TIDMEXO
RNS Number : 3766X
Exova Group PLC
28 August 2015
2015 HALF YEAR RESULTS ANNOUNCEMENT
28 AUGUST 2015
Solid first half performance
-- Revenue up 6.9% at constant currency; 5.7% at actual rates
o 2.8% organic growth at constant currency despite weakness in
global energy markets
o 4.1% growth from M&A activity
-- 6.0% organic growth at constant currency excluding Oil & Gas and Industrials
-- Margins broadly flat before additional listed company costs
-- Six M&A transactions completed with encouraging pipeline
-- Interim dividend of 1.0p per share
Adjusted results(1) 2015 2014 Reported Organic Growth
GBPm GBPm growth growth from acquisitions
at constant net of
currency disposals
------------------------ ------ ------ --------- ------------- -------------------
Revenue 142.4 134.7 5.7% 2.8% 4.1%
------------------------ ------ ------ --------- ------------- -------------------
EBITA 21.4 21.1 1.4%
------------------------ ------ ------ ---------
EBITA margin 15.0% 15.7%
------------------------ ------ ------
Pro-forma diluted
earnings per share(2) 5.4p 5.4p
------------------------ ------ ------
Statutory results(3) 2015 2014 Reported
GBPm GBPm growth
---------------------- ------ -------- ---------
Operating profit 13.1 2.1 523.8%
---------------------- ------ -------- ---------
Profit/(loss) before
taxation 10.0 (38.1)
---------------------- ------ --------
Diluted earnings
per share 2.8p (38.2p)
---------------------- ------ --------
Interim dividend 1.0p -
per share
---------------------- ------ --------
Notes:
1) Adjusted results are stated before restructuring costs,
acquisition and integration costs, IPO related costs, impairment of
assets, management fee to private equity investor, interest,
taxation and amortisation of intangibles.
2) 2014 pro-forma diluted adjusted earnings per share has been
calculated as if the post IPO capital and debt structure had been
in place throughout the period.
3) Statutory results for 2014 reflect pre-IPO funding structure and IPO transaction costs.
Ian El-Mokadem, Chief Executive Officer, commented:
"Performance in the first six months of 2015 was in line with
our expectations. Excluding the headwinds in Oil & Gas and
Industrials, the business grew organically by 6% demonstrating the
benefits of good geographical and end market diversification. We
completed six acquisitions in the period including BM TRADA which
is our largest acquisition to date. BM TRADA enhances our position
in testing and certification of Fire and Building Products and
takes us into an attractive new area of management systems
certification."
"Overall, we anticipate that full year performance will be in
line with the Board's expectations."
Contacts
For further information please contact:
Ian Middleton, Powerscourt Group
Tel. Direct +44 (0)20 7250 1446 / +44 (0)7885 508 527
exova@powerscourt-group.com
Sophie Moate, Powerscourt Group
Tel. Direct +44 (0)20 7549 0994 / +44 (0)7761 974 589
exova@powerscourt-group.com
Ian Power, Investor Relations
Exova Group plc
Telephone: +44 (0)131 476 7612
Investor.Relations@Exova.com
Analyst briefing and conference call
There will be a conference call and meeting for analysts today
at 9.00am GMT, held at Goldman Sachs, 10th Floor, Peterborough
Court, 133 Fleet Street, London EC4A 2BB. If you would like to
attend the meeting, please contact Powerscourt Group at the above
e-mail address. Details of the conference call and a copy of the
presentation are available on the website:
http://www.exova.com/investors/results-and-reports/
Corporate website: www.exova.com
Trading Update
Exova will issue its next Trading Update on 11 November
2015.
Exova
Exova is one of the world's leading laboratory-based testing
groups, trusted by organisations to test and advise on the safety,
quality and performance of their products and operations.
Headquartered in Edinburgh, UK, including BM TRADA, Exova operates
142 laboratories and offices in 32 countries and employs around
4,500 people throughout Europe, the Americas, the Middle East and
Asia/Asia Pacific.
Exova's capabilities help to extend asset life, bring
predictability to applications, and shorten the time to market for
customers' products, processes and materials. With over 90 years'
experience, Exova specialises in testing across a number of key
sectors from health sciences to aerospace, transportation, oil and
gas, fire and construction.
HALF YEAR REPORT 2015
BUSINESS REVIEW
The principal activities of the Group are specialist testing and
advisory services and the key markets served are Aerospace, Oil
& Gas and Industrials, Product and Certification, Health
Sciences and Middle East.
The business comprises 142 permanent facilities in 32 countries
and employs around 4,500 people.
Overview of performance
2015 Growth Organic
GBPm 2014 at reported growth
GBPm exchange at constant
rates exchange
rates
---------------------------- ------ -------- ------------- -------------
Revenue 142.4 134.7 5.7% 2.8%
Adjusted EBITA(1) 21.4 21.1 1.4%
EBITA margin 15.0% 15.7%
Net finance costs (3.1) (40.2)
Income tax expense (2.3) (1.9)
Diluted adjusted earnings
per share 5.4p (21.6p)
Pro-forma diluted adjusted
earnings per share(2) 5.4p 5.4p
Dividend per share 1.0p -
Cash conversion(3) 67.3% 50.9%
Notes:
1) Adjusted items are stated before restructuring costs,
acquisition and integration costs, IPO related costs, impairment of
assets, management fee to private equity investor, interest,
taxation and amortisation of intangibles.
2) 2014 pro-forma diluted adjusted earnings per share has been
calculated as if the post IPO capital and debt structure had been
in place throughout the period.
3) The cash conversion ratio is calculated by dividing free cash
flow by adjusted EBITDA. Free cash flow is defined as adjusted
EBITDA less movements in net working capital (excluding the effect
of the IPO related cost accrual), less capital expenditure net of
dispo
2015 2014 Growth
Revenue GBPm GBPm (%)
------------------------- ------ ------ -------
Constant currency
Organic 137.8 134.0 2.8%
Acquisitions 6.6 - 4.9%
Disposals - 1.1 (0.8)%
144.4 135.1 6.9%
Currency effect (2.0) (0.4) (1.2)%
------------------------- ------ ------ -------
Reported 142.4 134.7 5.7%
------------------------- ------ ------ -------
The Group showed good overall growth in the first six months of
2015 through a combination of organic growth (2.8%) and the
contribution from bolt-on acquisitions net of disposals (4.1%).
The Group reports in sterling which strengthened against the
basket of currencies in the territories in which the Group
operates. This resulted in a negative translational effect of
1.2%.
Adjusted EBITA margin
Adjusted EBITA margin decreased by 70bps from 15.7% to 15.0%.
Following the IPO in April 2014, the Group has incurred additional
on-going costs associated with being a listed company and, after
adjusting for these costs, the underlying Adjusted EBITA margin
reduction was 10bps.
