TIDMVSVS
RNS Number : 8337G
Vesuvius plc
29 July 2021
29 July 2021
Half Year Results for the six months ended 30 June 2021
Strong commercial performance, supported by recovering end
markets and market share gains
Vesuvius plc, a global leader in molten metal flow engineering
and technology, announces its unaudited results for the six months
ended 30 June 2021.
Financial summary H1 2021 H1 2020 Year-on-year Underlying
change change(1)
(GBPm) (GBPm)
-------------------------------- ---- -------- -------- ------------- -----------
Revenue 808.1 720.0 12% 18%
Trading Profit(2) 73.3 51.1 43% 54%
Return on Sales(2) 9.1% 7.1% 200 bps 220 bps
Operating Profit 68.5 39.8 72%
Headline Profit Before
Tax(2) 70.3 45.9 53%
Profit Before Tax 65.5 34.6 89%
Profit 46.3 24.9 86%
Headline Earnings(2) 48.5 31.3 55%
Headline EPS(2) (pence) 17.9 11.6 54%
Statutory EPS (pence) 15.9 8.4 89%
-------------------------------------- -------- -------- ------------- -----------
Adjusted operating cash
flow(2) 37.9 70.2 -46%
Cash generated from operations 50.2 79.2 -37%
Net Debt(2) 196.6 229.7 -14%
Dividend (pence) 6.2p 3.1p +100%
-------------------------------------- -------- -------- ------------- -----------
(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 16 in
the Condensed Group Financial Statements.
Half Year 2021 Highlights
-- Revenue of GBP808.1m, an increase of 18% on an underlying
basis, reflecting the ongoing recovery in both our Steel and
Foundry Divisions across most geographies and all end markets
-- Strong underlying sales growth in both Steel Flow Control
(+21%) and Foundry (+22%), supported by the end market rebound and
market share gains, with more moderate growth in Advanced
Refractories (+9%) where priority was given to price increases over
volumes
-- Trading profit of GBP73.3m, an increase of 54% on an
underlying basis, with return-on-sales up 220bps to 9.1%
-- H1 2021 trading profit impacted by GBP10.3m in excess freight
costs due to global supply chain disruption
-- Selling price increases compensated raw material costs but
did not fully mitigate H1 excess freight costs
-- Focus on market share growth and medium-term market opportunities from:
o GBP28m capacity expansion in Steel Flow Control in Asia and
EMEA, to be operational from late 2022
o 12 new products launched, underlining the benefits of
maintaining our industry-leading R&D investment during 2020
-- Continued strong working capital performance with trade
working capital/sales having improved to 20.7% at June 2021 (12m
average), versus 23.2% at December 2020 and 24.6% at June 2020
-- Improvement in our Net debt/EBITDA to 1.1x at June 2021,
versus 1.2x at December 2020, and refinancing of our revolving
credit facility ("RCF") in early July which was increased in size
from GBP300m to GBP385m
-- Interim dividend of 6.2p (2020: 3.1p), an increase of 100% versus 2020
Comment from Patrick Andr é , CEO:
"Vesuvius delivered a strong commercial performance in H1 2021,
supported by the continued improvement in end markets and market
share gains in Steel Flow Control and Foundry. While we continue to
experience inflationary pressure in certain raw materials and
freight, this will be offset in H2 through incremental selling
price increases currently being implemented. Consequently, trading
profit in the second half is expected to be similar to the first
half. Overall, our expectation for the full year is unchanged.
Looking beyond the ongoing transition period of the pandemic
recovery, we expect continuing structural growth in our end markets
of steel and foundry to present attractive organic growth
opportunities, supported by the strategic expansion of our Steel
Flow Control production capacities in Asia and EMEA.
We remain confident that we will deliver further meaningful
improvement in our financial performance in the coming years, based
on our optimised manufacturing footprint, our ongoing R&D
investment and new product pipeline, as well as our entrepreneurial
and decentralised business model."
Presentation of H1 2021 Results
Vesuvius management will make a presentation to analysts and
investors on 29 July, 2021 at 10.00 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:
+44 (0) 207 822
Vesuvius plc Patrick Andr é , Chief Executive 0000
+44 (0) 207 822
Guy Young, Chief Financial Officer 0000
Euan Drysdale, Group Head of Corporate +44 (0) 7584
Finance 641 315
Pamela Antay, Head of Investor +44 (0) 7827
Relations 802 277
Media enquiries:
Andrew Jaques/ Rachel Farrington/Peter +44 (0) 203 128
MHP Communications Lambie 8100
About Vesuvius plc
Vesuvius is a global leader in molten metal flow engineering and
technology principally serving the steel and foundry
industries.
We develop innovative and customised solutions, often used in
extremely demanding industrial environments, which enable our
customers to improve their manufacturing processes, enhance product
quality and reduce costs. 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 low-cost 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 he or she is recognised,
developed and properly rewarded.
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 2021
Vesuvius delivered a strong commercial performance in H1 2021,
supported by the continued improvement in end markets and market
share gains in Steel Flow Control and Foundry.
According to the World Steel Association (WSA), crude steel
production in the world excluding China and Iran increased by 18.3%
in H1 2021, which is 0.3% ahead of H1 2019. Foundry end-markets
across all regions also posted significant growth, with production
in the global light vehicle, medium & heavy commercial vehicle
and mining & construction end markets up 29.7%, 20.3% and
16.4%, respectively, according to IHS and Oxford Economics data.
Compared to H1 2019, global light vehicle production is down 12.3%,
whilst medium & heavy commercial vehicles is up 2.1% and mining
& construction is up 6.1%. The lagging recovery versus 2019
levels in the light vehicles market reflects the global shortage of
semi-conductors, which has constrained the ability of OEMs to
ramp-up production.
GBPm H1 2021 Acquisitions H1 2021 H1 2020 Currency Acquisitions H1 2020 Reported Underlying
Reported / Disposals Underlying Reported / Disposals Underlying % Change % Change
--------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Revenue 808.1 - 808.1 720.0 -36.2 - 683.8 12% 18%
Trading
Profit 73.3 - 73.3 51.1 -3.6 - 47.5 43% 54%
Return
on +200 +220
Sales 9.1% 9.1% 7.1% 6.9% bps bps
--------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Group trading performance
In the first half of 2021, the Group generated revenues of
GBP808.1m, an increase of 12% compared to H1 2020, on a reported
basis. Underlying Group revenue, adjusted for the effects of
currency translation, increased by 18%. Trading profit (adjusted
EBITA) was GBP73.3m, an increase of 43% on a reported basis and 54%
on an underlying basis. The Group achieved return on sales of 9.1%
in H1 2021, an increase of 200bps (220bps on an underlying basis).
This strong performance was achieved despite the unwinding of the
majority of temporary Covid-related cost savings and the impact of
excess freight costs.
On an underlying basis, adjusted for the effects of currency
translation, Group revenues remain 3.3% below the level achieved in
H1 2019. This is due to the exposure of our Steel Division to NAFTA
and the EU 27 + UK where production remains below H1 2019 levels
and the exposure of the Foundry Division to light vehicles which is
lagging broader market growth due to the semi-conductor
shortage.
Strategic progress
Vesuvius' core strategic objective is to deliver long-term
sustainable and profitable growth. We have a clear strategy to
achieve this objective centred around four key execution
priorities. We continued to make progress on these priorities in
the first half of 2021, and believe we are well-positioned to
benefit from the strengthening recovery trends in our end markets.
It remains our stated ambition to achieve a 12.5% trading profit
margin once volumes have recovered to pre-pandemic levels.
-- Reinforce our technology leadership
o Maintained our industry-leading level of R&D investment,
with H1 2021 R&D spend of GBP14.8m, up from GBP13.6m in H1
2020
-- Develop our technical offering and increase the penetration of our value-creating solutions
o Launched 12 new products in H1 2021, more than we launched in
the whole of 2020. On track to hit our target of 22 new product
launches in 2021
-- Flow Control: Vesuvius Air-Shield improves steel quality and
reduces frequency of tube changes
-- Advanced Refractories: Energy efficient Basilite spray
increases tundish availability
-- Foundry: SEMCO FF formaldehyde-free coating with improved
environmental performance for our customers
-- Capture growth in developing markets
o Strong Steel Flow Control growth, outperforming the market in
fast-growing regions such as India, Latin America, Russia, Turkey
and Vietnam
o In China, our Foundry Division grew 27%, whilst Steel Flow
Control increased 16%
-- Improve our cost leadership and margins
o Return on sales increased to 9.1%, up 220bps (underlying)
versus H1 2020
o Full period impact of restructuring actions taken during 2020
delivered a GBP2.5m benefit
Further progress on our ESG agenda H1 2021
Following the launch of our Group Sustainability Initiative at
our 2020 full year results, we continue to make progress on a
number of fronts. Selected highlights from H1 2021 include:
-- Progressive switch to renewable electricity: Four
manufacturing sites have converted to renewable electricity in H1
2021. These sites represent c.19% of our total Scope 2 emissions,
and c.5% of our Scope 1 and Scope 2 emissions
-- Systematic use of internal carbon pricing to assess
decisions: We have integrated carbon pricing (EUR30/t CO(2) in
2021) into our capex analysis which supports the selection of more
environmentally friendly production processes when investing in
capacity increases
-- Reinforced R&D effort to develop products which improve
the sustainability of our customers: Increased R&D focus on
products that help our customers improve their environmental
footprint
-- Improved ESG rating: MSCI ESG rating upgraded to 'A' from 'BBB' in June 2021
Foreign exchange
The net impact of average H1 2021 exchange rates compared to H1
2020 averages has been an H1 2021 headwind of approximately GBP3.6m
at trading profit level. The implied impact of average H1 2021
exchange rates, when compared to average 2020 exchange rates, would
be a headwind of 6% on our 2021 full year trading profit.
Excess freight costs
The Group's trading profit in H1 2021 has been negatively
impacted by GBP10.3m in excess freight costs due to disruption in
global supply chains and the impact this has had on the logistics
market. We expect this headwind to continue throughout 2021.
Benefit from restructuring programmes completed in 2020
In H1 2021, we benefitted from GBP2.5m of restructuring savings
related to a full period impact of actions taken during 2020. We
expect a benefit for the full year 2021 of GBP4.3m, in-line with
previous guidance.
Expansion of Steel Flow Control capacity supports organic
growth
The Group will undertake a GBP28m capacity expansion, to be
operational from late 2022, in some of our most profitable product
lines, to support future organic growth and market share gains:
-- Significant investment at our Skawina Poland plant to serve
EMEA, and in particular fast-growing markets in EEMEA
o +35% expansion in EMEA Viso capacity
o +100% expansion in EMEA Slide gate capacity
-- +50% expansion in Viso capacity in Kolkata, India to serve
the fast growing markets of both India and South East Asia
Working capital
Our continued strong focus on working capital has resulted in
our average trade working capital / sales for the prior 12 months
improving further to 20.7% at June 2021, compared to 23.2% at
December 2020 and 24.6% at June 2020.
This improvement is driven by: a decrease between December 2020
and June 2021 in our debtor days from 77.1 to 73.4 (12m average); a
decrease in our inventory days from 76.0 to 70.7 (12m average); and
an increase in our creditor days from 60.6 to 62.7 (12m average).
We expect that our inventory days will increase over the remainder
of 2021 due to our decision to build-up raw material and finished
goods inventories in anticipation of a further recovery in end
markets.
Tax
Our Effective Tax Rate ("ETR") is currently 26.5% (H1 2020:
27.2%). This resulted in an H1 2021 headline tax charge of GBP18.5m
(H1 2020: GBP12.3m; Full year 2020: GBP24.4m).
Revolving credit facility ("RCF")
We successfully refinanced our RCF on 5 July 2021. This has
increased in size from GBP300m to GBP385m with a maturity date of 5
July 2025 and an option to extend this by 1 year. An accordion
feature allows for an additional GBP100m of future borrowing,
subject to our lending banks obtaining credit approvals at that
time.
