TIDMTYMN
RNS Number : 0562F
Tyman PLC
05 March 2020
TYMAN PLC
RESULTS FOR THE YEARED 31 DECEMBER 2019
Tyman plc (TYMN.L) announces results for the year ended 31
December 2019.
Summary Group Results
LFL(2)
GBPm unless stated 2019 (1) 2018 Change (adj*)
---------------------------------- --------- ------- ---------- --------
Revenue 613.7 591.5 +4% (2)%
Adjusted operating profit* 85.4 83.6 +2% (5)%
Adjusted operating margin* 13.9% 14.1% (20)bps
Operating profit 40.5 50.5 (20)%
Adjusted profit before taxation* 71.0 72.7 (2)%
Profit before taxation 24.8 38.9 (36)%
Adjusted EPS* 27.46p 27.68p (1)%
Basic EPS 9.08p 13.76p (34)%
Dividend per share 12.20p 12.00p +2%
Leverage* (2) 1.72x 1.96x (0.24)x
Return on capital employed* 12.0% 13.4% (140) bps
---------------------------------- --------- ------- ---------- --------
* Alternative performance measures. These "Adjusted" metrics
(formerly "Underlying") provide additional information to
shareholders on the underlying performance of the business and are
used consistently through the statement. Further details can be
found on page 43
(1) All 2019 numbers are on a reported basis, including the
impact of IFRS 16, with the exception of leverage, which is
calculated in accordance with the debt covenant methodology. 2018
numbers are on a previous GAAP basis (see APMs on page 43 )
(2) LFL = constant currency like-for-Like (see APMs on page 43 )
Highlights:
-- Reported revenue up 4% and adjusted operating profit up 2%
-- LFL revenue down 2% reflects customer losses in North America
and challenging end markets as previously reported
-- LFL adjusted operating profit down 5%, with slight margin deterioration to 13.9%
-- Strong cash generation with cash conversion of 132% and reduction in leverage to 1.72x
-- Good progress in addressing North America footprint
consolidation issues: no further material customer losses in H2 and
improvements at Statesville facility
-- Self-help measures underway including streamlining operations in International markets
-- Final dividend increased by 2% in line with progressive policy
Martin Towers, Chair of the Board of Directors, commented :
"2019 has been a busy year for Tyman, a year of transition and
stabilisation. The Board was delighted Jo Hallas joined as Chief
Executive on 1(st) April. Jo moved quickly to address the emerging
operational issues in North America, particularly at Statesville.
Jo was joined by Jason Ashton as CFO in May. The new executive team
has delivered a second half performance very similar to the
comparative period in 2018. With work still to be done, the
business nevertheless moves forward into 2020 from a strengthening
platform and a sharper focus around its strategic positioning as a
Group.
I am cognisant that, because of the need to recruit and onboard
the new executive team, I have served on the Board for slightly
longer than is current best practice. However, with the recent
Board changes now in place, recruitment of a new Chair is underway.
The process is being led by Paul Withers in his capacity as Senior
Independent Director and search consultants have been appointed. To
ensure an orderly transition, the Board has asked that I seek
re-election at the forthcoming AGM. Following the recruitment of my
successor, and after a short handover period, I intend to retire
from the Board."
Jo Hallas, Chief Executive Officer, commented : "While revenue
and adjusted operating profit increased following the successful
acquisitions in 2018, performance was impacted by challenging
markets and the operational and customer disruption which was
identified in North America in the first half. I'm encouraged by
the progress made to date in resolving these issues, with
operational improvements ongoing, no further material customer
losses in the second half and with a notable improvement in
customer satisfaction. I'm pleased with the reduction in leverage
to 1.72x, which reflects our strong focus on cash management
through the year and is robust progress towards our new medium-term
leverage target of between 1.0 and 1.5x.
We anticipate mixed markets in 2020, absent a material impact
from the coronavirus situation which we are monitoring closely. We
expect limited top-line growth, but aim to deliver margin expansion
through self-help activities already commenced and improvement
actions at the Statesville facility. In parallel, we will progress
strategic initiatives that strengthen our platform for the next
phase of Tyman's evolution. I am confident that, taken together,
executing on these priorities will position the business well for
long-term profitable growth."
5 March 2020
Enquiries
Tyman plc 020 7976 8000
Jo Hallas - Chief Executive Officer
Jason Ashton - Chief Financial Officer
MHP Communications 020 3128 8100
Reg Hoare / Rachel Mann / Ailsa Prestige
Analyst and investor presentation
Tyman will host an analyst and investor presentation at 9.30
a.m. today, Thursday 5 March 2020, at the offices of Numis
Securities, 10 Paternoster Square, London, EC4M 7LT.
The presentation will be webcast at the Group's website (
www.tymanplc.com ) and the audio conference call details are:
Number +44 (0) 330 336 9127
Participant PIN 6976611
Notes to editors
Tyman (TYMN: LSE) is a leading international supplier of
engineered fenestration components and access solutions to the
construction industry. The company designs and manufactures
products that enhance the comfort, sustainability, security, safety
and aesthetics of residential homes and commercial buildings.
Tyman's portfolio of leading brands serve their markets through
three divisions: North America (AmesburyTruth), UK and Ireland
(ERA) and International (SchlegelGiesse). Headquartered in London,
the Group employs approximately 3,900 people with facilities in 18
countries worldwide. Further information is available at
www.tymanplc.com .
Overview of results
Progress in 2019
The Group delivered reported revenue and adjusted operating
profit growth in 2019 of 4% and 2% respectively, assisted by the
contributions from the acquisitions made in 2018 and the beneficial
impact from currency. On a LFL basis, revenue decreased by 2% in
the year and adjusted operating profit by 5%.
Performance was impacted by customer disruption and operational
issues arising from the final moves of the North American footprint
consolidation project and transition to the new type of door seal.
Progress has been made towards resolving these issues in the second
half , with new leadership in place and no further material
customer losses. There has been notable improvement in the level of
customer satisfaction through improved quality to the customer and
better communication, however productivity levels are not yet at
the desired level and operational improvements are ongoing.
Resolving the remaining issues is a key priority for 2020 and the
Group continues to progress options to re-instate supply of the
legacy door seal product.
Pleasingly, the integration of Ashland into our North American
division has continued to progress well and is on track to meet its
$5m synergy target in 2020. In a challenging market, the UK and
Ireland division grew market share in the distribution channel and
realised the benefits from its 2018 footprint consolidation. The
International division achieved LFL revenue growth against a
deteriorating market backdrop, including delivering further share
gain in its largest market, Italy.
Across the Group, we implemented a number of self-help measures.
Following a review of our geographical footprint, we commenced a
programme to streamline operations in the International markets,
including ceasing manufacturing in Australia and China and closing
the distribution facility in Singapore. We also commenced the
closure of a sub-scale facility in North America and undertook
other cost management and right-sizing actions in both the North
American and International divisions. These initiatives support
re-alignment of the Group's fixed cost base and allow capital and
management bandwidth to be better focused.
Close management of working capital and capital expenditure
during the year led to strong cash conversion of 132% and resulted
in a reduction in leverage to 1.72x adjusted EBITDA, supporting
good progress towards our new medium-term target of between 1.0x
and 1.5x.
Health, safety and sustainability
The health and safety of our people is our top priority. We were
very pleased to appoint our first Group Health, Safety and
Sustainability Director during the year, bringing further momentum
to our drive towards safety excellence. Having progressed our
health and safety record over a number of years through a series of
improvement activities, the next phase is to develop a
behavioural-based safety culture, fostering a positive, open
culture where everyone feels empowered to speak up and take
proactive action. This will build greater unity across our teams
and create genuine all-employee ownership for safety.
In 2019, the Group achieved a lost time injury frequency rate of
4.0 injuries sustained per million hours worked, representing a 17%
reduction against prior year. Over the course of the year, a suite
of leading-indicator metrics was introduced, root cause analysis in
incident investigation was enhanced and safety leadership tours
were introduced. A safety leadership training programme was also
developed to equip leaders with the skills to role model the
behaviours needed to help build the culture and world-class levels
of safety performance the Group aspires to. All people managers and
supervisors globally will undertake the programme over the course
of 2020.
We are also very excited by the role that Tyman can play in
making our world more sustainable, through providing energy-saving
and greener solutions for our customers as well as reducing our own
operational impacts. We have already expanded the scope of our
reporting and started to assess the broader impact of our products
to help us understand where best to target our improvement
programmes in the future. Further developing our sustainability
action plans will be a key focus over the course of 2020.
M&A
Early in the year, the Group acquired Y-cam, a smart home
security business which operates a proprietary cloud-based
platform. This acquisition provides us with a market-leading
technology that will enable the provision of value-added services
such as security monitoring. A range of new smartware products
based on this platform is launching across late 2019 and the first
half of 2020.
Progress has been made in integrating the acquisitions completed
in 2018, with Ashland and Zoo continuing to perform strongly. Good
momentum is also now building with both Profab and Reguitti despite
some specific challenges faced by each business in the year.
Strategy update
In late 2019, with new executive leadership in place and
progress demonstrated in resolving the North American footprint
consolidation issues, a strategy review was initiated to develop
plans for the next phase of Tyman's growth.
Three distinct strategic themes emerged: 'focus', 'define' and
'grow', the first two of which are aimed at strengthening the base
for future growth. Overall, the strategy is largely evolutionary,
building on the inherent capabilities already established in the
Group.
The focus element of the strategy reflects actions to streamline
and strengthen what we have, thereby laying the foundations for
sustainable, profitable growth. This includes self-help measures,
such as resolving remaining Statesville issues, further footprint
realignments and completing the integration of recent acquisitions.
There is also significant scope to tune existing systems and
processes across the Group.
The define element of the strategy centres on building cultural
cohesion across the Group to facilitate ongoing synergy extraction.
There has been genuine excitement across the organisation in 2019
as we have used safety excellence as a beachhead for our culture
development and for establishing a clearly-defined business system
that enables best practice development and propagation. Over the
course of 2020, we plan to extend this to lean excellence and other
initiatives.
The grow element of the strategy is initially organic, through
executing well in serving our customers, developing and launching
new products and expanding our existing channels to market. In
addition, we will seek to unlock the cross-leverage potential
inherent in our portfolio. Over the course of 2019, some
interesting wins have been generated through such cross-divisional
activity, with further opportunities being identified. Mid-term,
growth will be achieved through a blend of divisional initiatives,
cross-portfolio leverage and M&A.
Capital allocation priorities will be aligned with the strategy.
In the near-term, capital investments will be in organic
development, including new products and operational excellence.
Mid-term, Tyman continues to be the natural consolidator in a
fragmented market and we would intend to supplement our organic
growth with acquisitions that either bring products and
technologies of future strategic importance, or synergistically
balance out our geographic strength across our core markets. The
Group's dividend policy remains progressive.
Further information will be provided at a capital markets day
later in the year.
Coronavirus
The situation regarding coronavirus is rapidly evolving and may
create headwinds for our business in 2020. We are monitoring the
situation very closely in terms of the well-being of our people and
the risk of disruption to our supply base and markets. As we
continue to assess the extent and duration of the potential impact
on Tyman, we will provide updates as necessary.
Summary and outlook
Whilst the short-term challenges in North America have led to a
disappointing performance in 2019, the business has a solid
platform for growth derived from our market-leading brands,
extensive portfolio, deep customer relationships, domain expertise
and geographic reach. There is still much to do in 2020 to resolve
the issues in North America, but the progress made in the second
half of the year is encouraging.
The macro-economic outlook is still challenging and
unpredictable and consequently the focus is on both self-help
measures and driving excellent execution with customers. In 2020,
we expect limited top-line growth, but aim to deliver margin
expansion underpinned by a continued focus on working capital
management and cash generation to enable the Group to show
meaningful progression on ROCE and leverage. Beyond 2020, there are
further opportunities for commercial and cost synergies as well as
from best practice development and propagation throughout the
Group.
The resilience of our customer relationships through the
difficulties in North America is evidence of the value that we
create over the long-term for our customers. Alongside fixing our
short-term issues and streamlining complexity, the core of our
strategy will be to further enhance this value through our
strengths in innovation, quality and service.
I am excited by the opportunity at Tyman and I look forward to
sharing our plans at a capital markets day later in the year.
Jo Hallas
Chief Executive Officer
North America (AmesburyTruth)
GBPm except where stated 2019 2018(1) Change LFL
--------------------------- ------ -------- ------- ----
Revenue 386.0 377.9 +2% -3%
Adjusted Operating Profit 64.5 62.5 +3% -3%
Adjusted Operating Margin 16.7% 16.5% +20bps
--------------------------- ------ -------- ------- ----
1. Prior year divisional figures have been amended for
comparability to reflect a change to the presentation of
inter-divisional sales in 2019. For further details, see segment
note on pages 31 to 33.
Markets
After a weak start to the year, US residential and commercial
markets recovered through the second half to end the year flat
against 2018. Single-family housing starts, to which the Group has
proportionally higher exposure, grew 1%, with building permits
declining 1%. Growth in US residential repair and remodelling
markets moderated, with the NAHB RMI average index lower at 54
(2018: 58).
