TIDMEXO
RNS Number : 4618I
Exova Group PLC
31 August 2016
2016 HALF YEAR RESULTS ANNOUNCEMENT
31 August 2016
Exova Group plc ("Exova"), a leading international provider of
technically demanding testing and advisory services, announces its
results for the period ended 30 June 2016.
Strong revenue growth drives solid first half
-- Revenue up 9.5% at constant currency; 13.0% at actual rates
o 1.7% organic(1) growth at constant currency(2) (8.3% excluding
Oil & Gas and Industrials)
o 7.8% growth from M&A activity
-- Strong performance in Product and Certification, Aerospace,
Health Sciences and the Middle East
-- Oil & Gas and Industrials continued to weaken and forward visibility remains poor
-- Sale of Food, Water and Pharmaceuticals business in the UK and Ireland completed
-- Two acquisitions completed, Admaterials in Singapore and
Jones Environmental Forensics in the UK, with encouraging
pipeline
-- Interim dividend of 1.05p per share, +5%
Growth from
Organic acquisitions
2016 2015 Reported growth net of disposals
Adjusted results(3) GBPm GBPm growth at constant at constant
currency currency
------------------------ ------- ------- ----------- -------------- ------------------
Revenue 160.9 142.4 13.0% 1.7% 7.8%
------------------------ ------- ------- ----------- -------------- ------------------
EBITA 23.4 21.4 9.3%
------------------------ ------- ------- ----------- -------------- ------------------
Profit before taxation 20.1 18.3 9.8%
------------------------ ------- ------- ----------- -------------- ------------------
EBITA margin 14.6% 15.0% (40)bps
------------------------ ------- ------- ----------- -------------- ------------------
Basic earnings
per share 5.8p 5.4p 7.4%
------------------------ ------- ------- ----------- -------------- ------------------
Interim dividend
per share 1.05p 1.0p 5%
------------------------ ------- ------- ----------- -------------- ------------------
2016 2015 Reported
Statutory results GBPm GBPm growth
------------------------ ------ ------ ---------
Operating profit 18.6 13.1 42%
------------------------ ------ ------ ---------
Profit before taxation 15.3 10.0 53%
------------------------ ------ ------ ---------
Basic earnings
per share 4.2p 2.8p 50%
------------------------ ------ ------ ---------
Interim dividend
per share 1.05p 1.0p 5%
------------------------ ------ ------ ---------
Notes:
1) Organic revenue growth at constant currency represents
revenue growth at constant currency for each year excluding the
growth attributable to acquisitions until the acquisition has been
owned for a 12 month period and excluding the revenue attributable
to disposals in the year of disposal and the preceding year. As
such, the revenue associated with our UK & Ireland Food, Water
& Pharmaceutical disposal are now reflected within inorganic
growth.
2) Constant currency growth figures are provided in order to
remove the impact of currency translation. We calculate growth at
constant rates by translating the current and prior period revenue
at the same exchange rates.
3) Adjusted results are operating profit from continuing
operations before separately disclosed items, interest and
taxation.
Ian El-Mokadem, Chief Executive Officer, commented:
"This is another satisfactory set of results in line with our
expectations, demonstrating clear progress towards our medium term
objectives. Overall growth was very strong, driven by acquisitions
and broad based organic growth in all areas of the portfolio, with
the exception of our Oil & Gas and Industrials cluster, which
we now expect to weaken further in the second half.
The portfolio has been strengthened by the recent acquisitions
and disposal, and with further cost actions taken to mitigate the
poor trading conditions in oil & gas, we are on track to
achieve market expectations."
Portfolio realigned
In keeping with our stated objectives to optimize the portfolio
to take advantage of structural growth in individual clusters, we
acquired Admaterials in Singapore, a specialist in construction
materials testing and certification. Additionally, on 1 July, we
acquired Jones Environmental Forensics in the UK, a business which
provides testing and technically demanding analysis for
contaminated water and soil. Furthermore, on the same day, we also
completed the disposal of ten laboratories in the UK and Ireland
engaged in Food, Water and Pharmaceutical testing.
Following the completion of these transactions we intend to
realign our clusters and organisational structure to reflect the
shape of the Group more appropriately going forward. Full details
of these changes will be announced at our Capital Markets Day
scheduled for 21 September.
Outlook
The Board continues to expect modest organic revenue growth at
constant currency in 2016, driven by good overall growth in most
clusters, but with a continuing deterioration in oil and gas
moderating the rate of growth for the Group as a whole in the
second half of the year. Our acquisitions programme should however
continue to contribute significantly to overall revenue growth.
Given our further cost actions, we also continue to expect Group
margins to be broadly in line with market expectations.
As outlined at the start of the year, our medium term revenue
expectation remains mid-single digit organic growth and additional
continued expansion through acquisitions with gradual margin
improvement.
Contacts
For further information please contact:
Peter Ogden, Powerscourt Group
Tel. Direct +44 (0)20 7549 0997 / +44 (0)7793 858 211
exova@powerscourt-group.com
Sophie Moate, Powerscourt Group
Tel. Direct +44 (0)20 7549 0994 / +44 (0)7761 974 589
exova@powerscourt-group.com
Analyst briefing and conference call
There will be an analyst briefing and conference call today at
9.30am GMT, held at Goldman Sachs, 10(th) Floor, Peterborough
Court, 133 Fleet Street, London, EC4A 2BB. If you would like to
attend the meeting, please contact Powerscourt Group at the above
mentioned e-mail address. A copy of the presentation is available
on the website.
Corporate website: www.exova.com
Exova
Exova is one of the world's leading laboratory-based testing
groups, trusted by organisations to test and advise on the safety,
quality and performance of their products and operations.
Headquartered in Edinburgh, UK, Exova operates 138 laboratories and
offices in 33 countries and employs more than 4,300 people
throughout Europe, the Americas, the Middle East, Asia/Asia Pacific
and Africa.
Exova's capabilities help to extend asset life, bring
predictability to applications, and shorten the time to market for
customers' products, processes and materials. With over 90 years'
experience, Exova specialises in testing across a number of key
sectors from health sciences to aerospace, transportation, oil and
gas and construction.
HALF YEAR REPORT 2016
BUSINESS REVIEW
The principal activities of the Group are specialist testing and
advisory services and the key markets served are Aerospace; Oil
& Gas and Industrials; Product and Certification; Health
Sciences and Middle East.
Exova operates primarily in the Testing segment of the Testing,
Inspection and Certification ("TIC") sector. It has a growing
Certification business, as well as providing Inspection services in
a number of niche markets and geographies.
The business comprises 138 permanent facilities in 33 countries
and employs more than 4,300 people.
Overview of performance
2016 Growth Organic(1)
GBPm 2015 at reported growth
GBPm exchange at constant(2)
rates exchange
rates
---------------------------- ------ ------- ------------- ----------------
Revenue 160.9 142.4 13.0% 1.7%
Adjusted EBITA(3) 23.4 21.4 9.3%
EBITA margin 14.6% 15.0%
Net finance costs (3.3) (3.1)
Income tax expense (3.5) (2.3)
Basic earnings per share 4.2p 2.8p
Basic adjusted earnings
per share(3) 5.8p 5.4p
Interim dividend per share 1.05p 1.0p
Cash conversion(4) 66% 67%
---------------------------- ------ ------- ------------- ----------------
Notes:
1) Organic revenue growth at constant currency represents
revenue growth at constant currency for each year excluding the
growth attributable to acquisitions until the acquisition has been
owned for a 12 month period and excluding the revenue attributable
to disposals in the year of disposal and the preceding year. As
such, the revenue associated with our UK & Ireland Food, Water
& Pharmaceutical disposal are now reflected within inorganic
growth.
