Registered No. 03690830
LUXFER HOLDINGS PLC
Annual Report and Financial Statements
31 December, 2016
LUXFER HOLDINGS PLC ¦ Anchorage Gateway ¦ 5 Anchorage Quay ¦ Salford ¦ M50 3XE
LUXFER HOLDINGS PLC
Contents
STRATEGIC REPORT
Principal Activities and Review of the Business
Strategy and Business Model
Group Key Performance Indicators (“KPIs”)
Review of the Year Ended 31 December, 2016
Environmental Matters and Corporate Social Responsibility
Principal Risks and Uncertainties
GOVERNANCE
The Board of Directors
Executive Management Board
Other Officers of the Company
Corporate Governance
Directors’ Report
Directors’ Interests and Related Party Transactions
Directors’ Remuneration Report
Remuneration Report
Directors’ Responsibilities Statement
FINANCIAL STATEMENTS
Independent Auditor’s Report to the Members of Luxfer Holdings PLC
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Company Balance Sheet
Company Cash Flow Statement
Company Statement of Changes in Equity
Notes to the Company Financial Statements
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Glossary of Terms
Unless the context in which we use the terms indicates otherwise, the following terms used in this report have
the following meanings:
ADR
ADS
AGM
Articles
American Depositary Receipt which evidences an ADS, being the uncertificated form in which the
Company’s ordinary shares are traded on the NYSE. One ordinary share is represented by one ADR.
American Depositary Share, the uncertificated form in which the Company’s ordinary shares are
traded on the NYSE. One ordinary share is represented by one ADS.
Annual General Meeting of the Company.
The Articles of Association of Luxfer Holdings PLC adopted by special resolution of the Company on
26 October 2011, effective from the date of the I.P.O.
Companies Act
U.K. Companies Act 2006.
FPI
Group
I.P.O.
NYSE
Foreign Private Issuer under the SEC registration rules.
Luxfer Holdings PLC and its subsidiaries.
The Initial Public Offering in the U.S. completed by Luxfer Holdings PLC on 9 October, 2012.
New York Stock Exchange.
£0.50 Ordinary shares
The Company’s ordinary shares of £0.50 each.
SEC
Year
LTiP
Securities and Exchange Commission of the U.S.
1 January, 2016, to 31 December, 2016.
Long-Term Umbrella Incentive Plan.
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LUXFER HOLDINGS PLC
STRATEGIC REPORT
Principal Activities and Review of the Business
The principal activity of Luxfer Holdings PLC is that of the holding company for the Luxfer Group.
Luxfer Group is an international materials technology company specialising in the design, manufacture and
supply of high-performance materials, components and gas cylinders to customers in a broad range of
growing environmental, healthcare, protection and speciality end-markets.
Our area of expertise covers the chemical and metallurgical properties of aluminium, magnesium, zirconium,
carbon and rare earths, and we have pioneered the application of these materials in many high-technology
industries. For example:
• We were the first to use rare earths to develop and patent a magnesium alloy (EZ33A) for use in high-
temperature aerospace applications such as helicopter gearboxes;
• We were at the forefront of the commercial development of zirconia-rich mixed oxides for use in
automotive catalysis;
• We were the first to manufacture a high-pressure gas cylinder out of a single piece of aluminium using
cold-impact extrusion;
• We developed and patented the superforming process and the first superplastic aluminium alloy
(AA2004) and were the first to offer preformed aluminium panel-work commercially;
• We have a long history of innovation derived from our strong technical base, and we work closely with
customers to apply innovative solutions to their most demanding product needs.
FORWARD-LOOKING STATEMENTS
This Strategic Report contains certain statements, statistics and projections that are, or may be, forward-looking. The accuracy and
completeness of all such statements, including, without limitation, statements regarding our future financial position, strategy, plans and
objectives for the management of future operations, is not warranted or guaranteed. These statements typically contain words such as
“believes,” “intends,” “expects,” “anticipates,” “estimates,” “may,” “will,” “should” and words of similar import. By their nature, forward-looking
statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. We undertake
no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Although we
believe that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be
correct. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by
such forward-looking statements. These factors include, but are not limited to:
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general economic conditions or conditions affecting demand for the services offered by us in the markets in which we operate, both
domestically and internationally, including as a result of the Brexit referendum, being less favourable than expected;
worldwide economic and business conditions and conditions in the industries in which we operate;
fluctuations in the cost of raw materials and utilities;
currency fluctuations and other financial risks;
our ability to protect our intellectual property;
the significant amount of indebtedness we have incurred and may incur and the obligations to service such indebtedness and to
comply with the covenants contained therein;
relationships with our customers and suppliers;
increased competition from other companies in the industries in which we operate;
changing technology;
claims for personal injury, death or property damage arising from the use of products produced by us;
the occurrence of accidents or other interruptions to our production processes;
changes in our business strategy or development plans, and our expected level of capital expenditure;
our ability to attract and retain qualified personnel;
restrictions on the ability of Luxfer Holdings PLC to receive dividends or loans from certain of its subsidiaries;
regulatory, environmental, legislative and judicial developments;
our intention to pay dividends; and
factors that are not known to us at this time.
The Group cautions that the foregoing list of important factors is not exhaustive. When relying on forward-looking statements to make
decisions with respect to the Group, investors and others should carefully consider the foregoing factors and other uncertainties and events.
Such forward-looking statements speak only as of the date on which they are made, and the Group does not undertake any obligation to
update or revise any of them, whether as a result of new information, future events or otherwise.
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LUXFER HOLDINGS PLC
Luxfer Group is comprised of two reporting divisions:
The Elektron Division focuses on speciality materials based primarily on magnesium, zirconium and rare
earths. We sell our products through two brands.
Under our Magnesium Elektron brand, we develop and, in almost all cases, manufacture advanced
lightweight, corrosion-resistant, heat-resistant and flame-resistant magnesium alloys, magnesium powders,
magnesium plates and rolled sheets, photo-engraving plates, magnesium products for biomedical
applications, seawater-activated batteries and soluble magnesium alloys. Our lightweight magnesium alloys
and components are used in the aerospace and automotive industries. Our magnesium powders are used in
the defence industry for countermeasure flares to protect aircraft against missile attack. Our photo-engraving
plates are used in the graphic arts industry. Our seawater activated batteries are used in military applications.
Our soluble magnesium alloys are used in the oil and gas industry. Luxfer Magtech Inc., acquired in 2014,
produces magnesium-based flameless heating pads for self-heating meals used by the U.S. military and
emergency relief agencies; an extensive line of self-heating meals, soups and beverages used by military and
civilian end-users; chemical agent detection kits and chemical decontamination equipment; and seawater
desalination kits.
Under our MEL Chemicals brand, we develop and manufacture speciality zirconium compounds for use in
automotive exhaust catalysts, industrial catalysts, ceramic sensors for electronics, structural ceramics, thermal
barrier coatings for aerospace, filters for water purification and dental ceramic crowns and implants.
The Gas Cylinders Division manufactures products made from aluminium, composites and other materials
using technically advanced processes. We sell our products through two brands.
Under our Luxfer Gas Cylinders brand, we develop and manufacture advanced high-pressure aluminium
and carbon composite cylinders used to contain medical oxygen, breathing air for fire-fighters and other first-
responders, clean-burning compressed natural gas for alternative fuel vehicles and power plants, hydrogen
for fuel-cell-powered vehicles, speciality gases used in microchip and electronics manufacturing, carbon
dioxide for fire extinguishers and beverage dispensing, inflation gases for aerospace, air and gas mixtures for
scuba diving, nitrous oxide to enhance engine performance in race cars and boats, and gases used in a
variety of general industrial applications.
Under our Superform brand, we design and manufacture lightweight aluminium, titanium and magnesium
panels superformed into highly complex shapes to a wide range of industries, including aerospace, specialist
automotive, rail transport and healthcare.
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LUXFER HOLDINGS PLC
Strategy and Business Model
Our business strategy is underpinned by the Luxfer Model, which consists of five key themes:
• Maintaining technical excellence relating both to our products and to the processes needed to make
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Building and maintaining strong, long-term customer relationships;
Selling high-performance products into speciality markets that require products with high-technology
content for which customers are willing to pay premium prices;
A commitment to innovation that generates products that are well-equipped to address opportunities
created by heightened chemical emissions controls, global environmental concerns, public health
legislation and the need for improved protection technology; and
Achieving high levels of manufacturing excellence by improving processes and reducing operating costs,
thus insulating us against competitors in low-labour-cost economies.
