TIDMVSVS
RNS Number : 9976T
Vesuvius plc
28 July 2022
28 July 2022
Half Year Results for the six months ended 30 June 2022
Strong financial performance driven by full mitigation of
inflationary pressures and market share gains
Vesuvius plc, a global leader in molten metal flow engineering
and technology, announces its unaudited results for the six months
ended 30 June 2022.
Financial summary H1 2022 H1 2021 Year-on-year Underlying
change change(1)
(GBPm) (GBPm)
-------------------------------- ---- --------- --------- -------------- ------------
Revenue 1,015.9 808.1 +26% +21%
Trading Profit (2) (adjusted
EBITA) 127.4 73.3 +74% +69%
Return on Sales (2) 12.5% 9.1% +340 bps +350 bps
Operating Profit 122.3 68.5 +79%
Profit Before Tax 116.7 65.5 +78%
Headline Profit Before
Tax (2) 121.8 70.3 +73%
Profit 84.9 46.3 +83%
Headline Earnings (2) 84.7 48.5 +75%
Statutory EPS (pence) 30.0p 15.9p +89%
Headline EPS (2) (pence) 31.4p 17.9p +75%
Adjusted operating cash
flow (2) 33.1 37.9 (13%)
Cash generated from operations 69.0 50.2 +37%
Net Debt (2) 327.7 196.6 +67%
Dividend (pence per share) 6.5p 6.2p +5%
-------------------------------------- --------- --------- -------------- ------------
(1) Underlying basis is at constant currency and excludes
separately reported items and the impact of acquisitions and
disposals.
(2) For definitions of non-GAAP measures, refer to Note 15 in
the Condensed Group Financial Statements.
Half Year 2022 Highlights
-- Revenue of GBP1,015.9m, an increase of +21% on an underlying basis
-- Trading profit (adjusted EBITA) of GBP127.4m, an increase of 69% on an underlying basis
-- These increases were driven by:
o Selling price increases to fully mitigate inflationary
pressures and cover the price lag from 2021
o Market share gains across both divisions
o Predicated on the relevance of our technology-driven business
model that provides value for customers
-- Positive volume growth of c.2% in our Steel Division
(excluding the impact of Universal business acquisition) in the
world excluding China and Iran, despite a 4% decline in the
corresponding steel production. Volume decline in China was limited
to c.1% despite a 6.5% decline in the corresponding steel
production. Flow Control volume growth worldwide was above the
average of the Steel division
-- Despite market share gains, the Foundry division saw a
decline in volume of c.3% due to continued weakness in the
automotive market. It however delivered strong volume growth in key
developing markets including Turkey (+9%), Brazil (+8%) and Vietnam
(+6%)
-- The integration of the Universal Refractories business is
proceeding as planned and performance remains ahead of our
expectations
-- Strategic capacity expansion in Flow Control in Asia and EMEA remains on track
-- Trade working capital/sales increased, as planned, to
mitigate supply chain disruptions, reaching 22.8% (12m average)
versus 20.9% at FY2021
-- Net debt /adjusted EBITDA(2) of 1.3x at 30 June 2022 versus 1.4x at FY2021
-- Doubling of our 2025 target for carbon footprint reduction
from 10% to 20% (versus 2019 levels) and introducing an additional
2035 target of a 50% reduction
-- Proposed interim dividend of 6.5p, a 5% increase on the prior year
Comment from Patrick André, CEO:
"Despite difficult market conditions, we achieved a record level
of trading profit and profitability in the first half of 2022
thanks to the benefits of the restructuring of our manufacturing
footprint over the past years and our continued investment in
Research and Development. These results confirm the long-term
profitability potential of our activity under normal market
conditions and the importance of our technology driven business
model.
"In the coming months, we expect a further deterioration of our
market environment. Vesuvius is, however, well prepared to confront
this temporary slowdown thanks to our lean, entrepreneurial and
decentralised organisation. This, together with the positive
results of the first half, make us confident that full year Group
trading profit (EBITA) will be towards the top end of the range of
current analysts' expectations.(3)
"Beyond the current temporary slowdown of activity, we remain
fully confident in the longer-term growth potential of both our
Steel and Foundry end markets and are continuing at pace the
implementation of our expansion programme through capital
investments, in particular in Flow Control."
(2) For definitions of non-GAAP measures, refer to Note 15 in
the Condensed Group Financial Statements.
(3) The range of analyst expectations as at 25 July 2022 for
2022 Trading Profit (EBITA) is between GBP155m and GBP199m compiled
by Vesuvius.
Presentation of Half Year 2022 Results
Vesuvius management will make a presentation to analysts and
investors on 28 July 2022 at 09.30 UK time at the London Stock
Exchange, 10 Paternoster Square, London EC4M 7LS. For those unable
to attend, the event will be livestreamed and can be accessed by
clicking here . Participants can also join via an audio conference
call. Please click here to register. Once registered, you will be
provided with the information needed to join the conference,
including dial-in numbers and passcodes. Be sure to save this
information in your calendar.
For further information, please contact:
Shareholder/analyst
enquiries:
Patrick Andr é , Chief +44 (0) 207
Vesuvius plc Executive 822 0000
Guy Young, Chief Financial +44 (0) 207
Officer 822 0000
Euan Drysdale, Group Head +44 (0) 7584
of Corporate Finance 641 315
Rachel Stevens, Head of Investor +44 (0) 7387
Relations 545 271
Media enquiries:
Andrew Jaques/ Rachel Farrington/Peter +44 (0) 203
MHP Communications Lambie 128 8570
About Vesuvius plc
Vesuvius is a global leader in molten metal flow engineering and
technology principally serving process industries operating in
challenging high--temperature conditions.
We develop innovative and customised solutions, often used in
extremely demanding industrial environments, which enable our
customers to make their manufacturing processes safer, more
efficient and more sustainable. These include flow control
solutions, advanced refractories and other consumable products and
increasingly, related technical services including data
capture.
We have a worldwide presence. We serve our customers through a
network of cost-efficient manufacturing plants located close to
their own facilities, and embed our industry experts within their
operations, who are all supported by our global technology
centres.
Our core competitive strengths are our market and technology
leadership, strong customer relationships, well established
presence in developing markets and our global reach, all of which
facilitate the expansion of our addressable markets.
Our ultimate goal is to create value for our customers, and to
deliver sustainable, profitable growth for our shareholders giving
a superior return on their investment whilst providing each of our
employees with a safe workplace where they are recognised,
developed and properly rewarded.
We think beyond today to create solutions that will shape the
future for everyone.
Forward looking statements
This announcement contains certain forward looking statements
which may include reference to one or more of the following: the
Group's financial condition, results of operations, cash flows,
dividends, financing plans, business strategies, operating
efficiencies or synergies, budgets, capital and other expenditures,
competitive positions, growth opportunities for existing products,
plans and objectives of management and other matters.
Statements in this announcement that are not historical facts
are hereby identified as "forward looking statements". Such forward
looking statements, including, without limitation, those relating
to the future business prospects, revenue, working capital,
liquidity, capital needs, interest costs and income, in each case
relating to Vesuvius, wherever they occur in this announcement, are
necessarily based on assumptions reflecting the views of Vesuvius
and involve a number of known and unknown risks, uncertainties and
other factors that could cause actual results, performance or
achievements to differ materially from those expressed or implied
by the forward looking statements. Such forward looking statements
should, therefore, be considered in light of various important
factors that could cause actual results to differ materially from
estimates or projections contained in the forward looking
statements. These include without limitation: economic and business
cycles; the terms and conditions of Vesuvius' financing
arrangements; foreign currency rate fluctuations; competition in
Vesuvius' principal markets; acquisitions or disposals of
businesses or assets; and trends in Vesuvius' principal
industries.
The foregoing list of important factors is not exhaustive. When
considering forward looking statements, careful consideration
should be given to the foregoing factors and other uncertainties
and events, as well as factors described in documents the Company
files with the UK regulator from time to time including its annual
reports and accounts.
You should not place undue reliance on such forward looking
statements which speak only as of the date on which they are made.
Except as required by the Rules of the UK Listing Authority and the
London Stock Exchange and applicable law, Vesuvius undertakes no
obligation to update publicly or revise any forward looking
statements, whether as a result of new information, future events
or otherwise. In light of these risks, uncertainties and
assumptions, the forward looking events discussed in this
announcement might not occur.
Vesuvius plc, 165 Fleet Street, London EC4A 2AE
Registered in England and Wales No. 8217766
LEI: 213800ORZ521W585SY02
www.vesuvius.com
Vesuvius plc
Half Year Results for the six months ended 30 June 2022
Vesuvius delivered its strongest ever half year performance,
driven by full mitigation of inflationary pressures and market
share gains
GBPm H1 2022 Acquisitions H1 2022 H1 2021 Currency Acquisitions H1 2021 Reported Underlying
Reported / Disposals Underlying Reported / Disposals Underlying % Change % Change
--------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Revenue 1,015.9 (18.3) 997.6 808.1 13.7 821.8 25.7% 21.4%
Trading
Profit 127.4 (2.9) 124.5 73.3 0.3 73.6 73.8% 69.1%
Return
on
Sales 12.5% 12.5% 9.1% 9.0% +340bps +350bps
--------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Group trading performance
In H1 2022, the Group generated revenues of GBP1,015.9m, an
increase of 26% compared to H1 2021, on a reported basis.
Underlying Group revenue, adjusted for the effects of currency
translation and acquisitions/disposals, increased by 21%, driven
primarily by selling price increases which fully mitigated
inflationary pressures. Trading profit (adjusted EBITA) was
GBP127.4m, an increase of 74% on a reported basis and 69% on an
underlying basis. The Group achieved a return on sales of 12.5% in
H1 2022, an increase of +340bps (+350bps on an underlying basis)
which brings our return on sales for the last 12 months to 10.6%,
in line with that delivered in 2019. This was our strongest ever
half year performance, which was achieved despite a challenging
back drop of steel production declines and broad-based inflationary
pressures.
Market backdrop
Steel production in the world excluding China and Iran, which
accounts for approximately 90% of Vesuvius' sales, decreased by -4%
year-on-year to the end of June (Source: the World Steel
Association), with all major geographies recording volume declines,
except for India which grew by +9%. The production declines in EMEA
excluding Iran, NAFTA and South America were -9%, -2% and -3%,
respectively.
Non-automotive Foundry end-markets have achieved limited growth
since H1 2021, with production in general engineering, mining &
construction, power generation and railway & marine growing by
+3%, +1%, +1% and -1%, respectively, according to Oxford Economics
data.
This contrasts with global production of light vehicles and
medium & heavy commercial vehicles which declined in H1 2022
versus H1 2021 by -3% and -28%, respectively, according to IHS
data. Encouragingly, automotive end markets appear to have
stabilised in H1 2022 versus H2 2021, with light vehicle volumes up
+1% and medium & heavy vehicles up +5%. These figures are more
likely to reflect a stabilisation than a return to growth given
that automotive production is typically higher in H1 versus H2 as a
result of summer plant shutdowns during the third quarter.
Strategic progress
Vesuvius' core strategic objective is to deliver long-term
sustainable and profitable growth. We have a clear strategy to
achieve this objective centred around our key execution priorities.
We continued to make progress on these priorities in H1 2022, and
believe we are well-positioned to deliver a robust performance in
the coming months.
-- Reinforce our technology leadership
o Maintained our industry-leading level of R&D investment,
with a 19% increase in H1 2022 R&D spend to GBP17.6m, up from
GBP14.8m in H1 2021
o We are targeting a doubling in Robot Casting Technology
("RCT") customer installations by 2025
-- Develop our technical service offering and increase the
penetration of our value-creating solutions
o Flow Control : Continued development of our RCT range for the
ladle make-up area. The Flow Control device and refractory
consumables are tailor-made for robotic operations. These products
increase the ergonomics of the process, consistency, productivity
and reduce the cost of usage through greater efficiency of
refractory consumption and reduced manpower requirement
o Advanced Refractories : Further development of Vesuvius
Advanced Robotic Gunning ("VARG"), where we have partnered with a
major steel producer to commission the first VARG installation.
VARG enables steel producers to undertake fully automated,
"hands-free" furnace repair gunning on BOF enabled by a combination
of advanced Vesuvius technology, systems and materials
o Foundry : Product for the rotary cleaning of steel, a new
steel treatment process that significantly reduces non-metallic
inclusion defects in high integrity castings, reducing the need for
costly rectification.
-- Capture growth in developing markets
o Our Steel division delivered strong growth in Brazil, India,
Vietnam and Turkey
o Our Foundry division delivered strong growth in Brazil,
Vietnam and Turkey
-- Improve our cost leadership and margins
o Return on sales increased to 12.5%, up 350bps versus H1
2021
o The Steel division return on sales improved 500bps to 13.7%,
driven by the recovery of the cost headwinds which impacted the
division in 2021 and 2022 and a favourable mix effect with higher
sales of Flow Control products
o The Foundry division achieved meaningful margin recovery
compared to H2 2021, due to price increases and operational
improvements at two important plants in Germany and the USA
Enhanced ambitious sustainability targets for reducing our
carbon emissions
In alignment with our target to achieve net zero by 2050, we
have enhanced our target for 2025 up to -20% (vs. 2019 levels),
compared to our earlier target of -10%, which we exceeded in 2021.
We have also added a staging-point target of -50% by 2035. Both
targets are supported by a roadmap of actions to deliver these
savings, including planning our first pilot study to convert gas
kilns to electricity.
Good progress in integration of the Universal Refractories Inc
("Universal") business
Following the acquisition of the Universal business in December
2021, it has made a strong contribution to the Group to date,
slightly ahead of plan. The acquisition reinforces our core tundish
business (within Advanced Refractories) and expands our presence
amongst the growing electric arc furnace ("EAF") steel producers in
North America, while also further strengthening our Foundry
business. During this initial period of integration, we have sought
to maintain and develop the strong elements of the business, while
realising synergies through the consolidation of both Advanced
Refractories and Foundry production lines. We have also implemented
our global health and safety standards and brought managers on to
our incentive schemes, such that they have a financial interest in
the performance of Vesuvius. These actions, combined with regular
communication with the employee base, has facilitated high employee
retention through the transition period.
Foreign exchange
The net impact of average H1 2022 exchange rates compared to
2021 averages has been an H1 2022 tailwind of approximately GBP2.6m
at a trading profit level. The implied impact of average H1 2022
exchange rates, when compared to average 2021 exchange rates, would
be a tailwind of 3% on our 2022 full year trading profit.
Selling price increases have fully mitigated all inflationary
pressures
Our active management of selling prices has successfully offset
all cost inflation to date, with the recovery in full of the cost
headwind that impacted the Group in 2021. Our H1 2022 results bring
our LTM margin to 10.6%, in line with that delivered in 2019. We do
not expect raw material costs to continue to increase in 2022,
although broader based inflation, energy and labour costs remain
under pressure.
Working capital
As indicated previously, we have continued to see working
capital growth in early 2022 due to higher business activity and
our decision during 2021 to build-up raw material inventory to
counteract the risk of supply chain disruption and ensure customer
deliveries. This resulted in an increase in trade working
capital/sales to 22.8% (12m average) versus 20.9% at year-end
2021.
A reduction of working capital intensity is contingent on an
improved supply chain, which is not expected until late in 2022 or
early 2023.
