TIDMELM
RNS Number : 8321G
Elementis PLC
29 July 2021
29 July 2021
ELEMENTIS plc
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
Strong financial performance improvement, profit before tax up
165%
-- Revenue up 17% (up 12% on an underlying basis*) from COVID-19
impacted H1 2020 ($387m) to $452m driven by improved industrial
demand, customer restocking and currency tailwinds.
-- Adjusted operating profit up 29% (21% on an underlying
basis*) to $54m with strong operational performance and underlying
revenue growth partially offset by cost increases. Profit after tax
of $28m, up from a loss of $51m in the prior year period due to
performance improvement and a $66m reduction in adjusting items(1)
.
-- Net debt(4) ($415m) in line with 31 December 2020 ($408m) as
earnings growth and disciplined working capital management offset
$20m EU state aid payment. Leverage ratio(5) (3.0x net debt/EBITDA)
declining and forecast to reduce further during the second
half.
Further strategic progress, well positioned for sustainable
growth and value creation
-- Coatings revenue up 15% on an underlying basis* with adjusted
operating margins increasing to 17% - reflective of a more
efficient and higher quality business with attractive growth
potential.
-- Good progress on Innovation, Growth and Efficiency strategy
to deliver medium term Group performance objectives. Delivered $25m
of revenue from new business opportunities, 12 new product launches
and increased new products** from 11% to 13% of sales.
-- On course for targeted $10m underlying cost savings in 2021,
offset by the reversal of $10m of temporary COVID-19 related
savings in 2020. India plant on track to start up in Q3 with
efficiency benefits in 2022 and beyond.
Outlook unchanged, in line with expectations; multi-year
recovery in progress
-- Full year outlook positive and unchanged, with the Group
expected to deliver an improved financial performance and a
reduction in leverage, in line with expectations.
-- The second half of the year is expected to follow a normal
level of seasonality, with continued demand recovery and self-help
actions offset by short term margin headwinds from accelerating
cost inflation and supply chain constraints.
-- While the pace of recovery depends on COVID-19 developments,
a continued strengthening of demand combined with further strategic
progress are expected to drive a material multi-year performance
improvement and delivery of the Group's medium term financial
objectives.
FINANCIAL SUMMARY
-------------------------------- -------------- -------------- ----------
Six months Six months % Change
ended 30 June ended 30 June
2021 2020
-------------------------------- -------------- -------------- --------
Revenue $452m $387m +17%
Adjusted operating profit(1) $54m $42m +29%
Adjusted profit before tax(1) $40m $28m +41%
Adjusted diluted earnings
per share(2) 5.5c 3.5c +57%
Adjusted operating cash flow(3) $30m $28m +8%
Net debt(4) $415m $453m -8%
Ordinary dividend per share - - -
Reported results
-------------------------------- -------------- -------------- --------
Profit/(loss) for the period $28m $(51)m +154%
Basic earnings/(loss) per
share(2) 4.8c (8.8)c +155%
-------------------------------- -------------- -------------- --------
Business performance overview
-- Personal Care revenue down 5% on an underlying basis* (down
1% on a reported basis) at $89m. Adjusted operating profit down 8%
on an underlying basis* (down 4% on a reported basis) to $19m,
representing a 21.6% margin, modestly down on the prior year
(22.4%).
o Pace of category demand recovery for cosmetics and
anti-perspirant deodorants uncertain due to ongoing COVID-19
related social and travel restrictions.
o Margins resilient at 21.6%, with cost savings offset by
product mix and lower volumes.
-- Coatings revenue, which now includes the Energy business, up
15% on an underlying basis* (21% on a reported basis), from $162m
to $197m. Adjusted operating profit of $33m significantly up on
prior year ($21m), with adjusted operating profit margins up from
12.7% to 16.7%.
o Strong industrial coatings volume recovery across all
geographies and continued resilience in decorative demand.
o Margin improvement reflective of improved product portfolio,
new business wins and fixed cost savings from Charleston/St Louis
consolidation, partially offset by accelerating raw material cost
inflation.
-- Talc revenue up 14% on an underlying basis* to $77m (26% on a
reported basis). Adjusted operating profit up 18% on underlying
basis (27% on a reported basis) to $8m, with margins in line with
the prior year (10.2%) at 10.3%.
o Strong industrial talc growth driven by automotive production
recovery, new business wins and geographic expansion, partially
offset by continued weak paper demand.
o Margins stable with improved volumes offset by temporary
weather-related cost increases.
-- Chromium revenue up 16% to $90m. Adjusted operating profit up 48% to $5m.
o Revenue improvement driven by demand recovery across
industrial end markets, including metal plating and construction
applications, partially offset by weaker year on year pricing.
o Margins up from 4.0% to 5.1% with improved fixed cost
absorption due to higher volumes offset by pricing and supply chain
bottlenecks.
Commenting on the results, CEO, Paul Waterman said:
"We have made a strong start to the year benefiting from the
combination of focused strategy execution and improved industrial
demand. While the significant demand recovery has triggered ongoing
supply chain challenges and accelerating cost inflation across the
globe, we are well positioned to manage these impacts. Overall, the
Group has encouraging trading momentum and is on track to deliver
an improved financial performance and a reduction in leverage, in
line with expectations.
Elementis is focused on developing high quality businesses that
have enduring competitive advantages in structural growth markets.
In the coming years, as end markets continue to recover and our
Innovation, Growth and Efficiency strategy continues to be
successfully executed, we are well positioned for material
performance improvement that will support the delivery of our
medium term financial ambitions."
Notes:
* Adjusted for constant currency. Previously referred to as
'organic'. See Finance Report
** New products defined as products launched within the last 5
years, patented and protected products (excluding Chromium)
1 - See note 5
2 - See note 9
3 - See Finance report
4 - See note 12
5 - See unaudited information
Further information
A virtual presentation for investors and analysts will be held
at 09:00 BST on 29 July 2021. The presentation will be webcast on
www.elementis.com . Conference call dial in details:
UK: 020 3936 2999 Other locations: +44 20 3936 2999
Participant access code: 537261
Enquiries
Elementis
James Curran, Investor Relations 020 7067 2994
Tulchan
Martin Robinson 020 7353 4200
Olivia Peters
-S -
Business review
CEO's report
I am pleased with our performance in the first six months of
2021, which shows not only in the improved financial results but
also in the operational progress demonstrated throughout the
business. While industrial demand has improved, COVID-19 continues
to impact many of our end markets and has created global supply
challenges ranging from accelerating raw material inflation to
logistical disruptions. Our performance reflects the strong
positioning of our products and the importance of our self-help
agenda, and we see scope for multi-year performance improvement as
the macro-economic environment improves and we execute against our
strategic priorities.
Group performance
Personal Care
In the six months to 30 June 2021, Personal Care revenue
declined 5% on an underlying basis* (down 1% on a reported basis)
due to continued demand weakness in our two key end markets, colour
cosmetics and anti-perspirant deodorants. As a result of the impact
of COVID-19 related social and travel restrictions, retail sales of
cosmetics and deodorants fell 11% and 15% respectively in Europe in
the first quarter. While there were early signs of improvement in
the second quarter, demand in these end markets remains below
pre-pandemic levels, and future recovery will be influenced by
COVID-19 developments and the global measures taken to mitigate its
impact.
Adjusted operating profit for Personal Care declined 8% on an
underlying basis* (down 4% on a reported basis) to $19m, with
adjusted operating margin modestly down on the prior year (22.4%)
at 21.6%. The decline in adjusted operating profit was primarily
driven by weaker volumes and product mix partially offset by tight
cost management.
Coatings
In Coatings, revenue rose 15% on an underlying basis* to $197m
due to strong market demand, particularly in industrial coatings,
new business wins and customer restocking. Revenue from the Energy
business, now reported as part of Coatings, was broadly flat on the
prior year at $15m. Including currency translation impacts,
Coatings revenue rose 21% on a reported basis. All regional
performance commentary is on an underlying basis* unless otherwise
stated.
-- EMEA revenue rose 29% on the prior year period as decorative
activity remained buoyant and industrial demand recovered across
all geographies. Decorative coatings demand increased significantly
driven by strong DIY demand. Industrial coatings volumes rose
double digits, reflective of new business success, particularly for
our Thixatrol(R) (organic thixotrope) products, improved activity
across automotive and industrial machinery end markets, and
customer restocking.
-- In Asia, where over 80% of our sales come from industrial
coatings, revenue rose 15% driven by volume growth as industrial
activity rebounded, particularly in China in areas such as marine
and protective coatings, and new business wins across our
waterborne industrial additives platform. Outside of China, demand
was mixed due to a resurgence of COVID-19 cases in South East Asia
and raw material shortages at customers.
-- Americas revenue rose 6% on the back of good decorative and
industrial demand. In the US, decorative demand remained solid,
driven by healthy construction and residential property activity,
and continued new business momentum for our Rheolate(R) HX rheology
series. Revenue from industrial coatings was higher than the prior
year period as underlying demand improved, in areas such as
automotive and protective coatings, and customers rebuilt
inventories. Sales in Latin America rose modestly as the spread of
COVID-19 continues to hold back the demand recovery.
Adjusted operating profit rose 48% on an underlying basis* (60%
on a reported basis) from $21m to $33m with volume growth, improved
price/mix and cost savings from the Charleston plant closure and St
Louis capacity consolidation partially offset by accelerating raw
material cost inflation. As a result, adjusted operating profit
margins increased from 12.7% (restated to include the Energy
business) to 16.7%. The Coatings transformation programme has
created an integrated and more customer centric organisation that
is well positioned for future success.
