Tyman Regulatory News (TYMN)

TYMAN PLC

("Tyman" or the "Group" or the "Company")

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

Tyman plc, a leading international supplier of engineered components to the door and window industry, announces preliminary audited results for the year ended 31 December 2016.

Financial highlights

(1) CC LFL = Constant Currency Like for Like (see definition on page 55)

(2) 2015 comparatives for Underlying Profit before Taxation and Underlying EPS have been restated (see Alternative Performance Measures on page 55)

Statutory financial highlights

Business highlights

· Year of profitable growth assisted by contributions from strategic acquisitions and favourable exchange rates

· Integration of the three acquisitions completed in the year now well advanced

· Synergy targets for both Giesse and Bilco now expected to be achieved by the end of 2017 - significantly ahead of schedule

· Strong cash generation and tight control over working capital taking Leverage back below 2.00x at the year end

· Dividend increased by 20.0 per cent. to reflect improved cash generation and profitability

· Continued margin progression in AmesburyTruth despite limited volume growth

· Stronger second half for ERA with UK markets holding up better than expected post the EU Referendum

· Schlegel International Underlying Operating Margin increased to 10.0 per cent. due to contribution from Giesse and early delivery of synergies

2017 Trading to date

· Current year has started positively and in line with expectations across each of the Divisions

Louis Eperjesi, Chief Executive, commented:

"2016 was a further year of profitable growth for Tyman assisted by the completion of strategic acquisitions and the benefit of favourable exchange rates, underpinned by strong cash generation. The continued improvement in margins by the Divisions is evidence of the quality of our businesses and their leading market positions.

"The acquisitions of Giesse and Bilco filled two significant gaps in our product portfolio bringing the Group a high quality hardware brand for European markets and a meaningful presence in US commercial for the first time. On a smaller scale, the acquisition of Response has extended our electronic access capabilities in the UK. Progress on integration has been rapid and as a result both Bilco and Giesse will deliver their targeted synergy objectives by the end of 2017 - significantly ahead of schedule.

"2017 has started in line with our expectations across each of the Divisions. We expect that US residential and commercial markets will be stronger this year than they were in 2016. We expect to see a continuation of the gradual recovery in European markets however UK markets are likely to remain variable given lower levels of housing transactions and probable declines in real incomes.

"We expect that input costs will increase in the majority of our markets in 2017 and will look to manage input cost inflation where it arises through effective purchasing, price management and cost reduction programmes.

"Our self help initiatives across each of our Divisions, together with good visibility of synergy opportunities, means Tyman is well positioned for further progress in 2017."

Tyman will host an analyst and investor presentation at 8.30 a.m. today, Wednesday 8 March 2017, at the offices of Canaccord Genuity, 88 Wood Street, London EC2V 7QR.

The presentation will be webcast at the Group's website - www.tymanplc.com - and the audio conference call details are set out below.

Conference Call Dial In Details

Forthcoming dates

Notes to editors

Tyman plc is a leading international supplier of engineered components to the door and window industry. The Group's three Divisions - AmesburyTruth, ERA and Schlegel International - are market leaders in their respective geographies.

The Group employs over 3,500 people and operates facilities in 19 countries worldwide. Tyman is listed on the London Stock Exchange under the ticker TYMN.

Further information on the Group and the Group's products are available at the Group's website - www.tymanplc.com.

results overview

2016 was a further year of profitable growth for Tyman. The Group completed three strategically important acquisitions, developing its capabilities in European hardware with Giesse, in North American commercial with Bilco and in UK electronic access through Response. Despite markets being generally less favourable than expected, Tyman delivered increased revenue and profitability on both a reported and a constant currency like for like basis.

Cash generation in the year was very strong due to growth in profitability underpinned by tight control of working capital. Operating cash conversion improved to 105.9 per cent., despite continued investment in the balance sheet over the year, including gross capital expenditure at 1.32x depreciation. As a result, Leverage at the year end of 1.89x was comfortably back within the Group's core year end target range of 1.50x to 2.00x and the dividend has increased by 20.0 per cent. to 10.50p for the full year.

ROCE improved by a further 130 bps to 13.8 per cent. as the Group continues to make progress towards its medium term target of a ROCE of 15 per cent..

2017 Priorities

The Group's key priorities for 2017 are an extension of the themes we have developed over the past few years and include:

1. Integration

The completion of the integrations of Giesse and Bilco into their respective Divisions along with accelerated implementation of the synergy plans outlined at the time of acquisition.

2. Footprint

The start of the second phase of the AmesburyTruth footprint project with construction now under way of the Division's third centre of excellence in Statesville, North Carolina.

Construction and fit out of ERA's new West Midlands facility consolidating three existing distribution facilities onto a single site.

Further evaluation of the Schlegel International footprint following the acquisition of Giesse.

Tyman's aim remains to ensure that each Division operates from safe, modern and flexible facilities that are able to manage the increasing demands of their respective customer bases. The Group's footprint needs to be appropriate for the medium term needs of the business, taking into account opportunities for near shoring of those products best made or sourced close to the point of consumption.

3. Intra group collaboration

Encouraging strong communication, consistency of approach and standards of excellence across each of the Divisions with a particular emphasis in 2017 on health and safety, risk management, cross selling and supply chain.

4. Health and safety

Renewing the Group's commitment to the health and safety of its employees through increased employee training, the development of safer working practices, necessary capital investment and sharing of best practice across Divisions.

5. Financial objectives

Sustained margin improvement, working capital discipline and cash generation along with continued expansion in the Group's average return on capital towards the committed medium term target of 15.0 per cent..

Input cost inflation pressures in 2017 will be managed through a combination of effective purchasing, price management and cost reduction programmes.

6. Self help initiatives

Continuing with the Group's well established self help initiatives to improve the businesses; in particular in the areas of new product development, people, supply chain and capital projects with a focus on automation and lean manufacturing to ensure Tyman differentiates itself from the competition and continues to grow market share.

7. M&A

Pursuing the Group's active acquisition programme, prioritising hardware and seals businesses in Europe and select emerging markets together with commercial hardware businesses in North America and elsewhere.

Outlook

The current year has started in line with expectations across each of the Divisions.

The outlook for the US market appears positive for 2017 with encouraging permit levels for single family construction coming into the year and the Division expects that repair and remodelling markets will show more meaningful growth this year. Residential markets in Canada are expected to remain challenging for AmesburyTruth in 2017, given the strength of the US Dollar, although permit levels for single family homes may indicate some improvement in the underlying market.

Commercial markets are expected to show growth in the US and Canada and AmesburyTruth's commercial platform is now well established to take advantage of opportunities as they arise.

While UK markets held up better than expected in the second half of 2016, the likelihood of falling real incomes and lower levels of housing transactions in 2017 may impact general consumer confidence.

Accordingly, ERA's core expectation for 2017 remains that UK and Irish markets will be flat to down with further cost inflation coming through due to the relative weakness of Sterling. As in previous years, input cost inflation will be managed through a combination of effective purchasing, price management and cost reduction programmes.

Schlegel International expects 2017 will see further growth for the Division's EMEAI and Asia Pacific businesses. Latin American markets are expected to remain challenging but may show some modest improvement.

OPERATIONAL REVIEW

AMESBURYTRUTH

Markets

US residential

US residential markets saw further growth in new build starts and completions during 2016. Seasonally adjusted starts increased by 10.3 per cent. to 1.3 million units and completions by 7.4 per cent. to 1.1 million units per annum with single family starts and completions increasing by 5.6 per cent. and 8.3 per cent. respectively.

