Final Results
McBride plc ("McBride", the "Company" or the "Group")
Strong second half response to COVID-19;
'Compass' strategy phase 1 concluded by the new CEO
8 September 2020
McBride, the leading European manufacturer and supplier of Contract Manufactured and Private Label products for the domestic household and professional cleaning/hygiene markets, announces its unaudited preliminary results for the year ended 30 June 2020.
Headlines
Strategy & Management
• Chris Smith appointed as CEO, June 2020
• New strategy and implementation programme launched; named Programme Compass
• Headline aim: Profitably grow annual revenues to €1 billion in the next five years, through focused divisional strategies
• Phase 1 of the review of strategy concluded
• Move to a product technology led divisional structure from 1 January 2021
• Detailed divisional strategies to be outlined at investor day in February 2021
Business
• Strong profit performance in last 4 months of the year driven by increased demand for cleaning, dishwash and aerosol products
• No significant production or business disruption from Covid-19
• Further delivery against key business improvement objectives:
• new Malaysian factory to support further growth, to be operational from December 2020
• Aerosols standalone business established, operating above targeted break-even position
• logistics improvement study concluded, implementation underway
• as previously indicated, Barrow (UK Powders site) scheduled to close in October 2020
• new product sustainability targets for 2025 announced
Financial
• Group revenues £706.2m, 2.1% lower (1.7% at constant currency), mostly from Aerosols UK exit
• Adjusted operating profit(2) of £28.3m, lower by 0.6m or 2.1%
• Operating profit of £15.4m (2019: £26.6m)
• Adjusted profit before tax of £24.2m (2019: £24.5m)
• Profit before tax of £11.2m (2019: £22.0m)
• Adjusted diluted EPS(3) from continuing operations 2.1% lower at 9.5p (2019: 9.7p)
• Full-year payment to shareholders proposed at 1.1p (2019: 3.3p)
• Net debt at £101.5m (30 June 2019 restated for IFRS 16: £130.8m)
• Debt/adjusted EBITDA(8) 2.1x (2019: 2.6x)
Chris Smith, Chief Executive Officer, commented:
"The Group has delivered a solid FY20 performance overall. Following a tough first half year, demand for many of our cleaning products rose strongly as a result of Covid-19. I am very proud of the way the McBride team has responded to the numerous challenges and opportunities that have arisen from the pandemic and the improved second half financial performance. Today McBride is announcing the initial findings of a thorough business review and the initial phase of its new "Compass" strategy that targets annual revenues of €1 billion over the next five years. From January 2021, we will establish separately managed divisions, each with their own focused strategies, and I am confident that the new McBride teams will deliver on our new ambitions."
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McBride plc |
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Chris Smith, Chief Executive Officer |
0161 203 7401 |
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Clive Jennings, Interim Chief Finance Officer |
0161 203 7401 |
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FTI Consulting |
020 3727 1000 |
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Ed Bridges, Nick Hasell |
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The Analyst presentation meeting at 11.00am today will be held by webcast. The results and strategy presentations will be available on the McBride plc investor relations website from 10.00am today, together with a link to the webcast.
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£m unless otherwise stated |
Year to 30 Jun 2020 |
Year to 30 Jun 2019 |
Reported % Change |
Constant Currency % Change1 |
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Continuing operations 9 |
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Household revenue |
671.0 |
673.6 |
(0.4)% |
(0.0)% |
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Group revenue |
706.2 |
721.3 |
(2.1)% |
(1.7)% |
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Adjusted operating profit2 |
28.3 |
28.9 |
(2.1)% |
(1.7)% |
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Operating profit |
15.4 |
26.6 |
(42.1)% |
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Adjusted profit before taxation |
24.2 |
24.5 |
(1.2)% |
(0.8)% |
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Profit before taxation |
11.2 |
22.0 |
(49.1)% |
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Adjusted diluted earnings per share3 |
9.5p |
9.7p |
(2.1)% |
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Diluted earnings per share |
3.7p |
6.5p |
(43.1)% |
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Total operations 9 |
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Revenue |
706.2 |
743.2 |
(5.0)% |
(4.6) % |
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Adjusted operating profit2 |
28.3 |
28.1 |
0.7% |
1.1% |
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Operating profit |
15.1 |
20.8 |
(27.4)% |
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Adjusted profit before taxation |
24.2 |
23.7 |
2.1% |
2.5% |
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Profit before taxation |
10.9 |
16.2 |
(32.7)% |
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Adjusted diluted earnings per share3 |
9.5p |
9.4p |
1.1% |
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Diluted earnings per share |
3.6p |
4.4p |
(18.2)% |
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Net debt5 |
101.5 |
130.8 |
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Net debt pre-IFRS 166 |
92.8 |
120.9 |
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Return on capital employed7 |
16.1% |
15.3% |
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Full year payment to shareholders (per ordinary share) |
1.1p |
3.3p |
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1 Comparatives translated at 30 June 2020 exchange rates.
2 Adjustments were made for the amortisation of intangible assets and exceptional items.
3 Adjustments were made for the amortisation of intangible assets, exceptional items, unwind of discount on provisions, exceptional tax charges and any related tax.
4 Adjusted finance costs refers to figures excluding unwind discount on environmental remediation provisions and prior year exceptional finance costs.
5 Net debt comprises cash and cash equivalents, overdraft, bank and other loans and lease liabilities.
6 Net debt excluding IFRS 16 comprises cash and cash equivalents, overdraft, bank and other loans, excluding lease liabilities.
7 Rolling twelve months adjusted operating profit to 30 June 2020 as a percentage of average period end net assets excluding net debt (pre IFRS 16).
8 Adjustments were made for the amortisation of intangible assets, exceptional items and depreciation.
9 During the prior financial year, the Group successfully completed the sale of the European Personal Care (PC) Liquids business. The financial results of this business have been treated as discontinued operations in both the current and prior year financial statements. The remaining activities within the Group are referred to as continuing operations .
The information in this announcement has not been audited or otherwise independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this announcement, or its contents, or otherwise arising in connection with this announcement.
This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares of the Company.
Certain statements, statistics and projections in this announcement are or may be forward looking. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that may or may not occur and actual results or events may differ materially from those expressed or implied by the forward-looking statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Accordingly, forward-looking statements contained in this announcement regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which are based on the knowledge and information available only at the date of this announcement's preparation.
The Company does not undertake any obligation to update or keep current the information contained in this announcement, including any forward-looking statements, or to correct any inaccuracies which may become apparent and any opinions expressed in it are subject to change without notice.
References in this announcement to other reports or materials, such as a website address, have been provided to direct the reader to other sources of information on McBride plc which may be of interest. Neither the content of McBride's website nor any website accessible by hyperlinks from McBride's website nor any additional materials contained or accessible thereon, are incorporated in, or form part of, this announcement.
Strategic Progress
This progress update will be in two parts; first, early information on the new strategic direction of the Group and then a review of the business improvement initiatives outlined in last year's Annual Report.
New strategy direction
The Group has launched Programme Compass, its 2020 strategy review and implementation programme. We have concluded the first phase of our review which included an externally supported market study and early strategy development work, the outcome of which has provided clear insight into prospects for profitable growth and profitability improvement.
Today we are announcing our new aim of growing annual revenues to €1 billion in the next five years. This ambition is supported by a number of key outputs from our initial review:
• The European household market (including branded products) totals £14 billion with expected growth of 2% per annum over the next 5 years
• Whilst private label share has fallen in the past three years, it is expected to grow in the next 5 years
• Identified and targeted opportunities for profitable growth will allow McBride to grow beyond average market trends
• A divisional approach will best promote the focus and accountability required to deliver both individual division and portfolio performance improvement
• Cost reduction and efficiency improvements will be a key aspect in the improved profitability
• Certain functions will remain centralised in order to maximise synergy benefits.
The need for varying strategies and separate focus will require a reorganisation of the business. Our intention is therefore to restructure the European Household business into three product technology led and separately managed and accountable business divisions. Managing directors and divisional leadership teams will manage each the following divisions, Liquids (£384m revenues), Unit Dosing (£183m) and Powders (£78m). Our Asia and Aerosols businesses, which are already standalone will remain as today and be overseen by the Powders Managing Director. Our new divisional structure will be implemented from 1 January 2021.
The strategy presentation document will be available on our website from 10.00am today.
Update on initiatives
During the year we continued to make good progress on a number of initiatives highlighted in last year's annual report:
• Factory footprint: the new factory in Malaysia is expected to start operations in December 2020, slightly later than the original plan as a result of lockdown challenges relating to Covid-19, with the exit of the old facility now expected in March 2021. In late 2019, we announced the closure of the Barrow UK powders facility as part of the consolidation of laundry powder volumes from our three plants to two. Production at Barrow is due to cease in October 2020.
• Logistics footprint: we have completed the study on options to optimise both our warehouse network and transport management processes. The initial actions are now underway with a phased benefit from the fourth quarter of the new financial year.
• Digital transformation: we have successfully rolled out latest generation IT operating platforms for colleagues, which has been well tested as office based colleagues worked smoothly from home during lockdown. We are embarking on a simplification of our SAP business systems environment and are in the early stages of installing new HR systems in Europe.
• Integrated Business Planning: the project to introduce this latest generation sales and operations planning process made progress in the year, with new software under trial and continuing adoption of these processes in internal business reviews. This project is being further adapted and evolved to meet the needs of Programme Compass in FY21 and beyond.
• Customer segmentation: whilst we have further developed our thinking on how to segment our customers and as a result our proposition for different customers, we have only used this lightly in the year for such decisions as R&D and production prioritisation. The new organisation will dictate a different approach to segmentation and hence extending the roll-out of this action has been deferred.
• Underperforming sectors: our Aerosols business has now transitioned to a stand-alone operation. Its goal this past year was to turn from a loss-making business to at least a break-even position. It is pleasing to see the progress we have made, with the business delivering profits in excess of £2 million.
Group Operating Results
Continuing operations
The financial year to June 2020 saw a contrasting business performance between the first and second halves. Our first half year proved challenging, particularly due to weaker second quarter revenues across most European markets. Our second half year saw significant volume recovery in the last four months as a result of strong demand for cleaning products due to Covid-19. Consequently our second half adjusted operating profits were £16.7 million, generating a margin of 4.7%, which contrasts with £11.6 million and a margin of 3.3% in the first half.