Each of our businesses has developed a strategic roadmap, based on a balanced scorecard methodology and
driven by the Luxfer Model.
These strategic roadmaps contain business-specific initiatives, actions and measures necessary to guide the
businesses towards achieving their financial objectives.
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LUXFER HOLDINGS PLC
Group Key Performance Indicators (“KPIs”)
The Group has used the following indicators of performance to assess its development against its strategic
and financial objectives during the year.
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Table 1: Group Key Performance Indicators20162015201420132012Operating performanceRevenue$m414.8 460.3 489.5 481.3 511.6 Net Revenue (Revenue excluding rare earth surcharge)$m414.8 460.3 487.3 472.9 471.1 Trading profit8$m35.3 42.3 44.8 59.2 68.5 Adjusted net income1$m24.7 29.5 30.9 39.8 44.7 Basic earnings per share7$0.830.601.091.271.84Adjusted net income basic earnings per share7$0.931.101.151.482.08Adjusted EBITDA2$m55.3 62.2 64.8 76.6 83.2 Revenue per employee$'000s246 270 290 300 337 Return on revenue3%8.5 9.2 9.2 12.3 13.4 Return on invested capital4%11.8 12.4 14.1 21.6 28.1 Financial performanceNet cash flow from operating activities$m29.2 52.8 23.0 37.1 69.0 Net debt to EBITDA9times1.9 1.5 1.6 0.5 0.3 Non-financial performanceNumber of days lost following accidents at work5work-days215 285 261 973 929 ISO 14001 environmental management system certification6%91.8 87.6 88.0 90.8 72.8 Economic indicatorsAverage aluminium price (three-month LME)$/tonne1,610 1,6741,8961,8872,049 Average U.S. dollar to GBP sterling exchange rate$:£1.34 1.52 1.65 1.57 1.59 Average Euro to GBP sterling exchange rate€:£1.22 1.38 1.27 1.18 1.23 3. Return on revenue is measured as trading profit divided by revenue.4. Return on invested capital is defined as the after-tax trading profit divided by shareholders’ equity plus net debt. 6. Percentage of Group revenue originating from ISO14001-certified businesses.7. Each American Depositary Share ("ADS") listed on the NYSE represents one ordinary share.8. Trading profit is defined as operating profit or loss before profit on sale of redundant site, changes to defined benefit pension plans and restructuring and other expense.9. Net debt is defined as cash and cash equivalents less non-current bank and other loans.Notes1. A non-GAAP measure for net income after tax, excluding certain non-trading items. Reconciliation to GAAP measure is disclosed in Note 10 of the consolidated financial statements. 2. A non-GAAP measure for earnings before interest, tax, depreciation and amortisation. Reconciliation to GAAP measure is disclosed in Note 2 to the consolidated financial statemements. 5. Under regulations issued by the Occupational Safety & Health Administration of the U.S. Department of Labor, the number of days absent for each accident is capped at 180 days.
LUXFER HOLDINGS PLC
Review of the Year Ended 31 December, 2016
2016 proved to be a challenging year for the Group, with trading performance below Company and market
expectations. The Group continues to address short term declines in revenue and profitability whilst also
focusing on the long-term position through the continued development of new product technologies. Group
revenue, net of exchange rate translation, fell by $32.1 million from the previous year.
Trading profit in 2016 of $35.3 million represented a 16.5% decrease over the reported $42.3 million in
2015. Net income for 2016 was $21.9 million and adjusted earnings were $24.7 million, compared to $29.5
million in 2015. The fall in profitability was a result of a weakness in trading in our Elektron Division, primarily
the magnesium business; however, our Gas Cylinders Division’s performance improved when compared to
2015, predominantly as a result of increased sales and cost reductions in the alternative fuel (AF) business.
Cash generated from operating activities was $29.2 million in 2016, down from $52.8 million in 2015, due to
movements in working capital and provisions alongside a decrease in EBITDA. The Group has continued to
return funds to its shareholders in the form of regular dividends each quarter throughout 2016 and through
the continued share buy-back program.
The ratio of Net Debt to adjusted EBITDA at the end of 2016 was 1.9x compared to 1.5x at the end of 2015,
mainly as a result of the decrease in adjusted EBITDA compared to 2015.
Translation Exchange Rates
The consolidated financial statements are presented in U.S. dollars. The two principal currencies used to
translate the results of non-U.S. operations are GBP sterling and the euro. In 2016, the GBP sterling was, on
average, significantly weaker against the U.S. dollar than in 2015, resulting in unfavourable movements when
translating the operating results of U.K. operations into U.S. dollars. The euro was also on average weaker
against the U.S. dollar than in 2015, resulting in unfavourable movements when translating the operating
results of European operations into U.S. dollars. The net effect was a loss of $13.4 million on revenue;
however, there was a gain of $1.6 million on operating profit when translating the operating results of non-
U.S. operations into U.S. dollars.
Revenue
On an IFRS reported basis, Group revenue for the 12-month period from operations was $414.8 million, a
decrease of $45.5 million from $460.3 million in 2015. Compared to 2015, revenue reflected a $13.4 million
loss from less-favourable average translation exchange rates. Thus, underlying revenue, net of exchange rate
translation, fell by $32.1 million. Reasons for the revenue change are discussed in detail by division, but in
general, there were lower sales of our automotive materials for catalysis and magnesium recycling services,
along with lower sales of U.S. defence-related products following cuts to U.S. defence spending. We did,
however, achieve higher sales in the AF market, which is still subdued by the low oil price and following on
from the launch of our SoluMag® alloy in 2015, sales of that have continued to improve throughout 2016.
Elektron Division revenue in 2016 was $189.0 million compared to $221.2 million in 2015. Exchange rate
translation differences were adverse by $6.5 million, and underlying revenue was $25.7 million, or 12.0%,
lower than 2015. Revenue was lower in the Division primarily due to reduced sales of automotive catalysis
materials, currently in transition to a new generation of technology, and a reduction in lower-margin
magnesium recycling services. In the second half of the year, sales of U.S. defence-related magnesium
products were depressed reflecting lower levels of U.S. defence spending. However, revenue from European
high-performance aerospace alloys and industrial catalysis chemical products increased, as did sales of our
new SoluMag® alloy. Photo-engraving revenue was impacted by de-stocking at distributors in the latter part
of the year, as we made a transition to selling direct to certain customers instead of through distributors. This
action will enable us to better support major customers and take cost out of the supply chain.
Gas Cylinders Division revenue was lower at $225.8 million compared to £239.1 million in 2015. Exchange
rate translation differences were adverse by $6.9 million, and underlying revenue was $6.4 million, or 2.8%
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LUXFER HOLDINGS PLC
lower than 2015. Revenue was lower in the Division largely due to depressed medical cylinder demand, in
part due to our customers reassigning stocks of cylinders between regions, rather than buying new cylinders.
On a positive note, the AF business continued to perform well with year-on-year growth and sales of industrial
cylinders also up. Superform sales were down slightly on 2015 due to lower forming sales as we run down old
contracts, but tooling sales on new long-term contracts have increased as a result of the new business won
with Ferrari and other prestige car manufacturers.
Cost of Sales and Gross Profit
The gross profit margin for 2016 of 22.5% was slightly down on 2015 at 22.6%.
The average LME price for aluminium was $1,609 per metric ton in 2016, a decrease of $65 per metric ton, or
3.8%, from the 2015 equivalent figure. Magnesium costs increased in 2016 compared to the previous year
with the average price of Chinese magnesium on a free on board basis being $2,197 per metric ton, a $57 per
metric ton increase in 2016 compared to 2015.
Distribution Costs, Administrative Expenses and Other Trading Items
The total of these costs in 2016 was $58.1 million, compared to $61.7 million in 2015. Administrative
expenses decreased by $1.8 million due to an exchange rate gain from our non-U.S. operations, partially
offset with a small underlying increase due to inflation. Distribution costs also decreased by $0.1 million, due
to an exchange rate translation gain from non-U.S. operations, reflecting increased levels of exports from the
U.K. to the U.S., which more than offset the lower sales activity in 2016. In 2016, there was a profit of $0.5
million attributable to the joint ventures and associates, compared to a loss of $1.2 million in 2015.