Separately disclosed items
30 June 30 June
-----------------------------
2015 2014
-----------------------------
GBPm GBPm
----------------------------- -------- --------
Amortisation of intangible
assets 4.8 4.0
Acquisition and integration
costs 2.1 0.7
Restructuring costs 1.4 0.8
IPO related costs - 13.3
----------------------------- -------- --------
Total 8.3 18.8
----------------------------- -------- --------
Amortisation of intangible assets
Amortisation in the six months to 30 June 2015 was GBP4.8m (six
months to 30 June 2014: GBP4.0m). The major element of intangible
assets is the value of customer relationships.
Acquisition and integration costs
In the six months to 30 June 2015 there were GBP2.1m (six months
to 30 June 2014: GBP0.7m) of acquisition and integration costs
primarily relating to the acquisition of BM TRADA and Environmental
Evaluation Limited.
Restructuring costs
In the six months to 30 June 2015 there were GBP1.4m (six months
to 30 June 2014: GBP0.8m) of restructuring costs primarily relating
to management actions to adapt the business to changes in the Oil
& Gas market.
IPO related costs
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:01 ET (06:01 GMT)
No IPO related costs were incurred in the period. In the six
months to 30 June 2014 GBP13.3m of costs relating to the IPO were
incurred. These costs primarily related to commissions, legal,
accounting and other advisers fees including irrecoverable VAT in
connection with the IPO.
Net finance costs 30 June 30 June
--------------------------------
2015 2014
--------------------------------
GBPm GBPm
-------------------------------- -------- --------
Net cash interest payable
Bank loans and senior loan
notes 2.5 7.1
Other loans and charges 0.3 0.9
Make whole on senior loan
notes - 15.5
Interest income on short
term deposits - (0.1)
-------------------------------- -------- --------
2.8 23.4
-------------------------------- -------- --------
Non-cash costs
Loan due to parent undertaking - 8.1
Preference share dividend - 1.0
Write off of historical
debt issue costs - 7.5
Amortisation of debt issue
costs 0.3 0.2
-------------------------------- -------- --------
0.3 16.8
-------------------------------- -------- --------
Net finance costs 3.1 40.2
-------------------------------- -------- --------
Net finance costs have reduced considerably since the
refinancing associated with the IPO in April 2014.
Earnings per share ("EPS")
Diluted earnings per share for the six months ended 30 June 2015
was 2.8p (six months ended 30 June 2014: (38.2p)).
Diluted adjusted earnings per share for the six months ended 30
June 2015 was 5.4p (six months ended 30 June 2014: 5.4p). This
measure calculates EPS before separately disclosed items and, for
2014, is calculated on a pro-forma basis as if the post IPO capital
and debt structure had been in place throughout the period.
Dividend
The Board has approved an interim dividend of 1.0p per share (30
June 2014: nil per share) to be paid on 11 November 2015 to
shareholders on the register at the close of business on 30 October
2015.
Acquisitions
During the period the Group completed six acquisitions.
On 9 February 2015, the Group acquired 100% of the share capital
of Environmental Evaluation Limited (EEL).The company helps UK
customers meet environmental regulations through the provision of
asbestos testing and inspection, stack sampling and occupational
hygiene advisory services and is recognised as a leading provider
of asbestos management services for the nuclear decommissioning
industry. The acquisition added 83 colleagues and forms part of the
Group's Health Sciences cluster.
On 13 May 2015 the Group completed the acquisition of BM TRADA
Group Limited ("BMT"). BMT adds to the Group's existing Fire and
Building Products testing and certification services and provides a
new platform for growth in the attractive area of management
systems certification. BMT employs 340 people across 16 countries
with annual turnover in excess of GBP20.0m and has become part of
our Product and Certification cluster.
Our Calibration business also completed four smaller
acquisitions/outsourcings in the period.
External net debt (excluding debt issue costs)
30 June 31 December
---------------------------
2015 2014
---------------------------
GBPm GBPm
--------------------------- -------- ------------
Cash and cash equivalents (30.4) (29.9)
Term loans 181.7 173.5
Finance leases 0.3 0.5
--------------------------- -------- ------------
Net debt 151.6 144.1
--------------------------- -------- ------------
At 30 June 2015, our term loans comprised GBP181.7m (31 December
2014: GBP173.5m) of non-amortising borrowings denominated in
sterling, euro, Canadian dollars, US dollars and Swedish krona. In
addition, a GBP76m revolving credit facility was undrawn at 30 June
2015 (31 December 2014: GBP90m undrawn). There are no repayments
scheduled on our term loans until 2019.
The external net debt to last twelve months adjusted EBITDA
ratio was 2.45 times as at 30 June 2015.
Presentation of results
Constant currency growth figures are provided in order to remove
the impact of currency translation. We calculate growth at constant
rates by translating the current and prior period results at the
same exchange rates.
Organic growth at constant currency represents revenue growth at
constant currency excluding the growth attributable to acquisitions
until the acquisition has been owned for a 12 month period and
excluding the revenue attributable to disposals in the year of
disposal and the preceding year.
Adjusted results are stated before restructuring costs,
acquisition and integration costs, IPO related costs, impairment of
assets, management fee to private equity investor, interest,
taxation and amortisation of intangibles.
The Group presents, as separately disclosed items on the face of
the consolidated income statement, those items of income and
expense which, because of their nature, merit separate presentation
to allow users to understand better the elements of financial
performance in the period to facilitate a comparison with prior
periods and a better assessment of trends in financial
performance.
