Full year
2022
GBPm
------------------------------------------ --------- ----------
Operating profit 216.8
Adjustments for:
Amortisation of acquired intangible
assets 10.4
Trading Profit 227.2
Profit on disposal of non-current
assets (0.1)
Depreciation and amortisation 55.5
Defined benefit retirement plans net
charge 5.6
Net decrease in inventories 2.2
Net increase in trade receivables (9.2)
Net decrease in trade payables (28.0)
Net decrease in other working capital 24.7
Outflow related to restructuring charges (1.5)
Defined benefit retirement plans cash
outflows (6.3)
Vacant site remediation costs paid (1.8)
Cash generated from operations 268.3
------------------------------------------ --------- ----------
9 Employee benefits
The net employee benefits liability as at 30 June 2023 was
GBP50.8m (2022 half year: GBP54.0m; 2022 full year: GBP56.1m)
derived from an actuarial valuation of the Group's defined benefit
pension and other post-retirement obligations as at that date.
All the liabilities in the UK were insured following a buy-in
agreement with Pension Insurance Corporation plc ("PIC") in 2021.
This buy-in agreement secured an insurance asset from PIC that
matches the remaining pension liabilities of the UK Plan, with the
result that the Company no longer bears any investment, longevity,
interest rate or inflation risks in respect of the UK Plan.
As disclosed in note 26 of the 2022 Annual Report and Financial
Statements, the above amounts may materially change in the next 12
months if there is a change in assumptions.
Unaudited Unaudited
Half year Half year Full year
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ---------
Employee benefits - net surpluses
UK defined benefit pension plans 26.7 23.3 24.5
ROW defined benefit pension plans 1.6 1.2 1.7
-------------------------------------- ---------- ---------- ---------
Net surpluses 28.3 24.5 26.2
-------------------------------------- ---------- ---------- ---------
Employee benefits - net liabilities
UK defined benefit pension plans (1.1) (1.6) (1.1)
US defined benefit pension plans (19.8) (21.8) (22.5)
Germany defined benefit pension plans (37.2) (34.7) (38.4)
ROW defined benefit pension plans (11.2) (13.1) (10.9)
Other post-retirement benefit plans (9.8) (7.3) (9.4)
-------------------------------------- ---------- ---------- ---------
Net liabilities (79.1) (78.5) (82.3)
-------------------------------------- ---------- ---------- ---------
Net liabilities (50.8) (54.0) (56.1)
-------------------------------------- ---------- ---------- ---------
The expense recognised in the Condensed Group Income Statement
in respect of the Group's defined benefit retirement plans and
other post-retirement benefit plans is shown below.
Unaudited Half year Unaudited Half year
2023 2022 Full year 2022
GBPm GBPm GBPm
------------------------ ---------------------------------------- ------------------- ----------------------- --------------
In arriving at trading
profit
(as defined in Note
15.4) * within other manufacturing costs 0.7 0.8 1.7
* within administration, selling an
d distribution costs 2.3 2.2 3.9
In arriving at profit
before tax * within net finance costs 1.1 0.7 1.4
Total net charge 4.1 3.7 7.0
------------------------------------------------------------------ ------------------- ----------------------- --------------
10 Contingent liabilities
Vesuvius has extensive international operations and is subject
to various legal and regulatory regimes, including those covering
taxation and environmental matters.
Certain of Vesuvius' subsidiaries are subject to legacy matter
lawsuits, predominantly in the US, relating to a small number of
products containing asbestos manufactured prior to the acquisition
of those subsidiaries by Vesuvius. These suits usually also name
many other product manufacturers. To date, Vesuvius is not aware of
there being any liability verdicts against any of these
subsidiaries. Each year a number of these lawsuits are withdrawn,
dismissed or settled. The amount paid, including costs, in relation
to this litigation has not had a material adverse effect on
Vesuvius' financial position or results of operations.