Trading Profit
Trading profit for 2016 was $35.3 million compared to $42.3 million for 2015, down 16.5%.
Elektron Division trading profit of $23.9 million in 2016 was a decrease of $9.8 million from $33.7 million in
2015. Changes in exchange rates used to translate divisional trading profit into U.S. dollars led to a $0.7
million translation loss in 2016. Favourable transaction rates increased profits by $1.8 million, and trading
profit at constant translation exchange rates therefore decreased by $10.9 million, or 31.3%.
The reduction in trading profit for the Elektron Division was primarily due to the challenges faced in the
magnesium business highlighted above. However, zirconium has held up well during the transition in
autocatalysis technologies, with trading profit being flat compared to the prior year, helped by the progress in
chemical catalysis.
There was an adverse variance of $11.0 million from 2015 due to changes in sales volumes and mix across
the division and other trading variances net of price changes were adverse by $0.4 million as a result of
reduced selling prices on our zirconium products, net of reduced raw material costs. Employment and other
costs decreased by a net $0.5 million, driven by cost-saving activities initiated in 2016.
Gas Cylinders Division trading profit of $11.4 million in 2016 was an increase of $2.8 million from $8.6 million
in 2015. Changes in exchange rates used to translate divisional trading profit into U.S. dollars led to a $0.2
million translation gain in 2016. Less-favourable transaction rates reduced profits by $2.1 million. Trading
profit at constant exchange rates therefore increased by $4.7 million or 70.1%.
Sales of aluminium cylinders fell across all markets, other than industrial, while composite cylinder unit sales
increased. Volume and sales mix variances had a total negative impact of $2.4 million compared to 2015,
although material costs and sales prices offset this, being favourable by $6.1 million.
Savings of $1.0 million in employment and other costs were achieved in 2016 through a reduction of
administrative headcount and various efficiency improvement projects.
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LUXFER HOLDINGS PLC
Adjusted EBITDA
Adjusted EBITDA, defined as profit for the period before taxation for the period, finance income (which
comprises interest received) and costs (which comprises, interest costs, IAS 19R retirement benefits finance
charges and the unwind of the discount on deferred contingent consideration from acquisitions), other income
/ (expense) from acquisitions and disposals of businesses, profit on sale of redundant site, changes to defined
benefit pension plans, restructuring and other (expense) / income, other share-based compensation charges,
loss on disposal of property, plant and equipment and depreciation and amortisation, was $55.3 million in
2016, a margin on sales of 13.3%, compared to $62.2 million and 13.5%, respectively, in 2015.
Operating Profit
During 2016, a net credit of $0.6 million was recognised following the sale of $10.0 million of U.S. deferred
pensioners liabilities to an insurer, and lump sum payments of $4.9 million offered to certain U.S. deferred
pensioners.
A profit of $2.1 million has been recognised in relation to the sale of the redundant Redditch site to a
company that specialises in remediating contaminated land.
Restructuring and other expenses were $2.2 million for the year, which included rationalisation costs of $0.4
million in the Elektron Division. In addition, we incurred $0.6 million of costs in our Elektron Division related to
patent infringement litigation against a competitor. The remaining charge of $1.2 million related to a
receivable impairment charge in relation to an aerospace customer that has entered Chapter 11 protection in
the U.S.
After these items, operating profit was $35.8 million, down from $37.9 million in 2015.
Net Acquisition and Disposal Costs
In 2016, we incurred a non-operating credit of $0.2 million compared to a $2.0 million charge in 2015. There
was a $0.5 million credit related to the remeasurement of deferred contingent consideration arising from the
Elektron Division’s acquisition of Luxfer Magtech where an element of deferred contingent consideration was
no longer payable due to the acquired business failing to achieve a profit trigger as at 31 December, 2016.
This was offset by a $0.3 million charge in relation to costs incurred on a potential acquisition which was
subsequently aborted.
Finance Costs
Net interest costs were $5.6 million in 2016 compared to $6.9 million in 2015. Costs were lower in 2016 as a
result of the refinancing exercise that was carried out during the year which led to a reduction in the interest
rates on the private placement loans. The IAS 19R retirement benefits finance charge was $2.1 million
compared to $3.0 million in 2015, as a result of the deficit being lower for the majority of 2016 than it was for
2015. In 2016, there was a $0.4 million charge in relation to the unwind of discount on the deferred
contingent consideration that arose from the acquisitions of Luxfer Utah and Luxfer Magtech in 2014.
Profit before Taxation
Our profit before taxation was $27.9 million in 2016, a 9.0% increase compared to the $25.6 million in 2015.
Our margin on profit before tax was 6.7% in 2016 and 5.6% in 2015.
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LUXFER HOLDINGS PLC
Taxation
In 2016, our tax expense was $6.0 million on profit before tax of $27.9 million. The statutory effective tax
rate was 21.5% on the profit before tax. Of the charge of $6.0 million, $3.7 million (13.3% effective rate)
related to current tax payable and $2.3 million (8.2% effective rate) was a deferred income tax charge. In
2015, our tax expense was $9.5 million on profit before tax of $25.6 million. The statutory effective tax rate
was 37.1% on the profit before tax. Of the charge of $9.5 million, $6.1 million (23.8% effective rate) related
to current tax payable and $3.4 million (13.3% effective rate) was a deferred income tax charge. In recent
years our statutory effective tax rate has been affected by various non-trading items. The statutory effective
tax rate for 2016 decreased to 21.5%. The 2015 effective tax rate was affected as nearly all of the $21.8
million of restructuring costs in the Gas Cylinders Division did not lead to a tax credit due to losses in AF
operations. The effective rate excluding the effect of these losses in 2015 was 22.6%.
Net Income for the Period
Net income for the period was $21.9 million, compared to $16.1 million in 2015. The increase can be
attributed to lower restructuring and other expenses, offset by a lower credit for changes to defined benefit
pension plans. Adjusted earnings, which excludes the after tax impact of non-trading items, was $24.7
million, down on the adjusted earnings for 2015 of $29.5 million.
Cash Flow
In 2016, net cash flows from operating activities decreased by $23.6 million to $29.2 million, from $52.8
million in 2015. There was a net working capital outflow of $7.6 million in 2016 compared to an inflow of $7.1
million in 2015, an unfavourable variance of $14.7 million. The decrease in inventories resulted in a cash
inflow of $4.5 million in 2016, a $1.5 million increase from a cash inflow of $3.0 million in 2015. There was an
outflow in receivables of $1.8 million in 2016, compared to an inflow of $5.0 million in 2015, an unfavourable
movement of $6.8 million. The average days taken to collect debt increased slightly in 2016 to 49 days,
compared to 46 days in 2015. There was also an outflow in payables of $10.3 million in 2016, an increase of
$9.4 million from the $0.9 million outflow in 2015. Payable levels reduced in the latter part of 2016, with
reduced purchasing of new raw materials, as a result of the decreased sales volumes. Lower average
indebtedness, coupled with the refinancing of our private placement loans, resulted in the net interest costs of
$5.6 million in 2016 being $1.3 million lower than the $6.9 million in 2015. The gain on the changes to
defined benefit pension plans of $0.6 million in 2016 and $18.2 million in 2015 were non cash. There was an
outflow in provisions of $2.6 million in 2016. The non-cash restructuring charges of $17.7 million incurred in
2015 did not recur in 2016; neither did the $1.2 million inflow from the sale of assets classified as held for
sale.
Net cash used in investing activities decreased by $6.1 million, or 28.8%, to $15.1 million in 2016 from $21.2
million in 2015. Capital expenditure in 2016 was $16.5 million, an increase of $1.2 million from the $15.3
million expenditure in 2015. In addition, we incurred $2.4 million of expenditure on intangibles in 2016. We
had an inflow of $3.0 million and $0.4 million respectively in relation to proceeds from the sale of the
redundant Redditch site and sales of property, plant and equipment. There was also $0.2 million received
from compensation for insured assets. Investment in joint ventures and associates was a $0.2 million inflow,
compared with a $4.2 million outflow in 2015. Interest income from joint ventures decreased to $0.3 million,
compared with $0.4 million in 2015. We had a net cash outflow of $0.3 million in relation to purchase of
businesses.