Financial position and liquidity
Net Debt at 30 June 2021 stood at GBP196.6m, up from GBP175.1m
at the end of 2020. Our adjusted operating cash flow was GBP37.9m,
offset by the payment of the 2020 Final dividend of GBP38.7m in May
2021, GBP3.4m of net finance cost, and GBP13.7m of income taxes
paid. Our Net Debt / LTM EBITDA ratio was 1.1x at 30 June 2021
versus 1.2x at the end of 2020. This provides us with significant
headroom against our debt covenant limit of 3.25x net debt/LTM
EBITDA.
Our available committed liquidity would have been GBP488.5m at
30 June 2021, when adjusted to reflect the increase in size of our
new RCF, compared to GBP437.3m at 31 December 2020.
Quality, health and safety
The Board and the entire leadership team of Vesuvius place great
emphasis on the importance of quality, health and safety in the
workplace and in the communities in which we operate. Reliability
in quality and delivery is vital to our customers as they use
Vesuvius' products in critical areas of their own processes. The
level of risk attached to a catastrophic failure is often such
that, for people and equipment, no compromise can be accepted. Our
Lost Time Injury Frequency Rate was disappointing at 1.2 per
million hours worked in H1 2021 versus 1.1 in H1 2020 and 1.4 in H1
2019.
Interim Dividend
The Board has declared an interim dividend of 6.2 pence per
share (2020: 3.1p per share), which represents an increase of 100%
compared to our 2020 interim dividend. The interim dividend will be
paid on 17 September 2021 to shareholders on the register at the
close of business on 6 August 2021. Any shareholder wishing to
participate in the Vesuvius Dividend Reinvestment Plan needs to
have submitted their election to do so by 26 August 2021.
Outlook
Vesuvius delivered a strong commercial performance in H1 2021,
supported by the continued improvement in end markets and market
share gains in Steel Flow Control and Foundry. While we continue to
experience inflationary pressure in certain raw materials and
freight, this will be offset in H2 through incremental selling
price increases currently being implemented. Consequently, trading
profit in the second half is expected to be similar to the first
half. Overall, our expectation for the full year is unchanged.
Looking beyond the ongoing transition period of the pandemic
recovery, we expect continuing structural growth in our end markets
of steel and foundry to present attractive organic growth
opportunities, supported by the strategic expansion of our Steel
Flow Control production capacities in Asia and EMEA.
We remain confident that we will deliver further meaningful
improvement in our financial performance in the coming years, based
on our optimised manufacturing footprint, our ongoing R&D
investment and new product pipeline, as well as our entrepreneurial
and decentralised business model.
Operational Review
Vesuvius comprises two Divisions, Steel and Foundry. The Steel
Division operates as three business lines, Steel Flow Control,
Advanced Refractories and Steel Sensors & Probes (formerly
Digital Services).
Steel Division
Steel production in the world excluding China and Iran, which
accounts for approximately 90% of Vesuvius' sales, increased by
18.3% year-on-year with all geographies recording positive volume
growth. Production growth was especially strong in India (+31.3%)
and South America (+28.2%).
The table below sets out the growth in steel production in H1
2021 compared to H1 2020 and to H1 2019. The growth rates show that
despite the strong recovery in H1 2021, steel production volumes
remain below the H1 2019 levels in certain key regions, including
NAFTA and the EU 27 + UK.
Crude steel production H1 '21/'20 H1 '21/'19
year-on-year change
------------------------ ----------- -----------
China 11.8% 14.0%
India 31.3% 1.8%
NAFTA 16.3% -3.7%
South America 28.2% 3.7%
EMEA ex Iran 15.2% 1.1%
EEMEA ex Iran 12.8% 5.0%
EU 27 + UK 18.0% -2.9%
World 14.4% 7.8%
World ex China &
Iran 18.3% 0.3%
Source: World Steel Association (Month-to-date totals may
include revised data not available on a monthly basis)
Vesuvius' Steel Division reported revenues of GBP570.3m in H1
2021, an increase of 10.5% compared to H1 2020. On an underlying
basis, Steel Division revenue was up 16.5%, with particularly
strong performance in the growing markets of India, South America
and Vietnam, where we grew 48%, 57% and 70%, respectively.
There was a strong performance in Steel Flow Control, with
underlying sales growth of 21%, outperforming steel production
growth of 18.3% in the world excluding China and Iran. In Advanced
Refractories, lower growth reflected our continued prioritisation
of profitability over volumes. The Steel Division revenues
incorporate a moderate positive price impact in H1 2021, as price
increases compensated raw material costs but did not fully mitigate
H1 excess freight costs.
Steel Division trading profit improved 27% to GBP49.4m, with
return on sales expanding 110bps to 8.7%.
Steel Division H1 2021 H1 2020 Change Underlying
(GBPm) (GBPm) (%) change
(%)
----------------------------- -------- -------- -------- -----------
Steel Flow Control Revenue 315.5 274.4 15% 21%
Steel Advanced Refractories
Revenue 238.6 228.8 4% 9%
Steel Sensors and Probes
Revenue 16.2 13.1 24% 35%
------------------------------ -------- -------- -------- -----------
Total Steel Revenue 570.3 516.3 10.5% 16.5%
Total Steel Trading Profit 49.4 38.9 27% 35%
Total Steel Return on Sales 8.7% 7.5% 110 bps 120 bps
------------------------------ -------- -------- -------- -----------
Steel Flow Control
The Flow Control business unit supplies the global steel
industry with consumable ceramic products, systems, robotics,
digital services and technical services. These products are used to
contain, control and monitor the flow of molten steel in the
continuous casting process. The consumable ceramic products that
Vesuvius supplies have a short service life (often a matter of a
few hours) due to the significant wear caused by the extremely
demanding environment in which they are used. These products must
withstand extreme temperature changes, whilst resisting liquid
steel and slag corrosion. In addition, the ceramic parts in contact
with the liquid steel must not in any way contaminate it. The
quality, reliability and consistency of these products and the
associated digital services we provide are therefore critical to
the quality of the finished metal being produced and the
productivity, profitability and safety of our customers'
processes.
Steel Flow Control Revenue H1 2021 H1 2020 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------ -------- -------- ------- -----------
Americas 101.9 92.2 11% 24%
Europe, Middle East & Africa
(EMEA) 124.1 101.5 22% 25%
Asia-Pacific 89.4 80.7 11% 14%
------------------------------- -------- -------- ------- -----------
Total Steel Flow Control
Revenue 315.5 274.4 15% 21%
------------------------------- -------- -------- ------- -----------
In the first half of 2021, underlying revenues in the Group's
Steel Flow Control business increased by 21% year-on-year to
GBP315.5m, driven by strong recovery in most regions.
In EMEA excluding Iran, revenues grew 25% compared to H1 2020 on
an underlying basis, versus steel production growth of 15%. This
outperformance was broad-based, with revenue growth exceeding 20%
in both the EU 27+UK and EEMEA (EMEA excluding EU 27+UK).
In the Americas, underlying revenues grew 24%, outperforming
steel production growth of 19%. This outperformance was driven by
54% growth in South America.
In Asia Pacific, revenues grew 14% on an underlying basis, with
China up 16% versus steel production growth of 12%. In the rest of
the Asia Pacific region, the outperformance in Vietnam (+76.4%
versus steel production growth of 68%) was partially offset by a
decline in South Korea.
Steel Advanced Refractories
The Steel Advanced Refractories business unit supplies complete
value-added solutions to its customers including specialist
refractory materials, advanced installation technologies (including
robots), computational fluid dynamics capabilities and lasers. The
specialist refractory materials are subject to extreme
temperatures, corrosion and abrasion, they are in the form of
powder mixes, which are spray-applied or cast onto the vessel to be
lined ('monolithics') and refractory shapes (e.g. bricks, pads,
dams and other larger precast shapes). The service life of the
products that Advanced Refractories supplies into the steel making
process can vary (some a matter of hours and others for a period of
years) based upon the type of refractory and the level of wear
caused by the demanding environment in which they are used. An
integral part of our success depends upon our best-in-class
installation technologies (including robots) and lasers to track
the performance of installed Vesuvius refractories as well as the
strong level of collaboration with our customers.
Steel Advanced Refractories H1 2021 H1 2020 Change Underlying
Revenue (GBPm) (GBPm) (%) change
(%)
----------------------------------- -------- -------- ------- -----------
Americas 80.3 77.3 4% 13%
Europe, Middle East & Africa
(EMEA) 90.3 97.2 -7% -5%
Asia-Pacific 68.0 54.3 25% 31%
------------------------------------ -------- -------- ------- -----------
Total Steel Advanced Refractories
Revenue 238.6 228.8 4% 10%
------------------------------------ -------- -------- ------- -----------
Steel Advanced Refractories reported revenues of GBP238.6m in H1
2021, an increase of 10% on an underlying basis.
On an underlying basis, revenues grew 13% in the Americas, with
strong outperformance in South America, which grew 70% versus steel
production growth of 28%.
In EMEA excluding Iran, revenues posted an underlying decline of
5% during the period as we continued to exit unprofitable contracts
and also led price increases in product lines that were impacted by
higher raw material costs.
In Asia Pacific, revenues grew 31% on an underlying basis driven
by strong outperformance in India (+57%), Vietnam (+67%) and Japan
(+48%).
Steel Sensors & Probes (formerly Digital Services)
The Steel Sensors & Probes business unit offers products to
our customers to enable them to make their underlying processes
more efficient and reliable. The business unit focuses on providing
a range of sensors and probes that enhance the control and
monitoring of our customers' production processes, complementing
Vesuvius' strong presence and expertise in molten metal engineering
to create new technologies and integrate them into expert process
management systems. These products include temperature sensors,
oxygen, hydrogen and sublance probes, iron oxide and metal sampling
for the steel, aluminium and foundry industries. By using these
technologies, customers can focus on critical parameters within
their processes, enabling them to refine their production methods
to improve quality, lower production costs and maximise
efficiency.
Steel Sensors & Probes H1 2021 H1 2020 Change Underlying
Revenue (GBPm) (GBPm) (%) change
(%)
------------------------------ -------- -------- ------- -----------
Americas 10.5 8.1 30% 50%
Europe, Middle East & Africa
(EMEA) 5.7 4.9 15% 16%
Asia-Pacific 0.1 0.1 -24% -24%
------------------------------- -------- -------- ------- -----------
Total Steel Sensors & Probes
Revenue 16.2 13.1 24% 35%
------------------------------- -------- -------- ------- -----------
Revenues in Steel Sensors & Probes were GBP16.2m in H1 2021,
representing an underlying increase of 35% year-on-year. The strong
performance in the Americas was driven by new customer wins,
especially in South America. In EMEA, we also performed well and
continued to gain traction.
Foundry Division
The Foundry Division is a world leader in the supply of
consumable products, technical advice and application support to
improve the performance and quality of ferrous and non-ferrous
castings. Vesuvius operates under the brand FOSECO in the foundry
market. The foundry process is highly sequential and is critically
dependent on consistency of product quality and productivity
optimisation. Working alongside customers at their sites, our
engineers provide on-site technical expertise in addition to
advanced computational fluid dynamics capabilities to develop the
best customised solutions. The conditioning of molten metal, the
nature of the mould used and, especially, the design of the way
metal flows into the mould are key parameters in a foundry,
determining both the quality of the finished castings and the
labour, energy and metal usage efficiency of the foundry. Vesuvius'
products and associated services to foundries improve these
parameters.
Foundry Division H1 2021 H1 2020 Change Underlying
(GBPm) (GBPm) (%) change
(%)
-------------------------
Foundry Revenue 237.8 203.7 17% 22%
Foundry Trading Profit 23.9 12.2 96% 119%
Foundry Return on Sales 10.1% 6.0% 410 bps 450 bps
-------------------------- -------- -------- -------- -----------
Foundry end-markets across all regions also posted significant
growth, with production in the global light vehicle, medium &
heavy commercial vehicle and mining & construction end markets
up 29.7%, 20.3% and 16.4%, respectively, according to IHS and
Oxford Economics data. Compared to H1 2019, global light vehicle
production is down 12.3%, whilst medium & heavy commercial
vehicles is up 2.1% and mining & construction is up 6.1%.