Full-year Group revenues at £706.2 million were 1.7% lower than the prior year at constant currency, the reduction almost entirely a result of the decision to exit UK Aerosol manufacture in the fourth quarter of the previous financial year, with a consequent effect on Aerosol sales.
The Group's full year Household revenues at constant currency were broadly flat compared to the prior year. This performance was driven by significant year ‑ on ‑ year growth in our South region and Asia, offsetting continued challenges in the French market and a weak performance in the UK.
Full-year adjusted operating profit of £28.3 million was slightly lower than the prior year (2019: £28.9m) with adjusted operating profit margin unchanged at 4.0%. Full-year operating profit was £15.4 million (2019: £26.6m). This includes amortisation of £2.1 million and exceptional charges of £10.8 million, largely related to the closure in 2020 of the Barrow site and consultancy costs incurred as part of the Group's review of strategy, organisation and operations.
Household
Reported revenues in our Household business decreased by 0.4% to £671.0 million (2019: £673.6m), unchanged at constant currency, and adjusted operating profit was £33.1 million (2019: £39.9m), with adjusted operating profit margins declining from 5.9% to 4.9%. Following our Aerosols business becoming a 'stand-alone' operation, a review of the use of shared functions resulted in a higher proportion of Group overhead costs being allocated to the Household segment from Aerosols, accounting for 0.8% of the 1.0% profit reduction.
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Year to |
Year to |
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30 June |
30 June |
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2020 |
2019 |
Reported |
Constant |
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Revenue |
£m |
£m |
change |
currency(i) |
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UK |
159.8 |
173.1 |
(7.7)% |
(7.7)% |
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France |
118.5 |
122.0 |
(2.9)% |
(2.3)% |
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North |
110.7 |
111.3 |
(0.5)% |
(0.2)% |
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South |
88.4 |
79.4 |
11.3% |
11.8% |
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East |
167.5 |
166.4 |
0.7% |
1.2% |
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Asia |
26.1 |
21.4 |
22.0% |
23.1% |
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671.0 |
673.6 |
(0.4)% |
(0.0)% |
• (i) Comparatives translated at 30 June 2020 exchange rates.
(ii) Half year comparatives translated at 30 June 2020 exchange rates.
The Group's first half Household revenues at constant currency were 1.4% lower compared to the prior year. Following a steady performance in the first four months of the year, the Group experienced a marked slowdown in November and December, especially in the UK and East regions.
Second half year revenues were 1.3%(ii) higher than in the first half of the year, primarily a result of changes in consumer demand due to Covid-19 which had a broadly similar impact across all of our European markets in the last four months of the year. Consumers' focus on hygiene increased demand for bleach and surface cleaning products (run-rates up 15%), whilst dish-washing tablets and liquids (run-rates up 13%) benefited from more food and drink being consumed at home. This was offset in part by a decline in demand for laundry products (run-rates down 7%).
Following exceptional levels of growth in many markets in March and April, reflecting consumer stockpiling across all categories ahead of countries going into lockdown, we saw overall demand return to more normal levels by the end of the fourth quarter.
While our factories continued to produce significant volumes during the period, exceptional orders in March and April depleted our finished goods inventories and significantly impacted our ability to supply full customer demand in the later months of the fourth quarter. This was especially the case for certain liquids products, primarily as a result of capacity limits in a number of our factories.
In the UK, revenues of £159.8 million were 7.7% lower compared to the prior year. A number of previously lost contract volumes were not fully offset by new wins and reduced volumes overall contributed to an 8.5% revenue reduction for the year, with a partial recovery of revenue achieved from favourable pricing actions. Overall revenues in the last four months were unchanged compared to the run rate seen before the lockdown. The UK business is heavily weighted to laundry products and the discounters, both of which underperformed the market in general. Higher run-rates in cleaners (+20%) and a small improvement in dishwash were offset by lower run-rates in laundry (-14%) in the last four month period.
In France, revenues of £118.5 million were down 2.3% at constant currency versus the prior year. Performance in the second half of the year improved significantly, resulting in an overall volume decline for the year of 2.7%. This was driven by our strong market share in private label dishwash and surface cleaner categories, which were in high demand due to Covid-19. Revenue run-rates in the last four months were 9% higher compared to those seen before the lockdown, with strong gains in cleaners (+23%) and dishwash (+7%) being partially offset by slight declines in laundry (-3%).
In the North region, revenues of £110.7 million compared with £110.9 million at constant currency in the prior year. In the first half of the year, volumes declined 5.1%, largely as expected following contract losses in the prior financial year. Performance in the second half of the year improved, mainly as a result of our position in private label dishwash and surface cleaner categories which were in higher demand during Covid-19. Revenue run-rates in the last four months were 13% higher compared to those seen before lockdown.
Our South region reported revenues of £88.4 million, a revenue increase of 11.8% at constant currency. The year saw continued progress in our Iberian business where new customer and contract wins resulted in a volume increase of 29.6% versus prior year. Within the larger Italian market, volumes for the full year increased modestly by 3.3% versus prior year. Revenue run-rates in the last four months were 1% lower compared to those seen before the lockdown reflecting a slight slowing of performance in the second half of the year due in part to some limited supply of auto dishwash and cleaning products and reduced demand for laundry products.
The East region, covering Germany, Poland and other East European countries, delivered revenues of £167.5 million, representing an increase of 1.2% at constant currency. The region had a mixed year, with a particularly strong start to the first quarter driven by contract gains and strong promotional activity, subsequently tempered by contract losses in the second quarter. Revenue run-rates in the last four months were 7% higher compared to those seen before the lockdown, with increases in cleaners (+7%) and dishwash (+20%), being offset by declines in laundry (-7%).
Asia reported sales of £26.1 million; a 23.1% increase on prior year at constant currency. This strong growth was driven by sales of dishwasher tablets, liquid hand wash and hand sanitiser. The region was able to supply higher volumes at relatively short notice, due to the investments made in the previous year to increase production capacity and flexibility. This growth has pushed the existing production facility to its capacity limits and the new Malaysian factory, which is expected to be operational in December 2020, will enable the Group to accelerate sales growth in the region going forward.
Whilst in the first half-year to December 2019 the Group saw relative stability in input costs, the second half of the financial year benefited from slightly softer raw material and packaging pricing. Materials based on oil prices saw prices in general lower, helping to offset increases on caustic soda and paper feedstocks. Direct labour costs benefited from operational efficiencies and savings from the Hull site closure in 2019, partially offset by higher costs incurred in relation to keeping our factories running well during the Covid-19 pandemic.
Distribution costs continued to remain under pressure, although some easing has been evident compared to the very high levels of price pressure seen in the prior years. During the last four months of the year, disruption resulting from the Covid-19 pandemic resulted in poorer transport utilisation. As a result, the ratio of distribution costs to sales has increased by 0.3% versus the prior year. The logistics management team have now completed their warehouse footprint and operational effectiveness review. The resultant transition is now underway with a phased impact from the end of the new financial year, delivering in the future a more cost competitive position.
Administrative overheads increased by £3.7 million, with a significant element being driven by one-off costs. These include increased costs linked to Covid-19, release of indirect tax provisions in the prior year; and the cost of changes in the Board, including the departure of the former CEO. Employee costs comprise just over half of the total and increased in line with inflation or national pay awards; whilst bonus and LTIP costs reverted to normal levels following a net credit in the prior year.
Aerosols
Reported revenues were £35.2 million (2019: £47.7m) with the revenue decline reflecting the decision to exit UK Aerosol manufacture in the fourth quarter of the previous financial year.
Following the reset of our Aerosols business, and its transition to a stand-alone business unit with its own locally controlled resources, a review of the use of shared functions resulted in a higher proportion of Group overhead costs being allocated from Aerosols to the Household segment. Applying this principle to the FY19 result would have resulted in Aerosols reporting an operating loss of circa £1 million.
At the end of February, prior to any impacts from Covid-19, we were on-track to achieve our ambition to bring the reset Aerosols business back to at least a break-even position. In response to increased demand for sanitising products as the Covid-19 pandemic spread to Europe, the Aerosols team quickly developed aerosol sanitiser products which saw good sales interest in the last 3 months of the year. As a result, the business reported an adjusted operating profit of £2.2 million for the year, significantly ahead of our financial ambition for the year.
Exceptional items
Total exceptional items of £10.8 million were recorded during the period in relation to continuing operations (2019: £0.4m). The charges primarily comprised the following:
• A factory footprint review charge of £9.4 million. This included £8.7 million related to the expected closure costs for the Barrow production facility, scheduled for October 2020. Of this, non-cash costs of £3.2 million include £0.5 million write down of goodwill, £1.7 million write down of plant and machinery and £1.0 million write down of inventory. Additionally, £2.7 million has been reserved for redundancy costs and £2.8 million was incurred in relation to legal and professional fees for consultancy around factory footprint and site closure. The remaining charges relate to restructuring activities to reduce the operational cost base in the UK;
• £1.3 million relating to consulting support in relation to the Group's ongoing review of strategy, organisation and operations (Programme Compass);
• A net £0.1 million of residual items relating to the Aerosols reorganisation of 2019. This comprises a gain of £0.8 million following the sale of the land and buildings at the former UK Aerosols site in Hull, offset by an exceptional charge of £0.9 million following the termination of a third party contract for the Hull warehouse operation and other site closure costs.
Discontinued Operations
During the prior financial year, the Group successfully completed the sale of the European Personal Care (PC) Liquids business. The financial results of this business have been treated as discontinued operations in the current year financial statements. The remaining activities within the Group are referred to as continuing operations.
During the year there was no revenue or operating profit/loss related to the PC Liquids business. In the prior year, the PC Liquids business generated revenues of £21.9 million and had an adjusted operating loss of £0.8 million.
Following the sale of our PC Liquids business in the previous financial year, liabilities for specific future redundancy remained with McBride. The acquirer implemented these redundancies in the first half-year, resulting in McBride paying £0.3 million.