The market in Canada continued to contract, with single-family
housing starts down 6%, due in part to the discontinuation of
government energy rebate programmes in place for some regions in
2018.
Business performance and developments
Reported revenue increased 2% to GBP386.0 million, assisted by
the incremental contribution from Ashland and the relative weakness
of Sterling against the US Dollar in the year. On a LFL basis,
revenue declined 3%, with performance impacted by operational
disruption and customer losses relating to the North American
footprint consolidation project.
Adjusted operating profit declined 3% on a LFL basis, with the
impact of reduced sales and other operating inefficiencies related
to the footprint consolidation project being partially mitigated by
the underlying savings from the project as well as some
restructuring undertaken in the second half.
While the final moves of the footprint consolidation project
were completed in early 2019, two issues arose from the project:
cost inefficiencies derived from issues associated with the
transfer of production facilities, and customer losses related to
both frustrations associated with poor customer service levels and
challenges with the transition to a new type of door seal.
Phase 1 facilities are now fully stabilised and running at
expected levels of productivity, with an encouraging level of new
business wins. Progress has been made towards resolving the issues
at the Phase 2 facility in Statesville, however this is not yet
operating at the desired level. There has been notable improvement
in the level of customer satisfaction through improved quality to
the customer as well as better communication. Whilst temporary
labour costs have been reduced and aged order backlog improved,
yields remain low and processing costs high. Changes to the plant
leadership team and further investment in quality and continuous
improvement resources have been made in the second half and several
Kaizen events have been held, with a number of initiatives underway
to resolve the remaining issues.
The transfer of manufacturing from Rochester to the new
Statesville facility in late 2018 also involved transition to a new
type of door seal. While the new product offers various advantages,
the different compressibility attributes resulted in the new
product being rejected by several customers. In light of the
reduction in expected volumes of the new seals product line, a
non-cash charge of GBP5.3 million was recorded for the write down
of the new door seal fixed assets and associated costs. The
business continues to progress options to reinstate capacity for
supply of the previous door seal product.
Ashland, which was acquired in March 2018, is performing well,
with revenue up 1%. The business is on track to deliver US$5.0
million of cumulative annual synergies in 2020. There are further
opportunities in 2020 and beyond to integrate and optimise the
combined North America product offering.
Revenue from the division's access solutions business, Bilco,
grew 4% on a LFL basis, benefitting from the mix of projects
delivered and strong growth in roof hatch sales to wholesale
distributors and sidewalk door products despite a weaker commercial
construction market in the second half.
Restructuring
With the major building blocks of the North American footprint
in place, some smaller optimisation opportunities have been
identified. The closure of Fremont, a small stamping facility in
Nebraska is underway, with manufacturing being transferred to other
facilities, generating labour and facility cost savings as well as
reducing future capital investment. In addition, as part of this
closure, c. GBP2 million of low-margin, non-fenestration business
will be exited. The transition is being managed in close
collaboration with customers, with completion expected by June
2020.
New product development
The division continues to focus on innovation, with products
launched in 2018 and 2019 performing ahead of expectations and a
strong pipeline of new products due for release in 2020. Addressing
the trend in the US towards Euro Groove window systems, the Euro
Contour Hardware system, which was co-developed with the
International division, was launched in 2019. This solution
balances maximum performance and flexibility, while minimising the
number of SKUs required. The Pegasus combination operator and lock
which combines opening/closing and locking into one motion as well
as the SafeGard(TM), an innovative child safety device for windows,
were also launched in 2019 and have been well-received.
Leadership changes
In early June, Bob Burns was appointed to lead the North America
division, having joined Tyman through the acquisition of Ashland
Hardware in 2018. Over the balance of the year, further changes
were made to strengthen the North American leadership team.
Outlook
Single-family housing starts are expected to continue to grow
modestly in 2020, supported by low mortgage rates and increased new
home sales activity. Growth in US residential repair and
remodelling markets is expected to slow in the second half of the
year due to continued weakness in existing home sales as well as
the forthcoming US election. Weakness in the commercial
construction market is expected to continue.
The primary focus of the North America division in 2020 will be
the continued operational improvement of the Statesville facility;
realising further synergies from the integration of Ashland; and
strengthening the overall offer through product rationalisation,
repositioning and new product development.
UK and Ireland (ERA)
GBPm except where stated 2019 2018(1) Change LFL
--------------------------- ------ -------- ------- ----
Revenue 107.2 97.4 +10% -1%
Adjusted Operating Profit 13.8 12.7 +9% -2%
Adjusted Operating Margin 12.9% 13.1% -20bps
--------------------------- ------ -------- ------- ----
1. Prior year divisional figures have been amended for
comparability to reflect a change to the presentation of
inter-divisional sales in 2019. For further details, see segment
note on pages 31 to 33.
Markets
The UK market for doors and windows contracted further in 2019
as the uncertainty surrounding Brexit continued. FENSA data for
door and window installations estimates the market was down 2%
against 2018.
Business performance and developments
Reported revenue increased by 10%, assisted by incremental
contributions from Zoo and Profab, both of which were acquired in
2018. On a LFL basis, revenue declined 1%, largely reflecting the
subdued RMI market, with the upturn seen at the end of 2018
providing a difficult comparator in the second half. This was
partially offset by growth in sales into the distribution channel
and the continued benefit of the May 2018 price increase.
Momentum against strategic objectives continued and the benefits
from the 2018 footprint consolidation and lower input costs were
realised. However, these were offset by the impact of lower volumes
combined with the loss-making Ventrolla business and the investment
being made in smartware. Consequently, LFL adjusted operating
profit declined 2% and adjusted operating margin declined from
13.1% to 12.9%.
The impact of the weaker market on hardware sales into the OEM
channel was exacerbated by some customer-specific issues in their
operations, and consequently LFL revenue declined 5%. Despite the
market conditions, a more focused channel strategy has driven
growth in sales into the distribution channel of 6% on a LFL basis,
further assisted by the incremental contribution from Zoo, which
achieved strong revenue growth.
Smartware sales declined in the period as a result of the
decision to exit a third-party distribution agreement in late 2018.
In February 2019, the division completed the acquisition of Y-cam,
a cloud-based smart security platform that enables the provision of
value-added services such as security monitoring. The launch of the
ERA Protect range of second generation smartware products using the
Y-cam platform commenced at the end of 2019, with range extensions
to follow in 2020. The network of smartware installers generated
through the ERA Installer Scheme has expanded rapidly and creates a
new channel for smart security products that addresses a consumer
'do it for me' trend. This unique channel combined with the leading
product range creates a strong foundation for growth in this
nascent market.
The division's commercial access businesses Bilco, Howe Green
and Profab were brought together with the launch of the Access 360
brand in 2019, providing a single go-to-market identity for this
synergistic portfolio. LFL revenue for Access 360 increased by 9%
in the period, reflective of the timing of projects and strong
growth in roof hatches and smoke vent sales. Profab had a
challenging year due to a weak opening project pipeline following
acquisition in August 2018, recovery from which led to operational
bottlenecks in H2, together impacting profitability across the
year. The Access 360 business ended the year with a healthy order
book and a strong pipeline for delivery in 2020.
The sash window refurbishment business, Ventrolla, recorded a
decline in LFL revenue of 15% in 2019, due to the ongoing impact of
the lower level of online residential enquiries seen following
changes to the website in 2018. The new management team put in
place at the beginning of 2019 resolved the inefficiencies in the
installation process and improved lead generation for the
residential business over the course of 2019. Encouragingly, these
leads are now converting to sales. The commercial part of this
business demonstrated significant growth in 2019.
New product development
New product launches are gaining momentum, with sales from
products introduced in the last three years now accounting for 12%
of sales. Sales of the new Surefire auto-fire multipoint door
locking system have exceeded expectations. Similarly, the new
high-security patio door lock has gained good traction with leading
system design houses. The Giesse aluminium hardware range continues
to show strong sales growth in the UK.
Outlook
With greater certainty around Brexit, the UK residential RMI
market is expected to improve in 2020. In addition, the Access 360
business has a strong orderbook and pipeline of projects for
delivery in 2020.
The primary focus of the UK and Ireland division in 2020 will be
on driving new product introductions including building momentum
with the new smartware offer; and further optimising the cost base
through continued integration of recent acquisitions and
strengthening of continuous improvement capabilities.
International (SchlegelGiesse)
GBPm except where stated 2019 2018(1) Change LFL
--------------------------- ------ -------- ------- ----
Revenue 120.5 116.2 +4% +1%
Adjusted Operating Profit 14.8 15.2 -3% -8%
Adjusted Operating Margin 12.3% 13.1% -80bps
--------------------------- ------ -------- ------- ----
1. Prior year divisional figures have been amended for
comparability to reflect a change to the presentation of
inter-divisional sales in 2019. For further details, see segment
note on pages 31 to 33.
Markets
The International division's primary markets were challenging in
2019, with most markets weakening, particularly in the second half
of the year. In addition to the general slowdown in core European
markets, there were macro issues in other specific markets: the
Australian market continues to suffer from recession; the weak
economic conditions in Latin America persisted; and the Middle East
was impacted by the ongoing liquidity constraints.
Business performance
Reported revenue grew by 4%, benefitting from the incremental
contribution from Reguitti, which was acquired in August 2018, as
well as favourable exchange movements. On a LFL basis, revenue grew
by 1%, with a strong start to the year being largely offset in the
second half as markets deteriorated.
On a LFL basis, adjusted operating profit declined by 8%, mainly
driven by higher-margin markets weakening proportionately more than
lower-margin ones. The investment made in personnel in late 2018 in
anticipation of growth was unwound through actions taken early in
the second half of the year, thereby creating a neutral position
across the full year.
In the division's largest market, Italy, the market leadership
position was consolidated with further share gain in a declining
market. The "all in one" strategy of cross-selling hardware and
seals yielded positive results, while at the same time, strong
progress was made with window and door system design houses on the
strength of the division's innovation capabilities.
In Spain, volumes improved overall revenue growth, but hardware
price competition was high in a difficult market environment.
Pleasingly, while still small in absolute terms, the "all in one"
strategy allowed the business to achieve high double-digit revenue
growth in seals, demonstrating the success of this approach,
alongside further strengthening of distributor partnerships.
In the division's third largest market of China, sales were
overall flat as strong growth achieved in the first half was eroded
through the remainder of the year as the market weakened and
European competitors entered the residential RMI sector with
competitively priced products. The division is in the process of
value-engineering certain products to better reflect local market
requirements and expects to launch these in the second half of
2020.
Integration of the Reguitti acquisition has proceeded to plan,
with the combined salesforce now offering the full portfolio of
products and generating the expected cross selling benefits.
However, the overall return from Reguitti has been below
expectations due to some specific low-cost competition in Italy.
Actions have been taken to address this, including introducing a
suite of value-engineered products supported by targeted marketing
campaigns. Cross-selling is also underway with the Zoo portfolio in
the UK and Ireland division, with products from both families
featuring in the other's 2020 catalogue.
Restructuring
In the second half of 2019, a review of the geographical
footprint of the International division was undertaken with a view
to re-aligning the fixed cost base and allowing capital and
management bandwidth to be better focused. A restructuring
programme was commenced to cease manufacturing in Australia and
China, with products to be supplied to these markets from a
combination of other Group manufacturing facilities and Far East
suppliers. The distribution centre in Singapore will also be closed
and the ASEAN market will be served as an export territory. All
three projects will be completed in the first half of 2020. Other
opportunities for footprint optimisation are under review.
New product development
Several new products were launched in late 2019 or are due to be
launched in early 2020. These included expanded ranges of CHIC
concealed hinges as well as the Supra and Ultra rosette-free
handles, both of which address the minimalist trend for narrower
window frames with a wider expanse of glass. A particularly
innovative new solution for patio doors is due to be launched in
2020, with universally positive feedback from customers to date on
the prototype product. Products launched within the last three
years generated 6% of revenue in 2019 and new product development
will be a key element of driving organic growth in 2020 and
beyond.
Outlook
The Group expects core International markets to remain
challenging in 2020. The main priorities of the International
division in 2020 are to drive share gain in core markets through
new product launches and continued channel expansion; and to
successfully execute the restructuring plan to create a stronger
foundation for growth.
FINANCIAL REVIEW
Income statement
Revenue and profit
Reported revenue in the period increased by 3.8 % to GBP613.7
million (2018: GBP591.5 million), largely reflecting the impact of
acquisitions made in 2018 of GBP24.0 million and the favourable
impact of foreign exchange movements of GBP14.6 million. On a LFL
basis, revenue declined 1.8% compared to the prior year,
principally as a result of the customer losses associated with the
North America footprint consolidation project of c. GBP12.9 million
and volume declines largely driven by market softness of GBP14.6
million. The impact of these was partially offset by pricing
actions of GBP11.0 million and surcharges of GBP5.8 million.
Adjusted administrative expenses increased to GBP 120.2 million
(2018 restated: GBP114.5 million), with GBP 4.7 million of the
increase due to acquisitions and GBP1.7 million due to the impact
of foreign exchange. The majority of the underlying increase was a
combination of inflation and increased marketing investment.