The lagging recovery versus 2019 levels in the light vehicles
market reflects the global shortage of semi-conductors, which has
constrained the ability of OEMs to ramp-up production.
Vesuvius' Foundry Division reported revenues of GBP237.8m in H1
2021, an increase of 17% compared to H1 2020. On an underlying
basis, Foundry Division revenue was up 22%.
The Foundry Division also achieved meaningful margin recovery,
with trading profit growing 119% on an underlying basis to
GBP23.9m, as Return on Sales expanded 450bps to 10% in H1 2021.
Foundry Revenue H1 2021 H1 2020 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------
Americas 48.6 44.1 10% 24%
Europe, Middle East & Africa
(EMEA) 104.4 90 16% 18%
Asia-Pacific 84.7 69.6 22% 27%
------------------------------- -------- -------- ------- -----------
Total Foundry Revenue 237.8 203.7 17% 22%
------------------------------- -------- -------- ------- -----------
Foundry revenues in the Americas grew 24% year-on-year on an
underlying basis, driven by 12% growth in NAFTA, and very strong
performance in South America, which was up 78%.
In EMEA, revenues increased by 18%, with EEMEA (EMEA excluding
EU 27+UK) growing at 24% and the EU 27+UK growing at 18%.
In Asia Pacific, we benefitted from continued strong performance
in China, where revenues grew 27% and India where revenues grew
66%.
Financial Review
The following review considers a number of our financial KPIs
and sets out other relevant financial information.
Basis of Preparation
All references in this financial review are to headline
performance unless stated otherwise. See Note 16 to the Condensed
Group Financial Statements for the definition of headline
performance.
H1 2021 performance overview
The Group performed well in H1 2021 and we are encouraged by the
positive trends in our key end markets of steel and foundry.
Reported revenue increased by GBP88.1m over the prior year and by
GBP124.3m on an underlying basis (+18%).
However, in the first half of the year, our business has
experienced increasing raw material prices and supply chain
disruption which has caused some temporary friction costs.
Nevertheless, the Group has continued to deliver on our strategic
priorities while also achieving further efficiencies in the
management of working capital.
Trading profit for H1 2021 was GBP73.3m, 54% higher than prior
year on an underlying basis. Return on sales was 9.1%, higher than
prior year by 220bps on an underlying basis.
The Group's cash conversion in H1 2021 was impacted by an
increase in working capital to support the revenue growth.
Dividend
The Board has declared an interim dividend of 6.2 pence per
share to be paid on 17 September 2021 to shareholders on the
register at the close of business on 6 August 2021. Any shareholder
wishing to participate in the Vesuvius Dividend Reinvestment Plan
needs to have submitted their election to do so by 26 August 2021.
It remains the Board's intention to deliver long-term dividend
growth, provided this is supported by underlying earnings, cash
flows, capital expenditure requirements and the prevailing market
outlook.
Key Performance Indicators
We have identified a number of KPIs against which we have
consistently reported. As with prior years, we measure our results
on an underlying basis, where we adjust to ensure appropriate
comparability between periods, irrespective of currency
fluctuations and any business acquisitions and disposals.
This is done by:
-- Restating the previous period's results at the same foreign
exchange (FX) rates used in the current period
-- Removing the results of disposed businesses in both the current and prior years
-- Removing the results of acquired businesses in both the current and prior years
Therefore, for 2021, we have retranslated 2020 results at the FX
rates used in calculating the 2021 results. There were no
acquisitions or disposals in the current or prior years and
consequently no additional adjustments were required.
Objective: Deliver growth
KPI: Underlying revenue growth
Reported revenue for H1 2021 was GBP808.1m. Reported revenue for
H1 2020 was GBP720.0m which equated to GBP683.8m on an underlying
basis. H1 2021 underlying revenue increased by 18% year-on-year.
The strong increase in revenue has been driven by a recovery across
geographies in both our steel and foundry end-markets versus
2020.
GBPm H1 2021 Revenue H1 2020 Revenue % change
--------- ---------------------------------------------- --------------------------------------------------------- ----------------------
As As
reported Acquisition/Disposals Underlying reported Currency Acquisition/Disposals Underlying Reported Underlying
--------- --------- ---------------------- --------- --------- ---------------------- ----------- --------- -----------
Steel 570.3 - 570.3 516.3 (26.7) - 489.6 11% 17%
Foundry 237.8 - 237.8 203.7 (9.5) - 194.2 17% 22%
--------- --------- ---------------------- ----------- --------- --------- ---------------------- ----------- --------- -----------
Total
Group 808.1 - 808.1 720.0 (36.2) - 683.8 12% 18%
Objective: Generate sustainable profitability and create
shareholder value
KPI: Trading profit and Return on Sales
We continue to measure underlying trading profit of the Group as
well as trading profit as a percentage of sales, which we refer to
as our Return on Sales or RoS.
Trading profit for H1 2021 was GBP73.3m and Return on Sales was
9.1%. On an underlying basis, trading profit increased by 54% and
Return on Sales by 220bps versus prior year. The increase in
trading profit and Return on Sales is due to higher revenue and
ongoing delivery of benefits from the restructuring programme
partially offset by temporary friction costs linked to supply chain
disruptions.
In H1 2021, the Steel Division recorded Return on Sales of 8.7%,
a 120bps underlying improvement from H1 2020 Trading profit
increased by 35% on an underlying basis, to GBP49.4m during the
period. Return on Sales in the Foundry Division increased by 450bps
year-on-year on an underlying basis, to 10% in H1 2021. Trading
profit was GBP23.9m representing a 119% increase on an underlying
basis versus prior year.
GBPm H1 2021 Trading profit H1 2020 Trading profit % change
--------- ---------------------------------------------- --------------------------------------------------------- ----------------------
As As
reported Acquisition/Disposals Underlying reported Currency Acquisition/Disposals Underlying Reported Underlying
--------- --------- ---------------------- --------- --------- ---------------------- ----------- --------- -----------
Steel 49.4 - 49.4 38.9 (2.4) - 36.5 27% 35%
Foundry 23.9 - 23.9 12.2 (1.3) - 10.9 96% 119%
--------- --------- ---------------------- ----------- --------- --------- ---------------------- ----------- --------- -----------
Total
Group 73.3 - 73.3 51.1 (3.6) - 47.5 43% 54%
KPI: Headline PBT and Headline EPS
Headline profit before tax (PBT) and headline earnings per share
(EPS) are used to measure the underlying financial performance of
the Group. The main difference between trading profit and PBT is
net finance costs which were GBP3.6m in H1 2021, GBP2.3m lower than
H1 2020.
Our Headline PBT was GBP70.3m, 53% above last year on a reported
basis. After amortisation of acquired intangibles of GBP4.8m, our
PBT of GBP65.5m was 89% higher than H1 2020. Headline EPS from
continuing operations at 17.9p is 54% higher than H1 2020.
KPI: Return on net assets (RONA)
RONA is our principal measure of capital efficiency. We do not
exclude the results of businesses acquired and disposed from this
calculation, as capital efficiency is an important consideration in
our portfolio decisions. It is calculated by dividing trading
profit plus our share of profits from joint ventures by our average
operating assets (property, plant and equipment, trade working
capital and interests in joint ventures and associates,
investments, and other operating receivables, payables and
provisions).
As with most of our KPIs, we measure this on a 12-month moving
average basis at average exchange rates for the period to ensure
that we focus on sustainable underlying improvements. Our RONA for
H1 2021 was 20.2% (2020: half year 19.6%; full year 16.0%).
Objective: Maintain strong cash generation and an efficient
capital structure
KPI: Free cash flow and working capital
Fundamental to ensuring that we have adequate capital to execute
our corporate strategy is converting our profits into cash, partly
through strict management of our working capital. The Group
generated adjusted operating cash flows of GBP37.9m, representing a
46% decrease versus H1 2020. This implies a cash conversion rate in
H1 2021 of 52% (2020: half year 137%; full year 171%). H1 2021 cash
conversion was impacted by growing working capital to sustain
revenue growth and investments in capex. Free cash flow from
continuing operations was GBP16.4m in H1 2021 (2020: half year
GBP43.9m; full year GBP113.5m).
We measure working capital both in terms of actual cash flow
movements, and as a percentage of sales revenue. Trade working
capital as a percentage of sales in H1 2021 was 20.7% (2020: half
year 24.6%; full year 23.2%), measured on a 12-month moving average
basis. In absolute terms on a constant currency basis trade working
capital increased by GBP51.2m in H1 2021.
KPI: Net debt and interest cover
Following the refinancing of the Group's syndicated bank
facility on 5(th) July 2021, the Group had committed borrowing
facilities of GBP664.0m as at 30(th) June 2021 (2020: half year
GBP942.8m; full year GBP586.6m), of which GBP348.7m was undrawn
(2020: half year GBP254.7m; full year GBP246.5m).
Net Debt at 30 June 2021 stood at GBP196.6m, up from GBP175.1m
at the end of 2020. Our adjusted operating cash flow was GBP37.9m,
offset by the payment of the 2020 Final dividend of GBP38.7m in May
2021, GBP3.4m of net finance cost, and GBP13.7m of income taxes
paid.
At the end of H1 2021, the net debt to EBITDA ratio was 1.1x
(2020: half year 1.2x; full year 1.2x) and EBITDA to interest was
21.4x (2020: half year 18.0x; full year 14.5x). These ratios are
monitored regularly to ensure that the Group has sufficient
financing available to run the business and fund future growth.
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.
Objective: Be at the forefront of innovation
KPI: R&D Spend
We believe that our market-leading product technology and
services deliver fundamental value to our customers and that the
primary mechanism to deliver that value is to invest significantly
in research and development. In H1 2021, we spent GBP14.8m on
R&D activities (2020: half year GBP13.6m; full year GBP26.8m at
constant 2021 currency), which represents 1.8% of our revenue
(2020: half year 2.0%; full year 1.9%).
Financial Risk Factors
The Group undertakes regular risk reviews and, as a minimum, a
full risk assessment process twice a year. As in previous years
this included input from the Board in both the assessment of risk
and the proposed mitigation. We consider the main financial risks
faced by the Group as being those posed by a decline in our
end-markets, leading to reduced revenue and profit as well as
potential customer default. We also monitor carefully the
challenges that come from broader financial uncertainty, which
could bring lack of liquidity and market volatility. Important but
lesser risk exists in interest rate movements, foreign exchange
rate movements and cost inflation, but these are not expected to
have a material impact on the business after considering the
controls we have in place.
Our key mitigation of end-market risk is to manage the Group's
exposure through balancing our portfolio of business geographically
and to invest in product innovation. We do so through targeted
capital investment in new and growing businesses and a combination
of capital and human resource in emerging markets. When considering
other financial risks, we mitigate liquidity concerns by financing,
using both the bank and private placement markets. The Group also
seeks to avoid a concentration of debt maturities in any one period
to spread its refinancing risk. Following the refinancing of the
Group's syndicated bank facility on 5(th) July 2021, our liquidity
would have stood at GBP488.5m at 30(th) June 2021. 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 loan from Standard Chartered Bank.
Restructuring
In H1 2021, we benefitted from GBP2.5m of savings from the
restructuring activities undertaken in 2020. During the period, we
reported no restructuring costs (2020: half year GBP2.5m; full year
GBP6.1m) within separately reported items. We are carrying forward
a restructuring provision of GBP6.0m.
Vacant site remediation
The Group owns a number of disused properties in the US, which
do not form part of our trading operations. Costs are being
incurred at one of these sites to address the significant increase
in the volume of water run-off occurring in 2019 and 2020. We have
engaged waste management specialists, are taking actions to reduce
the level of water (including hydrological studies) and are in
contact with the relevant regulatory authorities. We estimate that
it will take 12 months to finalise remediation. The costs in H1
2021 for this remediation are GBPnil (2020 half year: GBP3.8m, 2020
full year: GBP10.3m). These non-recurring costs were treated as a
separately reported item. There was no impact upon headline
performance. Cash spend on vacant site remediation during the
period was GBP1.0m (2020 half year: GBP1.2m, 2020 full year:
GBP1.9m).
