Titan Europe unaudited consolidated financial statements
for the six months ended 30 June 2012 (under IFRS)
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2012
Six months ended | ||||||||||||
30 June | 30 June | |||||||||||
2012 | 2011 | |||||||||||
Unaudited | Unaudited | |||||||||||
£ | ’000 | £ | ’000 | |||||||||
Revenue | 252,586 | 253,161 | ||||||||||
Trading profit | 14,750 | 18,005 | ||||||||||
Restructuring and rationalisation costs | 2 | (376 | ) | (151 | ) | |||||||
Net impact of earthquake | 3 | (1,194 | ) | – | ||||||||
Significant legal costs | (314 | ) | – | |||||||||
Profit from operations | 12,866 | 17,854 | ||||||||||
Net finance costs | 4 | (4,977 | ) | (4,394 | ) | |||||||
Finance income/(charges) | 5 | 108 | (117 | ) | ||||||||
Other finance charges | 6 | (692 | ) | (730 | ) | |||||||
Net financing costs | (5,561 | ) | (5,241 | ) | ||||||||
Share of profit of associate and joint venture | 8 | 1,272 | 1,399 | |||||||||
Gain on previously held interest in joint venture | 8 | 1,826 | ||||||||||
Profit before income tax | 8,577 | 15,838 | ||||||||||
Income tax charge | 7 | (3,594 | ) | (4,267 | ) | |||||||
Profit for the period attributable to equity shareholders | 4,983 | 11,571 | ||||||||||
Earnings per 40p ordinary share | ||||||||||||
Basic | 10 | 5.71 | p | 13.73 | p | |||||||
Diluted | 10 | 5.50 | p | 13.30 | p | |||||||
Basic excluding exceptional items* | 10 | 7.26 | p | 11.65 | p | |||||||
Diluted excluding exceptional items* | 10 | 7.00 | p | 11.29 | p |
* This excludes, net of tax, restructuring and rationalisation costs, significant legal costs, net impact of earthquake and gain on previously held interest in joint venture. |
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2012
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Profit for the period | 4,983 | 11,571 | ||||||
Other comprehensive income | ||||||||
Hedge accounting on financial instruments | ||||||||
– current year (losses)/gains | (67 | ) | 1,334 | |||||
– reclassification to income statement | (321 | ) | 131 | |||||
Tax credit/(charge) on hedge accounting on financial instruments | 107 | (403 | ) | |||||
Net actuarial (losses)/gains on pension liabilities | (1,128 | ) | 296 | |||||
Tax on net actuarial (losses)/gains on pension liabilities | 319 | (84 | ) | |||||
Movement in translation adjustment | (4,777 | ) | (32 | ) | ||||
Other comprehensive (expense)/income, net of tax | (5,867 | ) | 1,242 | |||||
Total comprehensive (expense)/income for the period attributable to equity shareholders | (884 | ) | 12,813 |
2
CONSOLIDATED BALANCE SHEET
At 30 June 2012
As at 30 June 2012 Unaudited £’000 | As at 30 June 2011 Unaudited £’000 | As at 31 December 2011 Audited £’000 | ||||||||||
ASSETS | ||||||||||||
Non-current assets | ||||||||||||
Property, plant and equipment | 132,185 | 150,711 | 142,546 | |||||||||
Intangible assets | 56,539 | 57,923 | 56,999 | |||||||||
Investments | 12,889 | 13,619 | 12,237 | |||||||||
Deferred taxes | 30,042 | 36,716 | 31,634 | |||||||||
Trade and other receivables | 807 | 610 | 767 | |||||||||
Total non-current assets | 232,462 | 259,579 | 244,183 | |||||||||
Current assets | ||||||||||||
Inventories | 110,061 | 116,981 | 111,537 | |||||||||
Trade and other receivables | 102,644 | 107,411 | 85,682 | |||||||||
Income tax recoverable | 86 | 133 | 146 | |||||||||
Cash and cash equivalents | 34,155 | 29,901 | 40,262 | |||||||||
Held for sale assets | – | 2,457 | 1,210 | |||||||||
Total current assets | 246,946 | 256,883 | 238,837 | |||||||||
Total assets | 479,408 | 516,462 | 483,020 | |||||||||
LIABILITIES | ||||||||||||
Non-current liabilities | ||||||||||||
Borrowings | 99,884 | 109,621 | 109,663 | |||||||||
Trade and other payables | 2,049 | 2,260 | 2,213 | |||||||||
Derivative financial instruments | 3,976 | 1,047 | 4,068 | |||||||||