As the settlement of many of the obligations for which reserve
is made is subject to legal or other regulatory process, the timing
and amount of the associated outflows is subject to some
uncertainty (see Note 30 of the 2022 Annual Report and Financial
Statements for further information). The amount paid, including
costs in relation to this litigation, has not had a material effect
on Vesuvius' financial position or results of operations in the
current period.
11 Related parties
The nature of related party transactions in H1 2023 are in line
with those transactions disclosed in Note 34 of the 2022 Annual
Report and Financial Statements. All transactions with related
parties are conducted on an arm's length basis and in accordance
with normal business terms. Transactions with joint ventures and
associates are consistent with those disclosed in Note 34 of the
2022 Annual Report and Financial Statements. Transactions between
related parties that are Group subsidiaries are eliminated on
consolidation.
Unaudited Unaudited
Half year Half year
2023 2022
Transactions with joint ventures and associate GBPm GBPm
----------------------------------------------- ---------- ----------
Sales to joint ventures 2.1 2.6
Purchases from joint ventures 14.5 19.4
Dividends received from joint ventures - -
Trade payables owed to joint ventures 9.9 11.4
Trade receivables owed by joint ventures 1.0 0.6
----------------------------------------------- ---------- ----------
There were no transactions with the associate in the period.
12 Acquisitions and divestments
There were no acquisitions or divestments in the period.
13 Provisions
Disposal,
closure
and environmental Restructuring
costs charges Other Total
GBPm GBPm GBPm GBPm
--------------------------------- ------------------ ------------- ----- -----
As at 1 January 2023 57.7 3.6 5.4 66.7
Exchange adjustments (2.7) 0.2 (0.1) (2.6)
Charge to Condensed Group Income
Statement 0.6 - 4.1 4.7
Adjustment to discount 1.2 - - 1.2
Cash spend (2.7) (1.0) (3.7) (7.4)
As at 30 June 2023 54.1 2.8 5.7 62.6
--------------------------------- ------------------ ------------- ----- -----
Disposal,
closure
and environmental Restructuring
costs charges Other Total
GBPm GBPm GBPm GBPm
--------------------------------- ------------------ ------------- ----- ------
As at 1 January 2022 41.7 5.0 4.0 50.7
Exchange adjustments 4.4 (0.4) 0.4 4.4
Charge to Condensed Group Income
Statement 2.0 - 5.7 7.7
Adjustment to discount 0.5 - - 0.5
Cash spend (3.7) (0.5) (5.8) (10.0)
As at 30 June 2022 44.9 4.1 4.3 53.3
--------------------------------- ------------------ ------------- ----- ------
Of the total provision balance at 30 June 2023 of GBP62.6m (30
June 2022: GBP53.3m), GBP47.7m (30 June 2022: GBP36.0m) is
recognised in the Group Balance Sheet within non-current
liabilities and GBP14.9m (30 June 2022: GBP17.3m) within current
liabilities.
In assessing the probable costs and realisation certainty of
provisions, reasonable assumptions are made. Changes to the
assumptions used could significantly alter the Directors'
assessment of the value, timing or certainty of the costs. The
nature of the provisions held remains consistent with those held at
31 December 2022 and further description is set out within Note 30
of the 2022 Annual Report and Financial Statements.
14 Financial instruments
The Company's financial assets are measured at amortised cost
with the exception of certain investments in debt, which are
measured at fair value through other comprehensive income, and
certain derivative instruments, which are measured at fair value
through profit or loss. Financial liabilities are measured at
amortised cost with the exception of certain derivative
instruments, which are measured at fair value through profit and
loss.
IFRS 13 Fair Value Measurement requires classification of
financial instruments within a hierarchy that prioritises the
inputs to fair value measurement. The three levels of the fair
value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for
identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable
for the asset or liability, either directly or indirectly;
Level 3 - Inputs that are not based on observable market
data.