Net cash flows from financing activities decreased by $26.3 million to a $35.5 million outflow in 2016, from a
$9.2 million outflow in 2015. Cash outflows in respect of dividend payments to holders of our ordinary shares
were $13.3 million, $2.5 million up on 2015 as a result of the increase in the quarterly dividend from $0.10
per share to $0.125. Total interest paid on the borrowings was $6.4 million, down $0.2 million on the $6.6
million paid in 2015. Repayments of $8.5 million were made to the banking facilities, compared to $9.6 million
of drawdowns in 2015, a movement of $18.1 million. Following the approval of a share buyback program at
the 2014 Annual General Meeting, the purchase of 634,185 shares resulted in a cash outflow in 2016 of $6.3
million, compared with $1.9 million in 2015.
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LUXFER HOLDINGS PLC
Shareholder Equity and Borrowings
Shareholder equity as at 31 December, 2016, was $141.9 million, compared to $169.7 million at 31
December, 2015, the decrease being primarily attributable to the negative effect of translating non-U.S.
assets at the 2016 exchange rates and the remeasurement of defined benefit retirement plans. The Group
had gross debt of $121.0 million and net debt of $107.4 million as at 31 December, 2016. Invested capital,
defined as total shareholder equity plus net debt, was $249.3 million as at 31 December, 2016; this compares
to an equivalent figure of $264.4 million in 2015. The ratio of the return on invested capital (defined as
trading profit for the year, less notional tax, divided into invested capital) was 11.8% in 2016.
Future Developments
Over the year, we had a relatively encouraging first half, but the shortage of orders for magnesium-based
products, particularly defence-related, reduced consolidated results for the second half.
In the Gas Cylinders Division, we successfully restored profitability to the AF business from the losses of 2015,
despite the continuing market weakness caused by low oil prices. European medical demand remained
compressed throughout 2016, resulting in reduced European cylinder shipments. North American SCBA
demand finished flat compared to 2015, although with a stronger first half than second.
In the Elektron division, the profitability of our zirconium chemicals units was slightly improved as we
continued transitioning to new technologies. Sales of high-performance magnesium alloys, which had fallen in
2015 under the impact of lower helicopter build rates (weaker spending by defence and oil and gas
industries), stabilised. We made steady progress with our proprietary SoluMag® oil and gas alloy, selling $4m
of product into a difficult market and providing enhanced productivity to an important customer base. The
launch of Biotronik’s Magmaris scaffold, based on our SynerMag® alloy, was a major milestone.
Sterling appears to have currently settled at around 18% down on its value prior to the ‘Brexit’ vote in June.
We remain optimistic that exchange rates, which have been unhelpful in 2016, will be a significant benefit in
2017 and beyond.
New products and sales initiatives, arising from our strategic growth initiatives, are collectively expected to
generate a progressively meaningful contribution in 2017. These include the bioresorbable scaffold, other new
medical products and services, geographic expansion of Luxfer Magtech, and a step-change in the capacity of
our Superform business in the second half of the year.
We have seen some recovery in 2017 order cover for both military flares that use our atomised magnesium
powders and military meals that use our flameless heaters, with new awards or contracts covering 2017
requirements for these products having been placed by U.S. government agencies in Q4 2016. We have also
received improved forecasts from European customers for medical cylinders. While our order book is still
lower than normal in certain areas, management is confident that full-year 2017 adjusted earnings should be
restored to near the level achieved in 2015, which means at least 10% higher than 2016. We expect
that it will take at least until the second quarter of 2017 before we get the full benefit of new
contracts.
We expect 2017 capital expenditure to be in the range of $20 million to $24 million.
Based on the rates achieved in 2016 and our anticipated mix of profits across the globe, we expect our
effective tax rate to be approximately 25% in 2017.
Essential Contracts or Arrangements
Apart from our financing agreements, we do not have contracts or other arrangements which individually are
fundamental to the ability of the business to operate effectively.
10
LUXFER HOLDINGS PLC
Environmental Matters and Corporate Social Responsibility
Many of our corporate values are reflected in the Luxfer Model described on page 4 of this Strategic Report.
Helping Create a Greener World
One of our three strategic growth markets is ‘Environmental’. We produce materials used in automotive
catalysts to neutralise noxious gases. Our Isolux®, MELsorb® and Innotech products remove or neutralise
harmful chemicals from drinking water, effluent, body fluids or surfaces. Many of our materials, such as
magnesium alloys and superformed aluminium sheet, are in demand because they are lighter in weight than
alternatives, enabling users to improve fuel efficiency and reduce carbon emissions. In recent years we have
introduced a range of large high-pressure cylinders for the containment of cleaner alternative fuels such as
compressed natural gas and hydrogen.
Managing Environmental Impact
We, and our predecessor businesses, have been around for a long while, and a number of our sites have
been manufacturing at their locations for several decades, including during times when there was less
awareness about protecting the environment. Today we are very focused on minimising any on-going
environmental impact from our operations and we are also proactively and progressively clearing those legacy
issues that we acquired in 1996 with the businesses that now comprise the Luxfer Group. We estimate that
our expenditures on environmental matters could be approximately $0.3 million in 2017.
Other than for minor violations, the Group has neither created nor uncovered new environmental concerns in
more than a decade and we continue to strengthen our controls. All our major sites are expected to achieve
ISO 14001 certification to ensure environmental awareness and compliance.
14 of our 20 sites had achieved certification by the end of 2016. The Group has chosen the proportion of
sales revenue generated from ISO 14001-compliant sites as a non-financial key performance indicator, and
this figure has now reached 92%.
Our U.K. zirconium chemicals business and our U.K. magnesium alloys business come under the European
Union Regulation, Evaluation, Authorisation and Restriction of Chemicals (“REACH”) controls, which aim,
among other things, to provide a high level of protection of human health and the environment from the use
of chemicals, and to make manufacturers and importers responsible for understanding and managing the
risks associated with their use. As a manufacturer and importer, our chemicals business participates in several
REACH consortia (as member or lead member), under which manufacturers and importers of like substances
register them and work together to collect and collate specified information about those chemicals, which is
then used to assess any potential hazards or risks posed, and how those risks are best controlled.
The U.S. E.P.A. (United States Environmental Protection Agency) and a number of chemical companies are in
dispute over the chemical technicalities of the types of chemicals required to be registered under the Toxic
Substances Control Act 1976 (“TSCA”). The dispute is over the classification of chemical mixtures. Given we
manufacture mixed oxides, we are involved in this matter. We expect the matter to be resolved without any
major disruption in our supply chain, but there remains a risk that the dispute escalates to more formal legal
proceedings.
Managing Energy Use
Energy is a major requirement for the Group’s activities, which involve melting and forming metals, changing
the state of chemicals, and running heavy machinery. Our U.K. plants have signed up for the European-wide
ESOS programme aimed at minimising energy usage and we undertook baseline audits during 2016.
Our U.K. operations are regulated under the Carbon Reduction Commitment Energy Efficiency Scheme
(“CRC”). The scheme is designed to target CO2 emissions not already covered by Climate Change Levy
Agreements and the European Union Trading Emissions Scheme. The legislation requires organisations to
monitor and report on their energy usage and take action to reduce consumption. We are registered under
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LUXFER HOLDINGS PLC
the scheme. All of our U.K. operations participate in Climate Change Agreements, with the exception of our
gas cylinders plant, due to the nature of its cold-extrusion process.
Greenhouse Gas Emissions
Each business unit monitors its usage of the following:
Electricity (usually in KWh from utility bills);
Natural gas (usually in MMBTU from utility bills);
Propane (for fork-lift trucks from number of bottles used multiplied by capacity);
Cover gases (to prevent molten metal from oxidising from number of cylinders used multiplied by
capacity); and
Any other greenhouse gases used in the manufacturing process (from amount invoiced, delivered either
in bulk or in cylinders).
Other than for electricity, the conversion into equivalent CO2 tonnes is done using standard conversion factors
readily available from websites of, for example, DEFRA in the U.K. Broadly speaking, natural gas (and other,
pure gases) has a very similar CO2 equivalency no matter from where it is sourced.
