TIDMMRO
RNS Number : 6370L
Melrose Industries PLC
07 September 2023
7 September 2023
MELROSE INDUSTRIES PLC
UNAUDITED RESULTS
FOR THE SIX MONTHSED 30 JUNE 2023
Trading ahead of expectations, upgraded outlook, share buybacks
to be commenced early
Melrose Industries PLC ("Melrose", the "Company" or the
"Group"), an Aerospace Engines and Structures Group, today
announces its interim results for the six months ended 30 June 2023
("the Period").
Highlights
Adjusted(1) results Statutory results
2023 2022(2) 2023 2022(2)
---------- -------------- ------------ --------------
Continuing operations GBPm GBPm GBPm GBPm
---------- -------------- ------------ --------------
Revenue 1,633 1,364 1,633 1,364
---------- -------------- ------------ --------------
Aerospace operating profit/(loss) 175 67 (4) (93)
---------- -------------- ------------ --------------
Operating profit/(loss) (post PLC
costs) 159 45 (18) (281)
---------- -------------- ------------ --------------
Profit/(loss) before tax 134 9 (62) (314)
---------- -------------- ------------ --------------
Diluted earnings per share 7.5p 0.2p (3.0)p (16.8)p
---------- -------------- ------------ --------------
Net debt(1) 553 1,294 n/a n/a
---------- -------------- ------------ --------------
Melrose Group - at constant currency(3)
Trading ahead of expectations - upgraded guidance
-- Upgraded full year guidance: Aerospace 2023 adjusted(1)
operating profit range increases by over 8% to between
GBP375 million and GBP385 million with a higher Engines
margin than previously guided
-- Net debt leverage(1) reducing towards 1x EBITDA(1) by
the end of 2023 (before share buyback programme)
-- This outperformance further underpins the achievement
of the 2025 guidance
Half year results
-- Aerospace revenue of GBP1.63 billion, growth of 19%(3)
over last year (15% including businesses being exited)
-- Aerospace adjusted(1) operating profit of GBP175 million,
more than 2.5x the prior year
-- Aerospace adjusted(1) operating margin of 10.7% an increase
of 5.8 percentage points on the prior year and 3.2 percentage
points on the second half of 2022
-- Adjusted(1) diluted earnings per share increased to 7.5p
(2022: 0.2p). Statutory loss per share was 3.0p (2022:
16.8p)
-- Restructuring and repricing progressing well combined
with improved quality and arrears reduction
-- Net debt(1) of GBP553 million in line with expectations,
reducing leverage(1) to 1.5x (pro-forma 2022 opening leverage(1)
1.8x)
Earlier shareholder returns
-- Higher confidence and strong progress allows Melrose to
commence early its share buyback programme, at the beginning
of October 2023, starting with a GBP500 million buyback
over 12 months and being well placed to continue thereafter
keeping leverage (1) comfortably within previous guidance
-- Continuation of the progressive annual dividend, with
an interim dividend of 1.5 pence per share declared
New Investor Event - Engines
-- To be held on site in Sweden, the global HQ for the Engines
business, during October 2023 to showcase in more detail
and colour the full quality of the Engines business, including
a new target for Engines operating margins to rise above
30% post 2025
Management changes
-- Melrose is now a long-term aerospace group with exceptional
organic growth prospects. In line with this new strategic
direction, on 7 March 2024 Simon Peckham and Geoffrey
Martin will step down as Melrose Chief Executive and
Group Finance Director respectively, to be replaced by
Peter Dilnot (currently Melrose Chief Operating Officer)
and Matthew Gregory (currently Chief Financial Officer
GKN Aerospace) respectively. Thus providing management
continuity as Melrose becomes a pureplay aerospace group.
Simon Peckham, Geoffrey Martin and Christopher Miller
will not stand for re-election as directors at the 2024
AGM
By division - at constant currency(3)
Engines
-- Engines revenue growth of 19% in the first half with
adjusted(1) operating profit nearly doubling and adjusted(1)
operating margin up to 24.5%
-- Engines aftermarket growth of 46% driven by recovering
flying hours and the Group entering the lucrative aftermarket
'sweet spot' allowing an above market performance
Structures
-- Structures revenue growth of 18%(3) (13% including businesses
being exited) and adjusted operating margin reaching
2.5% in the first half versus loss-making in the first
half of 2022
-- Civil ramp-up delivering 24% growth. Defence repricing
and portfolio work accelerated with around 25% of the
renegotiations planned by 2025 being successfully concluded
in the last few months
Demerger of GKN Automotive, GKN Powder Metallurgy and GKN
Hydrogen
-- The demerger of the GKN Automotive, GKN Powder Metallurgy
and GKN Hydrogen businesses from Melrose into Dowlais
Group PLC successfully completed on 20 April 2023 as
scheduled
Upgraded guidance for 2023 full year (assuming US $ = 1.25
average exchange rate for the year)
Group
-- Revenue of between GBP3.35 billion and GBP3.45 billion
-- Aerospace adjusted(1) operating profit between GBP375
million and GBP385 million
-- Aerospace adjusted(1) EBITDA of between GBP525 million
and GBP535 million
-- PLC costs reducing to GBP30 million
-- Net debt leverage(1) reducing towards 1x EBITDA(1) by
the end of 2023 (before share buyback programme)
Simon Peckham, Chief Executive of Melrose Industries PLC, today
said:
"We are delighted with these results and the outlook for
Melrose. Whilst there is still work to do, the business is very
capable of producing over GBP1 billion of EBITDA and providing
excellent returns for shareholders. This is further demonstrated by
the confidence to start early the share buyback programme. Chris,
Geoff and I are pleased to hand over to Peter and Matthew to
continue the great performance achieved by Aerospace, and to guide
this handover during the coming months and into 2024. Melrose
shareholders own a truly special business, with rapidly increasing
profits, exceptionally strong long-term cash flows and a
disciplined shareholder focused approach to capital."
(1. Described in the glossary to the 2023 Interim Financial
Statements)
(2. Results for the period ended 30 June 2022 have been restated
for discontinued operations and the one for three share
consolidation)
(3. Like-for-like growth is calculated at constant currency
against 2022 results and excludes businesses being exited)
S
Enquiries:
Investor Relations:
Chris Dyett
+44 (0) 7974 974 690
ir@melroseplc.net
Montfort Communications: +44 (0) 20 3514 0897
Nick Miles
+44 (0) 7739 701 634
miles@montfort.london
Charlotte McMullen
+44 (0) 7921 881 800
mcmullen@montfort.london
CHAIRMAN'S STATEMENT
I am pleased to report a strong set of interim results for the
six months ended 30 June 2023 (the "Period"), which have
underpinned the confidence in making an upgrade to the full year
results. Furthermore, as we have evolved into being a long-term
aerospace group in line with previous announcements, we are
providing details and timing about the intended executive
management changes scheduled for the first half of next year to
take this exciting new strategy forward.
RESULTS FOR THE CONTINUING GROUP
These results include statutory revenue for the Group of
GBP1,633 million (2022: GBP1,364 million), an adjusted operating
profit of GBP159 million (2022: GBP45 million) and a statutory loss
before tax of GBP62 million (2022: GBP314 million). This includes
solely the Aerospace business, post PLC costs, as a result of the
GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses
being demerged from the Group on 20 April 2023 and therefore being
treated as discontinued in these results for accounting
purposes.
Further details of these results are contained in the Finance
Director's Review.
TRADING
The Aerospace business has performed well during the Period. The
industry-leading Engines division has exceeded its margin guidance
and continues to demonstrate exceptional profit growth and
long-term cash flows. The design-led Structures division continues
to improve and deliver on its strong positions on excellent
platforms.
CASH AND SHARE BUYBACK PROGRAMME
These interim results demonstrate increasing confidence and
strong progress, with upgraded profit guidance and with net debt
reducing towards 1x EBITDA by the end of 2023 (prior to share
buybacks). With profits rising fast, and with restructuring already
well-advanced to realise the Aerospace business's full potential,
your Board is confident to commence early its share buyback
programme, at the beginning of October 2023, starting with a GBP500
million buyback over 12 months, and being well placed to continue
thereafter while keeping leverage well within the previous
guidance.
DIVID
Your Board has declared an interim dividend of 1.5 pence per
share, which will be paid on 20 October 2023 to shareholders on the
register at the close of business on 15 September 2023.
DEMERGER OF GKN AUTOMOTIVE, GKN POWDER METALLURGY AND GKN
HYDROGEN
The demerger of the GKN Automotive, GKN Powder Metallurgy and
GKN Hydrogen businesses from the Company into Dowlais Group PLC
("Dowlais") completed on 20 April 2023 as scheduled (the
"Demerger"). This transaction marks the successful transformation
of these businesses whilst under Melrose ownership, enabling them
to continue as a standalone automotive-focused group listed on the
London Stock Exchange.
Prior to the Demerger, the Company undertook a one for three
consolidation of the existing Melrose ordinary shares after 6:00
p.m. on 19 April 2023. Admission and dealings in the new Melrose
ordinary shares on the London Stock Exchange commenced at 8.00 a.m.
on 20 April 2023, and there are now 1,351,475,321 Melrose ordinary
shares of 160/7 pence in issue.
BOARD MATTERS
Given Melrose has transitioned into a long-term aerospace group,
the Company believes that this is the right time to begin evolving
the executive management team to progress the changed strategy.
Christopher Miller our Executive Vice-Chairman, and Simon Peckham
our Chief Executive, who have each served the Company since it was
founded in 2003, and Geoffrey Martin who joined as Group Finance
Director in 2005, have overseen the successful execution of the
Company's 'Buy, Improve, Sell' strategy. Christopher, Simon and
Geoffrey have expressed their intention not to stand for
re-election at the Company's Annual General Meeting in 2024,
leaving behind a highly successful record of shareholder value
creation.
The Board has nominated Peter Dilnot to oversee Melrose to
realise the next chapter of development of the Aerospace business,
and to be appointed Chief Executive from 7 March 2024. This will
allow an orderly transition with the benefit of Peter's continued
insight and stewardship, having served as Melrose Chief Operating
Officer since 2019, during which time he also served as CEO of GKN
Aerospace on an interim basis.
Peter will be joined by Matthew Gregory, whom the Board has
nominated for appointment as Group Finance Director of Melrose from
7 March 2024. Matthew brings further continuity to the Company's
transition, currently serving as the Chief Financial Officer of GKN
Aerospace.
Separately, during the Period, Funmi Adegoke resigned as a
non-executive director of the Board with effect from 16 June 2023
following a promotion within Halma PLC. We thank Funmi for her
contributions to the Company and are pleased to have welcomed
Gillian Elcock, who was appointed to the Board as a non-executive
director with effect from 21 June 2023. Gillian has extensive
investment research experience including several years covering
aerospace and defence as an analyst at Putnam Investments and
Insight Investment, with two engineering degrees from MIT and an
MBA from the Harvard Business School.
STRATEGY AND PURPOSE
Since being founded in 2003, Melrose has created significant
shareholder value through its 'Buy, Improve, Sell' strategy.
Following completion of the Demerger, Melrose has now changed
strategy to being purely an aerospace business, and thus will now
report publicly as two divisions: Engines and Structures. The Board
has already confirmed that it will not seek to undertake another
acquisition of an unrelated industrial business or, in the near
term, a material aerospace business.
For the next few months the focus is to complete the current
restructuring plans. These are well underway and are expected to be
largely complete by the time of the 2023 preliminary full year
results announcement in March next year. As part of this strategy,
Aerospace is continuing to invest heavily in sustainable technology
as it pursues its mission to be a highly trusted and sustainable
aerospace partner in the sky.
OUTLOOK
The Board is confident of achieving its upgraded full year
expectations. In Engines, our RRSP portfolio looks towards
continued market growth and an upcoming lucrative aftermarket
phase. Operational efficiencies and the benefit of ongoing
restructuring means that we expect full year 2023 to show an
excellent improvement in performance, with the Aerospace business
positioned for further profitable success over the coming
years.
Justin Dowley
Non-executive Chairman
7 September 2023
CHIEF EXECUTIVE'S REVIEW
It has been a busy period, with the successful demerger of the
Dowlais businesses allowing full focus on executing the remaining
restructuring plans for Aerospace, as a standalone business.
Aerospace continues to perform strongly, with restructuring
projects well underway and on track to be materially complete in
the near future, unlocking the full potential of this great
business.
The business's adjusted operating margin more than doubled
compared to the prior period to 10.7%, representing good progress
towards its 2025 operating margin guidance of 17-18% as outlined
during the Capital Markets Event in May 2023. This has allowed an
upgrade to 2023 expectations, predominantly focused on Engines,
with further volume recovery and improvements to come.
Supported by continued strong momentum and market recovery
underpinned by robust demand, the outlook for the Aerospace
business is very positive and we remain confident in its prospects
and ability to perform well in 2023 and beyond. Aerospace's
technology is embedded on the world's most successful, highest
volume platforms. This progress is supported over the medium-term
through ongoing business improvements, as well as the increase in
flight hours and narrowbody production in civil and growing defence
budgets driving demand for military platforms.
Inflationary pressure and global supply chains continue to
provide some challenges which are expected to continue into 2024,
but the business continues to manage these and has been able to
fully offset all additional costs.
Building on its commitment to developing best in class
sustainable technology solutions that will assist in moving the
aviation sector into the era of more sustainable air travel, the
business continues to progress the technological advances made on
the successful H2Gear project. Aerospace signed a partnership
agreement with Embraer at the 2023 Paris Air Show, laying the path
to flight testing a zero-emissions liquid hydrogen propulsion
system. The business also advanced its Additive Manufacturing
leadership, introducing its largest Additive Manufacturing cell at
the new Global Technology Centre in the US.
Further details are set out in the divisional reviews below.
ENGINES
The Engines business made excellent progress during the first
half. This was driven by strong market growth underpinned by the
performance of its diverse portfolio of 19 RRSPs, which are set to
generate approximately GBP20 billion in net cash flow in the
future. These gains were reinforced by positive momentum from
target growth initiatives and the benefits of business
improvements.
During the Period, like-for-like revenue was up 19% versus 2022
with aftermarket growth of 46% reflecting increased flying hours
and above market contribution from RRSP contracts entering their
lucrative aftermarket phase. Adjusted operating margins improved
8.6 percentage points to 24.5%. Encouragingly this first half
performance is ahead of previous full year guidance of 22% and
moving further towards the 2025 guidance of 28%. The first half
margin expansion was driven by increased aftermarket RRSP profits,
global spares business expansion and operational improvement -
including restructuring projects delivering positive returns.
Good progress was made with growth initiatives, including global
spares ramp-up, additive manufacturing capability, and commercial
contracts. The repair business grew by 21% in the first half and
the Malaysia fan blade repair centre gained its CAAC certification
opening up the China and Asia markets. Additionally, factory
preparation is underway for a new state-of-the-art dedicated engine
component repair centre in California. Additive manufacturing for
structural engine components has accelerated with a multi-year
GBP40 million investment in new production capabilities in Sweden,
while commercial progress continues with all major engine OEMs to
insert GKN Additive technology into existing engine designs. The
business is also extending its OEM supply agreements, such as an
important 10 year extension that has recently been signed with
Pratt & Whitney for the production of F135 engine ducts.
Inevitably the development of engines is an ongoing process and
recently Pratt & Whitney announced there was a manufacturing
process issue affecting PW1100G engines. The production of powdered
metal parts continues, and Pratt & Whitney will continue to
deliver both new engines and new spares across all product lines.