The following table summarises Vesuvius' financial instruments
measured at fair value, and shows the level within the fair value
hierarchy in which the financial instruments have been
classified:
Unaudited Unaudited
Half year 2023 Half year 2022 Full year 2022
Assets Liabilities Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ----------- ------ ----------- ------ -----------
Investments (Level 2) 0.7 0.8 - 0.5 -
Derivatives not designated
for hedge
accounting purposes (Level
2) 0.1 (0.2) 0.2 (0.2) 0.1 (0.1)
Derivatives designated
for hedge
accounting purposes (Level
2) 1.2 - 3.1 - 2.7 -
---------------------------- ------ ----------- ------ ----------- ------ -----------
All of the derivative financial instruments not designated for
hedge accounting purposes reported in the table above will mature
within a year of the balance sheet date. There were no transfers
between fair value hierarchies during the period. The method for
determining the hierarchy and for valuing the financial instruments
is consistent with that used at year-end, as disclosed in Note 25
of the 2022 Annual Report and Financial Statements. Fair value
disclosures have not been made in respect of other financial assets
and liabilities on the basis that the carrying amount is deemed to
be a reasonable approximation of fair value.
The Group's Treasury department, acting in accordance with
policies approved by the Board, is principally responsible for
managing the financial risks faced by the Group. The Group's
activities expose it to a variety of financial risks, the most
significant of which are market risk and liquidity risk. The
condensed interim financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements; they should be read in conjunction with the
Group's 2022 Annual Report and Financial Statements, in which
further details of these financial risks were disclosed in Note 25.
There have been no changes in the risk management policies since
year end.
In June 2020 the Group executed a $86m Cross currency interest
rate swap ('CCIRS') with 3 of its relationship banks. The effect of
this is to convert the $86m Private Placement Notes issued in June
2020 into EUR76.6m. The timing and amount of the US Dollar
cashflows under the CCIRS exactly mirror those of the Private
Placement Notes and the maturity date of the CCIRS also matches the
repayment date of the Notes. The CCIRS would by default be revalued
through the Income Statement; however as it is in a designated
hedging relationship it is instead revalued through Other
Comprehensive Income. More specifically, the US Dollar exposure is
designated as a cashflow hedge of the underlying Private Placement
Notes and the Euro exposure is designated as a net investment hedge
of part of the Group's foreign operations. The CCIRS is presented
as a non-current asset or liability as it is expected to be settled
more than 12 months after the end of the reporting period.
With the exception of the CCIRS change in the fair value of
Derivatives outstanding at 30 June 2023 has been booked through the
Income Statement. All of the fair values shown in the table above
are classified under IFRS 13 as Level 2 measurements which have
been calculated using quoted prices from active markets, where
similar contracts are traded and the quotes reflect actual
transactions in similar instruments. All of the derivative assets
and liabilities not designated for hedge accounting purposes
reported in the table above will mature within a year of the
balance sheet date.
14 Financial instruments (continued)
The cross-currency interest rate swaps are fair valued at each
reporting date and the Group applies hedge accounting in accordance
with IFRS 9 such that the movement in fair value is accounted for
directly within equity. The USD component is designated as a
cashflow hedge of the $86m US Private Placement Notes. The Euro
component is designated as a net investment hedge of the Group's
Euro denominated net assets.
As at 30 June 2023, EUR244.0m (2022 half year: EUR249.0m; full
year: EUR246.0m) and $60.0m (2022 half year: $60.0m; full year:
$60.0m) of borrowings were designated as hedges of net investments
in EUR244.0m (2022 half year: EUR249.0m; full year: EUR246.0m) and
$60.0m (2022 half year: $60.0m; full year: $60.0m) worth of
overseas foreign operations. In addition, the EUR76.6m (2022 half
year: EUR76.6m; full year: EUR76.6m) CCIRS liability has been
designated as a net investment hedge of a further EUR76.6m (2022
half year: EUR76.6m; full year: EUR76.6m) worth of overseas foreign
operations.
As the value of the borrowings and the CCIRS liability exactly
matches the designated hedged portion of the net investments, the
relevant hedge ratio is 1:1. The net investment hedges are
therefore 100% effective with no ineffectiveness. It is noted that
hedge ineffectiveness would arise in the event there were
insufficient euro-denominated overseas foreign operations to be
matched against the EUR76.6m CCIRS liability.