Adjusted operating profit increased by 2.2% to GBP 85.4 million
(2018: GBP83.6 million) and declined 4.8% on a LFL basis. The
operational disruption and customer losses relating to the North
America footprint consolidation project negatively impacted
adjusted operating profit by c. GBP8.1 million. Pricing actions
offset cost inflation which started to moderate in the year.
Tariffs and surcharges of GBP5.8 million related to recovery of US
tariffs and metal costs. Reported operating profit decreased 19.8%,
with the benefit from more favourable foreign exchange movements of
GBP 1.6 million, acquisitions net of disposals of GBP1.9 million
and the adoption of IFRS 16 'leases' (see note 13) of GBP1.6
million being offset by increased exceptional items. The Group's
adjusted operating margin decreased 20bps to 13.9 % (2018:
14.1%).
Adjusted profit before taxation decreased by 2.3 % to GBP 71.0
million (2018: GBP72.7 million) and declined 7.8 % on a LFL basis.
Reported profit before taxation decreased by 36.2 % to GBP 24.8
million (2018: GBP38.9 million) as a result of an increase in
exceptional items of GBP11.6 million and the impact of applying
IFRS 16, which reduced profit before tax by GBP1.4 million.
Materials and input costs
GBPm except where stated FY 2019 Materials(1) Average(2) Spot(3)
----------------------------- --------------------- ----------- --------
Aluminium (Euro) 23.2 -4% -6%
Polypropylene (Euro) 34.8 -7% -10%
Stainless steel (US) 52.8 -3% +8%
Zinc (US) 33.4 -11% -4%
Far East components (UK)(4) 45.2 -5% -8%
----------------------------- --------------------- ----------- --------
(1) FY 2019 materials cost of sales for raw materials,
components and hardware for overall category
(2) Average 2019 tracker price compared with average 2018 tracker price
(3) Spot tracker price as at 31 December 2019 compared with spot
tracker price at 31 December 2018
(4) Pricing on a representative basket of components sourced from the Far East by ERA.
Raw material costs continued to moderate in 2019 with average
prices across all commodity categories lower than 2018. Steel
purchases in North America continue to be impacted by the direct
and indirect effect of US tariffs and surcharges are in place to
recover these costs.
Exceptional items
Certain items that are material and non-trading in nature have
been drawn out as exceptional such that the effect of these items
on the Group's results can be better understood and to enable a
clearer analysis of trends in the Group's underlying performance.
Exceptional costs paid in cash in 2020 are expected to be c.
GBP5.0-GBP10.0 million.
GBPm 2019 2018
----------------------------------- ------- ------
Footprint restructuring - costs (7.1) (4.8)
Footprint restructuring - credits 0.6 0.9
----------------------------------- ------- ------
Footprint restructuring - net (6.5) (3.9)
M&A and integration (5.3) (1.7)
Write-off of inventory fair value
adjustments - (2.5)
Loss on disposal of business (1.7) (0.1)
Impairment charges (5.4) -
Other - 0.9
----------------------------------- ------- ------
(18.9) (7.3)
----------------------------------- ------- ------
Footprint restructuring
Costs attributable to footprint restructuring in the year
amounted to GBP7.1 million, with credits of GBP0.6 million.,
Footprint restructuring principally relates to directly
attributable costs incurred in the ongoing North American footprint
consolidation project. This includes costs associated with the
closure of the Fremont, Nebraska facility which was announced in
late 2019. The credits related to gains on the disposal of assets
and release of unused provisions.
Additionally, a restructuring project has been commenced to
streamline operations in the International markets with a view to
better focussing the business and improving the cost base . This
includes exit of manufacturing in Australia and China and closure
of the distribution facility in Singapore. Estimated costs
associated with this of GBP1.4 million are therefore included in
exceptional items in 2019.
M&A and integration
GBP2.8 million of the M&A and integration costs relate to
costs associated with the integration of Ashland, Zoo, Profab, and
Reguitti which were acquired in 2018 and Y-cam which was acquired
in 2019. The remaining GBP2.5 million of these costs relate to
adjustments made to the consideration and fair value of inventory
in respect of previous acquisitions which are outside of the
measurement period for adjustment against goodwill. The adjustment
to consideration related to finalisation of a tax liability on
closure of an escrow account, and the adjustment to inventory
resulted from further information that has come to light regarding
the condition of certain aged inventory at the acquisition
date.
Write-off of inventory fair value adjustments
The write-off of inventory fair value adjustments in 2018 of
GBP2.5 million related to non-cash adjustments relating to the IFRS
requirement that finished goods held in inventory must be revalued
to their market value on acquisition. This uplift in the book value
was considered to be of a one-off nature and is of a magnitude that
would distort the adjusted trading result of acquisitions in the
period and was therefore classified as exceptional.
Loss on disposal of business
This charge relates to a reduction in expected deferred
consideration receivable in respect of the Rochester
non-fenestration business which was disposed in December 2018.
Impairment charges
Impairment charges relate to the write down of assets and
inventory associated with the new door seals product in North
America. There is uncertainty over the level of future cash flows
that will be generated to support these assets in the near term and
therefore these have been written down to their estimated
recoverable value.
Finance costs
Net finance costs increased to GBP15.7 million (2018: GBP11.6
million), with GBP3.0 million of the increase relating to interest
on lease liabilities recognised as a result of adopting IFRS
16.
Interest payable on bank loans, private placement notes and
overdrafts increased to GBP11.1 million (2018: GBP10.7 million)
reflecting additional finance charges incurred on higher average
borrowings. The Group's average cost of funds and margin payable
over the year increased by 10 bps to 3.9% (2018: 3.8%) reflecting
increased base rates and a higher weighting of US dollar
denominated borrowings which carry a higher rate of interest.
Non-cash movements charged to net finance costs in the period
include amortisation of capitalised borrowing costs of GBP0.5
million (2018: GBP1.0 million) and pension interest cost of GBP0.3
million (2018: GBP0.3 million).
Interest rate swap contracts
A portion of the Group's floating rate borrowings are held at
fixed rates via interest rate swap contracts. At the year end, the
notional value to swap of the Group's outstanding borrowings under
the revolving credit facility was 13.5% (2018: 10.4%). The weighted
average fixed rate of the swap contracts was 1.7% (2018: 1.7%).
In addition, the Group has issued US$100 million in aggregate
under its US Private Placement programme, all of which is held at
fixed rates. In total, 46.0% (2018: 29.9%) of the Group's Adjusted
Debt excluding lease liabilities is effectively held at fixed rates
of interest.
At 31 December 2019, the Group held interest swap contracts with
a liability at fair value of GBP0.2 million (2018: GBP0.3
million).
Forward exchange contracts
At 31 December 2019, the Group's portfolio of forward exchange
contracts at fair value amounted to a net liability of GBP0.5
million (2018: net asset of GBP0.3 million). The notional value of
the portfolio amounted to GBP34.1 million, comprising US dollar and
Chinese renminbi forward exchange contracts with notional values of
US$39 million and RMB45 million respectively. These contracts have
a range of maturities up to 30 September 2020.
During the year, a fair value loss of GBP0.8 million (2018: fair
value gain of GBP0.3 million) was recognised directly in the income
statement.
Taxation
The Group reported an income tax charge of GBP7.1 million (2018:
GBP12. 6 million), comprising a current tax charge of GBP13.4
million (2018: GBP15.4 million) and a deferred tax credit of GBP6.3
million (2018: GBP2.8 million). The decrease in the income tax
charge reflects the reduction in profit before tax.
The adjusted tax charge was GBP 17.5 million (2018: GBP19.7
million) representing an effective adjusted tax rate of 24.6%
(2018: 27.1%). The reduction in the adjusted effective tax rate of
250bps reflects an adjustment to the liability for prior years
following the submission of final returns, utilisation of available
tax credits, and elimination of double taxation following a Group
reorganisation.
During the period, the Group paid corporation tax of GBP14.2
million (2018:
GBP12.3 million), reflecting a GBP1.2m refund received in 2018
not repeated, as well as timing of payments on account. This
reflects a cash tax rate on adjusted profit before tax of 20.0%
(2018: 17.0%).
Earnings per share
Basic earnings per share decreased by 34.0% to 9.08 pence (2018:
13.76 pence). Adjusted earnings per share decreased slightly to
27.46 pence (2018: 27.68 pence) as a result of the reduction in
profit before tax and the impact of adopting IFRS 16, offset by
lower tax charges. Excluding the impact of IFRS16, basic earnings
per share decreased 28.7% and adjusted earnings per share increased
by 1.9%.
There is no material difference between these calculations and
the fully diluted earnings per share calculations.
Cash generation, funding and liquidity
Cash and cash conversion
GBPm 2019 2018
----------------------------------------- ------- -------
Net cash generated from operations 97.1 72.6
Add: Pension contributions 1.0 1.1
Add: Income tax paid 14.2 12.3
Less: Purchases of property, plant and
equipment (10.7) (15.7)
Less: Purchases of intangible assets (0.8) (1.5)
Add: Proceeds on disposal of PPE 0.8 5.3
----------------------------------------- ------- -------
Operational Cash Flow after exceptional
cash costs 101.6 74.1
Exceptional cash costs 11.3 3.2
----------------------------------------- ------- -------
Operational Cash Flow 112.9 77.3
Less: Pension contributions (1.0) (1.1)
Less: Income tax paid (14.2) (12.3)
Less: Net interest paid (15.0) (9.2)
Less: Exceptional cash costs (11.3) (3.2)
----------------------------------------- ------- -------
Free Cash Flow 71.4 51.5
----------------------------------------- ------- -------
Excluding impact of IFRS 16
----------------------------------------- ------- -------
Operational Cash Flow 104.3 77.3
----------------------------------------- ------- -------
Free Cash Flow 62.8 51.5
----------------------------------------- ------- -------
Operational cash flow in the period increased by 46.1% to
GBP112.9 million, primarily as a result of applying IFRS 16, a
slight reduction in net capital expenditure and strong working
capital management. As a result of applying IFRS 16, lease
cashflows that were previously included in net cash generated from
operations are now included within financing activities.
Operational cash flow excluding the impact of IFRS 16 increased by
35.0% to GBP104.3 million (2018: GBP77.3 million). This is after
adding back GBP11.3 million (2018: GBP3.2 million) of exceptional
costs cash settled in the period, GBP4.7 million of which related
to settlement of costs associated with the North American footprint
project and were provided for in 2018.
Free cash flow in the period was higher than 2018 at GBP71.4
million (2018: GBP51.5 million) reflecting the strong operational
cash flow, offset to some extent by the increased exceptional cash
outflows, increased interest payments, and higher levels of income
tax payments on account.
Operating cash conversion in 2019 was strong at 132.2% (2018:
92.4%) as a result of the significant focus on working capital
optimisation as well as the impact of adopting IFRS 16. Excluding
the impact of IFRS 16, Operating cash conversion increased 320bps
to 124.4% .
Bank facilities and US private placement notes
Total facilities available to the Group, as at 31 December 2019,
were as follows:
Facility Maturity Currency Committed Uncommitted
----------------- --------- -------------- ---------- ------------
2018 Facility Feb 2024 Multicurrency GBP240.0m GBP70.0m
4.97 % USPP Nov 2021 US$ US$55.0m -
5.37 % USPP Nov 2024 US$ US$45.0m -
Other facilities Various EUR EUR0.6m -
----------------- --------- -------------- ---------- ------------
Liquidity
At 31 December 2019 the Group had gross outstanding borrowings
of GBP273.5 million (2018: GBP262.5 million), cash balances of
GBP49.0 million (2018: GBP51.9 million) and committed but undrawn
facilities of GBP102.8 million (2018: GBP58.5 million) as well as
potential access to the uncommitted GBP70.0 million accordion
facility. The increase in gross borrowings is due to the adoption
of IFRS 16, which has resulted in GBP60.0 million of lease
liabilities being recorded on the balance sheet at 31 December 2019
(see notes 8 and 13). This was offset by a reduction in bank
borrowings reflecting the strong cash generation in the year.
Excluding lease liabilities, gross borrowings were GBP213.5
million.
Net debt at 31 December 2019 was GBP224.5 million. Adjusted net
debt, which excludes lease liabilities and unamortised finance
arrangement fees was GBP164.5 million (2018: GBP210.6 million).
Covenant performance
Performance Headroom Headroom
At 31 December 2019 Test (1) (2) (2)
--------------------- --------- ------------ --------- ---------
Leverage < 3.00x 1.72x 42.2m 42.7%
Interest Cover > 4.00x 8.95x 54.7m 55.3%
--------------------- --------- ------------ --------- ---------
(1) Calculated covenant performance consistent with the Group's
banking covenant test (banking covenants set on a frozen GAAP basis
and not impacted by IFRS 16)
(2) The approximate amount by which adjusted EBITDA would need
to decline before the relevant covenant is breached
At 31 December 2019, the Group retained significant headroom on
its banking covenants. Leverage at the year end improved
significantly to 1.72x (2018: 1.96x) following a year without
significant acquisitions and strong working capital control.