Taxation
A key measure of the Group's tax burden is the effective tax
rate, which the Group calculates on the income tax associated with
headline performance, divided by the headline profit before tax and
before the Group's share of post-tax profit of joint ventures. The
Group's effective tax rate was in-line with expectations at 26.5%
in H1 2021 (2020: half year 27.2%; full year 26.9%) based on the
income tax costs associated with headline performance of GBP18.5m
(2020: half year GBP12.3m; full year GBP24.4m).
We expect the Group's effective tax rate on headline profit
before tax and before the share of post-tax profits from joint
ventures to be between 26% and 27% in 2021.
Capital expenditure
Capital expenditure in H1 2021 was GBP20.6m (2020: half year
GBP26.2m; full year GBP59.0m) of which GBP16.1m in the Steel
Division (2020: half year GBP22.5m; full year GBP45.9m) and GBP4.5m
in the Foundry Division (2020: half year GBP3.7m; full year
GBP13.1m). Capital expenditure on revenue-generating customer
installation assets, primarily in Steel, was GBP2.3m (2020: half
year GBP4.1m; full year GBP8.7m).
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 and 57% of the liabilities in the UK have already been
insured. The Group's net pension surplus at 30 June 2021 was
GBP10.9m (2020 full year: GBP2.1m deficit). The improvement is
largely attributable to GBP8.5m from changes to actuarial
assumptions (increasing discount rates; updated mortality
assumptions and pension membership data) which was mainly due to an
increase in bond yields resulting in a reduction in the value of
German and US liabilities, as well as foreign exchange gains of
GBP3.7m.
Principal Risks and Uncertainties
Risk Management
The Board's oversight of principal risks involves a specific
review of the processes by which the Group manages those risks.
This establishes a clear understanding at Board level of the
individuals and groups within the business formally responsible for
the management of specific risks and the mitigation in place to
address them. The Board also establishes the Group's risk appetite,
considering the nature and extent of the principal risks that the
Group should take and the associated adequacy of the steps being
taken to mitigate them.
The Board has overall responsibility for establishing and
maintaining a system of risk management and internal control, and
for reviewing its effectiveness. The Group undertakes a continuous
process of risk identification and review, which includes a formal
process, conducted annually for mapping risks from the bottom up,
with each major business unit and key operational, senior
functional and senior management staff identifying their principal
risks. This assessment undergoes a formal review at half-year. The
results are compiled centrally to deliver a coordinated picture of
the key operational risks identified by the business. These are
further reviewed by the Group Executive Committee. In conjunction
with this process, each Director contributes their individual view
of top-down strategic risks facing the Group - drawing on the broad
commercial and financial experience gained both inside and outside
the Group. The results of this assessment are then overlaid on the
internal assessment of risks to build a comprehensive analysis of
existing and emerging risk. This review process extends to cover
both financial and non-financial risks, and considers the risks
associated with the impact of the Group's activities on employees,
customers, suppliers, the environment, local communities and
society more generally.
Risk Mitigation
The principal risks identified are actively managed in order to
mitigate exposure. Senior management 'owners' have been identified
for each principal risk, and they manage the mitigations of that
specific risk and contribute to the analysis of its likelihood and
materiality. This analysis is reported to the Board. 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.
Principal Risks
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 in this announcement 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. As a result of Covid-19 there is heightened
focus on risks and their mitigation, but the Group's principal
risks remain the same. These risks are not the only ones that the
Group will face. Some risks are not yet known and some currently
not deemed to be material could become so.
Changes to Risk in 2021
During 2021, the Board has continued to review the Group's
existing and emerging risks, and to focus on the processes for
mitigating and managing these risks. The Board believes that there
has been no material change to the Group's principal risks and
uncertainties during the half-year and that the ongoing Covid-19
pandemic has not given rise to any change in the principal risks
previously identified by the Group, which are set out in the table
below. The Board fully recognises that with the changing economic
and social pressures brought about by Covid-19, including remote
working and less face-to-face management presence, there is an
increased need to ensure that risks and their mitigation are
properly assessed. Whilst there has been an overall improvement in
markets as restrictions ease in some countries, as with the vast
majority of companies, the Covid-19 pandemic continues to impact
the Group's staff, customers, shareholders and suppliers, and as a
consequence the Group's management processes and financial
performance. As a result, the Group maintains a heightened focus on
risk and its mitigation. The risks that materialised in 2020
continue to be closely managed with mitigating measures in place.
These are most notably:
End Market Risk: Whilst Vesuvius continues to experience demand
for its products below pre Covid-19 levels in some key regions, the
overall market has significantly improved from 2020 and continues
on this trend, albeit with certain geographies remaining more
affected than others. The Group has continued to focus on careful
management of its cost base including management of working capital
and scrutiny of plant performance and staffing levels as activity
increases. Vesuvius repaid the UK Government Financing received at
the beginning of the pandemic and only a small number of staff
remain on any of the furlough schemes in place around the world.
The various Tax Deferral schemes available to Vesuvius
continue.
People, Culture and Performance: Management continues to place
its people as its highest priority. The majority of the
pandemic-related measures established in 2020 have continued into
2021. Many staff continue to work from home but there is an
increasing trend of staff returning to their offices where
circumstances and regulation allows. There continue to be regular
interactive internal communication calls involving the CEO and GEC
members and a regular Newsletter providing CEO messages and details
of best practices, successes, and news from around the Group. The
focus on values continues with employee family initiatives, the
continuing of our Living the Values Awards competition and support
for local communities around the world.
Business interruption: Whilst the Group did suffer some initial
disruption in its manufacturing processes, driven predominantly by
government shutdowns at the start of the Covid-19 pandemic, since
this time all plants have been open and operating. For those
working from home, the Group has embedded the measures that
facilitate the use of virtual meetings between staff from all over
the world. Lessons have been learned and contingency plans have
been updated to seek to ensure the continued operation of all
plants in the event of any further lockdowns around the world.
Vesuvius has been successful in fulfilling every order placed by
our customers over the course of the pandemic, whilst ensuring that
production processes continue to respect the social distancing
rules in each country. The result of some of the steps taken to
mitigate disruption have included higher freight and expedited
costs in the year as a result of supply chain disruptions.
Management's responsiveness continues to ensure all the
principal risks are managed effectively with product quality
remaining at its high level, our safety culture driving key
responses to protect employees and our continued investment in
Research and Development to drive new product introductions.
Additional Medium to Long Term Considerations
Given the protracted nature of the pandemic, management's
response to the following risks continues to be closely
evaluated:
-- Protectionism and globalisation giving rise to disruption of
global supply chains and movement of people.
-- Further end market risks arising from a prolonged recession of the global economy.
-- People, culture and performance with the need to ensure the
ongoing mental health of staff subject to protracted periods of
remote working against a background of uncertain/ anxious
times.
-- ESG, with an increased focus on employee and social issues as
the longer-term effects of the pandemic become clearer.
The Board has continued to monitor the implications of certain
other emerging 'macro' trends such as automation in manufacturing
and increasing digitalisation, both of which could act as
disruptors to industry, and has retained focus on the increasing
issues posed by cyber threats, with further investments approved to
develop and implement strategies to deal with these.
Climate Change
The Group's risk management processes 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
standalone risk for the Group's operations. However, 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. As such, 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 reduce their climate impact - will play a critical
part in the development of the Group going forward. The Group
recognises that climate change could present further uncertainty
for the Group in terms of increasing climate change-related
regulations, evolution of the geographical distribution of our
customer base and the costs of meeting more onerous disclosure
requirements.
ESG is 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. The Group continues to
focus internally on the action we can take to drive our business'
sustainability. In 2020, the Group adopted a new Sustainability
initiative, which sets out the Group's approach to environmental
issues, sets targets in specific areas and as such seeks to
mitigate issues such as the increasing costs of energy, and the
potential reduction in capital accessibility as investor sentiment
focuses on environmentally-conscious companies. In 2021 the Group
has continued to progress its sustainability initiative, building
its analyses and further developing and mapping our risks and
opportunities linked to climate change. All our businesses are also
focused on progressing the Group's achievement of its
sustainability targets.
Principal risks and uncertainties:
Risk Potential impact Mitigation
End market risks
Vesuvius suffers an unplanned -- Unplanned drop in -- Geographic diversification
drop in demand, revenue demand and/or revenue of revenues
and/ or margin because due to reduced production -- Product innovation
of market volatility by our customers and service offerings
beyond its control -- Margin reduction securing long-term revenue
-- Customer failure leading streams and maintaining
to increased bad debts performance differential
-- Loss of market share -- Increase in service
to competition and product lines by
-- Cost pressures at the development of the
customers leading to Technical Services offering
use of cheaper solutions -- R&D includes assessment
of emerging technologies
-- Manufacturing capacity
rationalisation and flexible
cost base
-- Diversified customer
base: no customer is
greater than 10% of revenue
-- Robust credit and
working capital control
to mitigate the risk
of default by counterparties
--------------------------------- ---------------------------------------
Protectionism and globalisation
The Vesuvius business -- Restricted access -- Highly diversified
model cannot adapt or to market due to enforced manufacturing footprint
respond quickly enough preference of local suppliers with manufacturing sites
to threats from protectionism -- Increased barriers located in 26 countries
and globalisation to entry for new businesses -- Strong local management
or expansion with delegated authority
-- Increased costs from to run their businesses
import duties, taxation and manage customer relationships
or tariffs -- Cost flexibility
-- Loss of market share -- Tax risk management
-- Trade restrictions and control framework
together with a strong
control of inter-company
trading
--------------------------------- ---------------------------------------
Product quality failure
Vesuvius staff/contractors -- Injury to staff and -- Quality management
are injured at work or contractors programmes including
customers, staff or third -- Product or application stringent quality control
parties suffer physical failures lead to adverse standards, monitoring
injury or financial loss financial impact or loss and reporting
because of failures in of reputation as technology -- Experienced technical
Vesuvius products leader staff knowledgeable in
-- Incident at customer the application of our
plant caused manufacturing products and technology
downtime or damage to -- Targeted global insurance
infrastructure programme
-- Customer claims from -- Experienced internal
product quality issues legal function controlling
third-party contracting
--------------------------------- ---------------------------------------
Complex and changing
regulatory environment -- Revenue reduction -- Compliance programmes
Vesuvius experiences from reduced end-market and training across the
a contracting customer access Group
base or increased transaction -- Disruption of supply -- Internal Audit function
and administrative costs chain and route to market -- Experienced internal
due to compliance with -- Increased internal legal function including
changing regulatory requirements control processes dedicated compliance
-- Increased frequency specialists
of regulatory investigations -- Global procurement
-- Reputational damage category management of
strategic raw materials
--------------------------------- ---------------------------------------
Failure to secure innovation
Vesuvius fails to achieve -- Product substitution -- Enduring and significant
continuous improvement by customers investment in R&D, with
in its products, systems -- Increased competitive market-leading research
and services pressure through lack -- A shared strategy
of differentiation of for innovation throughout
Vesuvius offering the Group, deployed via
-- Commoditisation of our R&D centres
product portfolio through -- Stage gate process
lack of development from innovation to commercialisation
-- Lack of response to to foster innovation
changing customer needs and increase alignment
-- Loss of intellectual with strategy
property protection -- Programme of manufacturing
and process excellence
-- Quality programme,
focused on quality and
consistency
-- Stringent intellectual
property registration
and defence
--------------------------------- ---------------------------------------
Business interruption
Vesuvius loses production -- Loss/closure of a -- Diversified manufacturing
capacity or experiences major plant temporarily footprint
supply chain disruption or permanently impairing -- Disaster recovery
due to physical site our ability to serve planning
damage (accident, fire, our customers -- Business continuity
natural disaster, terrorism), -- Damage to or restriction planning with strategic
industrial action, cyber in ability to use assets maintenance of excess
attack or global health -- Denial of access to capacity
crisis critical systems or control -- Physical and IT control
processes systems security, access
-- Disruption of manufacturing and training
processes -- Cyber risks integrated
-- Inability to source into wider risk-management
critical raw materials structure
-- Well-established global
insurance programme
-- Group-wide safety
management programmes
-- Dual sourcing strategy
and development of substitutes
--------------------------------- ---------------------------------------
People, culture and performance
Vesuvius is unable to -- Organisational culture -- Internal focus on
attract and retain the of high performance is talent development and
right calibre of staff, not achieved training, with tailored
fails to instil an appropriate -- Staff turnover in career-stage programmes
culture or fails to embed growing economies and and clear performance
the right systems to regions management strategies
drive personal performance -- Stagnation of ideas -- Contacts with universities
in pursuit of the Group's and development opportunities to identify and develop
long-term growth -- Loss of expertise talent
and critical business -- Career path planning
knowledge and global opportunities
-- Reduced management for high-potential staff
pipeline for succession -- Internal programmes
to senior positions for the structured transfer
of technical and other
knowledge
-- Clearly defined Values
underpin business culture
--------------------------------- ---------------------------------------
Health and safety
Vesuvius staff or contractors -- Injury to staff and -- Active safety programmes,
are injured at work because contractors with ongoing wide-ranging
of failures in Vesuvius' -- Health and safety monitoring and safety
operations, equipment breaches training
or processes -- Manufacturing downtime -- Independent safety
or damage to infrastructure audit team
from incident at plant -- Quality management
-- Inability to attract programmes including
the necessary workforce stringent manufacturing
-- Reputational damage process control standards,
monitoring and reporting
--------------------------------- ---------------------------------------
Environmental, social
and governance (ESG) -- Loss of opportunity -- Development and implementation
criteria to grow sales of a new Sustainability
Vesuvius fails to capitalise -- Loss of opportunity initiative, which includes
on the opportunity to to increase margin stretching targets focused
help its customers significantly -- Loss of stakeholder on reducing the Group's
reduce their carbon emissions confidence including Energy usage, CO 2 emissions,
as environmental pressure Investors waste and recycled materials
grows on the Steel Industry -- Reputational damage -- R&D focus on products
or Vesuvius fails to that assist customers
meet the expectations to reduce carbon emissions
of its various stakeholders and improve their own
including employees and sustainability measures
investors -- Skilled technical
sales force to develop
efficient solutions for
our customers
-- Globally disseminated
Code of Conduct sets
out standards of conduct
expected and ABC Policy
adopted with a zero tolerance
regarding bribery and
corruption
-- Internal Speak up
mechanisms to allow reporting
of concerns
-- Extensive use of due
diligence to assess existing
and potential business
partners and customers
--------------------------------- ---------------------------------------
Half Year Results for the six months ended 30 June 2021
Directors' responsibility statement
We confirm that to the best of our knowledge:
(a) The Condensed Group Financial Statements have been prepared
in accordance with IAS 34, Interim Financial Reporting, as
contained in UK-adopted IFRS (UK-adopted international accounting
standards); and
(b) 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 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
financial year; and
- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related parties' transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period; and any changes in the related parties'
transactions described in the last annual report that could do
so.