This project is now closed with no further costs expected.
Finance costs
Adjusted finance costs(4) of £4.1 million (2019: £4.4m) were lower than prior year, mainly due to foreign exchange benefits on currency revaluations.
Taxation
Reported profit before taxation from continuing operations was £11.2 million (2019: £22.0m). Adjusted profit before taxation from continuing operations reduced by £0.3 million to £24.2 million (2019: £24.5m). The tax charge on continuing adjusted profit before tax for the period of £6.8 million (2019: £6.8m) represents a 28% (2019: 28%) effective tax rate. The impact on the future effective tax rate for the Group as a result of the new divisional structure is currently being assessed.
The Group operates across a number of jurisdictions and tax risk can arise in relation to the pricing of cross border transactions, where a taxation authority's interpretation of the arm's length principle can diverge from the approach taken by the Group. Transfer pricing is inherently subjective and in determining the appropriate level of provision, the Group considers the probability of a range of outcomes, using a weighted average methodology to focus risk on the most likely outcomes in the event of an audit. The amount provided also takes account of international dispute resolution mechanisms where available to mitigate double taxation. This analysis is reassessed at each period end and the estimates refined as additional information becomes available.
At 30 June 2020, the Group estimated its maximum possible tax exposure for ongoing tax audits and uncertain tax treatments to be £25.5 million, of which a provision of £5.0 million has been made.
Earnings per share
On an adjusted basis, diluted earnings per share (EPS) from continuing operations was 9.5 pence (2019: 9.7p). Total adjusted EPS increased to 9.5 pence (2019: 9.4p) with basic EPS at 3.6 pence (2019: 4.4p).
Payments to shareholders
During the year, the Board initiated a dividend policy review as part of the overall review of strategy, organisation and operations. As the Group's revised future plans and direction are concluded through the remainder of 2020 and future funding needs are defined, the Board expects to confirm its revised policy which will include consideration of views from current shareholders.
The Board cancelled the interim payment to shareholders of 0.8 pence per ordinary share declared in February 2020 as a result of uncertainty relating to Covid-19. In the light of the Group's earnings for the year and the delay in conclusion of the revised dividend policy going forward, the Board recommends a final payment of 1.1 pence to shareholders. It is intended this will be issued using the Company's B Share scheme on 27th November 2020 to shareholders on the register on 23rd October 2020. Elections for cash must be received by 1pm on 13th November 2020.
Cashflow and balance sheet
Cash generated from operations before exceptional items was £64.9 million (2019: £25.7m) in the year to 30 June 2020. One off benefits in the final quarter as a result of various Covid-19 effects are estimated at in excess of £10 million, which will reverse in the new financial year.
Trading working capital(a) as a percentage of sales decreased from 12.0% at 30 June 2019 to 10.6% at the end of the period. Inventory levels were slightly higher than prior year, with our factories performing very well to rebuild inventory levels following the exceptional level of orders in March and April that depleted our finished goods inventories. To a large extent, the additional revenues created by the exceptional level of demand had been converted to cash by the end of the year and the re-build of inventories through the last quarter not fully paid for. Additionally, the Group benefited from Covid-19 assistance packages from Governments that allowed a postponement of certain tax payments into the next financial year (£4.9m).
During the year, capital expenditure increased to £19.2 million in cash terms. In recent years we've prioritised capital expenditure to underpin our strategy of focused investment in growth categories.
Cash consideration of £3.0 million was received in relation to sale of land and buildings at the former Aerosols site at Hull, UK which completed during the second quarter. In the prior year, cash consideration of £12.5 million was received in relation to the successful disposal of the PC Liquids business in addition to £1.6 million cash received for the disposal of our former manufacturing site in Italy.
The Group's net assets increased to £66.9 million (2019: £64.2m). Gearing(b) improved to 57% (30 June 2019: 66%) and return on capital employed (excluding IFRS 16) of 16.1% was higher compared to the prior year (2019: 15.3%).
(a) Trade working capital defined as inventories, trade receivables and trade payables as a percentage of sales
(b) Gearing defined as the ratio of net debt/average year-end capital
Bank facilities and net debt
Net debt at the year-end excluding IFRS 16 decreased by £28.1 million to £92.8 million (30 June 2019: £120.9m) due mostly to the strong cash generation from operations in the year. Net debt including IFRS 16 was £101.5 million (30 June 2019 restated for IFRS 16: £130.8m).
The Group has an unsecured €175 million revolving credit facility ("RCF") that is committed until June 2022. At 30 June 2020, the amount undrawn on the facility was €61.3 million (2019: €73.4m).
The Group's RCF funding arrangements are subject to banking covenants, representations and warranties that are customary for unsecured borrowing facilities, including two financial covenants: Debt Cover (the ratio of net debt to EBITDA) may not exceed 3:1 and Interest Cover (the ratio of EBITDA to net interest) may not be less than 4:1. For the purpose of these calculations, net debt excludes IFRS 16 leases and amounts drawn under the invoice discounting facilities. As at 30 June 2020, the debt cover ratio under the RCF funding arrangements was 1.4x (2019: 1.9x) and the interest cover was 12.2x (2019: 12.0x). The Group remains well within these covenants.
Additionally, the Group has a number of facilities whereby it can borrow against certain of its trade receivables. In the UK, the Group has a £25 million facility that is committed until October 2021. In France and Belgium, the Group has an aggregate €30 million facility, which has a rolling notice period of six months for the French part and three months for the Belgian part. The Group can borrow from the provider of the relevant facility up to the lower of the facility limit and the value of the respective receivables. The Group also has access to uncommitted working capital facilities amounting to £32.8 million at 30 June 2020 (2019: £58.6m).
Pensions
The Group provides a number of post-employment benefit arrangements. In the UK, the Group operates a closed defined benefit scheme and a defined contribution pension scheme. Elsewhere in Europe, the Group has a number of smaller unfunded post-employment benefit arrangements that are structured to accord with local conditions and practices in the countries concerned. At 30 June 2020, the Group recognised a deficit on its UK scheme of £28.4 million (30 June 2019: £28.1m). The deficit is broadly unchanged over the period due to the increase in pension liabilities being offset by asset returns and deficit contributions paid by the Group.
The latest funding valuation for the UK scheme was completed as at 31 March 2018. As part of the deficit funding plan agreed with the trustees, the Company has agreed annual contributions of £4 million. As part of the agreement, the trustees have amended the fund's investment strategy with the aim of de-risking the scheme's assets to better match the cash inflows from the Fund's assets with the cash flow requirements of the Fund. This Cashflow Driven Investment (CDI) strategy was implemented during the first half of the financial year 30 June 2020. Through the use of credit / bond investments, the CDI strategy delivers a stable, more certain expected return and will reduce volatility in the reported accounting deficit as assets and liabilities are better matched.
The Group has other unfunded post-employment benefit obligations outside the UK that amounted to 3.1 million (30 June 2019: £3.0m).
Sustainability
We recognise the importance of sustainability to both our customers and the wider environment. Our product development plans are focused on three pillars that support this agenda; reduction in the use of plastics, responsible sourcing and product compaction. Today we are setting new targets that will deliver a clear step forward in terms of sustainability for every new product. Our targets for 2025 are that:
• All our plastic packaging will be fully recyclable
• We will add on average at least 50% post-consumer recycled content in our plastic bottles
• All our carton and paper will be sustainably sourced
• We will continue to drive our customers towards the use of sustainable palm oil
• Our product development will deliver further compaction in our laundry capsules and auto-dishwashing tablets and development of a range of tablet form, home dissolvable cleaners products
Principal Risks and Uncertainties
The Group is subject to risk factors both internal and external to its business, and has a well-established set of risk management procedures. The following risks and uncertainties are those that the Directors believe could have the most significant impact on the Group's business:
• Consumer and customer trends;
• Market competitiveness;
• Input costs;
• Legislation;
• Financial risks;
• Breach of IT security;
• Covid-19; and
• Brexit impacts.
We provide further detail regarding our response to the risks and uncertainties relating to Covid-19 and Brexit in the sections below.
Covid-19
During the Covid-19 pandemic our priorities have been to protect our team members and to support their health and well-being; to look after our customers; and to make our business secure, both financially and operationally. We took a number of swift actions, including:
• Forming a Covid-19 team in mid-March drawn from the Group's senior management. The team met daily to assess the range of issues impacting the Group. They scoped and rapidly put in place a plan of action, assigning activities and responsibilities. The team continues to meet regularly each week to monitor progress and to consider whether to adapt and/or flex the plan of action in light of ongoing developments.
• Introducing enhanced safety procedures for social distancing and segregation for our factory based colleagues. In addition, special arrangements were made to accommodate changes to shift patterns, assistance for colleagues with home challenges and flexible overtime arrangements.
• Achieving a smooth transition to remote working for all of our office based teams within a few days of local lockdowns being announced. A phased return to work for office staff has been achieved in most locations, again with the relevant national safety guidelines being introduced.
•Taking prudent and decisive action early in the process to preserve liquidity and reduce discretionary costs. This included cancellation of our interim dividend for the 2020 financial year, drawing down cash from our RCF facility and pausing all non-essential recruitment and travel.
Brexit
The Board continues to monitor the implications for the Group's operations in light of the new trading relationship between the UK and the EU, the final arrangements for which have yet to be concluded. Most product ranges produced in the UK are manufactured for UK customers with a very minimal level of exports to our EU customers. Some product ranges imported to the UK from the EU would be impacted by issues with cross-border movement. The Group has identified contingency plans to be implemented to mitigate these risks.
The lack of an agreed free trade deal between the UK and EU could lead to a fall in consumer and business confidence. Such a fall in confidence could, in turn, reduce spend on our products.
A cross-functional Brexit Task Force has identified the impact of the UK and EU failing to reach a free trade agreement on the Group's operations and has produced a comprehensive mitigation plan.
Going Concern
In adopting the going concern basis for preparing the consolidated financial statements, the Directors have considered the issues impacting the Group during the period and have reviewed the Group's projected compliance with its banking covenants. Based on the Group's cash flow forecasts and operating budgets, and considerations of the potential impact of the Covid-19 pandemic and other principal risks and uncertainties, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors have also considered severe downside scenarios which still showed adequate headroom. Accordingly, the adoption of the going concern basis remains appropriate.