Interest cover decreased to 8.95x (2018: 9.27x), reflecting the
higher interest charges and reduction in EBITDA as measured under
the banking covenants.
Balance sheet - assets and liabilities
Working capital
Acqns
GBPm FY 2018 Mvt (1) FX 2019
----------------------- -------- ------- ------ ------ -------
Inventories 105.3 (13.7) - (3.0) 88.6
Trade receivables 71.6 (8.9) 0.1 (2.3) 60.5
Trade payables (52.6) 4.4 (0.1) 1.7 (46.6)
----------------------- -------- ------- ------ ------ -------
Trade working capital 124.3 (18.2) - (3.6) 102.5
----------------------- -------- ------- ------ ------ -------
(1) The fair value of working capital items assumed at the acquisition date
Trade working capital at the year end, net of provisions, was
GBP102.5 million (2018: GBP124.3 million).
Inventories decreased by GBP16.7 million to GBP88.6 million
(2018: GBP105.3 million) driven by the strong focus on working
capital optimisation. The provision for slow-moving and obsolete
inventory is slightly higher at GBP19.9 million (2018: GBP19.2
million).
Trade receivables decreased by GBP11.1 million to GBP60.5
million (2018: GBP71.6 million) due to an improvement in collection
of overdue debts. Trade payables decreased by GBP6.0 million to
GBP46.6 million (2018: GBP52.6 million).
Of the decrease in trade working capital, GBP3.6 million related
to exchange.
Capital expenditure
Gross capital expenditure decreased to GBP11.5 million (2018:
GBP17.3 million) or 0.79x depreciation excluding IFRS 16 RoU asset
depreciation (2018: 1.25x), as a result of a reduction in capital
investment projects following completion of the significant site
moves as part of the footprint project. Net capital expenditure was
GBP10.7 million (2018: GBP12.0 million), with 2018 including a
higher level of asset sales due to the footprint project. Capital
expenditure for the 2020 financial year is expected to be
GBP15-GBP20 million.
Goodwill and intangible assets
At 31 December 2019, the carrying value of Group goodwill and
intangible assets was GBP475.3 million (2018: GBP516.9 million).
Amortisation of intangible assets through the income statement
during the year was GBP25.0 million (2018: GBP27.3 million). An
impairment charge of GBP2.5m was recorded due to the closure of the
Fremont facility. Of the movement in carrying values, acquisitions
increased the carrying value by GBP1.5 million, with this being
offset by exchange movements of GBP12.6 million. The exchange
movement reflects the impact of the weakening of Sterling against
the US Dollar on the translation of the underlying US Dollar
denominated carrying values into the Group's functional currency at
the year end.
Provisions
Provisions at 31 December 2019 reduced to GBP9.6 million (2018:
GBP15.1 million), primarily reflecting the payment of costs related
to the closure of the Rochester, NY, and Amesbury, MA facilities
offset by additional provisions related to the restructuring of the
International division.
Balance sheet - equity
Shares in issue
At 31 December 2019, the total number of shares in issue was
196.8 million (2018: 196.8 million) of which 0.5 million shares
were held in treasury (2018: 0.5 million).
Bonus share issue and capital reduction
As outlined in the 2018 annual report and approved by
shareholders at the AGM on 9 May 2019, a bonus share issue from
undistributable reserves and subsequent capital reduction was
completed on 4 June 2019. The entire share premium was cancelled
and transferred to retained earnings. This increased the level of
reserves available for distribution as at 31 December 2019 to
GBP369.1 million.
Employee Benefit Trust purchases
At 31 December 2019, the EBT held 1.4 million shares (2018: 1.5
million). During the period, the EBT purchased 0.8 million shares
in Tyman plc at a total cost of GBP2.0 million to satisfy certain
share awards vested in March 2019 as well as future obligations
under the Group's various share plans.
Dividends
A final dividend of 8.35 pence per share (2018: 8.25 pence),
equivalent to GBP16.3 million based on the shares in issue as at 31
December 2019, will be proposed at the Annual General Meeting
(2018: GBP16.1 million). The total dividend declared for the 2019
financial year is therefore 12.20 pence per share (2018: 12.0
pence), an increase of 1.7%. This equates to a Dividend Cover of
2.25x, at the mid-point of the Group's target range of 2.00x to
2.50x.
The ex-dividend date will be 23 April 2020 and the final
dividend will be paid on 29 May 2020 to shareholders on the
register at 24 April 2020.
Only dividends paid in the year have been charged against equity
in the 2019 financial statements. In aggregate GBP23.6 million
(2018: GBP22.4 million) of dividend payments, representing 33.1% of
2019 Free Cash Flow, were made to shareholders during 2019.
Other financial matters
Return on capital employed
ROCE decreased by 140 bps to 12.0% (2018: 13.4%) due to
increases in the average capital employed, as a result of the
adoption of IFRS 16, acquisitions made in 2018, and the impact of
the fall in like for like adjusted operating profit. Excluding the
impact of IFRS 16, ROCE fell by 60bps to 12.8%. Following adoption
of IFRS 16, the medium-term target has been revised from 15% to
14%.
Returns on acquisition investment
Original
Acquisition Acquisition ROAI 2019
Date Investment (1)
-------------- ------------- ------------- ----------
Howe Green March 2017 GBP6.2m 17.0%
Ashland March 2018 US$102.4m 16.4%
Zoo Hardware May 2018 GBP18.7m 18.9%
Profab July 2018 GBP4.1m 10.5%
Reguitti August 2018 EUR16.2m 7.8%
-------------- ------------- ------------- ----------
(1) See Alternative Performance Measures on page 43
The Group's target ROAI was reduced from 15% to 14% in 2019, in
line with the change in ROCE target.
The integration of Howe Green is now complete and its run rate
ROAI after two years of ownership is 17.0%; exceeding the Group's
minimum target return threshold.
Ashland and Zoo have continued to perform well since acquisition
and are on track to exceed the minimum target return threshold. The
ROAI of Ashland after 22 months of ownership is 16.4%. Ashland is
expected to generate US$5m of annual synergy benefits from 2020.
The ROAI of Zoo after 19 months of ownership is 18.9%.
Profab suffered from a weak project pipeline in the first half
of the year, recovery from which led to operational bottlenecks in
the second half, impacting productivity across the year. Actions
have been taken to resolve these issues and an improvement in ROAI
is expected.
Reguitti is generating the expected level of synergies, however
these have been offset by the impact of some specific low-cost
competition in Italy. Actions have been taken to address this,
including introducing a suite of value-engineered products
supported by targeted marketing campaigns.
Y-Cam was acquired in February 2019 for an upfront consideration
of GBP1.0 million. This business is loss-making, reflecting that it
is a nascent business and investment is being made to support
future growth. Returns on this investment will therefore be
generated over a longer period than two years in line with the
acquisition plan.
Currency
Currency in the consolidated income statement
The principal foreign currencies that impact the Group's results
are the US Dollar, the Euro, the Australian Dollar and the Canadian
Dollar.
In 2019, the Sterling was weaker against the US Dollar and
Canadian Dollar, and stronger against the Euro and Australian
Dollar when compared with the average exchange rates in 2018.
Translational exposure
Currency US$ Euro AUS$ CA$ Other Total
----------------------- ------- ------ ------ ------- ------ ------
% mvt in average rate (4.3%) 0.9% 2.8% (2.0%)
GBPm Revenue impact 16.4 (0.7) (0.2) 0.2 (2.3) 13.4
GBPm Profit impact
(1) 2.6 (0.1) - - (0.1) 2.4
1c decrease impact
(2) 470k 87k 5k 7k
----------------------- ------- ------ ------ ------- ------ ------
(1) Adjusted Operating Profit impact
(2) Defined as the approximate favourable translation impact of
a 1c decrease in the Sterling exchange rate of the respective
currency on the Group's Adjusted Operating Profit
The net effect of currency translation caused revenue and
adjusted operating profit from ongoing operations to increase by
GBP13.3 million and GBP2.4 million respectively compared with
2018.
Transactional exposure
Foreign exchange hedges against the US Dollar and Renminbi held
by the UK and Ireland division resulted in a loss of GBP0.8m in
2019 compared to a profit of GBP0.3m in 2018. The Group's other
transactional exposures generally benefit from the existence of
natural hedges and are immaterial.
Currency in the consolidated balance sheet
The Group aims to mitigate the translational impact of exchange
rate movements by denominating a proportion of total borrowings in
those currencies where there is a material contribution to adjusted
operating profit. Tyman's banking facility allows for funds to be
drawn in currencies.
The Group's gross borrowings (excluding leases) are denominated
in the following currencies:
2019 2018
-------------------------------- ------------------------
GBP'm Gross borrowings % borrowings Gross borrowings %
------------------ ----------------- ------------- ----------------- -----
Sterling - - (5.8) 2.2
US Dollars (146.7) 68.7 (188.1) 71.7
Euros (66.8) 31.3 (68.4) 26.1
------------------ ----------------- ------------- ----------------- -----
Gross borrowings (213.5) (262.3)
------------------ ----------------- ------------- ----------------- -----
New accounting standards
IFRS 16 - Leases
The Group has applied IFRS 16 for the first time in the period
ended 31 December 2019. As permitted by the standard, comparatives
for 2018 have not been restated and the impact on net assets has
been recognised within retained earnings as at 1 January 2019.
IFRS 16 has resulted in almost all leases being recognised on
the balance sheet. An asset (the right to use the leased item) of
GBP59.4 million and a financial liability to pay rentals of GBP60.0
million have been recognised on the balance sheet. Instead of
recognising a rental expense over the term of the lease within
operating profit, a depreciation charge of GBP7.5 million has been
recognised on the right to use asset, and a finance charge of
GBP3.0 million recognised on the lease liability.
This has increased adjusted operating profit by GBP1.6 million
in the period as a result of a portion of the expense now being
included within finance expenses and has reduced profit before tax
by GBP1.4 million as a result of interest charges being higher at
the beginning of the lease term.
Cash flows associated with lease payments which were previously
classified as operating cash flows are now classified within
financing cash flows, which has increased operating cash inflows
and increased financing cash outflows by GBP8.6 million.
The Group's banking covenants are unaffected as these are set on
the basis of prevailing GAAP. For further details of the impact of
IFRS 16 on the Group, see note 13.
Jason Ashton
Chief Financial Officer
Consolidated income statement
For the year ended 31 Decmber 2019
2019 2018
(Restated(2)
)
Note GBP'm GBP'm
------------------------------------- ----- -------- --------------
Revenue 3 613.7 591.5
Cost of sales 3 (408.1) (393.4)
------------------------------------- ----- -------- --------------
Gross profit 205.6 198.1
Administrative expenses (165.1) (147.6)
------------------------------------- ----- -------- --------------
Operating profit 40.5 50.5
Analysed as:
Adjusted(1) operating profit 3 85.4 83.6
Exceptional items 4 (18.9) (7.3)
Amortisation of acquired intangible
assets 7 (23.5) (25.8)
Impairment of acquired intangible
assets 7 (2.5) -
------------------------------------- ----- -------- --------------
Operating profit 40.5 50.5
Finance income - 0.4
Finance costs (15.7) (12.0)
------------------------------------- ----- -------- --------------
Net finance costs (15.7) (11.6)
------------------------------------- ----- -------- --------------
Profit before taxation 3 24.8 38.9
Income tax charge 5 (7.1) (12.6)
Profit for the year 17.7 26.3
------------------------------------- ----- -------- --------------
Basic earnings per share 6 9.08p 13.76p
Diluted earnings per share 6 9.05p 13.66p
------------------------------------- ----- -------- --------------
Non-GAAP alternative performance measures(1)
Adjusted(1) operating profit 85.4 83.6
------------------------------------- ----- -------- --------------
Adjusted(1) profit before taxation 6 71.0 72.7
------------------------------------- ----- -------- --------------
Basic Adjusted earnings per share 6 27.46p 27.68p
------------------------------------- ----- --------------
Diluted Adjusted earnings per share 6 27.35p 27.47p
------------------------------------- ----- -------- --------------
1 Before amortisation of acquired intangible assets, deferred
taxation on amortisation of acquired intangible assets, impairment
of goodwill, exceptional items, unwinding of discount on
provisions, gains and losses on the fair value of derivative
financial instruments, amortisation of borrowing costs and the
associated tax effect. See Alternative Performance Measures on page
43.
2 Depreciation on manufacturing assets was reclassified from
administrative expenses to cost of sales in 2019 to better reflect
the nature of this charge. For comparability, the 2018 comparatives
have been amended to reflect the new classification. See note
2.2.3.