Deferred taxes | 11,894 | 20,390 | 12,527 | |||||||||
Employee benefits | 9,042 | 9,492 | 8,764 | |||||||||
Provisions | 1,955 | 859 | 2,495 | |||||||||
Total non-current liabilities | 128,800 | 143,669 | 139,730 | |||||||||
Current liabilities | ||||||||||||
Borrowings | 55,960 | 59,791 | 55,261 | |||||||||
Trade and other payables | 122,543 | 137,033 | 116,510 | |||||||||
Current income tax liability | 3,470 | 1,605 | 2,202 | |||||||||
Derivative financial instruments | 970 | 3,009 | 1,009 | |||||||||
Employee benefits | 1,932 | 1,650 | 1,484 | |||||||||
Provisions | 1,708 | 2,022 | 2,069 | |||||||||
Total current liabilities | 186,583 | 205,110 | 178,535 | |||||||||
Total liabilities | 315,383 | 348,779 | 318,265 | |||||||||
Net assets | 164,025 | 167,683 | 164,755 | |||||||||
Equity | ||||||||||||
Issued share capital | 35,057 | 34,852 | 34,921 | |||||||||
Share premium account | 79,241 | 79,241 | 79,241 | |||||||||
Other reserves | 6,458 | 6,458 | 6,458 | |||||||||
Retained earnings | 43,269 | 47,132 | 44,135 | |||||||||
Total attributable to equity shareholders | 164,025 | 167,683 | 164,755 |
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CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2012
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Cash flows from operating activities | ||||||||
Profit/(loss) for the period | 4,983 | 11,571 | ||||||
Adjustments for: | ||||||||
Depreciation, amortisation and impairment | 12,661 | 9,148 | ||||||
Profit on sale of property, plant and equipment and other intangible assets | (102 | ) | (137 | ) | ||||
Impairment of held for sale assets | – | – | ||||||
Net financial expense | 4,972 | 5,567 | ||||||
Foreign exchange (losses)/gains | 589 | (326 | ) | |||||
Share of profit of associate and joint venture | (1,272 | ) | (1,399 | ) | ||||
Income tax expense | 3,594 | 4,267 | ||||||
Operating cash flow before changes in working capital, financial derivatives and other non-cash changes | 25,425 | 28,691 | ||||||
(Increase)/decrease in inventories | (2,376 | ) | (15,970 | ) | ||||
Increase in trade and other receivables | (20,583 | ) | (20,282 | ) | ||||
Increase in trade and other payables | 11,976 | 25,466 | ||||||
Decrease in provisions and employee benefits | (961 | ) | (603 | ) | ||||
Other non-cash changes | (1,702 | ) | (544 | ) | ||||
Cash generated from operations | 11,779 | 16,758 | ||||||
Interest paid | (3,823 | ) | (4,427 | ) | ||||
Income taxes paid | (1,807 | ) | (1,746 | ) | ||||
Net cash generated from operating activities | 6,149 | 10,585 | ||||||
Proceeds from sales of property, plant and equipment | 102 | 620 | ||||||
Proceeds from sale of held for sale assets | 1,235 | – | ||||||
Dividends received | 174 | – | ||||||
Purchase of subsidiary undertakings net of cash acquired | (756 | ) | (4,640 | ) | ||||
Purchase of property, plant and equipment | (7,757 | ) | (7,670 | ) | ||||
Purchase of intangible assets | (256 | ) | (423 | ) | ||||
Net cash used in investing activities | (7,258 | ) | (12,113 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from issue of share capital net of issue costs | 136 | 3,653 | ||||||
New bank loans raised | 514 | 10,469 | ||||||
Repayment of borrowings | (6,056 | ) | (7,863 | ) | ||||
Payment of finance lease liabilities | (537 | ) | (2,730 | ) | ||||
Net cash (used)/generated in financing activities | (5,943 | ) | 3,529 | |||||
Net (decrease)/increase in cash and cash equivalents | (7,052 | ) | 2,001 | |||||
Cash and cash equivalents at the beginning of the period | 21,993 | 9,608 | ||||||
Effect of exchange rate fluctuations on cash held | (372 | ) | 177 | |||||
Cash and cash equivalents at period end | 14,569 | 11,786 |
For the purposes of presenting the cash flow statement the components of cash and cash equivalents are offset, and is stated net of overdraft.