Current Trading and Outlook
Trading conditions are starting to normalise as consumer behaviour returns to pre-Covid-19 patterns. Volumes in laundry products have not recovered, although demand for other cleaning products continues to show some year-on-year growth. We anticipate modest revenue growth in the coming year following contract gains which, combined with increased efficiency, should see a modest improvement in year-on-year profitability.
Unaudited consolidated income statement
for the year ended 30 June 2020
|
|
|
2020 |
2019 |
||||
|
|
|
|
Adjusting |
|
|
Adjusting |
|
|
|
|
Adjusted (see note 1) |
Items (see note 8) |
Total |
Adjusted (see note 1) |
Items (see note 8) |
Total |
|
Continuing operations |
Note |
£m |
£m |
£m |
£m |
£m |
£m |
|
Revenue |
3 |
706.2 |
- |
706.2 |
721.3 |
- |
721.3 |
|
Cost of sales |
|
(462.0) |
(1.0) |
(463.0) |
(480.9) |
- |
(480.9) |
|
Gross profit |
|
244.2 |
(1.0) |
243.2 |
240.4 |
- |
240.4 |
|
Distribution costs |
|
(57.3) |
- |
(57.3) |
(56.6) |
- |
(56.6) |
|
Administrative costs |
|
(158.6) |
(9.7) |
(168.3) |
(154.9) |
(3.8) |
(158.7) |
|
Impairment of goodwill |
|
- |
(0.5) |
(0.5) |
- |
- |
- |
|
Impairment of fixed assets |
|
- |
(1.7) |
(1.7) |
- |
1.5 |
1.5 |
|
Operating profit |
4 |
28.3 |
(12.9) |
15.4 |
28.9 |
(2.3) |
26.6 |
|
Finance costs |
6 |
(4.1) |
(0.1) |
(4.2) |
(4.4) |
(0.2) |
(4.6) |
|
Profit/(loss) before taxation |
|
24.2 |
(13.0) |
11.2 |
24.5 |
(2.5) |
22.0 |
|
Taxation |
7 |
(6.8) |
2.3 |
(4.5) |
(6.8) |
(3.2) |
(10.0) |
|
Profit/(loss) for the year from continuing operations |
|
17.4 |
(10.7) |
6.7 |
17.7 |
(5.7) |
12.0 |
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
Loss for the year from discontinued operations |
5 |
- |
(0.2) |
(0.2) |
(0.6) |
(3.3) |
(3.9) |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
17.4 |
(10.9) |
6.5 |
17.1 |
(9.0) |
8.1 |
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per ordinary share from continuing and discontinued operations attributable to the owners of the parent during the year |
8 |
|
|
|
|
|
|
|
Basic earnings/(loss) per share |
|
|
|
|
|
|
|
|
From continuing operations |
|
|
|
3.7p |
|
|
6.5p |
|
From discontinued operations |
|
|
|
(0.1p) |
|
|
(2.1p) |
|
From profit for the year |
|
|
|
3.6p |
|
|
4.4p |
|
|
|
|
|
|
|
|
|
|
Diluted earnings/(loss) per share |
|
|
|
|
|
|
|
|
From continuing operations |
|
|
|
3.7p |
|
|
6.5p |
|
From discontinued operations |
|
|
|
(0.1p) |
|
|
(2.1p) |
|
From profit for the year |
|
|
|
3.6p |
|
|
4.4p |
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
|
15.4 |
|
|
26.6 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Amortisation of intangible assets |
|
|
|
2.1 |
|
|
1.9 |
|
Exceptional items |
5 |
|
|
10.8 |
|
|
0.4 |
|
Adjusted operating profit (non-GAAP, see note 1) |
3 |
|
|
28.3 |
|
|
28.9 |
Unaudited consolidated statement of comprehensive income
for the year ended 30 June 2020
|
|
|
2020 |
2019 |
|
|
Note |
£m |
£m |
|
Profit for the year |
|
6.5 |
8.1 |
|
Other comprehensive income/(expense) |
|
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
|
Currency translation differences on foreign subsidiaries |
|
- |
0.6 |
|
Gain/(loss) on net investment hedges |
|
0.8 |
(0.9) |
|
Gain/(loss) on cash flow hedges in the year |
|
0.4 |
(0.2) |
|
Cash flow hedges transferred to profit or loss |
|
0.2 |
0.2 |
|
Taxation relating to items above |
|
(0.1) |
- |
|
|
|
1.3 |
(0.3) |
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
Net actuarial loss on postemployment benefits |
|
(3.7) |
(3.5) |
|
Taxation relating to item above |
|
1.8 |
0.5 |
|
|
|
(1.9) |
(3.0) |
|
Total other comprehensive expense |
|
(0.6) |
(3.3) |
|
Total comprehensive income |
|
5.9 |
4.8 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income/(expense) attributable to equity shareholders arises from: |
|
|
|
|
Continuing operations |
|
6.1 |
8.7 |
|
Discontinued operations |
|
(0.2) |
(3.9) |
|
|
|
5.9 |
4.8 |
Unaudited consolidated balance sheet
at 30 June 2020
|
|
|
2020 |
2019 |
|
|
Note |
£m |
£m |
|
Non-current assets |
|
|
|
|
Goodwill |
|
19.9 |
20.4 |
|
Other intangible assets |
|
8.5 |
9.1 |
|
Property, plant and equipment |
|
134.7 |
136.0 |
|
Derivative financial instruments |
|
- |
0.1 |
|
Right-of-use assets |
|
7.3 |
- |
|
Deferred tax assets |
|
13.8 |
10.9 |
|
Other non-current assets |
|
- |
0.6 |
|
|
|
184.2 |
177.1 |
|
Current assets |
|
|
|
|
Inventories |
|
97.5 |
95.0 |
|
Trade and other receivables |
|
138.3 |
145.9 |
|
Current tax asset |
|
6.2 |
2.1 |
|
Derivative financial instruments |
|
1.4 |
0.6 |
|
Cash and cash equivalents |
|
44.2 |
14.4 |
|
|
|
287.6 |
258.0 |
|
Total assets |
|
471.8 |
435.1 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
198.1 |
182.3 |
|
Borrowings |
|
33.2 |
43.5 |
|
Lease liabilities |
|
3.5 |
- |
|
Derivative financial instruments |
|
0.4 |
0.3 |
|
Current tax liabilities |
|
12.4 |
7.4 |
|
Provisions |
12 |
6.3 |
3.7 |
|
|
|
253.9 |
237.2 |
|
Non-current liabilities |
|
|
|
|
Borrowings |
|
103.8 |
91.8 |
|
Lease liabilities |
|
5.2 |
- |
|
Derivative financial instruments |
|
0.3 |
0.4 |
|
Pensions and other post-employment benefits |
11 |
31.5 |
31.1 |
|
Provisions |
12 |
3.6 |
4.2 |
|
Deferred tax liabilities |
|
6.6 |
6.2 |
|
|
|
151.0 |
133.7 |
|
Total liabilities |
|
404.9 |
370.9 |
|
Net assets |
|
66.9 |
64.2 |
|
|
|
|
|
|
Equity |
|
|
|
|
Issued share capital |
|
18.3 |
18.3 |
|
Share premium account |
|
70.6 |
73.9 |
|
Other reserves |
|
74.6 |
69.9 |
|
Accumulated losses |
|
(96.6) |
(97.9) |
|
Total equity |
|
66.9 |
64.2 |
Unaudited consolidated cash flow statement
for the year ended 30 June 2020
|
|
|
2020 |
2019 |
|
|
Note |
£m |
£m |
|
Operating activities |
|
|
|
|
Profit before tax |
|
|
|
|
Continuing operations |
|
11.2 |
22.0 |
|
Discontinued operations |
|
(0.3) |
(5.8) |
|
Finance costs |
6 |
4.2 |
4.6 |
|
Exceptional items |
5 |
8.9 |
6.9 |
|
Share-based payments charge/(credit) |
|
0.4 |
(0.2) |
|
Depreciation of property, plant and equipment |
|
17.1 |
18.4 |
|
Depreciation of right-of-use assets |
|
3.7 |
- |
|
Profit on disposal of fixed assets |
|
(0.7) |
- |
|
Amortisation of intangible assets |
|
2.1 |
1.9 |
|
Impairment of goodwill |
5 |
0.5 |
- |
|
Impairment of fixed assets |
5 |
1.7 |
(1.5) |
|
Operating cash flow before changes in working capital before exceptional items |
|
48.8 |
46.3 |
|
Decrease in receivables |
|
8.6 |
8.1 |
|
Increase in inventories |
|
(1.3) |
(3.6) |
|
Increase/(decrease) in payables |
|
12.8 |
(20.9) |
|
Operating cash flow after changes in working capital before exceptional items |
|
68.9 |
29.9 |
|
Additional cash funding of pension schemes |
|
(4.0) |
(4.2) |
|
Cash generated from operations before exceptional items |
|
64.9 |
25.7 |
|
Cash outflow in respect of exceptional items |
|
(5.2) |
(6.9) |
|
Cash generated from operations |
|
59.7 |
18.8 |
|
Interest paid |
|
(3.3) |
(4.3) |
|
Taxation paid |
|
(4.7) |
(7.2) |
|
Net cash generated from operating activities |
|
51.7 |
7.3 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Proceeds from sale of property, plant and equipment |
|
3.3 |
14.9 |
|
Purchase of property, plant and equipment |
|
(17.6) |
(17.1) |
|
Purchase of intangible assets |
|
(1.6) |
(1.6) |
|
Settlement of derivatives used in net investment hedges |
|
0.6 |
(0.8) |
|
Net cash used in investing activities |
|
(15.3) |
(4.6) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Redemption of B Shares |
|
(3.4) |
(8.6) |
|
Net (repayment)/drawdown of overdrafts |
|
(10.2) |
9.3 |
|
Net drawdown/(repayment) of bank loans |
|
9.9 |
(0.4) |
|
Repayment of IFRS 16 lease obligations |
|
(4.3) |
- |
|
Purchase of own shares |
|
(0.1) |
- |
|
Capital element of finance lease rentals |
|
- |
(0.2) |
|
Net cash (used in)/generated from financing activities |
|
(8.1) |
0.1 |
|
Increase in net cash and cash equivalents |
|
28.3 |
2.8 |
|
Net cash and cash equivalents at the start of the year |
|
14.4 |
11.7 |
|
Currency translation differences |
|
1.5 |
(0.1) |
|
Net cash and cash equivalents at the end of the year |
|
44.2 |
14.4 |
Unaudited consolidated reconciliation of net cash flow to movement in net debt
for the year ended 30 June 2020
|
|
|
2020 |
2019 |
|
|
Note |
£m |
£m |
|
Increase in net cash and cash equivalents |
|
28.3 |
2.8 |
|
Net repayment/(drawdown) of bank loans and overdrafts |
|
0.3 |
(8.9) |
|
Capital element of finance lease rentals |
|
- |
0.2 |
|
Change in net debt resulting from cash flows |
|
28.6 |
(5.9) |
|
Currency translation differences |
|
(0.5) |
(0.7) |
|
Movement in net debt in the year |
|
28.1 |
(6.6) |
|
Net debt at the beginning of the year |
|
(120.9) |
(114.3) |
|
Net debt at the end of the year excluding lease liabilities |
|
(92.8) |
(120.9) |
|
Lease liabilities |
|
(12.9) |
- |
|
Repayment of IFRS 16 Lease liabilities |
|
4.3 |
- |
|
Currency translation differences |
|
(0.1) |
- |
|
Net debt at the end of the year |