2) Constant currency growth figures are provided in order to
remove the impact of currency translation. We calculate growth at
constant rates by translating the current and prior period revenue
at the same exchange rates.
3) Adjusted items are stated before separately disclosed items, interest and taxation.
4) The cash conversion ratio is calculated by dividing free cash
flow by adjusted EBITDA. Free cash flow is defined as adjusted
EBITDA less movement in net working capital (excluding the effect
of the IPO related cost accrual), less capital expenditure net of
disposals.
Revenue
2016
Six months ended 30 June GBPm Growth
----------------------------- ------------------ ---------
2015 reported
Constant currency 142.4
Organic 2.3 1.7%
Acquisitions 11.8 8.3%
Disposals (0.5) (0.5%)
----------------------------- ------------------ ---------
Growth at constant currency 156.0 9.5%
Currency effect 4.9 3.5%
----------------------------- ------------------ ---------
2016 reported 160.9 13.0%
----------------------------- ------------------ ---------
Revenue for the six months ended 30 June 2016 was GBP160.9m
which represented organic growth at constant currency of 1.7%.
Acquisitions contributed 8.3% of growth, partly offset by the
UK&I Food, Water and Pharmaceutical business disposal which
resulted in a reduction of 0.5%. The Group reports in sterling
which weakened during the course of the year over the currencies in
most of the territories in which the Group operates. This resulted
in a positive translational effect of 3.5%.
Adjusted EBITA margin
Adjusted EBITA margin decreased by 40bps from 15.0% to 14.6%.
This reflects the continuing challenges in Oil & Gas and
Industrials which negatively affected margins plus the carryover
impact of growth investments made in 2015.
Separately disclosed items
30 June 30 June
2016 2015
GBPm GBPm
----------------------------------- -------- --------
Amortisation of intangible assets 1.8 4.8
Restructuring costs 2.3 1.4
Acquisition and integration costs 0.7 2.1
Total 4.8 8.3
----------------------------------- -------- --------
Amortisation of intangible assets
Amortisation in the six months to 30 June 2016 was GBP1.8m, a
decrease of GBP3.0m from GBP4.8m in 2015. This decrease was due to
customer relationships acquired from Bodycote now fully amortised
partly offset by customer relationship amortisation relating to
acquisitions made over the last few years.
Restructuring costs
We incurred GBP2.3m of restructuring costs for the six months to
30 June 2016, compared to GBP1.4m for the same period in 2015. This
represents mainly staff redundancy costs relating to
rationalisation and restructuring of certain laboratories. It also
includes GBP0.8m for professional fees and staff redundancy costs
incurred in relation to the disposal of the Food, Water and
Pharmaceutical business in the UK and Ireland.
Restructuring costs in 2015 mainly related to management actions
to adapt the business to the changes in the oil & gas
market.
Acquisition and integration costs
Acquisition and integration costs include costs incurred in
relation to Admaterials Technologies Private Limited, Jones
Environmental Forensics Limited, integration costs for businesses
acquired towards the end of 2015 and on-going expenses to support
the pipeline.
Contingent consideration in relation to the acquisition of
Metallurgical Services Private Limited was reversed in the current
year as the target was not met.
Net finance costs 30 June 30 June
2016 2015
----------------------------------------
GBPm GBPm
---------------------------------------- -------- --------
Net cash interest payable
Bank loans 2.7 2.5
Other loans and charges 0.1 0.3
Interest income on short-term deposits (0.1) -
---------------------------------------- -------- --------
2.7 2.8
---------------------------------------- -------- --------
Non-cash costs
Amortisation of debt issue costs 0.3 0.3
Pension interest 0.3 -
0.6 0.3
---------------------------------------- -------- --------
Net finance costs 3.3 3.1
---------------------------------------- -------- --------
Net cash interest payable for the period was GBP2.7m compared to
GBP2.8m for the same period in 2015. The increase in pension
interest reflects the retirement benefit obligation assumed with
the 2015 BM TRADA Group Limited acquisition.
Earnings per share ("EPS")
Basic earnings per share for the six months ended 30 June 2016
was 4.2p (2015: 2.8p).
Basic adjusted earnings per share for the six months ended 30
June 2016 was 5.8p (2015: 5.4p). This measure calculates EPS before
separately disclosed items.
Dividend
The Board is recommending an interim dividend of 1.05p per share
(2015: 1.0p per share) to be paid on 9 November 2016 to
shareholders on the register at the close of business on 28 October
2016.
Acquisitions
On 15 February 2016, the Group acquired 70% of the share capital
in Admaterials Technologies Private Limited (Admaterials) for a
cash consideration of GBP5.3m. The consideration to acquire
Admaterials includes a put and call option to purchase the
remaining shareholding three years after the acquisition based on
the same earnings multiple as the original offer. This Singapore
based business provides testing in the construction sector, as well
as chemical, environmental and mechanical testing and certification
services. Founded in 2008, Admaterials is one of the leading
construction testing businesses in Singapore, as well as providing
chemical, environmental and mechanical testing to a range of
customers in the private and government sectors. The business has
annual revenues in the region of GBP3.5m and a team of more than 70
specialists.
On 1 July 2016, the Group acquired 100% of the share capital of
Jones Environmental Forensics Limited (Jones) for a cash
consideration of GBP13.9m. A further payment GBP1.0m was retained
and an amount of up to GBP1.6m is contingent upon future
profitability in the year following acquisition. The purchase
consideration is subject to further purchase price adjustments.
Jones is a North Wales-based independent environmental laboratory
business and the UK's market leader in contaminated land analysis
and a specialist in environmental forensics, with an excellent
reputation for both quality and service. Jones has built a strong
reputation as the laboratory of choice for contaminated soil and
water analysis, primarily selling its services to leading global
environmental consultants, with the ultimate end customers covering
a variety of market segments, many in which Exova has an existing
presence. The business which has a team of over 150 specialists
achieved revenues of around GBP8m in 2015.
Disposal
The sale of our Food, Water and Pharmaceutical business in the
UK and Ireland to Eurofins Scientific, announced on 19 May 2016,
completed on 1 July 2016, for a cash consideration of GBP17.9m
which is net of certain working capital balances retained and
liabilities transferred (gross consideration of GBP20.0m). The
consideration is subject to a further selling price adjustment.
This sale allows us to dedicate significantly more financial and
management resource to growing in sectors where we can build on our
market leading positions in technically demanding services such as
fire, aerospace, industrials and infrastructure related
testing.
External net debt (excluding debt issue costs)
30 June 31 December
2016 2015
GBPm GBPm
--------------------------- -------- ------------
Term loans 182.3 169.7
Revolving credit facility 12.0 12.0
Finance leases 0.4 0.4
--------------------------- -------- ------------
Gross debt 194.7 182.1
Cash and cash equivalents (34.3) (29.1)
Net debt 160.4 153.0
--------------------------- -------- ------------
Net debt has increased from GBP153.0m at 31 December 2015 to
GBP160.4m at 30 June 2016 due to the pound weakening against the
currencies the term loans are denominated in.
At 30 June 2016, our term loans comprised GBP182.3m of
non-amortising borrowings denominated in sterling, euro, Canadian
dollars, US dollars and Swedish krona. The amounts drawn down on
the revolving credit facility are denominated in sterling. In
addition, a GBP78.0m revolving credit facility was undrawn at 30
June 2016. There are no repayments scheduled on our term loans
until 2019.
Based on the definition in the bank covenant, net debt to
Adjusted EBITDA ratio is 2.3x (30 June 2015: 2.5x).
UK withdrawal from the EU
In the 2015 Annual Report and Accounts, we highlighted the
potential risks to the Group of the UK withdrawal from the EU. The
Group provides testing services to a range of clients across Europe
from a broad network of laboratories in both the UK and many
countries in Continental Europe.