Foreign exchange
Exchange rates for the Average Closing Average Closing
most significant currencies rate rate rate rate
used by the Group during
the year were:
------------------------------
30 June 30 June 30 June 30 June
2015 2015 2014 2014
------------------------------ -------- -------- -------- --------
Euro 1.3674 1.4065 1.2176 1.2516
US dollar 1.5269 1.5738 1.6698 1.7017
Canadian dollar 1.8828 1.9428 1.8398 1.8313
Swedish krona 12.8032 12.9801 10.9044 11.4554
UAE dirham 5.6090 5.7816 6.1344 6.251
Quatari riyal 5.5657 5.7357 6.0845 6.1967
------------------------------ -------- -------- -------- --------
OPERATING PERFORMANCE
Revenue
2015 Growth Organic
Six months ended GBPm 2014 at reported growth
30 June GBPm exchange at constant
rates exchange
rates
-------------------- ------ ------- ------------- -------------
Europe 74.5 71.7 3.9% 3.2%
Americas 47.8 46.7 2.4% (0.2)%
Rest of World 20.1 16.3 23.3% 9.6%
-------------------- ------ ------- ------------- -------------
Total Group 142.4 134.7 5.7% 2.8%
-------------------- ------ ------- ------------- -------------
2015 Growth Organic
Six months ended GBPm 2014 at reported growth
30 June GBPm exchange at constant
rates exchange
rates
-------------------- ------ ------- ------------- -------------
Aerospace 23.0 22.5 2.2% 4.5%
Oil & Gas and
Industrials 36.3 39.1 (7.2)% (5.2)%
Product and
Certification 41.3 37.3 10.7% 5.0%
Health Sciences 27.9 23.8 17.2% 8.9%
Middle East 13.9 12.0 15.8% 5.8%
-------------------- ------ ------- ------------- -------------
Total Group 142.4 134.7 5.7% 2.8%
-------------------- ------ ------- ------------- -------------
Adjusted EBITA
Six months ended 2015 2014
30 June
------------------
GBPm Margin GBPm Margin
------------------ ----- ------- ----- -------
Europe 10.8 14.5% 10.3 14.4%
Americas 8.5 17.8% 9.3 19.9%
Rest of World 2.1 10.4% 1.5 9.2%
------------------ ----- ------- ----- -------
Total Group 21.4 15.0% 21.1 15.7%
------------------ ----- ------- ----- -------
Regional Performance
Europe
Six months ended 30 June 2015 Growth Organic
GBPm 2014 at reported growth
GBPm exchange at constant
rates exchange
rates
-------------------------------- ------ ------- ------------- -------------
Revenue 74.5 71.7 3.9% 3.2%
Adjusted EBITA before on-going
listed company costs 11.4 10.5 8.6%
Margin 15.3% 14.6% 70 bps
-------------------------------- ------ ------- ------------- -------------
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August 28, 2015 02:01 ET (06:01 GMT)
In Europe, we have seen good organic growth in our Aerospace,
Health Sciences and Product and Certification clusters partially
offset by a contraction in Oil & Gas and Industrials. Aerospace
has returned to growth following the customer delays and supply
chain disruptions we experienced in 2014. Our Health Sciences
business is continuing to benefit from contracts won in 2014 and a
generally positive trading environment. Within Product and
Certification we saw good growth in both Fire and Calibration. As
expected, the impact of low oil prices has led to a contraction in
our Oil & Gas and Industrials cluster. Demand for more routine
testing has been weak, however activity in technically demanding
areas for previously committed long cycle capital expenditure
driven work has been more resilient. Headcount reductions have been
implemented in response to lower demand and we will continue to
actively manage the cost base in response to market
developments.
Margins improved in Product and Certification and Health
Sciences. In addition, early cost actions and the mix of work in
Oil & Gas and Industrials mitigated the downward pressure on
margins to some extent.
Americas
2015 Growth Organic
Six months ended 30 June GBPm 2014 at reported growth
GBPm exchange at constant
rates exchange
rates
-------------------------------- ------ ------- ------------- -------------
Revenue 47.8 46.7 2.4% (0.2)%
Adjusted EBITA before on-going
listed company costs 8.9 9.5 (6.3)%
(170)
Margin 18.6% 20.3% bps
-------------------------------- ------ ------- ------------- -------------
Organic revenues in the Americas were broadly flat reflecting
growing momentum in Aerospace and Transportation offset by a
contraction in Health Sciences and Oil & Gas and Industrials.
Aerospace returned to growth as expected following subdued demand
due to certain client specific delays and a slower than expected
ramp up in production related testing in 2014. Our Transportation
business began to benefit toward the end of the first half from
improving demand related to the development of new automotive
models. Health Sciences contracted due to a weak performance in the
Environmental business that was impacted by extreme weather
conditions in Eastern Canada which resulted in a very late start to
the season and a very competitive market environment. Oil & Gas
and Industrials volume and pricing challenges were partly offset by
market share gains in Western Canada and the downsizing of Canadian
laboratories to improve utilisation. Further restructuring
opportunities are also being assessed.
The margin decline reflects the combination of volume declines
and pricing pressure from customers in oil & gas in Western
Canada and Environmental.
Rest of World
2015 Growth Organic
Six months ended 30 June GBPm 2014 at reported growth
GBPm exchange at constant
rates exchange
rates
-------------------------------- ------ ------- ------------- -------------
Revenue 20.1 16.3 23.3% 9.6%
Adjusted EBITA before on-going
listed company costs 2.3 1.5 53.3%
Margin 11.4% 9.2% 220 bps
-------------------------------- ------ ------- ------------- -------------
In Rest of World, the Middle East cluster and our Fire
consulting business have both benefited from on-going
infrastructure investment in road and rail projects in Qatar and
Saudi Arabia. In Oil & Gas and Industrials we delivered strong
growth in Singapore from on-going project work and our Indian
acquisition integrated well and performed to plan. In addition, we
established a small laboratory in Malaysia to capture more routine
industrial business.
The margin improvement reflects good growth and disciplined cost
control in project work.
Outlook
We continue to expect modest organic revenue growth at constant
currency for the full year with further contraction in Oil &
Gas and Industrials in the second half offset to some extent by
continued improvement across the rest of the business. Overall, we
anticipate that full year performance will be in line with the
Board's expectations.
PRINCIPAL RISKS & UNCERTAINTIES
The 2014 Annual Report & Accounts set out the principal
risks and uncertainties faced by the business and detail the
process in place for managing these risks. The Report and Accounts
are available from our website www.exova.com. As set out on pages
10 and 11 of the Annual Report, we believe that the principal risks
and uncertainties which could impact the Group are as follows:
-- Health and safety
-- Loss of accreditation or customer approvals
-- People
-- Global economic and market conditions
-- Business infrastructure
-- Acquisitions
-- Litigation
-- Business integrity and ethics
-- Financial irregularity
-- Treasury
There have been no significant changes to the risk management
process in the current financial year.
Responsibility statement
The Directors confirm that, to the best of their knowledge:
-- The interim condensed set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting;
-- The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the period and description of principal risks and
uncertainties for the remainder of the financial year); and
-- The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties
transactions and changes therein).
By order of the Board
Ian El-Mokadem Anne Thorburn
Chief Executive Officer Chief Financial Officer
27 August 2015
Cautionary statement
This half year report has been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. The
report should not be relied upon by any other party or for any
other purpose.