Talc
In Talc, revenue rose 14% on an underlying basis* from $61m to
$77m with strong industrial demand more than offsetting continued
weak demand from paper applications. Including the impact of
currency translation, revenue rose 26% in the first half.
Revenue from industrial talc (representing over 85% of total
Talc revenue) rose 22% on an underlying basis*, driven by demand
recovery in key end markets, new business wins and geographic
expansion. Long life plastics and technical ceramics applications
both experienced strong growth in the first half as automotive
production recovered, albeit somewhat impacted by semi-conductor
related OEM production issues. Sales to coatings customers grew
double digits on the prior year period, reflective of market share
gains as we gained new customers and entered new geographies. Talc
s ales to customers in Asia and Americas rose 19% and 60%
respectively as the business executed on the strategy to grow and
gain market share beyond of its core European market.
Outside of industrial talc, sales to the graphic paper market
declined as expected by over 30% driven by the ongoing shift to
digital media. This market now represents only 8% of total Talc
revenue.
Adjusted operating profit rose 18% on an underlying basis* from
$6m to $8m, with adjusted operating margins of 10.3% in line with
prior year as volume growth was offset by temporary weather related
cost increases.
Chromium
Revenue in the period was $90m, up 16% from $78m in 2020 with
double digit volume growth partially offset by weaker year on year
average pricing and supply chain bottlenecks. Due to the rebound in
industrial activity, demand for chromium chemicals increased across
a range of end markets including automotive, leather tanning and
protective applications. While average unit pricing decreased on
the prior year period, pricing was sequentially stable on Q4 2020
levels. As a result of demand improvements and industry supply
chain challenges, we estimate global chromium industry capacity
utilisation rose from approximately 75% in 2020 to 80% in the first
half of 2021. If sustained, it is anticipated this will result in
spot market price increases that should benefit our performance in
2022 as they feed through to realised pricing.
Adjusted operating profit for the first six months of the year
was $5m, up 48% on the prior year period with volume growth
partially offset by weaker pricing. Adjusted operating profit
margin rose from 4.0% to 5.1%.
Net debt and leverage
At the end of June 2021 net debt fell $38m on the prior year
period (30 June 2020: $453m) to $415m as a result of underlying
cash generation, representing a net debt to adjusted EBITDA ratio**
of 3.0x (3.1x at 30 June 2020). Net debt was broadly in line with
December 2020 ($408m) as earnings growth and disciplined working
capital management offset a (previously announced) $20m tax cash
outflow following the European Commission's State Aid investigation
into the UK Finance Company Exemption ('FCE') regime.
Strong underlying cash generation and (last twelve months)
earnings growth are expected to drive a reduction in leverage in
the second half of 2021.
Interim dividend
We recognise the importance of a dividend to our shareholders.
However, given the elevated financial leverage and continued
COVID-19 related macroeconomic uncertainty the Board has decided it
is prudent to preserve cash and will not be declaring an interim
dividend for 2021. The Board will keep future dividends under
review and will restart payments as soon as it is appropriate to do
so.
Strategic progress
In the last few years, we have made significant progress
re-positioning Elementis as a premium performance additives
company, based on unique assets and value chains, and with clear
opportunities for growth. Our strategic pillars of Innovation,
Growth and Efficiency are designed to leverage this differentiated
portfolio and the execution of our strategic priorities will
deliver our medium term performance objectives of:
- 17% adjusted operating profit margin: driven by Innovation,
Growth, Efficiency and COVID-19 demand recovery
- 90% plus operating cash conversion: consistent with 5 year average historical performance
- Leverage under 1.5x net debt / EBITDA: consistent with debt reduction track record
1. Innovation
We are a global leader in performance-driven additives and are
focused on delivering innovative solutions to our customers that
drive product performance improvements, efficiency gains and
enhanced sustainability credentials. While COVID-19 limited the
opportunity to be in laboratories with our customers in 2020, the
time and effort spent delivering virtual support has put us in a
good position as working practices start to normalise, customers
return to their laboratories and new product launches increase.
Our innovation priorities are clear. Firstly, we want to create
distinctive new technologies that deliver both improved performance
and sustainability benefits. At present, just over 50% of our
revenue is from products that are natural or naturally derived,
building on our progress in recent years. Platforms such as our
castor wax based organic thixotropes for high performance adhesives
and hectorite derived skin care ingredients provide a great
foundation from which to drive this higher.
Secondly, we are focused on the material innovation challenges
that face our customers and the industries in which they operate,
and we want to deliver solutions at speed. In Personal Care,
increased cleansing and sanitising due to COVID-19 has exacerbated
irritation to sensitive skin. As a result, consumers want skin care
products in a variety of application formats - creams, lotions,
bars, concealers and make up - that is non-irritating to the skin.
In June, as part our growing skin care offering, we launched
Bentone(R) Luxe XO, an emulsifying gel that provides superior
application flexibility for skin care formulators when responding
to the 'new normal' skin care scenario. Customer uptake and
feedback has been strong and is helping to deliver our target of
$10m incremental skin care sales over the medium term.
Open innovation is also an important enabler of our strategic
ambitions. Our new partnership with AQDOT, a supramolecular
chemtech company, is combining novel odour capture and smart
fragrance release with our leading APDO formulation capabilities to
enhance our customer value proposition. In addition, with NXTLEVVEL
Biochem we are currently launching two bio-based coalescing agents
derived from levulinic acid, an exciting addition to our Coatings
platform that also brings potential technology transfer
opportunities to our other business segments.
As a result, in the first half of 2021 our revenue from new
products*** rose from 11% in the prior interim period to 13%,
progressing towards our goal of 17% by 2025. Our innovation
pipeline is well positioned and in 2021 we are on track to bring
more than 20 new products to the market.
2. Growth
Today over 90% of Elementis' earnings are generated by Personal
Care, Coatings and Talc. The value chains across these segments are
similar, transforming natural and long life resources into high
value additives through distinctive processing and formulation.
While industrial demand improved in the first half of the year, we
see clear medium term structural growth opportunities across these
businesses representing in total over $100m of incremental
revenue.
In Coatings, growth opportunities exist where our technologies
play into specific market needs or trends with clear sustainability
benefits - areas such as premium decorative coatings and waterborne
(as opposed to solvent based) industrial additives. In aggregate,
such growth platforms represent roughly one third of our Coatings
revenue and in the first half of 2021 they grew 34% driven by $10m
of new business wins. Technologies such as our powdered NiSATs for
premium decorative paints and castor wax based rheology modifiers
for adhesives and sealants all gained further traction at customers
and will be supported by the launch of over 7 new products in
second half. Combined with expansion in regions such as South East
Asia and continued close collaboration with global key accounts, we
are well positioned for further profitable, high margin growth in
our differentiated technology areas.
In Personal Care, we continue to see significant high margin
growth opportunities. Despite strong recent performance in Asia, it
represents under 20% of our Personal Care sales, and our medium
term aim is to double our cosmetics sales in the region. In January
we opened our first Personal Care technical service center in Asia,
located in Shanghai. Combined with investments in sales and
marketing resources, we are enhancing our ability to serve the
local market and grow our presence - in the first half of 2021 we
grew 15% in Asia. Likewise, our new AP Actives plant in India, will
help us grow in the region while also creating a highly advantaged
global supply chain. Construction of this plant has continued at
pace and is planned to start up in the third quarter of 2021.
Finally, in skin care, we aim to deliver $10m of incremental sales
over the medium term. In the first half of 2021 we launched two
products (Bentone(R) Luxe XO and Hydroclay (TM) 2100) building out
our product portfolio and helping deliver 13% skin care revenue
growth in the first half of the year.
In Talc we are the second largest global producer, serving high
value industrial applications. Our growth strategy is based on
leveraging our global scope and scale, synergistically expanding
into new geographies and market sectors. In the first half of 2021,
we grew 19% in Asia and 60% in Americas driven by $6m of new
business wins across long life plastics, technical ceramics and
coatings applications. Despite this success, we remain materially
underweight in these regions and with considerable runway for long
term growth. We also remain on track for our ultimate goal of
$20-25m of revenue synergies by 2023. Sales of talc to coatings
customers rose 11% in the first six months of 2021, leveraging
Elementis' global key account network and strong presence in the
coatings market. We have also continued to develop new products and
applications. A new pre-dispersed product combines our talc and
dispersant technologies to create a more effective solution for
coatings customers. Barrier coating solutions for recyclable food
packaging is also showing encouraging early progress, with 30
customer projects in progress and over 50% volume growth in the
first half.
3. Efficiency
Improving efficiency is an ongoing focus at Elementis. We are
always seeking to improve our organisation, drive ongoing
efficiency gains and become more agile. In the short term, due to
the impact of COVID-19 on global logistics and raw materials we are
experiencing mid-to-high single digit cost inflation across the
Group in 2021. While we anticipate a short term margin headwind in
the second half, through pricing actions, agile supply chain
management and progress towards our $20m savings by 2023, we are
confident of protecting and improving margins.