Many of the standards and schemes under which we operate are
international or client specific and we anticipate little or no
impact in these areas. We will monitor the impact on testing
regimes and certification programmes and will engage with the
relevant representative bodies and working groups as required.
We believe that the UK's withdrawal from the European Union is
unlikely to have a material adverse impact on the future growth
opportunities of the Group.
Presentation of results
Constant currency growth figures are provided in order to remove
the impact of currency translation. We calculate growth at constant
rates by translating the current and prior period revenue at the
same exchange rates.
Organic growth at constant currency represents revenue growth at
constant currency excluding the growth attributable to acquisitions
until the acquisition has been owned for a 12 month period and
excluding the revenue attributable to disposals in the year of
disposal and the preceding year.
Adjusted results are stated before separately disclosed items,
interest and taxation.
The Group presents, as separately disclosed items on the face of
the income statement, those items of income and expense which,
because of their nature, merit separate presentation to allow users
to understand better the elements of financial performance in the
period to facilitate a comparison with prior periods and a better
assessment of trends in financial performance.
Foreign exchange
Exchange rates for the most significant currencies used by the
Group during the period were:
Average Closing Average Closing
rate rate rate rate
30 June 30 June 30 June 30 June
2016 2016 2015 2015
Euro 1.293 1.234 1.367 1.407
US dollar 1.432 1.370 1.527 1.574
Canadian dollar 1.918 1.782 1.883 1.943
Swedish krona 12.047 11.661 12.803 12.980
UAE dirham 5.259 5.034 5.609 5.782
Qatari riyal 5.229 4.991 5.566 5.736
------------------- --------- --------- --------- ---------
OPERATING PERFORMANCE
Revenue
Six months ended 2016 2015 Growth at Organic
30 June GBPm GBPm reported exchange growth
rates at constant
exchange
rates
------------------ ------ ------ ------------------- -------------
Europe 87.1 74.5 16.9% 1.5%
Americas 49.6 47.8 3.9% 0.2%
Rest of World 24.2 20.1 20.0% 5.8%
------------------ ------ ------ ------------------- -------------
Group 160.9 142.4 13.0% 1.7%
------------------ ------ ------ ------------------- -------------
Six months ended 2016 Growth at Organic
30 June GBPm 2015 reported growth
GBPm exchange at constant
rates exchange
rates
--------------------------- ------ ------- ---------- -------------
Aerospace 25.5 23.0 11.0% 4.2%
Oil & Gas and Industrials 32.9 36.3 (9.4)% (16.1)%
Product and Certification 55.9 41.3 35.4% 9.6%
Health Sciences 29.4 27.9 5.2% 4.2%
Middle East 17.2 13.9 24.0% 16.3%
--------------------------- ------ ------- ---------- -------------
Group 160.9 142.4 13.0% 1.7%
--------------------------- ------ ------- ---------- -------------
Adjusted EBITA
Six months ended 30 2016 Margin 2015 Margin
June GBPm GBPm
Europe 12.1 13.9% 10.8 14.5%
Americas 8.2 16.5% 8.5 17.8%
Rest of World 3.1 12.9% 2.1 10.4%
--------------------- ------ ------- ------ -------
Group 23.4 14.6% 21.4 15.0%
--------------------- ------ ------- ------ -------
Regional Performance
Europe
Growth Organic growth
Six months ended 30 June 2016 2015 at reported at constant
GBPm GBPm exchange exchange
rates rates
--------------------------- ------ ----------- --------------------- ------------------
Revenue 87.1 74.5 16.9% 1.5%
Adjusted EBITA 12.1 10.8 12.0%
Margin 13.9% 14.5% (60) bps
--------------------------- ------ ----------- --------------------- ------------------
Europe saw modest organic growth of 1.5%, with strong
performances in Aerospace, Product and Certification and Health
Sciences helping to absorb the continuing challenges in Oil &
Gas and Industrials. We saw good organic growth across the
Aerospace sector driven by more focused account management and
growth in our Top 20 accounts. In Product and Certification, we
delivered strong growth in calibration and continued to experience
very strong growth in fire testing and the consulting business,
with regulation and standards supporting additional revenue
development. In Health Sciences, we completed the sale of our UK
and Ireland Food, Water and Pharmaceutical businesses on 1 July.
Growth in our environmental business was boosted by a modest
performance in stack testing. Our recently announced acquisition of
Jones Environmental Forensics Limited, the UK's leading
environmental contaminated land laboratory, gives us a national
presence and a leading positon in this sector. In Oil & Gas and
Industrials, as expected, the continued low oil price significantly
reduced project spend and therefore testing volumes. We have seen
some partial offset through industrials volumes for higher end
testing.
The decline in margin reflects the continuing challenges in Oil
& Gas and Industrials, with more intense competition and client
cost base reductions putting pressure on prices. This was partially
offset by Aerospace, where consolidation of our European creep and
stress rupture testing services drove margin improvement.
Americas
Growth Organic growth
Six months ended 30 June 2016 2015 at reported at constant
GBPm GBPm exchange exchange
rates rates
--------------------------- ------ ------ -------------------- -----------------
Revenue 49.6 47.8 3.9% 0.2%
Adjusted EBITA 8.2 8.5 (3.5%)
Margin 16.5% 17.8% (130) bps
--------------------------- ------ ------ -------------------- -----------------
Organic revenues in the Americas were marginally up, driven by
strong performances in the Aerospace, Transportation and Health
Sciences clusters. Aerospace delivered solid growth, with
investments in CMC fatigue testing and capability to support
testing associated with Additive Layer Manufacturing processes. In
transportation we delivered very strong growth overall, fuelled by
performance at our Troy laboratory; a major structural fatigue
testing project; and high test volumes in our engine-testing
facility in Toluca, Mexico. Health Sciences had a strong first half
with good growth in all businesses, particularly food. In Oil &
Gas and Industrials, we have continued to experience strong
headwinds leading to reductions in client volumes and pricing
pressures. This is driven by the depressed oil price, together with
some slow-down in the steel industry as a result of oversupply
through cheaper foreign imports.
The margin decline was driven by ongoing challenges in Western
Canada and Houston in the Oil & Gas and Industrials cluster,
but we are continuing to take a number of restructuring actions to
mitigate the impact.
Rest of World
Growth Organic growth
Six months ended 30 June 2016 2015 at reported at constant
GBPm GBPm exchange exchange
rates rates
--------------------------- ------ --------- -------------------- ----------------
Revenue 24.2 20.1 20.0% 5.8%
Adjusted EBITA 3.1 2.1 47.6%
Margin 12.9% 10.4% 250 bps
--------------------------- ------ --------- -------------------- ----------------
The Rest of the World delivered strong organic growth of 5.8%.
The Middle East cluster saw very strong growth, as a result of
ongoing infrastructure investment in rail and road projects in
Saudi Arabia and Qatar, together with growth in metallurgy testing.
We acquired a civils testing business in Singapore in February of
this year and integration is on track with performance in line with
expectation. Our fire consulting business has seen a change in mix
to more conventionally-sized projects, but the pipeline remains
promising. In Australia, fire testing has seen some very positive
development, driven by changing building codes and regulation. The
Asian Oil & Gas and Industrials business has seen reduced
project activity as a result of strong market headwinds.
Notwithstanding the challenges in our two Oil & Gas and
Industrials laboratories, we have seen strong margin improvement in
the region, driven by a mix of good growth coupled with disciplined
cost control.
Outlook
The Board continues to expect modest organic revenue growth at
constant currency in 2016, driven by good overall growth in most
clusters, but with a continuing deterioration in oil and gas
moderating the rate of growth for the Group as a whole in the
second half of the year. Our acquisitions programme should however
continue to contribute significantly to overall revenue growth.
