27 Aug 2010 07:00
27th August 2010 FOR IMMEDIATE RELEASE AGA RANGEMASTER GROUP PLC 2010 HALF-YEARLY FINANCIAL REPORT RANGEMASTER DRIVES IMPROVED PROFIT PERFORMANCE HIGHLIGHTS
AGA Rangemaster Group plc ("the Group"), the consumer brands group, is pleased to announce its interim results for the half year ended 30th June 2010.
Half year to 30th June 2010 2009 £m £m ______________Revenue 123.4 117.8 EBITDA 20.5* 2.0 Operating profit / (loss) before amortisation 1.6 (0.9) Operating profit / (loss) 0.8 (1.7) Profit / (loss) before tax 16.4 (2.4) Basic earnings / (loss) per share 17.6p
(2.3p)
Equity attributable to equity holders of the parent 132.6 151.3
Dividend proposed 0.7p - Net cash 22.4 2.3
* includes £16.3 million pension curtailment gain
Financial and operational highlights
- Revenues increased by 5% and operating profits improved in line with the
expected impact of operational gearing.
- Using the successful Rangemaster business model in the UK and North America
is raising efficiencies and reducing costs.
- Net cash of £22.4 million is over £20 million higher than at the previous
half year driven by continued sound working capital management. - Dividend payments restored at 0.7 pence per share. - Order intake remains up indicating improvements seen so far this year should continue through the second half. "2010 is proving encouraging with Rangemaster driving improved profitperformance even though consumers remain cautious. Rangemaster's export growth,product innovation and the breadth of its range of appliances are providing astimulus and we look to it, alongside AGA, to trigger the operational gearingwe have in place and we expect this to drive longer term earnings momentum." William McGrath Chief ExecutiveEnquiries:William McGrath, Chief Executive 020 7404 5959 (today)Shaun Smith, Finance Director 01926 455 731 (thereafter)
Simon Sporborg / Charlotte Kenyon (Brunswick) 020 7404 5959
AGA RANGEMASTER GROUP PLC 2010 INTERIM MANAGEMENT REPORT OverviewThe Group followed up a profitable second half to 2009 with an improved andprofitable first half to the year as markets bounced back after a slow start.Overall revenues were up by nearly 5% with growth at AGA and Rangemaster partlyoffset by revenue declines at Rayburn, Stanley and Fired Earth. A furtherstrong cash management performance resulted in the Group ending the period withover £22 million of net cash, an increase of over £20 million from a yearearlier. The current level of sales leads suggest that the improving trendsshould continue into the second half even though the level of housing mortgageapprovals - a key lead indicator for us - is suggesting the market is now flatyear-on-year.Broadening the use of the successful business processes of Rangemaster acrossthe Group, along with a vibrant product development programme, is deliveringresults. The enthusiasm of consumers for our products provides confidence thatthe fundamental strengths of the Group will provide the renewed impetus into amore sustained upturn.Half year performanceRevenue in the first half was £123.4 million up from £117.8 million in thefirst half of 2009. The UK provided 62% of sales, Europe 23% with 15% in NorthAmerica and the Rest of the World.EBITDA of £20.5 million was boosted in the half year by a pension curtailmentgain of £16.3 million and was £18.5 million higher than the previous half year.Operating profit before amortisation of £1.6 million compares with an operatingloss before amortisation in the previous half year of £0.9 million.Underlying earnings per share - excluding non-recurring costs of £0.7 millionand the post tax curtailment gain of £11.7 million - was 1.7 pence per sharecompared with a loss of 0.4 pence in the first half of 2009.
Given the improving performance and more stable markets the directors have decided to reintroduce an interim dividend at 0.7 pence per share. Future dividend payments will reflect the performance and the available cash resources of the Group.