For electricity, the CO2 equivalency depends on the power stations being used to generate it. Accordingly,
each business unit uses the ‘local’ equivalency factor published on official sites. For our U.S. businesses this is
available individually for each State on the U.S. Environmental Protection Agency website, and is updated
each year according to the mix of power-generation facilities in use. The CO2 equivalency factor for our
French business unit, for example, is much lower than that for those in the U.K., as France has a high
proportion of nuclear (‘zero-emission’ power plants), whereas the U.K. has a heavier mix of gas-powered and
coal-powered electricity generation.
Each business unit has a manager responsible for the collation of this data, which is collected centrally along
with other accounting information at year-end. The submissions from each business unit are aggregated, with
electricity usage being classified as ‘scope 2’, while natural gas and all other gases are classified as ‘scope 1’.
Year-on-year figures by business unit are used to identify any anomalies, while similar business units are also
compared to ensure consistency and understanding of the information.
The Greenhouse Gas (“GHG”) emissions statement below provides a summary of the Group GHG (carbon)
emissions for the year ended 31 December, 2016, compared to 2015.
We report on both Scope 1 and Scope 2 emission sources:
Scope 1 emissions: Direct emissions
from sources owned or operated by
the Group such as
Scope 2 emissions:
combustion of gas;
Indirect emissions attributable to the Group due to its consumption of electricity.
We do not collect details of emissions from travel.
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LUXFER HOLDINGS PLC
Greenhouse Gas Emission Statement
Baseline year
Full year 2016
Consolidation Approach
Operational control.
Boundary
Consolidated factories operated by us to manufacture Group products.
Emission factor data
source
U.K. sites: Conversion factors published by the Carbon Trust.
U.S. sites: Conversion factors published by the U.S. Environmental
Protection Agency for the individual State in which the site is situated.
Sites in other countries have used their relevant countries conversion
factor.
Intensity ratio
CO2 equivalent tonnes per $1 million of sales value ($1mSV).
Group Metric – Sales value $414.8 million in 2016 (2015: $460.3 million).
Greenhouse Gas Emission Source
2016
2015
(tCO2e) 1
(tCO2e/$1mSV)
(tCO2e) 1
(tCO2e/$1mSV)
62,707
153.2
65,881
143.1
43,011
105,718
105.1
258.4
45,683
99.2
111,564
244.3
Scope 1
Fuel combustion (natural gas
and propane) and operation of
facilities
Scope 2
Purchased electricity
Statutory total (Scope 1 &
2) 2
Notes:
1.
2.
Tonnes of CO2 equivalent.
Statutory carbon reporting disclosure required by the Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013.
Although our overall CO2 emissions fell by 5.2%, lower sales revenue in some markets and the effect of the
movement in exchange rates have resulted in poorer energy efficiency, so our CO2 sales per $million of sales
rose by 5.8%. At constant exchange rates, our CO2 sales per $million of sales rose by only 2.5%.
Industry Engagement
Our divisions are active members of relevant industry associations and standards bodies, both in Europe and
North America, where they have a positive influence variously as members and officers and technical
advisors. They often participate in, and chair committees within, those associations on technical and other
matters of interest or concern to their relevant industry, including standards, specifications and safety. These
organisations include the International Magnesium Association, the Chemical Industry Association, the Zircon
Industry Association, the Compressed Gas Association, the Metal Powder Producers Association, the British
Standards Institute, the Canadian Standards Association, the American Society of Testing and Materials, and
many others.
13
LUXFER HOLDINGS PLC
Our People
Employee Participation and Alignment of Employees’ Interests with the Interests of
Shareholders
All Employee Share Schemes
Since the end of 2013 we have offered an all employee share investment plan (“SIP”) to our U.K. employees,
and a substantial number of employees have taken up the opportunity to make contributions out of their pay
to purchase shares on a six-monthly basis under the plan. In 2014, we also established an employee stock
purchase plan (“ESPP”) under which our U.S. employees can accumulate contributions from pay over a six
monthly period to purchase shares. Both plans are set up under the relevant legislation in their country to
take advantage of any tax efficiencies offered by that legislation for the employees. We are investigating ways
in which we might, where cost-effective, offer the opportunity to purchase shares on a regular basis in
jurisdictions where we have smaller numbers of employees.
As far as reasonably possible, bonus arrangements are made available to motivate employees towards
financial, business and personal targets.
We also have a long-term incentive plan under which selected managers receive a grant of awards over
shares to encourage their retention in the Group and/or performance awards over shares where the targets
are designed to align the remuneration of managers with returns to shareholders and reward the achievement
of business targets and key strategic objectives.
Training and Development
The knowledge and skills of our people are key competitive advantages, and we endeavour to involve our
employees through regular local, divisional and Group communications and training.
We first launched a corporate management development programme in 2012 aimed at developing junior and
middle managers into future leaders. Those employees graduated in early 2015 and building on the success
of the programme we have launched a new two-year development programme for other selected junior and
middle managers who are due to graduate in 2017.
We have also implemented a Group-wide e-learning programme to provide training to employees to support
them in, and to promote compliance with, our Group compliance policies including, among other policies, our
Code of Ethics, Anti-Bribery, Competition and Whistleblowing polices.
In addition to the Group initiatives referred to above, training and development of our employees is carried
out in various different ways. Training of employees is undertaken on a business unit basis in areas where we
want to ensure compliance with regulation and encourage best practice such as in health and safety or in
specific areas to train, update and support employees in undertaking their jobs and on a divisional and cross
divisional basis to train functions within the Group. Training is delivered both from internal resources (where
available) and third party external resources as appropriate. Our divisions also have a commitment as part of
their own strategy maps to encourage and assist personal development of their employees. Both our
Magnesium Elektron and MEL Chemicals businesses in the U.K. have developed apprentice training schemes
in manufacturing and engineering.
Further information on employee policies, communication and engagement can be found in the Directors’
Report on pages 34 to 37.
At 31 December, 2016, the number of employees was as follows:
14
LUXFER HOLDINGS PLC
Employees *
Directors of Luxfer Holdings PLC
Senior Managers
Employees
Male
8
24
1,422
Female
-
3
250
*The Directors of Luxfer Holdings PLC include 6 independent Non-Executive Directors who are not employees of the Group and therefore this table will not fully reconcile to Note 6 of
the Group consolidated financial statements.
Health and Safety
We want our sites to be safe places to work so we closely monitor near-misses, injuries and lost-time
accidents (“LTAs”). We have chosen days lost from LTAs as a key performance indicator; see table on page 5.
We are pleased to report that 2016 has been a good year for safety. The 214 working days lost through
accidents in 2016 maintained the very significant improvements seen in 2015 and 2014 (285 and 261 days
respectively) compared to 2013 (973 days). The number of LTAs during the year was 18, which has increased
from 9 in 2015.
Customers and Suppliers
While we have multiple sourcing options in almost every area of the Group, our key suppliers are important to
us, and we have chosen them for their combination of quality, delivery performance and value for money. We
aim to pay them to terms and resolve any issues amicably.
We recognise our customers as the source of our success. Our aim is to build and sustain long-term
relationships based on mutual cooperation on design and high standards of quality and service. We work
closely in collaboration with our customers to find more innovative solutions to their needs for advanced
materials and products. Our focus is on demanding applications where our technical know-how and
manufacturing expertise combines to deliver a superior product.
Responsible Business Ethics
We expect our employees and associates to apply a high ethical standard in every aspect of business. We
have a corporate Whistleblowing Policy to facilitate reporting of failures to maintain these standards.
Our systems are designed to ensure compliance with all laws and regulations wherever we operate and we
have a number of Group and local policies to ensure compliance and best practice as appropriate. We actively
participate on many regulatory bodies that oversee or regulate industries to which we sell our products. We
have undertaken training on the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act, both European and
U.S. Competition law and other areas related to compliance which has been supplemented by the e-learning
training referred to earlier in this section.
All of our businesses are required to take into account the importance of human rights.
Corporate Giving and Engagement with the Community
Our business units are encouraged to support local causes, business-related charities and other community
support events through the donation of personal time and monetary contributions. For example, our U.S.