10 |
(101.5) |
(120.9) |
Unaudited consolidated statement of changes in equity
for the year ended 30 June 2020
|
|
|
|
Other reserves |
|
|
||
|
|
Issued |
Share |
Cash flow |
Currency |
Capital |
|
|
|
|
share |
premium |
hedge |
translation |
redemption |
Accumulated |
Total |
|
|
capital |
account |
reserve |
reserve |
reserve |
losses |
equity |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
At 1 July 2018 |
18.3 |
81.8 |
- |
(0.6) |
62.2 |
(94.5) |
67.2 |
|
Year ended 30 June 2019 |
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
8.1 |
8.1 |
|
Other comprehensive income/(expense) |
|
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
Currency translation differences on foreign subsidiaries |
- |
- |
- |
0.6 |
- |
- |
0.6 |
|
Loss on net investment hedges |
- |
- |
- |
(0.9) |
- |
- |
(0.9) |
|
Loss on cash flow hedges in the year |
- |
- |
(0.2) |
- |
- |
- |
(0.2) |
|
Gain on cash flow hedges transferred to profit or loss |
- |
- |
0.2 |
- |
- |
- |
0.2 |
|
Taxation relating to items above |
- |
- |
- |
- |
- |
- |
- |
|
|
- |
- |
- |
(0.3) |
- |
- |
(0.3) |
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
Net actuarial loss on postemployment benefits |
- |
- |
- |
- |
- |
(3.5) |
(3.5) |
|
Taxation relating to items above |
- |
- |
- |
- |
- |
0.5 |
0.5 |
|
|
- |
- |
- |
- |
- |
(3.0) |
(3.0) |
|
Total other comprehensive expense |
- |
- |
- |
(0.3) |
- |
(3.0) |
(3.3) |
|
Total comprehensive income/(expense) |
- |
- |
- |
(0.3) |
- |
5.1 |
4.8 |
|
Transactions with owners of the parent |
|
|
|
|
|
|
|
|
Issue of B Shares |
- |
(7.9) |
- |
- |
- |
- |
(7.9) |
|
Redemption of B Shares |
- |
- |
- |
- |
8.6 |
(8.6) |
- |
|
Sharebased payments |
- |
- |
- |
- |
- |
0.1 |
0.1 |
|
At 30 June 2019 |
18.3 |
73.9 |
- |
(0.9) |
70.8 |
(97.9) |
64.2 |
|
IFRS 16 transition |
- |
- |
- |
- |
- |
0.7 |
0.7 |
|
IFRIC 23 transition |
- |
- |
- |
- |
- |
(0.9) |
(0.9) |
|
At 1 July 2019 |
18.3 |
73.9 |
- |
(0.9) |
70.8 |
(98.1) |
64.0 |
|
Year ended 30 June 2020 |
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
6.5 |
6.5 |
|
Other comprehensive income/(expense) |
|
|
|
|
|
|
|
|
Items that may be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
Gain on net investment hedges |
- |
- |
- |
0.8 |
- |
- |
0.8 |
|
Gain on cash flow hedges in the year |
- |
- |
0.4 |
- |
- |
- |
0.4 |
|
Cash flow hedges transferred to profit or loss |
- |
- |
0.2 |
- |
- |
- |
0.2 |
|
Taxation relating to items above |
- |
- |
(0.1) |
- |
- |
- |
(0.1) |
|
|
- |
- |
0.5 |
0.8 |
- |
- |
1.3 |
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
Net actuarial loss on postemployment benefits |
- |
- |
- |
- |
- |
(3.7) |
(3.7) |
|
Taxation relating to items above |
- |
- |
- |
- |
- |
1.8 |
1.8 |
|
|
- |
- |
- |
- |
- |
(1.9) |
(1.9) |
|
Total other comprehensive income/(expense) |
- |
- |
0.5 |
0.8 |
- |
(1.9) |
(0.6) |
|
Total comprehensive income |
- |
- |
0.5 |
0.8 |
- |
4.6 |
5.9 |
|
Transactions with owners of the parent |
|
|
|
|
|
|
|
|
Issue of B Shares |
- |
(3.3) |
- |
- |
- |
- |
(3.3) |
|
Redemption of B Shares |
- |
- |
- |
- |
3.4 |
(3.4) |
- |
|
Sharebased payments |
- |
- |
- |
- |
- |
0.4 |
0.4 |
|
Purchase of own shares |
- |
- |
- |
- |
- |
(0.1) |
(0.1) |
|
At 30 June 2020 |
18.3 |
70.6 |
0.5 |
(0.1) |
74.2 |
(96.6) |
66.9 |
At 30 June 2020, the accumulated losses includes a deduction of £0.0 million (2019: £0.0m) for the cost of own shares held in relation to employee share schemes.
Notes to the unaudited consolidated financial information
For the year ended 30 June 2020
1 Basis of preparation
The financial information set out above does not constitute the company's statutory accounts for the years ended 30 June 2020 and 30 June 2019. The results for the year ended 30 June 2020 are unaudited. The financial information for 2019 is derived from the statutory accounts for 2019 which have been delivered to the registrar of companies. The auditor has reported on the 2019 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor 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. The statutory accounts for 2020 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.
The financial information has been prepared on the going concern basis in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union, IFRS Interpretations Committee and those parts of the Companies Act 2006 ('the Act') applicable to companies reporting under IFRS. The financial information has been prepared applying accounting policies that were applied in the preparation of the company's published consolidated financial statements for the year ended 30 June 2019 except for changes on the adoption of new accounting standards and amendments explained below. The financial statements have been prepared under the historical cost convention, modified in respect of the revaluation to fair value of contingent consideration, financial assets and liabilities (derivative financial instruments) at fair value through profit or loss and assets held for sale.
The financial information does not constitute statutory accounts of the Group for the years ended 30 June 2020 and 2019 within the meaning section 435 of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of IFRS.
Discontinued operations
During the prior financial year, the Group successfully completed the sale of the European Personal Care (PC) Liquids business. The financial results of this business have been treated as discontinued operations in the current and prior year financial statements. The remaining activities within the Group are referred to as continuing operations.
Going concern
In adopting the going concern basis for preparing the consolidated financial statements, the directors have considered the issues impacting the Group during the period and have reviewed the Group's projected compliance with its banking covenants. Based on the Group's cash flow forecasts and operating budgets, and considerations of the potential impact of the Covid-19 pandemic and other principal risks and uncertainties, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors have also considered severe downside scenarios which still showed adequate headroom. Accordingly, the adoption of the going concern basis remains appropriate.
Viability statement
In accordance with the requirements of the UK Corporate Governance Code ('the Code'), the Directors have performed a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. The Board has determined that a three ‑ year period to 30 June 2023 constitutes an appropriate period over which to provide its viability statement.
In assessing the Group's viability, the Directors have considered the current financial position of the Group and its principal risks and uncertainties and made the assumption that the current borrowings will be renewed on similar terms at the next refinancing date. The analysis considers severe but plausible downside scenarios incorporating the principal risks from a financial and operational perspective, with the resulting impact on key metrics, such as debt headroom and covenants, considered. The alternative scenarios assume sensitivity around exchange rates and interest rates, along with significant reductions in revenue, margins and cash flow over the three ‑ year period. In all cases the business model remained robust, funding capacity sufficient and covenants fully complied with. The Group's global footprint, product diversification and access to external financing all provide resilience against these factors and the other principal risks that the Group is exposed to. After conducting their viability review, the Directors confirm that, subject to refinancing as noted above, they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three ‑ year period of their assessment to 30 June 2023.
Adjusted results
The Group believes that adjusted operating profit, adjusted profit before taxation and adjusted earnings per share provide additional useful information to shareholders on the underlying performance achieved by the Group. These measures are used for internal performance analysis and in relation to employee incentive arrangements. The items excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangible assets and exceptional items. Adjusted earnings per share is based on the Group's profit for the year adjusted for the items excluded from operating profit in arriving at adjusted operating profit, the unwinding of discount on provisions, exceptional tax charges and the tax relating to those items.
'Adjusted operating profit' and 'adjusted earnings per share' are not defined under IFRS and, therefore, these measures as defined by the Group may not be comparable with similarly titled measures used by other companies. The Directors do not regard these measures as a substitute for, or superior to, the equivalent measures calculated and presented in accordance with IFRS.