Tax
Our headline Effective Tax Rate ("ETR") for H1 2022 was 27.5%
(H1 2021: 26.5%). This resulted in an H1 2022 headline tax charge
of GBP33.2m (H1 2021: GBP18.5m).
Capital expenditure
Capex for the period was GBP38.6m, over double that in H1 2021
of GBP17.6m. Major projects included are the significant investment
in additional Flow Control capacity at the Skawina plant in Poland,
to support the growing EEMEA market, and the Flow Control capacity
expansion in Kolkata, India to serve the fast-growing markets of
both India and South-East Asia.
Financial position and liquidity
As at 30 June 2022, Net Debt was GBP327.7m, up from GBP277.1m at
the end of 2021. Our adjusted operating cash flow was GBP33.1m,
after payment of GBP40.5m of dividends, GBP5.3m of net finance
costs, and GBP23.6m of income taxes.
Our Net Debt/adjusted EBITDA ratio was 1.3x at 30 June 2022,
versus 1.4x at 31 December 2021. This provides us with significant
headroom against our debt covenant limit of 3.25x net debt/adjusted
EBITDA. Our available committed liquidity was GBP416m at 30 June
2022, compared to GBP456m at 31 December 2021.
Quality, health and safety
The Board and the entire leadership team of Vesuvius place great
emphasis on the importance of quality, health and safety in the
workplace and in the communities in which we operate. Reliability
in quality and delivery is vital to our customers as they use
Vesuvius' products in critical areas of their own processes. The
level of risk attached to a catastrophic failure is often such
that, for people and equipment, no compromise can be accepted. We
achieved a Lost Time Injury Frequency Rate (LTIFR) of 1.07 in the
first half of 2022, broadly in-line with our record low level of
1.06 which we achieved in 2021.
Exposure to hostilities between Russia and Ukraine
We have ceased trading with all sanctioned customers in Russia.
In parallel, having considered the approach taken by the majority
of our peers and the effectiveness of stopping all trade with
Russia, in that context we have now resolved to continue to supply
non-sanctioned customers in Russia.
Potential gas supply issues in Europe
At the time of writing, there is political uncertainty regarding
the sustainability of gas supplies from Russia into Europe over the
coming months, which could impact both our operations and those of
our customers. We have been reviewing possible scenarios and have
put in place mitigation plans to support our operations in Europe,
including, if necessary, the mobilisation of available production
capacity in India, Mexico, the Middle East and China. As a result,
we anticipate that we will be able to continue providing essential
products and services to our European customers even in the case of
a complete cessation of Russian gas imports. Furthermore, as our
most energy intensive European based manufacturing processes were
closed or transferred out of Europe in the framework of our
European footprint restructuring two years ago, our exposure to
rising European energy prices is now relatively limited.
Interim Dividend
The Board has declared an interim dividend of 6.5 pence per
share, which is a 5% increase on the interim dividend for H1 2021
of 6.2 pence per share.
The interim dividend will be paid on 16 September 2022 to
shareholders on the register at the close of business on 5 August
2022. Any shareholder wishing to participate in the Vesuvius
Dividend Reinvestment Plan needs to have submitted their election
to do so by 25 August 2022.
Outlook
In the coming months, we expect a further deterioration of our
market environment. Vesuvius is, however, well prepared to confront
this temporary slowdown thanks to our lean, entrepreneurial and
decentralised organisation. This, together with the positive
results of the first half, make us confident that full year Group
trading profit (EBITA)(1) will be towards the top end of the range
of current analysts' expectations.(2)
Beyond the current temporary slowdown of activity, we remain
fully confident in the longer term growth potential of both our
Steel and Foundry end markets and are continuing at pace the
implementation of our expansion programme through capital
investments, in particular in Flow Control.
(1) For definitions of non-GAAP measures, refer to Note 15 in
the Condensed Group Financial Statements.
(2) The range of analyst expectations as at 25 July 2022 for
2022 Trading Profit (EBITA) is between GBP155m and GBP199m compiled
by Vesuvius.
Operational Review
Vesuvius comprises two Divisions, Steel and Foundry. The Steel
Division operates as three business lines, Flow Control, Advanced
Refractories and Sensors & Probes.
Steel Division
Steel production in the world excluding China and Iran, which
accounts for approximately 90% of Vesuvius' sales, decreased by 4%
year-on-year to the end of June, with all major geographies
recording volume declines, except for India which grew by9%. The
production declines in EMEA excluding Iran, NAFTA and South America
were -9%, -2% and -3%, respectively.
Vesuvius' Steel Division reported revenues of GBP744.0m in H1
2022, an increase of 31% compared to
H1 2021 on a reported basis. On an underlying basis, Steel
Division revenue was up 25% (2% volume), with particularly strong
performance in Turkey, Vietnam and India, where volumes grew 71%,
18% and 8%, respectively.
Flow Control strongly outperformed steel production in all
regions, with underlying sales growth of 25% (4% volume growth).
Volume growth in the world excluding China and Iran was 5%, versus
a steel production decline of -4% in the year to June, reflecting
our ability to continue gaining market share, even in a difficult
cost and pricing environment, thanks to the technological
differentiation of our product range. In Advanced Refractories, we
achieved underlying sales growth of 24%, which included a volume
decline limited to -1% (excluding the impact of the Universal
business acquisition), as compared with a decline of 4% of world
Steel volumes outside of China and Iran (-6.5% in China).
Steel Division trading profit improved 106% to GBP101.7m. Return
on sales expanded 500bps to 13.7%, driven by two key factors: (1)
recovery of the cost headwind that impacted the Group in 2021 and
2022 and (2) a positive mix effect due to higher volume growth in
the more profitable Flow Control products.
Steel Division H1 2022 H1 2021 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------- -------- -------- -------- -----------
Flow Control Revenue 402.6 315.5 28% 25%
Advanced Refractories Revenue 320.8 238.6 35% 24%
Steel Sensors &Probes Revenue 20.6 16.2 27% 22%
-------------------------------- -------- -------- -------- -----------
Total Steel Revenue 744.0 570.3 31% 25%
Total Steel Trading Profit 101.7 49.4 106% 97%
Total Steel Return on Sales 13.7% 8.7% +500bps +500bps
-------------------------------- -------- -------- -------- -----------
Flow Control
The Flow Control business unit supplies the global steel
industry with consumable ceramic products, systems, robotics,
digital services and technical services. These products are used to
contain, control and monitor the flow of molten steel in the
continuous casting process. The consumable ceramic products that
Vesuvius supplies have a short service life (often a matter of a
few hours) due to the significant wear caused by the extremely
demanding environment in which they are used. These products must
withstand extreme temperature changes, whilst resisting liquid
steel and slag corrosion. In addition, the ceramic parts in contact
with the liquid steel must not in any way contaminate it. The
quality, reliability and consistency of these products and the
associated robotic solutions and digital services we provide are
therefore critical to the quality of the finished metal being
produced and the productivity, profitability and safety of our
customers' processes.
Flow Control Revenue H1 2022 H1 2021 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------ -------- -------- ------- -----------
Americas 155.4 101.9 53% 43%
Europe, Middle East & Africa
(EMEA) 142.2 124.1 15% 19%
Asia-Pacific 105.0 89.4 17% 13%
------------------------------- -------- -------- ------- -----------
Total Flow Control Revenue 402.6 315.5 28% 25%
------------------------------- -------- -------- ------- -----------
In H1 2022, underlying revenues in the Group's Flow Control
business increased by 25% year-on-year to GBP402.6m, driven by
significant price increases and market share gains in all
regions.
In EMEA excluding Iran, revenues grew 19% year-on-year on an
underlying basis, resulting from significant price increases and a
volume decline of -4%, which represents an outperformance versus
steel production which declined by -9% in the year to June. Our
outperformance in the region was greatest in Eastern Europe, Middle
East and Africa ("EEMEA") (excluding Iran), where we experienced a
volume decline of only -5% versus a -12% decline in steel
volumes.
In the Americas, underlying revenues grew 43%, also driven by
significant price rises. On a volume basis, we outperformed steel
production growth in key markets including Mexico, Brazil and the
United States, where our volumes grew 6%, 5%, and 1%, respectively,
versus steel production decline in the year to June of -1%, -3% and
-2% respectively.
In Asia Pacific, revenues grew +13% on an underlying basis,
which included a mix of both price rises and volume increases. On a
volume basis, we outperformed steel production growth in key
markets such as Japan, Vietnam, India and China where our volumes
changed +16%, +18%, +13% and -2%, respectively, versus changes in
steel production in the year to June of -4%, -7%, +9% and -6%.
Advanced Refractories
The Advanced Refractories business unit supplies complete
value-added solutions to its customers including specialist
refractory materials and advanced installation technologies which
harness mechatronic solutions, computational fluid dynamics
capabilities and lasers. The specialist refractory materials are
subject to extreme temperatures, corrosion and abrasion, they are
in the form of powder mixes, which are spray-applied or cast onto
the vessel to be lined ('monolithics') and refractory shapes (e.g.
bricks, pads, dams and other larger precast shapes). The service
life of the products that Advanced Refractories supplies into the
steel making process can vary (some a matter of hours and others
for a period of years) based upon the type of refractory and the
level of wear caused by the demanding environment in which they are
used. An integral part of our success depends upon our
best-in-class installation technologies which improve the
consistency and performance of installed Vesuvius refractories as
well as the high level of collaboration with our customers.
Advanced Refractories H1 2022 H1 2021 Change Underlying
Revenue (GBPm) (GBPm) (%) change
(%)
------------------------------ -------- -------- ------- -----------
Americas 120.1 80.3 50% 20%
Europe, Middle East & Africa
(EMEA) 120.1 90.3 33% 34%
Asia-Pacific 80.6 68.0 19% 16%
------------------------------- -------- -------- ------- -----------
Total Advanced Refractories
Revenue 320.8 238.6 35% 24%
------------------------------- -------- -------- ------- -----------
Advanced Refractories reported revenues of GBP320.8m in H1 2022,
an increase of 24% on an underlying basis, driven by significant
price rises and an outperformance of steel production volumes in
several key regions, as we regained market share lost in 2021, when
we were a first mover in raising prices to offset inflationary
pressures.
On an underlying basis, revenues grew 20% in the Americas driven
by price rises. In EMEA excluding Iran, underlying revenues grew by
34% during the period, driven by significant price rises and a
volume decline of -4%, which represents a material outperformance
of steel production, which was down -9% in the year to June .
In Asia Pacific, revenues grew 16% on an underlying basis, which
included a mix of both price rises and volume increases. On a
volume basis, we outperformed steel production growth in key
markets such as Vietnam and China where our volumes grew 17% and
2%, respectively, versus steel production declines in the year to
June of -7% and -6%.
Steel Sensors & Probes
The Steel Sensors & Probes business unit offers products to
our customers to enable them to make their underlying processes
more efficient and reliable. The business unit focuses on providing
a range of products that enhance the control and monitoring of our
customers' production processes, complementing Vesuvius' strong
presence and expertise in molten metal engineering. These products
include temperature sensors, oxygen, hydrogen and sublance probes,
iron oxide and metal sampling for the steel, aluminium and foundry
industries. By using these technologies, customers can focus on
critical parameters within their processes, enabling them to refine
their production methods to improve quality, lower production costs
and maximise efficiency.
Steel Sensors & Probes H1 2022 H1 2021 Change Underlying
Revenue (GBPm) (GBPm) (%) change
(%)
------------------------------ -------- -------- ------- -----------
Americas 13.8 10.5 31% 22%
Europe, Middle East & Africa
(EMEA) 6.6 5.7 16% 21%
Asia-Pacific 0.2 0.1 287% 298%
------------------------------- -------- -------- ------- -----------
Total Steel Sensors & Probes
Revenue 20.6 16.2 27% 22%
------------------------------- -------- -------- ------- -----------
Revenues in Steel Sensors & Probes were GBP20.6m in H1 2022,
representing an underlying increase of 22% year-on-year. The strong
performance was driven by price rises as well as new customer wins
in both the Americas and EMEA.
Foundry Division
The Foundry Division is a world leader in the supply of
consumable products, technical advice and application support to
the global foundry industry to improve the performance and quality
of ferrous and non-ferrous castings. Vesuvius operates under the
brand FOSECO in the foundry market. The foundry process is highly
sequential and is critically dependent on consistency of product
quality and productivity optimisation. Working alongside customers
at their sites, our engineers provide on-site technical expertise
in addition to advanced computational fluid dynamics capabilities
to develop the best customised solutions. The conditioning of
molten metal, the nature of the mould used and, especially, the
design of the way metal flows into the mould are key parameters in
a foundry, determining both the quality of the finished castings
and the labour, energy and metal usage efficiency of the foundry.
Vesuvius' products and associated services to foundries improve all
of these parameters.
Foundry Division H1 2022 H1 2021 Change Underlying
(GBPm) (GBPm) (%) change
(%)
-------------------------
Foundry Revenue 271.9 237.8 14% 14%
Foundry Trading Profit 25.7 23.9 7% 9%
Foundry Return on Sales 9.5% 10.1% -60bps -40bps
-------------------------- -------- -------- ------- -----------
Despite an improved level of trading profit resulting from
successful price increase initiatives, the profitability of the
Foundry division in H1 2022 as measured by return on sales was
negatively impacted by a significant volume decline in the light
and heavy vehicles markets as compared with H1 2021, which was not
compensated by the slight improvement in other markets.
Global production of light vehicles and medium & heavy
commercial vehicles declined in H1 2022 versus H1 2021 by -3% and
-28%, respectively, according to IHS data. Encouragingly however,
automotive end markets appear to have stabilised in H1 2022 versus
H2 2021, with light vehicle volumes up 1% and medium & heavy
vehicles up 5%. These figures are more likely to reflect a
stabilisation than a return to growth given that automotive
production is typically higher in H1 versus H2 as a result of
summer plant shutdowns during the third quarter.
Automotive production remains for the time being significantly
below the pre-covid level of 2019, with global light vehicle
production in H1 2022 versus H1 2019 down -16% and medium &
heavy commercial vehicles down -22%, due to supply chain
constraints such as the persistent semi-conductor shortage.
In parallel, non-automotive Foundry end-markets have only
achieved limited growth globally since H1 2021, with production in
general engineering, mining & construction, power generation
and railway & marine changing by +3%, +1%, +1% and -1%,
respectively, according to Oxford Economics data.
Vesuvius' Foundry Division reported revenues of GBP271.9m in H1
2022, an increase of +14% compared to H1 2021 on a reported basis.
On an underlying basis, Foundry Division revenue was up +14%. This
increase in revenues was driven by price increases despite a low
single digit volume decline due primarily to continued weakness in
automotive end markets.
The Foundry Divisi on's margin, albeit lower than H1 2021, shows
a meaningful recovery compared to H2 2021 (+240bps), when trading
profit was negatively impacted by operational issues at two
important plants in Germany and the USA as well as the time lag
between price and cost increases, which has now been fully
eliminated. Good progress has been made in resolving these
operational issues and we expect them to be fully eliminated during
2022.
When compared to H1 2021, trading profit increased by 9% on an
underlying basis to GBP25.7m .