The names and functions of the Directors of Vesuvius plc are as
follows:
John McDonough CBE Chairman
Patrick André Chief Executive
Guy Young Chief Financial Officer
Douglas Hurt Non-executive Director,
Senior Independent Director
and
Chairman of the Audit Committee
Kath Durrant Non-executive Director and
Chairman of the Remuneration
Committee
Dinggui Gao Non-executive Director
Friederike Helfer Non-executive Director
Jane Hinkley Non-executive Director
On behalf of the Board
Guy Young
Chief Financial Officer
28 July 2021
Independent review report to Vesuvius plc
Report on the Condensed Group Financial Statements
Our conclusion
We have reviewed Vesuvius plc's Condensed Group Financial
Statements (the "interim financial statements") in the Half Year
Results of Vesuvius plc for the 6 month period ended 30 June 2021
(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.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Group Balance Sheet as at 30 June 2021;
-- 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.
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.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
28 July 2021
Condensed Group Income Statement
For the six months ended 30 June 2021
Half year 2021 (Unaudited) Half year 2020 (Unaudited) Full year 2020
----------------------------------- ----------------------------------- ---------------------------------------
Separately Separately Separately
Headline reported Headline reported Headline reported
performance(1) items(1) Total performance(1) items(1) Total performance(1) items(1) Total
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Revenue 2 808.1 - 808.1 720.0 - 720.0 1,458.3 - 1,458.3
Manufacturing costs (592.6) - (592.6) (534.7) - (534.7) (1,084.7) - (1,084.7)
Administration, selling
& distribution costs (142.2) - (142.2) (134.2) - (134.2) (272.2) - (272.2)
---------------------------------------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
2,
Trading profit 1 73.3 - 73.3 51.1 - 51.1 101.4 - 101.4
Amortisation of acquired
intangible assets - (4.8) (4.8) - (5.0) (5.0) - (9.9) (9.9)
Restructuring charges 3 - - - - (2.5) (2.5) - (6.1) (6.1)
Vacant site remediation
costs - - - - (3.8) (3.8) - (10.3) (10.3)
GMP equalisation charge 10 - - - - (0.8) (0.8)
Operating profit/(loss) 2 73.3 (4.8) 68.5 51.1 (11.3) 39.8 101.4 (27.1) 74.3
-------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Finance expense (6.2) - (6.2) (8.9) - (8.9) (18.8) - (18.8)
Finance income 2.6 - 2.6 3.0 - 3.0 7.9 - 7.9
-------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Net finance costs 4 (3.6) - (3.6) (5.9) - (5.9) (10.9) - (10.9)
Share of post-tax income
of joint ventures 0.6 - 0.6 0.7 - 0.7 1.1 - 1.1
Profit/(loss) before
tax 2 70.3 (4.8) 65.5 45.9 (11.3) 34.6 91.6 (27.1) 64.5
Income tax (charge)/credits 5 (18.5) (0.7) (19.2) (12.3) 2.6 (9.7) (24.4) 5.7 (18.7)
---------------------------------------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Profit/(loss) 51.8 (5.5) 46.3 33.6 (8.7) 24.9 67.2 (21.4) 45.8
============================================== ===== ============== ========== ======= ============== ========== ======= ============== ========== =========
Profit/(loss) attributable
to:
Owners of the parent 48.5 (5.5) 43.0 31.3 (8.7) 22.6 62.7 (21.4) 41.3
Non-controlling interests 3.3 - 3.3 2.3 - 2.3 4.5 - 4.5
---------------------------------------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Profit/(loss) 51.8 (5.5) 46.3 33.6 (8.7) 24.9 67.2 (21.4) 45.8
============================================== ===== ============== ========== ======= ============== ========== ======= ============== ========== =========
Earnings per share - pence 6
Total operations - basic 15.9 8.4 15.3
-
diluted 15.8 8.3 15.2
============================================== ===== ============== ========== ======= ============== ========== ======= ============== ========== =========
(1) Headline performance is defined in Note 16.1 and separately
reported items are defined in Note 1.5.
The above results were derived from continuing operations. The
separately reported items would form part of Administration,
selling & distribution costs if classified within headline
performance, which including these amounts would total GBP147.0m
(2020 half year: GBP145.5m, 2020 full year: GBP299.3m) .
Condensed Group Statement of Comprehensive Income
For the six months ended 30 June 2021
Unaudited Unaudited
Half
Half year year Full year
2021 2020 2020
Notes GBPm GBPm GBPm
---------------------------------------------------- ----- --------- --------- ---------
Profit 46.3 24.9 45.8
Items that will subsequently not be reclassified
to income statement:
--------- --------- ---------
Remeasurement of defined benefit assets/liabilities 8.5 14.9 7.7
Income tax relating to items not reclassified 5 (9.6) (5.6) (3.2)
Items that may subsequently be reclassified
to income statement:
Exchange differences on translation of the
net assets of foreign
Operations (28.8) 51.0 (14.9)
Exchange differences arising on translation
of net investment hedges 10.3 (24.6) (9.7)
Net change in costs of hedging (0.3) - 0.4
Change in the fair value of the hedging
instrument (0.2) - (8.1)
Amounts reclassified from the income
statement 0.7 - 6.3
---------
Other comprehensive income (loss), net
of income tax (19.4) 35.7 (21.5)
Total comprehensive income 26.9 60.6 24.3
==================================================== ===== ========= ========= =========
Total comprehensive income attributable
to:
Owners of the parent 24.9 57.5 22.0
Non-controlling interests 2.0 3.1 2.3
Total comprehensive income 26.9 60.6 24.3
---------------------------------------------------- ----- --------- --------- ---------
The above results were derived from continuing operation
Condensed Group Statement of Cash Flows
For the six months ended 30 June 2021
Unaudited Unaudited
Half year Half year Full year
2021 2020 2020
Notes GBPm GBPm GBPm
----------------------------------------------- ----- --------- --------- ---------
Cash flows from operating activities
Cash generated from operations 9 50.2 79.2 193.7
--------- --------- ---------
Interest paid (5.5) (8.2) (18.9)
Interest received 2.1 2.5 5.2
--------- --------- ---------
Net interest paid (3.4) (5.7) (13.7)
Income taxes paid (13.7) (11.5) (27.5)
Net cash inflow from operating activities 33.1 62.0 152.5
Cash flows from investing activities
--------- --------- ---------
Capital expenditure (17.6) (19.4) (40.5)
Proceeds from the sale of property,
plant and equipment 0.6 - 1.1
Acquisition of subsidiaries and joint
ventures, net of cash acquired 13 - - (1.4)
Dividends received from joint ventures 1.0 1.4 2.3
Net cash outflow from investing activities (16.0) (18.0) (38.5)
----------------------------------------------- ----- --------- --------- ---------
Net cash inflow before financing activities 17.1 44.0 114.0
Cash flows from financing activities
--------- --------- ---------
Proceeds from borrowings 8 - 310.2 320.4
Repayment of borrowings 8 (22.5) (92.5) (438.6)
Settlement of derivatives - 1.4 1.4
Purchase of ESOP Shares - - -
Dividends paid to equity shareholders 7 (38.7) - (8.4)
Dividends paid to non-controlling shareholders (0.7) (0.1) (1.9)
--------- --------- ---------
Net cash inflow/(outflow) from financing
activities (61.9) 219.0 (127.1)
----------------------------------------------- ----- --------- --------- ---------
Net (decrease)/increase in cash and
cash equivalents 8 (44.8) 263.0 (13.1)
Cash and cash equivalents at 1 January 206.8 222.1 222.1
Effect of exchange rate fluctuations
on cash and cash equivalents (4.0) 6.8 (2.2)
Cash and cash equivalents at the end
of the reporting period 158.0 491.9 206.8
=============================================== ===== ========= ========= =========
Free cash flow 16.11
Net cash inflow from operating activities 33.1 62.0 152.5
Capital expenditure (17.6) (19.4) (40.5)
Proceeds from the sale of property,
plant and equipment 0.6 - 1.1
Proceeds from the sale of assets classified
as held for sale - - -
Dividends received from joint ventures 1.0 1.4 2.3
Dividends paid to non-controlling shareholders (0.7) (0.1) (1.9)
----------------------------------------------- ----- --------- --------- ---------
Free cash flow(1) 16.11 16.4 43.9 113.5
=============================================== ===== ========= ========= =========
(1) For definitions of non-GAAP measures, refer to Note 16
Condensed Group Balance Sheet
As at 30 June 2021
Unaudited Unaudited
Half year Half year Full year
2021 2020 2020
Notes GBPm GBPm GBPm
------------------------------------------- ----- --------- ---------- ---------
Assets
--------- ---------- ---------
Property, plant and equipment 325.1 348.2 337.5
Intangible assets 675.5 732.3 696.1
Employee benefits - surpluses 10 113.2 116.3 117.1
Interests in joint ventures and associates 11.6 12.6 12.1
Investments 0.9 1.1 0.7
Deferred tax assets 84.9 95.1 96.1
Other receivables 17.7 23.3 18.6
Derivative financial instruments 15 - - -
---------
Total non-current assets 1,228.9 1,328.9 1,278.2
Cash and short-term deposits 8 162.1 500.9 209.7
Inventories 236.9 222.4 187.3
Trade and other receivables 410.2 361.8 369.9
Income tax receivable 1.8 1.7 3.7
Derivative financial instruments 15 - - 0.2
Assets classified as held for sale 0.9 - 0.9
Total current assets 811.9 1,086.8 771.7
Total assets 2,040.8 2,415.7 2,049.9
=========================================== ===== ========= ========== =========
Condensed Group Balance Sheet (continued)
As at 30 June 2021
Unaudited Unaudited
Half year Half year Full year
2021 2020 2020
Notes GBPm GBPm GBPm
---------------------------------- ----- --------- ---------- ---------
Equity
--------- ---------- ---------
Issued share capital 27.8 27.8 27.8
Retained earnings 2,508.1 2,496.1 2,502.9
Other reserves (1,468.3) (1,401.9) (1,451.3)
--------- ---------- ---------
Equity attributable to the owners
of the parent 1,067.6 1,122.0 1,079.4
Non-controlling interests 52.7 54.0 51.4
---------------------------------- ----- --------- ---------- ---------
Total equity 1,120.3 1,176.0 1,130.8
---------------------------------- ----- --------- ---------- ---------
Liabilities
--------- ---------- ---------
Interest-bearing borrowings 8 273.1 351.1 333.1
Employee benefits - liabilities 10 102.3 116.1 119.2
Other payables 13.0 15.8 13.2
Provisions 14 32.4 36.0 34.0
Income tax liabilities 7.7 10.0 8.5
Deferred tax liabilities 49.7 46.3 43.9
Derivative financial instruments 15 5.0 0.6 7.0
--------- ---------- ---------
Total non-current liabilities 483.2 575.9 558.9
Interest-bearing borrowings 8 80.4 378.8 45.0
Trade and other payables 338.1 265.9 288.7
Income tax payable 1.5 - 3.7
Provisions 14 17.2 19.0 22.8
Derivative financial instruments 15 0.1 0.1 -
---------
Total current liabilities 437.3 663.8 360.2
---------------------------------- ----- --------- ----------
Total liabilities 920.5 1,239.7 919.1
---------------------------------- ----- ---------
Total equity and liabilities 2,040.8 2,415.7 2,049.9
================================== ===== ========= ========== =========
Condensed Group Statement of Changes in Equity
For the six months ended 30 June 2021