Repair and remodelling was softer in 2016 than in recent years with the NAHB RMI sentiment index averaging 54 compared with 57 in both 2014 and 2015 and the LIRA index increasing by 6.9 per cent..

The value of residential construction put in place in the US increased by 3.6 per cent. to US$473.3 billion (2015: 13.4 per cent.) and the Division believes that the residential door and window market in the US increased by a similar percentage during the year.

US commercial

US commercial markets continued to grow in 2016 with the value of non-residential construction put in place increasing by 4.6 per cent. to US$708.2 million (2015:7.7 per cent.).

Canadian market

Canadian housing starts were broadly flat year on year with slight growth in single family starts offset by declines in multifamily. The value of Canadian non-residential construction put in place was broadly flat year on year.

Performance

Trading performance for AmesburyTruth was subdued in 2016 with a relatively strong first quarter not sustained through the balance of the year. Like for like Dollar Revenue was marginally ahead of 2015, with pricing actions and modest volume growth in larger US accounts being offset by volume declines in both Canada and smaller US accounts, where the Division has lost some less profitable market share.

Bilco Revenue for the full year increased by 5.7 per cent., with strong year on year growth seen in US commercial and, for the period under ownership, was slightly down at US$28.9 million, principally reflecting phasing of order patterns. Export Revenue for AmesburyTruth was in line with 2015.

Despite the small improvement in like for like Dollar Revenue, like for like Underlying Operating Profit increased by 4.6 per cent. demonstrating the success of the Division's focus on margin management and pricing, while the like for like Underlying Operating Margin increased to 19.1 per cent. (2015: 18.4 per cent.), as the Division continues to make progress towards its 20.0 per cent. Underlying Operating Margin target.

Reported Revenue in 2016 for the Division increased by 22.4 per cent. to £291.3 million (2015: £238.0 million). Reported Operating Profit increased by 25.9 per cent. to £54.8 million (2015: £43.5 million) assisted by the strengthening of the US Dollar year on year and the initial contributions from the Giesse and Bilco acquisitions. The reported Underlying Operating Margin is slightly lower than the like for like equivalent, reflecting the lower margin of the Bilco business before synergy benefits start to come through.

Progress against 2013 strategic priorities

In 2013 AmesburyTruth set out its key strategic priorities for the first three years of the then newly created Division:

1. to develop a meaningful position in the US commercial market;

2. to increase the Division's share of the Canadian market; and

3. to extend the Division's residential patio door market share.

US commercial

On a pro forma basis, including a full 12 months of commercial sales for Bilco and Giesse, US commercial revenue in 2016 was approximately US$66.0 million (2013: US$15.0 million) compared with the 2013-16 plan target of US$70.0 million. AmesburyTruth now has the appropriate platform for growth in the US commercial market with recognised brands, a significantly broader product offering and a defined route to market. Over the next three years the Division will grow and develop its commercial business still further through organic growth and further bolt on acquisitions.

Canada

On a pro forma basis, including a full 12 months of sales for Bilco, Revenue generated in Canada in 2016 was US$42.4 million (2013: US$36.0 million), compared with the2013-16 plan target of US$51.0 million. The Canadian market has performed less strongly over the period than was expected and the AmesburyTruth product offer has become progressively less price competitive for Canadian customers purchasing in US Dollars. The Division still believes that Canada offers opportunities for profitable growth when markets recover, particularly with Bilco as part of the portfolio, and will consider ways to better serve the Canadian customer base.

Patio door

AmesburyTruth's patio door business generated Revenue of US$50.7 million in 2016 (2013: US$34.0 million), compared with the stretching 2013-16 plan target of US$60.0 million. The Division has made good progress over the period, increasing its overall share of the patio door segment of the residential market and, with a number of patio door products in development, is confident that this segment of the business will continue to show above market growth.

Footprint project

AmesburyTruth made further progress in the year with the North American footprint project and the first phase of the project will complete by the end of March 2017. Phase One has involved the build out of the Division's existing site in Juarez, Mexico; the construction of a new 150,000 sq. ft. facility in Sioux Falls, South Dakota; and the closures of two existing sites in Sioux Falls and Canton, South Dakota.

The Juarez site, which operates as a Maquiladora, now employs approximately 680 people, compared with c. 200 at the start of 2015, and is operating as a full service manufacturing unit with competencies such as metal forming, spring winding, die casting and injection moulding all taking place on site. Manufacturing output in Juarez was increased gradually throughout 2016 and the facility is now operating at target production levels. The duplicate manufacturing runs that were required in 2016 to support the expansion in Mexico ceased by the year end.

In recent months there has been increased scrutiny of manufacturing businesses with Mexican operations supplying product into the US. Firm proposals concerning the terms of future trade between Mexico and the US have yet to be brought forward and the Division will closely monitor any proposed changes that may adversely impact the status, economics or logistics of operating in Mexico through a Maquiladora facility.

The significant majority of AmesburyTruth's products are manufactured in the US where the Division has intentionally retained manufacturing redundancy of those products currently made in Mexico. This redundancy could, if required, be utilised to support customers in the US.

The new Sioux Falls site became operational at the start of 2017 and is responsible for the manufacture of window balances, a variety of door and window hardware, as well as acting as the distribution hub for Giesse products in North America.

Since the year end the closed Sioux Falls site has been returned to the landlord and the freehold of the Canton site has been listed for sale.

Phase Two of the project commenced in November 2016 with the construction of a new 240,000 sq. ft. facility in Statesville, North Carolina. The build out of this facility is expected to complete by the end of 2017 and will form the third of the Division's four centres of excellence.

The AmesburyTruth ERP project, which is a precursor to the delivery of the North American footprint project, completed two further implementations during the course of 2016.

Footprint project financials

(1) The Division expects to realise cash proceeds of up to US$5.0 million from disposals of capital assets as part of the footprint project which will be offset against the gross capital expenditure of the project

Cash costs incurred during 2016 in connection with the footprint project were lower than expected, principally due to project phasing. The Division now expects a higher proportion of future cash costs associated with the project will be written off as incurred rather than capitalised.

The Division continues to target cumulative P&L savings from the footprint project of US$10.0 million from 2020.

Bilco and Giesse North America

The integration of Bilco is progressing to plan with a number of back office and procurement initiatives completed under the leadership of a dedicated integration team. Notable wins for Bilco in 2016 included projects to provide sidewalk doors in Mexico City and the Gulf and flood tight doors to the New York City transit authority.

The progress on integration of Bilco means that AmesburyTruth now expects to achieve the targeted US$2.5 million of pre tax cost and revenue synergies during 2017; some two years earlier than expected at acquisition.

In the period under ownership, Bilco saw sustained strong performance from its US commercial offering; however the strength of the Dollar led to weaker export sales. In residential the second half of the year was slower than the first, reflecting the more difficult US residential trading environment during the second half of 2016.

The Giesse North America facility was closed during the year and distribution of Giesse products is now managed from the Sioux Falls facility. The Giesse business grew significantly ahead of the market in North America following acquisition, with Revenue increasing by approximately 25.2 per cent. from a low base compared with the equivalent period in 2015.

Outlook

The outlook for the US market appears positive for 2017 with encouraging permit levels for single family construction coming into the year and the Division expects that repair and remodelling markets will show more meaningful growth in 2017. Residential markets in Canada are expected to remain challenging for AmesburyTruth in 2017, given the strength of the US Dollar, although permit levels for single family homes may indicate some improvement in the underlying market.

Commercial markets are expected to show growth in the US and Canada and the Division's commercial platform is now well established to take advantage of opportunities as they arise.