Foundry Revenue H1 2022 H1 2021 Change Underlying
(GBPm) (GBPm) (%) change
(%)
------------------------------
Americas 67.2 48.6 38% 25%
Europe, Middle East & Africa
(EMEA) 116.9 104.4 12% 18%
Asia-Pacific 87.7 84.7 4% 2%
------------------------------- -------- -------- ------- -----------
Total Foundry Revenue 271.9 237.8 14.3% 13.5%
------------------------------- -------- -------- ------- -----------
Foundry revenues in the Americas grew 25% year-on-year on an
underlying basis, which reflects a significant increase in prices
in addition to single digit volume growth in key end markets such
as Brazil (8%), Mexico (3%) and the United States (3%). Volumes in
the Americas benefitted from positive year-on-year growth in NAFTA
automotive production.
In EMEA, underlying revenues increased by 18% compared to H1
2021, which was driven by price increases. Volumes posted a low
single digit decline, driven by production declines of greater than
10% in both the light vehicle and medium & heavy vehicles
markets.
In Asia Pacific, sales increased by 2% on an underlying basis,
with a low single digit volume decline driven by weakness in China
due to two key factors: the impact of further lock-downs resulting
from an increase in Covid-19 infections; and a decline in
automotive production with light vehicle and medium and heavy
vehicle production down -5% and -52%, respectively.
Financial Review
The following review considers a number of our financial KPIs
and sets out other relevant financial information.
Basis of Preparation
All references in this financial review are to headline
performance unless stated otherwise. See Note 15.1 to the Group
Financial Statements for the definition of headline
performance.
H1 2022 performance overview
We are pleased with the performance of the Group in H1 2022,
following implementation of price increases to recover increased
raw material costs. Reported revenue increased by GBP207.8m (25.7%)
over the prior year. H1 2021 revenues on H2 2022 FX rates were
GBP821.7m. Revenue on a constant currency basis (excluding the
impact of acquisitions) grew by GBP175.8m (+21%), which was almost
entirely due to price increases. The revenue contribution from the
acquisition of the Universal business was GBP18.3m.
Our Steel division achieved positive volume growth of c.2%
despite a 4% decline in steel production in the world excluding
China and Iran. Our Foundry division experienced a low single digit
volume decline due primarily to continued weakness in automotive
end markets.
The Group is actively managing working capital to drive a strong
reduction in inventory and overdues in response to weakening end
markets.
Trading profit for H1 2022 was GBP127.4, 69.1% higher than prior
year on an underlying basis. This was a result of a GBP6.1m benefit
from increased volumes and mix, GBP10.3m recovery of comparable
prior period input cost increases, and a GBP34.5m benefit from the
net impact of price rises. The Universal business acquisition
contributed GBP2.9m. Return on sales was 12.5%, higher than prior
year by 350 bps on an underlying basis.
Operating profit increased by 79% to GBP122.3m, reflecting the
changes in trading profit described above, net of amortisation of
intangible assets of GBP5.1m (HY21: GBP4.8m).
The Group's cash conversion in H1 2022 was impacted by increases
in working capital and higher investments in capex.
Dividend
The Board declared an interim dividend of 6.5 pence per share to
be paid on 16 September 2022 to shareholders on the register at the
close of business on 5 August 2022. Any shareholder wishing to
participate in the Vesuvius Dividend Reinvestment Plan needs to
have submitted their election to do so by 25 August 2022.
It remains the Board's intention to deliver long-term dividend
growth, provided this is supported by underlying earnings and cash
flows, and taking into account capital expenditure requirements and
the prevailing market outlook.
Key Performance Indicators
We have identified a number of KPIs against which we have
consistently reported. As with prior years, we measure our results
on an underlying basis, where we adjust to ensure appropriate
comparability between periods, irrespective of currency
fluctuations and any business acquisitions and disposals.
This is done by:
-- Restating the previous period's results at the same foreign
exchange (FX) rates used in the current period
-- Removing the results of disposed businesses in both the current and prior years
-- Removing the results of acquired businesses in both the current and prior years
Therefore, for 2022, we have retranslated 2021 results at the FX
rates used in calculating the 2022 results. Adjustment has also
been made for 2022 results to remove the results of Universal,
which was acquired during 2021.
Objective: Deliver growth
KPI: Underlying revenue growth
Reported revenue for H1 2022 was GBP1,015.9m. Reported revenue
for H1 2021 was GBP808.1m which equated to GBP821.8m on an
underlying basis. H1 2022 underlying revenue increased by 21.4%
year-on-year. The strong increase in revenue in Steel has been
driven by strong price increases (+23% price) as well as strong
underlying performance in Steel (+2% volume). The Foundry Division
increase in revenues was driven primarily by price increases.
GBPm H1 2022 Revenue H1 2021 Revenue % change
--------- ------------------------------------- ------------------------------------------------ ----------------------
As Acquisition/ As Acquisition/
reported Disposals Underlying reported Currency Disposals Underlying Reported Underlying
--------- --------- ------------- --------- --------- ------------- ----------- --------- -----------
Steel 744.0 (17.3) 726.8 570.3 12.9 - 583.1 31% 25%
Foundry 271.9 (1.0) 270.8 237.8 0.9 - 238.7 14% 14%
--------- --------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Total
Group 1,015.9 (18.3) 997.6 808.1 13.7 - 821.8 26% 21%
Objective: Generate value for our shareholders
KPI: Trading profit and Return on Sales
We continue to measure underlying trading profit of the Group as
well as trading profit as a percentage of sales, which we refer to
as our Return on Sales or RoS.
Trading profit for H1 2022 was GBP127.4m and Return on Sales was
12.5%. On an underlying basis, trading profit of GBP124.5m
increased by 69% and Return on Sales by 350bps versus prior year.
The increase in trading profit and Return on Sales is due to
pricing in Steel and Foundry, and volume growth in Steel.
In H1 2022, the Steel Division recorded underlying Return on
Sales of 13.6%, a 500bps underlying improvement from H1 2021.
Trading profit increased by 97% on an underlying basis, to GBP99.0m
during the period.
The Foundry division recorded underlying Return on Sales of
9.4%, a 40bps decline from H1 2021 on an underlying basis.
Underlying trading profit was GBP25.5m representing an 8.8%
increase on an underlying basis versus prior year.
GBPm H1 2022 Trading profit H1 2021 Trading profit % change
--------- ------------------------------------- ------------------------------------------------ ----------------------
As Acquisition/ As Acquisition/
reported Disposals Underlying reported Currency Disposals Underlying Reported Underlying
--------- --------- ------------- --------- --------- ------------- ----------- --------- -----------
Steel 101.7 (2.7) 99.0 49.4 0.8 - 50.2 106% 97%
Foundry 25.7 (0.2) 25.5 23.9 (0.5) - 23.4 7% 9%
--------- --------- ------------- ----------- --------- --------- ------------- ----------- --------- -----------
Total
Group 127.4 (2.9) 124.5 73.3 0.3 - 73.6 74% 69%
KPI: Headline PBT and Headline EPS
Headline profit before tax (PBT) and headline earnings per share
(EPS) are used to measure the underlying financial performance of
the Group. The main difference between trading profit and PBT is
net finance costs which were GBP6.6m in H1 2022, GBP3.0m higher
than H1 2021.
Our Headline PBT was GBP121.8m, 73.3% above last year on a
reported basis. Including amortisation of acquired intangibles of
GBP5.1m, our PBT of GBP116.7m was 78% higher than H1 2021. Headline
EPS from continuing operations at 31.4p is 75% higher than H1
2021.
KPI: Return on invested capital (ROIC)
ROIC has been recently introduced as a KPI to measure the
returns we generate on the capital provided to us by our investors.
The choice of ROIC as our preferred returns metric is predicated on
it being a return that is applicable to both equity and debt
investors and in addition is a post-tax measure. Our ROIC for the
12 months to 30 June 2022 was 9.6% (12 months to 31 December 2021:
7.4% on a constant currency basis). See note 15.18 for details of
calculation.
Objective: Maintain an efficient capital structure
KPI: Free cash flow and working capital
Fundamental to ensuring that we have adequate capital to execute
our corporate strategy is converting our profits into cash, partly
through strict management of our working capital. The Group
generated adjusted operating cash flows of GBP33.1m, representing a
13% decrease versus H1 2021. This implies a cash conversion rate in
H1 2022 of 26% (2021: half year 52%; full year 32%). H1 2022 cash
conversion was impacted by growing working capital and higher
investments in capex. Free cash flow from continuing operations was
GBP1.5m in H1 2022 (2021: half year GBP16.4m; full year
GBP(0.3)m).
We measure working capital both in terms of actual cash flow
movements, and as a percentage of sales revenue. Trade working
capital as a percentage of sales in H1 2022 was 22.8% (2021: half
year 20.7%; full year 20.9%), measured on a 12-month moving average
basis. In absolute terms on a constant currency basis trade working
capital increased by GBP93.1m in H1 2022.
The increase in inventory on a constant currency basis versus
December 2021 (+GBP40.3m) and debtors (+GBP62.9m) was partially
offset by an increase in creditors (+GBP10.1m).
GBP40.3m inventory increase was mainly reported in finished
goods (GBP23.6m) and raw materials (GBP17.8m).
The GBP62.9m increase in trade debtors on a constant currency
basis versus December 2021 was mainly recorded in current debtors
+GBP56.1m. GBP7.0m increase was reported in overdues over 30 days.
Regionally, the increase in overdues was reported in EMEA
(GBP6.2m), partially offset by a decrease in NAFTA (GBP1.9m). While
total trade debtors have increased, debtors days have remained
relatively flat. We continue our focus on driving down
overdues.
KPI: Net debt and interest cover
The Group had committed borrowing facilities of GBP721.4m as at
30th June 2022 (2021: 30 June GBP664.0m; 31 December GBP706.3m), of
which GBP257.1m was undrawn (2021: 30 June GBP348.7m; 31 December
GBP308.1m).
At the end of H1 2022, the net debt to EBITDA ratio was 1.3x
(2021: 30 June 1.1x; 31 December 1.4x) and EBITDA to interest was
29.2x (2021: 30 June 21.4x; 31 December 30.5x). These ratios are
monitored regularly to ensure that the Group has sufficient
financing available to run the business and fund future growth.
The Group's debt facilities have two financial covenants: the
ratios of net debt to EBITDA (maximum 3.25x limit) and EBITDA to
interest (minimum 4x limit). Certain adjustments are made to the
net debt calculations for bank covenant purposes, the most
significant of which is to exclude the impact of IFRS 16.
Objective: Think beyond innovation
KPI: R&D Spend
We believe that our market-leading product technology and
services deliver fundamental value to our customers and that the
primary mechanism to deliver that value is to invest significantly
in research and development. In H1 2022, we spent GBP17.6m on
R&D activities (2021: half year GBP14.8m; full year GBP30.6m at
constant 2022 currency), which represents 1.7% of our revenue
(2021: half year 1.8%; full year 1.8%).
Financial Risk Factors
The Group undertakes regular risk reviews and, as a minimum, a
full risk assessment process twice a year. As in previous years
this included input from the Board in both the assessment of risk
and the proposed mitigation. We consider the main financial risks
faced by the Group as being those posed by a decline in our
end-markets, leading to reduced revenue and profit as well as
potential customer default. We also carefully monitor the
challenges that come from broader financial uncertainty, which
could bring lack of liquidity and market volatility. Important but
lesser risk exists in interest rate movements, foreign exchange
rate movements and cost inflation, but these are not expected to
have a material impact on the business after considering the
controls we have in place.
Our key mitigation of end-market risk is to manage the Group's
exposure through balancing our portfolio of business geographically
and to invest in product innovation. We do so through targeted
capital investment in new and growing businesses and a combination
of capital and human resource in emerging markets. When considering
other financial risks, we mitigate liquidity concerns by financing,
using both the bank and private placement markets. The Group also
seeks to avoid a concentration of debt maturities in any one period
to spread its refinancing risk. Liquidity stood at GBP416.2m on 30
June 2022. We define liquidity as undrawn committed debt facilities
plus our cash on balance sheet, less the cash in China which is
used as collateral against an equivalent loan from Standard
Chartered.
Taxation
A key measure of the Group's tax burden is the headline
effective tax rate, which the Group calculates on the income tax
associated with headline performance, divided by the headline
profit before tax and before the Group's share of post-tax profit
of joint ventures. The Group's headline effective tax rate was
in-line with expectations at 27.5% in H1 2022 (2021: half year
26.5%; full year 26.4%) based on the income tax costs associated
with headline performance of GBP33.2m (2021: half year GBP18.5m;
full year GBP35.9m).
We expect the Group's effective tax rate on headline profit
before tax and before the share of post-tax profits from joint
ventures to be between 27% and 28% in 2022.
Capital expenditure
Capital expenditure in H1 2022 was GBP38.2m (2021: half year
GBP20.6m; full year GBP67.4m) of which GBP33.2m was in the Steel
Division (2021: half year GBP16.1m; full year GBP47.2m) and GBP5.0m
in the Foundry Division (2021: half year GBP4.5m; full year
GBP20.2m).
Pensions
The Group has a limited number of historical defined benefit
plans located mainly in the UK, USA, Germany and Belgium. The main
plans in the UK and USA are largely closed to further benefits
accrual. In the funded UK plan, an insurance asset from PIC matches
the remaining pension liabilities of the UK Plan, with the result
that the Company no longer bears any investment, longevity,
interest rate or inflation risks in respect of this UK Plan. The
Group's net pension liability on 30 June 2022 was GBP54.0m (2021
full year: GBP77.0m deficit). The improvement is largely
attributable to GBP27.9m from changes to actuarial assumptions
(increasing discount rates; updated mortality assumptions and
pension membership data) which was mainly due to an increase in
bond yields resulting in a reduction in the value of German,
Belgian and US liabilities. These gains were partially offset by
foreign exchange losses of GBP4.0m.
Principal Risks and Uncertainties
Risk Management
The Board exercises oversight of principal risks through a
specific review of the way in which the Group manages those risks.
This process provides the Board with a clear understanding of the
individuals within the business responsible for the management of
each specific risk and the mitigation in place to address it. The
Board also reviews and establishes the Group's risk appetite for
those issues identified as principal risks and the associated
adequacy of the steps being taken to mitigate them.
The Board has overall responsibility for establishing and
maintaining a system of risk management and internal control, and
for reviewing its effectiveness. The Group undertakes a continuous
process of risk identification and review, which includes a formal
process, conducted annually for mapping risks from the bottom up,
with each major business unit and key operational, senior
functional and senior management staff identifying their principal
risks. This assessment undergoes a formal review at half-year. The
results are compiled centrally to deliver a coordinated picture of
the key operational risks identified by the business. These risks
are then reviewed by the Group Executive Committee. As part of this
process, each Director contributes their individual view of the
top-down strategic risks facing the Group - drawing on the broad
commercial and financial experience they have gained both inside
and outside the Group. The results of this assessment are then
overlaid on the internal assessment of risks to build a
comprehensive analysis of existing and emerging risk. The process
extends to cover both financial and non-financial risks, and
considers the risks associated with the impact of the Group's
activities on employees, customers, suppliers, the environment,
local communities and society more generally.
Risk Mitigation
The Principal Risks identified are actively managed in order to
mitigate exposure. Senior management 'owners' have been identified
for each principal risk, and they manage the mitigations of that
specific risk and contribute to the analysis of its likelihood and
materiality. This analysis is reported to the Board. The risks are
analysed in the context of our business structure which gives
protection against a number of principal risks we face with
diversified currencies, a widespread customer base, local
production matching the diversity of our markets and intensive
training of our employees. Additionally, we seek to mitigate risk
through contractual measures. Where cost-effective, the risk is
transferred to insurers. Our processes are not designed to
eliminate risk, but to identify our principal risks and seek to
reduce them to a reasonable level in the context of the delivery of
the Group's strategy.