This year our aim is to deliver $10m of supply chain savings as
part of our medium term efficiency programme. In late 2020 we
closed our Charleston, West Virginia, production plant and
consolidated capacity at our St Louis, Missouri, site. This step
has improved our efficiency and utilisation levels across our North
American organoclay operations, and returned the Energy business to
profitability. In addition, process and procurement excellence
across value chains are generating over $3m of savings in 2021. For
instance, enhanced temperature controls in our talc operations and
switching to water based quaternary amines (from solvent based) at
our Anji site are reducing both our costs and environmental impact.
These steps will offset $10m of temporary COVID-19 related cost
savings made in 2020 which have, as expected, returned to the
business in 2021 as the impact of COVID-19 has receded.
Sustainability and the reduction of our environmental footprint
are at the forefront of all operational decisions. A significant
enabler of an additional $10m of supply chain savings for delivery
by 2023 is our new AP Actives plant in India, which is on track for
start up in the third quarter. This facility will create a cost
advantaged, resilient, and as a closed water system, more
environmentally friendly global supply chain. Throughout our
operations we have identified over 60 projects that are beneficial
from both an efficiency and environmental perspective, and their
implementation will drive delivery of our 2030 sustainability
targets.
Another key enabler of our efficiency and simplification drive
is our digital implementation programme. In July our global
business management software went live in Asia, bringing the region
in line with Europe and the Americas and improving the flow of data
across the organisation. We also started the roll out of fully
online lead-to-order fulfillment cycles for customers. The
onboarding of customers to digital ordering systems will continue
throughout the year and is already resulting in an improved
customer experience, enhanced new business success and more
efficient resource management.
Chromium
While our Chromium business does not have the same growth
characteristics as the rest of the Group, it holds significant
competitive advantages. We are the only producer of chromium
chemicals in North America and we utilise a proprietary delivery
system that eliminates both operational and safety risks associated
with handling these chemicals. This has resulted in a very high and
resilient market share accompanied by attractive cash flows and
returns on capital. As the pandemic abates, we expect a continued
volume recovery to drive higher pricing and in turn ultimately
improve earnings and operating cash flows; a key attribute as the
Group focuses on quickly reducing debt levels.
Outlook
W e will continue to maintain our focus on delivering our
Innovation, Growth and Efficiency strategy. In 2021 we are on track
to deliver more than $35m of new business opportunities, over 20
new products and $10m of cost savings which will offset the
reversal of $10m of 2020 temporary COVID-19 savings. For the full
year this is anticipated to drive an improved financial performance
and a reduction in leverage, in line with expectations. In the
second half of the year, we expect a normal level of seasonality
(first half weighted) as continued underlying demand recovery and
self-help actions are offset by short term margin headwinds from
accelerating cost inflation and supply chain constraints.
Looking ahead, we continue to see significant potential for
Elementis. We have a clear, focused strategy and will pursue our
key growth and efficiency initiatives, continuing to innovate for
high margins and distinctiveness. We are confident that our
strategy, alongside a continued demand recovery, linked to COVID-19
developments, will drive a material multi-year performance
improvement, the delivery of our medium term Group financial
objectives and generate significant shareholder value.
Notes:
Where we refer to adjusted performance measures (e.g. adjusted
operating profit), see note 5.
* Adjusted for FX (where constant currency reflects prior year
results translated at current year exchange rates). Previously
referred to as 'organic'. See Finance report.
** Excluding the impact of IFRS 16.
*** New products defined as products launched within the last 5
years, patented and protected products (excluding Chromium).
Finance report
Effect
of (Decrease)/
Revenue exchange increase Revenue
Revenue for the six months 2020 rates 2021 2021
ended 30 June $m $m $m $m
--------------------------- --- ------- ---------- ----------- -------
Personal Care 89.8 3.2 (4.2) 88.8
Coatings 162.2 8.2 26.2 196.6
Talc 60.9 6.5 9.1 76.5
Chromium 77.5 - 12.7 90.2
Inter-segment (3.9) - 3.9 -
-------------------------------- ------- ---------- ----------- -------
Revenue 386.5 17.9 47.7 452.1
-------------------------------- ------- ---------- ----------- -------
Adjusted Effect
operating of (Decrease)/
Adjusted
operating
profit* exchange increase profit*
Adjusted operating profit 2020 rates 2021 2021
for the six months ended 30 June $m $m $m $m
----------------------------------- ---------- ---------- ----------- ----------
Personal Care 20.1 0.8 (1.7) 19.2
Coatings 20.6 1.6 10.7 32.9
Talc 6.2 0.5 1.2 7.9
Chromium 3.1 - 1.5 4.6
Central costs (8.0) 0.1 (2.4) (10.3)
----------------------------------- ---------- ---------- ----------- ----------
Adjusted operating profit 42.0 3.0 9.3 54.3
----------------------------------- ---------- ---------- ----------- ----------
* See note 5
Group results
Group revenue for the first six months of 2021 was $452.1m,
compared to $386.5m in the same period last year, an increase of
$65.6m (17.0%). Excluding the impact of currency, Group revenue
rose by 11.8%, driven by a rebound in industrial demand, as the
impact of COVID-19 recedes, and new business wins.
Group adjusted operating profit was $54.3m, compared to $42.0m
in the same period last year, an increase of 29.3%, and 20.7%
excluding currency movements with underlying** revenue growth
partially offset by cost increases. Operating profit increased from
a loss of $35.2m in the prior year period to a profit of $45.1m as
a result of improved underlying** earnings and $68.0m lower
adjusting items.
Central costs
Central costs are costs that are not identifiable as expenses of
a particular business and comprise the global corporate offices in
the UK and US which include the Board of Directors, executive and
senior management. Central costs increased by $2.3m in the first
half of 2021 as part of the reversal of $10m of temporary cost
savings made in 2020 in response to COVID-19.
Adjusting items
In calculating the profitability measures by which management
assesses the performance of the Group a number of items are
excluded from operating profit as reported in accordance with IFRS.
The Board believes that the adjusted measures assist shareholders
in better understanding the underlying performance of the
business.
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
------------------------------------------------------- ----------- ----------- ------------
Charge/(credit)
------------------------------------------------------- ----------- ----------- ------------
Adjusting items:
Restructuring - - 0.9
Business transformation 2.7 2.2 22.7
Environmental provisions (1.5) 4.0 6.7
M&A and disposal costs - 1.1 3.7
Amortisation of intangibles arising on acquisition 8.0 9.6 15.5
Impairment of goodwill - 60.3 60.3
Total charge to operating profit 9.2 77.2 109.8
------------------------------------------------------- ----------- ----------- ------------
Sale of business 1.1 - (0.3)
Charges to finance costs:
Mark to market of derivatives (5.0) 2.6 10.2
Currency hedge due to dividend cancellation - 1.8 1.8
Tax credit in relation to adjusting items (0.6) (10.5) (16.0)
------------------------------------------------------- ----------- ----------- ------------
Total adjusting items 4.7 71.1 105.5
------------------------------------------------------- ----------- ----------- ------------
In the first half of 2021, $9.2m of charges to operating profit
were classified as adjusting items. Of these items, $8.0m relate to
the amortisation of intangibles arising on acquisitions. Business
transformation costs of $2.7m represent costs relating to
previously initiated programmes to optimise our supply chain and
manufacturing footprint. A credit of $2.0m and a charge of $0.5m
relate to the impact of a change in discount rates on the
environmental provision and additional remediation work identified
respectively.
The charges to finance costs includes $5.0m for movements in
market to market valuation of financial instruments which are not
in hedging relationships.
An explanation of other adjusting items relating to the previous
period can be found within the Finance report of the 2020 Annual
report and accounts.
Other expenses
Other expenses are administration costs incurred and paid by the
Group's pension schemes, which relate primarily to former employees
of legacy businesses and were $1.0m in the period compared to $0.9m
in the previous year.
Net finance costs
30 June 30 June
2021 2020
$m $m
------------------------------------- ------- ----------------
Finance income 0.3 0.3
Finance cost of borrowings (12.1) (11.5)
------------------------------------- ------- ----------------
(11.8) (11.2)
Net pension finance expense (0.3) (0.3)
Unwind of discount on provisions (0.6) (0.6)
Fair value movement on derivatives 5.0 (2.6)
Dividend currency hedge cancellation -- (1.8)
Interest on lease liabilities (0.8) (0.8)
------------------------------------- ------- ----------------
Net finance costs (8.5) (17.3)
------------------------------------- ------- ----------------
Net finance costs for the first six months of the year of $8.5m
were $8.8m lower than the same period last year. Within this total,
net interest costs were $0.6m higher at $11.8m due to higher rate
of interest payable on borrowings. Net pension finance costs, the
unwind of discount on provisions and interest on lease liabilities
in the period remained in line with the previous year. The fair
value movement on derivatives which are not in hedging
relationships is credited to finance costs.
Tax
The Group reports an adjusted tax charge for the first half of
2021 of $7.5m (2020: $8.0m); giving rise to an adjusted effective
tax rate of 18.7% (2020: 28.5%). The adjusted effective tax rate is
lower than the prior year due to the one-off impact of withholding
taxes incurred on the repatriation of profits from China in
2020.
Tax on adjusting items for the first half of 2021 amounts to a
credit of $0.6m (2020: $10.5m); resulting in a total statutory tax
charge for the period of $6.9m (2020 credit of $2.5m) and a
reported effective tax rate of 19.9% (2020: 4.6%).
For the full year 2021, we currently forecast an adjusted
effective tax rate of around 22-23%.