2017 initiatives for AmesburyTruth include completion of the integration of Bilco together with delivery of the committed synergies. The second stage of the Divisional footprint project has now commenced and the Division is conducting a review of how best to serve AmesburyTruth's smaller customers.

ERA

(1) 2015 comparative includes Revenue (£11.3 million) and Underlying Operating Profit (£1.3 million) attributable to EWS up to the date of disposal. 2015 LFL Revenue and Underlying Operating Profit were £66.7 million and £10.3 million respectively.

Markets

2016 saw continued growth in UK new build construction with residential housing starts increasing by 5.0 per cent. in the year to 154,000 units; still 15 per cent. below the March 2007 peak. The CPA estimates that private housing RMI, which comprises the substantial majority of the market, grew modestly during the year overall; although the Division believes that the window and door improvement portion of the market was flat to down.

Demand patterns varied significantly through the year in the UK; with modest growth in the first quarter being offset by a gradual slow down in the lead up to the EU Referendum. In the immediate trading period after the EU Referendum there was a noticeable hiatus in the market; however demand stabilised over the summer months and volumes into the market largely held up over the balance of the year.

Business performance and developments

On a like for like basis, excluding Response Electronics from the current year and EWS from the prior year, Revenue increased by 3.7 per cent. principally due to the impact of pricing and surcharge actions year on year. Like for like Underlying Operating Profit increased to £11.6 million from £10.3 million in 2015, with the Underlying Operating Margin benefitting from good cost control over the year and the drop through of pricing.

On a reported basis, Revenue in the ERA Division decreased by 8.1 per cent. and reported Underlying Operating Profit was flat year on year, reflecting the impact of the 2015 disposal of EWS.

The devaluation of Sterling against a number of major currencies in 2016, combined with rising raw material costs, increased the unhedged landed costs of Far Eastern manufactured components significantly. Over the course of the year the index Sterling cost of the ERA basket of components increased by some 24.3 per cent.. To mitigate this impact, the Division implemented a price increase in the first half of the year and a currency surcharge in the second half of the year. In the second half of 2016 the Division had the benefit of currency hedges put in place prior to the EU Referendum that will not repeat in 2017.

The OEM channel saw encouraging volume growth in the UK of 2.2 per cent. with continued strong performance from the Division's bifold hardware range and increased sales of more recent product introductions such as the Invincible cylinder lock.

For the first time in a number of years during 2016, ERA showed improved performance in the distribution channel with new listings won with a number of customers. Distribution remains a meaningful opportunity for ERA and will continue to be a focus for the Division in 2017 given the strength of the ERA, Response and Fab & Fix brands, the expansion of ERA's electromechanical security ranges and the number of established distribution routes to market that exist in the UK.

Ventrolla acquired a further two franchises during 2016 bringing the total number of franchises under direct ownership to ten. Revenue for 2016 was in line with 2015, principally due to joinery capacity constraints, with a year end order book some 23.3 per cent. higher than at December 2015.

Ventrolla has evolved its business model in recent years, adding the in-house manufacture of new timber windows to its established renovation offering and participating in an increasing number of larger scale commercial projects. The significant increase in demand for Ventrolla's joinery products has required a move to larger premises in Q1 2017.

The acquisition of Response has allowed the Division to consolidate its electromechanical offering under a common branding hierarchy with clear distinctions between the ERA trade and retail brands. A new distribution agreement has been signed with Lightwave RF, a smart home automation business, and the Division has made encouraging progress in raising the profile of the ERA and Response brands within the retail channel.

The Division's online portal, ERA Everywhere, was successfully launched during the year and is being used by increasing numbers of OEM customers.

Delays in completing the purchase of the land earmarked for the construction of the new ERA facility in the West Midlands meant that contractors started work later than originally expected. As a result, construction and fit out of the new facility is now expected to take the majority of 2017 to complete, with full occupancy scheduled for the first quarter of 2018. The new facility will allow the Division to consolidate three existing distribution warehouses onto a single site incorporating a test centre, showroom and offices as well as light manufacturing and assembly capabilities.

UK Commercial

Until 2016, Tyman's UK and Ireland business was predominantly residential with only limited sales into the commercial market. The acquisitions of Bilco and Giesse have brought to Tyman extensions to the Group's existing product range that have commercial applications and the development of a meaningful commercial offering for the UK market is now underway.

Since the year end the Group has acquired Howe Green, a UK manufacturer of engineered floor and ceiling access hatches sold into the commercial and infrastructure markets. In the year ended 31 August 2016, Howe Green reported Revenue of approximately £3.0 million.

UK and Ireland outlook

While UK markets held up better than expected in the second half of 2016, the likelihood of falling real incomes and lower levels of housing transactions in 2017 may impact general consumer confidence.

Accordingly, the Division's core expectation for 2017 remains that UK and Irish markets will be flat to down with further cost inflation coming through due to the relative weakness of Sterling. As in previous years, the impact of input cost inflation will be managed through a combination of effective purchasing, price management and cost reduction programmes.

The Division has a number of new products under development, including extensions to the electromechanical range, and will continue to focus on expansion of the distribution channel.

SCHLEGEL INTERNATIONAL

Markets

EMEAI

European markets sustained their gradual recovery in 2016 with encouraging growth seen in the majority of markets and the Division's key Southern region continuing to expand. Eastern Europe was the only European region that did not grow in 2016, principally due to contraction in the two biggest construction markets of Turkey and Russia.

Middle East construction markets saw limited growth as a function of the low oil price; however Indian markets continued to grow.

China and Asia Pacific

Despite slowing GDP growth, Chinese construction markets expanded in 2016 as previously commissioned projects moved towards completion. There was modest growth in the majority of other Asia Pacific construction markets.

Latin America

Latin American construction markets remain relatively subdued. The Brazilian construction market continues to be challenging and the Argentinian market was flat across the year as a whole, despite a strong first quarter following the relaxation of exchange controls at the end of 2015.

Performance

Schlegel International's reported Revenue increased to £94.6 million (2015: £37.4 million) reflecting the initial contribution of Giesse to the Division and strong sales performance in the first ten months of ownership, together with the beneficial impact of foreign exchange translation. On a constant currency, like for like basis, Revenue in the year decreased with continued recovery in demand for seals in Europe being somewhat offset by difficult market conditions in Brazil and slow trading in Australasia.

Underlying Operating Profit increased to £9.4 million (2015: £1.6 million) with the Underlying Operating Margin expanding to 10.0 per cent. (2015: 4.2 per cent.) as the Division made significant progress towards its mid-teens Underlying Operating Margin target, principally due to the higher profitability of the acquired Giesse business and the early delivery of synergies.

Aggregate Group Revenue in EMEAI for the year increased by approximately 4.1 per cent. with improvement seen in most regions other than Eastern Europe and a strong performance in the Middle East. As expected, growth in the second half of the year for EMEAI was slower than the first due to the high volume of projects delivered in the first half of the year and restocking by certain distribution customers which did not repeat in the second half.

In China the Division changed the route to market for Giesse products, working with a smaller number of partner distributors to target the premium end of the Chinese market. As a consequence, while there was only small aggregate Revenue growth in China year on year, profitability was enhanced. Performance in Australasian markets was disappointing and the Division has made a number of changes to the commercial structure as a consequence.

Latin America recorded high levels of local currency Revenue growth with performance in Argentina enhanced by significant local price inflation and distributor restocking somewhat offset by continued declines in volumes in Brazil. Profitability in Latin America was flat year on year, principally due to the challenging Brazilian market.