As at 30 June 2023, the Group had $146.0m (2022 half year:
$146.0m; full year: $146.0m), EUR198.0m (2022 half year: EUR198.0m;
full year: EUR198.0m) and GBP28.0m (2022 half year: GBP28.0m; full
year: GBP28.0m) of US Private Placement Loan Notes (USPP)
outstanding, which carry a fixed rate of interest, representing 78%
(2022 half year: 68%; full year: 81%) of the Group's total
borrowings outstanding at that date. The Group had GBP47.5m (2022
half year: GBP102.0m; full year: GBP33.0m) and EUR46.0m (2022 half
year: EUR51.0m; full year: EUR48.0m) short-term drawdowns in
relation to its committed bank facilities, which carry floating
rates of interest, representing 22% (2022 half year: 32%; full
year: 19%) of the Group's total borrowings outstanding at 30 June
2023. Maturities of the corresponding USPP Notes were disclosed in
Note 25 to the 2022 Annual Report and Financial Statements.
The currency and interest rate profile of the Group's borrowings
is detailed in the tables below.
Financial liabilities (gross
borrowings)
Floating
Fixed rate rate Total
GBPm GBPm GBPm
------------------------ ------------- ---------- ------
Sterling 28.0 48.4 76.4
United States dollar 114.9 0.5 115.4
Euro 170.1 40.6 210.7
Other - 0.5 0.5
Capitalised costs (0.8) (1.5) (2.3)
As at 30 June 2023 312.2 88.5 400.7
------------------------ ------------- ---------- ------
Sterling 28.0 33.3 61.3
United States dollar 120.7 1.9 122.6
Euro 175.2 44.8 220.0
Capitalised costs (0.9) (1.8) (2.7)
As at 31 December 2022 323.0 78.2 401.2
------------------------ ------------- ---------- ------
14 Financial instruments (continued)
The maturity analysis of the Group's financial liabilities is
shown in the tables below. The cash flows shown are
undiscounted.
As at 30 June 2023 Within Between Between Over Total Carrying
one year 1-2 years 2-5 years 5 years contractual amount
cash flows
GBPm GBPm GBPm GBPm GBPm GBPm
Trade payables 245.8 - - - 245.8 245.8
Loans & overdrafts 47.9 56.2 211.1 128.2 443.4 403.0
Lease liabilities 10.6 9.4 15.0 14.0 49.0 41.6
Capitalised arrangement
fees - - - - - (2.3)
Derivative liability 0.2 - - - 0.2 0.2
------------------------- ---------- ----------- ----------- --------- ------------- -----------
Total financial
liabilities 304.5 65.6 226.1 142.2 738.4 688.3
------------------------- ---------- ----------- ----------- --------- ------------- -----------
As at 31 December Within Between Between Over 5 Total Carrying
2022 one year 1-2 years 2-5 years years contractual amount
cash flows
GBPm GBPm GBPm GBPm GBPm GBPm
Trade payables 239.5 - - - 239.5 239.5
Loans & overdrafts 52.6 9.2 255.3 133.4 450.5 403.8
Lease liabilities 12.3 9.2 13.2 13.5 48.2 40.8
Capitalised arrangement
fees - - - - - (2.7)
Derivative liability 0.1 - - - 0.1 0.1
------------------------- ---------- ----------- ----------- ------- ------------- ---------
Total financial
liabilities 304.5 18.4 268.5 146.9 738.3 681.5
------------------------- ---------- ----------- ----------- ------- ------------- ---------
In July 2022 and May 2023, the Group exercised its option to
request a one-year extension to the maturity of its GBP385m
committed bank facility. Following the requests GBP385m of the
facility matures in August 2026. At the time of the extension the
reference to USD LIBOR was replaced with reference to SOFR.
In H1 2023, the Group did not hold any borrowings for which the
interest payable referenced LIBOR benchmarks.