The half year report contains certain forward looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the time of
their approval of this report but such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
INDEPENDENT REVIEW REPORT TO EXOVA GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2015 which comprises the Interim Condensed
Consolidated Income Statement, the Interim Condensed Consolidated
Statement of Comprehensive Income, the Interim Condensed
Consolidated Balance Sheet, the Interim Condensed Consolidated
Statement of Changes in Equity, the Interim Condensed Consolidated
Statement of Cash Flows and Notes 1 to 15. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
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We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Edinburgh
27 August 2015
The maintenance and integrity of the Exova Group plc web site is
the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial information since it was
initially presented on the web site.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2015
2015 2014
(unaudited) (unaudited)
----------------------------------- -----------------------------------
Separately Separately
Before disclosed Before disclosed
separately items separately items
disclosed (note disclosed (note
items 4) Total items 4) Total
Continuing Notes GBPm GBPm GBPm GBPm GBPm GBPm
operations
------------------ ------ ------------ ----------- -------- --- ------------ ----------- --------
Revenue 2 142.4 - 142.4 134.7 - 134.7
Net operating
costs 3 (121.0) (8.3) (129.3) (113.8) (18.8) (132.6)
------------------ ------ ------------ ----------- -------- --- ------------ ----------- --------
Operating profit 21.4 (8.3) 13.1 20.9 (18.8) 2.1
Finance costs 5 (3.1) - (3.1) (40.3) - (40.3)
Finance income 5 - - - 0.1 - 0.1
------------------ ------ ------------ ----------- -------- --- ------------ ----------- --------
Profit/(loss)
before taxation 18.3 (8.3) 10.0 (19.3) (18.8) (38.1)
Income tax 6 (4.2) 1.9 (2.3) (3.2) 1.3 (1.9)
------------------ ------ ------------ ----------- -------- --- ------------ ----------- --------
Profit/(loss)
for the period 14.1 (6.4) 7.7 (22.5) (17.5) (40.0)
Profit/(loss) attributable
to:
Equity holders of
the Parent 7.1 (40.4)
Non-controlling
interests 0.6 0.4
-------------------------- ------------ ----------- -------- --- ------------ ----------- --------
Profit/(loss) for
the period 7.7 (40.0)
-------------------------- ------------ ----------- -------- --- ------------ ----------- --------
Earnings per share*
Basic 7 2.8p (38.2p)
----------------------------------------------------- -------- --- ------------ ----------- --------
Diluted 7 2.8p (38.2p)
----------------------------------------------------- -------- --- ------------ ----------- --------
* Earnings per share on the adjusted results is disclosed in
note 7
INTERIM CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
For the six months ended 30 June 2015
2015 2014
(unaudited) (unaudited)
GBPm GBPm
----------------------------------------------------------------------------------- ------------- --- -------------
Profit/(loss) for the period 7.7 (40.0)
Other comprehensive income to be reclassified in profit or loss in subsequent
periods
Exchange differences on translation of foreign operations and related borrowings (10.0) (3.7)
Other comprehensive income not to be reclassified to profit or loss in subsequent
periods
Actuarial gain on defined benefit plans 0.4 -
Income tax effect (0.1) -
Other comprehensive income for the period (net of tax) (9.7) (3.7)
----------------------------------------------------------------------------------- ------------- --- -------------
Total comprehensive income for the period (2.0) (43.7)
----------------------------------------------------------------------------------- ------------- --- -------------
Total comprehensive income for the period attributable to:
Equity holders of the Parent (2.5) (44.1)
Non-controlling interests 0.5 0.4
----------------------------------------------------------------------------------- ------------- --- -------------
Total comprehensive income for the period (2.0) (43.7)
----------------------------------------------------------------------------------- ------------- --- -------------
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2015
30 June 31 December
2014 2014
Restated Restated
30 June
2015 (note 1) (note 1)
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
-------------------------------- ------ ------------- ------------- ------------
Assets
Non-current assets
Goodwill 9 356.5 324.7 335.4
Intangible assets 10 10.4 15.7 14.4
Property, plant and
equipment 11 63.7 59.9 64.7
Government grants 7.3 8.2 8.8
Deferred tax assets 9.2 7.1 6.9
Investment in joint 0.4 - -
ventures
447.5 415.6 430.2
-------------------------------- ------ ------------- ------------- ------------
Current assets
Trade and other receivables 70.8 64.2 65.1
Income tax receivable 0.2 - 1.2
Government grants 1.4 1.8 -
Cash and cash equivalents 30.4 29.5 29.9
-------------------------------- ------ ------------- ------------- ------------
102.8 95.5 96.2
-------------------------------- ------ ------------- ------------- ------------
Total assets 550.3 511.1 526.4
-------------------------------- ------ ------------- ------------- ------------
Equity
Issued share capital 2.5 2.5 2.5
Share premium 109.5 109.5 109.5
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August 28, 2015 02:01 ET (06:01 GMT)
Merger reserve 324.5 324.5 324.5
Capital contribution
reserve 114.9 114.9 114.9
Foreign currency translation
reserve (10.0) (0.8) (0.1)
Retained earnings (270.8) (283.2) (273.4)
-------------------------------- ------ ------------- ------------- ------------
Equity attributable
to equity holders of
the Parent 270.6 267.4 277.9
Non-controlling interests 4.2 3.3 3.7
-------------------------------- ------ ------------- ------------- ------------
Total equity 274.8 270.7 281.6
-------------------------------- ------ ------------- ------------- ------------
Liabilities
Non-current liabilities
Bank and other borrowings 13 179.3 165.8 170.8
Finance leases 13 0.2 0.3 0.3
Retirement benefit obligations 14 16.4 1.7 3.1
Provisions 6.7 7.3 7.2
Deferred tax liabilities 9.4 10.1 10.4
Other liabilities 5.5 4.5 5.0
-------------------------------- ------ ------------- ------------- ------------
217.5 189.7 196.8
-------------------------------- ------ ------------- ------------- ------------
Current liabilities
Finance leases 13 0.1 0.2 0.2
Trade and other payables 55.2 46.1 44.5
Income tax payable - 2.2 -
Provisions 2.7 2.2 3.3
-------------------------------- ------ ------------- ------------- ------------
58.0 50.7 48.0
-------------------------------- ------ ------------- ------------- ------------
Total liabilities 275.5 240.4 244.8
-------------------------------- ------ ------------- ------------- ------------
Total equity and liabilities 550.3 511.1 526.4
-------------------------------- ------ ------------- ------------- ------------
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2015
Attributable to equity holders of the Parent
------------------------------------------------------------------------------------
Foreign
Capital currency Total
Share Share Merger contribution translation Retained shareholders' Non-controlling Total
capital premium reserve reserve reserve earnings equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
At 1 January
2015 2.5 109.5 324.5 114.9 (0.1) (273.4) 277.9 3.7 281.6
Comprehensive
income for the
period
Profit for the
period - - - - - 7.1 7.1 0.6 7.7
Other
comprehensive
income - - - - (9.9) 0.3 (9.6) (0.1) (9.7)
--------------- -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
Total
comprehensive
income for
the period - - - - (9.9) 7.4 (2.5) 0.5 (2.0)
Share-based
payments - - - - - 0.2 0.2 - 0.2
Dividends - - - - - (5.0) (5.0) - (5.0)
At 30 June
2015
(unaudited) 2.5 109.5 324.5 114.9 (10.0) (270.8) 270.6 4.2 274.8
--------------- -------- -------- -------- ------------- ------------ --------- -------------- ---------------- -------
For the six months ended 30 June 2014
Attributable to equity holders of the Parent
------------------------------------------------------------------------------------
Foreign
Capital currency Total