Schlegel International launched two new Giesse products in 2016 - the Chic handle and the Ultra hinge ranges - which have seen encouraging interest in a number of markets and the Division is making good progress with development of the next generation of sealing products. The Division's capital investments in the year include the automation of certain Giesse manufacturing processes, the refurbishment of foam seal ovens in the UK and the start of a project to migrate the existing Schlegel businesses onto the Giesse ERP system.

Integration of Giesse

Schlegel International increased significantly in size and scale as a result of the acquisition of Giesse. The Division made rapid progress during 2016 with its integration initiatives such that the first phase of integration was completed by the year end; around six months ahead of schedule.

The first phase of integration included the establishment of a functional reporting structure under a single executive team; simplifying the legal and financing structure of the Division; and consolidating certain functions such as sales and marketing, finance, procurement and new product development.

During the year, a number of site rationalisation initiatives were completed. A Divisional headquarters was established at the Giesse site in Bologna, Italy and five facilities were closed. In each case operations were transferred to other Group facilities.

In aggregate €2.4 million (£1.9 million) of synergy benefits were recorded as a consequence of the acquisition of Giesse in 2016, including €0.5 million of synergy benefits recorded below Underlying Operating Profit. The Group now expects that the committed €4.0 million of synergies will be delivered by the end of 2017, some twelve months ahead of schedule.

The formal transfer of the Giesse Gulf trade and assets to Schlegel International completed on 31 August 2016. As the economic risks and rewards of ownership were transferred to Schlegel International on 8 March 2016, the results of the Giesse Gulf business have been consolidated in the Group's results since that date.

2017 integration initiatives include further consideration of the Divisional footprint, the formal launch of the Division's integrated European salesforce and further cost saving initiatives.

Outlook

Schlegel International expects 2017 will see further growth in the Division's EMEAI and Asia Pacific markets; Latin American markets are expected to remain challenging but may show some modest improvement.

The second phase of integration is now underway and the Division is confident that the targeted €4.0 million of synergies relating to the acquisition of Giesse will be delivered earlier than planned by the end of 2017.

FINANCIAL REVIEW

INCOME STATEMENT

Revenue and profit

Reported Group Revenue increased by 29.5 per cent. to £457.6 million (2015: £353.4 million) assisted by initial contributions from the three acquisitions completed in the year and favourable exchange. On a constant currency, like for like basis, Group Revenue increased by approximately 0.9 per cent. year on year.

Reported Gross Margin improved by 275 bps to 36.5 per cent. (2015: 33.8 per cent.), benefitting from higher gross margins in the Giesse business and pricing initiatives, offset in part by the weakness of Sterling impacting the ERA Division.

Underlying Administrative Expenses increased to £97.5 million (2015: £68.0 million), reflecting the enlarged size and geographic reach of the Group. Corporate costs in the year were well controlled at £6.0 million (2015: £5.3 million), with the increase due to higher headcount and share-based payments.

Underlying Operating Profit increased by 35.7 per cent. to £69.8 million (2015: £51.4 million), and by 5.1 per cent. on a constant currency like for like basis. The Group's Underlying Operating Margin increased by 70 bps to 15.3 per cent. (2015: 14.6 per cent.). Pricing actions increased Underlying Operating Profit year on year by £7.7 million. These more than offset negative productivity movements of £3.7 million that principally arose from temporary manufacturing inefficiencies related to footprint projects, and general inflationary increases of £2.5 million.

Underlying Profit before Taxation increased by 37.6 per cent. to £62.1 million (2015 restated: £45.1 million) and increased by 5.0 per cent. on a constant currency like for like basis. Reported Profit before Taxation increased by 88.6 per cent. to £29.4 million (2015: £15.6 million).

Materials and input costs

(1) 2016 materials cost of sales for raw materials, components and hardware for overall category

(2) Average 2016 tracker price compared with average 2015 tracker price

(3) Spot tracker price as at 31 December 2016 compared with spot tracker price at 31 December 2015

Raw material costs remained relatively subdued in 2016 with average prices across most commodities lower than in 2015. On a spot basis, aluminium and oil derivatives were both more expensive at the end of 2016 and there are clear indications that commodity cycles have turned. As a consequence, raw material prices are expected to be higher in most of the Group's markets during 2017.

The UK basket of Far East Components has seen a significant increase in the unhedged landed costs of products in the year with the landed costs of product being 24.3 per cent. higher than at the end of 2016. Further details on the mitigating actions taken by the ERA Division are set out in the ERA Operational Review.

The impact of input cost inflation in 2017 on the Group will continue to be managed through a combination of effective purchasing, price management and cost reduction programmes.

Exceptional items

As announced in March 2015 and reported in previous periods, footprint restructuring principally relates to directly attributable costs incurred in the ongoing North American footprint project. The Group expects the North American footprint project will conclude by 2020. Included in the £2.7 million exceptional charge are £0.8 million releases of surplus restructuring provisions relating to the closure of the Gistel and Taliana operations of Schlegel International.

M&A and integration costs of £3.0 million relate to the legal, financial, taxation and consultancy costs associated with the three acquisitions announced during the period, including certain costs incurred in connection with the integration of the acquired businesses.

Write-off of inventory fair value adjustments of £5.7 million is a non-cash adjustment relating to the IFRS 3 requirement that finished goods held in inventory must be revalued to their market value on acquisition. £4.7 million relates to inventory acquired in the Giesse acquisition and £1.0 million to Bilco. Response is a distribution business and as a result the equivalent inventory revaluation is not material.

This uplift in book value is considered to be of a one-off exceptional nature and is of a magnitude that would distort the underlying trading results of Giesse and Bilco in the financial year. Accordingly, the uplift in value of the inventory acquired with the Giesse and Bilco acquisitions that was sold in the 2016 financial year, has been written off as exceptional. This treatment of the revaluation of finished goods acquired on acquisition as exceptional has been consistently applied to each of the Group's acquisitions in recent years.

Profit on disposal of business relates to the net deferred consideration for EWS received in 2016. Property provision releases and disposals of £0.2 million comprises surplus onerous lease provisions released during the year.

The 2015 redundancy and restructuring exceptional item principally comprised costs incurred in the restructuring of the ERA Division during the 2015 year in anticipation of the consolidation onto a single site now expected to complete by the end of Q1 2018.

Exceptional items comprise £5.3 million of costs cash settled in the year (2015: £3.1 million) and £5.6 million of non-cash costs (2015: £3.1 million).

These items are regarded by the Group as exceptional as they are significant and non-recurring in nature.

Finance costs

Net finance costs increased to £7.8 million (2015: £6.9 million). Interest payable on bank loans, private placement notes and overdrafts increased to £7.8 million (2015: £6.1 million) reflecting interest charges incurred on higher drawdowns made in the year as well as the finance charges relating to bank borrowings acquired with the Giesse acquisition.

Non-cash movements charged to net finance costs in the year include amortisation of capitalised borrowing costs of £0.4 million (2015: £0.4 million), a gain on the revaluation of fair value currency hedges of £0.3 million (2015: loss of £0.2 million), and pension interest cost of £0.5 million (2015: £0.4 million).

Income from short term bank deposits increased to £0.5 million (2015: £0.2 million) and Underlying net finance costs increased by £1.4 million to £7.7 million (2015 restated: £6.3 million).

Interest rates on borrowings

The Group's average cost of funds and margin payable over the year has decreased by 70 bps to 3.3 per cent. (2015: 4.0 per cent.) reflecting negative EURIBOR rates assumed on higher Euro borrowings drawn down in the year and increased exposure to variable rates following the maturity of interest rate swap contracts in March 2016.