Earnings per share
Statutory basic earnings per share were 4.8 cents for the period
compared to basic losses per share of 8.8 cents in the prior
interim period.
Basic adjusted and diluted adjusted earnings per share for the
first half of 2021, calculated on the adjusted earnings of $32.3m
(2020: $20.2m), were 5.6 cents and 5.5 cents respectively compared
to 3.5 cents and 3.5 cents for the same period last year.
Note 9 provides disclosure of earnings per share calculations
both including and excluding the effects of adjusting items and the
potential dilutive effects of outstanding and exercisable
options.
Adjusted cash flow
Cash flow is summarised below:
30 June 30 June
2021 2020
$m $m
----------------------------------------------------------- --------------------- -------
Profit before interest, tax, depreciation and amortisation
(Adjusted EBITDA)* 80.2 67.2
Change in working capital (26.5) (23.5)
Capital expenditure (24.2) (15.5)
Other 0.6 (0.3)
----------------------------------------------------------- --------------------- -------
Adjusted operating cash flow 30.1 27.9
Pension contribution net of current service cost 0.5 0.3
Interest (11.8) (11.7)
Tax (24.0) (3.9)
Adjusting items (5.5) (7.0)
Payment of lease liabilities (3.3) (3.0)
Free cash flow (14.0) 2.6
Dividends - -
Acquisitions and disposals 1.9 -
Currency fluctuations 4.9 (1.6)
----------------------------------------------------------- --------------------- -------
(Increase)/decrease in net debt (7.2) 1.0
Net debt at start of period (408.1) (454.2)
----------------------------------------------------------- --------------------- -------
Net debt as at end of period (415.3) (453.2)
----------------------------------------------------------- --------------------- -------
* See alternative performance measures on page 33.
Net debt in the first six months of $415.3m, was broadly stable
on the 2020 year end position of $408.1m, and down $37.9m on 30
June 2020. Adjusted operating cash flow in the period rose from
$27.9m to $30.1m with higher earnings partially offset by increased
capital expenditure and a working capital outflow as a result of
double digit revenue growth.
Capital expenditure in the period was $24.2m, $8.7m higher than
the previous year. Capital spending for the whole year is expected
to be $45-50m, with around 50% of the total spend allocated to our
new plant in India, on course for a Q3 start up, and our St Louis
plant, where capacity from the recently closed Charleston is being
consolidated.
There were no pension deficit payments in the period (2020:
nil), a result of the September 2017 triennial review of the UK
pension scheme completed in 2018. Under this agreement top up
contributions are no longer required until at least 2021. The 2020
triennial review is ongoing and is expected to complete later this
year.
Tax payments in the period were $20.1m higher than the previous
year due to a one off $20m payment in respect of EU state aid which
we expect to be repaid in due course.
Dividend payments were zero in the first six months of 2021
(zero in the prior year period), following the Board's decision to
suspend dividends in light of the macroeconomic uncertainties
associated with COVID-19 and a desire to preserve cash.
Overall the Group had a net debt position on its balance sheet
of $415.3m, representing a net debt/EBITDA ratio (pre IFRS 16) of
3.0x (3.1x at December 2020). A reduction in leverage is expected
by the year end, driven by improved trailing twelve month earnings
and robust cash conversion.
Working capital
30 June 30 June 31 December
Working capital days 2021 2020 2020
------------------------------------- ------- ------- -----------
Inventory 96 105 107
------------------------------------- ------- ------- -----------
Debtors 44 50 38
------------------------------------- ------- ------- -----------
Creditors 66 79 72
------------------------------------- ------- ------- -----------
Average working capital to sales (%) 21.7 23.2 23.8
------------------------------------- ------- ------- -----------
Total working capital for the Group was $25.2m higher than at
December 2020 driven by higher trade receivables in response to
increased customer demand. Inventory days reduced from 107 (Dec 20)
to 96 days and debtor days increased from 38 (Dec 20) to 44 days,
both reflective of higher levels of demand for our products.
Creditor days decreased from 72 to 66 days due to the timing of raw
material purchases and payments.
Balance sheet
30 June 30 June
31 December
2021 2020 2020
$m $m $m
------------------------------ ------- ------- -----------
Property, plant and equipment 506.5 502.4 516.0
Other net assets 832.6 784.2 752.5
Net debt (415.3) (453.2) (408.1)
------------------------------ ------- ------- -----------
Equity 923.8 833.4 860.4
------------------------------ ------- ------- -----------
Property, plant and equipment decreased by $9.5m compared to the
value at 31 December 2020, $8.1m as a result of currency
translation and depreciation of $25.6m for the 6 months running
ahead of capital expenditure of $24.2m. Other net assets increased
by $80.1m as a result of the $46.0m increase in retirement benefit
scheme net surplus, an increase in working capital of $25.2m due to
seasonality of trading patterns, an increase in recoverable tax
assets of $20.1m and small movements in lease liabilities and
deferred tax assets.
Equity increased by $63.4m compared to the value at 31 December
2020 as a result of statutory profit in the period of $27.6m,
actuarial gains on pensions of $48.5m offset by deferred tax on
actuarial movements of $11.8m and a loss of $4.8m due to foreign
exchange impact on other comprehensive income. The remainder of the
movement relates primarily to share based payment provisions and
movements in derivatives.
The main dollar currency exchange rates as at 30 June 2021 and
average rates in the period were:
2021 2021 2020 2020
30 June Average 30 June Average
--------- --------- --------- --------- ---------
Sterling 0.72 0.72 0.81 0.79
--------- --------- --------- --------- ---------
Euro 0.84 0.83 0.89 0.91
--------- --------- --------- --------- ---------
Pensions and post retirement plans
UK US Other Total
$m $m $m $m
---------------------------------------------- ----- ------ ----- ------
Movement in net deficit
Net surplus/(deficit) in schemes at 1 January
2021 7.9 (18.3) (9.8) (20.2)
Current service cost (0.4) (0.4) (0.2) (1.0)
Contributions - 0.2 0.4 0.6
Administration costs (0.8) (0.2) - (1.0)
Net interest expense 0.1 (0.2) (0.1) (0.2)
Actuarial (loss)/gain 39.4 9.1 - 48.5
Currency translation difference (1.0) - 0.1 (0.9)
Net surplus/(deficit) in schemes at 30
June 2021 45.2 (9.8) (9.6) 25.8
---------------------------------------------- ----- ------ ----- ------
During the period the deficit, under IAS 19, on the Group's
pension and post-retirement medical plans improved by $46.0m to a
net surplus of $25.8m. During the first six months of 2021 the UK
scheme had an annualised return on scheme assets of (2.1)% (2020:
14%), liabilities decreased by 8% (2020: increase by 8%) and the
net surplus increased by $37.3m. This movement was driven by
actuarial changes due predominantly to an increase in the discount
rate which more than offset a decrease in scheme assets over the
period. Within the US schemes the net deficit decreased by $8.5m
mainly due to an increase in the discount rate. Contributions in
the period totalled $0.6m (2020: $0.6m), remaining low following
the funding agreement reached with the UK Trustees after the
September 2017 triennial valuation which concluded in 2018. Under
this agreement top up contributions are no longer required until at
least 2021. The 2020 triennial review is ongoing and is expected to
complete later this year.
Related party transactions
There were no material related party transactions entered into
during the first half of the year and there have been no material
changes to the related party transactions disclosed in the
Company's 2020 Annual report and accounts on
page 171.
Notes:
** Adjusted for FX (where constant currency reflects prior year
results translated at current year exchange rates). Previously
referred to as 'organic'.
Cautionary statement
The Elementis plc interim results announcement for the half year
ended 30 June 2021, which comprises the CEO's report, Finance
report and the Directors' responsibility statement (which taken
together constitute the Interim management report) and the interim
financial statements and accompanying notes (incorporating a
Condensed consolidated balance sheet at 30 June 2021, Condensed
consolidated income statement, Condensed consolidated statement of
comprehensive income, Condensed consolidated cash flow statement
and Condensed consolidated statement of changes in equity, each for
the six months ended 30 June 2021) (altogether 'Half yearly
financial report'), contains information which viewers or readers
might consider to be forward looking statements relating to or in
respect of the financial condition, results, operations or
businesses of Elementis plc. Any such statements involve risk and
uncertainty because they relate to future events and circumstances.
There are many factors that could cause actual results or
developments to differ materially from those expressed or implied
by any such forward looking statements. Nothing in this Half yearly
financial report should be construed as a profit forecast.
Directors' responsibility statement
A full list of the Directors can be found on the Elementis
corporate website at: www.elementis.com.
The Directors confirm that to the best of their knowledge:
-- The condensed set of financial statements set out in this
Half-yearly financial report has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the United
Kingdom.
-- The condensed set of consolidated financial statements, which
has been prepared in accordance with the applicable set of
accounting standards, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the issuer,
or the undertakings included in the consolidation as a whole as
required by DTR 4.2.4R; and
-- The interim management report contained in this Half-yearly
financial report includes a fair review of the information required
by:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of the important events that have occurred during the
first six months of the financial year 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 year.
- DTR 4.2.8R of the Transparency Rules, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the
financial position or performance of the entity during that period;
and any changes in related party transactions described in the 2020
Annual report and accounts that could have a material effect on the
financial position or performance of the entity during the first
six months of the current financial year.