Operating performancesThe Group responded swiftly and firmly to the recession. Over the last 18months major steps have been taken to integrate more fully our kitchenappliance brands in the UK and in North America while keeping the cleardefinitions for the individual brands. The management structures in the UK andin North America have been streamlined and the Group aims to have a single setof processes across the Group. Such responses strengthen the capacity of thebusiness to deal with weak consumer demand.Our cast iron cooker brands are AGA, Rayburn and Stanley. The AGA brandrebounded with sales volumes up. For AGA, sales to existing owners upgradingtheir models have become significant and in addition over 300 owners haveupgraded their burner systems this year. Current levels of sales leads andretail footfall suggest a continuing improvement in the second half year. Theall-in-one cooker-boiler brands, Rayburn and Stanley, were down as consumerenthusiasm for solid fuel and wood burning models fell away. Overall, salesvolumes for cast iron cookers were down 10% from 6,500 to 5,850.For the cooker-boiler lines we are looking at ways to make the products morewidely accessible and better understood in the plumbing and heating market. Wealso opened our first AGA Rayburn 'Energy Management Centre' in Kidderminsterthis week - close to our Telford development centre and training school - inorder to put our products and brands at the centre of both a consumer and tradeshift in focus towards modernising the approach to sourcing and costing ofenergy in the home.Rangemaster had a further strong performance with revenues up around 10% andwith the operational gearing of our well invested Leamington Spa factoryboosting profitability. While cooker volumes in the UK were flat, averageselling prices were up with a shift to higher specification products and abroadening of the model ranges. 25% of cooker sales volumes were outside the UKwith France now comfortably above Ireland as the primary export market. Salesof the wider product range of splashbacks, hoods, fridges and sinks did well,particularly through our 192 design centres. Sales to the kitchen specialistmarket were well up including sales of Mercury cookers. Of total Rangemastersales, for every £1 spent on cookers in the UK 30 pence is spent on otherRangemaster products.In North America progress to create an integrated hot and cold offering underthe AGA Marvel brand continued. For three years Marvel sales have declined.Now, from our new and efficient facility in Greenville, Michigan, sales areimproving. This has been helped by the product quality and specificationimprovements made possible by the capital investment in the facility. Recentlywe have set about moving hot side production from our Kitchener, Ontariofacility to Greenville which is to be our production and distribution hub forNorth America. With refrigeration sales up and cooker sales set to improvefollowing the launch of the AGA PRO+, prospects look much improved.Fired Earth had a particularly strong period of customer engagement with apositive response to the new, free catalogue, the 'Tile Basics' tile campaignand the fitted kitchen launch. Footfall, web traffic and brochure requests rosesignificantly. Despite more, but smaller orders, the business continued to makelosses. A detailed review has led to the appointment of an experienced retailinterim managing director. The plan is to have an operation sharply focused onan expanded core tile and paint range and for sales plans for the developingkitchen living operation to be driven by the designer, Charles Smallbone.These steps are designed to eliminate the losses which are expected to bearound £2 million this year. These plans will be in place by the end of 2010,at which time the Board will review the next phase in the development of FiredEarth as a well recognised sector-leading home fashions brand.Dealers of Grange, our international furniture operation - some of whom arealready selling our appliances - will be offered the Charles SmallboneGrange-made kitchens. A Grange store in Rue du Bac in Paris is being refittedto display them before the up-and-coming Maison d'Objet exhibition in Paris.Grange had a better first half having reduced the cost base significantly,breaking even in Europe and with US losses now linked to high rents in some ofits design centre locations.
Continuing operational initiatives
The Group continues to take steps to limit costs and raise efficiency levels.Current initiatives involve the integration project at AGA Marvel and therepositioning of Fired Earth. In addition, we have looked at the salesstructures across the Group to ensure that sales staff have the right skills,focus, information and support to optimise the conversion of sales leads.Linking this effort closely with the work to increase leads through our centralmarketing initiatives on brochure fulfilment, web development and with the callcentre should all help drive revenue. With our selective marketing, our large1.2 million customer database and our 240,000 email addresses, we feel themarket presence and perception of our brands continue to improve.
Pension scheme
The pension scheme deficit as calculated on an IAS 19 accounting basis at 30th June 2010 was £39.6 million, compared with £40.5 million at 31st December 2009.
The full triennial valuation of the pension scheme undertaken by Towers WatsonLimited on the actuarial basis as at 31st December 2008 has now been signed bythe scheme actuary and has been submitted to the Pensions Regulator. Theactuarial deficit as at that date has been assessed at £161.3 million whenthere was a £57.5 million surplus on an accounting basis. Recalculated at 31stDecember 2009, the actuarial deficit is considered to be £84.0 million comparedwith the accounting deficit of £40.5 million as at that date. Under the recovery plan now agreed with the trustee of the scheme, the Groupwill make deficit contributions to the scheme of £2.0 million in 2010 and 2011,and (assuming the triennial valuation to be undertaken as at 31st December 2011subsequently does not change the contributions schedule) thereafter £10.0million per annum from 2012 to 2020 inclusive with a bullet payment of £48.0million on 31st December 2020. In 2011, a normal service contribution of around£2.5 million is expected after it was reduced for three years to around £1.0million because of the prepayment made in 2007.The Group continues to provide £50.0 million of guarantees in support of theGroup's potential obligation to the pension scheme in 2020 under a long-termfunding agreement to make the scheme fully funded on a self-sufficiency basisby that date.In 1997 when ACT tax credits were abolished, the Group immediately responded bystarting to focus actively on reducing pension costs. From that point the Grouphas been working hard and closely with the trustee of the scheme to ensure thatthe obligations to members are met while the costs to the Group are carefullymonitored and managed. In particular, in 2001 the scheme was closed to newentrants on the defined benefit basis of pension provision, and appropriatemodifications to future pension accrual have been made since then including thefreezing of current member pensionable salaries in 2009/2010. This has givenrise to total curtailment gains of £20.1 million under IAS 19. Shifts to moredefensive bond allocations were made in 2001 and 2007. Further liability andrisk management exercises will be undertaken when and where appropriate.
Current trading and prospects
We are moving into the key autumn selling season and the current level of leads across our brands does suggest a reasonable sales period ahead although the consumer mood is currently more subdued than in the spring.
Factors providing us with some confidence include: the new 'AGA Guide' which isgenerating excellent consumer interest; an upturn in kitchen leads followingthe launch of the new Bastide fitted range; and a strong portfolio ofestablished and new products from Rangemaster, reflected this autumn with thelaunch of the new 100 cm wide 'Professional+ 100' range.Against a background where consumers remain extremely cautious about committingto larger value purchases we do not expect a substantial profit rebound.However, we have put in place all the groundwork which is needed to ensure webenefit from an improving mood among our targeted customer base when it comes.The Group has great brands that are attracting new aspirational consumers andan excellent product portfolio and pipeline. This gives us confidence in theprospects for the Group.Financial review
Operating profit - The Group operating profit was £0.8 million compared to a loss of £1.7 million in the first half of 2009.