Principal Risks
The risks identified are those the Board considers to be the
most relevant to the Group in relation to their potential impact on
the achievement of its Strategic Objectives. All of the risks set
out on these pages could materially affect the Group, its
businesses, future operations and financial condition, and could
cause actual results to differ materially from expected or
historical results. The Group continues to focus on risk
mitigation, and whilst, as identified below, certain elements of
the Group's risks have manifested in 2022 as a result of the
continuing Covid pandemic, the Principal Risks remain the same.
These risks are not the only ones that the Group will face. Some
risks are not yet known and some currently not deemed to be
material could become so.
Changes to Risk in 2022
The Board believes that there has been no material change to the
Group's principal risks and uncertainties during the year to date .
However, a s in previous years, a number of issues identified in
the Group's principal risks and uncertainties have materialised in
the first half of the year. These are most notably:
- End Market Risk: The Board continues to monitor the
implications of the changing global economic environment, with
short term forecasts for steel volumes and automotive output having
been revised downwards (despite the longer term growth trend
continuing). The implications of inflation (seen most notably in
energy prices) and interest rate increases are closely monitored,
particularly as the effects are not universal across the globe with
some of our jurisdictions suffering much higher inflationary
pressures than others, impacting our staff and the cost base of our
business.
- Health & Safety/Business Interruption: Whilst the effects
of the Covid pandemic have receded in many places, the Board is
still keenly focused on managing the risks this poses, both for the
health and safety of our employees and the effects on our business.
The impact of Covid continues to bring some uncertainty,
particularly in jurisdictions where specific lockdowns can still be
imposed, which could affect our manufacturing base and ability to
operate as well as that of our customers.
- Protectionism and Globalisation: As set out elsewhere in this
release, at the time of writing, there is political uncertainty
regarding the sustainability of gas supplies from Russia into
Europe over the coming months, which could impact both our
operations and those of our customers. We have been reviewing
possible scenarios and have put in place mitigation plans to
support our operations in Europe, including, if necessary, the
mobilisation of available production capacity in India, Mexico,
Middle East and China . As a result, we anticipate that we will be
able to continue providing essential products and services to our
European customers even in case of a complete cessation of Russian
gas imports. Furthermore, as our most energy intensive European
based manufacturing processes were closed or transferred out of
Europe in the framework of our European footprint restructuring two
years ago, our exposure to rising European energy prices is now
relatively limited.
Climate Change
The Group's overall risk management processes also incorporate
consideration of the potential impact of climate-related risks on
the Group. The Group does not regard climate change itself to
represent a material stand-alone risk for the Group's operations.
Whilst a significant proportion of the Group's revenue is generated
from Steel manufacture and automotive castings, industries that are
under transition as a result of their focus on improving
environmental performance, we believe these changes will be
positive for the Group. The opportunities in the Group's business
strategy, which is founded on helping our customers to improve
their manufacturing efficiency and the quality of their products -
and therefore reduce their climate impact - will play a critical
part in the development of the Group going forward. The Group
recognises that climate change could present further uncertainty
for the Group in terms of increased regulation, evolution of the
geographical distribution of our customer base and the costs of
meeting more onerous disclosure requirements. The risks we
associate with our sustainability performance and our end
customers' sustainability transition - badged as ESG - are
identified as a separate element of the Group risk register,
recognising the work Vesuvius can do to mitigate the environmental
impact of our customers' processes. Other elements of this risk are
incorporated into the appropriate Principal Risk and Uncertainties
that the Group has identified. The Group continues to focus
internally on the action we can take to drive our business'
sustainability. In the first half of 2022, the Group made further
progress on its sustainability KPIs and continued work on the
Sustainability initiative announced in 2020. Under this initiative
the Group will seek to drive a lower CO(2) intensity, reduce energy
usage, and take the steps necessary to meet the target set of being
emissions net zero by 2050.
Principal risks and uncertainties:
Risk Potential impact Mitigation
End market risks
Vesuvius suffers an -- Unplanned drop in -- Geographic diversification
unplanned drop in demand, demand and/or revenue of revenues
revenue and/ or margin due to reduced production -- Product innovation
because of market volatility by our customers and service offerings
beyond its control -- Margin reduction securing long-term revenue
-- Customer failure leading streams and maintaining
to increased bad debts performance differential
-- Loss of market share -- Increase in service
to competition and product lines by
-- Cost pressures at the development of the
customers leading to Technical Services offering
use of cheaper solutions -- R&D includes assessment
of emerging technologies
-- Manufacturing capacity
rationalisation and flexible
cost base
-- Diversified customer
base: no customer is
greater than 10% of revenue
-- Robust credit and
working capital control
to mitigate the risk
of default by counterparties
-------------------------------- ------------------------------------
Protectionism and globalisation
The Vesuvius business -- Restricted access -- Highly diversified
model cannot adapt or to market due to enforced manufacturing footprint
respond quickly enough preference of local suppliers with manufacturing sites
to threats from protectionism -- Increased barriers located in 26 countries
and globalisation to entry for new businesses -- Strong local management
or expansion with delegated authority
-- Increased costs from to run their businesses
import duties, taxation and manage customer relationships
or tariffs -- Cost flexibility
-- Loss of market share -- Tax risk management
-- Trade restrictions and control framework
together with a strong
control of inter-company
trading
-------------------------------- ------------------------------------
Product quality failure
Vesuvius staff/contractors -- Injury to staff and -- Quality management
are injured at work or contractors programmes including
customers, staff or third -- Product or application stringent quality control
parties suffer physical failures lead to adverse standards, monitoring
injury or financial loss financial impact or loss and reporting
because of failures in of reputation as technology -- Experienced technical
Vesuvius products leader staff knowledgeable in
-- Incident at customer the application of our
plant caused manufacturing products and technology
downtime or damage to -- Targeted global insurance
infrastructure programme
-- Customer claims from -- Experienced internal
product quality issues legal function controlling
third-party contracting
Complex and changing
regulatory environment -- Revenue reduction -- Compliance programmes
Vesuvius experiences from reduced end-market and training across the
a contracting customer access Group
base or increased transaction -- Disruption of supply -- Internal Audit function
and administrative costs chain and route to market -- Experienced internal
due to compliance with -- Increased internal legal function including
changing regulatory requirements control processes dedicated compliance
-- Increased frequency specialists
of regulatory investigations -- Global procurement
-- Reputational damage category management of
strategic raw materials
--------------------------------- ---------------------------------------
Failure to secure innovation
Vesuvius fails to achieve -- Product substitution -- Enduring and significant
continuous improvement by customers investment in R&D, with
in its products, systems -- Increased competitive market-leading research
and services pressure through lack -- A shared strategy
of differentiation of for innovation throughout
Vesuvius offering the Group, deployed via
-- Commoditisation of our R&D centres
product portfolio through -- Stage gate process
lack of development from innovation to commercialisation
-- Lack of response to to foster innovation
changing customer needs and increase alignment
-- Loss of intellectual with strategy
property protection -- Programme of manufacturing
and process excellence
-- Quality programme,
focused on quality and
consistency
-- Stringent intellectual
property registration
and defence
--------------------------------- ---------------------------------------
Business interruption
Vesuvius loses production -- Loss/closure of a -- Diversified manufacturing
capacity or experiences major plant temporarily footprint
supply chain disruption or permanently impairing -- Disaster recovery
due to physical site our ability to serve planning
damage (accident, fire, our customers -- Business continuity
natural disaster, terrorism) -- Damage to or restriction planning with strategic
or other events such in our ability to use maintenance of excess
as industrial action, assets capacity
cyber attack or global -- Denial of access to -- Physical and IT control
health crises critical systems or control systems security, access
processes and training
-- Disruption of manufacturing -- Cyber risks integrated
processes into wider risk-management
-- Inability to source structure
critical raw materials -- Well-established global
insurance programme
-- Group-wide safety
management programmes
-- Dual sourcing strategy
and development of substitutes
--------------------------------- ---------------------------------------
People, culture and
performance -- Organisational culture -- Internal focus on
Vesuvius is unable to of high performance is talent development and
attract and retain the not achieved training, with tailored
right calibre of staff, -- Staff turnover in career-stage programmes
fails to instil an appropriate growing economies and and clear performance
culture or fails to embed regions management strategies
the right systems to -- Stagnation of ideas -- Contacts with universities
drive personal performance and development opportunities to identify and develop
in pursuit of the Group's -- Loss of expertise talent
long-term growth and critical business -- Career path planning
knowledge and global opportunities
-- Reduced management for high-potential staff
pipeline for succession -- Internal programmes
to senior positions for the structured transfer
of technical and other
knowledge
-- Clearly defined Values
underpin business culture
--------------------------------- ---------------------------------------
Health and safety
Vesuvius staff or contractors -- Injury to staff and -- Active safety programmes,
are injured at work because contractors with ongoing wide-ranging
of failures in Vesuvius' -- Health and safety monitoring and safety
operations, equipment breaches training
or processes -- Manufacturing downtime -- Independent safety
or damage to infrastructure audit team
from incident at plant -- Quality management
-- Inability to attract programmes including
the necessary workforce stringent manufacturing
-- Reputational damage process control standards,
monitoring and reporting
--------------------------------- ---------------------------------------
Environmental, social
and governance (ESG) -- Loss of opportunity -- Development and implementation
criteria to grow sales of a new Sustainability
Vesuvius fails to capitalise -- Loss of opportunity initiative, which includes
on the opportunity to to increase margin stretching targets focused
help its customers significantly -- Loss of stakeholder on reducing the Group's
reduce their carbon emissions confidence including Energy usage, CO2 emissions,
as environmental pressure Investors waste and recycled materials
grows on the Steel Industry -- Reputational damage -- R&D focus on products
or Vesuvius fails to that assist customers
meet the expectations to reduce carbon emissions
of its various stakeholders and improve their own
including employees and sustainability measures
investors -- Skilled technical
sales force to develop
efficient solutions for
our customers
-- Globally disseminated
Code of Conduct sets
out standards of conduct
expected and ABC Policy
adopted with a zero tolerance
regarding bribery and
corruption
-- Internal Speak up
mechanisms to allow reporting
of concerns
-- Extensive use of due
diligence to assess existing
and potential business
partners and customers
--------------------------------- ---------------------------------------
Half Year Results for the six months ended 30 June 2022
Directors' responsibility statement
We confirm that to the best of our knowledge:
(a ) The Condensed Group Financial Statements have been prepared
in accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group as required by DTR 4.2.4 R; and
(b) This half-yearly financial report includes a fair review of
the information required by:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related parties' transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period; and any changes in the related parties'
transactions described in the last Annual Report that could do
so.
The names and functions of the Directors of Vesuvius plc are as
follows:
John McDonough CBE Chairman
Patrick André Chief Executive
Guy Young Chief Financial Officer
Douglas Hurt Non-executive Director,
Senior Independent Director
and
Chairman of the Audit Committee
Kath Durrant Non-executive Director and
Chairman of the Remuneration
Committee
Dinggui Gao Non-executive Director
Friederike Helfer Non-executive Director
Jane Hinkley Non-executive Director
On behalf of the Board
Guy Young
Chief Financial Officer
27 July 2022
Independent review report to Vesuvius plc
Report on the Condensed Group Financial Statements
Our conclusion
We have reviewed Vesuvius plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
Half Year Results of Vesuvius plc for the 6 month period ended 30
June 2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Condensed Group Balance Sheet as at 30 June 2022;
-- the Condensed Group Income Statement and Condensed Group
Statement of Comprehensive Income for the period then ended;
-- the Condensed Group Statement of Cash Flows for the period then ended;
-- the Condensed Group Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Results of Vesuvius plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Half
Year Results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Half Year Results, including
the interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Results based on our review.
Our conclusion, including our Conclusion relating to going concern,
is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 July 2022
Condensed Group Income Statement
For the six months ended 30 June 2022
Half year 2022 (Unaudited) Half year 2021 (Unaudited) Full year 2021
----------------------------------- ----------------------------------- -------------------------------------
Separately Separately Separately
Headline reported Headline reported Headline reported
performance(1) items(1) Total performance(1) items(1) Total performance(1) items(1) Total
Continuing
operations Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Revenue 2 1,015.9 - 1,015.9 808.1 - 808.1 1,642.9 - 1,642.9
Manufacturing
costs (718.0) - (718.0) (592.6) - (592.6) (1,222.8) - (1,222.8)
Administration,
selling &
distribution
costs (170.5) - (170.5) (142.2) - (142.2) (277.7) - (277.7)
----------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Trading profit(2) 2 127.4 - 127.4 73.3 - 73.3 142.4 - 142.4
Amortisation
of acquired
intangible
assets - (5.1) (5.1) - (4.8) (4.8) - (9.7) (9.7)
Operating
profit/(loss) 2 127.4 (5.1) 122.3 73.3 (4.8) 68.5 142.4 (9.7) 132.7
-------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Finance expense (9.2) - (9.2) (6.2) - (6.2) (13.7) - (13.7)
Finance income 2.6 - 2.6 2.6 - 2.6 7.3 - 7.3
-------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Net finance
costs 3 (6.6) - (6.6) (3.6) - (3.6) (6.4) - (6.4)
Share of post-tax
profit of joint
ventures and
associates 1.0 - 1.0 0.6 - 0.6 1.3 - 1.3
Profit/(loss)
before tax 2 121.8 (5.1) 116.7 70.3 (4.8) 65.5 137.3 (9.7) 127.6
Income tax
(charge)/credits 4 (33.2) 1.4 (31.8) (18.5) (0.7) (19.2) (35.9) 16.2 (19.7)
----------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Profit/(loss) 88.6 (3.7) 84.9 51.8 (5.5) 46.3 101.4 6.5 107.9
================= ===== ============== ========== ======= ============== ========== ======= ============== ========== =========
Profit/(loss)
attributable
to:
Owners of the
parent 84.7 (3.7) 81.0 48.5 (5.5) 43.0 95.6 6.5 102.1
Non-controlling
interests 3.9 - 3.9 3.3 - 3.3 5.8 - 5.8
----------------- ----- -------------- ---------- ------- -------------- ---------- ------- -------------- ---------- ---------
Profit/(loss) 88.6 (3.7) 84.9 51.8 (5.5) 46.3 101.4 6.5 107.9
================= ===== ============== ========== ======= ============== ========== ======= ============== ========== =========
Earnings per share - pence 5
- basic 30.0 15.9 37.7
- diluted 29.8 15.8 37.5
================= ===== ============== ========== ======= ============== ========== ======= ============== ========== =========
(1) Headline performance and Separately reported items are
non-GAAP measures. Headlineperformance is defined in Note 15.1 and
Separately reported items are defined in Note 1.5.
(2) Trading profit is a non-GAAP measure and is defined in Note 15.4.
The above results were derived from continuing operations. The
separately reported items would form part of Administration,
selling & distribution costs if classified within headline
performance, which including these amounts would total GBP175.6m
(2021 half year: GBP147.0m, 2020 full year: GBP287.4m) .