We are confident that the PW1100G engine will be highly successful
and have always taken a conservative approach to its commercial
development. Whilst there will be short-term issues for some
customers, we are confident that there will be many years of
success to come.
The substantial reshaping of the Engines manufacturing footprint
is on track. Production has now ceased at the Manchester, US plant
and all other restructuring moves are expected to be largely
complete in the next four months. As a result of restructuring over
the last three years, Engines operations will be concentrated into
nine global manufacturing sites with the consolidation of key
product lines into highly productive Centres of Excellence. In
parallel there have been operational gains in productivity and
quality with the number of 'escapes' (quality issues reaching
customers) down 33% in the first half of this year. Despite the
industry's supply chain challenges, the business has sustained high
levels of on time delivery.
We are confident that with ongoing market recovery, RRSP
portfolio contribution and operational momentum, the Engines
business has the potential to achieve above 30% operating margins
post 2025.
STRUCTURES
The Structures business continued to make good financial and
operational progress in the first half. The ongoing ramp-up in
Civil production volumes and the successful actions to reshape the
Defence portfolio give promising momentum into the second half of
the year. This was underpinned by further progress on restructuring
and operational gains with improved quality and lower arrears
despite industry supply chain issues.
During the Period, like-for-like revenue was up 18% versus 2022
with Civil growth of 24% reflecting higher OEM production rates,
particularly with Airbus, Boeing and Gulfstream. Defence revenue
increased by 6% (excluding work being exited) in line with the
associated programme demand. Adjusted operating margins improved by
3.6 percentage points to 2.5% from a loss making position in the
first half of 2022. This first half performance is in line with the
expected 3% margin for the full year and demonstrates positive
momentum towards the full recovery of the business as volumes ramp
up. The first half margin expansion was driven by Civil volume
increases, improving quality of earnings in Defence and operational
improvements - including the positive impact of restructuring
projects.
There was a record number of orders for new aircraft in this
Period with particularly strong new demand from Asia. OEM
production rates remain constrained by supply chain and operational
issues, so order backlogs are currently at record levels of over
12,000 aircraft. For illustration, the A320 range is now scheduling
slots into 2029. The Structures business has established positions
on all major aircraft and is successfully ramping up at pace while
sustaining operational standards. During the Period, quality
improved further with the number of 'escapes' (quality issues
reaching customers) reducing by 44% versus 2022, and customer
arrears also improved by 31%.
There was also positive progress with commercial initiatives in
the first half. In Defence, the repricing and portfolio work
accelerated with around 25% of the renegotiations planned by 2025
being successfully concluded in the last few months. There is also
momentum on exiting non-core work with production handovers well
underway, particularly in the US. In Civil, a new contract was
signed with Airbus extending A220 wiring supply from our global
centres in Turkey, China and Mexico. Agreements have been reached
with Joby and Supernal, leading players in the emerging electric
air mobility market, covering composite structures and electrical
distribution systems. The China JV with COMAC is also moving
forward with initial work packages agreed for the new site which is
on track to be operational during the first half of 2024.
The extensive restructuring programme within Structures is
nearing completion following three years of activity. The resulting
operational footprint will be 24 global sites largely focused on
design to build programmes. In the first half, the Netherlands
consolidation project has delivered major milestones ahead of plant
closures later this year. Selected work is also being moved from
the US to our growing Mexico facility with all key projects
underway. The ongoing industry supply chain challenges continue to
be navigated without impact for key customers, however they caused
internal operational issues in the first half, including reduced
productivity in some sites. We would expect an improvement in the
second half and into 2024.
The ongoing structural ramp-up in Civil production, coupled with
positive momentum on improving the Defence portfolio and delivering
operational gains, gives us confidence that Structures is on track
to achieve its target 9% margin in 2025 with further expansion
potential thereafter.
OUTLOOK
The Engines business continues to de-risk its progress towards
achieving 28% margins in 2025 and then above 30% margins post 2025,
with the market recovery continuing to accelerate, and bolstered by
strong long-term platform positions and business improvements. The
business is in a strong position to benefit from the opportunity in
parts repair, with its expanding certified global repair capability
in key strategic locations. Over the medium to long-term, the
business is primed to pursue leading positions on next generation
platforms, with ongoing efforts to scale up its disruptive additive
fabrication technology, and expand its partnerships with leading
civil engines manufacturers and air forces. We look forward to
explaining this full potential in more detail at the new Engines
Investor Event in October this year in Sweden.
Continued growth within the Structures business remains
underpinned by very strong demand and growing backlogs, giving a
positive near-term outlook led by narrowbody. Flight hours are
returning strongly, with OEM deliveries ramping up fast to address
the continued backlog of orders in civil, with spending increasing
in defence. The business is well placed on all key platforms, and
on track to achieve its target 9% margin in 2025, with civil volume
ramp-ups driving growth, and the defence portfolio repricing and
rationalisation well underway. Longer-term prospects are supported
by ongoing footprint consolidation and quality improvements which
are progressing well.
MANAGEMENT CHANGES
We have announced today that Geoffrey and I will be stepping
down as Chief Executive and Group Finance Director respectively on
7 March 2024. Together with Christopher, Executive Vice-Chairman,
we will also step down from the Board at the next AGM. It has been
a very enjoyable 20 years, and we would like to thank all the
people both within and outside Melrose who have contributed to
Melrose's journey. We are very pleased to leave the business in
such great condition to be taken forward by a talented management
team led by Peter and Matthew. We believe that Melrose has a very
exciting future as one of the world's leading aerospace
companies.
Simon Peckham
Chief Executive
7 September 2023
FINANCE DIRECTOR'S REVIEW
The demerger of the Dowlais Group of businesses ("Dowlais"),
comprising GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen
completed on 20 April 2023 (the "demerger"). Dowlais contributed
approximately two thirds of the adjusted revenue and adjusted
operating profit of the Group in 2022, and, in accordance with IFRS
5, is shown as discontinued in these Condensed Interim Financial
Statements, leaving Aerospace as the only business remaining in the
Group.
Following the demerger, it has been deemed appropriate to report
Aerospace as two separate operating segments, namely Engines and
Structures, alongside the corporate cost centre.
MELROSE GROUP RESULTS - CONTINUING OPERATIONS
Statutory results:
The statutory IFRS results are shown on the face of the Income
Statement and show revenue of GBP1,633 million (2022: GBP1,364
million), an operating loss of GBP18 million (2022: GBP281 million)
and a loss before tax of GBP62 million (2022: GBP314 million). The
diluted earnings per share ("EPS"), calculated using the weighted
average number of shares in issue during the Period, were a loss of
3.0 pence (2022: loss of 16.8 pence).
Adjusted results:
The adjusted results are also shown on the face of the Income
Statement. They are adjusted to exclude certain items which are
significant in size or volatility or by nature are non-trading or
non-recurring, or are items released to the Income Statement that
were previously a fair value item booked on an acquisition. It is
the Group's accounting policy to exclude these items from the
adjusted results, which are used as an Alternative Performance
Measure ("APM") as described by the European Securities and Markets
Authority ("ESMA"). APMs used by the Group are defined in the
glossary to the Condensed Interim Financial Statements.
The Melrose Board considers the adjusted results to be an
important measure used to monitor how the businesses are performing
as they achieve consistency and comparability between reporting
periods when all businesses are held for the complete reporting
period.
The adjusted results for the Period show revenue of GBP1,633
million (2022: GBP1,364 million), an operating profit of GBP159
million (2022: GBP45 million) and a profit before tax of GBP134
million (2022: GBP9 million). Adjusted diluted EPS, calculated
using the weighted average number of shares in issue in the Period
of 1,404 million (2022: 1,455 million), were 7.5 pence (2022: 0.2
pence).
The following tables shows the adjusted results for the Period
split by reporting segment:
Corporate
Engines Structures Aerospace costs Total
GBPm GBPm GBPm GBPm GBPm
------------------------- ------- ---------- --------- --------- ------
Revenue 608 1,025 1,633 - 1,633
------------------------- ------- ---------- --------- --------- ------
Operating profit/(loss) 149 26 175 (16) 159
------------------------- ------- ---------- --------- --------- ------
Operating margin 24.5% 2.5% 10.7% n/a 9.7%
------------------------- ------- ---------- --------- --------- ------
The adjusted revenue for Engines of GBP608 million (2022: GBP484
million) shows constant currency growth of 19% over 2022, with
operating profit of GBP149 million (2022: GBP77 million) giving an
operating margin of 24.5% (2022: 15.9%), an increase of 8.6
percentage points.
The adjusted revenue for Structures of GBP1,025 million (2022:
GBP880 million) shows like-for-like constant currency growth of 18%
over 2022, (13% including businesses being exited), with operating
profit of GBP26 million (2022: loss of GBP10 million) giving an
operating margin of 2.5% (2022: -1.1%), an increase of 3.6
percentage points.
Corporate costs of GBP16 million (2022: GBP22 million) included
GBP15 million (2022: GBP19 million) of operating costs and GBP1
million (2022: GBP3 million) of costs relating to a divisional
cash-based long-term incentive plan.
Tables summarising the reconciliation of statutory results to
adjusted results by reportable segment are shown in note 3 of the
Condensed Interim Financial Statements, with a Group table shown
below.
RECONCILIATION OF STATUTORY RESULTS TO ADJUSTED RESULTS
The following table reconciles the Group statutory operating
loss to adjusted operating profit:
2023 2022
Continuing operations: GBPm GBPm
------------------------------------------------- ------ ----------
Statutory operating loss (18) (281)
Adjusting items:
Amortisation of intangible assets acquired in
business combinations 131 126
Restructuring costs 49 53
Equity-settled compensation scheme charges 26 8
Currency movements in derivatives and movements
in associated financial assets and liabilities (28) 150
Other (1) (11)
------------------------------------------------- ------ ----------
Adjustments to statutory operating loss 177 326
------------------------------------------------- ------ ----------
Adjusted operating profit 159 45
------------------------------------------------- ------ ----------
Adjusting items to the statutory operating loss are consistent
with prior periods and include:
-- The amortisation charge on intangible assets acquired
in business combinations of GBP131 million (2022: GBP126
million), which is excluded from adjusted results due
to its non-trading nature and to enable comparison with
companies that grow organically. However, where intangible
assets are trading in nature, such as computer software
and development costs, the amortisation is not excluded
from adjusted results.
-- Costs associated with restructuring projects in the Period
totalling GBP49 million (2022: GBP53 million). These are
shown as adjusting items due to their size and non-trading
nature.
There are three significant ongoing multi-year restructuring
programmes, impacting multiple sites across the Engines
and Structures divisions, including European footprint
consolidations which commenced in 2021, and significant
restructuring programmes in North America which commenced
in 2020. These programmes incurred a combined charge of
GBP40 million in the Period. Since commencement, the cumulative
charge on these three restructuring programmes to 30 June
2023 has been GBP195 million (31 December 2022: GBP155
million).
As 30 June 2023, these projects on average are over 90%
complete and are expected to complete in the near future.
In addition to the remaining charges to be incurred on
these projects, GBP40 million is included in restructuring
provisions at 30 June 2023 to be settled in cash over
the next two years.
-- The charge for the equity-settled compensation schemes
of GBP26 million (2022: GBP8 million), which includes
an accrual for employer's tax payable of GBP18 million
(2022: GBPnil). This is excluded from adjusted results
due to its size and volatility. The shares that would
be issued, based on the scheme's current valuation at
the end of the Period, are included in the calculation
of the adjusted diluted earnings per share, which the
Board considers to be a key measure of performance.
-- Movements in the fair value of derivative financial instruments
(primarily forward foreign currency exchange contracts),
where hedge accounting is not applied, along with foreign
exchange movements on the associated financial assets
and liabilities, entered into within the businesses to
mitigate the potential volatility of future cash flows
on long-term foreign currency customer and supplier contracts.
This totalled a credit of GBP28 million (2022: charge
of GBP150 million) in the Period and is shown as an adjusting
item because of its volatility and size.
-- Other net adjusting items, being a credit of GBP1 million
(2022: GBP11 million), relating to the net release of
fair value items in the Period, where items have been
resolved for more favourable amounts than first anticipated
at acquisition. The net release of fair value items is
shown as an adjusting item, avoiding positively distorting
adjusted results from items booked on acquisition.
DISCONTINUED OPERATIONS
Discontinued operations in the Period includes the demerged
businesses; GKN Automotive, GKN Powder Metallurgy and GKN
Hydrogen.
In accordance with IFRIC 17, the Dowlais businesses were
distributed from the Melrose Group at a fair value, calculated
using the opening traded share price on 20 April 2023, being
GBP1.46. This valuation resulted in a loss on disposal of GBP1.0
billion.
Costs relating to the demerger of the Dowlais Group totalled
GBP64 million, of which GBP6 million were accrued at 31 December
2022. This charge is offset by a non-cash contribution of GBP19
million in the form of a one per cent shareholding of Dowlais Group
PLC equity being retained by the Group. In addition GBP152 million
was recycled from the translation reserve in respect of these
businesses.
Discontinued businesses contributed GBP1,582 million to revenue
and achieved statutory operating profit of GBP32 million for the
period of the year under ownership.
TAX - CONTINUING OPERATIONS
The statutory results for the Period show a tax credit of GBP22
million (2022: GBP70 million), arising on a statutory loss before
tax of GBP62 million (2022: GBP314 million). The Group Income
Statement current underlying adjusted tax rate is approximately 21%
(2022: 67%). During the Period, the continuing businesses paid tax
of GBP15 million (2022: GBP8 million).
SHARE CONSOLIDATION AND NUMBER OF SHARES IN ISSUE
To enable both Melrose and Dowlais to initiate at appropriate
pricing levels, a one for three share consolidation was performed
by Melrose on the eve of the demerger, which resulted in the number
of shares in issue reducing from 4,054 million to 1,351 million.
Shareholders then received one Dowlais share for every
post-consolidation Melrose share they held.
In accordance with IAS 33, the one for three consolidation is
applied to all periods in these Condensed Interim Financial
Statements. The weighted average number of shares used for basic
earnings per share calculations was 1,351 million (2022: 1,455
million), and when including the number of shares expected to be
issued from the Melrose equity-settled share plan, the weighted
average number of shares used for diluted earnings per share, was
1,404 million (2022: 1,455 million).
LONG-TERM INCENTIVE SCHEME
The Melrose 2020 Employee Share Plan, ("the MESP"), rewards the
performance of certain senior management by issuing them Melrose
shares, as described in the Directors' Remuneration Report in the
2022 Annual Report.
As a result of splitting the Melrose Group, certain adjustments
to the MESP were approved by shareholders, which preserved the
rights of the participants of the plan. The first adjustment was to
reflect the demerger by allocating the invested capital between the
continuing Melrose Group and Dowlais. Second, recognising that the
timelines of both the demerger and the crystallisation date of the
MESP coincided, the performance period of the MESP was extended by
one year. Finally, to recognise the platform already prepared for
the Dowlais businesses whilst part of the Melrose Group, the
invested capital in the GKN Automotive business and the GKN Powder
Metallurgy businesses formed the basis from which the creation of
further value in Dowlais will be rewarded up to 31 May 2025, in a
separate parallel Melrose Automotive Share Plan ("the MASP").