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NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months ended 30 June 2012
1. Basis of preparation
The Group reported the results for the year ended 31 December 2011 under International Financial Reporting Standards as adopted by the European Union (“adopted IFRS”). The interim financial statements have been prepared in accordance with the accounting policies adopted in the last Annual financial statements for the year ended 31 December 2011. Had the consolidated financial statements been prepared under IFRS as issued by International Accounting Standards Board (“IASB”), there would be no material changes to the information presented in these consolidated financial statements. The full accounting policies of the Group are set out in the last Annual financial statements.
The Group interim financial statements have been prepared on a going concern basis. The directors have reviewed the funding position of the Group. In doing so, the directors have considered and forecast the cash flow requirements and continued compliance with covenants of the Group arising from operational, investment and financing activities, and the continued availability of committed and non-committed facilities. They believe it is appropriate to prepare these interim financial statements on a going concern basis.
The information relating to the six months ended 30 June 2012 and 30 June 2011 is unaudited and does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. The statutory financial statements for the year ended 31 December 2011, prepared under adopted IFRS, have been reported on by the Group’s auditors and delivered to the Registrar of Companies. The auditors’ report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
2. Restructuring and rationalisation costs
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Redundancy costs | 123 | 132 | ||||||
Restructuring of manufacturing plants | 253 | 19 | ||||||
Impairment of held for sale assets | – | – | ||||||
376 | 151 |
3. Earthquake impact
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Extra cost of sales | 1,441 | – | ||||||
Impairment of building | 3,868 | – | ||||||
Insurance advance payment to date | (4,115 | ) | – | |||||
1,194 | – |
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The impact of the earthquake accounted for as at 30 June 2012, is split in to three main categories as follows:
● | Extra costs of sales includes all the additional costs incurred to produce and sell the products to our customers following the earthquake at the Finale Emilia facility; |
● | Impairment of the building following a preliminary assessment of the building damage and remedial works required; |
● | Insurance advance payment to date does not represent the full expected insurance reimbursement but simply the initial payment agreed with the insurers based on costs of remedial works and extra costs of sales incurred to limit business interruption. |
The final rebuilding cost and full extent of the business interruption costs are yet to be determined.
Titan’s Italian operations at Finale Emilia recommenced limited production on the 16 July 2012 following the extensive building remedial work. We continue to manage customer supplies with the use of extensive internal and third party resources, giving rise to these extra costs of sales, and we are working closely with our insurance and loss recovery partners to ensure that the financial impact of this earthquake on the business is minimised. Despite this excellent recovery work, we cannot realistically anticipate that there will be no volume loss in the short term.
As indicated in the Trading update on 27 June 2012, further remedial work is underway to ensure the structural stability of the building occupied by the paint plant; the Board anticipates that production will recommence in October 2012; until then, the alternate painting arrangements will remain in use.
4. | Net finance costs |
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Net interest expenses | (4,388 | ) | (4,720 | ) | ||||
Finance foreign exchange (expense)/income | (589 | ) | 326 | |||||
(4,977 | ) | (4,394 | ) |
5. | Finance income/(charges) |
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Interest on defined benefit pension plan and long-term | ||||||||
employee benefits | (213 | ) | (248 | ) | ||||
Net gains/(loss) on re-measurement of derivatives to fair value | 321 | 131 | ||||||
108 | (117 | ) |
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6. Other finance charges
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Unwinding of the fair value adjustment on the | ||||||||
Accordo Quadro loans | (692 | ) | (730 | ) |
7. Taxation
The June 2012 tax charge on profit on ordinary activities excluding share of associate and joint venture and gain on previously held interest in joint venture, reflects an effective rate of 49.2 per cent. (June 2011: 34.0 per cent.) due to the impact of local Italian taxes, particularly IRAP which is increasing the effective tax rate by 12.0 percentage points. For the full year 2012 the final effective tax rate remains uncertain particularly in Italy as the full impact of the earthquake is yet to be determined.
During the period the main rate of UK corporation tax was reduced from 26 per cent. to 24 per cent., this change was effective from 1 April 2012. Further reductions to the main rate of corporation tax were announced in the March 2012 Budget. These changes propose to reduce the main rate of UK corporation tax by 1 per cent. per annum to 22 per cent. by 1 April 2014. These changes had not been substantively enacted at the balance sheet date, and therefore are not recognised in these financial statements.