Interest rate swap contracts

A proportion of the Group's borrowings are held at fixed rates via interest rate swap contracts. At the year end the notional value to swap of the Group's outstanding borrowings under the revolving credit facility was 14.2 per cent. (2015: 88.1 per cent.). The weighted average fixed rate of the swap contracts was 1.7 per cent..

At 31 December 2016, the Group held interest rate swap contracts amounting to a fair value liability of £0.3 million (2015: £0.1 million). During the year, a fair value loss of £0.2 million (2015: fair value gain £0.2 million) was considered effective and recognised directly in other comprehensive income.

Forward exchange contracts

At 31 December 2016, the Group's portfolio of forward exchange contracts at fair value amounted to a net asset of £0.5 million (2015: £0.2 million). The notional value of the portfolio amounted to £12.5 million, comprising US$ and Chinese Renminbi forward exchange contracts with notional values of US$7.5 million and RMB55.0 million respectively. These contracts have a range of maturities up to 3 July 2017.

During the year, a fair value gain of £0.3 million (2015: fair value loss £0.2 million) was recognised directly in the income statement. As set out in the Alternative Performance Measures section, these items have been excluded from the Group's definition of "Underlying".

Taxation

The Group reported an income tax charge of £8.6 million (2015: £7.9 million), comprising a current tax charge of £11.4 million (2015: £9.7 million) and a deferred tax credit of £2.8 million (2015: £1.8 million).

The Underlying tax charge was £18.1 million (2015 restated: £12.6 million), representing an effective Underlying tax rate of 29.2 per cent. (2015 restated: 27.9 per cent.).

During the year, the Group paid corporation tax of £12.7 million (2015: £8.9 million) which equates to a cash tax rate on Underlying profit before taxation of 20.4 per cent. (2015: 19.7 per cent.).

Earnings per share

Basic Earnings Per Share increased by 162.1 per cent. to 11.98 pence (2015: 4.57 pence). Diluted Earnings Per Share increased to 11.93 pence (2015: 4.55 pence).

Underlying Earnings Per Share increased by 31.5 per cent. to 25.41 pence (2015 restated: 19.33 pence). Underlying Diluted Earnings Per Share increased to 25.31 pence (2015 restated: 19.24 pence). The increase reflects the improvement in Underlying Operating Profit offset by increases in finance costs for the year.

CASH GENERATION, FUNDING AND LIQUIDITY

Cash and cash conversion

The Group generated Operational Cash Flow in the year of £73.9 million, an increase of 69.3 per cent. (2015: £43.7 million) after adding back £8.3 million (2015: £4.7 million) of exceptional costs cash settled in the year, £3.0 million of which were accrued in prior years. Free cash flow in the year increased significantly to £46.0 million (2015: £23.9 million).

Operating Cash Conversion in the year was 105.9 per cent. (2015: 84.9 per cent.) reflecting good control over working capital and lower than expected capital expenditure.

Bank facilities and US private placement notes

The total facilities available to the Group are as follows:

Following the acquisition of Giesse, the Group retained certain Giesse banking facilities. At 31 December 2016, the remaining facilities have a total value of €3.6 million.

Liquidity

At 31 December 2016 the Group had gross outstanding borrowings of £217.7 million (2015: £113.2 million), cash balances of £40.9 million (2015: £30.0 million) and committed but undrawn facilities of £46.5 million (2015: £135.1 million) as well as potential access to the uncommitted £60.0 million accordion facility.

Underlying Net Debt at the year end was £176.7 million (2015: £83.2 million). Under IFRS, which reduces gross debt by the unamortised portion of finance arrangement fees, net debt at 31 December 2016 was £175.6 million (2015: £81.6 million).

Covenant performance

Calculated covenant performance consistent with the Group's banking covenant test

The Group continues to retain significant headroom on its banking covenants.

Over the year, Leverage increased by 0.54x to 1.89x (2015: 1.35x), largely driven by the material increase in borrowings to finance the purchase of Giesse and Bilco. Leverage reduced significantly over the second half of the year from an estimated 2.35x on completion of the acquisition of Bilco and at the year end was comfortably within the Group's core year end target range of 1.50x to 2.00x.

Interest Cover increased over the year to 11.41x from 10.19x in 2015, reflecting negative EURIBOR rates assumed on significantly higher Euro borrowings drawn down in the year and increased exposure to variable rates arising following the maturity of interest rate swap contracts in March 2016.

BALANCE SHEET - ASSETS AND LIABILITIES

Working capital

(1) The fair value of working capital items assumed at the acquisition date less IFRS 3 exceptional inventory fair value adjustments

At the year end trade working capital, net of provisions, was £87.7 million (2015: £55.7 million). Of the increase, £25.4 million relates to trade working capital assumed on acquisition, £10.9 million to exchange movements offset by a £4.3 million net cash inflow (2015: net cash outflow of £1.6 million) of trade working capital across the year.

Inventories on the balance sheet increased by £24.7 million to £70.7 million (2015: £46.0 million). Of the movement in the year, £19.3 million relates to inventories recognised from acquisitions, offset by the £5.7 million post-acquisition write-off of inventory fair value adjustments.

Trade receivables increased by £25.8 million to £55.3 million (2015: £29.5 million). Bad debts written off in the year by the Group as a percentage of Revenue was negligible (2015: 0.1 per cent.).

Trade payables increased to £38.3 million (2015: £19.8 million) with £14.5 million relating to acquisitions made during the year and £3.7 million to exchange movements.

Capital expenditure

Gross capital expenditure increased to £15.4 million (2015: £11.8 million) or 1.32x depreciation (2015: 1.50x) as the Group continued the programme of targeted capital investment across each of the Divisions. Capital expenditure was lower than expected coming into the year, reflecting phasing on projects and the deferral of expenditure on the ERA footprint project. Intangible asset expenditure totalled £2.8 million (2015: £2.9 million) and principally related to the continuing investment in the AmesburyTruth ERP system.

Goodwill and intangible assets

At 31 December 2016, the carrying value of the Group's goodwill and intangible assets was £480.0 million (2015: £340.5 million). Of the movements in the carrying values in the year, £90.7 million arose from the acquisitions made during the year. As a result of the marked deterioration of Sterling against major currencies in the year, most of the £68.6 million exchange movement arose as a result of the translation of the underlying US Dollar and Euro-denominated intangibles into the Groups functional currency at the year end.

Amortisation of intangible assets during the year was £22.7 million (2015: £20.0 million).

Cash Generating Units

The Group's CGUs have been defined as each of the Group's three operating Divisions. In the opinion of the Directors, the Divisions represent the smallest groups of assets that independently generate cash flows for the Group consistent with the approach adopted in 2015.

The key change to the Schlegel International CGU in 2016 was the acquisition of Giesse. The integration of Giesse into Schlegel is now at an advanced stage with a single IT, New Product Development and sales and marketing management structure. In addition, significant footprint consolidation has been implemented with sites in Italy, Spain and Brazil.

Similarly, both the Giesse North American business and the Bilco business have been substantially integrated within the existing AmesburyTruth commercial business within such that cash flows are no longer generated independently.

Consequently, the Directors consider it appropriate to continue to define the Group's CGUs as each of the Group's three operating divisions.

Pensions and post-retirement medical benefits

At 31 December 2016, the Group's gross pension and post-retirement medical benefit obligations under IAS 19 were £52.7 million (2015: £25.4 million). Of the increase in the year, £19.8 million related to retirement benefit obligations assumed as a result of the Bilco and Giesse acquisitions and £6.8 million related to exchange movements. The net unindemnified pension and post retirement obligation payable by the Group at the year end was £16.1 million (2015: £9.9 million).