2 Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 June 2019, except for:
The Group has applied the following standards and amendments for the first time for the annual reporting period commencing 1 July 2019:
- IFRS 16 - Leases
- IFRIC 23 - Uncertainty over Income Tax Treatments
Impact of initial application of IFRS 16, 'Leases'
The Group has adopted this new standard with the modified retrospective approach from 1 July 2019 with the cumulative net effect of initial application being an adjustment to the opening balance of accumulated losses as at 1 July 2019. Comparative information has not been restated and is presented, as previously reported, under IAS 17 and therefore may not be directly comparable.
The Group currently leases both properties and vehicles, comprising cars and commercial vehicles, which under IAS 17 were classified as a series of operating lease contracts with payments made (net of any incentives received from the lessor) charged to profit or loss on a straight-line basis over the period of the lease.
From 1 July 2019, under IFRS 16, leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.
For leases, the liabilities were measured at the present value of the remaining lease payments, discounted, in the absence of a rate implicit in the lease, at the lessee's incremental borrowing rate on its current facility as of 1 July 2019, adjusted for risk weighting by country, currency, size of asset and credit risk. The discount rate applied therefore differs by lease and ranges from 1.6% to 4.9%.
The associated right-of-use assets were measured using the approach set out in IFRS 16.C8(b)(i), whereby right-of-use assets are equal to their carrying amount as if the Standard had been applied since the commencement date, but discounted using the lessee's incremental borrowing rate at the date of initial application.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period using the effective interest method. The right-of-use asset is depreciated on a straight-line basis over the shorter of the asset's useful life and the lease term.
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• In determining whether existing contracts meet the definition of a lease, the Group did not reassess those contracts previously identified as leases and did not apply the standard to those contracts not previously assessed as leases.
• Leases with less than 12 months remaining as at the date of adoption of the new standard were not within the scope of IFRS 16.
• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
• To rely on its assessment of whether leases were onerous by applying IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' rather than performing an impairment review.
• To use hindsight to determine whether an option to extend or terminate a lease would be exercised at inception.
In addition the Group has elected to make use of the following exemptions in IFRS 16:
• Short-term leases (12 months or less from commencement) will not be within the scope of IFRS 16.
• Leases for which the asset is of low value (IT equipment and small items of office equipment) will not be within the scope of IFRS 16.
The effect of IFRS 16 adoption is as follows:
Impact on the statement of financial position as at 1 July 2019:
|
|
|
As at 30 June |
IFRS 16 |
As at 1 July |
|
|
|
2019 |
adjustment |
2019 |
|
|
|
£m |
£m |
£m |
|
Non-current assets |
|
|
|
|
|
Right-of-use assets |
|
- |
8.2 |
8.2 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Lease liabilities |
|
- |
3.8 |
3.8 |
|
Provisions |
|
3.7 |
(0.5) |
3.2 |
|
Non-current liabilities |
|
|
|
|
|
Lease liabilities |
|
- |
6.1 |
6.1 |
|
Provisions |
|
4.2 |
(1.9) |
2.3 |
|
Net assets |
|
64.2 |
0.7 |
64.9 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Accumulated loss |
|
(97.9) |
0.7 |
(97.2) |
|
Total equity |
|
64.2 |
0.7 |
64.9 |
£2.4 million (£0.5m current and £1.9m non-current) of provisions held on the balance sheet for onerous leases at 30 June 2019 have been reversed under the transitional practical expedient and offset to impair the respective right-of-use asset.
A reconciliation of the revised operating lease commitments as disclosed at 30 June 2019 under IAS 17 to the lease liabilities at 1 July 2019 under IFRS 16 is as follows:
|
|
|
|
|
£m |
|
Operating lease commitments under IAS 17 at 30 June 2019 |
|
|
|
8.5 |
|
Additional contract leases identified as part of IFRS 16 assessment |
|
|
|
2.8 |
|
Adjusted operating lease commitments under IAS 17 at 30 June 2019 |
|
|
|
11.3 |
|
Discounted using the Group's incremental borrowing rate at 1 July 2019 |
|
|
|
(0.5) |
|
Less: Short-term leases recognised as an expense on a straight-line basis |
|
|
(0.4) |
|
|
Less: Low value leases recognised as an expense on a straight-line basis |
|
|
(0.5) |
|
|
Lease liabilities at 1 July 2019 |
|
|
|
9.9 |
IFRIC 23 'Uncertainty over Income Tax Treatments'
IFRIC 23 changes the method of calculating provisions for uncertain tax positions. The Group previously recognised provisions based on the most likely amount of the liability, if any, for each separate uncertain tax position. The interpretation requires a probability weighted average approach to be taken in situations where there is a wide range of possible outcomes. For tax issues with a binary outcome, the most likely amount method remains in use.
The Group has implemented the interpretation using the modified retrospective approach, with the cumulative impact of application recognised at 1 July 2019 without restatement of comparatives. The effect of this was an increase to the provision for uncertain tax positions of £0.9 million. The Group has updated its accounting policy to reflect the requirements of the interpretation.
Accounting standards issued but not yet adopted
The following new standards and interpretations are issued but are not yet effective:
|
International Accounting Standards (IAS/IFRS) |
Effective Date |
|
|
|
|
|
|
IFRS 3 |
Definition of a business - Amendments to IFRS 3 |
1 January 2020 |
|
IFRS 9, & 7, IAS 39 |
Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7 |
1 January 2020 |
|
IAS 1, IAS 8 |
Definition of Material - Amendments to IAS 1, IAS 8 |
1 January 2020 |
|
IFRS 16 |
Covid-19 Related Rent Concessions - Amendments to IFRS 16 |
1 June 2020 |
Management does not believe the impact of adopting other new or amended standards and interpretations will have a material impact on the results or net assets of the Group.
3 Segment information
Background
Financial information is presented to the Board by product category for the purposes of allocating resources within the Group and assessing the performance of the Group's businesses. It is considered that Household products have different market characteristics to Aerosols in terms of volumes, market share and production requirements. Accordingly, the Group's operating segments are determined by product category, being Household and Personal Care & Aerosols.
Corporate costs, which include the costs associated with the Board and the Executive Leadership Team, governance and listed company costs and certain central functions (mostly associated with financial disciplines such as treasury), are reported separately to Household and Aerosols.
The Board uses adjusted operating profit to measure the profitability of the Group's businesses. Adjusted operating profit is, therefore, the measure of segment profit presented in the Group's segment disclosures. Adjusted operating profit represents operating profit before specific items that are considered to hinder comparison of the trading performance of the Group's businesses either period-on-period or with other businesses. During the periods under review, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangible assets and exceptional items.
Following the disposal of the Group's PC Liquids assets in the prior period, the respective results of this division are disclosed as a discontinued operation.
Analysis by reportable segment:
|
|
|
|
|
|
|
|
Operating segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal |
|
|
|
|
|
Household - Regions |
Total |
Care & |
Total |
|
Total |
|||||
|
|
UK |
France |
North(1) |
South(2) |
East(3) |
Asia |
Household |
Aerosols(4) |
segments |
Corporate(5) |
Group |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue |
159.8 |
118.5 |
110.7 |
88.4 |
167.5 |
26.1 |
671.0 |
35.2 |
706.2 |
- |
706.2 |
|
Adjusted operating profit/(loss) |
|
|
|
|
|
|
33.1 |
2.2 |
35.3 |
(7.0) |
28.3 |
|
Amortisation of intangible assets |
|
|
|
|
|
|
|
|
|
|
(2.1) |
|
Exceptional items (see note 5) |
|
|
|
|
|
|
|
|
|
|
(10.8) |
|
Operating profit |
|
|
|
|
|
|
|
|
|
|
15.4 |
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
(4.2) |
|
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
11.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Adjusted operating result |
|
|
|
|
|
|
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
90.2 |
7.3 |
97.5 |
- |
97.5 |
|
Capital expenditure |
|
|
|
|
|
|
19.2 |
1.2 |
20.4 |
- |
20.4 |
|
Amortisation and depreciation(6) |
|
|
|
|
|
|
22.6 |
0.3 |
22.9 |
- |
22.9 |
|
|
|
|
|
|
|
|
Operating segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal |
|
|
|
|
|
Household - Regions |
Total |
Care & |
Total |
|
Total |
|||||
|
|
UK |
France |
North(1) |
South(2) |
East(3) |
Asia |
Household |
Aerosols(4) |
segments |
Corporate(5) |
Group |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue |
173.1 |
122.0 |
111.3 |
79.4 |
166.4 |
21.4 |
673.6 |
47.7 |
721.3 |
- |
721.3 |
|
Adjusted operating profit/(loss) |
|
|
|
|
|
|
39.9 |
(4.0) |
35.9 |
(7.0) |
28.9 |
|
Amortisation of intangible assets |
|
|
|
|
|
|
|
|
|
|
(1.9) |
|
Exceptional items (see note 5) |
|
|
|
|
|
|
|
|
|
|
(0.4) |
|
Operating profit |
|
|
|
|
|
|
|
|
|
|
26.6 |
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
(4.6) |
|
Profit before taxation |
|
|
|
|
|
|
|
|
|
|
22.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue |
- |
- |
- |
- |
- |
- |
- |
21.9 |
21.9 |
- |
21.9 |
|
Adjusted operating loss |
|
|
|
|
|
|
- |
(0.8) |
(0.8) |
- |
(0.8) |
|
Inventories |
|
|
|
|
|
|
90.3 |
4.7 |
95.0 |
- |
95.0 |
|
Capital expenditure |
|
|
|
|
|
|
17.1 |
1.6 |
18.7 |
- |
18.7 |
|
Amortisation and depreciation |
|
|
|
|
|
|
20.1 |
0.2 |
20.3 |
- |
20.3 |
1) Belgium, Holland and Scandinavia.
2) Italy and Spain.
3) Germany, Poland, Luxembourg and other Eastern Europe.
4) Continuing operations relates to Aerosols activity only.
5) Corporate represents costs related to the Board, the Executive Leadership Team and key supporting functions.
6) Depreciation includes £3.7m of depreciation from IFRS 16 right-of-use assets in the 2020 financial year.