Net pension credit - The net pension credit of £16.4 million (half year 2009: £0.8 million) includes a curtailment gain of £16.3 million following thefreezing of pensionable salaries for the majority of the scheme members earlyin the year. The pensionable salaries of the other scheme members had alreadybeen frozen in the second half of 2009 which gave rise to a curtailment gain of£3.8 million.Non-recurring costs - Non-recurring costs were £0.7 million in the period (fullyear 2009: £3.6 million). These mainly relate to the announced closure of ourCanadian manufacturing operation which will have been moved into our Greenvilleplant by the end of November. The move is expected to deliver annualisedsavings of £0.6 million in 2011.Finance income / costs - The net finance costs were £0.1 million (half year2009: £0.2 million) reflecting the low rate of interest earned on cash depositsoffset by interest payable on the Group's EUR and USD hedging loans.Taxation - The effective tax rate for the year is forecast at 26.2% compared toan effective rate of nil in 2009. The income tax expense relates to deferredtax on pensions. Deferred tax has been accounted for at a rate of 28.0% as theFinance (No. 2) Bill 2010 was not substantively enacted until after the balancesheet date.Earnings per share - Reported basic earnings per share were 17.6 pence (halfyear 2009: 2.3 pence loss). The average number of shares in issue was 69.2million, unchanged from the previous half year and year end. Adjustedunderlying earnings per share (excluding the post tax pension curtailment gainand non-recurring costs) were 1.7 pence (half year 2009: 0.4 pence loss).
Dividends - An interim dividend of 0.7 pence per share has been proposed (2009: nil).
Cashflow - The Group continues to place great emphasis on managing itsoperating cashflow and the result was a small £1.8 million cash outflow in theperiod (half year 2009: £2.0 million inflow). The working capital outflow was £5.4 million (half year 2009: £2.7 million inflow) and followed a full yearinflow in 2009 of £22.9 million.Net capital expenditure in the period was tightly controlled and totalled £1.2million (half year 2009: £4.3 million) and compares to a depreciation charge of£3.2 million (half year 2009: £3.4 million). The 2009 capital expenditurefigure included a £2.8 million payment for the Marvel factory in the USA.
The total cash outflow from operating and investing activities was £5.5 million (half year 2009: £5.9 million).
Balance sheet - The balance sheet continues to remain strong with net cash of £22.4 million (30th June 2009: £2.3 million). Working capital at the period endwas well controlled at £19.4 million (30th June 2009: £34.1 million).The IAS 19 net pension deficit was revalued to £39.6 million and compares to adeficit of £40.5 million at 31st December 2009 and £13.8 million at 30th June2009.
Net assets of the Group at 30th June 2010 were £133.0 million, little changed from the £134.3 million at the end of last year.
Risks and uncertainties - There are a number of risks and uncertainties whichcould have a material impact on the Group's performance over the remaining sixmonths of the financial year and could cause actual results to differ fromexpected and historical results. The directors do not consider that theprincipal risks and uncertainties have changed since the publication of theAnnual Report and Accounts for the year ended 31st December 2009. A detailedexplanation of the key risks and uncertainties can be found on pages 12 to 13of the Annual Report & Accounts 2009, a copy of which is available at www.agarangemaster.com.By order of the board:J Coleman W B McGrathChairman Chief Executive27th August 2010 AGA RANGEMASTER GROUP PLC 2010 HALF-YEARLY FINANCIAL REPORT CONSOLIDATED INCOME STATEMENT Half year Half year Year to to June to June December 2010 2009 2009 Unaudited Unaudited Audited ______________________________________ Note £m £m £m Revenue 123.4 117.8 245.0Net operating costs (122.6) (119.5) (246.5)
________________________________________________________________________________________
Group operating profit / (loss) 0.8 (1.7) (1.5) Net pension credit 10 16.4 0.8 5.4 Non-recurring cost 4 (0.7) (1.3) (3.6)
________________________________________________________________________________________
Profit /(loss) before net finance costs and income tax 16.5 (2.2)
0.3Finance income 0.1 0.2 1.1Finance costs (0.2) (0.4) (0.9)
________________________________________________________________________________________
Profit / (loss) before income tax 16.4 (2.4)
0.5
Income tax expense 6 (4.3) - -
________________________________________________________________________________________
Profit / (loss) for the period 12.1 (2.4)
0.5
________________________________________________________________________________________
Profit / (loss) attributable to: Equity holders of the parent 12.2 (1.6) 1.7Non-controlling interests (0.1) (0.8) (1.2)
________________________________________________________________________________________
Profit / (loss) for the period 12.1 (2.4)
0.5
________________________________________________________________________________________
Earnings / (loss) per share attributable to equity holders of the parent 7 P P P Basic 17.6 (2.3) 2.5Diluted 17.6 (2.3) 2.5
________________________________________________________________________________________
p p pDividend per share - proposed or paid 8 0.7 - -
________________________________________________________________________________________
All the above results relate to continuing operations.