Condensed Group Statement of Comprehensive Income
For the six months ended 30 June 2022
Unaudited Unaudited
Half Half
year year Full year
2022 2021 2021
Notes GBPm GBPm GBPm
---------------------------------------------------- ----- --------- --------- ---------
Profit 84.9 46.3 107.9
Items that will not subsequently be
reclassified to income statement:
--------- --------- ---------
Remeasurement of defined benefit assets/liabilities 27.9 8.5 (80.6)
Income tax relating to items not reclassified 4 (7.9) (9.6) 12.5
Items that may subsequently be reclassified
to income statement:
Exchange differences on translation of the
net assets of foreign
Operations 100.4 (28.8) (31.4)
Exchange differences arising on translation
of net investment hedges (11.6) 10.3 14.4
Net change in costs of hedging - (0.3) (1.2)
Change in the fair value of the hedging
instrument 6.8 (0.2) 2.2
Amounts reclassified from the income
statement (7.1) 0.7 (0.7)
---------
Other comprehensive income (loss), net
of income tax 108.5 (19.4) (84.8)
Total comprehensive income 193.4 26.9 23.1
==================================================== ===== ========= ========= =========
Total comprehensive income attributable
to:
Owners of the parent 186.9 24.9 17.7
Non-controlling interests 6.5 2.0 5.4
Total comprehensive income 193.4 26.9 23.1
---------------------------------------------------- ----- --------- --------- ---------
The above results were derived from continuing operations.
Condensed Group Statement of Cash Flows
For the six months ended 30 June 2022
Unaudited Unaudited
Half
year Half year Full year
2022 2021 2021
Notes GBPm GBPm GBPm
----------------------------------------------- ----- --------- --------- ---------
Cash flows from operating activities
Cash generated from operations 8 69.0 50.2 82.9
Interest paid (7.4) (5.5) (11.9)
Interest received 2.1 2.1 4.3
Income taxes paid (23.6) (13.7) (30.1)
Net cash inflow from operating activities 40.1 33.1 45.2
Cash flows from investing activities
--------- --------- ---------
Capital expenditure (38.6) (17.6) (45.5)
Proceeds from the sale of property,
plant and equipment 1.3 0.6 1.2
Acquisition of subsidiaries and joint
ventures, net of cash acquired 12 0.5 - (43.7)
Dividends received from joint ventures - 1.0 1.0
Net cash outflow from investing activities (36.8) (16.0) (87.0)
----------------------------------------------- ----- --------- --------- ---------
Net cash inflow/(outflow) before financing
activities 3.3 17.1 (41.8)
Cash flows from financing activities
--------- --------- ---------
Proceeds from borrowings 7 50.1 - 89.4
Repayment of borrowings 7 (9.1) (22.5) (31.4)
Purchase of ESOP Shares (1.9) - (1.1)
Dividends paid to equity shareholders 6 (40.5) (38.7) (55.5)
Dividends paid to non-controlling shareholders (1.3) (0.7) (2.2)
--------- --------- ---------
Net cash (outflow) from financing activities (2.7) (61.9) (0.8)
----------------------------------------------- ----- --------- --------- ---------
Net (decrease)/increase in cash and
cash equivalents 7 0.6 (44.8) (42.6)
Cash and cash equivalents at 1 January 162.4 206.8 206.8
Effect of exchange rate fluctuations
on cash and cash equivalents 9.2 (4.0) (1.8)
Cash and cash equivalents at the end
of the reporting period 172.2 158.0 162.4
=============================================== ===== ========= ========= =========
Free cash flow 15.11
Net cash inflow from operating activities 40.1 33.1 45.2
Capital expenditure (38.6) (17.6) (45.5)
Proceeds from the sale of property,
plant and equipment 1.3 0.6 1.2
Dividends received from joint ventures - 1.0 1.0
Dividends paid to non-controlling shareholders (1.3) (0.7) (2.2)
----------------------------------------------- ----- --------- --------- ---------
Free cash flow(1) 15.11 1.5 16.4 (0.3)
=============================================== ===== ========= ========= =========
(1) For definitions of alternative performance measures, refer
to Note 15
Condensed Group Balance Sheet
As at 30 June 2022
Unaudited Unaudited
Half
year Half year Full year
2022 2021 2021
Notes GBPm GBPm GBPm
------------------------------------------- ----- --------- ---------- ---------
Assets
--------- ---------- ---------
Property, plant and equipment 380.2 325.1 352.5
Intangible assets 732.6 675.5 696.8
Employee benefits - surpluses 9 24.5 113.2 25.1
Interests in joint ventures and associates 14.5 11.6 12.8
Investments 0.8 0.9 0.5
Deferred tax assets 94.8 84.9 104.2
Other receivables 18.8 17.7 16.2
Derivative financial instruments 14 3.1 - -
Total non-current assets 1,269.3 1,228.9 1,208.1
Cash and short-term deposits 7 177.2 162.1 169.1
Inventories 360.7 236.9 299.4
Trade and other receivables 547.1 410.2 445.2
Income tax receivable 2.3 1.8 7.6
Derivative financial instruments 14 0.2 - 0.1
Assets classified as held for sale - 0.9 -
Total current assets 1,087.5 811.9 921.4
Total assets 2,356.8 2,040.8 2,129.5
=========================================== ===== ========= ========== =========
Condensed Group Balance Sheet (continued)
As at 30 June 2022
Unaudited Unaudited
Half
year Half year Full year
2022 2021 2021
Notes GBPm GBPm GBPm
---------------------------------- ----- --------- ---------- ---------
Equity
--------- ---------- ---------
Issued share capital 27.8 27.8 27.8
Retained earnings 2,545.5 2,508.1 2,483.4
Other reserves (1,381.7) (1,468.3) (1,467.6)
--------- ---------- ---------
Equity attributable to the owners
of the parent 1,191.6 1,067.6 1,043.6
Non-controlling interests 59.8 52.7 54.6
---------------------------------- ----- --------- ---------- ---------
Total equity 1,251.4 1,120.3 1,098.2
---------------------------------- ----- --------- ---------- ---------
Liabilities
--------- ---------- ---------
Interest-bearing borrowings 7 348.2 273.1 329.9
Employee benefits - liabilities 9 78.5 102.3 102.1
Other payables 7.8 9.4 11.6
Provisions 13 36.0 32.4 32.6
Income tax liabilities - - -
Deferred tax liabilities 28.9 49.7 29.6
Derivative financial instruments 14 - 5.0 2.5
--------- ---------- ---------
Total non-current liabilities 499.4 471.9 508.3
Interest-bearing borrowings 7 159.8 80.4 113.8
Trade and other payables 416.8 341.7 372.9
Income tax payable 11.9 9.2 18.1
Provisions 13 17.3 17.2 18.1
Derivative financial instruments 14 0.2 0.1 0.1
---------
Total current liabilities 606.0 448.6 523.0
---------------------------------- ----- --------- ----------
Total liabilities 1,105.4 920.5 1,031.3
---------------------------------- ----- ---------
Total equity and liabilities 2,356.8 2,040.8 2,129.5
================================== ===== ========= ========== =========
Condensed Group Statement of Changes in Equity
For the six months ended 30 June 2022
Issued Owners
share Other Retained of the Non-controlling Total
capital reserves earnings parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January 2022 27.8 (1,467.6) 2,483.4 1,043.6 54.6 1,098.2
Profit - - 81.0 81.0 3.9 84.9
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
assets/liabilities - - 27.9 27.9 - 27.9
Income tax relating to items
not reclassified - - (7.9) (7.9) - (7.9)
Exchange differences on translation
of the net assets of foreign
operations - 97.8 - 97.8 2.6 100.4
Exchange differences arising
on translation of net investment
hedges - (11.6) - (11.6) - (11.6)
Net change in costs of hedging - - - - - -
Change in the fair value of
the hedging instrument - 6.8 - 6.8 - 6.8
Amounts reclassified from the
income statement - (7.1) - (7.1) - (7.1)
Other comprehensive income/(loss),
net of income tax - 85.9 20.0 105.9 2.6 108.5
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income/(loss) - 85.9 101.0 186.9 6.5 193.4
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 3.5 3.5 - 3.5
Purchase of ESOP shares - - (1.9) (1.9) - (1.9)
Dividends paid (Note 6) - - (40.5) (40.5) (1.3) (41.8)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - (38.9) (38.9) (1.3) (40.2)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2022 27.8 (1,381.7) 2,545.5 1,191.6 59.8 1,251.4
------------------------------------ -------- --------- --------- ------- --------------- -------
Issued Owners
share Other Retained of the Non-controlling Total
capital reserves earnings parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
As at 1 January 2021 27.8 (1,451.3) 2,502.9 1,079.4 51.4 1,130.8
Profit - - 43.0 43.0 3.3 46.3
-------- --------- --------- ------- --------------- -------
Remeasurement of defined benefit
liabilities/assets - - 8.5 8.5 - 8.5
Income tax relating to items
not reclassified - - (9.6) (9.6) - (9.6)
Exchange differences on translation
of the net assets of foreign
operations - (27.5) - (27.5) (1.3) (28.8)
Exchange differences arising
on translation of net investment
hedges - 10.3 - 10.3 - 10.3
Net change in costs of hedging - (0.3) - (0.3) - (0.3)
Change in the fair value of
the hedging instrument - (0.2) - (0.2) - (0.2)
Amounts reclassified from the
Income Statement - 0.7 - 0.7 - 0.7
-------- --------- --------- ------- --------------- -------
Other comprehensive income/(loss),
net of income tax - (17.0) (1.1) (18.1) (1.3) (19.4)
------------------------------------ -------- --------- --------- ------- --------------- -------
Total comprehensive income/(loss) - (17.0) 41.9 24.9 2.0 26.9
-------- --------- --------- ------- --------------- -------
Recognition of share-based payments - - 2.0 2.0 - 2.0
Dividends paid (Note 6) - - (38.7) (38.7) (0.7) (39.4)
-------- --------- --------- ------- --------------- -------
Total transactions with owners - - (36.7) (36.7) (0.7) (37.4)
------------------------------------ -------- --------- --------- ------- --------------- -------
As at 30 June 2021 27.8 (1,468.3) 2,508.1 1,067.6 52.7 1,120.3
Basis of preparation
1.1 Basis of accounting
These Condensed Group Financial Statements of Vesuvius plc
("Vesuvius" or the "Company") and its subsidiary and joint venture
companies (the "Group") have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
These Condensed Group Financial Statements have been prepared
using the same accounting policies as used in the preparation of
the Group's Annual financial statements for the year ended 31
December 2021, except for taxes on income in the interim period
which are accrued using the tax rate that would be applicable to
the expected total annual profit or loss. The assessment of the
Group's critical accounting estimates and judgements remain
consistent with the 2021 Annual Report and Financial Statements .
The Group's Annual report and financial statements for the year
ended 31 December 2021 were prepared in accordance with UK-adopted
international accounting standards (IFRS) and the requirements of
the Companies Act 2006.
The Condensed Group Financial Statements do not include all of
the information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements of the Group for the year-ended 31 December 2021. The
financial information presented in this document is unaudited but
has been reviewed by the Company's auditor.
The comparative figures for the financial year ended 31 December
2021 are not the Group's statutory accounts for that financial year
but have been extracted from those accounts. Those accounts have
been reported on by the Company's auditor and delivered to
Companies House. The report of the auditor was unqualified, did not
include reference to any matters to which the auditor drew
attention by way of emphasis without qualifying its report and did
not contain a statement under section 498(2) or (3) of the
Companies Act 2006. These sections address whether proper
accounting records have been kept, whether the Company's accounts
are in agreement with those records and whether the auditor has
obtained all the information and explanations necessary for the
purposes of its audit.
1.2 Basis of consolidation
The Condensed Group Financial Statements incorporate the
financial statements of the Company and entities controlled by the
Company (its "subsidiaries"). Control exists when the Company has
the power to direct the relevant activities of an entity that
significantly affect the entity's return so as to have rights to
the variable return from its activities. In assessing whether
control exists, potential voting rights that are currently
exercisable are taken into account. The results of subsidiaries
acquired or disposed of during the year are included in the
Condensed Group Income Statement from the effective date of
acquisition or up to the effective date of disposal, as
appropriate.
The principal accounting policies applied in the preparation of
these Condensed Group Financial Statements are set out in the
Notes. These policies have been consistently applied to all of the
years presented, unless otherwise stated. Where necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with those detailed
herein to ensure that the Condensed Group Financial Statements are
prepared on a consistent basis. All intra-Group transactions,
balances, income and expenses are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's interest
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination together
with the non-controlling interests' share of profit or loss and
each component of other comprehensive income less their dividends
since the date of the combination. Their share of comprehensive
income/(loss) is attributed to the non-controlling interests even
if this results in the non-controlling interests having a deficit
balance.
1.3 Going concern
The Directors have prepared cash flow scenarios for the Group
for a period at least 12 months from the date of approval of the
2022 Interim Condensed Financial Statements. These forecasts
reflect an assessment of current and future end market conditions,
including the impact of covid-related lockdowns in China and war in
Ukraine, and their impact on the Group's future trading
performance. The analysis undertaken includes a severe but
plausible downside scenario which assumes a decline in business
activity and profitability in H2 2022 to the level achieved in H2
2020. Relative to H1 2022, this implies an c.30% decline in sales
and a c.60% decline in Trading Profit, with no improvement from
this level assumed in 2023. Even in this downside scenario, the
forecasts show that the Group's maximum net debt / EBITDA (pre-IFRS
16 in-line with the covenant calculation) does not exceed 1.0x,
compared to a leverage covenant of 3.25x.
On the basis of the exercise described above and the Group's
available committed liquidity which stands at GBP416m at 30 June
2022, the Directors consider that the Group and the Company have
adequate resources to continue in operational existence for a
period of at least 12 months from the date of signing of these
Interim Condensed Financial Statements. Accordingly, they continue
to adopt a going concern basis in preparing the Condensed Financial
statements of the Group and the Company.
1.4 Functional and presentational currency
The financial statements are presented in millions of pounds
sterling, which is the functional currency of the Company, and
rounded to one decimal place.
1.5 Disclosure of "separately reported items"
Columnar presentation
The Group has adopted a columnar presentation for its Condensed
Group Income Statement, to separately identify headline performance
results, as the Directors consider that this gives a useful view of
the underlying results of the ongoing business. As part of this
presentation format, the Group has adopted a policy of disclosing
separately on the face of its Group Income Statement, within the
column entitled 'Separately reported items', the effect of any
components of financial performance for which the Directors
consider separate disclosure would assist users both in a useful
understanding of the financial performance achieved for a given
year and in making projections of future results.
Separately reported items
Both materiality and the nature of the components of income and
expense are considered in deciding upon such presentation. Such
items may include, inter alia, the financial effect of exceptional
items which occur infrequently, such as major restructuring
activity (which may require more than one year to complete),
significant movement in the Group's deferred tax balances such as
was, for example, caused by the impact of US tax reform in 2017,
items reported separately for consistency, such as amortisation
charges relating to acquired intangible assets, profits or losses
arising on the disposal of continuing or discontinued operations
and the taxation impact of the aforementioned items reported
separately.
The amortisation charge in respect of intangible assets
recognised on business combinations is excluded from the trading
results of the Group since they are non-cash charges and are not
considered reflective of the core trading performance of the
Group.
In its adoption of this policy, the Company applies an
even-handed approach to both gains and losses and aims to be both
consistent and clear in its accounting and disclosure of such
items.