Luxfer Gas Cylinders and Superform businesses have for a long time made significant contributions to the
United Way charity through both corporate giving and individual employee fund raising activities and donation
of personal time.
The Group made charitable donations in 2016 amounting to $29,000 (2015: $44,000), consisting of a number
of small donations to various community, welfare, health, sport and educational charities local to the
businesses that make up the Group both in the U.K. and elsewhere. During 2016, our businesses continued
their links with universities and schools to develop young talent.
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LUXFER HOLDINGS PLC
Principal Risks and Uncertainties
Internal Controls and Risk Management
The Group has in place a comprehensive risk management programme designed to ensure that significant
and emerging risks are identified, assessed and managed effectively.
We operate to established procedures to identify key risks, evaluate their likelihood and size, and manage and
assess the effectiveness of controls to mitigate the impact and likelihood of these significant risks occurring.
Such a system can only provide reasonable and not absolute assurance against material misstatement or loss.
Our procedures are reviewed on an on-going basis as considered appropriate and cover both financial and
non-financial risks.
Below we describe the Group’s principal internal procedures for identifying, evaluating and mitigating risk
generally and in certain specific areas. We also discuss our principal risks and uncertainties.
Risk Management - Over the years the Company has developed and implemented a Risk Management
Process with the help of external advisors.
Our Risk Management Framework
On a self-certification and self-monitoring basis, with guidance from head office, local management
create a written risk profile for their business by identifying and evaluating the likelihood and
magnitude of their key operational, commercial and financial risks. At the same time action plans
are developed to mitigate or, where possible, eliminate identified risks;
Individual business and divisional risk factors are consolidated to form an overall risk profile for the
Group;
To enable it to review the effectiveness of the Group’s risk management and internal controls the
Board and the Audit Committee receives an annual report from the Head of Internal Audit on major
identified risks, the processes involved in their identification and controls in place to manage those
risks;
Any major new risk to the Group, arising or perceived during the year between reports, is identified
to and discussed with the Board at their regular Board meetings;
Training is undertaken locally and on a Group-wide basis to eliminate or mitigate certain identified
or perceived risks that may affect the Group or a business where relevant;
A range of Group policies to manage specific identified risks.
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LUXFER HOLDINGS PLC
Health and Safety - As an integral part of good business practice; the Group is committed to achieving and
maintaining high standards of health and safety for all its employees, contractors, visitors and all those who
may be affected by its operations.
The Main Elements in our Approach to Health and Safety Risk:
A Group health and safety policy with which all business units in the Group are required to
comply;
Health and safety is considered as an element in the Group’s corporate risk assessment;
A designated health and safety officer for each operating unit in the Group, appropriately trained
and responsible for health and safety matters and compliance with relevant legislation;
A report on site, and divisional, health and safety by local management as a permanent agenda
item at the regular business reviews undertaken by the Chief Executive Officer and the Group
Finance Director;
A designated member of the Executive Management Board to monitor, co-ordinate and report
upon the health and safety aspects of specific regions of the Group's international operations;
Quarterly reporting by the Chief Executive Officer to the Board on health and safety in the
quarter along with the reporting of any matter of which the Board should be aware between
reports as appropriate;
Periodic cross-audits between business units and regional periodic meetings of health and safety
officers from business units across the Group to provide an opportunity for best practice to be
shared. Recommendations resulting from audits are reported on and followed up at subsequent
business reviews with the Chief Executive Officer;
Risks identified on a site basis and appropriate training of employees undertaken;
External professional expertise is sourced as and when appropriate;
Three Group health and safety awards made annually to the site with the 'Best Overall Safety
Performance', the site with the 'Most Improved Safety Performance' and the 'Best Small Plant'.
All employees at the award-winning site participate in a reward.
Environment - The Group remains committed to a high standard of environmental management to ensure
legislative compliance across all operations.
The Main Elements in our Approach to Environmental Risk:
A designated member of the Executive Management Board to monitor, co-ordinate and report
upon the environment and environmental issues relevant to the Group and its activities for
specific regions of the Group’s international operations;
Each manufacturing site has a designated manager responsible for environmental matters who
has appropriate knowledge and expertise;
All manufacturing sites are required to comply with the Group Environmental Policy and their
site-specific environmental management system;
External expertise and advice is sought as necessary and appropriate;
The Group is committed to achieving ISO 14001 certification globally at larger manufacturing
sites, and the majority of these sites have now attained the certification, as have some smaller
sites;
All U.K. manufacturing sites requiring Integrated Pollution Prevention and Control (“IPPC”)
permits have attained them;
An appropriate environmental investigation and report for all new sites acquired by the Group.
17
LUXFER HOLDINGS PLC
Internal Financial Controls
The Key Controls Consist of:
The preparation of comprehensive monthly financial accounts, forecasts and reviews comparing
performance to budget with a summary submitted to and discussed with the Directors at regular
Board meetings;
Hedging policies approved by the Board and operated by a hedging committee chaired by the Group
Finance Director. The policy covers the Group’s exposure to, and management of, metal costs and
foreign exchange rates as appropriate. The Board also receives regular monthly reports on such
activities. Policies are reviewed periodically as circumstances dictate;
A Group Accounting Policies Manual and Group Authority Manual incorporating clearly defined
operating guidelines and procedures with authorisation limits set at appropriate levels requiring
proper, consistent and legally compliant financial management at all levels;
Regular performance reviews with divisional management carried out by the Chief Executive Officer
and the Group Finance Director at site;
An on-going annual programme to assess the design, implementation and operational effectiveness
of the internal controls structure and procedures for financial reporting based on the criteria set out
by the Committee of Sponsoring Organisations of the Treadway Commission in Internal Controls
Integrated Framework, to satisfy management’s attestation under Section 404 of the Sarbanes-Oxley
Act;
Under the supervision of the internal audit function, periodic internal audits carried out by Group
finance staff and internal audit co-sourcing, targeting pre-defined specific areas of financial controls
and reporting in any year on a rotational basis;
Self-certification by divisional management of the adequacy of, and compliance with, financial
controls.
Internal Audit - During 2016, the internal audit function among other things, continued to work on the
internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
As at 31 December, 2016, the two Executive Directors in their capacity as Chief Executive Officer and Group
Finance Director, have carried out an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures under the supervision and the participation of the Executive Management
Board, which is responsible for the management of the internal controls, and which includes the Chief
Executive Officer and the Group Finance Director. In accordance with the requirements of Section 404 of
Sarbanes-Oxley, and as included in the Form 20-F filed with the SEC, management conducted an evaluation
of the effectiveness of internal control over financial reporting based on the Internal Control – Integrated
Framework (the 2013 Framework) issued by the Committee of Sponsoring Organisations of the Treadway
Commission. As at 31 December, 2016, management has assessed the effectiveness of internal control over
financial reporting and has concluded that such internal control over financial reporting was effective. In
addition, there have been no changes in the Group’s internal control over financial reporting during 2016 that
have materially affected, or are reasonably likely to affect materially, the Group’s internal control over
financial reporting.
Treasury and Financial Risk - The Group operates a central treasury function that controls all borrowing
facilities, investment of surplus funds and management of financial risks. The Group also has a number of
financial risks. The management of these financial risks and mitigating actions are explained further in Note
27 of the Group consolidated financial statements.
18
LUXFER HOLDINGS PLC
We set out in the tables below our principal risks and uncertainties and how we seek to mitigate or eliminate
them.
Area of Risk
Mitigating Activity
Dependency on certain key markets – The Group
depends on certain end-markets, including automotive, self-
contained breathing apparatus, aerospace and defence,
medical and printing and paper. An economic downturn or
regulatory changes in any of these end-markets could
reduce sales. It is possible that all or most of these end-
markets could be in decline at the same time, such as
during a recession, which could significantly adversely
affect the results of our operations due to decreased sales.
The dramatic fall in oil prices has impacted our alternative
fuels end-markets, and has also reduced demand from the
oil and gas sector for products that use our materials, such
as helicopters.
Effect of external factors due to the global nature of
our business - Our global presence exposes us in the
countries in which we operate to economic conditions,
geopolitical risks, specific regulations and other external
factors, which could affect our operations. Following the
recent U.K. referendum decision to leave the European
Union (E.U.) the British Government will commence
negotiating the terms of the U.K.’s future relationship with
the E.U. from early 2017, expected to result in a formal exit
from 2019. Although those terms are unknown, it is
possible that there will be greater restrictions on imports
and exports between the U.K. and E.U. countries and
increased regulatory complexity. These changes may
adversely affect our operations and financial results.