Share Share Merger contribution translation Retained shareholders' Non-controlling Total
capital premium reserve reserve reserve earnings equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- -------- -------- -------- ------------- ------------ --------- -------------- ---------------- --------
At 1 January
2014 4.4 - - 114.9 2.9 (244.1) (121.9) 2.9 (119.0)
Comprehensive
income for the
period
Loss for the
period - - - - - (40.4) (40.4) 0.4 (40.0)
Other
comprehensive
income - - - - (3.7) - (3.7) - (3.7)
---------------- -------- -------- -------- ------------- ------------ --------- -------------- ---------------- --------
Total
comprehensive
income for the
period - - - - (3.7) (40.4) (44.1) 0.4 (43.7)
Share-based
payments - - - - - 1.0 1.0 - 1.0
Capitalisation
of shareholder
loan 0.7 - 277.5 - - - 278.2 - 278.2
Conversion of
preference
share capital 34.2 - 9.9 - - - 44.1 - 44.1
Redemption of
deferred share
capital (37.3) - 37.1 - - 0.3 0.1 - 0.1
Issue of share
capital 0.5 109.5 - - - - 110.0 - 110.0
At 30 June 2014
(unaudited) 2.5 109.5 324.5 114.9 (0.8) (283.2) 267.4 3.3 270.7
---------------- -------- -------- -------- ------------- ------------ --------- -------------- ---------------- --------
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2015
2015 2014
(unaudited) (unaudited)
Notes GBPm GBPm GBPm GBPm
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Profit/(loss) before
taxation 10.0 (38.1)
Depreciation of property,
plant and equipment 6.1 6.0
Amortisation of intangible
assets 4.8 4.0
Impairment loss on property, 0.2 -
plant and equipment
Government grants (0.5) (0.7)
Share-based payments 0.2 1.0
Net finance costs 5 3.1 40.2
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Operating cash flows before
movements in working
capital 23.9 12.4
Increase in trade and other
receivables (1.2) (5.6)
Increase in trade and other
payables 0.2 3.8
Decrease in provisions and
retirement benefit
obligations (1.3) (0.3)
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----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Movements in working capital (2.3) (2.1)
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Cash generated from
operations 21.6 10.3
Interest paid (2.6) (25.8)
Tax paid (1.9) (2.8)
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Net cash flows from/(used
in) operating activities 17.1 (18.3)
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Investing activities
Acquisition of subsidiary
undertakings (net of cash
acquired) 12 (17.4) (5.2)
Purchase of property, plant
and equipment (5.8) (5.2)
Purchase of intangible (1.1) -
assets
Interest received - 0.1
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Net cash flows used in
investing
activities (24.3) (10.3)
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Net cash flows before
financing
activities (7.2) (28.6)
Financing activities
Proceeds from borrowings 14.0 170.0
Payment of finance lease
liabilities (0.2) (0.1)
IPO proceeds - 110.0
Repayment of bank borrowings - (94.2)
Senior loan notes redemption - (155.0)
Repayment of other
borrowings - (0.3)
Repayment of loans to
minority
shareholders - (0.3)
Debt issue costs paid - (3.2)
Dividends paid to equity (5.0) -
holders
of the Parent
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Net cash flows from
financing
activities 8.8 26.9
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Net increase/(decrease) in
cash and cash equivalents 1.6 (1.7)
Cash and cash equivalents
at the beginning of the
period 29.9 32.0
Effects of exchange rate
changes (1.1) (0.8)
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Cash and cash equivalents
at the end of the period 30.4 29.5
----------------------------- ------ ---------------- ---------------- --- ---------------- --------------------
Separately disclosed items included
in cash flows from operating
activities (3.5) (9.5)
------------------------------------- ---------------- ---------------- --- ---------------- --------------------
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
For the six months ended 30 June 2015
1. BASIS OF PREPARATION AND CHANGES TO THE GROUP'S ACCOUNTING POLICIES
Basis of preparation
The interim condensed consolidated financial statements of Exova
Group plc and its subsidiaries (together referred to as "the
Group") for the six months ended 30 June 2015 were authorised for
issue in accordance with a resolution of the Directors on 27 August
2015.
These interim condensed consolidated financial statements have
been prepared on the going concern basis as the Directors, having
considered available relevant information, have a reasonable
expectation that the Group has adequate resources to continue to
operate for the foreseeable future.
The comparative figures for the financial year ended 31 December
2014 do not constitute statutory accounts as defined in Section 434
of the Companies Act 2006. Those accounts have been reported on by
the auditors and have been delivered to the Registrar of Companies.
The report of the auditor was unqualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and did not
contain a statement under Section 498(2) or (3) of the Companies
Act 2006.
Statement of compliance
The interim condensed consolidated financial statements for the
six months ended 30 June 2015 have been prepared in accordance with
IAS 34 Interim Financial Reporting as endorsed and adopted for use
in the European Union and the Disclosure and Transparency Rules
(DTR) of the Financial Conduct Authority. They do not include all
the information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual financial statements for the year ended 31 December
2014.
Restatement
During the period ended 30 June 2015 the provisional fair values
attributable to the 2014 acquisitions of Raufoss Offshore Limited
and Metallurgical Services Private Limited were finalised. In the
balance sheet the effect has been to increase goodwill by GBP0.6m
and to reduce intangible assets and deferred tax liabilities by
GBP0.9m and GBP0.3m respectively. Note 12 "Business combinations"
provides more detail.
The provisional fair values attributable to the acquisition of
Catalyst Environmental Limited were finalised at 31 December 2014
and therefore the balance sheet at 30 June 2014 was restated to
take this into account. In the balance sheet at 30 June 2014, the
effect has been to increase goodwill and trade and other
receivables by GBP0.2m and GBP0.1m respectively and increase
deferred tax liabilities by GBP0.3m. Note 12 "Business
combinations" provides more detail.
New standards, interpretations and amendments adopted by the
Group
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the year ended 31 December
2014, except for the adoption of a new accounting policy on joint
ventures as noted below.
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective. There are no standards or interpretations effective for
the first time in the current financial period with a significant
impact on the Group's consolidated results or financial
position.
As a result of the acquisition of the BM TRADA Group Limited,
and the joint venture companies within that group, the Group has
adopted the following accounting policy during the period:
Joint ventures
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control. The Group's
investments in joint ventures are accounted for using the equity
method.
Under the equity method, the investment in a joint venture is
initially recognised at cost. The carrying amount of the investment
is adjusted to recognise changes in the Group's share of net assets
of the joint venture since the acquisition date. Goodwill relating
to the joint venture is included in the carrying amount of the
investment and is not tested for impairment individually. The
income statement reflects the Group's share of the results of
operations of the joint venture. Any change in other comprehensive
income of those investees is presented as part of the Group's other
comprehensive income. In addition, when there has been a change
recognised directly in the equity of the joint venture, the Group
recognises its share of any changes, when applicable, in the
statement of changes in equity. Unrealised gains and losses
resulting from transactions between the Group and the joint venture
are eliminated to the extent of the interest in the joint venture.