AGA RANGEMASTER GROUP PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Half year Half year Year to to June to June December 2010 2009 2009 Unaudited Unaudited Audited
____________________________________
£m £m £mProfit/ (loss) for the period 12.1 (2.4)
0.5
________________________________________________________________________________________
Exchange adjustments on hedge of net investments (0.1) 2.1
1.6
Exchange differences on translation of foreign operations (1.7) (11.6)
(9.3)
Actuarial losses on defined benefit pension schemes (16.0) (72.7)
(104.5)
Deferred tax on actuarial losses 4.3 20.4
29.3
________________________________________________________________________________________
Other comprehensive losses for the period (13.5) (61.8)
(82.9)
________________________________________________________________________________________
Total comprehensive losses for the period (1.4) (64.2) (82.4)________________________________________________________________________________________ Attributable to: Equity holders of the parent (1.3) (63.5) (81.1)Non-controlling interests (0.1) (0.7) (1.3)
________________________________________________________________________________________
Total comprehensive losses for the period (1.4) (64.2)
(82.4)
________________________________________________________________________________________
AGA RANGEMASTER GROUP PLC CONSOLIDATED BALANCE SHEET Half year Half year Year to to June to June December 2010 2009 2009 Unaudited Unaudited Audited
_________________________________________
Note £m £m £mNon-current assets Goodwill 66.7 65.8 66.9Intangible assets 22.2 22.2 23.2Property, plant and equipment 9 48.9 54.3 50.8Deferred tax assets 21.7 5.5 21.7
________________________________________________________________________________________
159.5 147.8
162.6
________________________________________________________________________________________
Current assets Inventories 44.9 54.8 46.0Trade and other receivables 36.4 33.7 31.7Current tax assets 1.8 2.1 1.8Cash and cash equivalents 11 39.7 38.5 45.0
________________________________________________________________________________________
122.8 129.1
124.5
________________________________________________________________________________________
Assets held for sale 3.2 1.7
3.1
________________________________________________________________________________________
Total assets 285.5 278.6
290.2
________________________________________________________________________________________
Current liabilities Borrowings 11 (1.7) (5.7) (1.3)Trade and other payables (61.9) (54.4) (63.2)Current tax liabilities (16.8) (9.1) (18.4)Current provisions 12 (2.2) (2.1) (2.4)
________________________________________________________________________________________
(82.6) (71.3)
(85.3)
________________________________________________________________________________________
Net current assets 40.2 57.8
39.2
________________________________________________________________________________________
Non-current liabilities Borrowings 11 (15.6) (30.5) (15.7)Retirement benefit obligation 10 (39.6) (13.8) (40.5)Deferred tax liabilities (6.1) (1.5) (6.1)Provisions 12 (8.6) (9.1) (8.3)
________________________________________________________________________________________
(69.9) (54.9)
(70.6)
________________________________________________________________________________________
Total liabilities (152.5) (126.2)
(155.9)
________________________________________________________________________________________
Net assets 133.0 152.4
134.3
________________________________________________________________________________________
Equity Share capital 13 32.5 32.5 32.5Share premium account 29.6 29.6 29.6Other reserves 84.0 85.9 85.8Retained (losses) / earnings (13.5) 3.3 (14.1)
________________________________________________________________________________________
Equity attributable to equity holders of the parent 132.6 151.3
133.8
Non-controlling interest 0.4 1.1
0.5
________________________________________________________________________________________
Total equity 133.0 152.4
134.3
________________________________________________________________________________________
AGA RANGEMASTER GROUP PLC CONSOLIDATED CASH FLOW STATEMENT Half year Half year Year to to June to June December 2010 2009 2009 Unaudited Unaudited Audited
___________________________________
Note £m £m
£m
Cash flows from operating activities Profit / (loss) before income tax 16.4 (2.4)
0.5
Reconciliation of profit / (loss) before income tax to net cash flows: Net finance costs / (income) 0.1 0.2
(0.2)
Depreciation of property, plant and equipment 9 3.2 3.4
7.1
Impairment of assets held for sale - -
0.8
Amortisation of intangible assets 0.8 0.8
1.6
Loss on disposal of property, plant and equipment - -
0.1
Share-based payments expense 0.1 0.1
0.2
Decrease in inventories 0.8 5.6
15.3
(Increase) / decrease in receivables (5.3) 3.2
5.6
(Decrease) / increase in payables (0.9) (6.1) 2.0Decrease in provisions (0.1) (1.5) (1.3)Movement in pensions (16.9) (1.3) (6.4)
_______________________________________________________________________________________
Cash (used in) / generated from operating activities (1.8) 2.0
25.3Finance (costs) / income (0.1) (0.2) 0.2Tax (payment) / receipt (1.6) (2.5) 4.0
_______________________________________________________________________________________
Net cash (used in) / generated from operating activities (3.5) (0.7)
29.5
_______________________________________________________________________________________
Cash flows from investing activities
Disposal proceeds from sale of subsidiaries less costs (0.2) 0.3
(0.4)