The IFRS 2 charge in respect of the MESP was calculated on
inception in 2020 and charged over a three year period. It is
unimpacted by the amendments described above and for the period
ended 30 June 2023 the IFRS 2 charge, shown as an adjusting item,
was GBP7 million (2022: GBP8 million). The charge in respect of the
MASP was GBP1 million (2022: GBPnil).
CASH GENERATION AND MANAGEMENT
Adjusted free cash flow for the continuing Group in the Period
was an outflow of GBP65 million (2022: GBP82 million), after net
interest and tax spend of GBP49 million (2022: GBP45 million), but
before restructuring spend of GBP53 million (2022: GBP15
million).
An analysis of free cash flow is shown in the table below:
2023 2022
GBPm GBPm
----------------------------------------------------- ------ -----
Continuing operations:
----------------------------------------------------- ------ -----
Adjusted operating profit 159 45
----------------------------------------------------- ------ -----
Depreciation and amortisation 71 73
----------------------------------------------------- ------ -----
Lease obligation payments (16) (14)
----------------------------------------------------- ------ -----
Positive non-cash impact from loss-making contracts (13) (9)
----------------------------------------------------- ------ -----
Working capital movements:
----------------------------------------------------- ------ -----
Inventory (53) (71)
----------------------------------------------------- ------ -----
Receivables and payables (116) (47)
----------------------------------------------------- ------ -----
Adjusted operating cash flow (pre-capex) 32 (23)
----------------------------------------------------- ------ -----
Net capital expenditure (40) (16)
----------------------------------------------------- ------ -----
Defined benefit pension contributions - ongoing (2) (2)
----------------------------------------------------- ------ -----
Restructuring (53) (15)
----------------------------------------------------- ------ -----
Net other (6) 4
----------------------------------------------------- ------ -----
Free cash flow pre-interest and tax (69) (52)
----------------------------------------------------- ------ -----
Net interest and net tax paid (49) (45)
----------------------------------------------------- ------ -----
Free cash flow (118) (97)
----------------------------------------------------- ------ -----
Adjusted free cash flow (65) (82)
----------------------------------------------------- ------ -----
During the Period, the working capital movements in the
continuing Group were consistent with revenue growing by 15%, with
inventory levels growing by 10%, GBP53 million, and net receivables
and payables growing by 6%, GBP116 million. The working capital
performance is expected to be stronger in the second half of the
year than the first because of the seasonality trends of the
Aerospace business.
Capital expenditure in the Aerospace business in the Period was
GBP40 million (2022: gross capital expenditure of GBP25 million net
of GBP9 million received from the disposal of a property). Capital
expenditure in Aerospace represented 0.7x (2022: 0.4x) depreciation
of owned assets.
Restructuring spend in the Period was GBP53 million (2022: GBP15
million).
In the continuing Group, net interest paid in the Period was
GBP34 million (2022: GBP37 million), net tax payments were GBP15
million (2022: GBP8 million) and ongoing contributions to defined
benefit pension schemes were GBP2 million (2022: GBP2 million).
The movement in net debt (as defined in the glossary to the
Condensed Interim Financial Statements) is summarised as
follows:
GBPm
--------------------------------------------------------- --------
Opening net debt (1,139)
--------------------------------------------------------- --------
Net cash outflow from Dowlais businesses to date of
demerger (54)
--------------------------------------------------------- --------
Reduction in net debt following the demerger of Dowlais 885
--------------------------------------------------------- --------
2022 second interim dividend paid to shareholders (61)
--------------------------------------------------------- --------
Demerger related costs and pension buy-in(1) (118)
--------------------------------------------------------- --------
Proforma opening net debt (487)
--------------------------------------------------------- --------
Free cash flow of the continuing Group in the Period (118)
--------------------------------------------------------- --------
FX and other non-cash movements(1) 52
--------------------------------------------------------- --------
Net debt at 30 June 2023 at closing exchange rates (553)
--------------------------------------------------------- --------
1 Includes GBP16 million of demerger related costs unpaid at 30
June 2023, reversed through non-cash movements
Proforma opening net debt of GBP487 million for the continuing
Melrose Group is calculated after adjusting the closing net debt at
31 December 2022, of GBP1,139 million, for: the payment of demerger
related costs of GBP62 million; bank facility arrangement fees of
GBP11 million; the cost of fully securing the benefits of all
members of the GKN UK Pension Scheme Number 4 in advance of an
expected buy-out process, of GBP45 million; the second interim
dividend for the year ended 31 December 2022 of GBP61 million; and
the net debt that Dowlais inherited on inception.
Group net debt at 30 June 2023, translated at closing exchange
rates (being US $1.27 and EUR1.16), was GBP553 million (31 December
2022: GBP1,139 million), after a free cash outflow from the
continuing Group of GBP118 million, described above, net favourable
foreign exchange movements of GBP29 million, and other non-cash
movements of GBP23 million.
For bank covenant purposes the Group's net debt is calculated at
average exchange rates for the previous twelve months, to better
align the calculation with the currency rates used to calculate
profits, and was GBP572 million.
The Group net debt leverage on this basis at 30 June 2023 was
1.5x EBITDA compared to a proforma opening leverage of 1.8x EBITDA
(31 December 2022: reported 1.4x EBITDA).
PROVISIONS
Total provisions at 30 June 2023 were GBP275 million (31
December 2022: GBP611 million).
The following table details the movement in provisions in the
Period:
Total
GBPm
----------------------------------------------- -----
Provisions at 1 January 2023 611
----------------------------------------------- -----
Continuing businesses:
----------------------------------------------- -----
Net charge in the Period 56
----------------------------------------------- -----
Spend against provisions (52)
----------------------------------------------- -----
Utilisation of loss-making contract provision (13)
----------------------------------------------- -----
Foreign exchange (7)
----------------------------------------------- -----
Discontinued businesses:
----------------------------------------------- -----
Movement in provisions in the Period 24
----------------------------------------------- -----
Demerger of Dowlais (344)
----------------------------------------------- -----
Provisions at 30 June 2023 275
----------------------------------------------- -----
The net charge to the Income Statement in the Period for
continuing operations was GBP56 million, including GBP32 million
relating to restructuring activities and GBP18 million relating to
employer's tax payable on equity-settled compensation schemes.
These two items are both shown as adjusting items and included in
the adjusting items section discussed earlier in this review.
During the Period, GBP13 million was utilised against
loss-making contract provisions in Aerospace and GBP52 million of
cash was spent against provisions with GBP40 million relating to
restructuring activities.
Net provision movements relating to property, environmental
& litigation and warranty in Aerospace were not material in the
Period.
The net movement on provisions in the Period within Dowlais was
GBP24 million, with GBP344 million of provisions leaving the Group
on demerger.
PENSIONS AND POST-EMPLOYMENT OBLIGATIONS
Melrose operates a number of defined benefit pension schemes and
retiree medical plans across the Group, accounted for using IAS 19
Revised: "Employee Benefits".
The values of the Group plans were updated at 30 June 2023 by
independent actuaries to reflect the latest key assumptions and are
summarised as follows:
Accounting
Assets Liabilities deficit
GBPm GBPm GBPm
------------------------------------- -------- ----------- ----------
GKN UK Group pension schemes Number
1 593 (644) (51)
GKN UK Group pension schemes Number
4 416 (416) -
Other Group pension schemes 46 (84) (38)
------------------------------------- -------- ----------- ----------
Total Group pension schemes 1,055 (1,144) (89)
------------------------------------- -------- ----------- ----------
At 30 June 2023, following the demerger of Dowlais, the total
plan assets of Melrose Group's defined benefit pension plans has
reduced to GBP1,055 million (31 December 2022: GBP1,941 million)
and total plan liabilities to GBP1,144 million (31 December 2022:
GBP2,429 million), a net deficit of GBP89 million (31 December
2022: GBP488 million).
The GKN UK Group Pension Schemes (Numbers 1 and 4) are the most
significant pension plans remaining in the Group, and are closed to
new members and to the accrual of future benefits for current
members.
During the Period, the Group commenced a process to buy-out the
GKN UK Group Pension Scheme Number 4. The first stage of the
process, purchasing a buy-in policy which fully secures all
members' benefits, was completed in the Period, resulting in assets
and liabilities of GBP416 million being recorded equally at 30 June
2023. The buy-out process is expected to complete in the first half
of 2024.
At 30 June 2023, the GKN UK Group Pension Scheme Number 1 had
gross assets of GBP593 million (31 December 2022: GBP628 million),
gross liabilities of GBP644 million (31 December 2022: GBP667
million) and a net deficit of GBP51 million (31 December 2022:
GBP39 million).
Other pension schemes in the Group include US pension plans
which are generally funded schemes and closed to new members. At 30
June 2023, these US pension plans had a net deficit of GBP25
million.
A summary of the assumptions used are shown in note 11 to the
Condensed Interim Financial Statements.
FINANCIAL RISKS AND UNCERTAINTIES
The principal financial risks and uncertainties faced by the
Group include liquidity risk, finance cost risk, exchange rate
risk, contract and warranty risk and commodity cost risk. The
nature of these risks in relation to the Group are explained in
detail on pages 35 to 37 of the 2022 Annual Report, a copy of which
is available on the Company's website, www.melroseplc.net .
Further explanations and details of the strategic risk profile
of the Group, which includes non-financial risk, are set out on
pages 40 to 48 of the 2022 Annual Report.
EXCHANGE RATES USED IN THE PERIOD
Exchange rates used for currencies most relevant to the Group in
the Period were:
Average Closing
US Dollar rate rate
----------------------------------- --------- --------
Six months to 30 June 2023 1.23 1.27
----------------------------------- --------- --------
Twelve months to 31 December 2022 1.24 1.21
----------------------------------- --------- --------
Six months to 30 June 2022 1.30 1.22
----------------------------------- --------- --------
Euro
----------------------------------- --------- --------
Six months to 30 June 2023 1.14 1.16
----------------------------------- --------- --------
Twelve months to 31 December 2022 1.17 1.13
----------------------------------- --------- --------
Six months to 30 June 2022 1.19 1.16
----------------------------------- --------- --------
The Group policy on foreign currency risk is explained on page
36 of the 2022 Annual Report.
The following table shows an indication of a full year impact of
a 10 percent strengthening of the US Dollar and the Euro, if they
were to strengthen in isolation against all other currencies, on
the re-translation of adjusted operating profit into Sterling:
GBPm USD EUR
-------------------------------- ---- ----
Movement in adjusted operating
profit 29 6
---------------------------------- ---- ----
% impact on adjusted operating
profit 8% 2%
---------------------------------- ---- ----
In the first half of the year, the Group incurred a 5%
translational foreign exchange gain on adjusted operating profit
compared to the same period last year.
The impact from transactional foreign exchange exposures is not
material in the short-term due to hedge coverage being
approximately 90%.
The Group utilises its multi-currency banking facility and
cross-currency swaps, where relevant, to maintain an appropriate
mix of debt in US Dollars, Euros and Sterling. The hedge of having
debt drawn in US Dollars and Euros protects against some of the
Balance Sheet and banking covenant foreign exchange translation
risk. A 10 percent strengthening in either the US Dollar or Euro
would have had the following impact on debt as at 30 June 2023:
GBPm USD EUR
------------------ ---- ----
Increase in debt 37 13
------------------ ---- ----
LIQUIDITY RISK MANAGEMENT
The Group's net debt position at 30 June 2023 was GBP553 million
(31 December 2022: GBP1,139 million).
The Group entered into new committed bank facilities that became
effective on completion of the demerger and fully replaced the
existing bank facility. These new facilities consist of a
multi-currency denominated term loan and multi-currency denominated
revolving credit facilities that mature in April 2026. The Group
also has the option to extend, for up to two one-year periods, US
$550 million, GBP300 million and EUR300 million of the revolving
credit facilities. Details of the new facilities and amounts
borrowed as at 30 June 2023 are shown below;
Local currency GBPm
---------------------------- ---------
Size Drawn Headroom Headroom
---------------------------- ----- ------ --------- ---------
Term loan:
---------------------------- ----- ------ --------- ---------
USD 300 300 - -
---------------------------- ----- ------ --------- ---------
EUR 100 100 - -
---------------------------- ----- ------ --------- ---------
Revolving credit facility:
---------------------------- ------------------------ ---------
USD 800 96 704 554
---------------------------- ----- ------ --------- ---------
GBP 300 - 300 300
---------------------------- ----- ------ --------- ---------
Euro 300 - 300 258
---------------------------- ----- ------ --------- ---------
Total headroom 1,112
---------------------------- ----- ------ --------- ---------
As at 30 June 2023, the term loan was fully drawn and there was
GBP0.1 billion of drawings on the multi-currency committed
revolving credit facility. Applying the exchange rates at 30 June
2023, the headroom equated to approximately GBP1.1 billion.
In addition to the headroom on the multi-currency committed
revolving credit facility, at 30 June 2023 cash, deposits and
marketable securities, net of overdrafts, in the Group amounted to
GBP20 million (31 December 2022: GBP292 million), whilst drawings
on uncommitted borrowing facilities amounted to GBP58 million (31
December 2022: GBPnil).
At 30 June 2023, capital market borrowings held by the Group
consisted of an outstanding value of GBP130 million of a bond due
to mature in May 2032, with a current coupon rate of 4.625%.
The committed bank funding has two financial covenants, being a
net debt to adjusted EBITDA covenant and an interest cover
covenant, both of which will be tested half-yearly in June and
December, with the first testing date for the net debt to adjusted
EBITDA and interest cover covenants being the periods ending 31
December 2023 and 30 June 2024 respectively.
The Group net debt to adjusted EBITDA covenant test level is set
at maximum of 3.5x from the first testing date and the interest
cover covenant is set at a minimum 4.0x from its initial testing
date.
FINANCE COST RISK MANAGEMENT
The policy of the Board is to fix approximately 70% of the
interest rate exposure of the Group.
In addition to the fixed coupon payable under the GBP130 million
bond discussed above, the Group uses financial derivatives to fix a
portion of the cost of its committed bank facility. At 30 June
2023, 74% of debt has a fixed interest rate consistent with the
Group policy and the maximum rates the Group will pay on the fixed
portions of its US Dollar and Euro bank debt are 3.4% and 3.0%
respectively. The bank margin on the Group's committed bank
facility is currently in the range of 1.3% to 1.55% depending on
which of the facilities are being utilised.
The Group's cost of drawn debt for the year is currently
expected to be approximately 5.3%.
GOING CONCERN
As part of their consideration of going concern, the Directors
have reviewed the Group's future cash forecasts and profit
projections, which are based on market and internal data and recent
past experience.
The Group has modelled a reasonably possible downside scenario
against future cash forecasts and for this reasonably possible
downside scenario, the Group has sufficient headroom to avoid
breaching any of its financial covenants and would not require any
additional sources of financing throughout the forecast period.
The Directors recognise the challenges in the current economic
environment, including high levels of inflation and challenges in
supply chains and the Group is actively managing the associated
impacts on trading through a sharp focus on pricing, productivity
and costs. In addition, the Group's cash flow forecasts consider
any impacts from further economic factors such as rising interest
rates.
The macroeconomic environment remains uncertain and volatile and
the impacts of the economic factors discussed above could be more
prolonged or severe than that which the Directors have considered
in the Group's reasonably possible downside scenario.
