20645_Scapa_AR_160504

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FINANCE DIRECTOR’S REVIEW CONTINUED DIVIDENDS AND CAPITAL ALLOCATION The Board is recommending a 33% increase in the full year dividend with a final dividend of [2.0p] (2015: 1.5p). This proposed dividend reflects both our cash performance in the period and our underlying confidence in our business. Dividend cover (being the ratio of earnings per share before exceptional items, amortisation of intangible assets and legacy pension items) is 5.3 times. If approved at the Annual General Meeting the final dividend will be paid on [21 August 2016] to shareholders on the register on [24 July 2016]. Our objective is to maximise long-term shareholder returns through a disciplined deployment of cash. To support this we have adopted a cash allocation policy that allows for: investment in capital projects that support growth, regular returns to shareholders from our free cash flow, acquisitions to supplement our existing portfolio of business and an efficient Balance Sheet appropriate to the Company’s investment requirements. CONTINUED PROGRESSION ON POST-RETIREMENT BENEFITS The Group does not have any material defined benefit schemes in operation and the majority of the post-retirement benefit schemes for employees are defined contribution. The Group’s Balance Sheet carries pension deficits that relate to schemes that have been closed for many years, and some very small overseas leaving indemnities that are classed as defined benefit. Over recent years we have been very active in trying to address the cost and volatility of the legacy pension deficits. The current year is no exception; in the US we concluded a lump sums exercise offering deferred members an exit from the Scapa scheme, and in the UK we concluded a flexible benefits project and embedded that project in the ongoing options for retiring members. The two projects removed liabilities from the schemes at a cash cost lower than the accounting value. The resulting gain on the projects has been taken to the P&L as exceptional settlement credits of £1.0m for the US and £0.6m for the UK (2015: Nil). Overseas cash contributions were £0.8m (2015: £0.8m), and these contributions relate to leavers and not to a deficit repair schedule of payments. Expenses of £0.7m (2015: £0.7m) in relation to the pension schemes are reported through operating profit under IAS 19 (revised). During the year the fair value of the scheme assets decreased by £17.0m which was less than the decrease in total liabilities of £29.3m, resulting in an overall reduction of the deficit of £12.3m. The decrease in liabilities was driven by an increase in the rate used to discount the liabilities, being 3.45% (2015: 3.40%). The scheme’s investment strategy includes a portfolio of assets that are matched to the duration of the member liabilities. This strategy hedges the deficit from changes in bond yields that affect the discount rate and is reflected in the asset and liability movements in the current year. The overall deficit in all schemes was £27.5m (2015: £39.8m). The Group’s deficit has enjoyed another reduction in tough market conditions where many companies are seeing worsening IAS19 positions. Scapa has other pension projects in the pipeline and will continue to execute 30 SCAPA GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016
STRATEGIC REPORT projects that provide the right balance of member and Company benefits. In 2012 we put in place a CAR structure with the UK Trustee and continue to make contributions under this arrangement. In the year we made contributions of £3.7m (2015: £3.5m). We expect this contribution to continue and we have the objective of buying out the pension scheme within the next 10 years. SHAREHOLDERS’ FUNDS Shareholders’ funds increased by £15.9m to £77.7m (2015: £61.8m). Profit after tax was £6.1m (2015: £9.5m). The pension gain in the period was £17.9m (2015: £2.2m loss). Movements in equity relating to share issues, share options and share dividends netted to £0.4m (2015: £0.1m). Favourable currency impact on overseas asset values was £2.5m (2015: £4.8m) and tax credits booked directly to reserves were (£0.2m) (2015: £0.1m). RISK MANAGEMENT AND THE YEAR AHEAD Risk is managed closely and is spread across our businesses and managed to individual materiality. Our key risks have been referenced in this annual report primarily on pages [12 to 17], in the Chief Executive’s review and in the Audit and Risk Committee report on pages [39 to 41]. We have a code of conduct which is adopted internationally and reflects our ethical approach to business. The Board has considered all of the above factors in its review of going concern as described on page [57] and has been able to conclude the review satisfactorily. We choose key performance indicators that reflect our strategic priorities of investment, growth and profit. These KPIs are part of our day-to-day management of the business and in the year ahead we will focus on growth and value creation and the integration of our recent acquisition. In this way we aim to deliver continued value to shareholders. G S HARDCASTLE GROUP FINANCE DIRECTOR 24 MAY 2016 31 ANNUAL REPORT AND ACCOUNTS 2016 SCAPA GROUP PLC
Page 1 and 2: STRATEGIC VALUE CREATION SCAPA GROU
Page 3 and 4: FINANCIAL HIGHLIGHTS STRATEGIC REPO
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Page 7 and 8: STRATEGIC REPORT PERFORMANCE AND DI
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Page 15 and 16: STRATEGIC REPORT RISK MANAGEMENT MO
Page 17 and 18: PRINCIPAL RISKS AND UNCERTAINTIES S
Page 19 and 20: STRATEGIC REPORT Risk Accountable E
Page 21 and 22: VIABILITY STATEMENT STRATEGIC REPOR
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Page 25 and 26: STRATEGIC REPORT We continue to inv
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Page 29 and 30: STRATEGIC REPORT OUR STRATEGY 2015/
Page 31: STRATEGIC REPORT The underlying eff
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Page 39 and 40: CORPORATE GOVERNANCE of Group Finan
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Page 49 and 50: CORPORATE GOVERNANCE To assess the
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Page 53 and 54: REPORT OF THE REMUNERATION COMMITTE
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Page 57 and 58: CORPORATE GOVERNANCE Purpose Operat
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Page 61 and 62: DIRECTORS’ ANNUAL REMUNERATION RE
Page 63 and 64: CORPORATE GOVERNANCE The performanc
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GROUP ACCOUNTING POLICIES CONTINUED
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FINANCIAL STATEMENTS 2. SEGMENT ASS
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FINANCIAL STATEMENTS 9. TAXATION CO
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FIVE YEAR SUMMARIES FINANCIAL STATE
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COMPANY BALANCE SHEET SHEET AS AT 3
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STATEMENT OF ACCOUNTING POLICIES CO
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COMPANY INFORMATION FINANCIAL STATE
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