The AmesburyTruth schemes are closed to new entrants and post-retirement healthcare benefits are capped. As at 31 December 2016, Bilco's net retirement benefit obligations amounted to US$1.3 million (£1.0 million) however the net amounts payable under the Bilco retirement benefit obligation are fully recoverable from and indemnified by the vendors of Bilco with a proportion held in escrow.

The Italian schemes relate to TFR termination obligations payable to employees of the Group's Italian operations. Italian employers are required to make provision for a severance package to their employees equivalent to 6.9 per cent. of each employee's gross annual salary, revalued on the basis of 75.0 per cent. of inflation plus a fixed rate of 1.5 per cent. during the period of accrual. Upon termination of employment, the employer is obliged to pay a lump sum to the employee. As at 31 December 2016, the Group's TFR termination obligations amounted to £3.1 million. TFR termination obligations are unfunded.

Cash contributions made to the schemes during the year were £0.9 million (2015: £0.9 million). Benefit payments to scheme members were £1.6 million (2015: £1.2 million).

BALANCE SHEET - EQUITY

Shares in issue

At 31 December 2016, the total number of shares in issue was 178.6 million (2015: 170.1 million). On 21 June 2016 the Group issued 8,478,128 shares by way of a placing with institutional investors to reduce balance sheet gearing and provide structural headroom on the Group's banking facilities following the Bilco and Giesse acquisitions. At the year end, the Group had 0.5 million shares in Treasury (2015: 0.5 million).

The basic weighted average number of shares at the year end was 173.0 million (2015: 168.2 million). The diluted weighted average number of shares was 173.8 million (2015: 169.0 million).

Employee Benefit Trust purchases

At the year end the Tyman Employee Benefit Trust held 1.0 million shares (2015: 1.3 million). On 9 March 2016 the Trust purchased 658,976 shares in Tyman plc at a total cost of £1.9 million in order to satisfy certain share awards vested in March 2016 as well as future obligations under the Group's various share plans.

Dividend

A final dividend of 7.50 pence per share (2015: 6.09 pence), equivalent to £13.3 million (2015: £10.3 million), will be proposed at the Annual General Meeting. The total dividend declared for the 2016 financial year is therefore 10.50 pence per share (2015: 8.75 pence), an increase of 20.0 per cent. over 2015. This equates to a dividend cover at the top end of the Group's target range of 2.00 - 2.50x.

The ex-dividend date will be 20 April 2017 and the final dividend will be paid on 19 May 2017 to shareholders on the register on 21 April 2017.

Only dividends paid during the year have been charged against equity in the 2016 financial statements. In aggregate £15.6 million (2015: £14.6 million) of dividend payments, representing 34.1 per cent. of 2016 free cash flow, were made to shareholders during 2016.

At 31 December 2015, the Parent Company's total reserves available for distribution to shareholders were £198.9 million. Total dividends paid during 2016 utilised approximately 7.8 per cent. of the estimated reserves available for distribution at the beginning of the year.

OTHER FINANCIAL MATTERS

Returns on Acquisition Investment

See Alternative Performance Measures on page 55

Giesse has made a strong contribution in the first ten months of ownership and looks well positioned to exceed the target return threshold within two years of acquisition.

At the year end Bilco had been owned by the Group for six months and no material synergy benefits were derived from the Bilco acquisition in 2016. Bilco's ROAI is expected to increase during 2017 as synergy benefits start to be realised.

Currency

Currency in the consolidated income statement

The principal foreign currencies that impact the Group's results are the US Dollar, the Euro, the Australian Dollar and the Canadian Dollar. On average in 2016 each of these currencies was materially stronger against Sterling.

Translational exposure

(1) Impact of other currencies is immaterial

(2) Underlying Operating Profit impact

(3) Defined as the approximate favourable translation impact of a 1c decrease in the Sterling exchange rate of the respective currency on the Group's Underlying Operating Profit

The net effect of currency translation caused Revenue and Underlying Operating Profit from ongoing operations to increase by £39.2 million and £7.1 million respectively compared with 2015. This result is driven by a combination of the enlarged size of the Group in the US and Europe following the acquisitions of Giesse and Bilco, as well as the depreciation of Sterling against a number of major currencies in the year.

Transactional exposure

Divisions that purchase or sell products in currencies other than their functional currency will potentially incur transactional exposures. For purchases by the Group's ERA Division from the Far East, these exposures are principally Sterling/US Dollar or Renminbi. For purchases by Schlegel International's Australian business from the US and the Far East, these exposures are principally Australian Dollar/US Dollar or Renminbi.

The Group's policy is to recover adverse transactional currency movements through price increases or surcharges. Divisions typically buy currency forward to cover expected future purchases for up to around six months. The objective is to achieve an element of certainty in the cost of landed goods and to allow sufficient time for any necessary price changes to be implemented.

In 2016, the transactional impact of the weakness in Sterling against the US Dollar and Renminbi on the reported profits of the ERA Division was approximately £1.5 million (2015: £1.5 million). This was however mitigated to a large extent by hedging. In 2016, when comparing the hedge rates achieved against the spot rates, the benefits of hedging was approximately £1.7 million.

The Group's other transactional exposures generally benefit from the existence of natural hedges or are immaterial.

Currency in the consolidated balance sheet

The Group aims to mitigate the translational impact of exchange rate movements by denominating a proportion of total borrowings in those currencies where there is a material contribution to Underlying Operating Profit. The Group's banking facilities allows for funds to be drawn in a number of different currencies.

Alternative Performance Measures

A detailed description of the APMs used by the Group is included in the definitions on page 55.

In 2016 the APMs were applied and calculated consistent with the equivalent calculations made in 2015 other than the definition of Underlying Interest which now excludes gains and losses on the fair value of derivative financial instruments.

In the opinion of the Directors, the inclusion of gains and losses on the fair value of derivative financial instruments creates unnecessary volatility in the relevant APMs which does not reflect the true underlying performance of the business.

In 2016 this adjustment has the effect of decreasing the Group's Underlying Profit before Taxation by £0.3 million and the Group's Underlying Earnings Per Share by 0.15p. The 2015 comparatives have been restated which increases the 2015 Underlying Profit before Taxation by £0.2 million and the 2015 Underlying Earnings Per Share by 0.08p.

Reconciliation of statutory Profit before taxation to Underlying Profit after taxation:

2017 SUMMARY GUIDANCE

Interest payable on borrowings for the full year under existing facilities is expected to be c. £8.5 - £9.5 million. The actual amount payable will be dependent on Leverage and the currency of borrowing. The non-cash amortisation of capitalised borrowing is expected to be c. £0.4 million.

Exceptional costs are expected to be c. £5.0 - £7.0 million reflecting the restructuring associated with footprint projects across all the three Divisions and further integration and synergy costs associated with the acquisitions. The majority of these costs will be cash settled in 2017.

The Underlying tax rate for Tyman in 2017 is expected to be c. 30.0 - 31.0 per cent. reflecting the larger proportional contribution to Group taxable profits derived from higher tax jurisdictions. The final Underlying tax rate for the year will principally depend on the Group's geographical mix of taxable profits. 2017 cash taxation rates are expected to be higher than in 2016 but should still be below the Group's Underlying tax rate.

Core maintenance and investment capital expenditure for the year for the Group is expected to be c. £12.5 - £15.0 million. Capital expenditure costs associated with footprint projects in 2017 across the three Divisions are expected to total c. £8.0 million.

Trade working capital trough to peak for the year is expected to be c. £15.0 million - £20.0 million with the working capital peak occurring around the half year.