However, the Group's current committed bank facility headroom,
its access to liquidity, and the sensible levels of bank covenants
in place with lending banks, allow the Directors to consider it
appropriate that the Group can manage its business risks
successfully and adopt a going concern basis in preparing these
Condensed Interim Financial Statements .
Geoffrey Martin
Group Finance Director
7 September 2023
CAUTIONARY STATEMENT
This announcement contains forward-looking statements. These
statements are made in good faith based on the information
available up to the time of the approval of this announcement, and
should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any
such forward-looking information. Accordingly, readers are
cautioned not to place undue reliance on any such forward-looking
statements. Subject to compliance with applicable laws and
regulations, the Company does not undertake any obligation to
update any forward-looking statement to reflect events or
circumstances after the date of this announcement.
This announcement has been prepared solely to provide
information to shareholders to assess the Company's strategies and
the potential for those strategies to succeed, and neither the
Company nor its directors accept any liability to any other person
save as would arise under English law.
NO OFFER OF SECURITIES
Nothing in this announcement constitutes an offer of securities
for sale in the U.S. Securities may not be sold in the U.S. absent
registration or an exemption from registration.
RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
a) the condensed financial statements have been prepared
in accordance with IAS 34 "Interim Financial Reporting"
as adopted by the UK;
b) the interim management report includes a fair review of
the information required by DTR 4.2.7R (indication of
important events and their impact, and description of
principal risks and uncertainties for the remaining six
months of the financial year); and
c) 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
Simon Peckham Geoffrey Martin
Chief Executive Group Finance Director
7 September 2023 7 September 2023
INDEPENT REVIEW REPORT TO MELROSE INDUSTRIES PLC
Conclusion
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 2023 the condensed consolidated income
statement, the condensed consolidated statement of comprehensive
income, the condensed consolidated statement of cash flows, the
condensed consolidated balance sheet, the condensed consolidated
statement of changes in equity and related notes 1 to 13.
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 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules 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 (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, 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.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
International Financial Reporting Standards. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion 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 ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, 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 company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
6 September 2023
Melrose Industries PLC
Condensed Consolidated Income Statement
Restated
(1) Restated
6 months 6 months (1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Continuing operations Notes GBPm GBPm GBPm
--------------------------------------- ------- ---------- ----------- ------------
Revenue 3 1,633 1,364 2,954
Cost of sales (1,326) (1,176) (2,533)
--------------------------------------- ------- ---------- ----------- ------------
Gross profit 307 188 421
Net operating expenses (325) (469) (691)
--------------------------------------- ------- ---------- ----------- ------------
Operating loss 3,4 (18) (281) (270)
Finance costs (45) (33) (83)
Finance income 1 - 25
Loss before tax (62) (314) (328)
Tax 5 22 70 99
--------------------------------------- ------- ---------- ----------- ------------
Loss after tax for the period from
continuing operations (40) (244) (229)
Discontinued operations
Loss for the period from discontinued
operations 8 (1,020) (113) (74)
--------------------------------------- ------- ---------- ----------- ------------
Loss after tax for the period (1,060) (357) (303)
Attributable to:
Owners of the parent (1,060) (360) (308)
Non-controlling interests - 3 5
--------------------------------------- ------- ---------- ----------- ------------
(1,060) (357) (303)
Earnings per share
Continuing operations
- Basic 6 (3.0)p (16.8)p (16.3)p
- Diluted 6 (3.0)p (16.8)p (16.3)p
Continuing and discontinued operations
- Basic 6 (78.5)p (24.7)p (21.9)p
- Diluted 6 (78.5)p (24.7)p (21.9)p
Adjusted(2) results from continuing
operations
Adjusted operating profit 3,4 159 45 147
Adjusted profit before tax 4 134 9 62
Adjusted profit after tax 4 106 3 58
Adjusted basic earnings per share 6 7.8p 0.2p 4.1p
Adjusted diluted earnings per
share 6 7.5p 0.2p 4.1p
--------------------------------------- ------- ---------- ----------- ------------
(1) Results for the period ended 30 June 2022 and the year ended
31 December 2022 have been restated for discontinued operations
(see note 2).
(2) Defined in the summary of significant accounting policies
(see note 2).
Melrose Industries PLC
Condensed Consolidated Statement of Comprehensive Income
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
---------------------------------------------- ------- ---------- ----------- -------------
Loss after tax for the period (1,060) (357) (303)
Items that will not be reclassified
subsequently to the
Income Statement:
Net remeasurement (loss)/gain on
retirement benefit obligations (91) 258 (32)
Fair value loss on investments in
equity instruments (2) (27) (34)
Income tax credit/(charge) relating
to items that will not be reclassified 5 22 (72) (1)
----------------------------------------------
(71) 159 (67)
Items that may be reclassified subsequently
to the
Income Statement:
Currency translation on net investments (190) 512 593
Share of other comprehensive (expense)/income
from equity accounted investments (11) 22 13
Transfer to Income Statement from
equity of cumulative translation
differences on disposal of foreign
operations 8 (152) - (11)
Derivative gains/(losses) on hedge
relationships 8 (19) (39)
Transfer to Income Statement on hedge
relationships - (1) 2
Income tax (charge)/credit relating
to items that may be reclassified 5 (5) 6 5
(350) 520 563
Other comprehensive (expense)/income
for the period (421) 679 496
Total comprehensive (expense)/income
for the period (1,481) 322 193
Attributable to:
Owners of the parent (1,481) 318 187
Non-controlling interests - 4 6
---------------------------------------------- ------- ---------- ----------- -------------
(1,481) 322 193
Melrose Industries PLC
Condensed Consolidated Statement of Cash Flows
Restated
(1) Restated
6 months 6 months (1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
-------------------------------------------- ------- ---------- ----------- ------------
Operating activities
Net cash used in operating activities
from continuing operations 12 (172) (69) (39)
Net cash from operating activities
from discontinued operations 12 36 39 243
-------------------------------------------- ------- ---------- ----------- ------------
Net cash (used in)/from operating
activities (136) (30) 204
Investing activities
Disposal of businesses, net of cash
disposed 8 (320) (8) 478
Settlement receipt from loans held
with demerged entities 8 1,205 - -
Purchase of property, plant and equipment (36) (21) (69)
Proceeds from disposal of property,
plant and equipment - 9 45
Purchase of computer software and
capitalised development costs (4) (4) (7)
Acquisition of subsidiaries, net of
cash acquired - - (4)
Settlement of derivatives used in
net investment hedging - - (109)
Equity accounted investment additions - - (3)
Interest received 2 - 1
Net cash from/(used in) investing
activities from continuing operations 847 (24) 332
Net cash used in investing activities
from discontinued operations 12 (67) (35) (140)
-------------------------------------------- ------- ---------- ----------- ------------
Net cash from/(used in) investing activities 780 (59) 192
Financing activities
Repayment of borrowings (1,262) - (598)
Drawings on borrowing facilities 450 7 632
Costs of raising debt finance (11) - -
Repayment of principal under lease
obligations (16) (14) (29)
Purchase of own shares, including
associated costs 7 - (119) (504)
Dividends paid to owners of the parent 7 (61) (44) (77)
------------
Net cash used in financing activities
from continuing operations (900) (170) (576)
Net cash used in financing activities
from discontinued operations 12 (6) (11) (23)
-------------------------------------------- ------- ---------- ----------- ------------
Net cash used in financing activities (906) (181) (599)
Net decrease in cash and cash equivalents,
net of bank overdrafts (262) (270) (203)
Cash and cash equivalents, net of
bank overdrafts at the beginning of
the period 292 468 468
Effect of foreign exchange rate changes (10) 25 27
-------------------------------------------- -------
Cash and cash equivalents, net of
bank overdrafts at the end of the
period 12 20 223 292
(1) Results for the period ended 30 June 2022 and year ended 31
December 2022 have been restated for discontinued operations (see
note 2).
As at 30 June 2023, the Group had net debt of GBP553 million (31
December 2022: GBP1,139 million). A definition and reconciliation
of the movement in net debt is shown in note 12.
Melrose Industries PLC
Condensed Consolidated Balance Sheet
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
-------------------------------------- ------- ---------------------- ---------------------- -----------
Non-current assets
Goodwill and other intangible
assets 3,496 7,022 6,846
Property, plant and equipment 748 2,561 2,599
Investments 78 68 62
Interests in equity accounted
investments 11 432 435
Deferred tax assets 508 318 373
Derivative financial assets 27 32 36
Other receivables 735 580 670
Retirement benefit surplus 11 - 295 93
-------------------------------------- -------
5,603 11,308 11,114
Current assets
Inventories 557 1,002 1,025
Trade and other receivables 797 1,467 1,426
Derivative financial assets 10 31 38
Current tax assets - 28 29
Cash and cash equivalents 110 293 355
Assets classified as held for
sale - 641 -
1,474 3,462 2,873
Total assets 3 7,077 14,770 13,987
Current liabilities
Trade and other payables 1,220 2,661 2,347
Interest-bearing loans and borrowings 148 548 63
Lease obligations 13 38 56 60
Derivative financial liabilities 57 223 86
Current tax liabilities 19 129 141
Provisions 9 176 285 281
Liabilities associated with assets
held for sale - 97 -
1,658 3,999 2,978
Net current liabilities (184) (537) (105)
Non-current liabilities
Other payables 343 402 431
Interest-bearing loans and borrowings 517 973 1,433
Lease obligations 13 151 311 306
Derivative financial liabilities 115 171 141
Deferred tax liabilities 448 673 619
Retirement benefit obligations 11 89 517 581
Provisions 9 99 398 330
-------------------------------------- ------- ---------------------- ----------------------
1,762 3,445 3,841
Total liabilities 3 3,420 7,444 6,819
Net assets 3,657 7,326 7,168
Equity
Issued share capital 309 327 309
Share premium account 3,271 3,271 3,271
Merger reserve 109 109 109
Capital redemption reserve 753 735 753
Other reserves (2,330) (2,330) (2,330)
Translation and hedging reserve 288 595 638
Retained earnings 1,257 4,582 4,379
Equity attributable to owners of
the parent 3,657 7,289 7,129
Non-controlling interests - 37 39
Total equity 3,657 7,326 7,168
Melrose Industries PLC
Condensed Consolidated Statement of Changes in Equity
Equity
Capital attributable
Issued Share redemption Translation to owners Non-
share premium Merger reserve Other and hedging Retained of the controlling Total
capital account reserve GBPm reserves reserve earnings parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------- ------- ----------- -------- ------------ --------- ------------ ------------ -------
At 1 January 2022 333 3,271 109 729 (2,330) 76 5,319 7,507 33 7,540
(Loss)/profit
for the period - - - - - - (360) (360) 3 (357)
Other
comprehensive
income - - - - - 519 159 678 1 679
----------------- ------- ------- ------- ----------- -------- ------------ --------- ------------ ------------ -------
Total
comprehensive
income/(expense) - - - - - 519 (201) 318 4 322
Purchase of own
shares (note 7) (6) - - 6 - - (500) (500) - (500)
Dividends paid
(note 7) - - - - - - (44) (44) - (44)
Equity-settled
share-based
payments - - - - - - 8 8 - 8
----------------- ------- ------- ------- ----------- -------- ------------ --------- ------------ ------------ -------
At 30 June 2022
(unaudited) 327 3,271 109 735 (2,330) 595 4,582 7,289 37 7,326
Profit for the
period - - - - - - 52 52 2 54
Other
comprehensive
income/(expense) - - - - - 43 (226) (183) - (183)
----------------- ------- ------- ------- ----------- -------- ------------ --------- ------------ ------------ -------
Total
comprehensive
income/(expense) - - - - - 43 (174) (131) 2 (129)
Purchase of own
shares (note 7) (18) - - 18 - - (4) (4) - (4)
Dividends paid
(note 7) - - - - - - (33) (33) - (33)
Equity-settled
share-based
payments - - - - - - 8 8 - 8
At 31 December
2022 (audited) 309 3,271 109 753 (2,330) 638 4,379 7,129 39 7,168
Loss for the
period - - - - - - (1,060) (1,060) - (1,060)
Other
comprehensive
expense - - - - - (350) (71) (421) - (421)
----------------- ------- ------- ------- ----------- -------- ------------ --------- ------------ ------------ -------
Total
comprehensive
expense - - - - - (350) (1,131) (1,481) - (1,481)
Dividends paid
(note 7) - - - - - - (61) (61) - (61)
Demerger
distribution
(note 8) - - - - - - (1,973) (1,973) - (1,973)
Derecognition
of
non-controlling
interests on
demerger
(note 8) - - - - - - - - (39) (39)
Equity-settled
share-based
payments - - - - - - 2 2 - 2
Deferred tax on
equity-settled
share-based
payments
(note 5) - - - - - - 41 41 - 41
At 30 June 2023
(unaudited) 309 3,271 109 753 (2,330) 288 1,257 3,657 - 3,657
Notes to the Condensed Interim Financial Statements
1. Corporate information
The interim financial information for the six months ended 30
June 2023 has been reviewed by the auditor, but not audited. The
information for the year ended 31 December 2022 shown in this
report does not constitute statutory accounts for that year as
defined in section 434 of the Companies Act 2006. A copy of the
statutory accounts for that year has been delivered to the
Registrar of Companies. The auditor has reported on those accounts.
Their report was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
2. Summary of significant accounting policies
The interim financial information for the six months ended 30
June 2023, which has been approved by the Board of Directors, has
been prepared on the basis of the accounting policies set out in
the Group's 2022 Annual Report on pages 161 to 171, as impacted by
the demerger, see note 8.
The Group's 2022 Annual Report can be found on the Group's
website www.melroseplc.net. These Condensed Interim Financial
Statements should be read in conjunction with the 2022 information
and have been prepared in accordance with UK-endorsed International
Financial Reporting Standards ("IFRS"). These Condensed Interim
Financial Statements do not comprise statutory accounts within the
meaning of section 435 of the Companies Act 2006 and have been
prepared in accordance with IAS 34: "Interim Financial Reporting"
contained in UK-endorsed IFRS.
Share consolidation
On 19 April 2023, a share consolidation took place whereby
shareholders received one new share in the Company for every three
existing shares held. In accordance with IAS 33: "Earnings per
Share", a one for three adjustment is required to the weighted
average number of shares in existence prior to the share
consolidation and prior periods have been restated accordingly.
Discontinued operations and disposals
On 20 April 2023, the Group completed the demerger of the GKN
Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses
through the flotation of Dowlais Group PLC ("Dowlais") on the
London Stock Exchange. The results of the Dowlais businesses have
been classified within discontinued operations for all periods
presented; with the Income Statement, the Statement of Cash Flows
and their associated notes being restated accordingly. See note 8
for further detail.
Dowlais became a related party to the Group on demerger.
In addition, discontinued operations for 2022 include the
results of the Ergotron business which was disposed of on 6 July
2022.
Alternative performance measures
The Group presents Alternative Performance Measures ("APMs") in
addition to the statutory results. These are presented in
accordance with the Guidelines on APMs issued by the European
Securities and Markets Authority ("ESMA"). APMs used by the Group
are set out in the glossary to these Condensed Interim Financial
Statements and the reconciling items between statutory and adjusted
results are listed below and described in more detail in note
4.
Adjusted profit measures exclude items which are significant in
size or volatility or by nature are non-trading or non-recurring or
any item released to the Income Statement that was previously a
fair value item booked on an acquisition.