Approved by the Board on 29 July 2021 and signed on its behalf
by:
Paul Waterman Ralph Hewins
CEO CFO
29 July 2021 29 July 2021
INDEPENT REVIEW REPORT TO ELEMENTIS PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the income statement,
the balance sheet, the statement of changes in equity, the cash
flow statement and related notes 1 to 15. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2 , the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
International Financial Reporting Standards. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
29 July 2021
Condensed consolidated income statement
for the six months ended 30 June 2021
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
Note (unaudited) (unaudited) (audited)
------------------------------ ---- ---------------- -------------- ------------
Revenue 4 452.1 386.5 751.3
Cost of sales (283.8) (254.9) (494.0)
------------------------------ ---- ---------------- -------------- ------------
Gross profit 168.3 131.6 257.3
Distribution costs (73.9) (55.3) (112.6)
Administrative expenses (49.3) (111.5) (172.9)
Operating profit/(loss) 4 45.1 (35.2) (28.2)
(Loss)/profit on disposal 15 (1.1) - 0.3
Other expenses (1.0) (0.9) (1.6)
Finance income 6 0.3 0.3 0.3
Finance costs 7 (8.8) (17.6) (39.6)
------------------------------ ---- ---------------- -------------- ------------
Profit/(loss) before tax 4 34.5 (53.4) (68.8)
------------------------------ ---- ---------------- -------------- ------------
Tax (charge)/credit 8 (6.9) 2.5 1.8
------------------------------ ---- ---------------- -------------- ------------
Profit/(loss) for the period 27.6 (50.9) (67.0)
------------------------------ ---- ---------------- -------------- ------------
Attributable to:
Equity holders of the parent 27.6 (50.9) (67.0)
------------------------------ ---- ---------------- -------------- ------------
Earnings/(loss) per share
Basic (cents) 9 4.8 (8.8) (11.5)
------------------------------ ---- ---------------- -------------- ------------
Diluted (cents) 9 4.7 (8.7) (11.3)
------------------------------ ---- ---------------- -------------- ------------
Condensed consolidated statement of comprehensive income for the
six months ended 30 June 2021
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
(unaudited) (unaudited) (audited)
--------------------------------------------------- ------------ ------------ -----------------------
Profit/(loss) for the period 27.6 (50.9) (67.0)
--------------------------------------------------- ------------ ------------ -----------------------
Other comprehensive income:
Items that will not be reclassified subsequently
to profit or loss:
Actuarial gain on pension and other post
retirement schemes 48.5 2.9 (0.3)
Deferred tax associated with pension and
other post retirement schemes (11.8) (0.3) (0.3)
--------------------------------------------------- ------------ ------------ -----------------------
36.7 2.6 (0.6)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations (16.7) 19.5 25.0
Effective portion of change in fair value
of net investment hedges 12.3 (39.6) (3.6)
Recycling of deferred foreign exchange losses
on disposal (0.4) - (0.2)
Effective portion of changes in fair value
of cash flow hedges 1.5 (2.7) (1.4)
Fair value of cash flow hedges transferred
to income statement (0.2) 0.1 0.9
Exchange differences on translation of share
options reserves 0.1 (3.7) (2.7)
--------------------------------------------------- ------------ ------------ -----------------------
(3.4) (26.4) 18.0
--------------------------------------------------- ------------ ------------ -----------------------
Other comprehensive income, net of tax 33.3 (23.8) 17.4
--------------------------------------------------- ------------ ------------ -----------------------
Total comprehensive income/(loss) for the
period 60.9 (74.7) (49.6)
--------------------------------------------------- ------------ ------------ -----------------------
Attributable to:
--------------------------------------------------- ------------ ------------ -----------------------
Equity holders of the parent 60.9 (74.7) (49.6)
--------------------------------------------------- ------------ ------------ -----------------------
Total comprehensive income/(loss) for the
period 60.9 (74.7) (49.6)
--------------------------------------------------- ------------ ------------ -----------------------
Condensed consolidated balance sheet
at 30 June 2021
2021 2020 2020
30 June 30 June 31 December
$m $m $m
(unaudited) (unaudited) (audited)
---------------------------------------------------- ------------ ------------ -------------
Non-current assets
Goodwill and other intangible assets 882.9 870.0 892.6
Property, plant and equipment 506.5 502.4 516.0
ACT recoverable - 2.0 0.6
Tax recoverable 20.1 - -
Deferred tax assets 26.3 28.2 26.3
Retirement benefit surplus 45.2 19.4 7.9
---------------------------------------------------- ------------ ------------ -------------
Total non-current assets 1,481.0 1,422.0 1,443.4
---------------------------------------------------- ------------ ------------ -------------
Current assets
Inventories 160.9 172.0 164.3
Trade and other receivables 155.2 123.5 108.3
Derivatives 1.5 0.1 1.4
Current tax asset 7.2 2.5 7.2
Cash and cash equivalents 93.6 102.0 111.0
---------------------------------------------------- ------------ ------------ -------------
Total current assets 418.4 400.1 392.2
---------------------------------------------------- ------------ ------------ -------------
Total assets 1,899.4 1,822.1 1,835.6
---------------------------------------------------- ------------ ------------ -------------
Current liabilities
Bank overdrafts and loans - (2.0) (3.7)
Trade and other payables (152.9) (123.2) (132.6)
Financial liabilities (11.5) (7.2) (17.3)
Current tax liabilities (27.1) (22.5) (23.2)
Lease liabilities (7.3) (6.3) (7.2)
Provisions (6.2) (6.1) (9.6)
---------------------------------------------------- ------------ ------------ -------------
Total current liabilities (205.0) (167.3) (193.6)
---------------------------------------------------- ------------ ------------ -------------
Non-current liabilities
Loans and borrowings (505.2) (548.6) (510.6)
Retirement benefit obligations (19.4) (35.3) (28.1)
Deferred tax liabilities (151.1) (142.5) (143.1)
Lease liabilities (34.2) (38.0) (37.2)
Provisions (47.2) (44.9) (49.2)
Financial liabilities (13.5) (12.1) (13.4)
---------------------------------------------------- ------------ ------------ -------------
Total non-current liabilities (770.6) (821.4) (781.6)
---------------------------------------------------- ------------ ------------ -------------
Total liabilities (975.6) (988.7) (975.2)
---------------------------------------------------- ------------ ------------ -------------
Net assets 923.8 833.4 860.4
---------------------------------------------------- ------------ ------------ -------------
Equity
Share capital 52.2 52.1 52.1
Share premium 240.5 237.7 237.7
Other reserves 104.8 66.6 108.6
Retained earnings 526.3 477.0 462.0
---------------------------------------------------- ------------ ------------ -------------
Equity attributable to equity holders of the parent 923.8 833.4 860.4
---------------------------------------------------- ------------ ------------ -------------
Total equity and reserves 923.8 833.4 860.4
---------------------------------------------------- ------------ ------------ -------------
Condensed consolidated cash flow statement
for the six months ended 30 June 2021
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
(unaudited) (unaudited) (audited)
Operating activities:
Profit/(loss) for the period 27.6 (50.9) (67.0)
Adjustments for:
Other expenses 1.0 0.9 1.6
Finance income (0.3) (0.3) (0.3)
Finance costs 8.8 17.6 39.6
Tax 6.9 (2.5) (1.8)
Depreciation and amortisation 33.9 34.8 66.7
Impairment loss on property, plant and equipment - - 11.7
(Decrease)/increase in provisions (6.1) - 3.7
Pension contributions net of current service cost 0.5 0.3 1.1
Share based payments 2.5 1.9 3.5
Impairment of Goodwill - 60.3 60.3
Loss/(profit) on disposal of business 1.1 - (0.3)
Operating cash flows before movements in working
capital 75.9 62.1 118.8
Decrease/(increase) in inventories 3.0 (5.6) 7.8
(Increase)/decrease in trade and other receivables (46.8) (8.0) 13.3
Increase/(Decrease) in trade and other payables 17.3 (9.9) (0.6)
------------------------------------------------------ ---------------- --------------- ------------
Cash generated by operations 49.4 38.6 139.3
Income taxes paid (24.0) (3.9) (8.5)
Interest paid (12.1) (12.0) (23.7)
------------------------------------------------------ ---------------- --------------- ------------
Net cash flow from operating activities 13.3 22.7 107.1
------------------------------------------------------ ---------------- --------------- ------------
Investing activities:
Interest received 0.3 0.3 0.3
Disposal of property, plant and equipment - 0.1 1.8
Purchase of property, plant and equipment (24.3) (15.4) (41.5)
Disposal of business 1.9 - 0.5
Acquisition of intangibles (0.1) (0.2) (0.3)
Net cash flow from investing activities (22.2) (15.2) (39.2)
------------------------------------------------------ ---------------- --------------- ------------
Financing activities:
Issue of shares by the Company and the ESOT net
of issue costs - 0.1 0.1
Dividends paid - - -
Outflow of cancelled dividend hedge - (1.8) (1.8)
Net movement on existing debt (3.7) (2.9) (56.3)
Payment of lease liabilities (3.3) (3.1) (6.7)
------------------------------------------------------ ---------------- --------------- ------------
Net cash used in financing activities (7.0) (7.7) (64.7)
------------------------------------------------------ ---------------- --------------- ------------
Net (decrease)/increase in cash and cash equivalents (15.9) (0.2) 3.2
Cash and cash equivalents at beginning of period 111.0 103.9 103.9
Foreign exchange on cash and cash equivalents (1.5) (1.7) 3.9
------------------------------------------------------ ---------------- --------------- ------------
Cash and cash equivalents at end of period 93.6 102.0 111.0
------------------------------------------------------ ---------------- --------------- ------------
Condensed consolidated unaudited statement of changes in equity
for the six months ended 30 June 2021
Share Share Translation Hedging Other Retained Total
capital premium reserve reserve reserves earnings equity
$m $m $m $m $m $m $m
---------------------------------- -------- -------- ----------- -------- --------- --------- -------
At 1 January 2021 52.1 237.7 (48.9) (8.9) 166.4 462.0 860.4
---------------------------------- -------- -------- ----------- -------- --------- --------- -------
Profit for the period - - - - - 27.6 27.6
Other comprehensive income:
Exchange differences - - (4.4) - 0.1 - (4.3)
Recycling of foreign exchange
gains on disposal - - (0.4) - - - (0.4)
Movement in cash flow hedges - - - 1.3 - - 1.3
Actuarial gain on pension
scheme 48.5 48.5
Deferred tax adjustment
on pension scheme deficit - - - - - (11.8) (11.8)
Transactions with owners:
Issue of shares 0.1 2.8 - - (2.9) - -
Share based payments - - - - 2.5 - 2.5
At 30 June 2021 52.2 240.5 (53.7) (7.6) 166.1 526.3 923.8
---------------------------------- -------- -------- ----------- -------- --------- --------- -------
Share Share Translation Hedging Other Retained Total
capital premium reserve reserve reserves earnings equity
$m $m $m $m $m $m $m
-------------------------------- -------- -------- ----------- -------- --------- --------- -------
At 1 January 2020 52.1 237.7 (69.0) (8.4) 168.5 525.3 906.2
-------------------------------- -------- -------- ----------- -------- --------- --------- -------
Profit for the period - - - - - (50.9) (50.9)
Other comprehensive income:
Exchange differences - - (20.1) - (3.7) - (23.8)
Movement in cash flow
hedges - - - (2.6) - - (2.6)
Actuarial gain on pension
scheme - - - - - 2.9 2.9
Deferred tax adjustment
on pension scheme deficit - - - - - (0.3) (0.3)
Transactions with owners:
Share based payments - - - - 1.9 - 1.9
At 30 June 2020 52.1 237.7 (89.1) (11.0) 166.7 477.0 833.4
-------------------------------- -------- -------- ----------- -------- --------- --------- -------
Notes to the interim financial statements for the six months
ended 30 June 2021
1. General Information
Elementis plc (the 'Company') and its subsidiaries (together,
the 'Group') manufactures specialty chemicals. The Group has
operations in the US, UK, Brazil, Germany, Finland, The
Netherlands, China, Taiwan, Malaysia and India. The Company is a
limited liability company incorporated and domiciled in England, UK
and is listed on the London Stock Exchange.