15 Alternative performance measures
The Company uses a number of Alternative Performance Measures
(APMs) in addition to those reported in accordance with IFRS. The
Directors believe that these APMs, listed below, are important when
assessing the underlying financial and operating performance of the
Group and its Divisions, providing management with key insights and
metrics in support of the ongoing management of the Group's
performance and cash flow. A number of these align with KPI's and
other key metrics used in the business and therefore are considered
useful to also disclose to the users of the financial statements.
The following APMs do not have standardised meaning prescribed by
IFRS and therefore may not be directly comparable to similar
measures presented by other companies.
15.1 Headline performance
Headline performance, reported separately on the face of the
Condensed Group Income Statement, is from continuing operations and
before items reported separately on the face of the Condensed Group
Income Statement.
15.2 Underlying revenue, underlying trading profit and underlying return on sales
Underlying revenue, underlying trading profit and underlying
return on sales are the headline equivalents of these measures
after adjustments to exclude the effects of changes in exchange
rates, business acquisitions and disposals. Reconciliations of
underlying revenue and underlying trading profit can be found in
the Financial Summary. Underlying revenue growth is one of the
Group's key performance indicators and provides an important
measure of organic growth of Group businesses between reporting
periods, by eliminating the impact of exchange rates, acquisitions
and disposals.
15.3 Return on Sales ('ROS')
ROS is calculated as trading profit divided by revenue. It is
one of the Group's key performance indicators and is used to assess
the trading performance of Group businesses. A calculation of ROS
is included in Note 2.
15.4 Trading profit/adjusted EBITA
Trading profit/adjusted EBITA is defined as operating profit
before separately reported items. It is one of the Group's key
performance indicators and is used to assess the trading
performance of Group businesses. It is also used as one of the
targets against which the annual bonuses of certain employees are
measured.
15.5 Headline profit before tax
Headline profit before tax is calculated as the net total of
trading profit, plus the Group's share of post-tax profit of joint
ventures and total net finance costs associated with headline
performance. It is one of the Group's key performance indicators
and is used to assess the financial performance of the Group as a
whole.
15.6 Headline effective tax rate ('ETR')
The Group's headline ETR is calculated on the income tax costs
associated with headline performance, divided by headline profit
before tax and before the Group's share of post-tax profit of joint
ventures and associates.
15.7 Headline earnings
Headline earnings is profit after tax before separately reported
items attributable to owners of the parent.
15.8 Headline earnings per share
Headline earnings per share is calculated by dividing headline
profit before tax less associated income tax costs, attributable to
owners of the parent by the weighted average number of ordinary
shares in issue during the year. It is one of the Group's key
performance indicators and is used to assess the underlying
earnings performance of the Group as a whole. It is also used as
one of the targets against which the annual bonuses of certain
employees are measured. Headline earnings per share is disclosed in
Note 5.
15 Alternative performance measures (continued)
15.9 Adjusted operating cash flow
Adjusted operating cash flow is cash generated from operations
before restructuring and vacant site remediation costs but after
deducting capital expenditure net of asset disposals. It is used in
calculating the Group's cash conversion.
Unaudited Unaudited Full year
Half Half
year year
2023 2022 2022
GBPm GBPm GBPm
------------------------------------------- ---------- ---------- ----------
Cash generated from continuing operations 106.8 69.0 268.3
-------------------------------------------- ---------- ---------- ----------
Add: Outflows relating to restructuring
charges 1.0 0.5 1.5
Add: Vacant site remediation costs
paid 0.6 0.9 1.8
Less: Capital expenditure (41.9) (38.6) (89.2)
Add: Proceeds from the sale of property,
plant and equipment 4.2 1.3 3.1
Adjusted operating cash flow 70.7 33.1 185.5
Trading Profit 104.9 127.4 227.2
-------------------------------------------- ---------- ---------- ----------
Cash Conversion 67% 26% 82%
-------------------------------------------- ---------- ---------- ----------
15.10 Cash conversion
Cash conversion is calculated as adjusted operating cash flow
divided by trading profit. It is useful for measuring the rate at
which cash is generated from trading profit. It is also used as one
of the targets against which the annual bonuses of certain
employees are measured. The calculation of cash conversion is
detailed in Note 15.9 above.