On this basis, the following are the principal items included
within adjusting items impacting operating profit:
-- Amortisation of intangible assets that are acquired in
a business combination, excluding computer software and
development costs;
-- Significant restructuring project costs and other associated
costs, including losses incurred following the announcement
of closure for identified businesses, arising from significant
strategy changes that are not considered by the Group
to be part of the normal operating costs of the business;
-- Acquisition and disposal related gains and losses;
-- Impairment charges that are considered to be significant
in nature and/or value to the trading performance of the
business;
-- Movement in derivative financial instruments not designated
in hedging relationships, including revaluation of associated
financial assets and liabilities;
-- The charge for the Melrose equity-settled compensation
scheme, including its associated employer's tax charge;
and
-- The net release of fair value items booked on acquisitions.
Further to the adjusting items above, adjusting items impacting
profit before tax include:
-- Acceleration of unamortised debt issue costs written off
as a consequence of Group refinancing;
-- Significant settlement gains and losses associated with
interest rate swaps following acquisition or disposal
related activity, which are not considered by the Group
to be part of normal financing costs;
-- Finance costs in respect of the Group's net debt strategically
allocated to a demerger group of businesses at the start
of the period and subsequently settled on demerger; and
-- The fair value changes on cross-currency swaps, entered
into by GKN prior to acquisition, relating to cost of
hedging which are not deferred in equity.
In addition to the items above, adjusting items impacting profit
after tax include:
-- The net effect on tax of significant restructuring from
strategy changes that are not considered by the Group
to be part of the normal operating costs of the business;
-- The net effect of significant new tax legislation; and
-- The tax effects of adjustments to profit before tax, described
above.
2. Summary of significant accounting policies (continued)
The Board considers the adjusted results to be an important
measure used to monitor how the businesses are performing as this
provides a meaningful reflection of how the businesses are managed
and measured on a day-to-day basis and achieves consistency and
comparability between reporting periods, when all businesses are
held for a complete reporting period.
The adjusted measures are used to partly determine the variable
element of remuneration of senior management throughout the Group
and are also in alignment with performance measures used by certain
external stakeholders. The adjusted measures are also taken into
account when valuing individual businesses.
Adjusted profit is not a defined term under IFRS and may not be
comparable with similarly titled profit measures reported by other
companies. It is not intended to be a substitute for, or superior
to, GAAP measures. All APMs relate to the current period results
and comparative periods where provided.
Going concern
The Condensed Interim Financial Statements have been prepared on
a going concern basis as the Directors consider that adequate
resources exist for the Company to continue in operational
existence for the foreseeable future. The Group's liquidity and
funding arrangements are described in the Finance Director's
Review. There is significant liquidity/financing headroom at 30
June 2023 (GBP1.1 billion) and throughout the going concern
forecast period. Forecast covenant compliance is considered further
below.
Covenants
The Group's banking facility has two financial covenants being a
net debt to adjusted EBITDA (leverage) covenant and an interest
cover covenant, both of which are tested half yearly in June and
December. As a result of the demerger, the Group has renegotiated
its banking arrangements. No covenant testing was required at 30
June 2023. The leverage covenant will be tested from 31 December
2023 and the interest cover covenant will be tested from 30 June
2024. Covenant calculations are detailed in the glossary to these
Condensed Interim Financial Statements.
The financial covenants for the going concern period are as
follows:
30 June 31 December 30 June
2023 2023 2024
----------------------------- --------- ------------ --------
Net debt to adjusted EBITDA n/a 3.50x 3.50x
----------------------------- --------- ------------ --------
Interest cover n/a n/a 4.00x
----------------------------- --------- ------------ --------
Testing
The Group modelled two scenarios in its assessment of going
concern; a base case and a reasonably possible sensitised case.
The base case takes into account the estimated impact of a
continued recovery in the Aerospace end markets as well as other
operational and strategic factors throughout the going concern
period and has been monitored against the actual results and cash
generation in the period since 1 July 2023.
The reasonably possible sensitised case models more conservative
sales assumptions in the remaining period of 2023 and the relevant
period in 2024. However, given there is liquidity headroom of
GBP1.1 billion and the Group's leverage is 1.5x at 30 June 2023,
comfortably below future testing levels, no further sensitivity
detail is provided.
Under the reasonably possible sensitised case, no covenant is
breached at either of the forecast testing dates being 31 December
2023 and 30 June 2024, with the testing at 31 December 2024 also
favourable, and the Group does not require any additional sources
of finance following its refinancing in April 2023.
In addition to the reasonably possible sensitised case, a
'reverse stress test' has been prepared to consider the point at
which the covenants may be breached. This reverse stress test
indicates that a significant reduction in sales, beyond what is
considered reasonable, would be required in order to breach
covenants. In this remote situation, management could take further
mitigating actions to protect profits and conserve cash, such as
reducing capital expenditure to minimum maintenance levels.
Impairment assessment
Following the Group's demerger of GKN Automotive, GKN Powder
Metallurgy and GKN Hydrogen on 20 April 2023 the internal reporting
structure changed for the remaining GKN Aerospace business to show
an Engines segment and a Structures segment (see note 3). As a
consequence, the Aerospace group of CGUs was reorganised into an
Engines group of CGUs and Structures group of CGUs effective from
20 April 2023.
As a result of the change in the groups of CGUs structure, an
allocation of goodwill to the two new groups of CGUs has been
performed based on their valuation at 20 April 2023. Subsequently,
impairment testing was completed, dated 20 April 2023, based on the
old structure of one group of CGUs (Aerospace) and the new
structure of two groups of CGUs (Engines and Structures). No
impairment was identified in respect of any of the groups of
CGUs.
3. Segment information
Segment information is presented in accordance with IFRS 8:
"Operating segments" which requires operating segments to be
identified on the basis of internal reports about components of the
Group that are regularly reported to the Group's Chief Operating
Decision Maker ("CODM"), which has been deemed to be the Group's
Board, in order to allocate resources to the segments and assess
their performance.
Following the demerger of the Automotive, Powder Metallurgy and
Other Industrial segments during the period their results are
classified within discontinued operations and the comparative
results for 2022 have been restated accordingly. In addition, the
results of the Aerospace business are now viewed by the CODM as
separated into Engines and Structures. The incremental information
is provided below with comparative results for 2022 also
re-presented accordingly.
The operating segments are as follows:
Engines - An industry leading global tier one supplier to the
aerospace engines market, including structural engineered
components; parts repair; commercial and aftermarket contracts.
Structures - A multi-technology global tier one supplier of both
civil and defence air frames, including lightweight composite and
metallic structures; electrical distribution systems and
components.
In addition, there is a central cost centre which is also
reported to the Board. The central cost centre contains the Melrose
Group head office costs and charges related to the divisional
management long-term incentive plans.
Reportable segment results include items directly attributable
to a segment as well as those which can be allocated on a
reasonable basis. Inter-segment pricing is determined on an arm's
length basis, in a manner similar to transactions with third
parties.
The Group's geographical segments are determined by the location
of the Group's non-current assets and, for revenue, the location of
external customers. Inter-segment sales are not material and have
not been disclosed.
The following tables present the results and certain asset and
liability information regarding the Group's operating segments and
central cost centre for the six month period ended 30 June 2023 and
comparative periods.
a) Segment revenues
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Continuing operations GBPm GBPm GBPm
------------------------- ---------- ------------ -------------
Engines 608 484 1,035
Structures 1,025 880 1,919
------------------------- ---------- ------------ -------------
Revenue 1,633 1,364 2,954
(1) Revenue has been restated for discontinued operations (see
note 2) and the re-presentation of the Engines and Structures
segments.
b) Segment operating profit
6 months ended 30 June 2023
Engines Structures Corporate(1) Total
Continuing operations GBPm GBPm GBPm GBPm
------------------------------------------ -------- ----------- ------------- --------
Adjusted operating profit/(loss) 149 26 (16) 159
Items not included in adjusted operating
profit (2) :
Amortisation of intangible assets
acquired in business combinations (68) (63) - (131)
Restructuring costs (12) (36) (1) (49)
Melrose equity-settled compensation
scheme charges - - (26) (26)
Net release and changes in discount
rates of fair value items - 1 - 1
Movement in derivatives and associated
financial assets and liabilities 3 (4) 29 28
Operating profit/(loss) 72 (76) (14) (18)
Finance costs (45)
Finance income 1
Loss before tax (62)
Tax 22
Loss after tax for the period from
continuing operations (40)
(1) C orporate adjusted operating loss of GBP16 million includes
a GBP1 million charge in respect of divisional management long-term
incentive plans.
(2) For further details on adjusting items, refer to note 4.
3. Segment information (continued)
6 months ended 30 June 2022 - restated(1) Corporate
Engines Structures (2) Total
Continuing operations GBPm GBPm GBPm GBPm
------------------------------------------- -------- ----------- ---------- ------
Adjusted operating profit/(loss) 77 (10) (22) 45
Items not included in adjusted operating
profit (3) :
Movement in derivatives and associated
financial assets and liabilities 9 4 (163) (150)
Amortisation of intangible assets
acquired in business combinations (64) (62) - (126)
Restructuring costs (10) (42) (1) (53)
Melrose equity-settled compensation
scheme charges - - (8) (8)
Acquisition and disposal related
(losses)/gains (5) - 6 1
Net release and changes in discount
rates of fair value items 1 9 - 10
Operating profit/(loss) 8 (101) (188) (281)
Finance costs (33)
Loss before tax (314)
Tax 70
Loss after tax for the period from
continuing operations (244)
(1) Operating profit has been restated for discontinued
operations (see note 2) and the re-presentation of the Engines and
Structures segments.
(2) C orporate adjusted operating loss of GBP22 million includes
a GBP3 million charge in respect of divisional management long-term
incentive plans.
(3) For further details on adjusting items, refer to note 4.
Year ended 31 December 2022 - restated(1) Corporate
Engines Structures (2) Total
Continuing operations GBPm GBPm GBPm GBPm
------------------------------------------- -------- ----------- ---------- ------
Adjusted operating profit/(loss) 162 24 (39) 147
Items not included in adjusted operating
profit (3) :
Amortisation of intangible assets
acquired in business combinations (135) (125) - (260)
Restructuring costs (25) (63) (2) (90)
Movement in derivatives and associated
financial assets and liabilities 20 1 (100) (79)
Melrose equity-settled compensation
scheme charges - - (15) (15)
Net release and changes in discount
rates of fair value items 3 9 - 12
Acquisition and disposal related
(losses)/gains (5) - 20 15
Operating profit/(loss) 20 (154) (136) (270)
Finance costs (83)
Finance income 25
Loss before tax (328)
Tax 99
Loss after tax for the year from
continuing operations (229)
(1) Operating profit has been restated for discontinued
operations (see note 2) and the re-presentation of the Engines and
Structures segments.
(2) C orporate adjusted operating loss of GBP39 million includes
a GBP3 million charge in respect of divisional management long-term
incentive plans.
(3) For further details on adjusting items, refer to note 4.
c) Segment total assets and liabilities
Total assets Total liabilities
--------------------------------------- ---------------------------------------
Restated(1) Restated(1) Restated(1) Restated(1)
30 June 30 June 31 December 30 June 30 June 31 December
2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ------------ ------------- ---------- ------------ -------------
Engines 3,926 3,951 3,798 1,449 956 1,202
Structures 2,596 2,915 2,894 1,115 1,531 1,315
Corporate 555 496 761 856 2,173 1,838
-------------- ---------- ------------ ------------- ---------- ------------ -------------
Continuing
operations 7,077 7,362 7,453 3,420 4,660 4,355
-------------- ---------- ------------ ------------- ---------- ------------ -------------
Discontinued
operations - 7,408 6,534 - 2,784 2,464
-------------- ---------- ------------ ------------- ---------- ------------ -------------
Total 7,077 14,770 13,987 3,420 7,444 6,819
(1) Total assets and liabilities have been restated for
discontinued operations (see note 2) and the re-presentation of the
Engines and Structures segments.
3. Segment information (continued)
d) Segment capital expenditure and depreciation
Capital expenditure Depreciation of Depreciation of
(1) owned assets (1) leased assets
---------------------------------------- ---------------------------------------- ----------------------------------------
Restated(2) Restated(2) Restated(2) Restated(2)
6 months Restated(2) 6 months Restated(2) 6 months
ended 6 months Year ended 6 months Year ended 6 months Year
ended ended ended ended ended ended
30 30 30
June 30 June 31 December June 30 June 31 December June 30 June 31 December
2023 2022 2022 2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ------------ ------------- ----------- ------------ ------------- ----------- ------------ -------------
Engines 20 14 38 21 22 46 3 3 7
Structures 22 13 39 38 39 77 8 8 14
Corporate - - - - - - 1 1 1
-------------- ----------- ------------ ------------- ----------- ------------ ------------- ----------- ------------ -------------
Continuing
operations 42 27 77 59 61 123 12 12 22
-------------- ----------- ------------ ------------- ----------- ------------ ------------- ----------- ------------ -------------
Discontinued
operations 51 84 231 43 120 238 6 11 25
-------------- ----------- ------------ ------------- ----------- ------------ ------------- ----------- ------------ -------------
Total 93 111 308 102 181 361 18 23 47
(1) Includes computer software and development costs. Capital
expenditure excludes lease additions.
(2) Capital expenditure and depreciation have been restated for
discontinued operations (see note 2) and the re-presentation of the
Engines and Structures segments.
e) Geographical information
The Group operates in various geographical areas around the
world. The parent company's country of domicile is the UK and the
Group's revenues and non-current assets in the rest of Europe and
North America are also considered to be material.
The Group's revenue from external customers and information
about specific segment assets (non-current assets excluding
deferred tax assets, non-current derivative financial assets,
non-current other receivables and retirement benefit surplus), by
geographical location are detailed below:
Revenue(1) from external
customers Segment assets
---------------------------------------- --------------------------------------
Restated(2) Restated(2)
6 months 6 months
ended ended Year ended Restated(2)
30 June 30 June 31 December 30 June 30 June Restated(2)
31 December
2023 2022 2022 2023 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------- ------------ -------------- --------- ------------ -------------
UK 282 232 509 1,027 1,098 1,042
Rest of Europe 251 185 408 2,318 2,538 2,501
North America 1,062 918 1,971 962 1,069 1,038
Other 38 29 66 26 25 28
---------------- ---------- ------------ -------------- --------- ------------ -------------
Continuing
operations 1,633 1,364 2,954 4,333 4,730 4,609
---------------- ---------- ------------ -------------- --------- ------------ -------------
Discontinued
operations 1,582 2,362 4,715 - 5,353 5,333
---------------- ---------- ------------ -------------- --------- ------------ -------------
Total 3,215 3,726 7,669 4,333 10,083 9,942
(1) Revenue is presented by destination.
(2) Revenue and segment assets have been restated for
discontinued operations (see note 2).
4. Reconciliation of adjusted profit measures
As described in note 2, adjusted profit measures are an
alternative performance measure used by the Board to monitor the
performance of the Group.
a) Operating profit
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Continuing operations Notes GBPm GBPm GBPm
--------------------------------------- ------- ---------- ----------- -------------
Operating loss (18) (281) (270)
Amortisation of intangible assets
acquired in business combinations a 131 126 260
Restructuring costs b 49 53 90
Melrose equity-settled compensation
scheme charges c 26 8 15
Movement in derivatives and associated
financial assets and liabilities d (28) 150 79
Net release and changes in discount
rates of fair value items e (1) (10) (12)
Acquisition and disposal related
gains f - (1) (15)
Total adjustments to operating
loss 177 326 417
Adjusted operating profit 159 45 147
(1) Results have been restated for discontinued operations (see
note 2) .