4 Operating profit
Operating profit is stated after charging/(crediting):
|
|
|
2020 |
|
|
2019 |
|
|
|
Continuing |
Discontinued |
|
Continuing |
Discontinued |
|
|
|
operations |
operations |
Total |
operations |
operations |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Cost of inventories (included in cost of sales) |
412.7 |
- |
412.7 |
429.6 |
15.0 |
444.6 |
|
Employee costs |
132.7 |
- |
132.7 |
132.6 |
2.3 |
134.9 |
|
Amortisation of intangible assets |
2.1 |
- |
2.1 |
1.9 |
- |
1.9 |
|
Depreciation of property, plant and equipment |
17.1 |
- |
17.1 |
18.4 |
- |
18.4 |
|
Depreciation of right-of-use assets |
3.7 |
- |
3.7 |
- |
- |
- |
|
Impairment/(writeback): |
|
|
|
|
|
|
|
Property, plant and equipment |
1.7 |
- |
1.7 |
(1.5) |
- |
(1.5) |
|
Inventories |
1.9 |
- |
1.9 |
0.2 |
- |
0.2 |
|
Trade receivables |
1.1 |
- |
1.1 |
0.1 |
- |
0.1 |
|
Expense relating to short term leases |
0.6 |
- |
0.6 |
- |
- |
- |
|
Expense relating to low value leases |
0.3 |
- |
0.3 |
- |
- |
- |
|
Rentals payable under operating leases |
- |
- |
- |
4.0 |
0.2 |
4.2 |
|
Research and development costs not capitalised |
6.2 |
- |
6.2 |
6.5 |
0.1 |
6.6 |
|
Net foreign exchange losses |
0.4 |
- |
0.4 |
0.9 |
- |
0.9 |
5 Exceptional items
Analysis of exceptional items:
|
|
2020 |
2019 |
|
|
£m |
£m |
|
Continuing operations |
|
|
|
Reorganisation and restructuring costs: |
|
|
|
Acquisition of Danlind |
- |
0.7 |
|
UK Aerosols closure |
0.1 |
(1.2) |
|
Factory footprint review |
9.4 |
0.9 |
|
Review of strategy, organisation and operations |
1.3 |
- |
|
Total charged to operating profit |
10.8 |
0.4 |
|
Group tax: |
|
|
|
Reduction of ACT deferred tax asset |
- |
4.1 |
|
Total charged to taxation |
- |
4.1 |
|
Total continuing operations |
10.8 |
4.5 |
|
|
|
|
|
Discontinued operations |
|
|
|
Sale of PC Liquids business |
0.3 |
5.0 |
|
Total discontinued operations |
0.3 |
5.0 |
|
Total |
11.1 |
9.5 |
Total exceptional items of £11.1 million were recorded during the year (2019: £9.5m). The charge primarily comprises the following:
Items relating to continuing operations
Total exceptional items incurred in relation to the continuing business of £10.8 million were recorded during the year (2019: 4.5m). The charge comprises the following:
• included within the exceptional charge of £9.4 million is £8.7 million related to the expected closure costs for the Barrow production facility, scheduled for October 2020. Of this, non-cash costs of £3.2 million include £0.5 million related to the write down of goodwill that was attributed to the site, £1.7 million relating to plant and machinery assets written down and £1.0 million relates to the write down of inventory. Additionally, £2.7 million has been reserved for redundancy costs and £2.8 million was incurred in relation to legal and professional fees for consultancy around factory footprint and site closure. The remaining charges relate to restructuring activities to reduce the operational cost base in the UK;
• exceptional charge of £1.3 million relating to consulting support in relation to the Group's ongoing review of strategy, organisation and operations (Programme Compass);
• UK Aerosols closure relates to the residual items from the Aerosols reorganisation of 2019. This comprises a gain of £0.8 million following the sale of the land and buildings at the former UK Aerosols site in Hull, offset by an exceptional charge of £0.9 million following the termination of a third party contract for the Hull warehouse operation and other site closure costs.
Items relating to discontinuing operations
As part of the sale agreement with Royal Sanders, the Group has incurred an additional £0.3 million of redundancy costs following the sale of the Group's PC Liquids activities in 2019.
6 Finance costs
|
|
2020 |
2019 |
|
|
£m |
£m |
|
Finance costs |
|
|
|
Interest on bank loans and overdrafts |
2.6 |
2.5 |
|
Interest on lease liabilities |
0.2 |
- |
|
Net foreign exchange (gain)/loss |
(0.3) |
0.3 |
|
Amortisation of facility fees |
0.3 |
0.3 |
|
Non-utilisation fees |
0.6 |
0.5 |
|
Premium on average rate currency options |
0.1 |
0.1 |
|
|
3.5 |
3.7 |
|
Post-employment benefits: |
|
|
|
Net interest cost on defined benefit obligation |
0.6 |
0.7 |
|
Adjusted finance costs |
4.1 |
4.4 |
|
Unwind of discount on provisions (see note 12) |
0.1 |
0.2 |
|
Total finance costs |
4.2 |
4.6 |
Interest rate swaps are used to manage the interest rate profile of the Group's borrowings. Accordingly, net interest payable or receivable on interest rate swaps is included in finance costs.
7 Taxation
Income tax expense/(credit):
|
|
2020 |
2019 |
||||
|
|
UK |
Overseas |
Total |
UK |
Overseas |
Total |
|
From continuing operations |
£m |
£m |
£m |
£m |
£m |
£m |
|
Current tax expense/(credit) |
|
|
|
|
|
|
|
Current year |
- |
8.0 |
8.0 |
- |
7.8 |
7.8 |
|
Adjustment for prior years |
(0.2) |
(2.6) |
(2.8) |
(1.1) |
(0.3) |
(1.4) |
|
|
(0.2) |
5.4 |
5.2 |
(1.1) |
7.5 |
6.4 |
|
Deferred tax expense/(credit) |
|
|
|
|
|
|
|
Origination and reversal of temporary differences |
(1.0) |
0.4 |
(0.6) |
4.3 |
1.4 |
5.7 |
|
Adjustment for prior years |
0.4 |
(0.2) |
0.2 |
(0.6) |
(1.5) |
(2.1) |
|
Impact of change in tax rate |
(0.3) |
- |
(0.3) |
- |
- |
- |
|
|
(0.9) |
0.2 |
(0.7) |
3.7 |
(0.1) |
3.6 |
|
Income tax expense/(credit) |
(1.1) |
5.6 |
4.5 |
2.6 |
7.4 |
10.0 |
The current tax adjustment for the prior year includes £1.3 million credit for the release of a provision following settlement of a tax enquiry and £0.9 million credit relating to the release of provisions for uncertain tax treatments due to the expiry of statutes of limitation.
Reconciliation to UK statutory tax rate
The total tax charge on the Group's profit before tax for the year differs from the theoretical amount that would be charged at the UK standard rate of corporation tax for the following reasons:
|
|
2020 |
2019 |
|
From continuing operations |
£m |
£m |
|
Profit before tax |
11.2 |
22.0 |
|
Profit before tax multiplied by the UK corporation tax rate of 19.00% (2019: 19.00%) |
2.2 |
4.2 |
|
Effect of tax rates in foreign jurisdictions |
2.6 |
2.2 |
|
Non-deductible expenses |
1.5 |
2.4 |
|
Tax incentives/nontaxable income |
(0.6) |
(0.6) |
|
Tax losses for which no deferred tax recognised |
1.3 |
0.9 |
|
Change in tax rate |
(0.3) |
- |
|
Reduction of ACT asset |
- |
4.1 |
|
Other differences |
0.4 |
0.3 |
|
Adjustment for prior years |
(2.6) |
(3.5) |
|
Total tax expense in profit or loss |
4.5 |
10.0 |
Taxation is provided at current rates on the profits earned for the year.
8 Earnings/(loss) per share
Basic earnings per ordinary share is calculated by dividing the profit for the year attributable to owners of the Company by the weighted average number of the Company's ordinary shares in issue during the financial year. The weighted average number of the Company's ordinary shares in issue excludes 42,041 shares (2019: 42,041 shares), being the weighted average number of own shares held during the year in relation to employee share schemes.
|
|
Reference |
2020 |
2019 |
|
Weighted average number of ordinary shares in issue (million) |
a |
182.8 |
182.8 |
|
Effect of dilutive LTIP awards (million) |
|
- |
0.1 |
|
Weighted average number of ordinary shares for calculating diluted earnings per share (million) |
b |
182.8 |
182.9 |
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming the conversion of all potentially dilutive ordinary shares.
During the year, the Company had equity-settled LTIP awards with a nil exercise price that are potentially dilutive ordinary shares.
Adjusted earnings per share measures are calculated based on profit for the year attributable to owners of the Company before adjusting items as follows:
|
|
|
2020 |
2019 |
|
From continuing operations |
Reference |
£m |
£m |
|
Earnings for calculating basic and diluted earnings per share |
c |
6.7 |
12.0 |
|
Adjusted for: |
|
|
|
|
Amortisation of intangible assets |
|
2.1 |
1.9 |
|
Exceptional items (see note 5) |
|
10.8 |
0.4 |
|
Unwind of discount on provisions |
|
0.1 |
0.2 |
|
Taxation relating to the above items |
|
(2.3) |
(0.9) |
|
Exceptional items - taxation (see note 5) |
|
- |
4.1 |
|
Earnings for calculating adjusted earnings per share |
d |
17.4 |
17.7 |
|
|
|
2020 |
2019 |
|
|
Reference |
pence |
pence |
|
Basic earnings per share |
c/a |
3.7 |
6.5 |
|
Diluted earnings per share |
c/b |
3.7 |
6.5 |
|
Adjusted basic earnings per share |
d/a |
9.5 |
9.7 |
|
Adjusted diluted earnings per share |
d/b |
9.5 |
9.7 |
|
|
|
2020 |
2019 |
|
From discontinued operations |
Reference |
£m |
£m |
|
Losses for calculating basic and diluted earnings per share |
c |
(0.2) |
(3.9) |
|
Adjusted for: |
|
|
|
|
Exceptional items (see note 5) |
|
0.3 |
5.0 |
|
Taxation relating to the above items |
|
(0.1) |
(1.7) |
|
Losses for calculating adjusted earnings per share |
d |
- |
(0.6) |
|
|
|
2020 |
2019 |
|
|
Reference |
pence |
pence |
|
Basic loss per share |
c/a |
(0.1) |
(2.1) |
|
Diluted loss per share |
c/b |
(0.1) |
(2.1) |
|
Adjusted basic loss per share |
d/a |
- |
(0.3) |
|
Adjusted diluted loss per share |
d/b |
- |
(0.3) |
|
|
|
2020 |
2019 |
|
Total attributable to ordinary shareholders |
Reference |
£m |
£m |
|
Earnings for calculating basic and diluted earnings per share |
c |
6.5 |
8.1 |
|
Adjusted for: |
|
|
|
|
Amortisation of intangible assets |
|
2.1 |
1.9 |
|
Exceptional items (see note 5) |
|
11.1 |
5.4 |
|
Unwind of discount on provisions |
|
0.1 |
0.2 |
|
Taxation relating to the above items |
|
(2.4) |
(2.6) |
|
Exceptional items - taxation (see note 5) |
|
- |
4.1 |
|
Earnings for calculating adjusted earnings per share |
d |
17.4 |
17.1 |
|
|
|
2020 |
2019 |
|
|
Reference |
pence |
pence |
|
Basic earnings per share |
c/a |
3.6 |
4.4 |
|
Diluted earnings per share |
c/b |
3.6 |
4.4 |
|
Adjusted basic earnings per share |
d/a |
9.5 |
9.4 |
|
Adjusted diluted earnings per share |
d/b |
9.5 |
9.4 |
9 Payments to shareholders
Payments to ordinary shareholders are made by way of the issue of B Shares in place of income distributions. Ordinary shareholders are able to redeem any number of the B Shares issued to them for cash. Any B Shares that they retain attract a dividend of 75% of LIBOR on the 0.1 pence nominal value of each share, paid on a twice-yearly basis.