Purchase of Mercury - -
(0.5)
Purchase of property, plant and equipment 9 (1.2) (4.3)
(6.2)
Expenditure on intangibles (0.6) (1.2)
(1.9)
_______________________________________________________________________________________
Net cash used in investing activities (2.0) (5.2)
(9.0)
________________________________________________________________________________________
Cash flows from financing activities Repayment of borrowings - (3.3) (20.5)New bank loans raised 0.2 5.3 2.6
_______________________________________________________________________________________
Net cash generated from / (used in) financing activities 0.2 2.0
(17.9) _______________________________________________________________________________________ Effects of exchange rate changes
- (0.5)
(0.5)
_______________________________________________________________________________________
Net (decrease) / increase in cash and cash equivalents (5.3) (4.4)
2.1
Cash and cash equivalents at beginning of period 45.0 42.9
42.9
_______________________________________________________________________________________
Cash and cash equivalents at end of period 11 39.7 38.5
45.0
_______________________________________________________________________________________
AGA RANGEMASTER GROUP PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Half year to 30th June 2010
Equity attributable to equity holders of the parent Non- Share Share Other Retained controlling Total capital premium reserves earnings Total interests equity _________________________________________________________________________________________ £m £m £m £m £m £m £m At 1st January 2010 32.5 29.6 85.8 (14.1) 133.8 0.5 134.3 Comprehensive income Profit / (loss) for the period - - - 12.2 12.2 (0.1) 12.1 Other comprehensive(losses) / income: Exchange adjustments on hedge of net investments - - (0.1) - (0.1) - (0.1) Exchange differences on translation of foreign operations - - (1.7) - (1.7) - (1.7) Actuarial losses on defined benefit pension schemes - - - 16.0) (16.0) - (16.0) Deferred tax on actuarial losses - - - 4.3 4.3 - 4.3
_________________________________________________________________________________________
Total comprehensive (losses)/ income for the period ended 30th June 2010 - - (1.8) 0.5 (1.3) (0.1) (1.4) Share based payments - - - 0.1 0.1 - 0.1 __________________________________________________________________________________________ At 30th June 2010 32.5 29.6 84.0 (13.5) 132.6 0.4 133.0 __________________________________________________________________________________________
Half year to 30th June 2009
Equity attributable to equity holders of the parent Non- Share Share Other Retained controlling Total capital premium reserves earnings Total interests equity
__________________________________________________________________________________________
£m £m £m £m £m £m £m At 1st January 2009 32.5 29.6 95.5 57.1 214.7 1.8 216.5 Comprehensive income Loss for the period - - - (1.6) (1.6) (0.8) (2.4) Other comprehensive (losses) / income: Exchange adjustments on hedge of net investments - - 2.1 - 2.1 - 2.1Exchange differences on translation of foreign operations - - (11.7) - (11.7) 0.1 (11.6) Actuarial losses on defined benefit pension schemes - - - (72.7) (72.7) - (72.7) Deferred tax on actuarial losses - - - 20.4 20.4 - 20.4 __________________________________________________________________________________________
Total comprehensive losses for the period ended 30th June 2009 - - (9.6) (53.9) (63.5) (0.7) (64.2)
Share based payments - - - 0.1 0.1 - 0.1
__________________________________________________________________________________________
At 30th June 2009 32.5 29.6 85.9 3.3 151.3 1.1 152.4
__________________________________________________________________________________________
AGA RANGEMASTER GROUP PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31st December 2009
Equity attributable to equity holders of the parent Non- Share Share Other Retained controlling Total capital premium reserves earnings Total interests equity __________________________________________________________________________________________ £m £m £m £m £m £m £m At 1st January 2009 32.5 29.6 95.5 57.1 214.7 1.8 216.5 Comprehensive income Profit / (loss) for the year - - - 1.7 1.7 (1.2) 0.5 Other comprehensive (losses) / income: Exchange adjustments on hedge of net investments - - 1.6 - 1.6 - 1.6Exchange differences on translationof foreign operations - - (9.2) - (9.2) (0.1) (9.3) Actuarial losses on defined benefit pension schemes - - - (104.5)(104.5) - (104.5)Deferred tax on actuarial losses - - - 29.3 29.3 - 29.3 ___________________________________________________________________________________________ Total comprehensive losses for the year ended 31st December 2009 - - (7.6) (73.5) (81.1) (1.3) (82.4)Transfer between reserves - - (2.1) 2.1 - - -Share based payments - - - 0.2 0.2 - 0.2__________________________________________________________________________________________ At 31st December 2009 32.5 29.6 85.8 (14.1) 133.8 0.5 134.3__________________________________________________________________________________________ AGA RANGEMASTER GROUP PLC NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
The interim condensed consolidated financial statements of the Group for thesix months ended 30th June 2010 were authorised for issue in accordance with aresolution of the directors on 26th August 2010.
AGA Rangemaster Group is a public limited company incorporated and domiciled in the UK whose shares are publicly traded on the London Stock Exchange.
The principal activities of the Group are the manufacture and sale of range cookers and related home fashions products.