4. Reconciliation of adjusted profit measures (continued)
a. The amortisation charge on intangible assets acquired in
business combinations of GBP131 million (2022: GBP126 million) is
excluded from adjusted results due to its non-trading nature and to
enable comparison with companies that grow organically. However,
where intangible assets are trading in nature, such as computer
software and development costs, the amortisation is not excluded
from adjusted results.
b. Costs associated with significant restructuring projects
totalled GBP49 million (2022: GBP53 million). These are shown as
adjusting items due to their size and non-trading nature.
There are three significant ongoing multi-year restructuring
programmes, impacting a number of sites across the Engines and
Structures divisions, including European footprint consolidations
which commenced in 2021, and significant restructuring programmes
in North America which commenced in 2020. These programmes incurred
a combined charge of GBP40 million in the six months ended 30 June
2023. Since commencement, the cumulative charge on these three
restructuring programmes to 30 June 2023 has been GBP195 million
(31 December 2022: GBP155 million).
As at 30 June 2023, these projects on average are over 90%
complete and are expected to conclude within the next 12 months. In
addition to the remaining charges to be incurred on these projects,
GBP40 million is included in restructuring provisions at 30 June
2023 to be settled in cash over the next two years.
c. The charge for the Melrose equity-settled compensation scheme
of GBP26 million (2022: GBP8 million), which includes an accrual
for employer's tax payable of GBP18 million (2022: GBPnil), is
excluded from adjusted results due to its size and volatility. The
shares that would be issued, based on the Scheme's current value at
the end of the reporting period, are included in the calculation of
the adjusted diluted earnings per share, which the Board considers
to be a key measure of performance.
d. Includes movements in the fair value of derivative financial
instruments (primarily forward foreign currency exchange
contracts), where hedge accounting is not applied, along with
foreign exchange movements on the associated financial assets and
liabilities, entered into within the businesses to mitigate the
potential volatility of future cash flows on long-term foreign
currency customer and supplier contracts. This totalled a credit of
GBP28 million (2022: charge of GBP150 million) and is shown as an
adjusting item because of its volatility and size.
e. Certain items previously recorded as fair value items on
acquisitions, have been resolved for more favourable amounts than
first anticipated. The net release of fair value items recognised
on acquisitions in the period of GBP1 million (2022: GBP10 million)
is shown as an adjusting item to avoid positively distorting
adjusted results.
f. Acquisition and disposal related net gains were GBPnil (2022:
GBP1 million) and are excluded from adjusted results due to their
non-trading nature and volatility.
b) Profit before tax
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Continuing operations Notes GBPm GBPm GBPm
------------------------------------- ------- ---------- ----------- -------------
Loss before tax (62) (314) (328)
Adjustments to operating loss
per above 177 326 417
Finance costs on demerger settled
net debt g 17 - -
Accelerated unamortised debt h 2 - -
issue costs
Fair value changes on cross-currency
swaps i - (3) (3)
Settlement of bonds j - - (24)
Total adjustments to loss before
tax 196 323 390
Adjusted profit before tax 134 9 62
(1) Results have been restated for discontinued operations (see
note 2).
g. Finance costs in respect of the proportion of the Group's net
debt strategically allocated to a demerger group of businesses at
the start of the period and subsequently settled on demerger. These
are excluded from adjusted results to ensure the finance costs of
the continuing Group are appropriately shown alongside the trading
performance of the continuing businesses.
h. Following the demerger of the GKN Automotive, GKN Powder
Metallurgy and GKN Hydrogen businesses, the existing bank
facilities at that time were repaid and all unamortised bank fees
were written off. This is shown as an adjusting item due to its
non-trading nature.
i. The fair value changes on cross-currency swaps relating to
cost of hedging which are not deferred in equity, are shown as an
adjusting item because of their volatility and non-trading
nature.
4. Reconciliation of adjusted profit measures (continued)
j. During the prior year, the Group undertook a tender to buy
back the 2032 GBP300 million bond. There were GBP170 million of
bonds repurchased, on which a gain of GBP24 million was realised.
This was shown as an adjusting item due to its non-trading
nature.
c) Profit after tax
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Continuing operations Note GBPm GBPm GBPm
---------------------------------------- ----- ------------------- -------------------- -------------
Loss after tax (40) (244) (229)
Adjustments to loss before tax
per above 196 323 390
Tax effect of adjustments to
loss before tax 5 (50) (76) (105)
Tax effect of significant restructuring - - 2
Total adjustments to loss after
tax 146 247 287
Adjusted profit after tax 106 3 58
(1) Results have been restated for discontinued operations (see
note 2).
5 . Tax
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Analysis of the (credit)/charge in
the period: GBPm GBPm GBPm
-------------------------------------------- --------- ----------- -------------
Continuing operations
Current tax 12 7 12
Deferred tax (34) (77) (111)
-------------------------------------------- --------- ----------- -------------
Total tax credit from continuing operations (22) (70) (99)
Discontinued operations
Current tax 39 22 58
Deferred tax (11) (33) (38)
-------------------------------------------- --------- ----------- -------------
Total tax charge/(credit) from discontinued
operations 28 (11) 20
Total tax charge/(credit) 6 (81) (79)
(1) Tax has been restated for discontinued operations (see note
2).
Continuing operations:
The effective tax rate in respect of adjusted profit before tax
for the period is 20.9% (2022: 66.7%). Adjusted tax has been
calculated by applying the expected tax rate to the adjusted profit
before tax of GBP134 million (2022: GBP9 million), giving an
adjusted tax charge of GBP28 million (2022: GBP6 million).
The adjusted tax charge of GBP28 million (2022: GBP6 million)
excludes a tax credit on adjusting items of GBP50 million (2022:
GBP76 million). This represents a deferred tax credit on intangible
asset amortisation of GBP30 million (2022: GBP30 million) and a tax
credit on other adjusting items of GBP20 million (2022: GBP46
million).
Other comprehensive income and changes in equity:
In addition to the amount included in the Income Statement, a
credit of GBP17 million (2022: charge of GBP66 million) has been
recognised directly in the Statement of Comprehensive Income. This
represents a tax credit of GBP22 million (2022: charge of GBP72
million) in respect of the remeasurement of retirement benefit
obligations and a tax charge of GBP5 million (2022: credit of GBP6
million) in respect of movements on hedge relationships and
translation differences. There is also a tax credit of GBP41
million (2022: GBPnil) recognised directly in the Statement of
Changes in Equity in respect of deferred tax on equity-settled
share-based payments.
6. Earnings per share
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Earnings attributable to owners of
the parent GBPm GBPm GBPm
-------------------------------------------- --------- ----------- -------------
Earnings for basis of earnings per share (1,060) (360) (308)
Less: loss for the period from discontinued
operations (note 8) 1,020 116 79
-------------------------------------------- --------- ----------- -------------
Earnings for basis of earnings per
share from continuing operations (40) (244) (229)
(1) Earnings has been restated for discontinued operations (see
note 2).
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Number Number Number
--------------------------------------------- --------- ----------- -------------
Weighted average number of ordinary
shares for the purposes of basic earnings
per share (million)(1) 1,351 1,455 1,406
Further shares for the purposes of diluted
earnings per share (million) 53 - -
Weighted average number of ordinary
shares for the purposes of diluted earnings
per share (million) 1,404 1,455 1,406
(1) Adjusted to include the effects of the one for three share
consolidation (see note 2).
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Earnings per share pence pence pence
-------------------------------------------- ---------- ----------- --------------
Basic earnings per share
From continuing and discontinued operations (78.5) (24.7) (21.9)
From continuing operations (3.0) (16.8) (16.3)
From discontinued operations (75.5) (7.9) (5.6)
-------------------------------------------- ---------- ----------- --------------
Diluted earnings per share
From continuing and discontinued operations (78.5) (24.7) (21.9)
From continuing operations (3.0) (16.8) (16.3)
From discontinued operations (75.5) (7.9) (5.6)
-------------------------------------------- ---------- ----------- --------------
(1) Earnings per share has been restated for discontinued
operations and to include the effects of the one for three share
consolidation (see note 2).
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Adjusted earnings from continuing operations GBPm GBPm GBPm
----------------------------------------------- ---------- ----------- -------------
Adjusted earnings for the basis of adjusted
earnings per share 106 3 58
(1) Earnings has been restated for discontinued operations (see
note 2).
Adjusted earnings per share from continuing
operations
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
pence pence pence
-------------------------------------------- ---------- ----------- -------------
Adjusted basic earnings per share 7.8 0.2 4.1
Adjusted diluted earnings per share 7.5 0.2 4.1
(1) Earnings per share has been restated for discontinued
operations and to include the effects of the one for three share
consolidation (see note 2).
7. Dividends
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
---------------------------------------------- -------- -------- ------------
Second interim dividend for the year ended
31 December 2022 of 1.5p (4.5p)(1) 61 - -
Interim dividend for the year ended 31
December 2022 of 0.825p (2.475p)(1) - - 33
Final dividend for the year ended 31 December
2021 of 1.0p (3.0p)(1) - 44 44
Total dividends paid 61 44 77
(1) Adjusted to include the effects of the one for three share
consolidation (see note 2).
An interim dividend of 1.5 pence per ordinary share is declared
by the Board, totalling GBP20 million.
On 9 June 2022, the Group commenced a GBP500 million share
buyback programme. At 30 June 2022, GBP119 million had been paid to
purchase 112,595,520 shares. The programme concluded on 1 August
2022 with 318,003,512 shares re-purchased and subsequently
cancelled, at a total cost, including fees, of GBP504 million.
8. Discontinued operations and assets held for sale
On 30 March 2023, shareholders approved the demerger of the GKN
Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses
through the flotation of Dowlais Group PLC ("Dowlais") on the
London Stock Exchange. As a consequence, the assets and liabilities
of Dowlais were reclassified as held for sale in accordance with
IFRS 5: "Non-current Assets Held for Sale and Discontinued
Operations".
On 20 April 2023, the Group completed the demerger of Dowlais.
The results of the Dowlais businesses have been classified within
discontinued operations for all periods presented. In addition,
discontinued operations for 2022 include the results of the
Ergotron business which was disposed of on 6 July 2022.
The demerger distribution of GBP1,973 million has been measured
at fair value in accordance with IFRIC 17: "Distributions of
Non-cash Assets to Owners" and represents the number of Dowlais
Group PLC shares issued to equity holders of 1,351,475,321
multiplied by the opening traded share price on 20 April 2023 of
146 pence. It was considered that the opening traded share price
provided a fair representation of the value of the demerger
distribution as it was the share price closest to the time of
demerger. If a different share price had been used, for example a
closing price on day one or first week of trading average, the
demerger distribution value would have been impacted. For each 1
pence change in the share price, the demerger distribution would
have been impacted by GBP14 million. Total demerger costs of GBP64
million, of which GBP6 million was recognised in the year ended 31
December 2022, were incurred before a contribution of GBP19 million
in the form of one percent of Dowlais Group PLC issued equity which
has been retained by the Group. The Melrose Automotive Share Plan
has also been taken into account within the loss on disposal
calculation, but its net impact was immaterial.
Financial performance of discontinued operations:
Restated(1)
6 months 6 months
ended ended Restated(1)
30 June 30 June Year ended
31 December
2023 2022 2022
GBPm GBPm GBPm
--------------------------------------------- ----------------------------- ------------------------- -------------
Revenue 1,582 2,362 4,715
Operating costs (1,550) (2,478) (4,740)
--------------------------------------------- ----------------------------- ------------------------- -------------
Operating profit/(loss) 32 (116) (25)
Net finance costs (7) (8) (13)
--------------------------------------------- ----------------------------- ------------------------- -------------
Profit/(loss) before tax 25 (124) (38)
Tax (28) 11 (20)
--------------------------------------------- ----------------------------- ------------------------- -------------
Loss after tax (3) (113) (58)
Loss on disposal of net assets of
discontinued
operations, net of recycled cumulative
translation differences but before
transaction costs (978) - (16)
Demerger transaction costs(2) (39) - -
Loss for the period from discontinued
operations (1,020) (113) (74)
Attributable to:
Owners of the parent (1,020) (116) (79)
Non-controlling interests - 3 5
--------------------------------------------- ----------------------------- ------------------------- -------------
(1,020) (113) (74)
(1) Restated for operations discontinued in the period (see note
2).
(2) Demerger transaction costs of GBP39 million comprise total
cash costs incurred in the period of GBP58 million, offset by a
non-cash contribution from Dowlais of GBP19 million.
Cash flow information relating to discontinued operations is
shown in note 12.
8. Discontinued operations and assets held for sale (continued )
Classes of assets and liabilities disposed of during the period
were as follows:
GBPm
-------------------------------------------------------- --------
Goodwill and other intangible assets 2,989
Property, plant and equipment 1,789
Current and deferred tax 127
Equity accounted investments 417
Inventories 515
Trade and other receivables 753
Derivative financial assets 45
Cash and cash equivalents 320
-------------------------------------------------------- --------
Total assets 6,955
Trade and other payables 1,232
Interest-bearing loans and borrowings(1) 1,205
Lease obligations 158
Current and deferred tax 435
Retirement benefit obligations 439
Provisions 344
Total liabilities 3,813
Net assets 3,142
Demerger distribution fair value 1,973
Derecognition of non-controlling interests on demerger 39
Demerger costs incurred (39)
Cumulative translation difference recycled on demerger 152
-------------------------------------------------------- --------
Loss on disposal of businesses (1,017)
(1) Prior to the demerger the interest-bearing loans and
borrowings were inter-company. On demerger, these were subsequently
settled.
9. Provisions
Property Warranty
Loss-making related Environmental related
contracts costs and litigation costs Restructuring Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- -------- --------------- -------- ------------- -------- ---------
At 1 January
2023 108 28 119 200 83 73 611
Utilised (16) - (3) (7) (58) - (84)
Charge to operating
profit(1) - - 6 15 48 54 123
Release to operating
profit(2) (1) - (2) (12) (1) - (16)
Disposal of businesses(3) (41) (5) (63) (154) (18) (63) (344)
Exchange adjustments (2) (1) (4) (4) (3) (1) (15)
-------------------------- ----------- -------- --------------- -------- ------------- -------- ---------
At 30 June 2023 48 22 53 38 51 63 275
Current 20 3 43 25 28 57 176
Non-current 28 19 10 13 23 6 99
-------------------------- ----------- -------- --------------- -------- ------------- -------- ---------
48 22 53 38 51 63 275
(1) Includes GBP99 million of adjusting items and GBP24 million
recognised in adjusted operating profit.
(2) Includes GBP2 million of adjusting items and GBP14 million
recognised in adjusted operating profit.
(3) Relates to the demerger of the GKN Automotive, GKN Powder
Metallurgy and GKN Hydrogen businesses (see note 8).
Provisions for loss-making contracts are considered to exist
where the Group has a contract under which the unavoidable costs of
meeting the obligations exceed the economic benefits expected to be
received under it. This obligation has been discounted and will be
utilised over the period of the respective contracts, which is up
to 15 years.
The provision for property related costs represents dilapidation
costs for ongoing leases and is expected to result in cash
expenditure over the next eight years.