2. Accounting policies
Basis of preparation
This condensed set of financial statements (also referred to as
'interim financial statements' in this announcement) has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the United Kingdom.
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the same accounting policies
and presentation that were applied in the preparation of the
Company's published consolidated financial statements for the year
ended 31 December 2020.
The information for the year ended 31 December 2020 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
3. Going concern
Given the continuing uncertainties resulting from the impact of
COVID-19 on the economic environment in which the Group operates,
the directors have placed a particular focus on the appropriateness
of adopting the going concern basis in preparing the condensed
consolidated financial statements for the six months ended 30 June
2021.
The Group's going concern assessment covers the period of at
least 12 months from the date of authorisation of these
consolidated half year financial statements (the "going concern
period"), and takes into account its substantial liquidity,
committed expenditure, and likely ongoing levels of costs. In
preparing the assessment, alongside the most likely "base case"
forecast, the Board has considered a "reverse stress test case"
which flexes sales and costs to determine what circumstances would
be required to breach banking covenants.
This assessment shows the Group has sufficient liquidity to
discharge its liabilities as they fall due throughout the going
concern period under the base case, assuming continued access to
our revolving credit facilities. Access to these credit facilities
is dependent on the group operating within its financial covenants.
The Group agreed covenant relaxations with our lenders in March and
September 2020, the revised provision in our banking arrangements
is for the net debt/EBITDA covenant to step down from 3.75x at
present to 3.25x in June 2022. Testing up to 30 June 2021 confirmed
that the Group operated within these covenants and under the base
case the Group is expected to remain within its financial covenants
throughout the going concern period and the conditions necessary
for the reverse stress scenario to be applicable were deemed
remote.
The Directors also considered factors likely to affect its
future performance and development, the Group's financial position,
current excess liquidity position, high level of cash conversion
and the principal risks and uncertainties facing the Group,
including the Group's exposure to credit, liquidity and market risk
and the mechanisms for dealing with these risks.
In conclusion, after reviewing the base case and considering the
remote likelihood of the scenario in the reverse stress test case
occurring as well as having considered the uncertainty relating to
COVID-19 and the mitigating actions available, the Directors have
formed the judgement that, at the time of approving the
consolidated financial statements, there are no material
uncertainties that cast doubt on the Group's going concern status
and that it is appropriate to prepare the consolidated accounts on
the going concern basis.
4. Segment reporting
Personal Care - production of rheological modifiers and
compounded products, including active ingredients for AP
deodorants, for supply to Personal Care manufacturers.
Coatings - production of rheological modifiers and additives for
decorative and industrial coatings. The Energy segment has been
amalgamated into the Coatings segment with effect from 1(st)
January 2021 because this is the basis on which the chief operating
decision maker views the business and the basis on which capital
allocation decisions are made owing to the shared asset base.
Talc - production and supply of talc for use in plastics,
coatings, technical ceramics and paper sectors.
Chromium - production of chromium chemicals.
Six months ended Year ended 31 December
30 June 2020 2020
Six months ended
30 June 2021 (restated*) (restated*)
Gross External Gross External Gross Inter-segment External
$m Inter-segment $m $m Inter-segment $m $m $m $m
-------------- ----- ------------- -------- ----- ------------- -------- ----- ------------- ---------
Revenue
Personal Care 88.8 - 88.8 89.8 - 89.8 160.8 - 160.8
Coatings 196.6 - 196.6 162.2 - 162.2 319.1 - 319.1
Talc 76.5 - 76.5 60.9 - 60.9 132.5 - 132.5
Chromium 90.2 - 90.2 77.5 (3.9) 73.6 146.9 (8.0) 138.9
Total revenue 452.1 - 452.1 390.4 (3.9) 386.5 759.3 (8.0) 751.3
-------------- ----- ------------- -------- ----- ------------- -------- ----- ------------- ---------
All r evenues relate to the sale of goods
2020 2020
2021 Six months Year
Six months ended ended
ended 30 June 31 December
30 June $m $m
Notes $m (restated*) (restated*)
-------------------------- ------ ------------- ------------ ------------
Adjusted operating profit
Personal Care 19.2 20.1 33.6
Coatings 32.9 20.6 41.4
Talc 7.9 6.2 16.6
Chromium 4.6 3.1 5.6
Central costs (10.3) (8.0) (15.6)
-------------------------- ------ ------------- ------------ ------------
Adjusted operating profit 54.3 42.0 81.6
-------------------------- ------ ------------- ------------ ------------
Adjusting items 5 (9.2) (77.2) (109.8)
-------------------------- ------ ------------- ------------ ------------
Operating profit/(loss) 45.1 (35.2) (28.2)
-------------------------- ------ ------------- ------------ ------------
(Loss)/profit on disposal (1.1) - 0.3
Other expenses (1.0) (0.9) (1.6)
Finance income 0.3 0.3 0.3
Finance costs (8.8) (17.6) (39.6)
-------------------------- ------ ------------- ------------ ------------
Profit/(loss) before tax 34.5 (53.4) (68.8)
-------------------------- ------ ------------- ------------ ------------
* Restated for the amalgamation of the Energy business into the
Coatings segment.
5. Adjusting items and alternative performance measures
In calculating the profitability measures by which management
assesses the performance of the Group a number of items are
excluded from operating profit as reported in accordance with IFRS.
The Board believes that the adjusted measures assist shareholders
in better understanding the underlying performance of the
business.
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
---------------------------------------------------------- ----------- ----------- ------------
Operating profit/(loss) 45.1 (35.2) (28.2)
---------------------------------------------------------- ----------- ----------- ------------
Adjusting items:
Restructuring - - 0.9
Business transformation 2.7 2.2 22.7
Environmental provisions
Increase in provisions due to additional remediation
work identified 0.5 0.9 5.6
Increase in provisions due to change in discount
rate (2.0) 3.1 1.1
M&A and disposal costs - 1.1 3.7
Impairment of goodwill - 60.3 60.3
Amortisation of acquired intangibles 8.0 9.6 15.5
Net adjusting items 9.2 77.2 109.8
---------------------------------------------------------- ----------- ----------- ------------
Adjusted operating profit 54.3 42.0 81.6
---------------------------------------------------------- ----------- ----------- ------------
2020 2020
2021 Six months Year
Six months ended ended
ended 30 June 31 December
30 June $m $m
$m (restated*) (restated*)
--------------------------- --------------- ------------ ------------
Adjusted operating profit
Personal Care 19.2 20.1 33.6
Coatings 32.9 20.6 41.4
Talc 7.9 6.2 16.6
Chromium 4.6 3.1 5.6
Central costs (10.3) (8.0) (15.6)
--------------------------- --------------- ------------ ------------
Adjusted operating profit 54.3 42.0 81.6
Other expenses (1.0) (0.9) (1.6)
Finance income 0.3 0.3 0.3
Finance costs(1) (13.7) (13.2) (27.6)
--------------------------- --------------- ------------ ------------
Adjusted profit before tax 39.9 28.2 52.7
--------------------------- --------------- ------------ ------------
* Restated for the amalgamation of the Energy business into the
Coatings segment.