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 2020 27.8 (1,427.5) 2,463.1 1,063.4 51.0 1,114.4
Profit - - 22.6 22.6 2.3 24.9
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
liabilities/assets - - 14.9 14.9 - 14.9
Income tax relating to items
not reclassified - - (5.6) (5.6) - (5.6)
Exchange differences on translation
of the net assets of foreign
operations - 50.2 - 50.2 0.8 51.0
Exchange differences arising
on translation of net investment
hedges - (24.6) - (24.6) - (24.6)
-------- --------- --------- ------- --------------- -------
Other comprehensive income/(loss),
net of income tax - 25.6 9.3 34.9 0.8 35.7
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income/(loss) - 25.6 31.9 57.5 3.1 60.6
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 1.1 1.1 - 1.1
Dividends paid (Note 7) - - - - (0.1) (0.1)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - 1.1 1.1 (0.1) 1.0
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2020 27.8 (1,401.9) 2,496.1 1,122.0 54.0 1,176.0
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 2021 27.8 (1,451.3) 2,502.9 1,079.4 51.4 1,130.8
Profit - - 43.0 43.0 3.3 46.3
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
assets/liabilities - - 8.5 8.5 - 8.5
Income tax relating to items
not reclassified - - (9.6) (9.6) - (9.6)
Exchange differences on translation
of the net assets of foreign
operations - (27.5) - (27.5) (1.3) (28.8)
Exchange differences arising
on translation of net investment
hedges - 10.3 - 10.3 - 10.3
Net change in costs of hedging - (0.3) - (0.3) - (0.3)
Change in the fair value of
the hedging instrument - (0.2) - (0.2) - (0.2)
Amounts reclassified from the
income statement - 0.7 - 0.7 - 0.7
Other comprehensive income/(loss),
net of income tax - (17.0) (1.1) (18.1) (1.3) (19.4)
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income/(loss) - (17.0) 41.9 24.9 2.0 26.9
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 2.0 2.0 - 2.0
Dividends paid (Note 7) - - (38.7) (38.7) (0.7) (39.4)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - (36.7) (36.7) (0.7) (37.4)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2021 27.8 (1,468.3) 2,508.1 1,067.6 52.7 1,120.3
------------------------------------ -------- --------- --------- ------- --------------- -------
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
International Accounting Standard("IAS") 34 Interim Financial
Reporting as contained in UK-adopted IFRS (UK-adopted international
accounting standards) and the Disclosure Guidance and Transparency
Rules sourcebook of the UK'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 2020, 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 2020 Annual Report and Financial Statements .
The Group's annual report and financial statements for the year
ended 31 December 2020 were prepared in accordance with
International Financial Reporting Standards in conformity with the
requirements of the Companies Act 2006 and the applicable legal
requirements of the Companies Act 2006. In addition to complying
with International Accounting Standards in conformity with the
requirements of the Companies Act 2006, these Condensed Group
Financial Statements also comply with International Financial
Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The Annual Report
and Financial Statements for the year ending 31 December 2021 will
be prepared in accordance with IFRS as adopted by the UK
Endorsement Board. This change in the basis of preparation is
required by UK company law for the purposes of financial reporting
as a result of the UK's exit from the EU on 31 January 2020 and the
cessation of the transition period on 31 December 2020, and does
not constitute a change in accounting policy but rather a change in
the framework which is required to ground the use of IFRS in
company law. There is no impact on recognition, measurement or
disclosure between the two frameworks in the period reported.
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 2020. 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
2020 are not the Group's statutory accounts for that financial year
but have been extracted from those accounts. 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 at least 12 months from the date of approval of the
2021 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 is based on a return to a Covid impacted market as
seen last year and assumes a decline in business activity and
profitability in H2 2021 to the level achieved in H2 2020. Relative
to H1 2021, this implies an c.8% decline in sales and a c.30%
decline in EBITDA, with no improvement from this level assumed in
2022. Even in this downside scenario, the forecasts show that the
Group's maximum net debt / EBITDA (pre-IFRS 16 in-line with the
covenant calculation) does not exceed 1.25x, compared to a leverage
covenant of 3.25x. Furthermore, the Group's available committed
liquidity was GBP488.5m at 30 June 2021, when adjusted to reflect
the increase in size of our new RCF, compared to GBP437.3m at 31
December 2020. Our new RCF is GBP385m and has a maturity date of 5
July 2025 and replaces the previous GBP300m RCF which was due to
mature in June 2022.
On the basis of the information described above 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 presentation 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.
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 such as
was, for example, caused by the impact of US tax reform in 2017,
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.
1.6 New and revised IFRS
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2021 reporting periods
and have not been early adopted by the Group. The Group's
assessment of the impact of these new standards and interpretations
is that they are not expected to have a significant impact on the
Group's financial position, performance, cash flows and
disclosures.
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 component. 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 2020 Annual Report and
Financial Statements.
Segmental analysis
The reportable segment results from continuing operations are
presented below.
Unaudited Half Year 2021
-------------------------------------------------------------------
Digital
Flow Advanced Services
Control Refractories (Sensors Continuing
& Probes) Steel Foundry operations
--------- -------------- ---------- ------
GBPm GBPm GBPm
------------------------------ --------- -------------- ---------- ------ ------- -----------
Segment revenue 315.5 238.6 16.2 570.3 237.8 808.1
at a point in time 567.4 237.8 805.2
Over time 2.9 - 2.9
------------------------------- --------- -------------- ---------- ------ ------- -----------
Segment adjusted EBITDA
* 66.0 31.8 97.8
Segment depreciation (16.6) (7.9) (24.5)
------------------------------- --------- -------------- ---------- ------ ------- -----------
Segment trading profit 49.4 23.9 73.3
------------------------------- --------- -------------- ---------- ------ -------
Return on sales margin 8.7% 10.1% 9.1%
Amortisation of acquired
intangible assets (4.8)
Operating profit 68.5
Net finance costs (3.6)
Share of post-tax profit
of joint ventures 0.6
------------------------------- --------- -------------- ---------- ------ ------- -----------
Profit before tax 65.5
------------------------------- --------- -------------- ---------- ------ ------- -----------
Capital expenditure additions 16.1 4.5 20.6
------------------------------- --------- -------------- ---------- ------ ------- -----------
Unaudited Half Year 2020
-------------------------------------------------------------------
Digital
Flow Advanced Services
Control Refractories (Sensors Continuing
& Probes) Steel Foundry operations
--------- -------------- ---------- ------
GBPm GBPm GBPm
------------------------------ --------- -------------- ---------- ------ ------- -----------
Segment revenue 274.4 228.8 13.1 516.3 203.7 720.0
at a point in time 512.4 203.7 716.1
Over time 3.9 - 3.9
------------------------------- --------- -------------- ---------- ------ ------- -----------
Segment adjusted EBITDA
* 56.1 20.4 76.5
Segment depreciation (17.2) (8.2) (25.4)
------------------------------- --------- -------------- ---------- ------ ------- -----------
Segment trading profit 38.9 12.2 51.1
------------------------------- --------- -------------- ---------- ------ -------
Return on sales margin 7.5% 6.0% 7.1%
Amortisation of acquired
intangible assets (5.0)
Restructuring charges (2.5)
Vacant site remediation
costs (3.8)
Operating profit 39.8
Net finance costs (5.9)
Share of post-tax profit
of joint ventures 0.7
------------------------------- --------- -------------- ---------- ------ ------- -----------
Profit before tax 34.6
------------------------------- --------- -------------- ---------- ------ ------- -----------
Capital expenditure additions 22.5 3.7 26.2
------------------------------- --------- -------------- ---------- ------ ------- -----------
Full Year 2020
-------------------------------------------------------------
Flow Advanced Sensors
Control Refractories & Probes Steel Foundry Total
-------- ------------- --------- -------
GBPm GBPm GBPm
------------------------------ -------- ------------- --------- ------- ------- -------
Segment revenue 561.3 458.6 25.5 1,045.4 412.9 1,458.3
at a point in time 1,035.7 412.9 1,448.6
Over time 9.7 - 9.7
------------------------------- -------- ------------- --------- ------- ------- -------
Segment adjusted EBITDA
* 110.6 41.4 152.0
Segment depreciation (34.2) (16.4) (50.6)
------------------------------- -------- ------------- --------- ------- ------- -------
Segment trading profit 76.4 25.0 101.4
------------------------------- -------- ------------- --------- ------- -------
Return on sales margin 7.3% 6.1% 7.0%
Amortisation of acquired
intangible assets (9.9)
Restructuring charges (6.1)
Vacant site remediation
costs (10.3)
GMP equalisation charge (0.8)
Operating profit 74.3
Net finance costs (10.9)
Share of post-tax profit
of joint ventures 1.1
------------------------------- -------- ------------- --------- ------- ------- -------
Profit before tax 64.5
------------------------------- -------- ------------- --------- ------- ------- -------
Capital expenditure additions 45.9 13.1 59.0
------------------------------- -------- ------------- --------- ------- ------- -------
* Adjusted EBITDA is defined in note 16.13
3 Restructuring charges
There are no charges for previously announced restructuring
programmes (2020 half year: GBP2.5m, 2020 full year: GBP6.1m). The
previous charges reflected redundancy costs (2020 half year:
GBP1.0m, 2020 full year: GBP2.7m), plant closure costs (2020 half
year: GBP1.0m, 2020 full year: GBP1.8m), asset write-offs: (2020
half year: GBPnil, 2020 full year: GBP1.5m), and consultancy fees
& travel (2020 half year: GBP0.5m, 2020 full year:
GBP0.1m).
In respect of these programmes a cash outflow of GBP3.0m (2020:
half year GBP9.2m; 2020 full year GBP16.7m) (Note 9) was incurred
in H1 2021 leaving provisions made, but unspent, of GBP6.0m (Note
14) as at 30 June 2021 (2020 half year: GBP13.4m; 2020 full year:
GBP9.2m).