Given our further cost actions, we also continue to expect Group
margins to be broadly in line with market expectations.
As outlined at the start of the year, our medium term revenue
expectation remains mid-single digit organic growth and additional
continued expansion through acquisitions with gradual margin
improvement.
PRINCIPAL RISKS & UNCERTAINTIES
The 2015 Annual Report & Accounts set out the principal
risks and uncertainties faced by the business and detail the
process in place for managing these risks. The Report and Accounts
are available from our website www.exova.com . As set out on pages
10 to 12 of the Annual Report, we believe that the principal risks
and uncertainties which could impact the Group are as follows:
-- Health and safety
-- Reputational damage
-- People
-- Global economic and market conditions
-- UK withdrawal from the EU
-- Business infrastructure
-- IT systems
-- Acquisitions
-- Litigation
-- Business integrity and ethics
-- Financial irregularity
-- Treasury
There have been no significant changes to the risk management
process in the current financial year.
Responsibility statement
The Directors confirm that, to the best of their knowledge:
-- The interim condensed set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting;
-- The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the period and description of principal risks and
uncertainties for the remainder of the financial year); and
-- The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties
transactions and changes therein).
By order of the Board
Ian El-Mokadem Philip Marshall
Chief Executive Officer Chief Financial Officer
30 August 2016
Cautionary statement
This half year report has been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. The
report should not be relied upon by any other party or for any
other purpose.
The half year report contains certain forward looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the time of
their approval of this report but such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
INDEPENT REVIEW REPORT TO EXOVA GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2016 which comprises the Interim Condensed
Consolidated Income Statement, the Interim Condensed Consolidated
Statement of Other Comprehensive Income, the Interim Condensed
Consolidated Balance Sheet, the Interim Condensed Consolidated
Statement of Changes in Equity, the Interim Condensed Consolidated
Statement of Cash Flows and Notes 1 to 17. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2016 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Glasgow
30 August 2016
The maintenance and integrity of the Exova Group plc web site is
the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial information since it was
initially presented on the web site.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2016
2016 2015
(unaudited) (unaudited)
----------------------------------- -----------------------------------
Separately Separately
Before disclosed Before disclosed
separately items separately items
disclosed (note disclosed (note
items 4) Total items 4)
Continuing Notes GBPm GBPm GBPm GBPm GBPm GBPm
operations
------------------ ------ ------------ ----------- -------- ------------ ----------- --------
Revenue 2 160.9 - 160.9 142.4 - 142.4
Net operating
costs 3 (137.5) (4.8) (142.3) (121.0) (8.3) (129.3)
------------------ ------ ------------ ----------- -------- ------------ ----------- --------
Operating profit 23.4 (4.8) 18.6 21.4 (8.3) 13.1
Finance costs 5 (3.4) - (3.4) (3.1) - (3.1)
Finance income 5 0.1 - 0.1 - - -
------------------ ------ ------------ ----------- -------- ------------ ----------- --------
Profit before
taxation 20.1 (4.8) 15.3 18.3 (8.3) 10.0
Income tax 6 (4.4) 0.9 (3.5) (4.2) 1.9 (2.3)
------------------ ------ ------------ ----------- -------- ------------ ----------- --------
Profit for
the period 15.7 (3.9) 11.8 14.1 (6.4) 7.7
Profit attributable to:
Equity holders
of the Parent 10.6 7.1
Non-controlling
interests 1.2 0.6
-------------------------- ------------------------- -------- ------------ ----------- --------
Profit for the
period 11.8 7.7
-------------------------- ------------------------- -------- ------------ ----------- --------
Earnings per share*
Basic 7 4.2p 2.8p
----------------------------------------------------- -------- ------------ ----------- --------
Diluted 7 4.2p 2.8p
----------------------------------------------------- -------- ------------ ----------- --------
* Earnings per share on adjusted results are disclosed in Note
7.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
For the six months ended 30 June 2016
2016 2015
(unaudited) (unaudited)
GBPm GBPm
----------------------------------------------- ----------------- -------------------
Profit for the period 11.8 7.7
Other comprehensive income to be reclassified
in profit or loss in subsequent periods
Exchange differences on translation
of foreign operations and related
borrowings 21.5 (10.0)
Other comprehensive income not to
be reclassified to profit or loss
in subsequent periods
Actuarial (loss) / gain on defined
benefit plans 15 (2.9) 0.4
Income tax effect 0.6 (0.1)
Other comprehensive income for the
period (net of tax) 19.2 (9.7)
----------------------------------------------- ----------------- -------------------
Total comprehensive income for the
period 31.0 (2.0)
----------------------------------------------- ----------------- -------------------
Total comprehensive income for the
period attributable to:
Equity holders of the Parent 29.4 (2.5)
Non-controlling interests 1.6 0.5
----------------------------------------------- ----------------- -------------------
Total comprehensive income for the
period 31.0 (2.0)
----------------------------------------------- ----------------- -------------------
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2016
30 June 2016 30 June 2015 31 December 2015
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Assets
Non-current assets
Goodwill 9 376.5 356.5 355.1
Intangible assets 10 18.7 10.4 17.7
Property, plant and equipment 11 71.8 63.7 68.7
Government grants 8.5 7.3 7.1
Deferred tax assets 9.9 9.2 8.0
Investments in joint ventures 0.2 0.4 0.2
----------------------------------------------------- ------- --- --------------- ------------- -----------------
485.6 447.5 456.8
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Current assets
Trade and other receivables 82.1 70.8 74.5
Income tax receivable 1.2 0.2 0.3
Government grants - 1.4 -
Cash and short-term deposits 34.3 30.4 29.2
Assets classified as held for sale 12 12.9 - -
----------------------------------------------------- ------- --- --------------- ------------- -----------------
130.5 102.8 104.0
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Total assets 616.1 550.3 560.8
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Equity
Issued share capital 2.5 2.5 2.5
Share premium 109.5 109.5 109.5
Merger reserve 324.5 324.5 324.5
Capital contribution reserve 114.9 114.9 114.9
Foreign currency translation reserve 15.7 (10.0) (5.4)
Retained earnings (259.5) (270.8) (262.9)
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Equity attributable to equity holders of the Parent 307.6 270.6 283.1
Non-controlling interests 6.3 4.2 4.7
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Total equity 313.9 274.8 287.8
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Liabilities
Non-current liabilities
Bank and other borrowings 14 180.5 179.3 167.6
Finance leases 14 0.3 0.2 0.3
Retirement benefit obligations 15 18.7 16.4 15.8
Provisions 4.9 6.7 6.7
Deferred tax liabilities 11.6 9.4 10.4
Other liabilities 11.0 5.5 6.4
----------------------------------------------------- ------- --- --------------- ------------- -----------------
227.0 217.5 207.2
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Current liabilities
Bank and other borrowings 14 12.0 - 12.1
Finance leases 14 0.1 0.1 0.1
Trade and other payables 55.2 55.2 50.5
Income tax payable 3.2 - -
Provisions 3.4 2.7 3.1
Liabilities classified as held for sale 12 1.3 - -
----------------------------------------------------- ------- --- --------------- ------------- -----------------
75.2 58.0 65.8
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Total liabilities 302.2 275.5 273.0
----------------------------------------------------- ------- --- --------------- ------------- -----------------
Total equity and liabilities 616.1 550.3 560.8
----------------------------------------------------- ------- --- --------------- ------------- -----------------