The interim condensed consolidated financial statements do not comprise theGroup's statutory accounts as defined by section 434 of the Companies Act 2006.Statutory accounts for the year ended 31st December 2009 were approved by theboard of directors on 12th March 2010 and were delivered to the Registrar ofCompanies. The auditors' report on those accounts was unqualified, it did notcontain an emphasis of matter paragraph and did not contain any statement undersection 498(2) or (3) of the Companies Act 2006.The financial information presented here is unaudited but has been reviewed bythe Group's auditor, Ernst & Young LLP. Its review opinion appears at the endof these notes.2. BASIS OF PREPARATION The interim condensed consolidated financial statements for the six monthsended 30th June 2010 have been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with InternationalAccounting Standard 34 (IAS 34) 'Interim Financial Reporting' as adopted by theEuropean Union.The interim condensed consolidated financial statements do not include all theinformation and disclosures required in the annual financial statements andshould be read in conjunction with the Group's Annual Report and Accounts as at31st December 2009 which have been prepared in accordance with InternationalFinancial Reporting Standards as adopted by the European Union.
The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statements.
3. ACCOUNTING POLICIES
The interim condensed consolidated financial statements have been preparedusing the same accounting policies as used in the preparation of the Group'sAnnual Report and Accounts for the year ended 31st December 2009 except for theadoption of new standards, interpretations and amendments, noted below. Theadoption of these standards, interpretations and amendments did not have anymaterial impact on the financial position or performance of the Group.
IAS 27 - Consolidated and Separate Financial Statements (amended) This amendment reflects changes to the accounting for non-controlling (previously minority) interests. It deals primarily with the accounting for changes in ownership interests in subsidiaries after control is obtained, the accounting for the loss of control of subsidiaries, and the allocation of profit or loss to controlling and non-controlling interests in a subsidiary.
IAS 38 - Intangible Assets (amended)This amendment clarifies that an intangible asset that is separable onlytogether with a related contract, identifiable asset or liability is recognisedseparately from goodwill together with the related item. Also complementaryintangible assets with similar useful lives may be recognised as a singleasset.
IAS 39 - Financial Instruments: Recognition and Measurement (amended) This amendment addresses the designation of a one-sided risk in a hedged item and the designation of inflation as a hedged risk or portion in particular situations.
IFRS 2 - Share-based Payments - Group Cash-settled Share-based PaymentsTransactions (amended)This standard has been amended to clarify the accounting for group cash-settledshare-based payment transactions, superseding IFRIC 8 and IFRIC 11.IFRS 3 - Business Combinations (revised)This revised standard applies the acquisition method to business combinations.All payments to purchase a business are recorded at fair value at theacquisition date, with contingent payments classified as debt and subsequentlyre-measured through the income statement. There is a choice on anacquisition-by-acquisition basis to measure the non-controlling interest in theacquiree either at fair value or at the non-controlling interest'sproportionate share of the acquiree's net assets. All acquisition costs areexpensed.
IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations (amended) This amendment specifies that if an entity is committed to a plan to sell a subsidiary, then it should classify all of that subsidiary's assets and liabilities as held for sale when the held for sale criteria are met and disclosures for discontinued operations are required by the parent when a subsidiary meets the definition of a discontinued operation.
IFRIC 17 - Distributions of Non-cash Assets to OwnersThis interpretation provides guidance on accounting for arrangements whereby anentity distributes non-cash assets to shareholders either as a distribution ofreserves or as dividends.
Amendments to the following standards did not have any impact on the accounting policies, financial position or performance of the Group:
IAS 1 - Presentation of Financial StatementsIAS 7 - Statement of Cash FlowsIAS 17 - LeasesIAS 36 - Impairment of AssetsIFRS 8 - Operating SegmentsIFRIC 16 - Hedge of a Net Investment in a Foreign Operation
4. NON-RECURRING COSTS
The non-recurring costs during the period to 30th June 2010 relate to redundancy and reorganisation programmes primarily at AGA Marvel.
5. SEGMENTAL ANALYSIS
The directors consider that there are two operating segments namely AGA (whichcomprises the brands and operations of AGA, Fired Earth, Waterford Stanley andGrange) and Rangemaster (which comprises the brands and operations ofRangemaster, AGA Marvel, Heartland, La Cornue and Divertimenti). Two areas ofthe business were identified over which the directors allocate resource, planpurchasing, manufacturing, combined sales targets and incentives and marketingprogrammes. These areas were determined to be the level at which the chiefoperating decision maker makes decisions and were deemed to be the operatingsegments of 'AGA' and 'Rangemaster'. The strategy as set by the board is forthe Group to be seen as a Global Consumer Brand which sells range cookers andrelated kitchen products internationally with cross selling opportunitiescreating appreciable competitive advantage for all our individual brands.The operating results of the operating segments, for which discrete informationis available, are regularly reviewed by the chief executive and his seniormanagement team to make decisions about the resources to be allocated to thesegments and assess their performance. The two operating segments areconsidered to meet the aggregation criteria as they have similar economiccharacteristics, products and services, production processes, types and classesof customer and methods of distribution. Management's focus is on the crossselling of all consumer products to our customer database. - e.g. AGA Marvel isresponsible for distributing product manufactured in the UK at our Leamington Spa (range cookers) and Telford (cast iron cookers) factories, which are then sold inNorth America under the AGA brand.Our customers are substantially of the same demographic. At the heart of oursales strategy we look to sell packages of products to our customer base which,for example, may include AGA, Fired Earth, Rangemaster or AGA Marvel brandedproducts and, in addition, this is how our senior management are nowincentivised - on delivery of Group targets. Therefore the directors considerthat there is only one reportable aggregated segment. All disclosures requiredunder IFRS 8 and IAS 34 have therefore already been given in these interimcondensed consolidated financial statements.