Environmental provisions relate to the estimated remediation
costs of pollution, soil and groundwater contamination at certain
sites and at 30 June 2023 amounted to GBP7 million (31 December
2022: GBP26 million). At 30 June 2023, litigation provisions
amounting to GBP46 million (31 December 2022: GBP93 million) relate
to estimated future costs and settlements in relation to legal
claims and associated insurance obligations. Due to their nature,
it is not possible to predict precisely when these provisions will
be utilised.
Provisions for the expected cost of warranty obligations under
local sale of goods legislation are recognised at the date of sale
of the relevant products and subsequently updated for changes in
estimates as necessary. Warranty terms are, on average, between one
and five years.
9. Provisions (continued)
Restructuring provisions relate to committed costs in respect of
restructuring programmes (as described in note 4), usually
resulting in cash spend within one to two years.
Other provisions include long-term incentive plans for
divisional senior management and the employer tax on equity-settled
incentive schemes which are expected to result in cash expenditure
over the next two years.
Where appropriate, provisions have been discounted.
10. Financial instruments
The table below sets out the Group's accounting classification
of each category of financial assets and liabilities and their fair
values as at 30 June 2023, 30 June 2022 and 31 December 2022:
Current Non-current Total
GBPm GBPm GBPm
--------------------------------------- -------- ------------------- --------
30 June 2023
Financial assets
Classified as amortised cost:
Cash and cash equivalents 110 - 110
Net trade receivables 490 - 490
Classified as fair value:
Investments - 78 78
Derivative financial assets:
Foreign currency forward contracts 8 11 19
Interest rate swaps - 8 8
Embedded derivatives 2 8 10
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (148) (517) (665)
Government refundable advances (8) (47) (55)
Lease obligations (38) (151) (189)
Other financial liabilities (824) (20) (844)
Classified as fair value:
Derivative financial liabilities:
Foreign currency forward contracts (56) (111) (167)
Embedded derivatives (1) (4) (5)
30 June 2022
Financial assets
Classified as amortised cost:
Cash and cash equivalents 293 - 293
Net trade receivables 971 - 971
Classified as fair value:
Investments - 68 68
Derivative financial assets:
Foreign currency forward contracts 29 22 51
Embedded derivatives 2 10 12
Assets classified as held for
sale 641 - 641
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (548) (973) (1,521)
Government refundable advances (5) (54) (59)
Lease obligations (56) (311) (367)
Other financial liabilities (2,203) (44) (2,247)
Classified as fair value:
Derivative financial liabilities:
Foreign currency forward contracts (120) (166) (286)
Interest rate swaps (5) - (5)
Cross-currency swaps (98) - (98)
Embedded derivatives - (5) (5)
Liabilities associated with assets
held for sale (97) - (97)
31 December 2022
Financial assets
Classified as amortised cost:
Cash and cash equivalents 355 - 355
Net trade receivables 969 - 969
Classified as fair value:
Investments - 62 62
Derivative financial assets:
Foreign currency forward contracts 35 27 62
Embedded derivatives 3 9 12
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (63) (1,433) (1,496)
Government refundable advances (7) (52) (59)
Lease obligations (60) (306) (366)
Other financial liabilities (1,911) (48) (1,959)
Classified as fair value:
Derivative financial liabilities:
Foreign currency forward contracts (82) (136) (218)
Interest rate swaps (3) - (3)
Embedded derivatives (1) (5) (6)
--------------------------------------- -------- ------------------- --------
The fair value of the derivative financial instruments, other
than embedded derivatives, is derived from inputs other than quoted
prices that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices)
and they are therefore categorised within level 2 of the fair value
hierarchy set out in IFRS 13: "Fair value measurement". The
embedded derivatives are classified as level 3 fair value under the
IFRS 13 fair value hierarchy. The Group's policy is to recognise
transfers into and out of the different fair value hierarchy levels
at the date of the event or change in circumstances that caused the
transfer to occur. There have been no transfers between levels in
the period.
11. Retirement benefit obligations
The Group sponsors defined benefit plans for qualifying
employees of certain subsidiaries. The funded defined benefit plans
are administered by separate funds that are legally separated from
the Group. The Trustees of the funds are required by law to act in
the interest of the fund and of all relevant stakeholders in the
plans. The Trustees of the pension funds are responsible for the
investment policy with regard to the assets of the fund.
During the period, GBP439 million of net retirement benefit
obligations were disposed with the demerger of the GKN Automotive,
GKN Powder Metallurgy and GKN Hydrogen businesses (see note 8).
Also during the period, a buy-in policy was purchased for GBP45
million fully insuring pensioner members who were in the GKN Group
Pension Scheme Number 4. Following the demerger of the GKN
Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses, the
most significant defined benefit pension plans in the Group at 30
June 2023 were:
GKN Group Pension Schemes (Numbers 1 and 4)
The GKN Group Pension Schemes (Numbers 1 and 4) are funded
plans, closed to new members and were closed to future accrual in
2017. The valuation of the plans was based on a full actuarial
valuation as of 5 April 2022, updated to 30 June 2023 by
independent actuaries.
GKN US Consolidated Pension Plan
The GKN US Consolidated Pension Plan is a funded plan, closed to
new members and closed to future accrual. The US Pension Plan
valuation was based on a full actuarial valuation as of 1 January
2023, updated to 30 June 2023 by independent actuaries.
The cost of the Group's defined benefit plans is determined in
accordance with IAS 19 (revised): "Employee benefits" using the
advice of independent professionally qualified actuaries on the
basis of formal actuarial valuations and using the projected unit
credit method. In line with normal practice, these valuations are
undertaken triennially in the UK and annually in the US.
The amount recognised in the Balance Sheet in respect of defined
benefit plans was as follows:
European
UK plans(1) US plans plans Other plans Total
30 June 2023 GBPm GBPm GBPm GBPm GBPm
------------------- ------------- ---------- ---------- ------------- -------
Plan assets 1,009 46 - - 1,055
Plan liabilities (1,064) (71) (9) - (1,144)
Net liabilities (55) (25) (9) - (89)
Analysed as:
Retirement benefit -
surplus
Retirement benefit
obligations (89)
Net liabilities (89)
European
UK plans(1) US plans plans Other plans Total
30 June 2022 GBPm GBPm GBPm GBPm GBPm
------------- ---------- ---------- -------------
Plan assets 2,146 174 23 29 2,372
Plan liabilities (1,861) (262) (435) (36) (2,594)
Net assets/(liabilities) 285 (88) (412) (7) (222)
Analysed as:
Retirement benefit surplus 295
Retirement benefit obligations (517)
Net liabilities (222)
European
UK plans(1) US plans plans Other plans Total
31 December 2022 GBPm GBPm GBPm GBPm GBPm
------------- ---------- ---------- -------------
Plan assets 1,779 120 20 22 1,941
Plan liabilities (1,755) (202) (443) (29) (2,429)
Net assets/(liabilities) 24 (82) (423) (7) (488)
Analysed as:
Retirement benefit surplus 93
Retirement benefit obligations (581)
Net liabilities (488)
(1) Includes a liability in respect of the GKN post-employment
medical plans of GBP4 million (30 June 2022: GBP7 million, 31
December 2022: GBP6 million).
11. Retirement benefit obligations (continued)
Valuations of material plans have been updated at 30 June 2023
by independent actuaries to reflect updated assumptions regarding
discount rates, inflation rates and asset values. The major
assumptions were as follows:
Rate of
increase
of pensions
in payment Discount rate Price inflation
% p.a. % % (RPI/CPI)
30 June 2023
GKN UK - Group Pension Schemes
(Numbers 1 and 4) 2.7 5.2 3.2/2.7
GKN US plans n/a 4.9 n/a
30 June 2022
GKN UK - Group Pension Schemes
(Numbers 1 - 4) 2.6 3.8 3.1/2.6
GKN US plans n/a 4.5 n/a
GKN Europe plans 2.3 3.2 2.3/2.3
31 December 2022
GKN UK - Group Pension Schemes
(Numbers 1 - 4) 2.7 4.8 3.2/2.7
GKN US plans n/a 5.0 n/a
GKN Europe plans 2.6 3.7 2.6/2.6
In addition, the defined benefit plan assets and liabilities
have been updated to reflect the contributions made to the defined
benefit plans and the benefits earned during the period to 30 June
2023.
12. Notes to the Cash Flow Statement
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Continuing operations GBPm GBPm GBPm
Reconciliation of operating loss to
net cash used in operating activities
Operating loss (18) (281) (270)
Adjusting items (note 4) 177 326 417
Adjusted operating profit 159 45 147
Adjustments for:
Depreciation of property, plant and
equipment 49 52 104
Amortisation of computer software and
development costs 22 21 41
Restructuring costs paid and movements
in provisions (72) (20) (60)
Defined benefit pension contributions
paid(2) (47) (2) (23)
Change in inventories (53) (71) (88)
Change in receivables (155) (96) (172)
Change in payables 39 49 112
Acquisition and disposal costs (46) (2) (10)
Tax paid (15) (8) (8)
Interest paid on loans and borrowings(3) (51) (34) (76)
Interest paid on lease obligations (2) (3) (6)
Net cash used in operating activities (172) (69) (39)
(1) Restated for discontinued operations (see note 2).
(2) The period ended 30 June 2023 includes GBP45 million for the
purchase of a buy-in policy for GKN Group Pension Scheme Number 4
(see note 11).
(3) The period ended 30 June 2023 includes GBP17 million of
finance costs on the proportion of the Group's net debt
strategically allocated to demerged businesses at the start of the
period and settled on demerger (see note 4b).
30 June 30 June 31 December
Reconciliation of cash and cash equivalents, 2023 2022 2022
net of bank overdrafts GBPm GBPm GBPm
--------
Cash and cash equivalents per Balance
Sheet 110 293 355
Bank overdrafts included within current
interest-bearing loans and borrowings (90) (96) (63)
Cash and cash equivalents classified
as held for sale - 26 -
--------
Cash and cash equivalents, net of
bank overdrafts per Statement of Cash
Flows 20 223 292
12. Notes to the Cash Flow Statement (continued)
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Cash flow from discontinued operations GBPm GBPm GBPm
Net cash from discontinued operations 54 107 377
Defined benefit pension contributions
paid (5) (9) (36)
Tax paid (8) (54) (81)
Interest paid on lease obligations (3) (3) (6)
Interest paid on loans and borrowings (2) (2) (11)
Net cash from operating activities
from discontinued operations 36 39 243
Interest received - - 3
Dividends received from equity accounted
investments - 29 59
Purchase of property, plant and equipment (62) (78) (203)
Proceeds from disposal of property,
plant and equipment - 21 21
Purchase of computer software and capitalised
development costs (5) (7) (20)
Net cash used in investing activities
from discontinued operations (67) (35) (140)
Repayment of principal under lease obligations (6) (11) (23)
Net cash used in financing activities
from discontinued operations (6) (11) (23)
(1) Restated for discontinued operations (see note 2).
Net debt reconciliation
Net debt consists of interest-bearing loans and borrowings
(excluding any acquisition related fair value adjustments),
cross-currency swaps and cash and cash equivalents. Currency
denominated balances within net debt are translated to Sterling at
swapped rates where hedged by cross-currency swaps.
Net debt is an alternative performance measure as it is not
defined in IFRS. The most directly comparable IFRS measure is the
aggregate of interest-bearing loans and borrowings (current and
non-current) and cash and cash equivalents.
A reconciliation from the most directly comparable IFRS measure
to net debt is given below.
30 June 30 June 31 December
2023 2022 2022
GBPm GBPm GBPm
Interest-bearing loans and borrowings
- due within one year (148) (548) (63)
Interest-bearing loans and borrowings
- due after one year (517) (973) (1,433)
External debt (665) (1,521) (1,496)
Less:
Cash and cash equivalents 110 293 355
Cash and cash equivalents included within
assets classified as held for sale - 26 -
(555) (1,202) (1,141)
Adjustments:
Impact of cross-currency swaps - (98) -
Non-cash acquisition fair value adjustments 2 6 2
Net debt (553) (1,294) (1,139)
The table below shows the key components of the movement in net
debt:
At
At Other Effect 30
31 December Cash Acquisitions non-cash of foreign June
2022 flow and disposals movements exchange 2023
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- ------ --------------- ---------------- --------------- ------
External debt (excluding
bank overdrafts) (1,433) (393) 1,205 7 39 (575)
Non-cash acquisition
fair value adjustments 2 - - - - 2
---------------------------- ------------- ------ --------------- ---------------- --------------- ------
(1,431) (393) 1,205 7 39 (573)
Cash and cash equivalents,
net of bank overdrafts 292 104 (366) - (10) 20
---------------------------- ------------- ------ --------------- ---------------- --------------- ------
Net debt (1,139) (289) 839 7 29 (553)
13. Lease obligations
Amounts payable under lease obligations:
30 June 30 June 31 December
2023 2022 2022
Minimum lease payments GBPm GBPm GBPm
Amounts payable:
Within one year 42 68 69
After one year but within five years 96 170 166
Over five years 78 198 209
Less: future finance charges (27) (69) (78)
Present value of lease obligations 189 367 366
Analysed as:
Amounts due for settlement within one
year 38 56 60
Amounts due for settlement after one
year 151 311 306
Present value of lease obligations 189 367 366
During the period GBP158 million of lease obligations were
disposed with the demerger of the GKN Automotive, GKN Powder
Metallurgy and GKN Hydrogen businesses (see note 8).
It is the Group's policy to lease certain of its property, plant
and equipment. The average lease term is ten years. Interest rates
are fixed at the contract date.
Glossary
Alternative Performance Measures ("APMs")
In accordance with the Guidelines on APMs issued by the European
Securities and Markets Authority ("ESMA"), additional information
is provided on the APMs used by the Group below.
In the reporting of financial information, the Group uses
certain measures that are not required under IFRS. These additional
measures (commonly referred to as APMs) provide additional
information on the performance of the business and trends to
stakeholders. These measures are consistent with those used
internally, and are considered important to understanding the
financial performance and financial health of the Group. APMs are
considered to be an important measure to monitor how the businesses
are performing because this provides a meaningful comparison of how
the business is managed and measured on a day-to-day basis and
achieves consistency and comparability between reporting
periods.
These APMs may not be directly comparable with similarly titled
measures reported by other companies and they are not intended to
be a substitute for, or superior to, IFRS measures. All Income
Statement and Cash Flow measures are provided for continuing
operations unless otherwise stated and comparable information has
been restated(1) .
Closest Reconciling
equivalent items to
statutory statutory
APM measure measure Definition and purpose
Income Statement Measures
Adjusting None Adjusting Those items which the Group excludes
items items (note from its adjusted profit metrics in
4) order to present a further measure
of the Group's performance.
These include items which are significant
in size or volatility or by nature
are non-trading or non-recurring and
any item released to the Income Statement
that was previously a fair value item
booked on an acquisition.
This provides a meaningful comparison
of how the business is managed and
measured on a day-to-day basis and
provides consistency and comparability
between reporting periods.
Adjusted Operating Adjusting The Group uses adjusted profit measures
operating loss(2) items (note to provide a useful and more comparable
profit 4) measure of the ongoing performance
of the Group. Adjusted measures are
reconciled to statutory measures by
removing adjusting items, the nature
of which are disclosed above and further
detailed in note 4.