Competition - Markets for many of the Group’s products
increasingly global and highly competitive,
are now
especially in terms of quality, price and service. The Group
could lose market share as a result of these competitive
pressures, which could negatively impact profit margins.
face potential
More generally, the Group may also
competition from manufacturers of products similar to the
Group’s aluminium and magnesium-based products using
other materials, such as steel, plastics or composite
materials.
The Group’s diverse product portfolio
reduces the risk of any one adverse
external economic factor impacting across
all of these end-markets; however, a range
of external factors could impact across the
majority or all of the Group’s end-markets.
To further mitigate this risk, the Group
continues
research and
development and to innovate, working
closely with its customers, to develop next
generation products in these end markets.
invest
to
in
The Group’s diverse product portfolio and
geographic spread reduces the risk of any
one external factor impacting across all
end-markets. The Group also closely
monitors geopolitical and global economic
developments in its markets and will be
closely monitoring
of
negotiations following the U.K.’s decision to
leave the E.U.
outcome
the
The Group continues to invest in new and
better products and aims to focus its
resources in speciality markets that need
high-performance products and a reliable
partner.
Protection and development of intellectual property
rights and changing industry requirements - As a
result of the nature of the competition faced by the Group,
its ability to remain profitable depends on its ability to
protect intellectual property and to invest in research and
development, which requires funding.
The Group seeks to protect its intellectual
property through patents and by reducing
the disclosure of commercially sensitive
information. It also invests long-term in
new
and manufacturing
processes and maintains this investment
through the business cycle.
products
19
LUXFER HOLDINGS PLC
Reliance on major customers - If the Group fails to
maintain its relationships with its major customers, or fails
to replace customers, or if there were reduced demand
from such customers or for the products produced by such
customers, it could reduce the Group’s sales and have an
adverse effect on the Group’s financial position. The
Group’s top 10 customers accounted for, in aggregate,
approximately 27% of Group revenue in 2016.
important, and
Long-term relationships with customers are
especially
the Group’s
operations work closely with customers to
ensure customer service is the best in the
industry and aim to support our customers
in their development of new products
through our own product innovations and
technical know-how.
Risks relating to interruption of operations - The
Group’s production facilities are located worldwide. Any of
its facilities could suffer an interruption in production,
either at separate times or at the same time, because of
various
including major
equipment failure. Although the Group carries insurance,
the cover on certain catastrophic events or natural
disasters, including earthquakes and certain other events,
is limited.
unavoidable
occurrences
The Group performs routine maintenance
on its production equipment on all its
manufacturing sites. These maintenance
programmes are carefully planned to keep
all plants operating at a high level of
efficiency, and to reduce the risk of
breakdowns and failure of equipment.
Health and Safety
is also a major
consideration in the operation of the Group
manufacturing facilities and is carefully
carries
monitored.
comprehensive
interruption
insurance.
business
Group
The
Effect of international currency markets - Changes in
foreign currency exchange rates or interest rates could
cause sales to drop or costs to rise. The Group conducts a
large proportion of its commercial transactions, purchases
of raw materials and sales of goods in various countries
and regions outside of the U.K., including the U.S.,
continental Europe and Asia. Changes in the relative
values of currencies can decrease the profits of the Group’s
operations through both the translation of profits into USD
or on import and export transactions.
The Group regularly enters into forward
foreign currency exchange contracts to
manage currency risks and a Hedging
Committee, overseen by the Group Finance
Director, monitors the implementation of
the Group’s hedging policy.
In the long-term the Group has sought to
recover the cost of increased commodity
and utility costs through price increases
and surcharges. The Group has sought to
provide
its customers with a stable
surcharge price on the increasing costs of
rare earths by buying forward rare earths
in bulk. Short term fluctuations in the
price risk on aluminium are mitigated by
agreeing fixed prices with the suppliers,
along with the use of LME derivative
contracts.
Increasingly, in recent years we have
included in our sales agreements an ability
to share cost increases with our customers.
in
that are used
raw materials and utilities
Exposure to fluctuations in raw material and utility
costs - The Group is exposed to fluctuations in costs of
the
to
manufacture its products and can incur unexpected cost
changes.
the
The primary raw material used
manufacturing of gas cylinders and superformed panels is
aluminium, and though our operations use specialist alloys,
their prices are pegged directly or indirectly to the quoted
London Metal Exchange prices for primary aluminium. This
makes the costs subject to speculative commodity cost
changes, as well as fundamental supply and demand cost
pressures. We have also experienced significant cost
fluctuations in other raw material costs such as primary
magnesium, carbon fibre, zircon sand and rare earths.
The Group’s operations also buy and sell goods in regional
markets that may be protected by tariff barriers. Changes
in these tariffs could have an adverse impact on the
profitability of the operations. In addition, the Group’s
energy costs, which constitute another major input cost of
the Group’s total expenses in 2016, may be subject to
significant variations.
20
LUXFER HOLDINGS PLC
The Group uses its operating and technical
expertise to mitigate these risks, with a
strong emphasis on high levels of product
quality and rigorous
testing, and by
ensuring that products are designed to
meet or exceed the regulatory design
standards of the markets they serve.
The Group has also obtained insurance
coverage for most of these types of
liabilities.
To mitigate this risk the Group seeks to
operate best practice procedures in this
area and is in the process of attaining the
ISO 14001 qualification at all of its larger
manufacturing sites. The bulk of the
Group’s known environmental issues are
legacy problems that arose many years
ago. Management have a programme in
place
improve and
eliminate these historic issues.
to progressively
The Group and the Trustees of the plans
closely monitor the financial performance
of the Schemes, taking actuarial and
investment advice as appropriate. These
are long-term liabilities, and we have a
programme in place to contribute cash to
our defined benefit plans over a number of
years. This is based on affordability and is
varied according to our net earnings.
These plans are funded and the bulk of the
assets are invested in ‘growth’ assets.
Product liability and regulatory risks - The Group is
exposed to possible claims for personal injury, death or
property damage that could result from a failure of a
product manufactured by the Group or of a third party
integrating a Group product. Many factors beyond the
Group’s control could lead to liability claims, which may in
turn lead to product legal claims or disruption in sales to
customers. The Group could be required to pay a material
amount if a claim is made against it that is not covered by
insurance or otherwise subject to indemnification, or that
exceeds the insurance coverage that the Group maintains.
Moreover, the Group does not currently carry insurance to
cover the expense of product recalls, and litigation
involving significant product recalls or product liability
could have a material adverse effect on the Group’s
financial position.
Environmental costs and liabilities - The Group may be
exposed to substantial environmental costs and liabilities,
as its operations are subject to a broad range of
in each of the
environmental
jurisdictions
in
increase
An
environmental costs and liabilities could have a material
adverse effect on the Group in any given year, which could
negatively affect the Group’s cash flows.
laws and regulations
it operates.
in which
Risks relating to the Group’s retirement benefit
plans - The Group operates defined benefit arrangements
in the U.K., the U.S. and France. These are further
explained in Note 29 of the Group consolidated financial
statements. Their funding requirements are subject to
fluctuations in investment markets and changes in the life
expectancy of members and, as a result, these plans have
significant deficits. Increased regulatory burdens have also
proved to be a significant risk, with taxes such as the U.K.’s
Pension Protection Fund Levy, which cost $0.4 million in
2016 ($0.4 million in 2015). Regulations in this area can
also constrain the level of debt incurred and restrict the
Company’s ability to pay dividends.