(1) Adjusted finance costs of $13.7m excludes the mark to market
on derivatives of $5.0m.
Adjusting items in the period fall into the following
categories:
Restructuring
In 2020, restructuring costs relate to the organisational
efficiency programme commenced in late 2019, which eliminated
duplicate roles, reduced management layers and increased spans of
control in order to realise cost savings and efficiencies across
the Group.
Business transformation
In November 2020, the closure of the Charleston plant was
announced. Costs of $2.3m in 2021 associated with the closure of
the site are classed as an adjusting item and the site is planned
to be disposed of in the future. Further charges of $0.4m relates
to the optimisation of the supply chain footprint across our
Chromium business.
Environmental provision
Of the $1.5m, a credit of $2.0m relates to the impact of changes
in discount rates and a charge $0.5m relates to extra remediation
work identified.
M&A and disposal costs
Charges of $3.7m for the year to 31 December 2020 represent
costs relating to the disposal of small, non-core businesses in the
Personal Care business segment and advisory fees incurred in
response to an unsolicited takeover approach received in the
year.
Amortisation of intangibles arising on acquisition
These costs total $8.0m in the 6 months to 30 June 2021 and, as
in prior periods, are excluded from operating profit to provide
readers of the report with additional useful analysis of the
performance of the business.
An explanation of other adjusting items relating to the full
year 2020 can be found within the 2020 Annual Report and
Accounts.
6. Finance income
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
-------------------------- ----------- ----------- ------------
Interest on bank deposits 0.3 0.3 0.3
-------------------------- ----------- ----------- ------------
7. Finance costs
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
---------------------------------------------- ----------- ----------- ------------
Interest on bank loans 12.1 11.5 22.6
Unwind of discount on provisions 0.6 0.6 2.7
Pension and other post-retirement liabilities 0.3 0.3 0.6
Fair value movement on derivatives (5.0) 2.6 10.2
Dividend currency hedge cancellation - 1.8 1.8
Interest on lease liabilities 0.8 0.8 1.7
---------------------------------------------- ----------- ----------- ------------
8.8 17.6 39.6
---------------------------------------------- ----------- ----------- ------------
8. Tax
The c harge for tax on profits of $6.9m or 19.9% (2020: credit
of $2.5m, or 4.6%) is based on the probable tax charge in those
jurisdictions where profits arise. Within this figure is a tax
credit of $0.6m (2020: $10.5m) in respect of adjusting items.
9. Earnings per share
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
---------------------------------------------- ----------- ----------- ------------
Earnings/(Loss) for the purposes of basic
earnings per share 27.6 (50.9) (67.0)
Adjusting items net of tax 4.7 71.1 105.5
---------------------------------------------- ----------- ----------- ------------
Adjusted earnings 32.3 20.2 38.5
---------------------------------------------- ----------- ----------- ------------
Number(m) Number(m) Number(m)
---------------------------------------------- ----------- ----------- ------------
Weighted average number of shares for the
purposes of basic
earnings per share 580.6 579.9 580.1
Effect of dilutive share options 8.7 4.3 13.6
---------------------------------------------- ----------- ----------- ------------
Weighted average number of shares for the
purposes of diluted
earnings per share 589.3 584.2 593.7
---------------------------------------------- ----------- ----------- ------------
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
cents cents cents
----------------------------- ----------- ----------- ------------
Earnings/(Loss) per share:
Basic 4.8 (8.8) (11.5)
----------------------------- ----------- ----------- ------------
Diluted 4.7 (8.7) (11.3)
----------------------------- ----------- ----------- ------------
Adjusted earnings per share:
----------------------------- ----------- ----------- ------------
Basic 5.6 3.5 6.6
----------------------------- ----------- ----------- ------------
Diluted 5.5 3.5 6.5
----------------------------- ----------- ----------- ------------
10. Dividends
The following dividends were declared and paid by the Group:
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
--------------------------------- ----------- ----------- ------------
Dividends paid on ordinary shares - - -
--------------------------------- ----------- ----------- ------------
11. Pension
Valuations for IAS 19 purposes were conducted as of 30 June
2021. The Group is reporting a surplus on its UK scheme of $45.2m
(30 June 2020: $19.4m) and a deficit on all other schemes of $19.4m
(30 June 2020: deficit of $35.3m) at the end of June 2021.
Additional commentary is included in the Finance report.
12. Movement in net cash/(borrowings)
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
------------------------------------------------- ----------- --------------- ------------
Change in net cash/(borrowings) resulting from
cash flows
(Decrease)/increase in cash and cash equivalents (15.9) (0.2) 3.2
Decrease in borrowings 3.7 2.9 56.3
------------------------------------------------- ----------- --------------- ------------
(12.2) 2.7 59.5
Currency translation differences 5.0 (1.7) (13.4)
(Increase)/decrease in net debt (7.2) 1.0 46.1
Net debt at beginning of period (408.1) (454.2) (454.2)
------------------------------------------------- ----------- --------------- ------------
Net debt at end of period (415.3) (453.2) (408.1)
------------------------------------------------- ----------- --------------- ------------
Bank and other Total financing Cash and cash Net debt and lease
borrowings Lease liabilities liabilities equivalents liabilities
$m $m $m $m $m
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
At 1 January 2020 (558.1) (46.9) (605.0) 103.9 (501.1)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Exchange rate
adjustments - 0.2 0.2 (1.7) (1.5)
Cash flows from
financing
activities 2.9 3.1 6.0 (2.9) 3.1
Other movements - (0.7) (0.7) 2.7 2.0
At 30 June 2020 (555.2) (44.3) (599.5) 102.0 (497.5)
Exchange rate
adjustments (17.3) (1.3) (18.6) 5.6 (13.0)
Business disposed
(see note 15) - - - 0.5 0.5
Cash flows from
financing
activities 53.4 1.9 55.3 (53.4) 1.9
Other movements - (0.7) (0.7) 56.3 55.6
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
At 31 December
2020 (519.1) (44.4) (563.5) 111.0 (452.5)
Exchange rate
adjustments 6.5 0.4 6.9 (1.5) 5.4
Business disposed
(see note 15) - - - 1.9 1.9
Cash flows from
financing
activities 3.7 3.3 7.0 (3.7) 3.3
Other movements - (0.8) (0.8) (14.1) (14.9)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
At 30 June 2021 (508.9) (41.5) (550.4) 93.6 (456.8)
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
13. Financial risk management
The Group has exposure to the following financial risks:
-- credit risk;
-- liquidity risk; and
-- market risk.
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Group's risk management policies are established to
identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and
adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the
Group's activities. The Group's Audit Committee, assisted by
Internal Audit, oversees how management monitors compliance with
the Group's risk management policies and procedures and reviews the
adequacy of the risk management framework in relation to the risks
faced by the Group. These interim financial statements do not
include all the financial risk management information and
disclosures that are required in the Annual report and accounts and
should be read in conjunction with the financial statements for the
year ended 31 December 2020. The Group's risk management policies
have not changed since the year end.
The Group measures fair values in respect of financial
instruments in accordance with IFRS 13, using the following fair
value hierarchy that reflects the significance of the inputs used
in making the measurements:
Level 1: Quoted market price (unadjusted) in an active market
for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly or indirectly.
Level 3: Valuation techniques using significant unobservable
inputs.
The Group carried its trade and other receivables and payables,
excluding derivatives, at amortised cost and consider fair value
approximates carrying value. Derivatives are categorised within
level 2. All other financial instruments, including cash and loans
are categorised within level 1.
14. Contingent liabilities
As is the case with other chemical companies, the Group
occasionally receives notice of litigation relating to regulatory
and legal matters. A provision is recognised when the Group
believes it has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Where
it is deemed that an obligation is merely possible and that the
probability of a material outflow is not remote, the Group would
disclose a contingent liability.
In 2013 the UK Government (through HMRC) introduced the UK
Finance Company Exemption ('FCE') regime. Elementis entered into
the FCE regime during 2014. In October 2017 the European Commission
opened a State Aid investigation into the regime. In April 2019 the
European Commission concluded that the FCE regime constituted State
Aid in circumstances where Groups had accessed the regime using a
financing company with UK significant people functions; the
European Commission therefore instructed the UK Government to
collect any relevant State Aid amounts. The UK government and other
UK-based international companies, including Elementis, appealed to
the General Court of the European Union against the decision in
2019.
In Spring 2020 HMRC requested that affected Groups submit their
UK significant people function analysis. The deadline for
submission of these analyses was delayed due to the impact of
COVID-19 and Elementis submitted its analysis to HMRC in July 2020.
In December 2020 the UK government introduced legislation to
commence collection proceedings.
Elementis received a charging notice from HMRC on 5 February
2021 which assessed for the maximum exposure of $19m (excluding
interest). This was paid to HMRC on 5 March 2021. A charging notice
for associated interest of $1m was received on 24 June 2021 and
paid on 7 July 2021. Whilst Elementis has lodged an appeal against
the charging notice this does not defer the payment of the tax
assessed. As Elementis considers that the appeal will ultimately be
successful, at 30 June 2021 an asset has been recorded within non
current assets in the accounts on the expectation that the charge
will be repaid in due course.