Consolidated statement of comprehensive income
For the year ended 31 December 2019
2019 2018
GBP'm GBP'm
--------------------------------------------- ------- -------
Profit for the year 17.7 26.3
---------------------------------------------- ------- -------
Other comprehensive (expense)/income
Items that will not be reclassified to
profit or loss
Remeasurements of post-employment benefit
obligations (1.0) 0.9
Total items that will not be reclassified
to profit or loss (1.0) 0.9
---------------------------------------------- ------- -------
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation of
foreign operations (11.9) 15.2
Total items that may be reclassified to
profit or loss (11.9) 15.2
---------------------------------------------- ------- -------
Other comprehensive (expense)/income for
the year, net of tax (12.9) 16.1
---------------------------------------------- ------- -------
Total comprehensive income for the year 4.8 42.4
---------------------------------------------- ------- -------
Items in the statement above are disclosed net of tax. The
income tax relating to each component of other comprehensive income
is disclosed in note 5.
Consolidated statement of changes in equity
For the year ended 31 December 2019
Share Share Other Treasury Hedging Translation Retained Total
capital premium reserves(1) reserve reserve reserve earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
----------------------- --------- --------- ------------- --------- --------- ------------ ---------- --------
At 1 January 2018 8.9 81.4 8.9 (2.8) (0.3) 56.2 212.3 364.6
Change in accounting
policy(2) - - - - - - (0.7) (0.7)
--------- --------- ------------- --------- --------- ------------ ----------
Total comprehensive
(expense)/income - - - - - 15.2 27.2 42.4
--------
Profit for the year - - - - - - 26.3 26.3
Other comprehensive
income/(expense) - - - - - 15.2 0.9 16.1
----------------------- --------- --------- ------------- --------- --------- ------------ ---------- --------
Transactions with
owners 0.9 50.8 (8.9) (2.1) - - (13.2) 27.5
Share-based
payments(3) - - - - - - 1.3 1.3
Dividends paid - - - - - - (22.4) (22.4)
Issue of shares 0.9 50.8 - - - - - 51.7
Transfer of merger
reserve - - (8.9) - - - 8.9 -
Issue of own shares
from Employee Benefit
Trust - - - 1.1 - - (1.0) 0.1
Purchase of own shares
for Employee Benefit
Trust - - - (3.2) - - - (3.2)
At 31 December 2018 9.8 132.2 - (4.9) (0.3) 71.4 225.6 433.8
Change in accounting
policy(4) - - - - - - 2.4 2.4
--------- --------- ------------- --------- --------- ------------ ----------
At 1 January 2019 9.8 132.2 - (4.9) (0.3) 71.4 228.0 436.2
Total comprehensive
income/(expense) - - - - - (11.9) 16.7 4.8
Profit for the year - - - - - - 17.7 17.7
Other comprehensive
income/(expense) - - - - - (11.9) (1.0) (12.9)
----------------------- --------- --------- ------------- --------- --------- ------------ ---------- --------
Transactions with
owners - (132.2) - 0.6 - - 106.9 (24.7)
Share-based
payments(2) - - - - - - 0.9 0.9
Dividends paid - - - - - - (23.6) (23.6)
Capital reduction - (132.2) - - - - 132.2 -
Issue of own shares
from Employee Benefit
Trust - - - 2.6 - - (2.6) -
Purchase of own shares
for Employee Benefit
Trust - - - (2.0) - - - (2.0)
----------------------- --------- --------- ------------- --------- --------- ------------ ---------- --------
At 31 December 2019 9.8 - - (4.3) (0.3) 59.5 351.6 416.3
----------------------- --------- --------- ------------- --------- --------- ------------ ---------- --------
1 Other reserves related to a merger reserve which arose on a
previous acquisition. This reserve was transferred to retained
earnings in 2018 on the basis that it was available for
distribution.
2 The change in accounting policy at 1 January 2018 related to
adoption of new accounting standards IFRS 15 and IFRS 9.
3 Share-based payments include a tax credit of GBP0.1 million
(2018: tax debit of GBP0.1 million) and a release of the deferred
share-based payment bonus accrual of GBP0.4 million (2018: GBP0.3
million).
4 The change in accounting policy at 1 January 2019 relates to
adoption of new accounting standard IFRS 16. See note 13.
Consolidated balance sheet
As at 31 December 2019
2019 2018
Note GBP'm GBP'm
---------------------------------------- ----- -------- --------
TOTAL ASSETS
Non-current assets
Goodwill 7 371.3 382.1
Intangible assets 7 104.0 134.8
Property, plant and equipment 65.8 76.9
Right of use assets 8 59.4 -
Financial assets at fair value through
profit or loss 1.1 1.2
Deferred tax assets 17.2 17.4
---------------------------------------- ----- -------- --------
618.8 612.4
Current assets
Inventories 88.6 105.3
Trade and other receivables 76.3 87.3
Cash and cash equivalents 49.0 51.9
Derivative financial instruments - 0.3
---------------------------------------- ----- -------- --------
213.9 244.8
TOTAL ASSETS 832.7 857.2
---------------------------------------- ----- -------- --------
LIABILITIES
Current liabilities
Trade and other payables (84.9) (87.0)
Derivative financial instruments (0.7) -
Borrowings 9 (0.3) (1.5)
Lease liabilities 8 (6.0) -
Current tax liabilities (6.5) (7.4)
Provisions (2.5) (7.0)
---------------------------------------- ----- -------- --------
(100.9) (102.9)
Non-current liabilities
Borrowings 9 (211.5) (259.2)
Lease liabilities 8 (54.0) -
Derivative financial instruments - (0.3)
Deferred tax liabilities (31.3) (38.2)
Retirement benefit obligations (11.2) (10.8)
Provisions (7.1) (8.1)
Other payables (0.4) (3.9)
---------------------------------------- ----- -------- --------
(315.5) (320.5)
TOTAL LIABILITIES (416.4) (423.4)
---------------------------------------- ----- -------- --------
NET ASSETS 416.3 433.8
---------------------------------------- ----- -------- --------
EQUITY
Capital and reserves attributable to owners of the Company
Share capital 9.8 9.8
Share premium - 132.2
Treasury reserve (4.3) (4.9)
Hedging reserve (0.3) (0.3)
Translation reserve 59.5 71.4
Retained earnings 351.6 225.6
TOTAL EQUITY 416.3 433.8
---------------------------------------- ----- -------- --------
Consolidated cash flow statement
For the year ended 31 December 2019
2019 2018
Note GBP'm GBP'm
---------------------------------------------- ----- ------- --------
Cash flow from operating activities
Profit before taxation 3 24.8 38.9
Adjustments 11 71.9 53.6
Changes in working capital(1) :
Inventories 13.7 (4.5)
Trade and other receivables 7.7 (2.8)
Trade and other payables 0.7 3.3
Provisions utilised (6.5) (2.5)
Pension contributions (1.0) (1.1)
Income tax paid (14.2) (12.3)
Net cash generated from operations 97.1 72.6
----------------------------------------------------- ------- --------
Cash flow from investing activities
Purchases of property, plant and equipment (10.7) (15.7)
Purchases of intangible assets 7 (0.8) (1.6)
Proceeds on disposal of property, plant
and equipment 0.8 5.3
Acquisitions of subsidiary undertakings,
net of cash acquired 10 (0.9) (106.4)
Interest received - 0.1
Net cash used in investing activities (11.6) (118.3)
----------------------------------------------------- ------- --------
Cash flow from financing activities
Interest paid (15.0) (9.1)
Dividends paid (23.6) (22.4)
Net proceeds on issue of shares - 50.4
Purchase of own shares for Employee Benefit
Trust (2.0) (3.2)
Refinancing costs paid (0.3) (2.0)
Proceeds from drawdown of revolving credit
facility 33.5 272.7
Repayments of revolving credit facility (73.4) (229.6)
Principal element of lease payments (5.6) -
Net cash (used in)/generated from financing
activities (86.4) 56.8
---------------------------------------------- ----- ------- --------
Net (decrease)/increase in cash and cash
equivalents (0.9) 11.1
Exchange losses on cash and cash equivalents (2.0) (1.8)
Cash and cash equivalents at the beginning
of the year 51.9 42.6
Cash and cash equivalents at the end of
the year 49.0 51.9
---------------------------------------------- ----- ------- --------
1 Excluding the effects of acquisition and exchange differences on consolidation.
Notes to the financial statements
1. General information
Tyman plc is a leading international supplier of engineered
fenestration and access solutions to the construction industry. The
Group designs and manufactures products that enhance the comfort,
sustainability, security, safety and aesthetics of residential
homes and commercial buildings. Tyman serves its markets through
three regional divisions. Headquartered in London, the Group
employs approximately 3,900 people with facilities in 18 countries
worldwide.
Tyman plc is a public limited company listed on the London Stock
Exchange, incorporated and domiciled in England and Wales. The
address of the Company's registered office is 29 Queen Anne's Gate,
London SW1H 9BU.
2. Accounting policies and basis of preparation
The consolidated financial statements have been prepared in
accordance with IFRS as adopted by the European Union,
interpretations issued by the International Financial Reporting
Interpretations Committee of the IASB, as adopted by the European
Union and the Companies Act 2006 applicable to companies reporting
under IFRS.
The consolidated financial statements have been prepared on a
historical cost basis, except for items that are required by IFRS
to be measured at fair value, principally certain financial
instruments.
Accounting policies have been consistently applied to all the
years presented, except as described below.
The financial information included in the full year results
announcement does not constitute statutory accounts of the Company
for the years ended 31 December 2019 and 2018. Statutory accounts
for the year ended 31 December 2018 have been reported on by the
Company's auditor and delivered to the Registrar of Companies.
Statutory accounts for the year ended 31 December 2019 have been
audited and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The report of the
auditors for both years was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
These results were approved by the Board of Directors on 5 March
2020.
2.1 Going concern
The Directors are confident, on the basis of current financial
projections, the banking facilities available, and after
considering sensitivities, that the Company and the Group have
sufficient resources for its operational needs that will enable the
Group to remain in compliance with its financial covenants in its
bank facilities for at least the next 12 months. Accordingly, the
Directors continue to adopt the going concern basis.
2.2 Changes in accounting policies and disclosures
2.2.1 New, revised and amended EU-endorsed accounting
standards
Certain new or amended standards became applicable for the
current reporting year and the Group changed certain accounting
policies and made adjustments to opening balances as at 1 January
2019 as a result of adopting IFRS 16 'Leases'.
The adoption of IFRS 16 had a material impact on the Group's
financial statements, and the impact of the adoption of this
standard is disclosed in note 13.
The other standards that became applicable in the year did not
materially impact the Group's accounting policies and did not
require retrospective adjustments.
2.2.2 New, revised and amended accounting standards currently
EU-endorsed but not yet effective
A number of new, revised and amended accounting standards and
interpretations are currently endorsed but are effective for annual
periods beginning on or after 1 January 2020, and have not been
applied in preparing these consolidated financial statements.
None of the standards which have been issued by the IASB but are
not yet effective are expected to have a material impact on the
Group.
2.2.3 Other changes to accounting policies
In 2019, depreciation on assets used in the manufacturing
process was reclassified from administrative expenses to cost of
sales to better reflect the nature of this charge. For
comparability, the 2018 comparatives were amended to reflect the
new classification. The effect of this was to increase cost of
sales by GBP10.2 million and reduce administrative expenses by
GBP10.2 million. There is no net effect on profit and no impact on
the statement of financial position.
In addition, following changes to the information reported to
the Chief Operating Decision Maker in 2019, an amendment has been
made to the presentation of segment information. The 2018
comparatives have been restated the reflect the new basis. See note
3.1 for further information.
3. Segment reporting
3.1 Change to segment reporting
In 2019, an amendment was made to the method of eliminating
inter-segment revenue as well as the allocation of share-based
payment charges in the internal reporting provided to the Chief
Operating Decision maker. Consequently, for comparability the 2018
comparatives have been restated to reflect the new method of
presentation. The changes were not material and there is no effect
on the total Group. Inter-segment revenue has been disclosed
separately to provide additional information.
3.2 Segment information
The reporting segments reflect the manner in which performance
is evaluated and resources are allocated. The Group operates
through three clearly defined divisions: AmesburyTruth, ERA and
SchlegelGiesse.
AmesburyTruth comprises all the Group's operations within the
US, Canada and Mexico. ERA comprises the Group's UK and Ireland
hardware business, together with Access 360, Ventrolla, and Tyman
Sourcing Asia. SchlegelGiesse comprises the Group's remaining
businesses outside the US, Canada, Mexico and the UK (although
includes the two UK seal manufacturing plants).
Centrally incurred functional costs that are directly
attributable to a Division are allocated or recharged to the
Division. All other centrally incurred costs and eliminations are
disclosed as a separate line item in the segment analysis.
Each reporting segment broadly represents the Group's
geographical focus, being the North American, UK and international
operations respectively. In the opinion of the Board, there is no
material difference between the Group's operating segments and
segments based on geographical splits. Accordingly, the Board does
not consider geographically defined segments to be reportable. For
completeness, the Group discloses certain financial data for
business carried on in the UK that is not accounted for in ERA in
notes 3.2.1 and 3.2.4.
The following tables present Group revenue and profit
information for the Group's reporting segments, which have been
generated using the Group accounting policies, with no differences
of measurement applied, other than those noted above.