6. TAXATION
Corporation tax for the interim period to 30th June 2010 has been charged atthe estimated rates chargeable for the full year in the respectivejurisdictions as follows: Half year Half year Year to to June to June December 2010 2009 2009
_________________________________________
£m £m £mCurrent tax UK corporation tax - - 1.9Overseas tax - - 1.1
____________________________________________________________________________________
- - 3.0Deferred tax UK corporation tax 4.3 - (0.8)Overseas tax - - (2.2)
____________________________________________________________________________________
4.3 -
(3.0)
____________________________________________________________________________________
Total income tax expense 4.3 -
-____________________________________________________________________________________
UK corporation tax 4.3 -
1.1
Overseas tax - -
(1.1)
____________________________________________________________________________________
Total income tax expense 4.3 -
-
____________________________________________________________________________________
Factors affecting the future tax charge:
On 22nd June 2010, the UK Chancellor of the Exchequer announced a number of corporate tax reforms. The following changes to corporation tax will have an impact on the Group:
* Corporation tax rate reduction from 28% to 24%, over 4 years. This reduction will be staggered as a 1% reduction each year, with the first reduction to 27% effective from 1st April 2011. * Reduction in the tax amortisation rate on plant and machinery additions from 20% to 18% per annum from 1st April 2012.
The reduction in the corporation tax rate to 27% was substantively enacted on the 21st July 2010. The full tax impact of these changes is estimated to be
£0.1 million per 1% movement in the taxation rate.
7. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on thefollowing data: Half year Half year Year to to June to June December 2010 2009 2009
___________________________________________
£m £m £m Earnings Profit / (loss) after tax 12.1 (2.4) 0.5Non-controlling interests 0.1 0.8 1.2
________________________________________________________________________________________
Profit / (loss) attributable to equity holders of the parent
12.2 (1.6) 1.7
________________________________________________________________________________________
Weighted average number of shares in issue million million
million For basic EPS calculation 69.2 69.2 69.2Dilutive effect of share options - - -
________________________________________________________________________________________
For diluted EPS calculation 69.2 69.2
69.2
________________________________________________________________________________________
Total operations p p pBasic 17.6 (2.3) 2.5Diluted 17.6 (2.3) 2.5
________________________________________________________________________________________
8. DIVIDENDS Half year Half year Year to to June to June December 2010 2009 2009 £m £m £m Nil final dividend for the year ended - - -31st December 2009 (2008: nil) Nil interim dividend paid (2009: nil) - - -
________________________________________________________________________________________
Amounts recognised as distributions to equity holders of the parent in the period - - -
________________________________________________________________________________________
The directors are proposing to pay an interim dividend in respect of the financial year ending 31st December 2010 of 0.7 pence per share (year to 31st December 2009: nil).
9. PROPERTY, PLANT & EQUIPMENT
During the six months to 30th June 2010 the Group purchased £1.2 million ofproperty, plant and equipment (period to 30th June 2009: £4.3 million of which£2.8 million, related to the building of the new Marvel factory in the US andwas included in payables at 31st December 2008). Depreciation in the period was£3.2 million (period to 30th June 2009: £3.4 million). Disposals in the periodwere £nil (period to 30th June 2009: £nil).
10. RETIREMENT BENEFITS
Defined benefit scheme assets have been valued at a market value on 30th June2010 at £711.6 million (30th June 2009: £637.5 million and 31st December 2009:£716.0 million) and the defined benefit liabilities at £751.2 million (30thJune 2009: £651.3 million and 31st December 2009: £756.5 million), giving a £39.6 million deficit at the interim date (30th June 2009: £13.8 million and31st December 2009: £40.5 million). The liabilities have been rolled forwardfrom 31st December 2009 and adjusted to take account of lower Retail PricesIndex inflation expectations and the decrease in bond yields, which has reducedthe discount rate from 5.7% to 5.3%.The net pension credit for the period of £16.4 million includes a curtailmentgain of £16.3 million in respect of the freezing of pensionable salaries forthose members whose pensionable salaries were not frozen in 2009 (period to30th June 2009: £0.8 million and year to 31st December 2009: £5.4 million whichincluded a £3.8 million curtailment gain).
11. CASH & BORROWINGS
Cash
Cash and cash equivalents at 30th June 2010 was £39.7 million (30th June 2009:£38.5 million and 31st December 2009: £45.0 million) and includes £22.5 millionwhich is collateralised against a bank guarantee that the Group has provided tothe AGA Rangemaster Group Pension Scheme.Borrowings 30th June 30th June 31st December 2010 2009 2009
_______________________________________
£m £m £mBank borrowings Current (unsecured) 1.7 5.7 1.3Non-current 15.6 30.5 15.7
_______________________________________________________________________________
Total 17.3 36.2
17.0
_______________________________________________________________________________
Current and non-current bank borrowings included £nil obligations under financeleases at 30th June 2010 (30th June 2009: £nil and 31st December 2009: £0.1million).
The Group's bank borrowings are primarily loan advances denominated in a number of currencies and have floating interest rates based on LIBOR or foreign equivalents.