The aggregate of the Group's share of profit or loss of a joint
venture is
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August 28, 2015 02:01 ET (06:01 GMT)
shown on the face of the income statement.
2. SEGMENTAL REPORTING
For management purposes, the Group is organised into three
operating divisions: Europe, Americas and Rest of World. These
three divisions are organised and managed separately based on the
geographies served and each is treated as an operating segment and
a reportable segment in accordance with IFRS 8 Operating Segments.
The operating and reportable segments are determined based on
reports reviewed by the Directors which are used to make
operational decisions.
Management monitors the operating results of its business units
separately for the purposes of making decisions about resource
allocation and performance assessment. Segment performance is
evaluated based on Adjusted EBITA and is measured consistently in
the consolidated financial statements. However, Group financing
(including finance costs and finance income), IPO related costs and
income taxes are managed centrally and are not allocated to
operating segments.
Transfer prices between operating segments are on an arm's
length basis in a manner similar to transactions with third parties
and inter-segment revenues are eliminated on consolidation.
Rest
of
Europe Americas World Eliminations Unallocated Total
For the six months GBPm GBPm GBPm GBPm GBPm GBPm
ended 30 June 2015
----------------------------- ------- --------- ------- ------------- ------------ -------
Operations
Revenue - external
customers 74.5 47.8 20.1 - - 142.4
Revenue - inter-business
segments 0.2 0.7 0.8 (1.7) - -
----------------------------- ------- --------- ------- ------------- ------------ -------
Total revenue 74.7 48.5 20.9 (1.7) - 142.4
----------------------------- ------- --------- ------- ------------- ------------ -------
Adjusted EBITDA 13.8 10.7 3.0 - - 27.5
Depreciation (3.0) (2.2) (0.9) - - (6.1)
----------------------------- ------- --------- ------- ------------- ------------ -------
Adjusted EBITA 10.8 8.5 2.1 - - 21.4
Amortisation of intangible
assets (2.4) (1.4) (1.0) - - (4.8)
Acquisition and integration
costs (1.8) (0.1) (0.2) - - (2.1)
Restructuring costs (0.8) (0.6) - - - (1.4)
Segmental operating
profit 5.8 6.4 0.9 - - 13.1
Net finance costs - - - - (3.1) (3.1)
----------------------------- ------- --------- ------- ------------- ------------ -------
Profit/(loss) before
taxation 5.8 6.4 0.9 - (3.1) 10.0
Income tax - - - - (2.3) (2.3)
----------------------------- ------- --------- ------- ------------- ------------ -------
Profit/(loss) for
the period 5.8 6.4 0.9 - (5.4) 7.7
----------------------------- ------- --------- ------- ------------- ------------ -------
Rest
of
Europe Americas World Eliminations Unallocated Total
For the six months GBPm GBPm GBPm GBPm GBPm GBPm
ended 30 June 2014
----------------------------- ------- --------- ------- ------------- ------------ -------
Operations
Revenue - external
customers 71.7 46.7 16.3 - - 134.7
Revenue - inter-business
segments 0.3 0.2 0.6 (1.1) - -
----------------------------- ------- --------- ------- ------------- ------------ -------
Total revenue 72.0 46.9 16.9 (1.1) - 134.7
----------------------------- ------- --------- ------- ------------- ------------ -------
Adjusted EBITDA 13.6 11.3 2.2 - - 27.1
Depreciation (3.3) (2.0) (0.7) - - (6.0)
----------------------------- ------- --------- ------- ------------- ------------ -------
Adjusted EBITA 10.3 9.3 1.5 - - 21.1
Management fee to
private equity investor (0.1) (0.1) - - - (0.2)
----------------------------- ------- --------- ------- ------------- ------------ -------
Operating profit
before separately
disclosed items 10.2 9.2 1.5 - - 20.9
Amortisation of intangible
assets (2.1) (1.1) (0.8) - - (4.0)
Acquisition and integration
costs (0.4) (0.3) - - - (0.7)
Restructuring costs (0.7) (0.1) - - - (0.8)
IPO related costs - - - - (13.3) (13.3)
----------------------------- ------- --------- ------- ------------- ------------ -------
Segmental operating
profit 7.0 7.7 0.7 - (13.3) 2.1
Net finance costs - - - - (40.2) (40.2)
----------------------------- ------- --------- ------- ------------- ------------ -------
Profit/(loss) before
taxation 7.0 7.7 0.7 - (53.5) (38.1)
Income tax - - - - (1.9) (1.9)
----------------------------- ------- --------- ------- ------------- ------------ -------
Profit/(loss) for
the period 7.0 7.7 0.7 - (55.4) (40.0)
----------------------------- ------- --------- ------- ------------- ------------ -------
3. NET OPERATING COSTS
2015 2014
Notes GBPm GBPm
------------------------------------- ------ ------ ------
Cost of sales 90.2 86.3
Selling and administrative expenses 31.5 29.0
Other income (0.7) (1.5)
Separately disclosed items 4 8.3 18.8
------------------------------------- ------ ------ ------
129.3 132.6
------------------------------------- ------ ------ ------
4. SEPARATELY DISCLOSED ITEMS
2015 2014
Notes GBPm GBPm
----------------------------------- ------ ------ ------
Amortisation of intangible assets 4.8 4.0
Acquisition and integration costs 2.1 0.7
Restructuring costs 1.4 0.8
IPO related costs - 13.3
----------------------------------- ------ ------ ------
3 8.3 18.8
Income tax (1.9) (1.3)
----------------------------------- ------ ------ ------
6.4 17.5
----------------------------------- ------ ------ ------
Further information is given in the Business Review under
separately disclosed items on page 4.
5. NET FINANCE COSTS
2015 2014
Notes GBPm GBPm
---------------------------------------- ------ ----- ------
Finance costs
Bank loans and senior loan notes 2.5 7.1
Other loans and charges 0.3 0.9
Amortisation of debt issue costs 0.3 0.2
Make whole on senior loan notes - 15.5
Loan due to parent undertaking 15 - 8.1
Preference share dividend 15 - 1.0
Write-off of historical debt issue
costs - 7.5
Total finance costs 3.1 40.3
---------------------------------------- ------ ----- ------
Finance income
Interest income on short-term deposits - (0.1)
---------------------------------------- ------ ----- ------
Total finance income - (0.1)
---------------------------------------- ------ ----- ------
Net finance costs 3.1 40.2
---------------------------------------- ------ ----- ------
6. INCOME TAX
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The major components of income tax expense in the interim
condensed consolidated income statement are:
2015 2014
GBPm GBPm
------------------------------------------ ------ ------
Income taxes
Income tax
0.1 -
* UK
* overseas 2.8 3.2
Deferred tax credit - net of originating
and reversing temporary differences (0.6) (1.3)
Total income tax expense 2.3 1.9
------------------------------------------ ------ ------
A tax charge of GBP0.1m (2014: GBPnil) is included in other
comprehensive income.