Share purchases by the employee benefit trust to satisfy LTIP and other share plan awards are expected to be c. £1.0 - £2.0 million and the share-based payments charge will be c. £1.1 million.

Incremental synergy benefits expected to accrue in the year are estimated at c. US$2.5 million from the integration of Bilco and c. €1.6 million from the integration of Giesse. The North American footprint project is expected to deliver c. US$2.0 million of incremental benefit during the year.

Tyman plc

Consolidated income statement

For the year ended 31 December 2016

1 Before amortisation of acquired intangible assets, deferred taxation on amortisation of acquired intangible assets, impairment of goodwill, exceptional items, unwinding of discount on provisions, gains and losses on the fair value of derivative financial instruments, amortisation of borrowing costs and the associated tax effect. See definition on page 55.

Tyman plc

Consolidated statement of comprehensive income

For the year ended 31 December 2016

Items in the statement above are disclosed net of tax.

Tyman plc

Consolidated statement of changes in equity

For the year ended 31 December 2016

1 Other reserves are non-distributable capital reserves which arose on previous acquisitions.

2 Share-based payments include a deferred tax debit of £0.3 million (2015: £0.4 million) and a release of the deferred share-based payment bonus accrual of £0.2 million (2015: £0.1 million).

Tyman plc

Consolidated balance sheet

As at 31 December 2016

Tyman plc

Consolidated cash flow statement

For the year ended 31 December 2016

Tyman plc

Notes to the consolidated financial statements

For the year ended 31 December 2016

1. General information

Tyman plc and its subsidiaries is a leading international manufacturer and supplier of engineered components to the door and window industry. At 31 December 2016 the Group had 23 manufacturing sites in eight countries along with a further 18 sourcing and distribution sites across North America, Europe, South America, Asia and Australasia with its products being found in homes and buildings worldwide.

Tyman plc is a public limited company listed on the London Stock Exchange, incorporated and domiciled in England and Wales. The address of the Company's registered office is 29 Queen Anne's Gate, London SW1H 9BU.

2. Accounting policies and basis of preparation

The accounting policies in this section relate to the financial statements in their entirety. Accounting policies, including critical accounting judgements and estimates used in the preparation of the financial statements, that relate to a particular note are described in the specific note to which they relate. The accounting policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of Tyman plc have been prepared in accordance with International Financial Reporting Standards and IFRS Interpretations Committee as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRSs.

The consolidated financial statements are principally prepared on the basis of historic cost. Where other bases are applied, these are identified in the relevant accounting policy.

2.2 Going concern

The Group's strategic plan covers the period to 31 December 2019. The Group's banking and private placement facilities are committed beyond the period of the strategic plan and contain significant covenant headroom. The Group's published year-end leverage target of 1.50x to 2.00x is designed to ensure that the Group has structural headroom on its financial covenants as it comes into each financial year such that it could withstand a material downturn in its end markets and any normalisation of interest rates.

In order to satisfy itself that the Group has adequate resources for the future, the Board reviewed the Group's committed funding and liquidity positions, its ability to generate cash from trading activities and its ability to raise external funding in the future. The operational performance, the future plans for the Group and the risks facing the Group were also reviewed.

In performing its reviews, the Board acknowledges the current level of growth prospects in global markets and has considered various sensitivity analyses when assessing the forecast funding and headroom requirements of the Group. The Directors are therefore confident, on the basis of current financial projections and the banking facilities available, and after considering sensitivities, that the Company and the Group has sufficient resources for its operational needs that will enable the Group to remain in compliance with its financial covenants in its bank facilities for at least the next 12 months. Accordingly, the Directors continue to adopt the going concern basis.

3. Segment reporting

3.1 Accounting policy

3.1.1 Revenue recognition

3.1.2 Segment reporting

3.2 Segment information

The reporting segments reflect the manner in which performance is evaluated and resources are allocated. The Group operates through three clearly defined divisions, namely: AmesburyTruth, ERA and Schlegel International.

ERA comprises the Group's UK and Ireland hardware business, together with Ventrolla and Tyman Sourcing Asia. Schlegel International comprises all of the Group's other businesses outside of the US, Canada and Mexico as well as the two UK seal manufacturing plants. AmesburyTruth comprises all of the Group's operations within the US, Canada and Mexico as well as the UK Bilco operation.

Operations acquired through the Giesse acquisition are reported as part of the Schlegel International Division, apart from Giesse North America, which is reported in the AmesburyTruth Division. Operations acquired through the Bilco acquisition are reported as part of the AmesburyTruth Division. Response Electronics is reported as part of the ERA Division.

Centrally incurred functional costs that are directly attributable to a division are allocated or recharged to that division. All other centrally incurred costs and eliminations are disclosed as a separate line item in the segment analysis.

Each reporting segment broadly represents the Group's geographical focus, being the North American, UK and international operations respectively. In the opinion of the Board, there is no material difference between the Group's operating segments and segments based on geographical splits. Accordingly, the Board does not consider geographically defined segments to be reportable. For completeness, the Group discloses certain operating data for business carried out in the UK that is not accounted for in the ERA Division in notes 3.2.1 and 3.2.4.

The following tables present Group revenue and profit information for the Group's product segments, which have been generated using the Group accounting policies, with no differences of measurement applied, other than those noted above.

3.2.1 Revenue

Included within the Schlegel International and AmesburyTruth segments is revenue attributable to the UK of £18.9 million (2015: £12.0 million).

No revenue from any single customer exceeds 10 per cent of total revenue from continuing operations.

3.2.2 Profit before taxation

3.2.3 Operating profit disclosures

3.2.4 Segment assets and liabilities

1 Included within unallocated segment liabilities are borrowings of £173.9 million (2015: £111.6 million), provisions of £1.2 million (2015: £1.2 million) and other liabilities of £4.2 million (2015: £3.2 million).

2 Non-current assets exclude amounts relating to deferred tax assets.

Non-current assets of the Schlegel International and AmesburyTruth segments include £14.5 million (2015: £12.3 million) attributable to the UK.

3.2.5 Capital expenditure

3.2.6 Other disclosures

4. Exceptional items

4.1 Accounting policy

4.2 Exceptional items

Footprint restructuring

Footprint restructuring principally relates to directly attributable costs incurred in the ongoing North American footprint project, first announced in March 2015. The Group expects the North American footprint project will conclude by 2020. Included in the £2.7 million exceptional charge is £0.8 million releases of surplus restructuring provisions relating to the closure of the Gistel and Taliana operations of Schlegel International.

M&A and integration

M&A and integration costs of £3.0 million relate to the legal, financial, taxation and consultancy costs associated with the three acquisitions announced during the year, including certain costs incurred in connection with the integration of the acquired businesses.

Write-off of inventory fair value adjustments

Write-off of inventory fair value adjustments of £5.7 million is a non-cash adjustment relating to the IFRS 3 requirement that finished goods held in inventory must be revalued to their market value on acquisition. £4.7 million relates to inventory acquired in the Giesse acquisition and £1.0 million to Bilco. Response is a distribution business and as a result the equivalent inventory revaluation is not material. This uplift in book value is considered to be of a one-off nature and is of a magnitude that would distort the underlying trading results of Giesse and Bilco in the financial year. Accordingly, the uplift in value of inventory acquired with the Giesse and Bilco acquisitions that was sold in the 2016 financial year has been written off as exceptional. This treatment of the revaluation of finished goods acquired on acquisition as exceptional has been consistently applied to each of the Group's acquisitions in recent years.

Profit/(Loss) on disposal of business

Profit on disposal of business relates to the net deferred consideration for EWS received in 2016.