At 30th June 2010 the non-current borrowings are split £0.4 million secured(30th June 2009: £0.4 million) and £16.9 million unsecured (30th June 2009: £30.1 million).12. PROVISIONS During the period £0.5 million has been spent in respect of the redundancy andreorganisation programmes at AGA Rangemaster in the UK that was provided for at31st December 2009. A provision of £0.5 million has been made for an ongoingrationalisation programme at AGA Marvel.
13. SHARE CAPITAL AND OPTIONS
The number of 46 7/8 pence ordinary shares in issue amounted to 69.2 million on 30th June 2010 (30th June 2009 and 31st December 2009: 69.2 million). This represents £32.5 million of share capital.
On 14th May 2010, the 369,092 Long-Term Incentive Plan options granted in May 2007 were lapsed.
14. FINANCIAL INSTRUMENTS Included in borrowings at 30th June 2010 were loans of EUR 7.5 million andUSD 13.7 million, which have been designated as hedges of net investments inoperations based in Europe and the United States. The loans are held as a hedgeagainst the Group's exposure to foreign exchange risk on these investments.
During the six month period ended 30th June 2010, the gain of £0.5 million on the retranslation of the EUR loan and the loss of £0.6 million on the retranslation of the USD loan have been transferred to equity to offset any gains and losses on translation of the net investments in subsidiaries.
15. CONTINGENT LIABILITIES & COMMITMENTS
The Group had no material contingent liabilities arising in the normal course of business at 30th June 2010.
The Group has arranged £50.0 million of bank guarantees, to guarantee obligations of the Group to the AGA Rangemaster Group Pension Scheme which may arise in the period up to 2020, of which £22.5 million is collateral as disclosed in note 11.
The Group had capital commitments of £0.8 million at 30th June 2010 (31st December 2009: £0.6 million).
16. RELATED PARTY TRANSACTIONS
The Group currently recharges the Group pension scheme with the cost of administration and independent advisers paid by the Group. The total amount recharged in the period was £0.1 million (half year to 30th June 2009: £0.1 million). The amount outstanding at 30th June 2010 was nil (30th June 2009:
£nil).
17. SEASONALITY OF OPERATIONS
The normal seasonal nature of our range cooker business is to see higherrevenues and operating profits in the second half of the year than in the firstsix months. Although this was not the case in 2009 it is envisaged that 2010will revert back to norm. AGA RANGEMASTER GROUP PLC CAUTIONARY STATEMENT These condensed consolidated interim financial statements contain certainforward-looking statements. These are made by the directors in good faith basedon the information available to them up to the time of their approval of thisreport but such statements should be treated with caution due to the inherentuncertainties, including both economic and business risk factors, underlyingany such forward-looking information. The directors undertake no obligation toupdate any forward-looking statements whether as a result of new information,future events or otherwise.
The Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to enable them to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.
The IMR has been prepared for the Group as a whole and therefore gives greateremphasis to those matters which are significant to AGA Rangemaster Group plcand its subsidiary undertakings when viewed as a whole. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors' confirm that these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
* an indication of important events that have occurred during the first six
months and their impact on the condensed set of financial statements and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
* material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
The directors of AGA Rangemaster Group plc are listed in the Annual Report andAccounts for 31st December 2009, a copy of which is available at www.agarangemaster.com.By order of the boardW B McGrathChief ExecutiveS M SmithFinance Director AGA RANGEMASTER GROUP PLC INDEPENDENT REVIEW REPORT TO THE MEMBERS OF AGA RANGEMASTER GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30thJune 2010 which comprises the Consolidated Income Statement, ConsolidatedBalance Sheet, Consolidated Statement of Comprehensive Income, ConsolidatedStatement of Changes in Equity, Consolidated Cash Flow Statement and therelated notes 1 to 17. We have read the other information contained in thehalf-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of financial statements.This report is made solely to the Company in accordance with guidance containedin International Standard on Review Engagements 2410 (UK and Ireland) 'Reviewof Interim Financial Information Performed by the Independent Auditor of theEntity' issued by the Auditing Practices Board. To the fullest extent permittedby law, we do not accept or assume responsibility to anyone other than theCompany, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview.Scope of reviewWe conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30th June 2010 is not prepared, inall material respects, in accordance with International Accounting Standard 34as adopted by the European Union and the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority.Ernst & Young LLPBirmingham AGA RANGEMASTER GROUP PLC MAIN ADDRESSES AND ADVISERS
Head office and registered office
AGA Rangemaster Group plcJuno DriveLeamington SpaWarwickshireCV31 3RGTelephone: 01926 455 755Fax: 01926 455 749e-mail: info@agarangemaster.comWebsite: www.agarangemaster.comRegistered in England No. 354715RegistrarsEquinitiAspect HouseSpencer RoadLancingWest SussexBN99 6DATelephone (Helpline): 0871 384 2355(Calls to this number are charged at 8p per minute from a BT landline.Other telephone providers' costs may vary).International (Helpline): 0044 (0) 121 415 7046
Auditors
Ernst & Young LLP
Joint financial advisers and stockbrokers
Numis Securities LimitedExecution Noble & Company Limited 2010 FINANCIAL CALENDAR Record date for interim ordinary dividend 5th November 2010Interim ordinary dividend payable 1st December 20102010 year end 31st December 2010
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