1.6 New and revised IFRS
Certain new accounting standards and interpretations have been
published that are applicable for periods commencing 1 January 2022
and others that are not mandatory for reporting periods commencing
on 1 January 2022 and have not been early adopted by the Group. The
Group's assessment of the impact of these new standards and
interpretations is that they are not expected to have a significant
impact on the Group's financial position, performance, cash flows
and disclosures.
Benchmark reform
The replacement of Libor with alternative interest rate
benchmarks is now well progressed and the Group has reviewed the
impact of this on its financial statements.
The GBP385m central bank facility signed on 5 July 2021 provides
for the use of SONIA and EURIBOR for GBP and EUR drawdowns
respectively. USD Libor remains quoted until June 2023; a
replacement reference rate for USD drawdowns will be agreed by that
date as provided for within the terms of the facility.
The Group's US private placement notes and cross currency
interest rate swaps are not exposed to Libor rates and as a result
are unaffected by the benchmark reform. The Group's GBP19m
bi-lateral loan agreement was amended in October 2021 with GBP
Libor replaced by SONIA.
The Group concludes that benchmark reform has no material impact
on its financial statements. The Group also confirms it has made no
changes to its risk management strategy as a result of benchmark
reform.
Hyperinflationary accounting in Turkey
Turkey became a hyperinflationary economy from 1 April 2022 and
IAS 29 'Financial Reporting in Hyperinflationary Economies' is
effective for periods ending on or after 30 June 2022. The group
operates in Turkey through its subsidiary, Vesuvius Istanbul Sanayi
ve Ticaret AS.
The standard applies retrospectively and impact assessments for
the year ended 31 December 2021 and period ended 30 June 2022 have
been completed. We have concluded that the impact of hyperinflation
in Turkey is not material for adjustment as at 1 January 2022 and
for the half year results to 30 June 2022.
2 Segment information
Operating segments for continuing operations
The Group's operating segments are determined taking into
consideration how the Group's components are reported to the
Group's Chief Executive Officer, who makes the key operating
decisions and is responsible for allocating resources and assessing
performance of the components. Taking into account the Group's
management and internal reporting structure, the operating segments
are Steel Flow Control, Steel Advanced Refractories, Steel Sensors
& Probes and the Foundry Division. The principal activities of
each of these segments are described in the Operational Review.
Steel Flow Control, Steel Advanced Refractories and Steel
Sensors & Probes operating segments are aggregated into the
Steel reportable segment. In determining that aggregation is
appropriate, judgement is applied which takes into account the
economic characteristics of these operating segments which include
a similar nature of products, customers, production processes and
margins.
Revenue from contracts with customers
Revenue comprises the fair value of the consideration received
or receivable for goods supplied and services rendered to customers
after deducting rebates, discounts and value-added taxes, and after
eliminating sales within the Group. Revenue from contracts with
customers is recognised when control of the goods or services are
transferred to the customer, upon the completion of specified
performance obligations, at an amount that reflects the
considerations to which the Group expects to be entitled to in
exchange for these consumable products and associated services.
The revenue recognition policy applicable to the current and
comparative periods and information about the Group's performance
obligations was disclosed in Note 5 of the 2021 Annual Report and
Financial Statements.
Segmental analysis
Unaudited Half Year 2022
-------------------------------------------------------------------
Flow Advanced Sensors
Control Refractories & Probes Steel Foundry Total
--------- -------------- ---------- --------
GBPm GBPm GBPm
------------------------------- --------- -------------- ---------- -------- -------- --------
Segment revenue 402.6 320.8 20.6 744.0 271.9 1,015.9
at a point in time 743.3 271.9 1,015.2
Over time 0.7 - 0.7
-------------------------------- --------- -------------- ---------- -------- -------- --------
Segment adjusted EBITDA
* 119.5 34.1 153.6
Segment depreciation (17.8) (8.4) (26.2)
-------------------------------- --------- -------------- ---------- -------- -------- --------
Segment trading profit 101.7 25.7 127.4
-------------------------------- --------- -------------- ---------- -------- --------
Return on sales # 13.7% 9.5% 12.5%
Amortisation of acquired
intangible assets (5.1)
Operating profit 122.3
Net finance costs (6.6)
Share of post-tax profit
of joint ventures 1.0
-------------------------------- --------- -------------- ---------- -------- -------- --------
Profit before tax 116.7
-------------------------------- --------- -------------- ---------- -------- -------- --------
Capital expenditure additions 33.2 5.0 38.2
Inventory 296.7 64.0 360.7
Trade debtors 334.2 103.9 438.1
Trade creditors (210.3) (68.6) (278.9)
-------------------------------- --------- -------------- ---------- -------- -------- --------
Unaudited Half Year 2021
-------------------------------------------------------------
Flow Advanced Sensors
Control Refractories & Probes Steel Foundry Total
-------- ------------- --------- -------
GBPm GBPm GBPm
------------------------------ -------- ------------- --------- ------- ------- -------
Segment revenue 315.5 238.6 16.2 570.3 237.8 808.1
at a point in time 567.4 237.8 805.2
Over time 2.9 - 2.9
------------------------------- -------- ------------- --------- ------- ------- -------
Segment adjusted EBITDA
* 66.0 31.8 97.8
Segment depreciation (16.6) (7.9) (24.5)
------------------------------- -------- ------------- --------- ------- ------- -------
Segment trading profit 49.4 23.9 73.3
------------------------------- -------- ------------- --------- ------- -------
Return on sales # 8.7% 10.1% 9.1%
Amortisation of acquired
intangible assets (4.8)
Operating profit 68.5
Net finance costs (3.6)
Share of post-tax profit
of joint ventures 0.6
------------------------------- -------- ------------- --------- ------- ------- -------
Profit before tax 65.5
------------------------------- -------- ------------- --------- ------- ------- -------
Capital expenditure additions 16.1 4.5 20.6
Inventory 189.2 47.7 236.9
Trade debtors 248.2 89.8 338.0
Trade creditors (162.7) (64.7) (227.4)
------------------------------- -------- ------------- --------- ------- ------- -------
Full Year 2021
-------------------------------------------------------------
Flow Advanced Sensors
Control Refractories & Probes Steel Foundry Total
-------- ------------- --------- -------
GBPm GBPm GBPm
------------------------------ -------- ------------- --------- ------- ------- -------
Segment revenue 648.7 489.1 33.7 1,171.5 471.4 1,642.9
at a point in time 1,169.9 471.4 1,641.3
Over time 1.6 - 1.6
------------------------------- -------- ------------- --------- ------- ------- -------
Segment adjusted EBITDA
* 135.9 56.3 192.2
Segment depreciation (33.9) (15.9) (49.8)
------------------------------- -------- ------------- --------- ------- ------- -------
Segment trading profit 102.0 40.4 142.4
------------------------------- -------- ------------- --------- ------- -------
Return on sales # 8.7% 8.6% 8.7%
Amortisation of acquired
intangible assets (9.7)
Operating profit 132.7
Net finance costs (6.4)
Share of post-tax profit
of joint ventures 1.3
------------------------------- -------- ------------- --------- ------- ------- -------
Profit before tax 127.6
------------------------------- -------- ------------- --------- ------- ------- -------
Capital expenditure additions 47.2 20.2 67.4
Inventory 248.1 51.3 299.4
Trade debtors 267.5 84.7 352.2
Trade creditors (191.3) (62.5) (253.8)
------------------------------- -------- ------------- --------- ------- ------- -------
# Return on sales is defined in note 15.3
* Adjusted EBITDA is defined in note 15.13
3 Net finance costs
Unaudited Unaudited
Half year Half year Full year
2022 2021 2021
GBPm GBPm GBPm
---------------------------------------- ---------- ---------- ---------
Interest payable on borrowings
Loans and overdrafts 6.7 5.0 10.7
Interest on lease liabilities 0.8 0.7 1.5
Amortisation of capitalised arrangement
costs 0.5 0.1 0.8
---------------------------------------- ---------- ---------- ---------
Total interest payable on borrowings 8.0 5.8 13.0
Interest on net retirement benefits
obligations 0.7 (0.1) (0.3)
Adjustments to discounts on provisions
and other liabilities 0.5 0.4 0.7
Adjustments to discounts on receivables (0.3) (0.2) (0.3)
Finance income (2.3) (2.3) (6.7)
---------------------------------------- ---------- ---------- ---------
Total net finance costs 6.6 3.6 6.4
---------------------------------------- ---------- ---------- ---------
Within the table above, total finance costs are GBP9.2m (2021
half year: GBP6.2m, 2021 full year: GBP13.7m) and total finance
income is GBP2.6m (2021 half year: GBP2.6m, 2021 full year:
GBP7.3m).
4 Income tax
A key measure of the Group's tax burden is the headline
effective tax rate, which the Group calculates on the income tax
associated with headline performance, divided by the headline
profit before tax excluding the Group's share of post-tax profit of
joint ventures. The Group's headline effective tax rate was in-line
with expectations at 27.5% in H1 2022 (2021: half year 26.5%; full
year 26.4%) based on the income tax costs associated with headline
performance of GBP33.2m (2021: half year GBP18.5m; full year
GBP35.9m).
The Group's total income tax costs include a credit of GBP1.4m
(2021 half year: GBP0.7m debit; 2021 full year: GBP16.2m credit)
relating to separately reported items comprising a credit of GBPnil
(2021 half year: GBPnil; 2021 full year GBP16.0m credit) relating
to the recognition of US deferred tax assets and a credit of
GBP1.4m (2021 half year: GBPnil; 2021 full year GBP0.2m credit)
relating to the amortisation of intangible assets.
The net income tax debit reflected in the Condensed Group
Statement of Comprehensive Income amounted to GBP7.9m (2021 half
year: GBP9.6m debit; 2021 full year: GBP13.0m credit), comprising
the following:
-- a debit of GBP7.9m (2021: half year GBP9.6m credit, inclusive
of the restatement of UK deferred tax from 19% to 25%; full year
GBP12.5m credit, inclusive of the buy-in of the UK pension scheme
and the restatement of UK deferred tax from 19% to 25%) in respect
of tax on net actuarial gains and losses on the employee benefits;
and
-- a debit of GBPnil in respect of exchange adjustments (2021:
half year GBPnil; full year GBP0.5m credit).
Certain corporate tax liabilities were classified as non-current
income tax payable (GBP7.7m) in the 30 June 2021 reported balance
sheet within the 2021 Half Year Results. These have been
reclassified to current income tax payable within the 30 June 2021
comparative balance sheet. There is no change to the net assets as
at 30 June 2021, Condensed Group Income Statement for the 6 month
period ended 30 June 2021 and non-current and current income tax
payable balance as at 31 December 2021 as a result of this
reclassification. A related interest liability of GBP3.6m as at 30
June 2021, included within other payables has been reclassified to
Trade and other payables, within current liabilities.
5 Earnings per share ("EPS")
5.1 Earnings for EPS
Basic and diluted EPS from continuing operations are based upon
the profit attributable to owners of the parent, as reported in the
Condensed Group Income Statement. The table below reconciles these
different profit measures.
Unaudited Unaudited
Half year Half year Full year
2022 2021 2021
GBPm GBPm GBPm
--------------------------------------- ---------- ---------- ---------
Profit attributable to owners of
the parent 81.0 43.0 102.1
Adjustments for separately reported
items:
Amortisation of acquired intangible
assets 5.1 4.8 9.7
Income tax (credit)/charge (1.4) 0.7 (16.2)
Headline profit attributable to owners
of the parent 84.7 48.5 95.6
----------------------------------------- ---------- ---------- ---------
5.2 Weighted average number of shares
Unaudited Half year Unaudited Half year Full year
2022 2021 2021
millions millions millions
---------------------------------------------------- ------------------- ------------------- ---------
For calculating basic and headline EPS 270.1 270.4 270.5
Adjustment for potentially dilutive ordinary shares 1.4 1.5 1.8
---------------------------------------------------- ------------------- ------------------- ---------
For calculating diluted and diluted headline EPS 271.5 271.9 272.3
---------------------------------------------------- ------------------- ------------------- ---------
For the purposes of calculating diluted and diluted headline
EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would
be issued were all outstanding share options to vest in full,
relating to the Company's share-based payment plans. Potential
ordinary shares are only treated as dilutive when their conversion
to ordinary shares would decrease EPS or increase loss per
share.
5.3 Per share amounts
Unaudited Half year Unaudited Half year Full year 2021
2022 2021
Pence pence pence
------------------------------------------------ ------------------- -------------------
Earnings per share - basic 30.0 15.9 37.7
- diluted 29.8 15.8 37.5
- headline 31.4 17.9 35.3
- diluted headline 31.2 17.8 35.1
-------------------------------------------------- ------------------- ------------------- --------------
6 Dividends
Unaudited Unaudited
Half year Half year Full year
2022 2021 2021
GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- ---------
Amounts recognised as dividends and paid to equity
shareholders
during the period
Final dividend for the year-ended 31 December
2020 of 14.3p per ordinary share - 38.7 38.7
Interim dividend for the year-ended 31
December 2021 of 6.2p per ordinary share - - 16.8
Final dividend for the year-ended 31 December
2021 of 15.0p per ordinary share 40.5 - -
40.5 38.7 55.5
---------------------------------------------- ---------- ---------- ---------
The Directors have declared an interim dividend of 6.5p in
respect of the year-ending 31 December 2022.
7 Reconciliation of movement in net debt
Balance Fair
as at Foreign value Balance
1 Jan exchange gains/ Non-cash Cash as at 30
2022 adjustments (losses) movements(*) flow June 2022
GBPm GBPm GBPm GBPm GBPm
------------------------ ------- ------------- --------- ------------- ------ ----------
Cash and cash
equivalents
Cash at bank
and in hand 169.1 9.4 - - (1.3) 177.2
Short term deposits - - - - - -
Bank overdrafts (6.7) (0.2) - - 1.9 (5.0)
------------------------ ------- ------------- --------- ------------- ------ ----------
162.4 9.2 - - 0.6 172.2
Borrowings,
excluding bank
overdrafts (440.3) (19.0) - (5.5) (41.0) (505.8)
Capitalised arrangement
costs 3.3 - - (0.5) - 2.8
Derivative financial
instruments (2.5) - 5.6 - - 3.1
Net debt (277.1) (9.8) 5.6 (6.0) (40.4) (327.7)
------------------------ ------- ------------- --------- ------------- ------ ----------
(*) GBP5.5m (2021 half year: GBP6.4m) of new leases were entered
into during the year.
Net debt is a measure of the Group's net indebtedness to banks
and other external financial institutions and comprises the total
of cash and short-term deposits, current and non-current
interest-bearing borrowings and derivative financial
instruments.
GBP50.1m proceeds from borrowings, shown in the Statement of
cash flows, includes GBP29.0m and GBP21.1m (EUR25.0m) of Sterling
and Euro drawings under the Group's GBP385msyndicated bank
facility.
GBP9.1m repayment of borrowings, shown in the statement of cash
flows, includes GBP3.0m repayments of Sterling drawings under the
collateralised bi-lateral loan facility and GBP6.1m of lease
repayments.
Cash is held both centrally and in operating territories. There
is no restricted cash. For certain territories including China,
India and Russia cash is more readily used locally than for broader
group purposes.