The income tax expense is recognised based on management's best
estimate of the average annual income tax rates on a region by
region basis expected for the full financial year applied to the
pre-tax income of the interim period per region.
The Group's consolidated effective tax rate as a function of the
profit before tax for the six months ended 30 June 2015 is 23% (six
months ended 30 June 2014: (5%)).
Differences between the estimated effective rate of 23% and the
weighted average notional statutory UK tax rate of 20.25% include,
but are not limited to, the mix of profits, the effect of tax rates
in foreign jurisdictions, non-deductible expenses, foreign exchange
movements and the effect of unrecognised tax losses.
7. EARNINGS PER SHARE
2015 2014
Based on the profit for the period Notes GBPm GBPm
-------------------------------------- ------ ---------- ----------
Profit/(loss) attributable to equity
holders of the Parent 7.1 (40.4)
Separately disclosed items 4 6.4 17.5
-------------------------------------- ------ ---------- ----------
Adjusted earnings after tax 13.5 (22.9)
-------------------------------------- ------ ---------- ----------
2015 2014
Number of shares millions millions
-------------------------------------- ------ ---------- ----------
Basic weighted average number of
ordinary shares 250.4 105.9
Potentially dilutive share awards - -
-------------------------------------- ------ ---------- ----------
Diluted weighted average number of
shares 250.4 105.9
-------------------------------------- ------ ---------- ----------
2015 2014
pence pence
-------------------------------------- ------ ---------- ----------
Basic earnings per share 2.8 (38.2)
Share awards - -
-------------------------------------- ------ ---------- ----------
Diluted earnings per share 2.8 (38.2)
-------------------------------------- ------ ---------- ----------
Basic adjusted earnings per share 5.4 (21.6)
Share awards - -
-------------------------------------- ------ ---------- ----------
Diluted adjusted earnings per share 5.4 (21.6)
-------------------------------------- ------ ---------- ----------
Basic earnings per share (EPS) amounts are calculated by
dividing the profit for the period attributable to the ordinary
equity holders of the parent company by the weighted average number
of ordinary shares outstanding during the period.
For the prior period, the dilutive effect of potential ordinary
shares through equity settled transactions was considered to be
anti-dilutive as they would have decreased the loss per share from
continuing operations and therefore were excluded from the
calculation of diluted EPS.
8. DIVIDENDS
Cash dividends to the equity holders of the Parent
Dividends on ordinary shares declared 2015 2014
and paid GBPm GBPm
---------------------------------------- ------ ------
Final dividend for 2014: 2.0p per share
(2013: nil per share) 5.0 -
---------------------------------------- ------ ------
Proposed dividends
The Board has approved an interim dividend of 1.0p per share (30
June 2014: nil per share) to be paid on 11 November 2015 to
shareholders on the register at the close of business on 30 October
2015.
9. GOODWILL
There was a negative impact of GBP10.9m of foreign exchange on
the total carrying value of goodwill in the six months ended 30
June 2015 (six months ended 30 June 2014: GBP2.7m negative impact;
year ended 31 December 2014: GBP0.3m negative impact).
Impairment reviews
Goodwill was tested for impairment at 31 December 2014 and will
be tested annually thereafter and when circumstances indicate the
carrying value may be impaired. The Group's impairment test is
performed by comparing the carrying amount of each cash-generating
unit ("CGU"), including goodwill, with the recoverable amount.
The recoverable amounts are determined from value-in-use
calculations and the key assumptions used to determine these
recoverable amounts were disclosed in the annual consolidated
financial statements for the year ended 31 December 2014.
The Group monitors its performance against these key
assumptions, amongst other factors, when reviewing for indicators
of impairment. At 31 December 2014 there was significant headroom
above the carrying value for each CGU with the exception of Rest of
World. As there has been no significant adverse change in the
financial performance of the Rest of World region, there is no
requirement for a formal review at this stage.
10. INTANGIBLE ASSETS
During the six months ended 30 June 2015, the Group capitalised
software assets with a cost of GBP1.1m (six months ended 30 June
2014: GBP1.5m from business combinations; year ended 31 December
2014: GBP4.8m including GBP3.9m from business combinations).
There was a negative impact of GBP0.3m of foreign exchange on
the total carrying value of intangible assets in the six months
ended 30 June 2015 (six months ended 30 June 2014: GBP0.6m negative
impact; year ended 31 December 2014: GBPnil impact).
11. PROPERTY, PLANT AND EQUIPMENT
Acquisitions and disposals
During the six months ended 30 June 2015, the Group capitalised
assets with a cost of GBP7.5m including GBP1.7m from business
combinations (note 12) (six months ended 30 June 2014: GBP5.9m
including GBP0.6m from business combinations; year ended 31
December 2014: GBP17.5m including GBP1.0m from business
combinations).
No assets were disposed of during the six months ended 30 June
2015 (six months ended 30 June 2014: GBPnil; year ended 31 December
2014: carrying value GBP0.9m).
There was a negative impact of GBP2.2m of foreign exchange on
the total carrying value of property, plant and equipment in the
six months ended 30 June 2015 (six months ended 30 June 2014:
GBP1.5m negative impact; year ended 31 December 2014: GBP0.2m
negative impact).
The net book value of property, plant and equipment was as
follows:
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
--------------------- -------- -------- ------------
Land and buildings 15.8 16.4 16.5
Plant and equipment 47.9 43.5 48.2
--------------------- -------- -------- ------------
63.7 59.9 64.7
--------------------- -------- -------- ------------
Property, plant and equipment included GBP0.5m (six months ended
30 June 2014: GBP0.5m; year ended 31 December 2014: GBP0.5m) of
assets held under finance leases.
Capital commitments
As at 30 June 2015 the Group has commitments to purchase
property, plant and equipment of GBP4.1m (six months ended 30 June
2014: GBP2.7m; year ended 31 December 2014: GBP2.2m).
12. BUSINESS COMBINATIONS
Acquisitions in the six months to 30 June 2015
Environmental Evaluation Limited
On 9 February 2015, the Group acquired 100% of the share capital
of Environmental Evaluation Limited for a consideration of GBP5.3m
(GBP4.7m net of cash acquired).
The company helps UK customers meet environmental regulations
through the provision of asbestos testing and inspection, stack
sampling and occupational hygiene advisory services. The
acquisition adds 83 colleagues and forms part of the Group's Health
Sciences cluster.
BM TRADA Group Limited
On 13 May 2015, the Group acquired 100% of the share capital of
BM TRADA Group Limited, a provider of certification and building
products testing services employing 340 colleagues in 16 countries.