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2016
Attributable to equity holders of the Parent
Foreign
Capital currency Total
Share Share Merger contribution translation Retained shareholders' Non-controlling Total
capital premium reserve reserve reserve earnings equity interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------ -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
At 1 January
2016 2.5 109.5 324.5 114.9 (5.4) (262.9) 283.1 4.7 287.8
Profit for the
period - - - - - 10.6 10.6 1.2 11.8
Other
comprehensive
Income - - - - 21.1 (2.3) 18.8 0.4 19.2
--------------- ------ -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
Total
comprehensive
income for
the period - - - - 21.1 8.3 29.4 1.6 31.0
Share-based
payments - - - - - 0.6 0.6 - 0.6
Dividends 8 - - - - - (5.5) (5.5) - (5.5)
At 30 June
2016
(unaudited) 2.5 109.5 324.5 114.9 15.7 (259.5) 307.6 6.3 313.9
--------------- ------ -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
At 1 January
2015 2.5 109.5 324.5 114.9 (0.1) (273.4) 277.9 3.7 281.6
Profit for the
period - - - - - 7.1 7.1 0.6 7.7
Other
comprehensive
income - - - - (9.9) 0.3 (9.6) (0.1) (9.7)
--------------- ------ -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
Total
comprehensive
income for
the period - - - - (9.9) 7.4 (2.5) 0.5 (2.0)
Share-based
payments - - - - - 0.2 0.2 - 0.2
Dividends 8 - - - - - (5.0) (5.0) - (5.0)
At 30 June
2015
(unaudited) 2.5 109.5 324.5 114.9 (10.0) (270.8) 270.6 4.2 274.8
--------------- ------ -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2016
2016 2015
(unaudited) (unaudited)
Notes GBPm GBPm GBPm GBPm
-------------------------------------- ------ ------ -------- --- ------------- ------------
Profit before taxation 15.3 10.0
Depreciation of property,
plant and equipment 6.9 6.1
Amortisation of intangible
assets 1.8 4.8
Impairment loss on property,
plant and equipment - 0.2
Government grants (0.4) (0.5)
Share-based payments 0.6 0.2
Non-cash movement in defined 0.1 -
benefit pension obligations
Net finance costs 5 3.3 3.1
-------------------------------------- ------ ------ -------- ------------- ------------
Operating cash flows before
movements in working capital 27.6 23.9
Increase in trade and other
receivables (2.9) (1.2)
(Decrease)/increase in trade
and other payables (0.7) 0.2
Decrease in provisions and
retirement benefit obligations (0.7) (1.3)
-------------------------------------- ------ ------ -------- ------------- ------------
Movements in working capital (4.3) (2.3)
-------------------------------------- ------ ------ -------- ------------- ------------
Cash generated from operations 23.3 21.6
Interest paid (2.8) (2.6)
Tax paid (1.9) (1.9)
-------------------------------------- ------ ------ -------- ------------- ------------
Net cash flows from operating
activities 18.6 17.1
-------------------------------------- ------ ------ -------- ------------- ------------
Investing activities
Purchase of property, plant
and equipment (6.7) (5.8)
Purchase of intangible assets (0.5) (1.1)
Acquisition of subsidiary
undertakings (net of cash
acquired) 13 (3.3) (17.4)
Interest received 0.1 -
-------------------------------------- ------ ------ -------- ------------- ------------
Net cash flows used in investing
activities (10.4) (24.3)
-------------------------------------- ------ ------ -------- ------------- ------------
Net cash flows before financing
activities 8.2 (7.2)
Financing activities
Proceeds from borrowings 4.0 14.0
Repayment of bank borrowings (4.0) -
Payment of finance lease liabilities (0.1) (0.2)
Dividends paid to equity holders
of the Parent (5.5) (5.0)
Net cash flows (used in)/from
financing activities (5.6) 8.8
-------------------------------------- ------ ------ -------- ------------- ------------
Net increase in cash and cash
equivalents 2.6 1.6
Cash and cash equivalents
at 1 January 29.1 29.9
Effects of exchange rate changes 2.6 (1.1)
-------------------------------------- ------ ------ -------- ------------- ------------
Cash and cash equivalents
at 30 June 34.3 30.4
-------------------------------------- ------ ------ -------- ------------- ------------
Separately disclosed items included
in cash flow from operating activities (4.5) (3.5)
------------------------------------------------------ -------- ------------- ------------
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
For the six months ended 30 June 2016
1. BASIS OF PREPARATION AND CHANGES TO THE GROUP'S
ACCOUNTING POLICIES
The interim condensed consolidated financial statements
of Exova Group plc and its subsidiaries (together referred
to as "the Group") for the six months ended 30 June
2016 were authorised for issue in accordance with a
resolution by the Directors on 30 August 2016.
These interim condensed consolidated financial statements
have been prepared on the going concern basis as the
Directors, having considered available relevant information,
have a reasonable expectation that the Group has adequate
resources to continue to operate for the foreseeable
future.
The comparative figures for the financial year ended
31 December 2015 do not constitute statutory accounts
as defined in Section 434 of the Companies Act 2006.
Those accounts have been reported on by the auditors
and have been delivered to the Registrar of Companies.
The report of the auditor was unqualified, did not
include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying
their report, and did not contain a statement under
Section 498(2) or (3) of the Companies Act 2006.
Statement of compliance
The interim condensed consolidated financial statements
for the six months ended 30 June 2016 have been prepared
in accordance with IAS 34 Interim Financial Reporting
as endorsed and adopted for use in the European Union
and the Disclosure and Transparency Rules (DTR) of
the Financial Conduct Authority. They do not include
all the information and disclosures required in the
annual financial statements, and should be read in
conjunction with the Group's annual financial statements
for the year ended 31 December 2015.
New standards, interpretations and amendments adopted by the
Group
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2015.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective. There are no standards or interpretations effective for
the first time in the current financial period with a significant
impact on the Group's consolidated results or financial
position.
The European Markets and Securities Authority has issued
"Guidelines on Alternative Performance Measures" which are
effective from 3 July 2016 and which have been followed in
explaining the use of non-GAAP measures in this interim
statement.
Non-GAAP Measures
Our reported interim results are prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union and applied in accordance with the provisions of
the Companies Act 2006. In measuring our performance, the financial
measures that we use include those which have been derived from our
reported results in order to eliminate factors which distort
period-on-period comparisons. These are considered non-GAAP
financial measures. We believe this information, along with
comparable GAAP measurements, is useful for investors in providing
a basis for measuring our operational performance. Below we set out
our definitions of non-GAAP measures and provide reconciliations to
relevant GAAP measures.
Free cash flow and adjusted EBITDA
Free cash flow is defined as adjusted EBITDA less movement in
net working capital (excluding the effect of the IPO related cost
accrual), less capital expenditure net of disposals.
Adjusted EBITDA is operating profit from continuing operations
before separately disclosed items, interest, taxation and
depreciation.
30 June 30 June
2016 2015
A reconciliation of profit before tax GBPm GBPm
to adjusted EBITDA and free cash flow
is presented below:
---------------------------------------- -------- --------
Profit before tax 15.3 10.0
Finance costs 3.4 3.1
Finance income (0.1) -
Restructuring costs 2.3 1.4
Acquisition and integration costs 0.7 2.1
Amortisation of intangibles 1.8 4.8
---------------------------------------- -------- --------
Adjusted EBITA 23.4 21.4
Depreciation of property plant and
equipment 6.9 6.1
Adjusted EBITDA 30.3 27.5
Net capital expenditure(1) (7.2) (6.9)
Movement in working capital (4.3) (2.3)
IPO costs paid 1.2 0.2
Free cash flow 20.0 18.5
---------------------------------------- -------- --------
1. Net capital expenditure comprises purchase of property, plant
and equipment and intangible assets less proceeds on disposal of
property plant & equipment
and intangible assets.