15.11 Free cash flow
Free cash flow is defined as net cash flow from operating
activities after net outlays for the purchase and sale of property,
plant and equipment, dividends from joint ventures and dividends
paid to non-controlling shareholders. It is one of the Group's key
performance indicators and is used to assess the underlying cash
generation of the Group and is one of the measures used in
monitoring the Group's capital. A reconciliation of free cash flow
is included underneath the Condensed Group Statement of Cash
Flows.
15.12 Average trade working capital to sales ratio
The average trade working capital to sales ratio is calculated
as the percentage of average trade working capital balances to the
total revenue for the previous 12 months, at constant currency.
Average trade working capital (comprising inventories, trade
receivables and trade payables) is calculated as the average of the
13 previous month-end balances. It is one of the Group's key
performance indicators and is useful for measuring the level of
working capital used in the business and is one of the measures
used in monitoring the Group's capital.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
GBPm GBPm GBPm
------------------------------- ----------- ----------- ----------
Average trade working capital 480.4 426.4 487.3
Last 12 months total revenue 1,989.9 1,868.6 2,047.4
Average trade working capital
to sales ratio 24.1% 22.8% 23.8%
-------------------------------- ----------- ----------- ----------
15 Alternative performance measures (continued)
15.13 Adjusted earnings before interest, tax, depreciation and
amortisation (adjusted EBITDA )
Adjusted EBITDA is calculated as the total of trading profit
before depreciation and amortisation of non-acquired intangible
assets. It is used in the calculation of the Group's interest cover
and net debt to adjusted EBITDA ratios. A reconciliation of
adjusted EBITDA is included in Note 2.
15.14 Net interest payable on borrowings
Net interest payable on borrowings is calculated as total
interest payable on borrowings less finance income, excluding
interest on net retirement benefit obligations, adjustments to
discounts and any item separately reported. It is used in the
calculation of the Group's interest cover ratio.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ----------
Total interest payable on borrowings (note
3) 10.4 8.0 18.3
Finance income (note 3) (6.5) (2.3) (8.8)
Net interest payable on borrowings 3.9 5.7 9.5
--------------------------------------------- ----------- ----------- ----------
15.15 Interest cover
Interest cover is the ratio of adjusted EBITDA for the last 12
months to net interest payable on borrowings for the last 12
months. It is one of the Group's key performance indicators and is
used to assess the financial position of the Group and its ability
to fund future growth. This measure is also a component of the
Group's covenant calculations.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------------- ----------- ----------- ----------
Last 12 months adjusted EBITDA 262.0 248.0 282.7
Last 12 months net interest payable on borrowings 7.7 8.5 9.5
Interest cover 34.0x 29.2x 29.8x
---------------------------------------------------- ----------- ----------- ----------
15.16 Net debt
Net debt comprises the net total of current and non-current
interest-bearing borrowings (including IFRS16 lease liabilities),
cash and short-term deposits and derivative financial instruments.
Net debt is a measure of the Group's net indebtedness to banks and
other external financial institutions. A reconciliation of the
movement in net debt is included in Note 7.