3.2.1 Revenue
2019 2018
(Restated)
GBP'm GBP'm
---------------- ------------------------------------ ------------------------------------
Segment Inter-segment External Segment Inter-segment External
revenue revenue revenue revenue revenue revenue
---------------- --------- -------------- --------- --------- -------------- ---------
AmesburyTruth 388.3 (2.3) 386.0 380.5 (2.6) 377.9
ERA 107.5 (0.3) 107.2 97.6 (0.2) 97.4
SchlegelGiesse 122.8 (2.3) 120.5 118.7 (2.5) 116.2
Total revenue 618.6 (4.9) 613.7 596.8 (5.3) 591.5
---------------- --------- -------------- --------- --------- -------------- ---------
Included within the SchlegelGiesse segment is revenue
attributable to the UK of GBP19.4 million (2018: GBP18.6 million).
There are no single customers which account for greater than 10% of
total revenue.
3.2.2 Profit before taxation
2019 2018
(Restated)
Note GBP'm GBP'm
------------------------------------- ----- -------- ------------
AmesburyTruth 64.5 62.5
ERA 13.8 12.7
SchlegelGiesse 14.8 15.2
------------------------------------- ----- -------- ------------
Operating segment result 93.1 90.4
Centrally incurred costs (7.7) (6.8)
------------------------------------- ----- -------- ------------
Adjusted operating profit 85.4 83.6
Exceptional items 4 (18.9) (7.3)
Amortisation of acquired intangible
assets 7 (23.5) (25.8)
Impairment of acquired intangibles 7 (2.5) -
------------------------------------- ----- -------- ------------
Operating profit 40.5 50.5
Net finance costs (15.7) (11.6)
Profit before taxation 24.8 38.9
------------------------------------- ----- -------- ------------
3.2.3 Operating profit disclosures
Cost of sales Depreciation Amortisation
---------------------- ------------------ ------------------
2019 2018 2019 2018 2019 2018
(Restated)
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---------------- ---- -------- ------------ -------- -------- -------- --------
AmesburyTruth (269.6) (264.3) (13.3) (8.7) (17.1) (21.2)
ERA (69.1) (62.3) (2.6) (1.2) (4.1) (3.0)
SchlegelGiesse (69.4) (66.8) (4.7) (2.6) (3.8) (3.0)
Total (408.1) (393.4) (20.6) (12.5) (25.0) (27.2)
---------------------- -------- ------------ -------- -------- -------- --------
3.2.4 Segment assets and liabilities
Segment assets Segment liabilities(1) Non-current assets(2)
----------------- ------------------------- ------------------------
2019 2018 2019 2018 2019 2018
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---------------- -------- ------- ------------ ----------- ----------- -----------
AmesburyTruth 530.5 562.1 (169.5) (180.1) 422.6 428.1
ERA 142.2 132.8 (40.1) (28.7) 92.1 82.1
SchlegelGiesse 153.8 156.3 (70.2) (64.0) 85.9 84.8
Unallocated 6.2 6.0 (136.6) (150.6) 1.0 -
Total 832.7 857.2 (416.4) (423.4) 601.6 595.0
----------------- -------- ------- ------------ ----------- ----------- -----------
1 Included within unallocated segment liabilities are centrally
held borrowings of GBP133.0 million (2018: GBP145.4million),
provisions of GBP0.4 million (2018: GBP0.4 million) and other
liabilities of GBP3.2 million (2018: GBP4.8 million). Where
borrowings can be directly attributed to segments, these have been
allocated.
2 Non-current assets exclude amounts relating to deferred tax assets.
Non-current assets of the SchlegelGiesse segment include GBP14.2
million (2018: GBP13.3 million) attributable to the UK.
3.2.5 Capital expenditure
Property, plant and
equipment Intangible assets
---------------------- --------------------
2019 2018 2019 2018
GBP'm GBP'm GBP'm GBP'm
---------------- ---------- ---------- --------- ---------
AmesburyTruth 5.8 11.1 0.2 0.9
ERA 0.8 1.3 - 0.3
SchlegelGiesse 4.1 3.3 0.5 0.5
Total 10.7 15.7 0.7 1.7
----------------- ---------- ---------- --------- ---------
3.2.6 Other disclosures
Intangible Retirement benefit
Goodwill assets obligations
---------------- ---------------- ---------------------
2019 2018 2019 2018 2019 2018
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
---------------- ------- ------- ------- ------- ---------- ---------
AmesburyTruth 275.7 286.0 68.8 91.7 (7.7) (7.0)
ERA 60.2 59.7 11.3 14.5 - -
SchlegelGiesse 35.4 36.4 23.9 28.6 (3.5) (3.8)
Total 371.3 382.1 104.0 134.8 (11.2) (10.8)
----------------- ------- ------- ------- ------- ---------- ---------
4. Exceptional items
2019 2018
GBP'm GBP'm
----------------------------------------------- ------- -------
Footprint restructuring - costs (7.1) (4.8)
Footprint restructuring - credits 0.6 0.9
------------------------------------------------ ------- -------
Footprint restructuring - net (6.5) (3.9)
M&A and integration - costs (5.3) (1.7)
Write-off of inventory fair value adjustments - (2.5)
Loss on disposal of business (1.7) (0.1)
Impairment charges (5.4) -
Other - 0.9
(18.9) (7.3)
----------------------------------------------- ------- -------
5. Taxation
5.1 Taxation - income statement and other comprehensive
income
5.1.1 Tax on profit on ordinary activities
2019 2018
GBP'm GBP'm
--------------------------------------------------- ------- -------
Current taxation
Current tax on profit for the year (15.0) (15.6)
Prior year adjustments 1.6 0.2
Total current taxation (13.4) (15.4)
---------------------------------------------------- ------- -------
Deferred taxation
Origination and reversal of temporary differences 6.8 4.0
Rate change adjustment (0.1) 1.1
Prior year adjustments (0.4) (2.3)
Total deferred taxation 6.3 2.8
---------------------------------------------------- ------- -------
Income tax charge in the income statement (7.1) (12.6)
---------------------------------------------------- ------- -------
Total (charge)/credit relating to components
of other comprehensive income
Current tax (charge)/credit on translation - (0.4)
Current tax credit on share-based payments 0.2 -
Deferred tax charge on actuarial gains and
losses 0.3 (0.3)
Deferred tax (charge)/credit on share-based
payments (0.1) (0.1)
Deferred tax (charge)/credit on translation 0.3 (0.3)
Income tax (charge)/credit in the statement
of other comprehensive income 0.7 (1.1)
---------------------------------------------------- ------- -------
Total current taxation (13.2) (15.8)
Total deferred taxation 6.8 2.1
Total taxation (6.4) (13.7)
---------------------------------------------------- ------- -------
The Group's UK profits for this financial year are taxed at the
statutory rate of 19.0% (2018: 19.0%). A reduction to the UK
corporation tax rate to 17.0% was introduced in the Finance Act
2016 with effect from 1 April 2020. The deferred tax balances have
been measured using the applicable enacted rates.
Under the Tax Cuts and Jobs Act 2017 the US Federal tax rate
reduced from 35.0% to 21.0% with effect from 1 January 2018.
Accordingly, the Group's US profits are taxed at 21.0% (2018:
21.0%).
Taxation for other jurisdictions is calculated at rates
prevailing in those respective jurisdictions.
5.1.2 Reconciliation of the total tax charge
The tax assessed for the year differs from the standard rate of
tax in the UK of 19.0% (2018: 19.0%). The differences are explained
below:
2019 2018
GBP'm GBP'm
--------------------------------------------------- ------- ---------
Profit before taxation 24.8 38.9
---------------------------------------------------- ------- ---------
Rate of corporation tax in the UK of 19.0% (2018:
19.0%) (4.7) (7.4)
Effects of:
Expenses not deductible for tax purposes (1.6) (1.3)
Overseas tax rate differences (1.9) (3.0)
Rate change adjustment (0.1) 1.1
Prior year adjustments 1.2 (2.0)
Income tax charge in the income statement (7.1) (12.6)
---------------------------------------------------- ------- -------
5.1.3 Factors that may affect future tax charges
On 25 April 2019, the European Commission published its final
decision regarding its investigation into the UK CFC rules,
concluding that the exemption applied to income derived from UK
activities constituted a breach of EU State Aid rules. On 12 June
2019, the UK government applied to the EU General Court to annul
this decision. Like many other multinational Groups that have acted
in accordance with UK legislation, the Group may be affected by the
final outcome of this case. The Group estimates the potential range
of exposure is between GBPnil and GBP4 million. The Group does not
consider that a provision is required at this stage based on the
level of uncertainty that exists over the potential liability. This
is considered to be a contingent liability at 31 December 2019.
6. Earnings per share
6.1 Earnings per share
2019 2018
GBP'm GBP'm
---------------------------- ------- -------
Profit for the year 17.7 26.3
Basic earnings per share 9.08p 13.76p
Diluted earnings per share 9.05p 13.66p
----------------------------- ------- -------
Basic earnings per share amounts are calculated by dividing net
profit for the year attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the
year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the
year plus the weighted average number of ordinary shares that would
be issued on the conversion of all the diluted potential ordinary
shares into ordinary shares.
6.1.1 Weighted average number of shares
2019 2018
GBP'm GBP'm
---------------------------------------------- ------- -------
Weighted average number of shares (including
treasury shares) 196.8 193.2
Treasury and Employee Benefit Trust shares (1.9) (1.8)
----------------------------------------------- ------- -------
Weighted average number of shares - basic 194.9 191.4
Effect of dilutive potential ordinary shares
- LTIP awards and options 0.8 1.5
Weighted average number of shares - diluted 195.7 192.9
----------------------------------------------- ------- -------
6.1.2 Non-GAAP Alternative Performance Measure: Adjusted
earnings per share
The Group presents an Adjusted earnings per share measure which
excludes the impact of exceptional items, certain non-cash finance
costs, amortisation of acquired intangible assets and certain
non-recurring items. Adjusted earnings per share has been
calculated using the adjusted profit before taxation and using the
same weighted average number of shares in issue as the earnings per
share calculation.
Adjusted profit after taxation is derived as follows:
2019 2018
GBP'm GBP'm
------------------------------------------------ ------- -------
Profit before taxation 24.8 38.9
Exceptional items 18.9 7.3
Gain/(Loss) on revaluation of fair value hedge 0.8 (0.3)
Amortisation of borrowing costs 0.5 1.0
Amortisation of acquired intangible assets 23.5 25.8
Impairment of acquired intangible assets 2.5 -
------------------------------------------------- ------- -------
Adjusted profit before taxation 71.0 72.7
Income tax charge (7.1) (12.6)
Add back: Adjusted tax effect(1) (10.4) (7.1)
Adjusted profit after taxation 53.5 53.0
------------------------------------------------- ------- -------
1 Tax effect of exceptional items, amortisation of borrowings
costs, amortisation of acquired intangible assets, gain or loss on
revaluation of fair value hedge and unwinding of discount on
provisions.
Adjusted earnings per share is summarised as follows:
2019 2018
------------------------------------- ------- -------
Basic Adjusted earnings per share 27.46p 27.68p
Diluted Adjusted earnings per share 27.35p 27.47p
-------------------------------------- ------- -------
7. Goodwill and intangible assets
7.1 Carrying amount of goodwill
Note GBP'm
------------------------------ ----- -------
Net carrying value
At 1 January 2018 323.8
Acquisitions of subsidiaries 40.8
Exchange difference 17.5
------------------------------- ----- -------
At 31 December 2018 382.1
Acquisitions of subsidiaries 10 0.9
Exchange difference (11.7)
At 31 December 2019 371.3
------------------------------- ----- -------
Goodwill is monitored principally on an operating segment basis
and the net book value of goodwill is allocated by CGU as
follows:
2019 2018
GBP'm GBP'm
---------------- ------- -------
AmesburyTruth 275.7 286.0
ERA 60.20 59.7
SchlegelGiesse 35.4 36.4
371.3 382.1
---------------- ------- -------
7.2 Carrying amount of intangible assets
Computer Acquired Customer
software brands relationships Total
Note GBP'm GBP'm GBP'm GBP'm
------------------------------ ----- ---------- --------- --------------- --------
Cost
At 1 January 2018 13.0 73.5 216.7 303.2
Additions 1.7 - - 1.7
Disposals (0.3) (0.9) - (1.2)
Acquisitions of subsidiaries - 12.3 38.1 50.4
Transfers to property,
plant and equipment (0.1) - - (0.1)
Exchange difference 0.6 4.0 12.1 16.7
------------------------------ ----- ---------- --------- --------------- --------
At 31 December 2018 14.9 88.9 266.9 370.7
Additions 0.7 - - 0.7
Disposals (1.8) - - (1.8)
Acquisitions of subsidiaries 10 - 0.6 - 0.6
Transfers to property,
plant and equipment - 0.3 - 0.3
Exchange difference (0.6) (3.3) (8.8) (12.7)
At 31 December 2019 13.2 86.5 258.1 357.8
------------------------------ ----- ---------- --------- --------------- --------
Accumulated amortisation
At 1 January 2018 (4.1) (41.6) (154.1) (199.8)
Amortisation charge for
the year (1.4) (5.3) (20.5) (27.2)
Disposals 0.3 0.9 - 1.2
Impairment (0.1) - - (0.1)
Exchange difference (0.2) (2.1) (7.7) (10.0)
------------------------------ ----- ---------- --------- --------------- --------
At 31 December 2018 (5.5) (48.1) (182.3) (235.9)
Amortisation charge for
the year (1.5) (6.4) (17.1) (25.0)
Disposals 0.5 - - 0.5
Impairment - - (2.5) (2.5)
Exchange difference 0.6 2.0 6.5 9.1
At 31 December 2019 (5.9) (52.5) (195.4) (253.8)
------------------------------ ----- ---------- --------- --------------- --------
Net carrying value
At 1 January 2018 8.9 31.9 62.6 103.4
------------------------------ ----- ---------- --------- --------------- --------
At 31 December 2018 9.4 40.8 84.6 134.8
------------------------------ ----- ---------- --------- --------------- --------
At 31 December 2019 7.3 34.0 62.7 104.0
------------------------------ ----- ---------- --------- --------------- --------
The amortisation charge for the year has been included in
administrative expenses in the income statement and comprises
GBP23.5 million (2018: GBP25.8 million) relating to amortisation of
acquired intangible assets and GBP1.5 million (2018: GBP1.4
million) relating to amortisation of other intangible assets.