Payments to ordinary shareholders made or proposed in respect of the year were as follows:
|
|
2020 |
2019 |
||
|
|
Pence |
|
Pence |
|
|
|
per share |
£m |
per share |
£m |
|
Interim |
- |
- |
1.5 |
2.7 |
|
Final |
1.1 |
2.0 |
1.8 |
3.3 |
|
Total for the year |
1.1 |
2.0 |
3.3 |
6.0 |
On 20 February 2020, the Group announced an interim payment to shareholders of 0.8 pence per ordinary share. On 25 March 2020, in light of the Covid-19 pandemic and as part of its prudent management of cash resources, the Group cancelled the interim payment to shareholders. This announcement did not impact shareholders' ability to redeem B shares for cash.
The proposed final payment in respect of 2020 of 1.1 pence per ordinary share is subject to approval by shareholders at the Company's 2020 AGM and has therefore not been recognised in these financial statements
Movements in the number of B Shares outstanding were as follows:
|
|
2020 |
2019 |
||
|
|
|
Nominal |
|
Nominal |
|
|
Number |
value |
Number |
value |
|
|
000 |
£m |
000 |
£m |
|
Issued and fully paid |
|
|
|
|
|
At 1 July |
815,631 |
0.8 |
1,560,374 |
1.5 |
|
Issued |
3,290,369 |
3.3 |
7,860,325 |
7.9 |
|
Redeemed |
(3,392,870) |
(3.4) |
(8,605,068) |
(8.6) |
|
At 30 June |
713,130 |
0.7 |
815,631 |
0.8 |
B Shares carry no rights to attend, speak or vote at Company meetings, except on a resolution relating to the winding up of the Company.
10 Capital and net debt
The Group's capital comprises total equity and net debt.
The Directors manage the Group's capital to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. The Directors aim to maintain an efficient capital structure with a relatively conservative level of debt-to-equity gearing so as to ensure continued access to a broad range of financing sources in order to provide sufficient flexibility to pursue commercial opportunities as they arise.
The Group's capital was as follows:
|
|
2020 |
2019 |
2018 |
|
|
£m |
£m |
£m |
|
Total equity |
66.9 |
64.2 |
67.2 |
|
Net debt |
101.5 |
120.9 |
114.3 |
|
Capital |
168.4 |
185.1 |
181.5 |
|
|
2020 |
2019 |
|
|
% |
% |
|
Gearing(1) |
57 |
66 |
(1) Gearing represents net debt/average year-end capital.
Movements in net debt were as follows:
|
|
|
|
|
|
Currency translation differences |
|
|
|
At 30 June |
|
IFRS 16 non- |
|
At 30 June 2020 |
|
|
|
2019 |
|
cash movements* |
Cash flows |
||
|
|
£m |
|
£m |
£m |
£m |
£m |
|
Cash and cash equivalents |
14.4 |
|
- |
28.3 |
1.5 |
44.2 |
|
Overdrafts |
(13.4) |
|
- |
10.2 |
(0.9) |
(4.1) |
|
Bank and other loans |
(121.9) |
|
- |
(9.9) |
(1.1) |
(132.9) |
|
Lease liabilities |
- |
|
(12.9) |
4.3 |
(0.1) |
(8.7) |
|
Net debt |
(120.9) |
|
(12.9) |
32.9 |
(0.6) |
(101.5) |
*IFRS 16 non-cash movements includes the initial liability at adoption of the new standard (£9.9m), additions (£2.8m) and interest charged (£0.2m).
|
|
|
|
Other |
Currency |
|
|
|
At 30 June |
Cash |
non-cash |
translation |
At 30 June |
|
|
2018 |
flows |
movements |
differences |
2019 |
|
|
£m |
£m |
£m |
£m |
£m |
|
Cash and cash equivalents |
11.7 |
2.8 |
- |
(0.1) |
14.4 |
|
Overdrafts |
(4.1) |
(9.3) |
- |
- |
(13.4) |
|
Bank and other loans |
(121.7) |
0.4 |
- |
(0.6) |
(121.9) |
|
Finance lease liabilities |
(0.2) |
0.2 |
- |
- |
- |
|
Net debt |
(114.3) |
(5.9) |
- |
(0.7) |
(120.9) |
11 Pensions and post-employment benefits
The Group provides a number of post-employment benefit arrangements. In the UK, the Group operates a closed defined benefit pension scheme and a defined contribution pension scheme. Elsewhere in Europe, the Group has a number of smaller unfunded post-employment benefit arrangements that are structured in accord with local conditions and practices in the countries concerned.
The net value of the pension deficit for the UK scheme increased in the year from £28.1 million at the end of the previous year to £28.4 million. The deficit is broadly unchanged over the period due to changes in asset values being broadly in line with changes in pension liabilities.
At 30 June 2020, the Group's post-employment benefit obligations outside the UK amounted to £3.1 million (2019: £3.0m).
12 Provisions
|
|
Reorganisation |
|
|
|
|
|
|
and |
Leasehold |
Environmental |
|
|
|
|
restructuring |
dilapidations |
remediation |
Other |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
|
At 1 July 2018 |
3.2 |
0.8 |
3.2 |
- |
7.2 |
|
Charged to profit or loss |
6.9 |
- |
- |
0.6 |
7.5 |
|
Unwind of discount |
- |
0.1 |
0.1 |
- |
0.2 |
|
Non-cash movement |
(3.7) |
- |
- |
- |
(3.7) |
|
Utilisation |
(2.9) |
(0.1) |
(0.3) |
- |
(3.3) |
|
At 30 June 2019 |
3.5 |
0.8 |
3.0 |
0.6 |
7.9 |
|
Charged to profit or loss |
7.4 |
0.2 |
0.1 |
(0.3) |
7.4 |
|
Unwind of discount |
- |
0.1 |
- |
- |
0.1 |
|
Non-cash movement |
(2.4) |
- |
- |
- |
(2.4) |
|
Utilisation |
(2.9) |
- |
(0.2) |
- |
(3.1) |
|
At 30 June 2020 |
5.6 |
1.1 |
2.9 |
0.3 |
9.9 |
Analysis of provisions:
|
|
2020 |
2019 |
|
|
£m |
£m |
|
Current |
6.3 |
3.7 |
|
Non-current |
3.6 |
4.2 |
|
Total |
9.9 |
7.9 |
Reorganisation costs in the year of £7.4 million comprise £5.3 million of redundancies and associated costs following the management decision to close the Barrow site, £0.7 million of costs associated with the ongoing review of strategy, organisation and operations and £1.4 million of other reorganisation costs.
The closing provision for reorganisation and restructuring projects primarily relates to the closure of the Barrow site and is expected to be utilised within twelve months of the balance sheet date.
Environmental remediation provision relates to historical environmental contamination at a site in Belgium and will be utilised as the land is restored within a period of approximately ten years.
Leasehold dilapidations provision relates to costs expected to be incurred to restore leased properties to their original condition at the end of the respective lease terms. A provision has been recognised for the present value of the estimated expenditure required to undertake restoration works. Amounts will be utilised as the respective leases end and restoration works are carried out, within a period of approximately four years.
The non-cash movement in the current year relates to the reclassification of an onerous lease provision, to impair the corresponding right-of-use asset under the IFRS 16 transition expedient.
13 Exchange rates
The principal exchange rates used to translate the results, assets and liabilities and cash flows of the Group's foreign operations into Sterling were as follows:
|
|
Average rate |
Closing rate |
||
|
|
2020 |
2019 |
2020 |
2019 |
|
Euro |
1.14 |
1.14 |
1.10 |
1.12 |
|
US Dollar |
1.26 |
1.30 |
1.23 |
1.27 |
|
Danish Krone |
8.51 |
8.47 |
8.17 |
8.33 |
|
Polish Zloty |
4.96 |
4.88 |
4.89 |
4.74 |
|
Czech Koruna |
29.60 |
29.20 |
29.31 |
28.38 |
|
Hungarian Forint |
384.57 |
365.28 |
390.80 |
360.71 |
|
Malaysian Ringgit |
5.30 |
5.34 |
5.26 |
5.25 |
|
Australian Dollar |
1.88 |
1.81 |
1.79 |
1.81 |
14 Annual General Meeting
Further to our July Trading Update, we today confirm that the Annual General Meeting will be held at 3.00pm on 23 November 2020.
15 Report and Accounts
Copies of the Annual Report and Financial Statements will be circulated to shareholders in October and can be viewed after the posting date on the McBride website.
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