2. SEGMENTAL REPORTING
For management purposes, the Group is organised into
three operating regions: Europe, Americas and Rest
of World. These three regions are organised and managed
separately based on the geographies served and each
is treated as an operating segment and a reportable
segment in accordance with IFRS 8 Operating Segments.
The operating and reportable segments were determined
based on reports reviewed by the Directors which are
used to make operational decisions.
Management monitors the operating results of its business
units separately for the purpose of making decisions
about resource allocation and performance assessment.
Segment performance is evaluated based on Adjusted
EBITA and is measured consistently in the consolidated
financial statements. However, Group financing (including
finance costs and finance income) and income taxes
are managed centrally and are not allocated to operating
segments.
Transfer prices between operating segments are on
an arm's length basis in a manner similar to transactions
with third parties and inter-segment revenues are
eliminated on consolidation.
As the business continues to evolve and consistent
with the Group's long-term strategic goals, we intend
to realign our organisational structure in line with
the key markets we serve.
Rest
of
Europe Americas World Eliminations Unallocated Total
For the six months GBPm GBPm GBPm GBPm GBPm GBPm
ended 30 June 2016
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Operations
Revenue - external
customers 87.1 49.6 24.2 - - 160.9
Revenue - inter-business
segments 1.0 0.1 0.1 (1.2) - -
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Total revenue 88.1 49.7 24.3 (1.2) - 160.9
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Adjusted EBITDA 15.4 10.7 4.2 - - 30.3
Depreciation (3.3) (2.5) (1.1) - - (6.9)
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Adjusted EBITA 12.1 8.2 3.1 - - 23.4
Amortisation of intangible
assets (1.4) (0.2) (0.2) - - (1.8)
Acquisition and integration
costs (0.7) (0.3) 0.3 - - (0.7)
Restructuring costs (1.3) (0.9) (0.1) - - (2.3)
Segmental operating
profit 8.7 6.8 3.1 - - 18.6
Net finance costs - - - - (3.3) (3.3)
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Profit / (loss) before
tax 8.7 6.8 3.1 - (3.3) 15.3
Income tax - - - - (3.5) (3.5)
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Profit / (loss) for
the period 8.7 6.8 3.1 - (6.8) 11.8
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Rest
of
Europe Americas World Eliminations Unallocated Total
For the six months GBPm GBPm GBPm GBPm GBPm GBPm
ended 30 June 2015
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Operations
Revenue - external
customers 74.5 47.8 20.1 - - 142.4
Revenue - inter-business
segments 0.2 0.7 0.8 (1.7) - -
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Total revenue 74.7 48.5 20.9 (1.7) - 142.4
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Adjusted EBITDA 13.8 10.7 3.0 - - 27.5
Depreciation (3.0) (2.2) (0.9) - - (6.1)
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Adjusted EBITA 10.8 8.5 2.1 - - 21.4
Amortisation of intangible
assets (2.4) (1.4) (1.0) - - (4.8)
Acquisition and integration
costs (1.8) (0.1) (0.2) - - (2.1)
Restructuring costs (0.8) (0.6) - - - (1.4)
Segmental operating
profit 5.8 6.4 0.9 - - 13.1
Net finance costs - - - - (3.1) (3.1)
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Profit / (loss) before
tax 5.8 6.4 0.9 - (3.1) 10.0
Income tax - - - - (2.3) (2.3)
----------------------------- ------- --------- ------------ ------------- --------------------- ------
Profit / (loss) for
the period 5.8 6.4 0.9 - (5.4) (7.7)
----------------------------- ------- --------- ------------ ------------- --------------------- ------
3. OPERATING COSTS
Notes 2016 2015
GBPm GBPm
--------------------------------------------- ------ ------
Cost of Sales 103.0 90.2
Selling and administrative expenses 35.9 31.5
Other income (1.4) (0.7)
Separately disclosed items 4 4.8 8.3
142.3 129.3
--------------------------------------------- ------ ------
4. SEPARATELY DISCLOSED ITEMS
2016 2015
GBPm GBPm
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ------
Amortisation of intangible assets 1.8 4.8
Restructuring costs 2.3 1.4
Acquisition and integration costs 0.7 2.1
3 4.8 8.3
Income tax credit (0.9) (1.9)
3.9 6.4
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ------
Further information is given in the Business Review under
separately disclosed items on page 4.
5. NET FINANCE COSTS
2016 2015
GBPm GBPm
---------------------------------------- -------------- -----
Finance costs:
Bank loans 2.7 2.5
Other loans and charges 0.1 0.3
Amortisation of debt issue costs 0.3 0.3
Pension interest 0.3 -
Total finance costs 3.4 3.1
---------------------------------------- -------------- -----
Finance income:
Interest income on short-term deposits (0.1) -
---------------------------------------- -------------- -----
Total finance income (0.1) -
---------------------------------------- -------------- -----
Net finance costs 3.3 3.1
---------------------------------------- -------------- -----
6. INCOME TAX
The major components of income tax expense in the interim
condensed consolidated income statement are:
2016 2015
GBPm GBPm
------------------------------------------ ------ ------
Income taxes
Income tax
- UK 0.8 0.1
- Overseas 3.2 2.8
Deferred tax credit - net of originating
and reversing temporary differences (0.5) (0.6)
Total income tax expense 3.5 2.3
------------------------------------------ ------ ------
A tax credit of GBP0.6m (2015: charge of GBP0.1m) is included in
other comprehensive income.
The income tax expense is recognised based on management's best
estimate of the average annual income tax rates on a region by
region basis expected for the full financial year applied to the
pre-tax income of the interim period per region.
The Group's consolidated effective tax rate as a function of the
profit before tax for the six months ended 30 June 2016 is 22.9%
(six months ended 30 June 2015: 23%). Differences between the
estimated effective rate of 22.9% and the weighted average notional
statutory UK tax rate of 20.25% include, but are not limited to,
the mix of profits, the effect of tax rates in foreign
jurisdictions, non-deductible expenses, foreign exchange movements
and the effect of unrecognised tax losses.
7. EARNINGS PER SHARE
2016 2015
Based on the profit for the period: Notes GBPm GBPm
--------------------------------------- -------- ------- ---------------------
Profit attributable to equity holders
of the Parent 10.6 7.1
Separately disclosed items 4 3.9 6.4
--------------------------------------- -------- ------- ---------------------
Adjusted earnings after tax 14.5 13.5
------------------------------------------------- ------- ---------------------
2016 2015
Number of shares: m m
Basic weighted average number of ordinary
shares 250.4 250.4
Potentially dilutive share awards 3.3 -
------------------------------------------------- ------- ---------------------
Diluted weighted average number of shares 253.7 250.4
------------------------------------------------- ------- ---------------------
2016 2015
pence pence
------------------------------------------------- ------- ---------------------
Basic earnings per share 4.2 2.8
Potentially dilutive share awards - -
------------------------------------------------- ------- ---------------------
Diluted earnings per share 4.2 2.8
------------------------------------------------- ------- ---------------------
Basic adjusted earnings per share 5.8 5.4
Potentially dilutive share awards (0.1) -
------------------------------------------------- ------- ---------------------
Diluted adjusted earnings per share 5.7 5.4
------------------------------------------------- ------- ---------------------
Basic earnings per share (EPS) amounts are calculated
by dividing the profit for the year attributable to
the ordinary equity holders of the Parent Company
by the weighted average number of ordinary shares
outstanding during the year.