8 Cash Generated from Operations
Unaudited
Half Unaudited
year Half year
2022 2021
GBPm GBPm
----------------------------------------- --- --------- ----------
Operating profit 122.3 68.5
Adjustments for:
Amortisation of acquired intangible
assets 5.1 4.8
Trading Profit 127.4 73.3
(Gain)/loss on disposal of
non-current assets (0.1) 0.2
Depreciation 26.2 24.5
Defined benefit retirement
plans net charge 3.0 3.3
Net increase in inventories (40.2) (53.3)
Net increase in trade receivables (62.9) (43.1)
Net increase in trade payables 9.8 45.3
Net decrease in other working
capital 10.0 8.7
Outflow related to restructuring
charges (0.5) (3.0)
Defined benefit retirement
plans cash outflows (2.8) (4.0)
Vacant site remediation costs
paid (0.9) (1.7)
Cash generated from operations 69.0 50.2
----------------------------------------------- --------- ----------
Full year
2021
GBPm
------------------------------------------ --------- ----------
Operating profit 132.7
Adjustments for:
Amortisation of acquired intangible
assets 9.7
Trading Profit 142.4
Loss on disposal of non-current assets 0.4
Depreciation 49.8
Defined benefit retirement plans net
charge 6.4
Net decrease in inventories (113.5)
Net decrease in trade receivables (53.5)
Net increase in trade payables 70.6
Net decrease in other working capital (5.5)
Outflow related to restructuring charges (4.0)
Defined benefit retirement plans cash
outflows (7.2)
Vacant site remediation costs paid (3.0)
Cash generated from operations 82.9
------------------------------------------ --------- ----------
9 Employee benefits
The net employee benefits liability as at 30 June 2022 was
GBP54.0m (2021 half year: GBP10.9m asset; 2021 full year: GBP77.0m
liability) derived from an actuarial valuation of the Group's
defined benefit pension and other post-retirement obligations as at
that date.
The improvement in the balance sheet position has been driven
primarily by an increase in bond yields resulting in a reduction in
the value of German, Belgian and US liabilities. The German
discount rate increased from 1.2% as at 31 December 2021 to 3.3% at
30 June 2022. In the funded UK plan, an insurance asset from PIC
matches the remaining pension liabilities of the UK Plan, with the
result that the Company no longer bears any investment, longevity,
interest rate or inflation risks in respect of this UK Plan.
As disclosed in note 26 of the 2021 Annual Report and Financial
Statements, the above amounts may materially change in the next 12
months if there is a change in assumptions.
Unaudited Unaudited
Half year Half year Full year
2022 2021 2021
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ---------
Employee benefits - net surpluses
UK defined benefit pension plans 23.3 112.6 23.7
ROW defined benefit pension plans 1.2 0.6 1.4
-------------------------------------- ---------- ---------- ---------
Net surpluses 24.5 113.2 25.1
-------------------------------------- ---------- ---------- ---------
Employee benefits - net liabilities
UK defined benefit pension plans (1.6) (1.7) (1.6)
US defined benefit pension plans (21.8) (20.6) (21.9)
Germany defined benefit pension plans (34.7) (53.4) (53.3)
ROW defined benefit pension plans (13.1) (19.9) (18.3)
Other post-retirement benefit plans (7.3) (6.7) (7.0)
-------------------------------------- ---------- ---------- ---------
Net liabilities (78.5) (102.3) (102.1)
-------------------------------------- ---------- ---------- ---------
Net assets/(liabilities) (54.0) 10.9 (77.0)
-------------------------------------- ---------- ---------- ---------
The expense recognised in the Condensed Group Income Statement
in respect of the Group's defined benefit retirement plans and
other post-retirement benefit plans is shown below.
Unaudited Half year Unaudited Half year
2022 2021 Full year 2021
GBPm GBPm GBPm
------------------------ ---------------------------------------- ------------------- ----------------------- --------------
In arriving at trading
profit
(as defined in Note
15.4) * within other manufacturing costs 0.8 0.9 1.8
* within administration, selling an
d distribution costs 2.2 2.4 4.6
In arriving at profit
before tax * within net finance costs 0.7 (0.1) (0.3)
Total net charge 3.7 3.2 6.1
------------------------------------------------------------------ ------------------- ----------------------- --------------
10 Contingent liabilities
Vesuvius has extensive international operations and is subject
to various legal and regulatory regimes, including those covering
taxation and environmental matters.
Certain of Vesuvius' subsidiaries are subject to legacy matter
lawsuits, predominantly in the US, relating to a small number of
products containing asbestos manufactured prior to the acquisition
of those subsidiaries by Vesuvius. These suits usually also name
many other product manufacturers. To date, Vesuvius is not aware of
there being any liability verdicts against any of these
subsidiaries. Each year a number of these lawsuits are withdrawn,
dismissed or settled.
As the settlement of many of the obligations for which reserve
is made is subject to legal or other regulatory process, the timing
and amount of the associated outflows is subject to some
uncertainty (see Note 30 of the 2021 Annual Report and Financial
Statements for further information). The amount paid, including
costs in relation to this litigation, has not had a material effect
on Vesuvius' financial position or results of operations in the
current period.
11 Related parties
The nature of related party transactions in H1 2022 are in line
with those transactions disclosed in Note 34 of the 2021 Annual
Report and Financial Statements. All transactions with related
parties are conducted on an arm's length basis and in accordance
with normal business terms. Transactions with joint ventures and
associates are consistent with those disclosed in Note 34 of the
2021 Annual Report and Financial Statements. Transactions between
related parties that are Group subsidiaries are eliminated on
consolidation.
Unaudited Unaudited
Half year Half year
2022 2021
Transactions with joint ventures and associates GBPm GBPm
------------------------------------------------ ---------- ----------
Sales to joint ventures 2.6 2.0
Purchases from joint ventures 19.4 14.2
Dividends received from joint ventures - 1.0
Trade payables owed to joint ventures 11.4 7.4
Trade receivables owed by joint ventures 0.6 0.9
------------------------------------------------ ---------- ----------
12 Acquisitions and divestments
There were no acquisitions or divestments in the period.
On 6 December 2021, Vesuvius plc acquired the trade and assets
of Universal Refractories Inc. (URI), a specialty refractory
producer based in Pennsylvania, USA, which is focused on tundish
(steel continuous casting) applications as well as consumable
products for the foundry industry. It has become part of the
Group's Steel Advanced Refractories business unit, with the
exception of the ladle liners business which has been absorbed by
our Foundry Division (<10% of sales). The transaction valued URI
at an enterprise value of $57.1m (GBP42.6m) on a cash and debt-free
basis and was funded from Vesuvius' internal resources.
The fair values of the assets and liabilities recognised as a
result of the acquisition have been updated during the six months
ended 30 June 2022.There was a decrease of GBP1.1m to net
identifiable assets acquired, largely due to a reduction in
non-compete intangible assets of GBP0.9m. There was also a decrease
of GBP0.5m to consideration.
Book value Fair value Adjusted
adjustments value
------------------------------------------ ----------- ------------- ---------
GBPm GBPm GBPm
------------------------------------------ ----------- ------------- ---------
Property, plant and equipment 4.5 6.9 11.4
Intangible asset (customer relationships
and know-how) - 11.3 11.3
Inventories 5.0 1.3 6.3
Receivables 5.5 - 5.5
Payables (1.9) (0.6) (2.5)
Borrowings (5.4) - (5.4)
Deferred tax - (2.8) (2.8)
------------------------------------------ ----------- ------------- ---------
Net identifiable assets acquired 7.7 16.1 23.8
Goodwill 13.9
------------------------------------------ ----------- ------------- ---------
Consideration 37.7
------------------------------------------ ----------- ------------- ---------
The goodwill is attributable to URI's reputation in the
marketplace and the synergies that Vesuvius expects to gain from
its integration. It is expected to be tax deductible.
Included within the property, plant and equipment acquired were
right of use leased assets of GBP0.2m.
The decision to acquire URI was driven by its long-standing
customer relationships and know-how. The identifiable intangible
assets acquired are customer relationships and know-how. The fair
value of these intangibles continues to be provisional pending
final valuations. A deferred tax liability of GBP2.8m has been
provided in relation to these fair value adjustments.
On acquisition, URI was subsumed into the Steel Advanced
Refractories business unit and the Foundry Division and goodwill is
monitored at the level of the Steel Advanced Refractories operating
segment.
The net cash outflow on acquisition was GBP43.1m, including
related excess working capital payment, the business was acquired
on a cash and debt-free basis. In accordance with IFRS3, we
disclose above consideration of GBP37.7m and borrowings repaid
immediately prior to acquisition of GBP5.4m.
The Group did not acquire any material interests in any
companies during the period ended 30 June 2022.
There was no contingent consideration paid during the period
ended 30 June 2022. Contingent consideration of GBP0.1m was paid
during 2021 in respect of the previous acquisition of Ecil Met
Tec.
13 Provisions
Disposal,
closure
and environmental Restructuring
costs charges Other Total
GBPm GBPm GBPm GBPm
--------------------------------- ------------------ ------------- ----- ------
As at 1 January 2021 42.2 9.2 5.4 56.8
Exchange adjustments (0.6) (0.2) (0.1) (0.9)
Charge to Condensed Group Income
Statement 0.7 - 5.0 5.7
Adjustment to discount 0.4 - - 0.4
Cash spend (4.0) (3.0) (5.4) (12.4)
As at 30 June 2021 38.7 6.0 4.9 49.6
--------------------------------- ------------------ ------------- ----- ------
Disposal,
closure
and environmental Restructuring
costs charges Other Total
GBPm GBPm GBPm GBPm
--------------------------------- ------------------ ------------- ----- ------
As at 1 January 2022 41.8 5.0 3.9 50.7
Exchange adjustments 4.4 (0.4) 0.4 4.4
Charge to Condensed Group Income
Statement 2.0 - 5.7 7.7
Adjustment to discount 0.5 - - 0.5
Cash spend (3.7) (0.5) (5.8) (10.0)
As at 30 June 2022 45.0 4.1 4.2 53.3
--------------------------------- ------------------ ------------- ----- ------
Of the total provision balance at 30 June 2022 of GBP53.3m (30
June 2021: GBP49.6m), GBP36.0m (30 June 2021: GBP32.4m) is
recognised in the Group Balance Sheet within non-current
liabilities and GBP17.3m (30 June 2021: GBP17.2m) within current
liabilities.
In assessing the probable costs and realisation certainty of
provisions, or related assets, reasonable assumptions are made.
Changes to the assumptions used could significantly alter the
Directors' assessment of the value, timing or certainty of the
costs or related amounts. The nature of the provisions held remains
consistent with those held at 31 December 2021 and further
description is set out within Note 30 of the 2021 Annual Report and
Financial Statements.
14 Financial instruments
The Company's financial assets are measured at amortised cost
with the exception of certain investments in debt, which are
measured at fair value through other comprehensive income, and
certain derivative instruments, which are measured at fair value
through profit or loss. Financial liabilities are measured at
amortised cost with the exception of certain derivative
instruments, which are measured at fair value through profit and
loss. The carrying value of financial assets and liabilities
carried at amortised cost approximates the fair value.
IFRS 13 Fair Value Measurement requires classification of
financial instruments within a hierarchy that prioritises the
inputs to fair value measurement. The three levels of the fair
value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for
identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable
for the asset or liability, either directly or indirectly;
Level 3 - Inputs that are not based on observable market
data.
The following table summarises Vesuvius' financial instruments
measured at fair value, and shows the level within the fair value
hierarchy in which the financial instruments have been
classified:
Unaudited Unaudited
Half year 2022 Half year 2021 Full year 2021
Assets Liabilities Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ----------- ------ ----------- ------ -----------
Investments (Level 2) 0.8 - 0.9 - 0.5 -
Derivatives not designated
for hedge
accounting purposes (Level
2) 0.2 (0.2) - (0.1) 0.1 (0.3)
Derivatives designated
for hedge
accounting purposes (Level
2) 3.1 - - (5.0) - (2.3)
---------------------------- ------ ----------- ------ ----------- ------ -----------
All of the derivative financial instruments not designated for
hedge accounting purposes reported in the table above will mature
within a year of the balance sheet date. There were no transfers
between fair value hierarchies during the period. The method for
determining the hierarchy and for valuing the financial instruments
is consistent with that used at year-end, as disclosed in Note 25
of the 2021 Annual Report and Financial Statements. Fair value
disclosures have not been made in respect of other financial assets
and liabilities on the basis that the carrying amount is deemed to
be a reasonable approximation of fair value .
The Group's Treasury department, acting in accordance with
policies approved by the Board, is principally responsible for
managing the financial risks faced by the Group. The Group's
activities expose it to a variety of financial risks, the most
significant of which are market risk and liquidity risk. The
condensed interim financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements; they should be read in conjunction with the
Group's 2021 Annual Report and Financial Statements, in which
further details of these financial risks were disclosed in Note 25.
There have been no changes in the risk management policies since
year end.
In June 2020 the Group executed a $86m Cross currency interest
rate swap ('CCIRS') with 3 of its relationship banks. The effect of
this is to convert the $86m Private Placement Notes issued in June
2020 into EUR76.6m. The timing and amount of the US Dollar
cashflows under the CCIRS exactly mirror those of the Private
Placement Notes and the maturity date of the CCIRS also matches the
repayment date of the Notes. The CCIRS would by default be revalued
through the Income Statement; however as it is in a designated
hedging relationship it is instead revalued through Other
Comprehensive Income. More specifically, the US Dollar exposure is
designated as a cashflow hedge of the underlying Private Placement
Notes and the Euro exposure is designated as a net investment hedge
of part of the Group's foreign operations. The CCIRS is presented
as a non-current asset or liability as it is expected to be settled
more than 12 months after the end of the reporting period
With the exception of the CCIRS the fair value of Derivatives
outstanding at 30 June 2022 has been booked through the Income
Statement. All of the fair values shown in the table above are
classified under IFRS 13 as Level 2 measurements which have been
calculated using quoted prices from active markets, where similar
contracts are traded and the quotes reflect actual transactions in
similar instruments. All of the derivative assets and liabilities
not designated for hedge accounting purposes reported in the table
above will mature within a year of the balance sheet date.
The cross-currency interest rate swaps are fair valued at each
reporting date and the Group applies hedge accounting in accordance
with IFRS 9 such that the movement in fair value is accounted for
directly within equity. The USD component is designated as a
cashflow hedge of the $86m US Private Placement Notes. The Euro
component is designated as a net investment hedge of the Group's
Euro denominated net assets.
As at 30 June 2022, EUR249m and $60m of borrowings were
designated as hedges of net investments in EUR249m and $60m worth
of overseas foreign operations. In addition, the EUR76.6m CCIRS
liability has been designated as a net investment hedge of a
further EUR76.6m worth of overseas foreign operations.
As the value of the borrowings and the CCIRS liability exactly
matches the designated hedged portion of the net investments , the
relevant hedge ratio is 1:1. The net investment hedges are
therefore 100% effective with no ineffectiveness. It is noted that
hedge ineffectiveness would arise in the event there were
insufficient euro-denominated overseas foreign operations to be
matched against the EUR76.6m CCIRS liability.
As at 30 June 2022, the Group had $146m, EUR198m and GBP28m
(GBP318.4m in total) of US Private Placement Loan Notes (USPP)
outstanding, which carry a fixed rate of interest, representing 68%
of the Group's total borrowings outstanding at that date.
Maturities of the corresponding USPP Notes were disclosed in Note
25 to the 2021 Annual Report and Financial Statements.