An impairment charge of GBP2.5 million was recognised on
customer relationship intangibles in 2019 as a result of the
closure of the Fremont, Nebraska facility. An impairment charge of
GBP0.1 million was recognised on computer software in 2018.
8. Leases
8.1 The Group's leasing arrangements
The Group leases manufacturing and warehousing facilities,
offices, and various items of plant, machinery, and vehicles used
in its operations.
Leases of manufacturing and warehousing facilities and offices
generally have lease terms between 5 and 25 years, while plant,
machinery, and vehicles generally have lease terms between 6 months
and 5 years. The Group's obligations under its leases are secured
by the lessor's title to the leased assets. Generally, the Group is
restricted from assigning and subleasing the leased assets. There
are several lease contracts that include extension and termination
options and variable lease payments, which are further discussed
below.
8.2 Carrying value of right of use assets
Set out below are the carrying amounts of right-of-use assets
recognised and the movements during the year
Land and Plant and
buildings machinery Total
Note GBP'm GBP'm GBP'm
----------------------------- ----- ----------- ----------- -------
At 31 December 2018 - - -
Change in accounting policy 13 62.8 2.2 65.0
----------------------------- ----- ----------- ----------- -------
At 1 January 2019 (revised) 62.8 2.2 65.0
Additions 1.9 1.2 3.1
Depreciation charge (6.5) (1.0) (7.5)
Exchange difference (1.2) (0.0) (1.2)
----------------------------- ----- ----------- ----------- -------
At 31 December 2019 57.0 2.4 59.4
----------------------------- ----- ----------- ----------- -------
8.3 Carrying value of lease liabilities
Set out below are the carrying amounts of lease liabilities
(included under interest-bearing loans and borrowings) and the
movements during the year:
2019
GBP'm
----------------------------- --- -------
At 31 December 2018 -
Change in accounting policy 13 (63.7)
----------------------------- --- -------
At 1 January 2019 (revised) (63.7)
New leases (3.0)
Lease modifications (0.1)
Interest charge (3.0)
Lease payments 8.6
Foreign exchange 1.2
At 31 December 2019 (60.0)
----------------------------- --- -------
1 January
2019 2019
GBP'm GBP'm
----------------------------- --- ------- ----------
Current liabilities (6.0) (5.5)
Non-current liabilities (54.0) (58.2)
(60.0) (63.7)
----------------------------- --- ------- ----------
8.4 Amounts recognised in profit of loss
The following are the amounts recognised in profit or loss
2019
GBP'm
------------------------------------------------ -------
Depreciation of RoU assets (7.5)
Interest expense (included in finance cost) (3.0)
Expense relating to short-term and low-value
assets not included in lease liabilities
(included in cost of sales and administration
expenses) (1.3)
Expense relating to variable lease payments
not included in lease liabilities (included
in cost of sales and administration expenses) (0.5)
(12.3)
------------------------------------------------ -------
8.5 Extension and termination options
The Group has several lease contracts that include extension and
termination options. These options are negotiated by management to
provide flexibility in managing the leased-asset portfolio and
align with the Group's business needs.
As at 31 December 2019, potential future cash outflows of
GBP63.0 (undiscounted) have not been included in the lease
liability because it is not reasonably certain that the leases will
be extended (or not terminated).
9. Interest-bearing loans and borrowings
9.1 Carrying amounts of interest-bearing loans and
borrowings
2019 2018
GBP'm GBP'm
------------------------------------ -------- --------
Unsecured borrowings at amortised cost:
Bank borrowings (137.7) (183.8)
Senior notes (75.8) (78.5)
Finance leases - (0.2)
Capitalised borrowing costs 1.7 1.8
------------------------------------ -------- --------
Borrowings (211.8) (260.7)
Lease liabilities 8 (60.0) -
Total interest-bearing liabilities (271.8) (260.7)
------------------------------------ -------- --------
Analysed as:
Current liabilities (6.3) (1.5)
Non-current liabilities (265.5) (259.2)
(271.8) (260.7)
------------------------------------ -------- --------
There were no defaults in interest payments in the year under
the terms of the existing loan agreements.
Non-cash movements in the carrying amount of interest-bearing
loans and borrowings relate to the amortisation of borrowing
costs.
The carrying amounts of interest-bearing loans and borrowings
are denominated in the following currencies:
2019 2018
GBP'm GBP'm
------------ -------- --------
Sterling 1.7 (4.2)
US Dollars (146.7) (188.1)
Euros (66.8) (68.4)
(211.8) (260.7)
------------ -------- --------
9.1.2 Bank borrowings
Multi-currency revolving credit facility
On 19 February 2018, the Group entered into the 2018 Facility.
The 2018 Facility gives the Group access to up to GBP310.0 million
of borrowings and comprises a GBP240.0 million committed revolving
credit facility and a GBP70.0 million uncommitted accordion
facility, expiring in February 2024. The banking facility is
unsecured and is guaranteed by Tyman plc and its principal
subsidiary undertakings.
As at 31 December 2019, the Group has undrawn amounts committed
under the multi-currency revolving credit facility of GBP102.8
million (2018: GBP58.5 million). These amounts are floating rate
commitments which expire beyond 12 months.
Other borrowings
The Group acquired bank borrowings as part of the acquisitions
of Giesse, Zoo Hardware, and Reguitti. At 31 December 2019, the
remaining facilities have a carrying value of GBP0.5 million (2018:
GBP2.3 million) an undrawn value of GBPNil (2018: GBPNil). These
facilities have a maturity ranging between 28 May 2020 and 10
September 2020 and are unsecured. In 2018, GBP0.8 million was
secured against trade receivables in a factoring arrangement, which
was terminated in 2019.
9.1.3 Private placement notes
On 19 November 2014, the Group issued private debt placement
notes with US financial institutions totalling US$100.0
million.
The debt placement is unsecured and comprises US$55.0 million
debt with a seven-year maturity at a coupon of 4.97% and US$45.0
million with a 10-year maturity at a coupon of 5.37%
9.2 Net debt
9.2.1 Net debt summary
2019 2018
GBP'm GBP'm
------------------- -------- --------
Borrowings (211.8) (260.7)
Lease liabilities (60.0) -
Cash 49.0 51.9
-------------------- -------- --------
At 31 December (222.8) (208.8)
-------------------- -------- --------
9.2.2 Net debt reconciliation
Cash Borrowings Lease liabilities Total
------------------------------ ------ ----------- ------------------ --------
At 1 January 2018 42.6 (205.4) - (162.8)
Cash flows 9.6 (41.2) - (31.6)
Acquisitions 1.5 (2.5) - (1.0)
Foreign exchange adjustments (1.8) (10.6) - (12.4)
Amortisation of borrowing
costs - (1.0) - (1.0)
------------------------------- ------ ----------- ------------------ --------
At 31 December 2018 51.9 (260.7) - (208.8)
Change in accounting
policy - - (63.7) (63.7)
------------------------------- ------ ----------- ------------------ --------
At 1 January 2019 51.9 (260.7) (63.7) (272.5)
Cash flows - 40.4 8.6 49.0
Acquisitions (0.9) - - (0.9)
New leases - - (3.0) (3.0)
Lease modifications - - (0.1) (0.1)
Lease interest accretion - - (3.0) (3.0)
Foreign exchange adjustments (2.0) 9.0 1.2 8.2
Amortisation of borrowing
costs - (0.5) - (0.5)
------------------------------- ------ ----------- ------------------ --------
At 31 December 2019 49.0 (211.8) (60.0) (222.8)
------------------------------- ------ ----------- ------------------ --------
10. Business combinations
10.1 Summary of business combinations
The following table summarises the consideration paid and the
fair value of assets acquired and liabilities assumed for all
acquisitions in the year at the respective acquisition dates. The
fair values will be finalised within 12 months of each acquisition
date.
Amendments
to 2018 acquisition
Y-cam (provisional) fair values Total
GBP'm GBP'm
------------------------------------ ---- -------------------- --------------------- ------
Intangible assets 7.2 0.6 - 0.6
Inventories 0.1 (0.1) -
Trade and other receivables (0.1) - (0.1)
Cash and cash equivalents 0.1 - 0.1
Trade and other payables (0.1) - (0.1)
Current tax liabilities - (0.3) (0.3)
Deferred tax liabilities (0.1) - (0.1)
------------------------------------ ---- -------------------- --------------------- ------
Total identifiable net assets 0.5 (0.4) 0.1
Goodwill arising on acquisition 7.1 0.5 0.4 0.9
Total consideration 1.0 - 1.0
------------------------------------ ---- -------------------- --------------------- ------
Satisfied by:
Cash 1.0 - 1.0
Deferred consideration - - -
Total consideration 1.0 - 1.0
------------------------------------ ---- -------------------- --------------------- ------
Net cash outflow arising on acquisition:
Cash consideration 1.0 - 1.0
Net cash and cash equivalents acquired (0.1) - (0.1)
Net cash outflow 0.9 - 0.9
------------------------------------ ---- -------------------- --------------------- ------
1 Subsequent to publishing the interim financial statements, the
Group has made amendments to the fair value of inventory acquired,
deferred tax liabilities, and consideration as part of the
progression of the acquisition accounting process.
10.2 Description of business combinations
Acquisition of Y-cam
On 18 February 2019, ERA completed the acquisition of Y-cam
Solutions Limited, a UK-based smart home security pioneer for
initial cash consideration of GBP1.0 million. The agreement
includes provision for additional consideration of up to GBP10
million, subject to reaching certain performance targets, to be
paid in instalments over a three-year period. Based on the current
projections, no deferred consideration will be payable.
Intangible assets acquired relate to technology assets and
residual goodwill is attributable to the expected benefits of using
the acquired technology platform in conjunction with ERA smartware
products and the acquired workforce. The estimated value of
intangibles, including goodwill, deductible for tax purposes is
nil.
Acquisition related costs of GBP0.2 million have been included
in exceptional costs in the Group's consolidated income statement
(note 4).
The fair value of trade and other receivables at the acquisition
date, revenue and profit in the consolidated income statement since
18 February 2019 are not material. Had Y-cam been acquired on 1
January 2019, the Groups' revenue and profit would not have been
materially different.
Changes to 2018 acquisition fair values
A number of changes have been made to the fair values of assets
and liabilities in relation to Ashland, Zoo, and Reguitti which
were acquired in 2018 as part of the finalisation of the
acquisition accounting. These adjustments are not material and have
therefore been recognised as adjustments to goodwill in the current
year without restating prior years.
11. Adjustments to cash flows from operating activities
The following non-cash and financing adjustments have been made
to profit before taxation to arrive at operating cash flow:
2019 2018
Note GBP'm GBP'm
----------------------------------------------- ----- ------- -------
Net finance costs 15.7 11.6
Depreciation of PPE 13.1 12.5
Depreciation of right of use assets 7.5 -
Amortisation of intangible assets 7 25.0 27.2
Impairment of intangible assets 7 2.3 0.1
Impairment of property, plant and equipment 4.3 -
(Profit)/loss on disposal of property, plant
and equipment 1.6 -
Write-off of inventory fair value adjustments - 2.5
Pension service costs and expected administration
costs 0.3 0.6
Non-cash provision movements 1.3 (1.9)
Share-based payments 0.8 1.0
71.9 53.6
----------------------------------------------- ----- ------- -------
12. Events after the balance sheet date
There were no events after the balance sheet date.
13. Changes in accounting policies
This note explains the impact of the adoption of IFRS 16
'Leases' on the Group's financial statements.
The Group has adopted IFRS 16 from 1 January 2019, but has not
restated comparatives for the 2018 reporting year, as permitted
under the specific transitional provisions in the standard. The
reclassifications and adjustments arising from the new standard are
recognised in the opening balance sheet as at 1 January 2019.