8. Share of profit of associate and joint venture
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Share of profit of joint venture* | – | 220 | ||||||
Share of profit of associate | 1,272 | 1,179 | ||||||
Share of profit of associate and joint venture | 1,272 | 1,399 | ||||||
Gain on previously held interest in joint venture | 1,826 | |||||||
Total share of profit of associate and joint venture | 1,272 | 3,225 |
*On 19 April 2011, the remaining 50 per cent. of Titan Jantsa was acquired, the share of profit of joint venture reflects the period up to the date of acquisition.
9. Foreign exchange
The exchange rates used to translate the subsidiaries’ accounts as at 30 June 2012 and as at 30 June 2011 from local currencies to UK sterling are as follows:
Income statement Average | Income statement Average | Balance sheet 30 June | Balance sheet 30 June | |||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Euro | 1.2151 | 1.1527 | 1.2415 | 1.1131 | ||||||||||||
US $ | 1.5769 | 1.6163 | 1.5615 | 1.6018 | ||||||||||||
AUS $ | 1.5185 | 1.5638 | 1.5367 | 1.5115 | ||||||||||||
Brazilian Real | 2.9327 | 2.6347 | 3.2422 | 2.5108 |
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The translation effect on the Group’s (unaudited) June 2012 Balance sheet and Income statement as a consequence of the movement in exchange rates are shown in the following table:
At month-end 30 June 2012 rates £’000 | At month-end 30 June 2011 rates £’000 | Variance £’000 | ||||||||||
Total non-current assets | 232,462 | 256,232 | (23,770 | ) | ||||||||
Total current assets | 246,946 | 268,716 | (21,770 | ) | ||||||||
Total assets | 479,408 | 524,948 | (45,540 | ) | ||||||||
Total non-current liabilities | (128,800 | ) | (144,318 | ) | 15,518 | |||||||
Total current liabilities | (186,583 | ) | (204,028 | ) | 17,445 | |||||||
Total liabilities | (315,383 | ) | (348,346 | ) | 32,963 | |||||||
Net assets | 164,025 | 176,602 | (12,577 | ) | ||||||||
Total shareholders’ equity | 164,025 | 176,602 | (12,577 | ) | ||||||||
Net debt | (121,309 | ) | (135,673 | ) | 14,364 | |||||||
At average | At average | |||||||||||
2012 rates | 2011 rates | Variance | ||||||||||
£ | ’000 | £ | ’000 | £ | ’000 | |||||||
Revenue | 252,586 | 261,647 | (9,061 | ) | ||||||||
Trading profit | 14,750 | 15,377 | (627 | ) | ||||||||
Profit from operations | 12,866 | 13,399 | (533 | ) | ||||||||
Profit before income tax | 8,577 | 9,016 | (439 | ) | ||||||||
Profit for the period | 4,983 | 5,309 | (326 | ) |
The trading profit included £386,000 of trading foreign exchange profit (June 2011: £88,000 loss) primarily as a result of retranslation of balances not held in the subsidiaries’ functional currency.
10. Earnings per share
The weighted average number of shares in issue used in the basic earnings per share calculation may be reconciled to the number used in the diluted earnings per ordinary share calculation as follows:
Six months ended | ||||||||
30 June | 30 June | |||||||
2012 | 2011 | |||||||
Unaudited | Unaudited | |||||||
£ | ’000 | £ | ’000 | |||||
Weighted average number | ||||||||
Basic earnings per share denominator | 87,323,425 | 84,250,273 | ||||||
Issuable on conversion of options | 3,203,231 | 2,716,516 | ||||||
Diluted earnings per share denominator | 90,526,656 | 86,966,789 |
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The earnings to which the earnings per share calculation has been applied are as follows:
£ | ’000 | £ | ’000 | |||||
Earnings/(loss) attributable to equity shareholders | 4,983 | 11,571 | ||||||
Significant one-off items (net of tax): | ||||||||
Restructuring and rationalisation costs | 259 | 102 | ||||||
Significant legal costs | 226 | – | ||||||
Net impact of earthquake | 870 | |||||||
Gain on previously held interest in joint venture | – | (1,856 | ) | |||||
Earnings/(loss) attributable to equity shareholders excluding | ||||||||
exceptional costs | 6,338 | 9,817 |
11. Share capital
Allotted, called up and fully paid:
Number of | ||||||||
40 pence | Ordinary | |||||||
shares | shares | |||||||
(thousands) | £ | ’000 | ||||||
At 1 January 2012 | 87,303 | 34,921 | ||||||
Increase in issued share capital | 340 | 136 | ||||||
At 30 June 2012 | 87,643 | 35,057 |
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