On 5 July 2021, the Group entered a new syndicated bank facility
for GBP385.0m. On the same date the previous syndicated bank
facility for GBP300.0m was cancelled. The new facility expires in
July 2025.
The currency and interest rate profile of the Group's borrowings
is detailed in the tables below.
Financial liabilities (gross
borrowings)
Floating
Fixed rate rate Total
GBPm GBPm GBPm
------------------------ ------------- ---------- ------
Sterling 28.0 102.0 130.0
United States dollar 119.9 0.2 120.1
Euro 170.5 48.2 218.7
Other - 0.6 0.6
Capitalised costs (1.0) (1.7) (2.7)
As at 30 June 2022 315.7 151.0 466.7
------------------------ ------------- ---------- ------
Sterling 28.0 76.4 104.4
United States dollar 107.9 1.2 109.1
Euro 166.4 27.2 193.6
Other - - -
Capitalised costs (1.2) (2.1) (3.3)
As at 31 December 2021 301.1 102.7 403.8
------------------------ ------------- ---------- ------
The maturity analysis of the Group's financial liabilities is
shown in the tables below. The cash flows shown are
undiscounted.
As at 30 June 2022 Within Between Between Over Total Carrying
one year 1-2 years 2-5 years 5 years contractual amount
cash flows
GBPm GBPm GBPm GBPm GBPm GBPm
Trade payables 278.9 - - - 278.9 278.9
Loans & overdrafts 33.4 34.3 276.7 176.2 520.6 469.4
Lease liabilities 11.3 9.6 14.8 15.3 51.0 41.2
Capitalised arrangement
fees - - - - - (2.7)
Derivative liability 0.2 - - - 0.2 0.2
------------------------- ---------- ----------- ----------- --------- ------------- -----------
Total financial
liabilities 323.8 43.9 291.5 191.5 850.7 787.0
------------------------- ---------- ----------- ----------- --------- ------------- -----------
As at 31 December Within Between Between Over 5 Total Carrying
2021 one year 1-2 years 2-5 years years contractual amount
cash flows
GBPm GBPm GBPm GBPm GBPm GBPm
Trade payables 253.8 - - - 253.8 253.8
Loans & overdrafts 37.4 9.6 178.2 235.0 460.2 407.1
Lease liabilities 11.6 9.2 13.4 13.2 47.4 39.9
Capitalised arrangement
fees - - - - - (3.3)
Derivative liability (0.6) (0.6) (0.6) 0.2 (1.6) 2.6
------------------------- ---------- ----------- ----------- ------- ------------- ---------
Total financial
liabilities 302.2 18.2 191.0 248.4 759.8 700.1
------------------------- ---------- ----------- ----------- ------- ------------- ---------
As noted above, the syndicated bank facility was replaced in
July 2021 and the replacement facility references SONIA for GBP
drawdowns. The maturity of the GBP19.0m bi-lateral bank facility
was extended from October 2021 to October 2022; at the time of the
extension the reference to GBP LIBOR was replaced with a reference
to SONIA.
In H1 2022, the Group did not hold any borrowings for which the
interest payable referenced LIBOR benchmarks, nor does it intend to
do so in the foreseeable future. The Group's GBP385m syndicated
bank facility allows for USD denominated borrowings and any such
borrowings would currently reference USD LIBOR. It is further noted
that the terms of the facility require an alternative reference
rate for USD borrowings to be agreed by June 2023.
15 Alternative performance measures (unreviewed)
The Company uses a number of Alternative Performance Measures
(APMs) in addition to those reported in accordance with IFRS. The
Directors believe that these APMs, listed below, are important when
assessing the underlying financial and operating performance of the
Group and its Divisions, providing management with key insights and
metrics in support of the ongoing management of the Group's
performance and cash flow. A number of these align with KPI's and
other key metrics used in the business and therefore are considered
useful to also disclose to the users of the financial statements.
The following APMs do not have standardised meaning prescribed by
IFRS and therefore may not be directly comparable to similar
measures presented by other companies.
15.1 Headline performance
Headline performance, reported separately on the face of the
Condensed Group Income Statement, is from continuing operations and
before items reported separately on the face of the Condensed Group
Income Statement.
15.2 Underlying revenue, underlying trading profit and underlying return on sales
Underlying revenue, underlying trading profit and underlying
return on sales are the headline equivalents of these measures
after adjustments to exclude the effects of changes in exchange
rates, business acquisitions and disposals. Reconciliations of
underlying revenue and underlying trading profit can be found in
the Financial Summary. Underlying revenue growth is one of the
Group's key performance indicators and provides an important
measure of organic growth of Group businesses between reporting
periods, by eliminating the impact of exchange rates, acquisitions
and disposals.
15.3 Return on Sales ('ROS')
ROS is calculated as trading profit divided by revenue. It is
one of the Group's key performance indicators and is used to assess
the trading performance of Group businesses. ROS is included in
Note 2.
15.4 Trading profit/adjusted EBITA
Trading profit/adjusted EBITA is defined as operating profit
before separately reported items. It is one of the Group's key
performance indicators and is used to assess the trading
performance of Group businesses. It is also used as one of the
targets against which the annual bonuses of certain employees are
measured.
15.5 Headline profit before tax
Headline profit before tax is calculated as the net total of
trading profit, plus the Group's share of post-tax profit of joint
ventures and total net finance costs associated with headline
performance. It is one of the Group's key performance indicators
and is used to assess the financial performance of the Group as a
whole.
15.6 Headline effective tax rate ('ETR')
The Group's headline ETR is calculated on the income tax costs
associated with headline performance, divided by headline profit
before tax and before the Group's share of post-tax profit of joint
ventures and associates.
15.7 Headline earnings
Headline earnings is profit after tax before separately reported
items attributable to owners of the parent.
15.8 Headline earnings per share
Headline earnings per share is calculated by dividing headline
profit before tax less associated income tax costs, attributable to
owners of the parent by the weighted average number of ordinary
shares in issue during the year. It is one of the Group's key
performance indicators and is used to assess the underlying
earnings performance of the Group as a whole. It is also used as
one of the targets against which the annual bonuses of certain
employees are measured. Headline earnings per share is disclosed in
Note 5.
15.9 Adjusted operating cash flow
Adjusted operating cash flow is cash generated from operations
before restructuring and vacant site remediation costs but after
deducting capital expenditure net of asset disposals. It is used in
calculating the Group's cash conversion.
Unaudited Unaudited Full
Half Half year
year year
2022 2021 2021
GBPm GBPm GBPm
------------------------------------------- ---------- ---------- -------
Cash generated from continuing operations 69.0 50.2 82.9
-------------------------------------------- ---------- ---------- -------
Add: Outflows relating to restructuring
charges 0.5 3.0 4.0
Add: Vacant site remediation costs
paid 0.9 1.7 3.0
Less: Capital expenditure (38.6) (17.6) (45.5)
Add: Proceeds from the sale of property,
plant and equipment 1.3 0.6 1.2
Adjusted operating cash flow 33.1 37.9 45.6
Trading Profit 127.4 73.3 142.4
-------------------------------------------- ---------- ---------- -------
Cash Conversion 26% 52% 32%
-------------------------------------------- ---------- ---------- -------
15.10 Cash conversion
Cash conversion is calculated as adjusted operating cash flow
divided by trading profit. It is useful for measuring the rate at
which cash is generated from trading profit. It is also used as one
of the targets against which the annual bonuses of certain
employees are measured.
15.11 Free cash flow
Free cash flow is defined as net cash flow from operating
activities after net outlays for the purchase and sale of property,
plant and equipment, dividends from joint ventures and dividends
paid to non-controlling shareholders. It is one of the Group's key
performance indicators and is used to assess the underlying cash
generation of the Group and is one of the measures used in
monitoring the Group's capital. A reconciliation of free cash flow
is included underneath the Condensed Group Statement of Cash
Flows.
15.12 Average trade working capital to sales ratio
The average trade working capital to sales ratio is calculated
as the percentage of average trade working capital balances to the
total revenue for the previous 12 months, at constant currency.
Average trade working capital (comprising inventories, trade
receivables and trade payables) is calculated as the average of the
13 previous month-end balances. It is one of the Group's key
performance indicators and is useful for measuring the level of
working capital used in the business and is one of the measures
used in monitoring the Group's capital.
Unaudited Unaudited Full year
Half year Half year
2022 2021 2021
GBPm GBPm GBPm
------------------------------- ----------- ----------- ----------
Average trade working capital 426.4 319.4 350.6
Last 12 months total revenue 1,868.6 1,542.3 1,674.6
Average trade working capital
to sales ratio 22.8% 20.7% 20.9%
-------------------------------- ----------- ----------- ----------
15.13 Adjusted earnings before interest, tax, depreciation and
amortisation (adjusted EBITDA )
Adjusted EBITDA is calculated as the total of trading profit
before depreciation and amortisation of non-acquired intangible
assets. It is used in the calculation of the Group's interest cover
and net debt to adjusted EBITDA ratios. A reconciliation of
adjusted EBITDA is included in Note 2.
15.14 Net interest payable on borrowings
Net interest payable on borrowings is calculated as total
interest payable on borrowings less finance income, excluding
interest on net retirement benefit obligations, adjustments to
discounts and any item separately reported. It is used in the
calculation of the Group's interest cover ratio.
Unaudited Unaudited Full year
Half year Half year
2022 2021 2021
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ----------
Total interest payable on borrowings (note
3) 8.0 5.8 13.0
Finance income (note 3) (2.3) (2.3) (6.7)
Net interest payable on borrowings 5.7 3.5 6.3
--------------------------------------------- ----------- ----------- ----------
15.15 Interest cover
Interest cover is the ratio of adjusted EBITDA for the last 12
months to net interest payable on borrowings for the last 12
months. It is one of the Group's key performance indicators and is
used to assess the financial position of the Group and its ability
to fund future growth. This measure is also a component of the
Group's covenant calculations.
Unaudited Unaudited Full year
Half year Half year
2022 2021 2021
GBPm GBPm GBPm
--------------------------------------------------- ----------- ----------- ----------
Last 12 months adjusted EBITDA 248.0 173.3 192.2
Last 12 months net interest payable on borrowings 8.5 8.1 6.3
Interest cover 29.2x 21.4x 30.5x
---------------------------------------------------- ----------- ----------- ----------
15.16 Net debt
Net debt comprises the net total of current and non-current
interest-bearing borrowings (including IFRS16 lease liabilities),
cash and short-term deposits and derivative financial instruments.
Net debt is a measure of the Group's net indebtedness to banks and
other external financial institutions. A reconciliation of the
movement in net debt is included in Note 7.
15.17 Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is the ratio of net debt at the
period-end to adjusted EBITDA for the last 12 months. It is one of
the Group's key performance indicators and is used to assess the
financial position of the Group and its ability to fund future
growth and is one of the measures used in monitoring the Group's
capital.
Unaudited Unaudited Full year
Half year Half year
2022 2021 2021
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- ----------
Net debt (note 7) 327.7 196.6 277.1
Last 12 months adjusted EBITDA (note 2) 248.0 173.3 192.2
Net debt to adjusted EBITDA 1.3x 1.1x 1.4x
------------------------------------------ ----------- ----------- ----------
15.18 Return on invested capital (ROIC)
From 2022 onwards, the Group has adopted ROIC as its key measure
of return from the Group's invested capital. RONA performance
measure has been replaced with ROIC which provides a more complete
measure of Vesuvius's returns. ROIC is calculated as trading profit
less amortisation of acquired intangibles plus share of post-tax
profit of joint ventures and associates for the previous 12 months
after tax, divided by the average invested capital (total assets
excluding cash plus non-interest bearing liabilities), at constant
currency (being the average over balance sheet date and the 12
month's prior balance sheet date invested capital).
Unaudited Unaudited Full year
Half year Half year
2022 2021 2021
GBPm GBPm
---------------------------------------- ---------- ---------- ----------
Average invested capital 1,437.9 1,349.5 1,371.6
Trading profit (note 15.4) 198.7 122.4 145.0
Amortisation of acquired intangible
assets (9.9) (9.8) (9.7)
Share of post-tax profit from
joint ventures and associates 1.7 1.2 1.4
Tax on trading profit and amortisation
of acquired intangible assets (51.9) (29.9) (35.8)
----------------------------------------- ---------- ---------- ----------
138.6 83.9 100.9
---------- ---------- ----------
ROIC 9.6% 6.2% 7.4%
-------------------------------------------------------------------------------
15.19 Constant currency
Figures presented at constant currency represent 2021 amounts
retranslated at average 2022 exchange rates.
15.20 Liquidity
Liquidity is the Group's cash and short-term deposits plus
undrawn committed debt facilities less cash used as collateral on
loans and any gross up of cash in notional cash pools.
Unaudited Unaudited Full year
Half year Half year
2022 2021 2021
GBPm GBPm GBPm
------------------------------------ ----------- ----------- ----------
Cash and short term deposits 177.2 162.1 169.1
Undrawn committed debt facilities 257.1 348.7 308.1
Cash used as collateral on loans (18.0) (19.0) (21.0)
Gross up of cash in notional pools (0.1) (3.3) (0.5)
------------------------------------- ----------- ----------- ----------
Liquidity 416.2 488.5 455.7
------------------------------------- ----------- ----------- ----------
15.21 Last twelve months ('LTM')
Some results are presented or calculated using data from the
last twelve months from the reference date.
16 Exchange rates (unreviewed)
The Group reports its results in pounds sterling. A substantial
portion of the Group's revenue and profits are denominated in
currencies other than pounds sterling. It is the Group's policy to
translate the income statements and cash flow statements of its
overseas operations into pounds sterling using average exchange
rates for the year reported (except when the use of average rates
does not approximate the exchange rate at the date of the
transaction, in which case the transaction rate is used) and to
translate balance sheets using period end rates. The principal
exchange rates used were as follows:
Income and expense
Average rates
----------------- -------------------------------------------------------------
Half year Full year
Half year Half year Full year to Half to Half
2022 2021 2021 year change year change
----------------- --------- --------- ----------- ------------ ------------
US Dollar 1.30 1.39 1.38 -6.5% -5.8%
Euro 1.19 1.15 1.16 3.5% 2.6%
Chinese Renminbi 8.42 8.98 8.87 -6.2% -5.1%
Japanese Yen 159.48 149.63 151.06 6.6% 5.6%
Brazilian Real 6.59 7.48 7.42 -11.9% -11.2%
Indian Rupee 98.87 101.82 101.67 -2.9% -2.8%
South African
Rand 19.97 20.17 20.32 -1.0% -1.7%
------------------ --------- --------- ----------- ------------ ------------
Assets and liabilities
Period end rates
----------------- -------------------------------------------------------------
Half year Full year
Half year Half year Full year to Half to Half
2022 2021 2021 year change year change
----------------- --------- --------- ----------- ------------ ------------
US Dollar 1.22 1.38 1.35 -11.6% -9.6%
Euro 1.16 1.17 1.19 -0.9% -2.5%
Chinese Renminbi 8.15 8.94 8.61 -8.8% -5.3%
Japanese Yen 165.25 153.62 155.69 7.6% 6.1%
Brazilian Real 6.4 6.87 7.54 -6.8% -15.1%
Indian Rupee 96.12 102.82 100.75 -6.5% -4.6%
South African
Rand 19.81 19.73 21.64 0.4% -8.5%
------------------ --------- --------- ----------- ------------ ------------
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END
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