13.1 Impact on the balance sheet
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
Increase/
decrease GBPm
------------------------------- ----------- --------
Property, plant and equipment Decrease ( 0.8 )
Right of use assets Increase 65.0
Deferred tax liability Increase (0.5)
Prepayments Decrease (0.5)
Other payables Decrease 2.9
Lease liabilities Increase (63.7)
------------------------------- ----------- --------
The net impact on retained earnings on 1 January 2019 was an
increase of GBP2.4 million.
13.1.1 Lease liabilities
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019.
The lease liabilities at 31 December 2019 and 1 January 2019
were as follows:
1 January
2019 2019
GBP'm GBP'm
------------------------- ------- -----------
Current liabilities (6.0) (5.5)
Non-current liabilities (54.0) (58.2)
(60.0) (63.7)
------------------------- ------- -----------
Lease liabilities recorded at 1 January 2019 can be reconciled
to operating lease disclosures as at 31 December 2018 as
follows:
GBPm
------------------------------------------------------------- -------
Operating lease commitments disclosed as at 31 December
2018 91.5
(Less): short-term leases recognised on a straight-line
basis as expense (0.7)
(Less): low-value leases recognised on a straight-line
basis as expense (0.4)
------------------------------------------------------------- -------
Gross future lease cashflows 90.4
Effect of discounting (26.5)
Add: finance lease liabilities recognised as at 31 December
2018 (0.2)
Lease liability recognised as at 1 January 2019 63.7
------------------------------------------------------------- -------
13.1.2 Right of use assets
Right of use assets were measured at the amount equal to the
lease liability, adjusted by the amount of prepaid or accrued lease
payments relating to leases and dilapidations assets recognised in
the balance sheet as at 31 December 2018. There were no onerous
lease contracts that would have required an adjustment to the right
of use assets at the date of initial application.
The recognised right-of-use assets relate to the following types
of assets:
1 January
2019 2019
GBP'm GBP'm
------------------------------- ------- -----------
Properties 57.0 62.8
Plant, equipment and vehicles 2.4 2.2
Total 59.4 65.0
------------------------------- ------- -----------
13.2 Impact on the income statement and earnings per share
For year ended 31 December 2019, Adjusted Operating Profit was
GBP1.6 million higher as a result of applying IFRS 16 due to a
portion of the lease expense now being recorded as interest
expense. Profit before tax was GBP1.4 million lower due to interest
expenses being higher at the beginning of the lease term. This also
reduced Earnings Per Share by 0.73p.
The impact on Adjusted Operating Profit by operating segment for
the year was:
GBPm
---------------- -----
AmesburyTruth 1.3
ERA 0.1
SchlegelGiesse 0.2
Total 1.6
---------------- -----
13.3 Impact on the cash flow statement
Payments in respect of leases which were previously recognised
within cash flows from operating activities are now recorded within
cash flow from financing activities, separated between payment of
interest and payment of principal elements. This has increased net
cash generated from operations and increased net cash used in
financing activities by GBP8.6 million.
Alternative performance measures
The Group uses a number of alternative performance measures.
APMs provide additional useful information to shareholders on the
underlying performance of the business. These APMs are consistent
with how business performance is measured internally by the Group,
align with the Group's strategy, and remuneration policies. These
measures are not recognised under IFRS and may not be comparable
with similar measures used by other companies. APMs are not
intended to be superior to or a substitute for GAAP measures.
The following summarises the key APMs used, why they are used by
the Group, and how they are calculated. Where appropriate, a
reconciliation to the nearest GAAP number is presented. Details of
other APMs are included in the Group's Annual Report and Accounts.
Measures formerly referred to as 'Underlying' are now referred to
as 'Adjusted'.
Adjusted operating profit and adjusted operating margin
Definition
Operating profit before amortisation of acquired intangible
assets, impairment of acquired intangible assets, impairment of
goodwill, and exceptional items.
Adjusted operating margin is calculated as adjusted operating
profit divided by revenue, expressed as a percentage.
Purpose
This measure is used to evaluate the trading operating
performance of the Group.
Exceptional items are excluded from this measure as they are
largely one off and non-trading in nature and therefore create
volatility in reported earnings.
Amortisation of acquired intangible assets is excluded from this
measure as this is a significant non-cash fixed charge that is not
affected by the trading performance of the business.
Impairment of acquired intangible assets and goodwill is
excluded, as this is a significant non-cash charge.
Reconciliation/calculation
Adjusted operating profit is reconciled on the face of the
income statement on page 25.
Like-for-like or LFL revenue and adjusted operating profit
Definition
The comparison of revenue or operating profit, as appropriate,
excluding the impact of IFRS 16, any acquisitions made during the
current year and, for acquisitions made in the comparative year,
excluding from the current year result the impact of the equivalent
current year pre-acquisition period. For disposals, results are
excluded for the whole of the current and prior period. The prior
period comparative is retranslated at the current period average
exchange rate. The result of Y-cam is not adjusted as it is not
material.
Change in current year
This measure has been amended in the current period to exclude
the impact of applying IFRS 16. The Group considers this amendment
provides shareholders with a comparable basis from which to
understand the organic trading performance in the year.
Purpose
This measure is used by management to evaluate the Group's
organic growth in revenue and adjusted operating profit, excluding
the impact of M&A and currency movements.
Reconciliation/calculation
2019 2018
GBP'm GBP'm
---------------------------------- ------- -------
Reported revenue 613.7 591.5
Disposals - (5.6)
Acquisitions (24.3) -
Effect of exchange rates - 14.6
Like-for-like revenue 589.4 600.5
------------------------------------ ------- -------
Adjusted operating profit 85.4 83.6
Acquisitions (3.2) -
Disposals - (1.4)
Impact of IFRS 16 (1.6) -
Effect of exchange rates - 2.5
Like-for-like adjusted operating
profit 80.6 84.7
------------------------------------ ------- -------
Adjusted profit before and after tax
Definition
Profit before amortisation of acquired intangible assets,
deferred tax on amortisation of acquired intangible assets,
impairment of acquired intangible assets, impairment of goodwill,
exceptional items, gains and losses on the fair value of derivative
financial instruments, amortisation of borrowing costs and
associated tax effects.
Purpose
This measure is used to evaluate the profit generated by the
Group through trading activities. In addition to the items excluded
from operating profit above, the gains and losses on the fair value
of derivative financial instruments, amortisation of borrowing
costs, and the associated tax effect are excluded. These items are
excluded as they are of a non-trading nature.
Reconciliation/calculation
A reconciliation is included in note 6.1.2.
Adjusted earnings per share
Definition
Adjusted profit after tax divided by the basic weighted average
number of ordinary shares in issue during the year, excluding those
held as treasury shares.
Purpose
This measure is used to assess the trading operating performance
per share in issue. This is used as the basis of the Group's
long-term incentive plan targets and is the measure used in
determining the level of dividend to be paid under the Group's
dividend policy.
Reconciliation/calculation
A reconciliation of adjusted profit after tax and the number of
shares can be found in note 6.
Leverage
Definition
Adjusted net debt translated at the average exchange rate for
the year divided by Adjusted EBITDA, calculated using the
prevailing GAAP at February 2018 (excluding the impact of IFRS 15,
9, and 16). This calculation is the covenant calculation defined in
the Group's banking facility and private placement debt
documents.
Purpose
This measure is used to evaluate the ability of the Group to
generate sufficient cash flows to cover its contractual debt
servicing obligations and to provide users of the accounts with
details of whether the Group remains in compliance with its lending
covenants.
Reconciliation/calculation
2019 2018
GBP'm GBP'm
----------------------------------------------- ------ ------
Adjusted Net Debt (at average exchange rate) 170.1 202.2
Adjusted EBITDA (in accordance with covenants) 98.9 103
----------------------------------------------- ------ ------
Leverage 1.72x 1.96x
----------------------------------------------- ------ ------
Return on Capital Employed (ROCE)
Definition
LTM adjusted operating profit as a percentage of the LTM average
capital employed (expressed as a 13 point average).
Purpose
This measure is used to evaluate how efficiently the Group's
capital is being employed to improve profitability.
Reconciliation/calculation
2019 2018
GBP'm GBP'm
-------------------------- ------ ------
Adjusted operating profit 85.4 83.6
Average capital employed 709.9 621.8
-------------------------- ------ ------
ROCE 12.0% 13.4%
-------------------------- ------ ------
Return on acquisition investment (ROAI)
Definition
Adjusted operating profit attributable to the acquired business
divided by the gross cost of investment (original cost plus
acquisition and integration costs), plus the change in fair value
of controllable capital employed between the date of acquisition
and the date of measurement. The denominator is adjusted for
seasonality where appropriate.
For acquisitions made within the last 12 months, adjusted
operating profit is an annualised measure. For acquisitions made
more than 12 months ago, adjusted operating profit is measured over
the last 12 months. ROAI is measured for 2 years following
acquisition.
Purpose
This measure is used to evaluate the efficiency and returns
achieved by the Group from its investments in recent material
business acquisitions and allows users of the accounts to compare
the relative performance of each acquisition made by the Group.
ROAI is measured over a two year period following acquisition.
Reconciliation/calculation
Howe Green Ashland Zoo Profab Reguitti
GBPm $m GBPm GBPm EURm
-------------------------------- ----------- -------- ------ ------- ---------
Adjusted operating profit 1.2 17.0 3.6 0.4 1.5
Acquisition enterprise value 6.4 106.3 19.1 4.4 16.5
Change in controllable capital
employed 0.6 (2.8) (0.2) (0.6) 2.7
-------------------------------- ----------- -------- ------ ------- ---------
7.0 103.5 18.9 3.8 19.2
--------------------------------
ROAI 17.0% 16.4% 18.9% 10.5% 7.8%
-------------------------------- ----------- -------- ------ ------- ---------
Operating cash conversion and operational cash flow
Definition
Operational cash flow
Net cash generated from operations before income tax paid,
exceptional costs cash settled in the year and pension
contributions, and after proceeds on disposal of property, plant
and equipment, payments to acquire property, plant and equipment
and payments to acquire intangible assets.
Adjusted operational cash flow
Operational cash flow, less lease payments.
Operating cash conversion
Operational cash flow divided by adjusted operating profit.
Purpose
These measures are used to evaluate the cash flow generated by
the business operations in order to pay down debt, return cash to
shareholders and invest in acquisitions. Cash conversion provides
users of the accounts with a measure of the extent that the Group's
profitability converts into cash.
Reconciliation/calculation
A reconciliation is included in the financial review on page
18.
Definitions and glossary of terms
Access 360 The Access Solutions business of ERA, constituting
Bilco UK, Profab and Howe Green
APM Alternative Performance Measure
ASEAN Association of Southeast Asian Nations
Ashland or Ashland Ashland Hardware Holdings Inc, acquired by
Hardware AmesburyTruth on 15 March 2018
Bilco The Bilco Company acquired by the Group's AmesburyTruth
Division on 1 July 2016
bps Basis points
CGU Cash Generating Unit
EBITDA Earnings before Interest, Taxation, Depreciation
and Amortisation
EBT Employee Benefit Trust
EMEAI Europe, Middle East and Africa and India region
EPS Earnings per Share
FENSA A government-authorised scheme that monitors
building regulation compliance for replacement
windows and doors.
Giesse Giesse Group acquired by the Group's Schlegel
International Division on 7 March 2016.
Howe Green Howe Green Limited acquired by the Group on
3 March 2017
IFRS International Financial Reporting Standards
LIRA Leading Indicator of Remodelling Activity published
by the Joint Centre for Housing Studies of
Harvard University
LTM Last twelve months
M&A Mergers and acquisitions
NAHB The National Association of Home Builders
NPD New Product Development
OEM Original equipment manufacturer
PPE Property, plant and equipment
Profab Profab Access Solutions Limited acquired by
ERA on 31 July 2018
Reguitti Reguitti S.P.A acquired by SchlegelGiesse on
31 August 2018
RMI Renovation, maintenance and improvement
Tyman Any references to Tyman, the Group, or the
Company refer to Tyman plc and its subsidiaries.
Y-cam Y-cam Solutions Limited acquired by ERA on
18 February 2019
Zoo or Zoo Hardware Zoo Hardware Limited acquired by ERA on 10
May 2018
Exchange rates
The following foreign exchange rates have been used in the
financial information to translate amounts into Sterling:
Closing Rates: 2019 2018
-------------------- ------- -------
US Dollars 1.3186 1.2736
Euros 1.1757 1.1128
Australian Dollars 1.8801 1.8055
Canadian Dollars 1.7164 1.7360
Brazilian Real 5.3005 4.9410
-------------------- ------- -------
Average Rates: 2019 2018
-------------------- ------- -------
US Dollars 1.2770 1.3350
Euros 1.1406 1.1302
Australian Dollars 1.8365 1.7862
Canadian Dollars 1.6943 1.7293
Brazilian Real 5.0371 4.8643
-------------------- ------- -------
Roundings
Percentage numbers have been calculated using unrounded figures,
which may lead to small differences in some figures and percentages
quoted.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKQBBKBKBDNK
(END) Dow Jones Newswires
March 05, 2020 02:00 ET (07:00 GMT)
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