8. DIVIDS
Cash dividends to the equity holders 2016 2015
of the Parent GBPm GBPm
--------------------------------------- ------ ------
Dividends on ordinary shares declared
and paid
Final dividend for 2015: 2.2p per
share (2014: 2.0p per share) 5.5 5.0
---------------------------------------- ------ ------
5.5 5.0
---------------------------------------- ------ ------
Proposed dividends
The Board has approved an interim dividend of 1.05p per share
(30 June 2015: 1.0p per share). The dividend will be paid on 9
November 2016 to shareholders on the register at the close of
business on 28 October 2016.
9. GOODWILL
During the six months, goodwill of GBP6.1m in relation to
current year acquisitions was capitalised and GBP9.5m was
re-allocated to assets classified as held for sale. There was a
positive impact of GBP24.8m of foreign exchange on the total
carrying value of goodwill in the six months ended 30 June 2016
(six months ended 30 June 2015: GBP10.9m negative impact; year
ended 31 December 2015: GBP6.1m negative impact).
Impairment reviews
Goodwill was tested for impairment at 31 December 2015 and will
be tested annually thereafter and when circumstances indicate the
carrying value may be impaired. The Group's impairment test is
performed by comparing the carrying amount of each cash-generating
unit ("CGU"), including goodwill, with the recoverable amount.
The recoverable amounts are determined from value-in-use
calculations and the key assumptions used to determine these
recoverable amounts were disclosed in the annual consolidated
financial statements for the year ended 31 December 2015.
The Group monitors its performance against these key
assumptions, amongst other factors, when reviewing for indicators
of impairment. At 31 December 2015 there was significant headroom
above the carrying value for each CGU with the exception of Rest of
World. As there has been no significant adverse change in the
financial performance of the Rest of World region, there is no
requirement for a formal review at this stage
10. INTANGIBLE ASSETS
During the six months ended 30 June 2016, the Group capitalised
software assets with a cost of GBP0.5m and customer relationship of
GBP1.7m (six months ended 30 June 2015: GBP1.1m; year ended 31
December 2015: GBP1.8m for software, GBP0.2m for patents and
GBP0.7m from trade names, both from business combinations).
There was a positive impact of GBP0.6m of foreign exchange on
the total value of intangible assets in the six months ended 30
June 2016 (six months ended 30 June 2015: GBP0.3m negative impact;
year ended 31 December 2015: GBP0.1m negative impact).
11. PROPERTY, PLANT AND EQUIPMENT
Acquisitions and disposals
During the six months ended 30 June 2016, the Group capitalised
assets with a cost of GBP7.9m including GBP1.2m from business
combinations (note 13) (six months ended 30 June 2015: GBP7.5m
including GBP1.7m from business combinations; year ended 31
December 2015: GBP17.5m including GBP1.8m from business
combinations).
No assets were disposed of during the six months ended 30 June
2016 (six months ended 30 June 2015: GBPnil; year ended 31 December
2015 GBP0.1m).
During the six months ended 30 June 2016, the Group transferred
GBP2.9m to assets classified as held for sale (six months ended 30
June 2015: GBPnil; year ended 31 December 2015: GBPnil).
There was a positive impact of GBP5.0m of foreign exchange on
the total carrying value of property, plant and equipment in the
six months ended 30 June 2016 (six months ended 30 June 2015:
GBP2.2m negative impact; year ended 31 December 2015: GBP6.0m
negative impact).
The net book value of property, plant and equipment was as
follows:
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
--------------------- -------- -------- ------------
Land and buildings 16.8 15.8 16.1
Plant and equipment 55.0 47.9 52.6
--------------------- -------- -------- ------------
71.8 63.7 68.7
--------------------- -------- -------- ------------
Property, plant and equipment include GBP0.3m (six months ended
30 June 2015: GBP0.5m; year ended 31 December 2015: GBP0.4m) of
assets held under finance leases.
Capital commitments
At 30 June 2016 the Group had commitments to purchase property,
plant and equipment for GBP2.8m (six months ended 30 June 2015:
GBP4.1m; year ended 31 December 2015: GBP3.4m).
12. HELD FOR SALE
The sale of our Food, Water and Pharmaceutical business in the
UK and Ireland to Eurofins Scientific, announced on 19 May 2016,
completed on 1 July 2016, for a cash consideration of GBP17.9m
which is net of certain working capital balances retained and
liabilities transferred (gross consideration of GBP20.0m). The
consideration is subject to a further selling price adjustment. The
sale consists of a portfolio of ten well-established, accredited
laboratories across the UK and Ireland which provide a wide range
of chemistry and microbiological testing services. This sale allows
us to dedicate significantly more financial and management resource
to growing in sectors where we can build on our market leading
positions in technically demanding services such as fire,
aerospace, industrials and infrastructure related testing.
Accordingly, the related net assets have been classified as held
for sale. Their value in the balance sheet is the lower of their
carrying amount and fair value less costs to sell. No impairments
have been recognised in respect of the sale.
Notes
30 June
2016
GBPm
Goodwill 9 9.5
Property, plant and equipment
11 2.9
Trade and other receivables 0.5
------------------------------- ----------------------------
Total assets 12.9
------------------------------- ----------------------------
Trade and other payables 0.2
Provisions 1.1
------------------------------- ----------------------------
Total liabilities 1.3
------------------------------- ----------------------------
Net assets 11.6
------------------------------- ----------------------------
13. BUSINESS COMBINATIONS
Acquisitions in the six months to 30 June 2016
On 15 February 2016, the Group acquired 70% of the share capital
in Admaterials Technologies Private Limited (Admaterials) with a
put and call option to acquire the remaining share capital in three
years' time. This Singapore based business provides testing in the
construction sector, as well as chemical, environmental and
mechanical testing and certification services. Founded in 2008,
Admaterials is one of the leading construction testing businesses
in Singapore, as well as providing chemical, environmental and
mechanical testing to a range of customers in the private and
government sectors. The business has annual revenues in the region
of GBP3.5m and a team of more than 70 specialists.
The provisional fair values are set out in the following
table:
Admaterials
Technologies
Notes Private
Limited
GBPm
--------------------------- ------- --------------
Intangible assets 1.7
Property, plant
and equipment 11 1.2
Trade and other
receivables 0.8
Cash and cash equivalents 0.4
Trade and other
payables (0.8)
Deferred tax liabilities (0.3)
Net assets acquired 3.0
Goodwill 9 6.1
Total purchase
consideration 9.1
Acquired cash and
cash equivalents (0.4)
Deferred consideration (1.8)
Contingent consideration (3.8)
----------------------------- ------- --------------
Net cash outflow
on acquisitions 3.1
----------------------------- ------- --------------
Purchase consideration:
Gross cash consideration
paid in the period 3.5
Deferred consideration 1.8
Contingent consideration 3.8
----------------------------- ----
9.1
-------------------------- ----
During the year the following payments were made for
acquisitions completed during the current and prior
year:
2016
GBPm
--------------------------------------------------- ------
Deferred consideration and purchase price
adjustment in respect of prior year acquisitions 0.2
Net cash outflow on acquisitions made in
the current year 3.1
---------------------------------------------------- ------
Total net cash outflow for the year 3.3
---------------------------------------------------- ------
At the period end, the initial accounting for Admaterials
is not complete due to the timing of the transaction.
Therefore the fair value amounts disclosed above are
provisional and may be subject to further adjustments
following the completion of the fair value assessment
exercise.
No material adjustments have been made in respect
of the trade and other receivables acquired.
Goodwill
The goodwill of GBP6.1m comprises the fair value of
the expected synergies arising from the acquisition
and the value of the human capital that does not meet
the criteria for recognition as a separable intangible
asset.
Contribution of acquisitions to revenue and profits
From the dates of acquisition the newly acquired subsidiaries
contributed GBP1.7m to revenue and if the acquisitions
were assumed to have been made on 1 January 2016,
the Group revenue would have been GBP161.0m.