The purchase consideration was GBP10.5m (net of retirement benefit
obligation assumed, cash acquired and included a contingent
consideration of GBP0.5m). The contingent consideration relates to
the transfer of the legal title in shares of some of the overseas
subsidiaries. The total consideration paid will be adjusted to
reflect the final valuation of the pension scheme at the date of
acquisition. The acquisition provides the Group with a new platform
for growth in systems certification in addition to extending the
global reach into eight new countries and expanding the Group's
range of building products testing and certification services.
Others
On 1 February 2015, the Group completed the outsourcing of the
in-house calibration operation of Sartorius-Werkzeuge in Germany
for a consideration of GBP0.6m.
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On 4 May 2015, the Group acquired 100% of the share capital of
Viking Quality Assurance AB, a calibration business based in Sweden
for a consideration of GBP0.7m.
On 4 May 2015, the Group acquired a calibration laboratory in
Sweden for a consideration of GBP0.1m.
On 1 June 2015, the Group completed the acquisition of 100% of
the share capital of Mechanischer Kalibrierdienst Eisenhuth GmbH, a
small calibration business based in Germany for a consideration of
GBP0.1m. The consideration was paid in July 2015.
As at 30 June 2015, the initial accounting for the acquisitions
made during 2015 is not complete due to the timing of the
transactions. Therefore the fair value amounts disclosed below are
provisional and may be subject to further adjustments following the
completion of the fair value assessment exercises.
No material adjustments have been made in respect of the trade
and other receivables acquired.
The provisional fair values are set out in the following
table:
Environmental BM TRADA
Evaluation Group
Limited Limited Others Total
Notes GBPm GBPm GBPm GBPm
------------------------------ ------ -------------- --------- ------- -------
Investment in joint
ventures - 0.4 - 0.4
Property, plant and
equipment 11 0.3 1.2 0.2 1.7
Deferred tax assets - 2.9 - 2.9
Trade and other receivables 0.7 6.0 0.2 6.9
Cash and cash equivalents 0.6 3.2 0.2 4.0
Trade and other payables (0.3) (12.0) (0.1) (12.4)
Long term provisions (0.4) (0.1) (0.1) (0.6)
Retirement benefit
obligations - (14.2) - (14.2)
------------------------------ ------ -------------- --------- ------- -------
Net assets acquired 0.9 (12.6) 0.4 (11.3)
Goodwill 9 4.4 26.3 1.1 31.8
------------------------------ ------ -------------- --------- ------- -------
Total purchase consideration 5.3 13.7 1.5 20.5
Acquired cash and cash
equivalents (0.6) (3.2) (0.2) (4.0)
Deferred consideration - - (0.1) (0.1)
Contingent consideration - (0.5) - (0.5)
------------------------------ ------ -------------- --------- ------- -------
Net cash outflow on
acquisitions in the
period 4.7 10.0 1.2 15.9
------------------------------ ------ -------------- --------- ------- -------
Purchase consideration:
Gross cash consideration
paid in the period 5.3 13.2 1.4 19.9
Deferred consideration - - 0.1 0.1
Contingent consideration - 0.5 - 0.5
------------------------------ ------ -------------- --------- ------- -------
5.3 13.7 1.5 20.5
------------------------------ ------ -------------- --------- ------- -------
During the six months ended 30 June 2015 the following payments
were made for acquisitions completed during 2014:
2015
GBPm
------------------------------------------ ------
Contingent consideration 1.3
Purchase price adjustment 0.2
------------------------------------------- ------
Net cash outflow on acquisitions made in
the prior year 1.5
Net cash outflow on acquisitions in the
period 15.9
------------------------------------------- ------
Total net cash outflow for the period 17.4
------------------------------------------- ------
Goodwill
The goodwill of GBP31.8m comprises the fair value of the
expected synergies arising from the acquisitions and the value of
the human capital that does not meet the criteria for recognition
as a separable intangible asset.
Contribution of acquisitions to revenue and profits
From the dates of acquisition the newly acquired business
contributed GBP5.7m to revenue and, if the acquisitions were
assumed to have been made on 1 January 2015, the Group revenue
would have been GBP156.8m.
No profit figures are disclosed as these businesses have now
been integrated into the rest of the Group and therefore it would
be impracticable to obtain a meaningful profit number.
Restatement (note 1)
During the period ended 30 June 2015 the provisional fair values
attributable to the 2014 acquisitions of Raufoss Offshore and
Metallurgical Services Private Limited were finalised. The
adjustments are summarised in the table below:
Purchase Adjustment Final
Provisional price to provisional fair
fair values adjustment fair values values
GBPm GBPm GBPm GBPm
------------------------------ ------------- ------------ ---------------- --------
The assets and liabilities
arising from the acquisitions
are as follows:
Intangible assets 2.4 - (0.9) 1.5
Property, plant and
equipment 0.5 - - 0.5
Trade and other receivables 0.6 - - 0.6
Cash and cash equivalents 0.1 - - 0.1
Trade and other payables (0.4) - - (0.4)
Deferred tax liabilities (0.8) - 0.3 (0.5)
------------------------------ ------------- ------------ ---------------- --------
Net assets acquired 2.4 - (0.6) 1.8
Goodwill 7.0 0.2 0.6 7.8
------------------------------ ------------- ------------ ---------------- --------
Total purchase consideration 9.4 0.2 - 9.6
Acquired cash and cash
equivalents (0.1) - - (0.1)
Contingent consideration (2.8) - - (2.8)
------------------------------ ------------- ------------ ---------------- --------
Net cash outflow on
acquisitions 6.5 0.2 - 6.7
------------------------------ ------------- ------------ ---------------- --------
The consideration to acquire Metallurgical Services Private
Limited includes a contingent consideration based upon exceeding
agreed future targets. This contingent consideration's range is
between a minimum of GBPnil and GBP2.9m and there have been no
changes to the amounts recognised at the year end or the range of
outcomes.
Acquisitions in 2014 (restated - note 1)
During the period to 30 June 2014, the Group made the following
acquisitions in aggregate:
Previously Adjustment Final
disclosed to provisional fair
values values values
GBPm GBPm GBPm
---------------------------------- ----------- ---------------- --------
Intangible assets 1.5 - 1.5
Property, plant and equipment 0.6 - 0.6
Trade and other receivables 0.9 0.1 1.0
Cash and cash equivalents 0.3 - 0.3
Trade and other payables (0.7) - (0.7)
Current tax liabilities (0.2) - (0.2)
Other long term provisions (0.2) - (0.2)
Deferred tax liabilities - (0.3) (0.3)
----------------------------------- ----------- ---------------- --------
Net assets acquired 2.2 (0.2) 2.0
Goodwill 4.6 0.2 4.8
----------------------------------- ----------- ---------------- --------
Total purchase consideration 6.8 - 6.8
Acquired cash and cash
equivalents (0.3) - (0.3)
Contingent consideration (1.3) - (1.3)
----------------------------------- ----------- ---------------- --------
Net cash outflow on acquisitions
in the period 5.2 - 5.2
----------------------------------- ----------- ---------------- --------
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