4 Net finance costs
Unaudited Unaudited
Half year Half year Full year
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------------- ---------- ---------- ---------
Interest payable on borrowings
Loans, overdrafts and factoring arrangements 5.0 7.2 15.6
Interest on lease liabilities 0.7 0.9 1.8
Amortisation of capitalised borrowing
costs 0.1 0.3 0.5
--------------------------------------------- ---------- ---------- ---------
Total interest payable on borrowings 5.8 8.4 17.9
Interest on net retirement benefits
obligations (0.1) (0.1) (0.1)
Adjustments to discounts on provisions
and other liabilities 0.4 0.5 1.0
Adjustments to discounts on receivables (0.2) (0.4) (0.5)
Finance income (2.3) (2.5) (7.4)
--------------------------------------------- ---------- ---------- ---------
Total net finance costs 3.6 5.9 10.9
--------------------------------------------- ---------- ---------- ---------
Within the table above, total finance costs are GBP6.2m (2020
half year: GBP8.9m, 2020 full year: GBP18.8m) and total finance
income is GBP2.6m (2020 half year: GBP3.0m, 2020 full year:
GBP7.9m).
5 Income tax
A key measure of the Group's tax burden is the 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 effective tax rate was in-line with expectations at
26.5% in H1 2021 (2020: half year 27.2%; full year 26.9%) based on
the income tax costs associated with headline performance of
GBP18.5m (2020: half year GBP12.3m; full year GBP24.4m).
The Group's total income tax costs include a debit of GBP0.7m
(2020 half year: GBP2.6m credit; 2020 full year: GBP5.7m credit)
relating to separately reported items comprising a debit of GBP0.7m
(2020 half year: GBP1.1m credit; 2020 full year GBP2.3m credit)
relating to the net movement on intangible assets constituting
amortisation of intangible assets (GBP1.1m credit) and a deferred
tax restatement (GBP1.8m debit) relating to the increase of the UK
corporate tax rate from 19% to 25% which was substantively enacted
on 24 May 2021.
In previous periods there was a credit related to restructuring
charges (2020 half year: GBP1.5m; 2020 full year GBP1.1m) and a
credit related to vacant site remediation costs (2020: half year
GBPnil; full year GBP2.3m).
The net income tax debit reflected in the Condensed Group
Statement of Comprehensive Income amounted to GBP9.6m (2020 half
year: GBP5.6m debit; 2020 full year: GBP3.2m debit), comprising the
following:
-- a debit of GBP9.6m (2020: half year GBP5.6m debit; full year
GBP2.8m debit) constituting a debit of GBP2.9m on net pension
actuarial gains and a further debit of GBP6.7m relating to the
increase of the UK corporate tax rate from 19% to 25% which was
substantively enacted on 24 May 2021 ; and
-- a debit of GBPnil on losses on the employee benefits plan
(2020: half year GBPnil; full year GBP0.4m debit) related to other
temporary timing differences.
6 Earnings per share ("EPS")
6.1 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
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------- ---------- ---------- ---------
Profit attributable to owners of the
parent 43.0 22.6 41.3
Adjustments for separately reported
items:
Amortisation of intangible assets 4.8 5.0 9.9
Restructuring charges - 2.5 6.1
Vacant site remediation costs - 3.8 10.3
GMP equalisation charge - - 0.8
Income tax credit 0.7 (2.6) (5.7)
Headline profit attributable to owners
of the parent 48.5 31.3 62.7
----------------------------------------- ---------- ---------- ---------
6.2 Weighted average number of shares
Unaudited Half year Unaudited Half year Full year
2021 2020 2020
millions millions millions
---------------------------------------------------- ------------------- ------------------- ---------
For calculating basic and headline EPS 270.4 269.8 269.9
Adjustment for potentially dilutive ordinary shares 1.5 1.6 1.7
---------------------------------------------------- ------------------- ------------------- ---------
For calculating diluted and diluted headline EPS 271.9 271.4 271.6
---------------------------------------------------- ------------------- ------------------- ---------
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.
6.3 Per share amounts
Unaudited Half year Unaudited Half year Full year 2020
2021 2020
pence pence pence
------------------------------------------------ ------------------- -------------------
Earnings per share - basic 15.9 8.4 15.3
- headline 17.9 11.6 23.2
- diluted 15.8 8.3 15.2
- diluted headline 17.8 11.5 23.1
-------------------------------------------------- ------------------- ------------------- --------------
7 Dividends
Unaudited Unaudited
Half year Half year Full year
2021 2020 2020
GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- ---------
Amounts recognised as dividends and paid to equity
shareholders
during the period
Interim dividend for the year-ended 31
December 2020 of 3.1p per ordinary share - - 8.4
Final dividend for the year-ended 31 December
2020 of 14.3p per ordinary share 38.7 - -
38.7 - 8.4
---------------------------------------------- ---------- ---------- ---------
The Directors have declared an interim dividend of 6.2p in
respect of the year-ending 31 December 2021.
8 Reconciliation of movement in net debt
Balance Foreign Fair value Balance
as at exchange gains/ Non-cash Cash as at 30
1 Jan 2021 adjustments (losses) movements(*) flow June 2021
GBPm GBPm GBPm GBPm GBPm
---------------------- ----------- ------------- ---------- ------------- ------ ----------
Cash and cash
equivalents
Cash at bank
and in hand 169.7 (4.1) - - (3.6) 162.0
Short term deposits 40.0 - - - (40.0) -
Bank overdrafts (2.9) 0.1 - - (1.2) (4.0)
---------------------- ----------- ------------- ---------- ------------- ------ ----------
206.8 (4.0) (44.8) 158.0
Borrowings, excluding
bank overdrafts (376.5) 9.6 - (6.4) 22.5 (350.8)
Capitalised borrowing
costs 1.4 - - (0.1) - 1.3
Derivative financial
instruments (6.8) - 1.7 - - (5.1)
Net debt (175.1) 5.6 1.7 (6.5) (22.3) (196.6)
---------------------- ----------- ------------- ---------- ------------- ------ ----------
(*) GBP6.4m (2020 half year: GBP7.5m) of new leases were entered
into during the year.
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 and derivative financial
instruments.
9 Cash Generated from Operations
Unaudited
Half Unaudited
year Half year
2021 2020
GBPm GBPm
----------------------------------------- --- --------- ----------
Operating profit 68.5 39.8
Adjustments for:
Amortisation of intangible
assets 4.8 5.0
Restructuring charges - 2.5
Vacant site remediation costs - 3.8
----------------------------------------------- --------- ----------
Trading Profit 73.3 51.1
Loss on disposal of non-current
assets 0.2 1.2
Depreciation 24.5 25.4
Defined benefit retirement
plans net charge 3.3 3.1
Net (increase) in inventories (53.3) (3.7)
Net (increase)/decrease in
trade receivables (43.1) 26.6
Net increase/(decrease) in
trade payables 45.3 (15.1)
Net decrease in other working
capital 8.7 4.7
Outflow related to restructuring
charges (3.0) (9.2)
Defined benefit retirement
plans cash outflows (4.0) (3.7)
Vacant site remediation costs
paid (1.7) (1.2)
Cash generated from operations 50.2 79.2
----------------------------------------------- --------- ----------
Full year
2020
GBPm
------------------------------------------ --------- ----------
Operating profit 74.3
Adjustments for:
Amortisation of intangible assets 9.9
Restructuring charges 6.1
Vacant site remediation costs 10.3
GMP equalisation charge 0.8
------------------------------------------ --------- ----------
Trading Profit 101.4
Loss on disposal of non-current assets 1.3
Depreciation 50.6
Defined benefit retirement plans net
charge 6.7
Net decrease in inventories 21.7
Net decrease in trade receivables 3.4
Net increase in trade payables 12.4
Net decrease in other working capital 23.8
Outflow related to restructuring charges (16.7)
Defined benefit retirement plans cash
outflows (9.0)
Vacant site remediation costs paid (1.9)
------------------------------------------ --------- ----------
Cash generated from operations 193.7
------------------------------------------ --------- ----------
10 Employee benefits
The net employee benefits asset as at 30 June 2021 was GBP10.9m
(2020 half year: GBP0.2m asset; 2020 full year: GBP2.1m liability)
derived from an actuarial valuation of the Group's defined benefit
pension and other post-retirement obligations as at that date.
The improvement in the balance sheet position has been driven
primarily by an increase in bond yields resulting in a reduction in
the value of German and US liabilities. As disclosed in note 26 of
the 2020 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
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ---------
Employee benefits - net surpluses
UK defined benefit pension plans 112.6 115.1 116.4
ROW defined benefit pension plans 0.6 1.2 0.7
-------------------------------------- ---------- ---------- ---------
Net surpluses 113.2 116.3 117.1
-------------------------------------- ---------- ---------- ---------
Employee benefits - net liabilities
UK defined benefit pension plans (1.7) (1.8) (1.8)
US defined benefit pension plans (20.6) (32.4) (25.9)
Germany defined benefit pension plans (53.4) (55.1) (63.1)
ROW defined benefit pension plans (19.9) (19.7) (21.4)
Other post-retirement benefit plans (6.7) (7.1) (7.0)
-------------------------------------- ---------- ---------- ---------
Net liabilities (102.3) (116.1) (119.2)
-------------------------------------- ---------- ---------- ---------
Net assets/(liabilities) 10.9 0.2 (2.1)
-------------------------------------- ---------- ---------- ---------
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
2021 2020 Full year 2020
GBPm GBPm GBPm
------------------------ ---------------------------------- ------------------- ----------------------- --------------
In arriving at trading
profit
(as defined in Note
16.4) * within manufacturing costs 0.9 0.9 1.7
* within administration, sell
ing and distribution costs 2.4 2.2 5.0
In arriving at profit
before tax * GMP equalisation charge - - 0.8
* within net finance costs (0.1) - (0.1)
Total net charge 3.2 3.1 7.4
------------------------------------------------------------ ------------------- ----------------------- --------------
As set out in Note 26 of the 2020 Annual Report and Financial
Statements, a GMP equalisation expense of GBP0.8m was recognised in
2020 and was separately reported, following issuance of a second UK
High Court GMP equalisation ruling on 20 November 2020.
11 Contingent liabilities
Guarantees given by the Group under property leases of disposed
operations amounted to GBPnil (2020 half year: GBP0.1m; full year
GBPnil).
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 2020 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.
12 Related parties
The nature of related party transactions in H1 2021 are in line
with those transactions disclosed in Note 34 of the 2020 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 33 of the
2020 Annual Report and Financial Statements. Transactions between
related parties that are Group subsidiaries are eliminated on
consolidation.
Unaudited Unaudited
Half year Half year
2021 2020
Transactions with joint ventures and associates GBPm GBPm
------------------------------------------------ ---------- ----------
Sales to joint ventures 2.0 1.6
Purchases from joint ventures 14.2 11.0
Purchases from associates - 0.1
Dividends received from joint ventures 1.0 1.4
Injection of equity funding - -
Trade payables owed to joint ventures 7.4 6.9
Trade receivables owed by joint ventures 0.9 0.6
------------------------------------------------ ---------- ----------
13 Acquisitions and divestments
There were no acquisitions or divestments in the period.
14 Provisions
Disposal,
closure
and environmental Restructuring
costs charges Other Total
GBPm GBPm GBPm GBPm
--------------------------------- ------------------ ------------- ----- ------
As at 1 January 2021 42.2 9.2 5.4 56.8
Exchange adjustments (0.6) (0.2) (0.1) (0.9)
Charge to Condensed Group Income
Statement 0.7 - 5.0 5.7
Adjustment to discount 0.4 - - 0.4
Cash spend (4.0) (3.0) (5.4) (12.4)
As at 30 June 2021 38.7 6.0 4.9 49.6
--------------------------------- ------------------ ------------- ----- ------
In assessing the probable costs and realisation certainty of
provisions, or related assets, reasonable assumptions are made.
Changes to the assumptions used could significantly alter the
Directors' assessment of the value, timing or certainty of the
costs or related amounts. The nature of the provisions held remains
consistent with those held at 31 December 2020 and further
description is set out within note 30 of the 2020 Annual Report and
Financial Statements.