15.17 Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is the ratio of net debt at the
period-end to adjusted EBITDA for the last 12 months. It is one of
the Group's key performance indicators and is used to assess the
financial position of the Group and its ability to fund future
growth and is one of the measures used in monitoring the Group's
capital.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- ----------
Net debt (note 7) 268.0 327.7 255.0
Last 12 months adjusted EBITDA (note 2) 262.0 248.0 282.7
Net debt to adjusted EBITDA 1.0x 1.3x 0.9x
------------------------------------------ ----------- ----------- ----------
15 Alternative performance measures (continued)
15.18 Return on invested capital (ROIC)
The Group has adopted ROIC as its key measure of return from the
Group's invested capital. ROIC is calculated as trading profit less
amortisation of acquired intangibles plus share of post-tax profit
of joint ventures and associates for the previous 12 months after
tax, divided by the average (being the average of the opening and
closing balance sheet) invested capital (defined as: total assets
excluding cash plus non-interest-bearing liabilities), at the
average foreign exchange rate for the year.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
GBPm GBPm
---------------------------------------- ---------- ---------- ----------
Average invested capital 1,574.4 1,437.9 1,503.6
Trading profit (note 15.4) 196.8 198.7 227.2
Amortisation of acquired intangible
assets (10.4) (9.9) (10.4)
Share of post-tax profit from
joint ventures and associates 0.7 1.7 1.2
Tax on trading profit and amortisation
of acquired intangible assets (51.3) (51.9) (57.5)
----------------------------------------- ---------- ---------- ----------
135.8 138.6 160.5
---------- ---------- ----------
ROIC 8.6% 9.6% 10.7%
-------------------------------------------------------------------------------
15.19 Constant currency
Figures presented at constant currency represent 2022 amounts
retranslated at average 2023 exchange rates.
15.20 Liquidity
Liquidity is the Group's cash and short-term deposits plus
undrawn committed debt facilities less cash used as collateral on
loans and any gross up of cash in notional cash pools.
Unaudited Unaudited Full year
Half year Half year
2023 2022 2022
GBPm GBPm GBPm
------------------------------------ ----------- ----------- ----------
Cash and short term deposits 173.2 177.2 184.2
Undrawn committed debt facilities 309.5 257.1 322.5
Cash used as collateral on loans (11.5) (18.0) (13.0)
Gross up of cash in notional pools - (0.1) (0.1)
------------------------------------- ----------- ----------- ----------
Liquidity 471.2 416.2 493.6
------------------------------------- ----------- ----------- ----------
15.21 Last twelve months ('LTM')
Some results are presented or calculated using data from the
last twelve months from the reference date.
16 Exchange rates
The Group reports its results in pounds sterling. A substantial
portion of the Group's revenue and profits are denominated in
currencies other than pounds sterling. It is the Group's policy to
translate the income statements and cash flow statements of its
overseas operations into pounds sterling using average exchange
rates for the year reported (except when the use of average rates
does not approximate the exchange rate at the date of the
transaction, in which case the transaction rate is used) and to
translate balance sheets using period end rates. The principal
exchange rates used were as follows:
Income and expense
Average rates
----------------- -------------------------------------------------------------
Half year Full year
Half year Half year Full year to Half to Half
2023 2022 2022 year change year change
----------------- --------- --------- ----------- ------------ ------------
US Dollar 1.23 1.30 1.24 -5.4% -0.8%
Euro 1.14 1.19 1.17 -4.2% -2.6%
Chinese Renminbi 8.56 8.42 8.31 1.7% 3.0%
Japanese Yen 166.52 159.48 161.86 4.4% 2.9%
Brazilian Real 6.25 6.59 6.38 -5.2% -2.0%
Indian Rupee 101.37 98.87 96.99 2.5% 4.5%
South African
Rand 22.48 19.97 20.16 12.6% 11.5%
------------------ --------- --------- ----------- ------------ ------------
Assets and liabilities
Period end rates
----------------- -------------------------------------------------------------
Half year Full year
Half year Half year Full year to Half to Half
2023 2022 2022 year change year change
----------------- --------- --------- ----------- ------------ ------------
US Dollar 1.27 1.22 1.21 4.1% 5.0%
Euro 1.16 1.16 1.13 0.0% 2.7%
Chinese Renminbi 9.23 8.15 8.37 13.3% 10.3%
Japanese Yen 183.34 165.25 158.60 10.9% 15.6%
Brazilian Real 6.08 6.40 6.39 -5.0% -4.9%
Indian Rupee 104.29 96.12 100.06 8.5% 4.2%
South African
Rand 23.92 19.81 20.57 20.7% 16.3%
------------------ --------- --------- ----------- ------------ ------------
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July 27, 2023 02:00 ET (06:00 GMT)
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