Redundancy and restructuring

The 2015 redundancy and restructuring exceptional item principally comprised costs incurred in the restructuring of the ERA division during the 2015 year in anticipation of the consolidation onto a single site now expected to complete by Q1 2018.

Property provision releases and disposals

Property provision releases and disposals comprises surplus onerous lease provisions released during the year.

5. Taxation

5.1 Accounting policy

5.1.1 Key source of estimation uncertainty: deferred tax assets

5.2 Taxation - income statement and other comprehensive income

5.2.1 Tax on profit on ordinary activities

The standard rate of corporation tax in the UK changed from 21.0 per cent to 20.0 per cent with effect from 1 April 2015. Accordingly, the Group's UK profits for this accounting period are taxed at an effective rate of 20.0 per cent (2015: 20.25 per cent).

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to 19.0 per cent from 1 April 2017 and to 17.0 per cent from 1 April 2020. The deferred tax balances have been remeasured to reflect these future changes of rate. The impact of the deferred tax rate change has not been material in 2016.

Taxation for other jurisdictions is calculated at rates prevailing in those respective jurisdictions.

5.2.2 Reconciliation of the total tax charge

The tax assessed for the year differs from the standard rate of tax in the UK of 20.0 per cent (2015: 20.25 per cent). The differences are explained below:

6. Earnings per share

6.1 Non-GAAP alternative performance measures accounting policy

6.2 Earnings per share

Basic earnings amounts are calculated by dividing net profit for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the diluted potential ordinary shares into ordinary shares. 

6.2.1 Weighted average number of shares

The weighted average number of shares was:

6.2.2 Non-GAAP alternative performance measure: underlying earnings per share

The Group presents an underlying earnings per share measure which excludes the impact of exceptional items, certain non-cash finance costs, amortisation of acquired intangible assets and certain non-recurring items. Underlying earnings per share has been calculated using the underlying profit before taxation and using the same weighted average number of shares in issue as the earnings per share calculation. See Alternative Performance Measures on page 55.

Underlying profit after taxation is derived as follows:

Underlying earnings per share is summarised as follows:

7. Goodwill and intangible assets

7.1 Accounting policy

7.1.1 Goodwill

7.1.2 Intangible assets

7.1.3 Impairment of goodwill and intangible assets

7.1.4 Critical accounting estimates and judgements: carrying amount of goodwill and intangibles

7.2 Carrying amount of goodwill

Goodwill is monitored principally on an operating segment basis and the net book value of goodwill is allocated by CGU as follows:

7.2.1 Impairment tests for goodwill

Assumptions

For the purposes of VIU testing, the Group's CGUs have been defined as each of the Group's three operating divisions. In the opinion of the Directors, the divisions represent the smallest groups of assets that independently generate cash flows for the Group consistent with the approach adopted in 2015.

In making this assessment, the Executive Directors have taken into account the three acquisitions made by the Group during the course of the year and the extent to which those acquisitions had been integrated into the respective Divisions. The key change to the Schlegel International CGU in 2016 was the acquisition of Giesse. The integration of Giesse into Schlegel is now at an advanced stage with a single IT, New Product Development and sales and marketing management structure. In addition, significant footprint consolidation has been implemented with sites in Italy, Spain and Brazil.

Similarly, during the year both the Giesse North America business and the Bilco business have been substantially integrated with the existing AmesburyTruth commercial business such that cash flows are no longer generated independently. Consequently, the Directors consider it appropriate to continue to define the Group's CGUs, for the purposes of VIU testing, as each of the Group's three operating divisions.

The recoverable amounts of CGUs are determined from VIU calculations. VIU is determined by discounting the future pre-tax cash flows generated from the continuing use of the CGU, using a pre-tax discount rate.

Cash flow projections, which have been reviewed and approved by the Board, are derived from three year forecasts produced by each division comprised of a detailed bottom up budget for 2017 and a forecast, based on the division's strategic plan for 2018 and 2019. Projections have been calculated for two further years out to 2021, derived from the 2019 forecast using prudent nominal growth rates. The assumptions used are 2.0 per cent sales growth, flat gross margins and 1.0 per cent growth in SG&A overheads. After, the five-year period cash flows were extrapolated using a long term growth rate of 1.5 per cent in order to calculate the terminal recoverable amount.

Discount rates are estimated using pre-tax rates that reflect current market assessments of the time value of money and the risk profiles of the CGUs.

The key assumptions used in the VIU calculations in each of the Group's CGUs at 31 December 2016 are as follows:

Impairment review results: 2016

A review of the carrying amount of goodwill and intangible assets across the Group has been carried out at year end in light of current trading conditions and future prospects. The annual impairment review did not result in any impairment losses being recognised in 2016.

The ERA CGU has significant headroom such that a permanent diminution of the VIU to below the carrying value of goodwill is considered by the Board to be highly unlikely.

AmesburyTruth is the CGU with the lowest relative VIU headroom. If the average EBITDA margin for AmesburyTruth for the five years from 2017 to 2021 was to decrease by 230 basis points from 22.0 per cent to 19.7 per cent and continue at that reduced level in perpetuity, the VIU headroom for AmesburyTruth would be zero. Given that the EBITDA margin achieved in 2016 was 21.8 per cent and considering the margin uplift potential of the footprint rationalisation project once completed, this scenario is unlikely to occur.

Schlegel International is the CGU with the smallest absolute VIU headroom. If the average EBITDA margin for Schlegel International for the five years from 2017 to 2021 was to decrease by 240 basis points from 13.4 per cent to 11.0 per cent and continue at that reduced level in perpetuity, the VIU headroom of Schlegel International would be zero. Given that the EBITDA margin in 2016 was 13.2 per cent and the margin uplift potential of the Giesse synergies once realised, this scenario is unlikely to occur.

Impairment review results: 2015

The closure of the manufacturing facility in Taliana, Spain (previously forming part of the Schlegel International CGU) gave rise to a £1.8 million impairment of goodwill. Impairment of goodwill is included in administrative expenses in the income statement in 2015.

7.3 Carrying amount of intangible assets

The amortisation charge for the year has been included in administrative expenses in the income statement and comprises £21.7 million (2015: £19.6 million) relating to amortisation of acquired intangible assets and £1.0 million (2015: £0.4 million) relating to amortisation of other intangible assets.

No impairments of intangible assets were recognised in 2016 and 2015.

8. Interest-bearing loans and borrowings

8.1 Accounting policy

8.2 Carrying amounts of interest-bearing loans and borrowings

There were no defaults in interest payments in the year under the terms of the existing loan agreements.

The carrying amounts of interest-bearing loans and borrowings are denominated in the following currencies:

8.2.1 Bank borrowings

Multi-currency revolving credit facility

On 10 June 2014, the Group entered into a banking facility of up to £240.0 million, comprising a £180.0 million committed multi-currency revolving credit facility and a £60.0 million uncommitted accordion facility. The banking facility extends to 10 June 2019 and is unsecured and guaranteed by Tyman plc and its principal subsidiary undertakings.

The Group has the following undrawn amounts committed under the multi-currency revolving credit facility:

Giesse borrowings

The Group acquired bank borrowings as part of the acquisition of Giesse (note 10). At 31 December 2016, the remaining facilities have a total value of €3.6 million, a carrying value of €2.2 million and an undrawn value of €1.4 million. These facilities have a maturity ranging between 2 December 2017 and 31 January 2020 and are unsecured.

8.2.2 Private placement notes

On 19 November 2014, the Group completed the issuance of a private debt placement with US financial institutions totalling US$100.0 million.