Restated(1)
6 months 6 months Restated(1)
ended ended Year ended
30 June 30 June 31 December
2023 2022 2022
Adjusted operating GBPm GBPm GBPm
profit
------------------------------------------
Operating loss (18) (281) (270)
Adjusting items
to operating
loss (note 4) 177 326 417
------------------------------------------
Adjusted operating
profit 159 45 147
Adjusted Operating Adjusting Adjusted operating margin represents
operating margin(3) items (note Adjusted operating profit as a percentage
margin 4) of revenue. The Group uses adjusted
profit measures to provide a useful
and more comparable measure of the
ongoing performance of the Group.
Closest Reconciling
equivalent items to
statutory statutory
APM measure measure Definition and purpose
Adjusted Loss before Adjusting Profit before the impact of adjusting
profit tax items (note items and tax. As discussed above, adjusted
before 4) profit measures are used to provide
tax a useful and more comparable measure
of the ongoing performance of the Group.
Adjusted measures are reconciled to
statutory measures by removing adjusting
items, the nature of which are disclosed
above and further detailed in note 4.
Restated(1)
6 months 6 months Restated(1)
ended ended
30 June 30 June Year ended
2023 2022 31 December
GBPm GBPm 2022
Adjusted profit GBPm
before tax
Loss before tax (62) (314) (328)
Adjusting items
to loss before tax
(note 4) 196 323 390
Adjusted profit
before tax 134 9 62
Adjusted Loss after Adjusting Profit after tax but before the impact
profit tax items (note of the adjusting items. As discussed
after 4) above, adjusted profit measures are
tax used to provide a useful and more comparable
measure of the ongoing performance of
the Group. Adjusted measures are reconciled
to statutory measures by removing adjusting
items, the nature of which are disclosed
above and further detailed in note 4.
Restated(1)
6 months 6 months Restated(1)
ended ended
30 June 30 June Year ended
2023 2022 31 December
GBPm GBPm 2022
Adjusted profit GBPm
after tax
Loss after tax (40) (244) (229)
Adjusting items
to loss after tax
(note 4) 146 247 287
Adjusted profit
after tax 106 3 58
Constant Income Constant The Group uses GBP based constant currency
currency Statement, currency models to measure performance. These
which foreign are calculated by applying 2023 6 month
is reported exchange average exchange rates to local currency
using rates reported results for the current and
actual prior periods. This gives a GBP denominated
average Income Statement which excludes any
foreign variances attributable to foreign exchange
exchange rate movements.
rates
Adjusted Operating Adjusting Adjusted operating profit for 12 months
EBITDA loss(2) items (note prior to the reporting date, before
for leverage 4), depreciation depreciation and impairment of property,
covenant of property, plant and equipment and before the amortisation
purposes plant and and impairment of computer software
equipment and development costs.
and amortisation
of computer Adjusted EBITDA for leverage covenant
software purposes is a measure used by external
and development stakeholders to measure performance.
costs, 12 months 12 months(4)
imputed ended ended Year ended(4)
lease charge, 30 June 30 June 31 December
share of 2023 2022 2022
non-controlling Adjusted EBITDA
interests for leverage covenant
and other purposes GBPm GBPm GBPm
adjustments
required Adjusted operating
for leverage profit 261 292 480
covenant Depreciation of
purposes(5) property, plant
and equipment and
amortisation of
computer software
and development
costs 143 415 406
Imputed lease charge (36) (61) (63)
Non-controlling
interests - (6) (5)
Other adjustments
required for leverage
covenant purposes
(5) 7 62 (19)
------------
Adjusted EBITDA
for leverage covenant
purposes 375 702 799
Closest Reconciling
equivalent items to
statutory statutory
APM measure measure Definition and purpose
Adjusted Effective Adjusting The income tax charge for the Group
tax rate tax rate items, adjusting excluding adjusting tax items, and the
tax items tax impact of adjusting items, divided
and the by adjusted profit before tax.
tax impact
of adjusting This measure is a useful indicator of
items (note the ongoing tax rate for the Group.
4 and note Restated(1)
5) 6 months 6 months Restated(1)
ended
30 June ended Year ended
2023 30 June 31 December
GBPm 2022 2022
Adjusted tax rate GBPm GBPm
Tax credit per Income
Statement 22 70 99
Adjusted for:
Tax impact of adjusting
items (50) (76) (105)
Tax impact of significant
restructuring - - 2
Adjusted tax charge (28) (6) (4)
Adjusted profit
before tax 134 9 62
Adjusted tax rate 20.9% 66.7% 6.5%
Adjusted Basic Adjusting Profit after tax attributable to owners
basic earnings items (note of the parent and before the impact
earnings per share 4 and note of adjusting items, divided by the weighted
per share 6) average number of ordinary shares in
issue during the financial period.
----------- ---------------
Adjusted Diluted Adjusting Profit after tax attributable to owners
diluted earnings items (note of the parent and before the impact
earnings per share 4 and note of adjusting items, divided by the weighted
per share 6) average number of ordinary shares in
issue during the financial period adjusted
for the effects of any potentially dilutive
options.
The Board considers this to be a key
measure of performance when all businesses
are held for the complete reporting
period.
----------- ---------------
Interest None Not applicable Adjusted EBITDA calculated for covenant
cover purposes (including adjusted EBITDA
of businesses disposed) as a multiple
of net interest payable on bank loans
and overdrafts.
This measure is used for bank covenant
testing.
----------- ---------------
Closest Reconciling
equivalent items to
statutory statutory
APM measure measure Definition and purpose
Balance Sheet Measures
Working Inventories, Not applicable Working capital comprises inventories,
capital trade current trade and other receivables,
and other non-current other receivables, current
receivables trade and other payables and non-current
less trade other payables.
and other
payables This measure provides additional information
in respect of working capital management.
------------------- ----------------
Net debt Cash and Reconciliation Net debt comprises cash and cash equivalents,
cash equivalents of net debt interest-bearing loans and borrowings
less (note 12) and cross-currency swaps but excludes
interest-bearing non-cash acquisition fair value adjustments.
loans
and borrowings Net debt is one measure that could be
and finance used to indicate the strength of the
related Group's Balance Sheet position and is
derivative a useful measure of the indebtedness
instruments of the Group.
------------------- ----------------
Bank covenant Cash and Impact of Net debt (as above) is presented in
definition cash equivalents foreign the Balance Sheet translated at period
of net less exchange end exchange rates.
debt at interest-bearing and adjustments
average loans for bank For bank covenant testing purposes net
rates and borrowings covenant debt is converted using average exchange
and leverage and finance purposes rates for the previous 12 months.
related
derivative Leverage is calculated as the bank covenant
instruments definition of net debt divided by adjusted
EBITDA for leverage covenant purposes.
This measure is used for bank covenant
testing.
30 June 30 June(4) 31 December(4)
2023 2022 2022
Net debt GBPm GBPm GBPm
Net debt at closing
rates (note 12) 553 1,294 1,139
Impact of foreign
exchange 19 (64) (27)
Bank covenant definition
of net debt at average
rates 572 1,230 1,112
Leverage 1.5x 1.8x 1.4x
Closest Reconciling
equivalent items to
statutory statutory
APM measure measure Definition and purpose
Proforma Cash and Disposal Proforma opening net debt represents
opening cash equivalents of businesses net debt for the Group when excluding
net debt less interest-bearing net of cash transactions related to the demerger
and proforma loans and cash of the GKN Automotive, GKN Powder Metallurgy
opening and borrowings equivalents and the GKN Hydrogen businesses.
leverage and finance disposed
related and borrowings Proforma opening net debt is one measure
derivative repaid, that could be used to indicate the strength
instruments associated of the Group's opening Balance Sheet
transaction position and is a useful measure to
costs, pension compare against the ongoing indebtedness
buy-in cost of the Group.
paid and
second interim
dividend Proforma opening net debt and GBPm
paid to leverage
shareholders
Opening net debt (note 12) (1,139)
Disposal of businesses, net of
cash disposed (note 8) (320)
Settlement receipt from loans
held with demerged entities (note
8) 1,205
Reduction in net debt following
the demerger of Dowlais 885
Cash flows from discontinued
operations (note 12) (37)
Finance cost on demerger settled
net debt (note 4b) (17)
Net cash outflow from Dowlais
businesses to date of demerger (54)
Demerger related costs(6) (62)
Pension buy-in (note 11) (45)
Debt refinancing costs (11)
Demerger related costs and pension
buy-in (118)
Second interim dividend for the
year ended 31 December 2022
(note 7) (61)
Proforma opening net debt (487)
Proforma opening adjusted EBITDA
for leverage covenant purposes(7) 266
Proforma opening leverage 1.8x
Closest Reconciling
equivalent items
statutory to statutory
APM measure measure Definition and purpose
Cash Flow Measures
Adjusted Net cash Non-working Adjusted operating cash flow (pre-capex)
operating from capital is calculated as net cash (used in)/from
cash flow operating items operating activities before net cash
(pre-capex) activities (note from operating activities from discontinued
12) operations, restructuring costs paid
and movement in provisions, defined
benefit pension contributions paid,
tax paid, interest paid on loans and
borrowings, interest paid on lease obligations,
acquisition and disposal costs and the
repayment of principal under lease obligations.
This measure provides additional useful
information in respect of cash generation
and is consistent with how business
performance is measured internally.
Restated(1)
6 months 6 months Restated(1)
ended ended
30 June 30 June Year ended
2023 2022 31 December
Adjusted operating GBPm GBPm 2022
cash flow
(pre-capex) GBPm
Net cash (used in)/from
operating activities (136) (30) 204
Operating activities:
Net cash from operating
activities from discontinued
operations (36) (39) (243)
Restructuring costs
paid and movements
in provisions(8) 59 11 37
Defined benefit pension
contributions paid 47 2 23
Tax paid 15 8 8
Interest paid on loans
and borrowings 51 34 76
Interest paid on lease
obligations 2 3 6
Acquisition and disposal
costs 46 2 10
Debt related:
Repayment of principal
under lease obligations (16) (14) (29)
Adjusted operating
cash flow
(pre-capex) 32 (23) 92
Closest Reconciling
equivalent items
statutory to statutory
APM measure measure Definition and purpose
Free cash Net increase/ Acquisition Free cash flow represents cash generated
flow decrease and disposal after all trading costs including restructuring,
in cash related pension contributions, tax and interest
and cash cash flows, payments.
equivalents dividends Restated(1)
(net paid to 6 months 6 months Restated(1)
of bank owners ended ended
overdrafts) of the 30 June 30 June Year ended
parent, 2023 2022 31 December
transactions GBPm GBPm 2022
in own Free cash flow GBPm
shares,
and movements Net decrease in cash
on borrowing and cash equivalents
facilities (net of bank overdrafts) (262) (270) (203)
Debt related:
Repayments of borrowings 1,262 - 598
Drawings on borrowing
facilities (450) (7) (632)
Costs of raising
debt finance 11 - -
Equity related:
Dividends paid to
owners of the parent 61 44 77
Purchase of own shares,
including associated
costs - 119 504
Acquisition and
disposal related:
Disposal of businesses,
net of cash disposed 320 8 (478)
Settlement receipt
from loans held with (1,205) - -
demerged entities
Acquisition of subsidiaries - - 4
Equity accounted
investments additions - - 3
Cash flows from/(used
in) discontinued
operations 37 7 (80)
Acquisition and disposal
costs 46 2 10
Settlement of derivatives
used in net investment
hedging - - 109
Finance costs on
demerger settled 17 - -
net debt
GKN UK pension plan
buy-in 45 - -
Free cash flow (118) (97) (88)
Adjusted Net increase/ Free cash Adjusted free cash flow represents free
free cash decrease flow, cash flow adjusted for restructuring
flow in cash as defined cash flows.
and cash above, Restated(1)
equivalents adjusted 6 months 6 months Restated(1)
(net for restructuring ended ended
of bank cash flows 30 June 30 June Year ended
overdrafts) 2023 2022 31 December
GBPm GBPm 2022
Adjusted free cash GBPm
flow
-----------
Free cash flow (118) (97) (88)
Restructuring costs
paid 53 15 53
-----------
Adjusted free cash
flow (65) (82) (35)
Closest Reconciling
equivalent items
statutory to statutory
APM measure measure Definition and purpose
Free cash Net increase/ Free cash Free cash flow pre-interest and tax
flow decrease flow, represents free cash flow adjusted for
pre-interest in cash as defined interest and tax and excluding finance
and tax and cash above, charges related to discontinued operations.
equivalents adjusted Restated(1)
(net for interest 6 months 6 months Restated(1)
of bank and tax ended ended
overdrafts) cash flows 30 June 30 June Year ended
and excluding 2023 2022 31 December
finance GBPm GBPm 2022
charges Free cash flow pre-interest GBPm
related and tax
to discontinued
operations Free cash flow (118) (97) (88)
Tax paid 15 8 8
Interest paid on
loans and borrowings 51 34 76
Interest paid on
lease obligations 2 3 6
Interest received (2) - (1)
Finance costs on
demerger settled
net debt (17) - -
Free cash flow pre-interest
and tax (69) (52) 1
Capital None Not applicable Calculated as the purchase of owned
expenditure property, plant and equipment and computer
(capex) software and expenditure on capitalised
development costs during the period,
excluding any assets acquired as part
of a business combination.
Net capital expenditure is capital expenditure
net of proceeds from disposal of property,
plant and equipment.
Capital None Not applicable Net capital expenditure divided by depreciation
expenditure of owned property, plant and equipment
to depreciation and amortisation of computer software
ratio and development costs.
Dividend Dividend Not applicable Amounts payable by way of dividends
per share per share in terms of pence per share.
(1) Results for the period ended 30 June 2022 and the year ended
31 December 2022 have been restated for discontinued operations
(see note 2).
(2) Operating loss is not defined within IFRS but is a widely
accepted profit measure being loss before finance costs, finance
income and tax.
(3) Operating margin is not defined within IFRS but is a widely
accepted profit measure being derived from operating loss(2)
divided by revenue.
(4) Period ended 30 June 2022 and year ended 31 December 2022
calculations remain aligned to the original calculations supporting
the Group's bank debt compliance certificates, and have not been
restated for discontinued operations.
(5) Included within other adjustments required for leverage
covenant purposes in the period ended 30 June 2022 and the year
ended 31 December 2022 are dividends received from equity accounted
investments, the removal of adjusted operating profit of equity
accounted investments and the inclusion of adjusted operating
profit, depreciation and an imputed lease charge in respect of
businesses classified as held for sale. Included in the period
ended 30 June 2023 are unrealised annualised savings from spend
incurred in the period on restructuring projects.
(6) Includes costs accrued in relation to the demerger of the
GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses.
In 2022, GBP4 million of demerger related costs were paid.
(7) Proforma opening adjusted EBITDA for leverage covenant
purposes comprises Aerospace adjusted operating profit,
depreciation of property, plant and equipment and amortisation of
computer software and development costs, imputed lease charge and
proforma central costs of GBP30 million.
(8) Excludes non-cash utilisation of loss-making contract
provisions for continuing operations of GBP13 million (30 June
2022: GBP9 million, 31 December 2022: GBP23 million).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FFFLIATIRIIV
(END) Dow Jones Newswires
September 07, 2023 02:00 ET (06:00 GMT)
Melrose Industries (LSE:MRO)
Gráfico Histórico do Ativo
De Abr 2024 até Mai 2024
Melrose Industries (LSE:MRO)
Gráfico Histórico do Ativo
De Mai 2023 até Mai 2024