15 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.
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 2021 Half year 2020 Full year 2020
Assets Liabilities Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ----------- ------ ----------- ------ -----------
Investments (Level 2) 0.9 - 1.1 - 0.7 -
Derivatives not designated
for hedge
accounting purposes (Level
2) - (0.1) - (0.1) 0.2 -
Derivatives designated
for hedge
accounting purposes (Level
2) - (5.0) - (0.6) - (7.0)
---------------------------- ------ ----------- ------ ----------- ------ -----------
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 2020 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 2020 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 $86m Private Placement Notes issued in June
2020 into EUR76.6m. The timing and amount of the US Dollar
cashflows under the CCIRS exactly mirror those of the Private
Placement Notes and the maturity date of the CCIRS also matches the
repayment date of the Notes. The CCIRS would by default be revalued
through the Income Statement; however as it is in a designated
hedging relationship it is instead revalued through Other
Comprehensive Income. More specifically, the US Dollar exposure is
designated as a cashflow hedge of the underlying Private Placement
Notes and the Euro exposure is designated as a net investment hedge
of part of the Group's foreign operations. The CCIRS is presented
as a non-current asset or liability as it is expected to be settled
more than 12 months after the end of the reporting period.
With the exception of the CCIRS the fair value of Derivatives
outstanding at 30 June 2021 has been booked through the Income
Statement. All of the fair values shown in the table above are
classified under IFRS 13 as Level 2 measurements which have been
calculated using quoted prices from active markets, where similar
contracts are traded and the quotes reflect actual transactions in
similar instruments. All of the derivative assets and liabilities
not designated for hedge accounting purposes reported in the table
above will mature within a year of the balance sheet date.
The cross -currency interest rate swaps are fair valued at each
reporting date and the Group applies hedge accounting in accordance
with IFRS 9 such that the movement in fair value is accounted for
directly within equity. The US$ 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 2021, EUR206m and $60m of borrowings were
designated as hedges of net investments in EUR206m and $60m worth
of overseas foreign operations. In addition, the EUR76.6m CCIRS
liability has been designated as a net investment hedge of a
further 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 2021, the Group had $146m and EUR180m (GBP260.0m
in total) of US Private Placement Loan Notes (USPP) outstanding,
which carry a fixed rate of interest, representing 81% of the
Group's total borrowings outstanding at that date. Maturities of
the corresponding USPP Notes were disclosed in Note 25 to the 2020
Annual Report and Financial Statements. The Group also had GBP14.0m
and EUR26.0m (GBP36.3m in total) drawn down under its syndicated
bank facility, a bi-lateral bank facility of GBP19.0m and
overdrafts of GBP4.1m, all of which carry a floating rate of
interest.
On 5 July 2021, the Group entered a new syndicated bank facility
for GBP385.0m. On the same date the previous syndicated bank
facility for GBP300.0m was cancelled. The new facility expires in
July 2025 subject to a one-year extension option exercisable in
2022 at the discretion of the Group and of the lending banks. On 5
July 2021 the Group replaced its GBP14.0m and EUR26.0m drawdowns
under the previous facility with equivalent short-term drawdowns
under the new facility. Drawdowns under the new facility reference
SONIA for GBP drawdowns and EURIBOR for EUR drawdowns.
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 - 36.4 36.4
United States dollar 105.6 0.1 105.7
Euro 154.4 22.7 177.1
Other - 0.2 0.2
Capitalised costs (1.3) - (1.3)
As at 30 June 2021 258.7 59.4 318.1
------------------------ ------------- ---------- ------
Sterling - 43.3 43.3
United States dollar 106.8 0.3 107.1
Euro 160.8 31.5 192.3
Other - 0.5 0.5
Capitalised costs (1.3) (0.1) (1.4)
As at 31 December 2020 266.3 75.5 341.8
------------------------ ------------- ---------- ------
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 2021 Within Between Between Over 5 Total Carrying
one year 1-2 years 2-5 years years contractual amount
cash flows
GBPm GBPm GBPm GBPm GBPm GBPm
Trade payables 227.4 - - - 227.4 227.4
Loans & overdrafts 81.1 8.5 98.8 178.4 366.8 319.4
Finance lease liabilities 9.4 9.0 10.7 13.7 42.8 35.4
Capitalised arrangement
fees - - - - - (1.3)
Derivative liability 0.4 0.5 (1.3) (0.9) (1.3) (5.1)
--------------------------- ---------- ----------- ----------- ------- ------------- -----------
Total financial
liabilities 318.3 18.0 108.2 191.2 635.7 575.8
--------------------------- ---------- ----------- ----------- ------- ------------- -----------
As at 31 December Within Between Between Over 5 Total Carrying
2020 one year 1-2 years 2-5 years years contractual amount
cash flows
GBPm GBPm GBPm GBPm GBPm GBPm
Trade payables 185.7 - - - 185.7 185.7
Loans & overdrafts 44.7 84.2 80.5 187.4 396.8 343.2
Finance leases 11.2 9.1 11.1 12.9 44.3 36.3
Capitalised arrangement
fees - - - - - (1.4)
Derivative liability (0.5) (0.4) 2.7 1.4 3.2 7.0
------------------------- ---------- ----------- ----------- ------- ------------- ---------
Total financial
liabilities 241.1 92.9 94.3 201.7 630.0 570.8
------------------------- ---------- ----------- ----------- ------- ------------- ---------
At 30 June 2021 the Group had a GBP14.0m drawdown under its
previous syndicated bank facility and a GBP19.0m drawdown under a
bi-lateral bank facility. Both of these arrangements referenced GBP
LIBOR and had not transitioned to SONIA or an alternative interest
rate benchmark. As noted above, the syndicated bank facility was
replaced on 5 July 2021 and the replacement facility references
SONIA for GBP drawdowns. The GBP19.0m bi-lateral bank facility
matures in October 2021, prior to the termination of GBP LIBOR. It
is anticipated that any replacement bi-lateral bank facility will
reference SONIA. Following repayment and termination of the
previous syndicated bank facility on 5 July 2021 and the maturity
of the bi-lateral bank facility in October 2021 there will be no
borrowing or hedging arrangements that reference GBP LIBOR.
16 Alternative performance measures (unreviewed)
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.
16.1 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.
16.2 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,
disposals and significant business closures.
16.3 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 reconciliation of
ROS is included in Note 2.
16.4 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.
16.5 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.
16.6 Effective tax rate ('ETR')
The Group's 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.
16.7 Headline earnings
Headline earnings is profit after tax before separately reported
items attributable to owners of the parent.
16.8 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 6.
16.9 Adjusted operating cash flow
Adjusted operating cash flow is cash generated from continuing
operations before restructuring but after deducting capital
expenditure net of asset disposals. It is used in calculating the
Group's cash conversion.
Unaudited Unaudited Full
Half Half year
year year
2021 2020 2020
GBPm GBPm GBPm
------------------------------------------- ---------- ---------- -------
Cash generated from continuing operations 50.2 79.2 193.7
-------------------------------------------- ---------- ---------- -------
Add: Outflows relating to restructuring
charges 3.0 9.2 16.7
Add: Vacant site remediation costs
paid 1.7 1.2 1.9
Less: Capital expenditure (17.6) (19.4) (40.5)
Add: Proceeds from the sale of property,
plant and equipment 0.6 - 1.1
Adjusted operating cash flow 37.9 70.2 172.9
Trading Profit 73.3 51.1 101.4
-------------------------------------------- ---------- ---------- -------
Cash Conversion 52% 137% 171%
-------------------------------------------- ---------- ---------- -------
16.10 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.
16.11 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.
16.12 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
2021 2020 2020
GBPm GBPm GBPm
------------------------------- ----------- ----------- ----------
Average trade working capital 314.2 373.8 337.8
Last 12 months total revenue 1,515.6 1,519.8 1,458.3
Average trade working capital
to sales ratio 20.7% 24.6% 23.2%
-------------------------------- ----------- ----------- ----------
16.13 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 intangibles.
It is used in the calculation of the Group's interest cover and net
debt to EBITDA ratios. A reconciliation of EBITDA is included in
Note 2.
16.14 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
2021 2020 2020
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ----------
Total interest payable on borrowings (note
4) 5.8 8.4 17.9
Finance income (note 4) (2.3) (2.5) (7.4)
Net interest payable on borrowings 3.5 5.9 10.5
--------------------------------------------- ----------- ----------- ----------
16.15 Interest cover
Interest cover is the ratio of adjusted EBITDA for the last 12
months to net interest 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
2021 2020 2020
GBPm GBPm GBPm
--------------------------------------------------- ----------- ----------- ----------
Last 12 months adjusted EBITDA 173.3 183.8 152.0
Last 12 months net interest payable on borrowings 8.1 10.2 10.5
Interest cover 21.4x 18.0x 14.5x
---------------------------------------------------- ----------- ----------- ----------
16.16 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 8.
16.17 Net debt to adjusted EBITDA
Net debt to EBITDA is the ratio of net debt at the period-end to
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
2021 2020 2020
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- ----------
Net debt (note 8) 196.6 229.7 175.1
Last 12 months adjusted EBITDA (note 2) 173.3 183.8 152.0
Net debt to adjusted EBITDA 1.1x 1.2x 1.2x
------------------------------------------ ----------- ----------- ----------
16.18 Return on net assets ('RONA')
RONA is calculated as trading profit plus share of post-tax
profit of joint ventures for the previous 12 months, divided by
average net operating assets, at constant currency (being the
average over the previous 13 months of property, plant and
equipment, trade working capital, interests in joint ventures and
associates, investments, other operating receivables, payables and
provisions). It is one of the Group's key performance indicators
and is used to assess the financial performance and asset
management of the Group and is one of the measures used in
monitoring the Group's capital.
Unaudited Unaudited Full year
Half year Half year
2021 2020 2020
GBPm GBPm GBPm
------------------------------ ----------- ----------- ----------
Average net operating assets 602.5 672.8 642.0
Trading profit 120.7 130.5 101.4
Share of post-tax profit
from joint ventures 1.1 1.1 1.1
------------------------------- ----------- ----------- ----------
121.8 131.6 102.5
----------- ----------- ----------
RONA 20.2% 19.6% 16.0%
------------------------------- ----------- ----------- ----------
16.19 Constant currency
Figures presented at constant currency represent 2020 amounts
retranslated at average 2021 exchange rates.
16.20 Last twelve months ('LTM')
Some results are presented or calculated using data from the
last twelve months from the reference date.
17 Exchange rates (unreviewed)
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
2021 2020 2020 year change year change
----------------- --------- --------- ----------- ------------ ------------
US Dollar 1.39 1.26 1.28 10.3% 8.6%
Euro 1.15 1.14 1.12 0.9% 2.7%
Chinese Renminbi 8.98 8.87 8.85 1.2% 1.5%
Japanese Yen 149.63 136.46 137.01 9.7% 9.2%
Brazilian Real 7.48 6.18 6.61 21.0% 13.2%
Indian Rupee 101.82 93.41 95.1 9.0% 7.1%
South African
Rand 20.17 20.94 21.08 -3.7% -4.3%
------------------ --------- --------- ----------- ------------ ------------
Assets and liabilities
Period end rates
----------------- -------------------------------------------------------------
Half year Full year
Half year Half year Full year to Half to Half
2021 2020 2020 year change year change
----------------- --------- --------- ----------- ------------ ------------
US Dollar 1.38 1.24 1.37 11.3% 0.7%
Euro 1.17 1.10 1.12 6.4% 4.5%
Chinese Renminbi 8.94 8.76 8.89 2.1% 0.6%
Japanese Yen 153.62 133.81 141.16 14.8% 8.8%
Brazilian Real 6.87 6.78 7.1 1.3% -3.2%
Indian Rupee 102.82 93.66 99.86 9.8% 3.0%
South African
Rand 19.73 21.48 20.08 -8.1% -1.7%
------------------ --------- --------- ----------- ------------ ------------
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END
IR EAEXPASXFEAA
(END) Dow Jones Newswires
July 29, 2021 02:00 ET (06:00 GMT)
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