15. Business exit
On 21 June the Group disposed of Eisenbacher Dentalwaren ED GmbH
and Adentatec GmbH, the dental alloys businesses located in Worth,
Germany for consideration of EUR4.6m ($5.7m).
The results of Eisenbacher Dentalwaren ED GmbH and Adentatec
GmbH, which have been included in the consolidated income statement
were as follows:
2021
Six months
ended
30 June
$m
------------------------- -----------
Revenue 3.1
Cost of sales (2.0)
------------------------- -----------
Gross profit 1.1
Distribution costs -
Administrative expenses (0.8)
------------------------- -----------
Operating profit 0.3
Finance costs -
------------------------- -----------
Profit before income tax 0.3
Tax -
------------------------- -----------
Net profit 0.3
------------------------- -----------
Revenue includes $nil related to inter-segment sales in 2021
(2020: $nil)
The Group recognised a total loss on current year disposal
of:
30 June
2021
$m
--------------------------------------------- -------
Consideration received 5.7
Net assets disposed of (see table below) (6.2)
Disposal costs (1.0)
Recycling of deferred foreign exchange gains 0.4
--------------------------------------------- -------
Loss on disposal (1.1)
--------------------------------------------- -------
Details of assets and liabilities at the date of disposal are
provided in the following table:
30 June
2021
$m
------------------------------ -------
Goodwill 1.0
Property, plant and equipment 0.1
Inventory 1.5
Trade and other receivables 0.5
Cash and bank balances 3.4
Trade and other payables (0.1)
Income tax payable (0.2)
------------------------------ -------
Total net assets disposed of 6.2
------------------------------ -------
Principal risks and uncertainties
The Group has policies, processes and systems in place to help
identify, evaluate and manage risks throughout the organisation
that may have a material effect on its business operations and
delivery of strategic objectives including its business model,
future performance, solvency, liquidity and/or reputation. The
Board continues to take a proactive approach to recognising and
mitigating risk with the aim of protecting its employees and
safeguarding the interests of the Group, its shareholders,
employees, customers, suppliers and all other stakeholders.
The principal risks and uncertainties facing the Group have not
substantively changed from those set out in the Annual Report and
Accounts for the 12 months ended 31 December 2020 (pages 59 to 62),
however, the following principal risks and uncertainties are
trending upwards as the global economy recovers from the impact of
COVID-19 in 2020; 'Business interruption as a result of supply
chain failure of key raw materials and/or 3(rd) party service
provision', and 'IT, Cyber and GDPR'.
COVID-19 pandemic risk strategy and actions in 2021
Employees
In 2020 a COVID-19 response team was established to co-ordinate
and focus action on the health and safety of our employees using
local, national and federal governmental guidance and public health
guidance. This team have continued to lead our response into 2021.
Led by Executive Leadership Team members, the team direct the
activities in respect of identifying, co-ordinating and mitigating
potential impacts in respect of COVID-19 with a primary focus on
the health and safety of employees - both at manufacturing sites
and those working in the home environment. Our response team
provides employees with policies, procedures and checklists, both
at site level and for home working and oversaw the deployment of a
dedicated micro-site where employees could access relevant health
& safety guidance and other information. We continue to run our
TogetherSafe initiative launched in 2020 with a focus on
demonstrating our commitment to safety and our team ethos into a
culture of shared responsibility by building a global network of
Safety Champions. A series of all employee and leadership townhalls
have also been held during the period offering a feedback loop and
shared understanding of how the Group continues to navigate the
pandemic.
Our compliance framework and attention to cyber risk has been
re-emphasised in recognition of increasing risk trends in these
areas, particularly in a time of global crisis.
Supply Chain
Our supply chain remains in a state of heightened business
continuity awareness. Our plant managers and their teams continue
to play a key role in local information gathering which has proved
highly valuable and our supply chain team have continued to focus
on ensuring continuity of supply and operational reliability. PPE,
social distancing and hygiene guidance is regularly reviewed at all
sites in light of local regulations and guidance. Raw materials
availability is regularly assessed and alternative suppliers
engaged where necessary. Management of pricing, demand planning and
inventory has been managed well during the period. We continue to
maintain a raised frequency of our supply and demand planning
processes to ensure a reliable, cost effective supply of products.
Production supply plans have been adjusted to meet changes in
demand whilst optimising overall cost to serve our customers.
Customers, distributors and suppliers
To support the recovery of our business performance, our senior
business leaders, customer accounts, R&D and supply chain teams
continue to understand the evolving impacts of the COVID-19
recovery on our customers, distributors and suppliers and the
economic environments in which they operate. This is then utilised
in our response planning. We continue to monitor credit risk and
viability of customer and distributor relationships and seek to
ensure fair trading terms for both parties. Notwithstanding the
COVID-19 impact on demand, new business opportunities continue to
come on-stream and we continue to monitor consumer behaviour and
sentiment.
Profitability and liquidity
In 2020 the Board took action to suspend the 2019 final dividend
and 2020 dividends and secured a relaxation of the key net
debt/EBITDA banking covenant from 3.25 to 3.75 for four testing
periods in response to the uncertainties associated with the
duration and impact of COVID-19. In 2021, whilst trading conditions
improve, Management continue to actively scenario plan based on
latest forecasts and oversee regular response plan updates with a
particular focus on controlling working capital and capital
expenditure.
Operational effectiveness
The impact of employees working from home has validated the
resiliency of our business continuity plans and our investment in
tools and technology. However, we continue to closely monitor the
security infrastructure and 3(rd) party systems to ensure ongoing
business continuity of systems and processes. Awareness campaigns
relating to malware and phishing attacks have been circulated to
mitigate the risk of these type of attacks and security measures
have been put in place.
In summary, t he Group continues to maintain appropriate
mitigation strategies to minimise any potential business disruption
and will continue to carry out a regular and robust assessment and
management of the Group's risks.
Alternative performance measures
A reconciliation from reported profit for the year to earnings
before interest, tax, depreciation and amortisation (EBITDA) is
provided to support understanding of the summarised cash flow
included within the finance report on pages 9 to 13.
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
----------------------------------------------- ----------- ----------- ------------
Profit/(loss) for the period 27.6 (50.9) (67.0)
----------------------------------------------- ----------- ----------- ------------
Adjustments for:
Finance Income (0.3) (0.3) (0.3)
Finance costs and other expenses after
adjusting items 9.8 18.5 41.2
Tax charge/(credit) 6.9 (2.5) (1.8)
Depreciation and amortisation 33.9 34.8 66.7
Excluding amortisation of intangibles arising
on acquisition (8.0) (9.6) (15.5)
Adjusting items before interest 10.3 77.2 109.5
----------------------------------------------- ----------- ----------- ------------
EBITDA 80.2 67.2 132.8
----------------------------------------------- ----------- ----------- ------------
Adjusted operating cash flow
Adjusted operating cash flow is defined as the net cash flow
from operating activities less net capital expenditure but
excluding income tax paid, interest paid or received, pension
contributions net of current service cost and adjusting items.
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
---------------------------------------------- ----------- ----------- ------------
Net Cash flow from operating activities 13.3 22.7 107.1
---------------------------------------------- ----------- ----------- ------------
Less:
Capital expenditure (24.2) (15.5) (40.0)
Add:
Income tax paid or received 24.0 3.9 8.5
Interest paid or received 11.8 12.0 23.7
Pension contributions net of current service
cost (0.5) (0.3) 0.1
Adjusting items - non cash 0.2 - (1.8)
Adjusting items - cash 5.5 5.1 12.2
---------------------------------------------- ----------- ----------- ------------
Adjusted operating cash flow 30.1 27.9 109.8
---------------------------------------------- ----------- ----------- ------------
Operating cash conversion
Operating cash conversion is defined as operating cash flow (as
defined above) excluding payments for provisions and share based
pay, divided by operating profit from total operations after
adjusting items
2021 2020 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
$m $m $m
--------------------------------------- ----------- ----------- ------------
Operating profit from total operations
after adjusting items 54.3 42.0 81.6
--------------------------------------- ----------- ----------- ------------
Operating cash flow 30.1 27.9 109.8
Add:
Provisions and share based pay (0.6) 0.3 1.7
--------------------------------------- ----------- ----------- ------------
29.5 28.2 111.5
--------------------------------------- ----------- ----------- ------------
Operating cash flow conversion 54% 67% 137%
--------------------------------------- ----------- ----------- ------------
Unaudited information
To support a full understanding of the performance of the Group,
the information below provides the calculation of Net Debt/EBITDA
as per our banking covenants.
$m
-------------------------------------------------- -----
EBITDA for the last twelve months to 30 June 2021 145.8
IFRS 16 adjustment (6.9)
-------------------------------------------------- -----
Adjusted EBITDA pre IFRS 16 138.9
-------------------------------------------------- -----
Net Debt 415.3
Net Debt / EBITDA* 2.99x
-------------------------------------------------- -----
* Net Debt/EBITDA, where EBITDA is the Adjusted EBITDA on
continuing operations of the Group on a pre IFRS 16 basis, is the
definition of Net Debt/ EBITDA for Elementis' core banking
covenants.
- ENDS -
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July 29, 2021 02:00 ET (06:00 GMT)
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