No profit figures are disclosed as this business has
now been integrated into the rest of the Group and
therefore it would be impracticable to obtain a meaningful
profit number.
Contingent consideration
30 June 30 31 December
2016 June 2015
2015
GBPm GBPm GBPm
-------------------------------- --- -------- ------ -----------------------
Metallurgical Services
Private Limited - 2.8 0.6
Western Technical Services
Limited and Accusense Systems
Limited 0.3 - 0.3
Admaterials Technologies 4.2 - -
Private Limited
4.5 2.8 0.9
------------------------------------ -------- ------ -----------------------
The consideration to acquire Metallurgical Services Private
Limited included contingent consideration based on future targets
being met. The contingent consideration's range was between a
minimum of GBPnil and a maximum of GBP2.8m. In the six months to 30
June 2016 the remaining amount of the contingent consideration was
reversed as the target was not met.
The consideration to acquire Western Technical Services Limited
and Accusense Systems Limited included contingent consideration
based on future targets being met. The contingent consideration's
range is between a minimum of GBPnil and a maximum of GBP0.3m. The
contingent consideration becomes payable in May 2017. The fair
value of the contingent consideration is the present value of
expected future cashflows based on the latest forecasts of future
performance.
The contingent consideration to acquire Admaterials Technologies
Private Limited represents a put and call option to purchase the
remaining shareholding three years after the acquisition, based on
the same earnings multiple as the original offer. The contingent
consideration's range is between a minimum of GBPnil and a maximum
of GBP8.1m. The contingent consideration is expected to become
payable in 2019. The fair value of the contingent consideration is
the present value of expected future cashflows based on the latest
forecasts of future performance.
Acquisitions in 2015
During the period to 30 June 2015, the Group made the following
acquisitions in aggregate:
Notes Environmental BM TRADA
Evaluation Group
Limited Limited Others Total
GBPm GBPm GBPm GBPm
----------------------------- ------ -------------- --------- ------- -------
Investments in joint
ventures - 0.4 - 0.4
Property, plant and
equipment 11 0.3 1.2 0.2 1.7
Deferred tax assets - 2.9 - 2.9
Trade and other receivables 0.7 6.0 0.2 6.9
Cash and cash equivalents 0.6 3.2 0.2 4.0
Trade and other payables (0.3) (12.0) (0.1) (12.4)
Long term provisions (0.4) (0.1) (0.1) (0.6)
Retirement benefit
obligations - (14.2) - (14.2)
----------------------------- ------ -------------- --------- ------- -------
Net assets acquired 0.9 (12.6) 0.4 (11.3)
Goodwill 9 4.4 26.3 1.1 31.8
----------------------------- ------ -------------- --------- ------- -------
Total purchase price 5.3 13.7 1.5 20.5
Acquired cash and
cash equivalents (0.6) (3.2) (0.2) (4.0)
Deferred consideration - - (0.1) (0.1)
Contingent consideration - (0.5) - (0.5)
----------------------------- ------ -------------- --------- ------- -------
Net cash outflow on
acquisitions in the
period 4.7 10.0 1.2 15.9
----------------------------- ------ -------------- --------- ------- -------
Purchase consideration: 5.3 13.2 1.4 19.9
Deferred consideration - - 0.1 0.1
Contingent consideration - 0.5 - 0.5
----------------------------- ------ -------------- --------- ------- -------
5.3 13.7 1.5 20.5
----------------------------- ------ -------------- --------- ------- -------
14. BANK AND OTHER BORROWINGS
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
------------------------------- -------- -------- ------------
Term loans 182.3 167.7 169.7
Revolving credit facility 12.0 14.0 12.0
Bank overdrafts - - 0.1
Debt issue costs - term loans (1.8) (2.4) (2.1)
------------------------------- -------- -------- ------------
Bank and other borrowings 192.5 179.3 179.7
Finance leases 0.4 0.3 0.4
------------------------------- -------- -------- ------------
192.9 179.6 180.1
------------------------------- -------- -------- ------------
Less than one year 12.1 0.1 12.2
More than one year 180.8 179.5 167.9
------------------------------- -------- -------- ------------
192.9 179.6 180.1
------------------------------- -------- -------- ------------
Net debt is arrived at as follows:
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
--------------------------- -------- -------- ------------
Term loans 182.3 167.7 169.7
Revolving credit facility 12.0 14.0 12.0
Finance leases 0.4 0.3 0.4
--------------------------- -------- -------- ------------
Gross Debt 194.7 182.0 182.1
Cash and cash equivalents (34.3) (30.4) (29.1)
--------------------------- -------- -------- ------------
Net Debt 160.4 151.6 153.0
--------------------------- -------- -------- ------------
Net debt is shown gross of unamortised debt issue costs of
GBP1.8m (30 June 2015: GBP2.4m; 31 December 2015: GBP2.1m).
15. RETIREMENT BENEFIT OBLIGATIONS
The fair value changes in the defined benefit schemes are shown
below:
30 June 30 June 31 December
2016 2015 2015
GBPm GBPm GBPm
--------------------------------- -------- -------- ------------
At beginning of period 15.8 3.1 3.1
Acquisition of UK scheme - 14.2 14.2
Current service cost 0.1 0.1 0.4
Net interest cost 0.3 0.1 0.4
Actuarial loss/(gain) 2.9 (0.4) (1.2)
Contributions by the employer (0.4) (0.5) (1.0)
Benefits paid (0.1) - (0.1)
Effect of exchange rate changes
on overseas schemes 0.1 (0.2) -
--------------------------------- -------- -------- ------------
At end of period 18.7 16.4 15.8
--------------------------------- -------- -------- ------------
16. RELATED PARTY TRANSACTIONS
The group companies have entered into certain transactions with
related parties as follows:
30 June 30 June 31 December
2016 2015 2015
Balance sheet GBPm GBPm GBPm
-------------------------------------- --------- -------- ------------
Termination of consultancy agreement
fee payable to private equity
transfer - 1.0 1.0
-------------------------------------- --------- -------- ------------
Amounts receivable from joint - 0.3 -
venture partners
-------------------------------------- --------- -------- ------------
17. POST BALANCE SHEET EVENTS
The sale of the UK and Ireland Food, Water and Pharmaceutical
business to international life sciences company, Eurofins
Scientific, completed 1 July 2016, for a cash consideration of
GBP17.9m, net of certain working capital balances retained and
liabilities transferred (gross consideration of GBP20.0m). The
consideration is subject to a further selling price adjustment.
The sale consists of a portfolio of ten well-established,
accredited laboratories across the UK and Ireland, which provide a
wide range of chemistry and microbiological testing services. This
business generated revenues of around GBP20m in 2015.
On 1 July 2016, the Group acquired 100% of the share capital of
Jones Environmental Forensics Limited (Jones) for a cash
consideration of GBP13.9m. A further payment GBP1.0m was retained
and an amount of up to GBP1.6m is contingent upon future
profitability of the business in the year following acquisition.
The purchase consideration is subject to further purchase price
adjustments. Jones is a North Wales-based independent environmental
laboratory business and the UK's market leader in contaminated land
analysis and a specialist in environmental forensics, with an
excellent reputation for both quality and service. Jones has built
a strong reputation as the laboratory of choice for contaminated
soil and water analysis, primarily selling its services to leading
global environmental consultants, with the ultimate end customers
covering a variety of market segments, many of which Exova has an
existing presence with. The business has a team of over 150
specialists and achieved revenues of around GBP8m in 2015.
No further disclosures have been provided under IFRS 3 in
respect of business combinations after the balance sheet date on
the basis that the initial accounting is not yet complete.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR URUVRNNAWOAR
(END) Dow Jones Newswires
August 31, 2016 02:00 ET (06:00 GMT)
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