21
LUXFER HOLDINGS PLC
to meet certain
The Group devotes significant resources to
network security, data encryption and other
measures to protect our systems and data
from unauthorised access or misuse,
including
information
security standards that may be required by
increases
our customers, all of which
cybersecurity protection costs. As these
threats, and government and regulatory
oversight of associated risks, continue to
evolve, we may be required to expend
additional resources to enhance or expand
upon the security measures we currently
maintain.
to sophisticated and
to gain unauthorised access
Exposure to risks related to cybersecurity threats
and incidents - In the conduct of its business, the Group
collects, uses, transmits and stores data on information
technology systems. This data
includes confidential
information belonging to us, our customers and other
business partners, as well as personally
identifiable
information of individuals. We have experienced, and
expect to continue to be subject to, cybersecurity threats
and incidents, ranging from employee error or misuse to
individual attempts
to
targeted
information systems
measures known as advanced persistent threats, none of
which have been material to the Group to date. We also
rely in part on the reliability of certain tested third parties’
cybersecurity measures, including firewalls, virus solutions
and backup solutions. Cybersecurity incidents may result in
business disruption, the misappropriation, corruption or loss
of confidential information and critical data (ours or that of
fines,
third parties), reputational damage, regulatory
litigation with third parties, diminution in the value of our
investment in research and development, data privacy
issues and
cybersecurity protection and
remediation costs. Future cybersecurity breaches or
incidents or further increases in cybersecurity protection
costs may have a material adverse effect on our business,
financial condition or results of operations.
increased
Approval
The Strategic Report is set out on pages 2 to 22 and incorporates the sections titled Environmental Matters
and Corporate Social Responsibility and Principal Risks and Uncertainties.
Signed on behalf of the Board by:
B G Purves
CHIEF EXECUTIVE OFFICER
14 MARCH, 2017
22
LUXFER HOLDINGS PLC
GOVERNANCE
The Board of Directors
Members of the Board of Directors - 1 January, 2016, to 31 December, 2016.
Name
Age Position
Peter Joseph Kinder
Haslehurst
76
Independent Non-Executive Chairman, Chairman of
Remuneration and Nomination Committees, Member of the Audit
Committee (retired from Luxfer on 24 May, 2016)
Joseph Allison Bonn
73
Independent Non-Executive Chairman, Chairman of
Remuneration and Nomination Committees, Member of the Audit
Committee
Brian Gordon Purves
62
Executive Director and Chief Executive Officer
Andrew Michael
Beaden
49
Executive Director and Group Finance Director
Kevin Sean Flannery
72
Independent Non-Executive Director, Member of Remuneration
and Audit Committees
David Farrington
Landless
Dr Brian Kushner
Clive Snowdon
Adam Cohn
57
58
63
45
Independent Non-Executive Director, Chairman of the Audit
Committee, Member of Nomination and Remuneration
Committees
Independent Non-Executive Director, Member of Remuneration,
Audit and Nomination Committees
Independent Non-Executive Director, Member of Remuneration,
Audit and Nomination Committees
Independent Non-Executive Director, Member of Remuneration
Committee
Biographies:
Peter Joseph Kinder Haslehurst
Peter was our Non-Executive Chairman for 10 years having been appointed in March 2006. Prior to taking up
the appointment as Non-Executive Chairman he had been a Non-Executive Director of the Company and a
member of the Audit Committee and Remuneration Committee since 2003. On his appointment as our
Chairman he was also appointed as Chair of both the Audit and Remuneration Committees and subsequently
the Nomination Committee when it was established in July 2013. On 28 May, 2015, he stepped down as Chair
of the Audit Committee but remained a member of the Audit Committee. Peter retired from Luxfer on 24 May,
2016.
Experience: Peter has been a Managing Director, Chief Executive and / or Chairman in international
manufacturing industries for over 45 years, including most recently as Chairman and Chief Executive of the
Brunner Mond Group from 2000 to 2008 and Chairman of Imago at Loughborough Ltd from 2003 to 2009.
He was appointed President emeritus of VAI Industries (U.K.), following Chairmanship of VA Tech (U.K.) from
1999 to 2002. Prior to that he was Chief Executive of the EIS Group PLC from 1985 to 1999, building a group
of 100 companies in 30 countries involved in aircraft and defence equipment and fluid technology products.
From 1969 to 1981 he was Managing Director of Wellman Mechanical Engineering Ltd., the metallurgical plant
makers. He was appointed as Chairman of the British Metal Working Plant Makers Association in 1974. He
23
LUXFER HOLDINGS PLC
holds a number of current appointments, including Chairman of the Audit Committee of the Institute of
Materials, Minerals and Mining where he was formerly Treasurer and Senior Vice President.
Peter holds a BSc degree in production engineering from Loughborough University and is a Chartered
Engineer. He is also a Companion of the Chartered Management Institute, a Fellow of the Institution of
Mechanical Engineers, a Fellow of the Institution of Engineering and Technology, a Fellow of the Royal
Society of the Arts and also a Fellow of the Institute of Materials, Minerals and Mining. He was made
Eisenhower Fellow from Britain in 1980 and awarded an honorary Doctor of Science at Loughborough
University in 2008. He is a Freeman of the City of London.
Joseph Allison Bonn
Joseph (Joe) was appointed as a Non-Executive Director on 1 March, 2007, at which time he was also
appointed to both the Audit and Remuneration Committees. He has also been a member of the Nomination
Committee since its establishment in July 2013 and was appointed as Interim Non-Executive Chairman on 24
May, 2016. As of 6 December, 2016, was appointed Non-Executive Chairman.
Experience: Joe has extensive experience in the aluminium and speciality chemical industry, having worked
for Kaiser Aluminium and Chemical Corporation for over 35 years in various senior capacities. Among other
appointments in the U.S., he has served on the Board and Executive Committee of the Aluminium Association,
the Board of the National Association of Purchasing Management and the International Primary Aluminium
Institute Board. He is currently a consultant with Joseph Bonn RE&C Corp.
Joe holds a BS degree from Rensselaer Polytechnic Institute and an MBA degree in Finance from Cornell
University.
Brian Gordon Purves
Brian was appointed as our Chief Executive Officer at the start of 2002 and has been an Executive Director of
the Company and its predecessor since 1996. He was one of the two-man management buy-in team that led
the private equity-funded acquisition of British Aluminium (including the core of our current Group) from Alcan
in 1996, serving as Finance Director from that date until 2001. Brian informed the Board of Directors during
2016 of his intention to retire during the course of 2017; although he will remain in his current role until his
successor is appointed.
Experience: Before joining the Company, Brian held several senior positions in the U.K. motor manufacturing
industry covering various financial, commercial and general management responsibilities.
Brian has an honours degree in natural philosophy (physics) from the University of Glasgow and a Master of
business studies degree from the University of Edinburgh. A Fellow of the Chartered Institute of Management
Accountants, he is also a Companion of the Chartered Management Institute.
Andrew Michael Beaden
Andrew (Andy) was appointed as Group Finance Director in June 2011 prior to the I.P.O., at which time he
was appointed to the Board as an Executive Director. Andy joined the Group in 1997 and became Group
Financial Controller in 2002, becoming a member of the Executive Management Board in January 2006. He
worked as Director of Planning and Finance from 2008 to 2011.
Experience: Before joining the Company Andy worked for KPMG, as well as several U.K. FTSE 100 companies
in a variety of financial roles.
Andy is a Chartered Accountant and holds a degree in economics and econometrics from Nottingham
University.
24
LUXFER HOLDINGS PLC
Kevin Sean Flannery
Kevin was appointed as a Non-Executive Director on 1 June, 2007, at which time he was also appointed to
both the Audit and Remuneration Committees. He was appointed to the Nomination Committee on its
establishment in July 2013, but stepped down on 6 October, 2016.
Experience: Kevin has over 40 years of experience in both operational and financial management roles in a
variety of industries and has also served in the capacities of Director, Chairman and Chief Executive Officer of
several companies in the U.S. He is currently the President and Chief Executive Officer of Whelan Financial
Corporation, a Company he founded in 1993 that specialises in financial management and consulting. He was
formerly the Chairman and Chief Executive Officer of several companies, including RoweCom, Inc.,
Telespectrum Worldwide and Rehrig United Inc. He currently serves as a director of FPM Heat Treating LLC,
a leading provider of heat-treatment processes and Energy XXI, and a Bermuda-based oil and gas Company.
He also served as a director of a number of other corporations between 2005 and 2011. Kevin began his
career at Goldman, Sachs & Co and was a senior managing partner of Bear Stearns & Co.
David Farrington Landless
David was appointed as a Non-Executive Director in March 2013 and was appointed to the Audit Committee
on 28 March, 2013 and the Nomination Committee on 23 July, 2013. He acts as the financial expert on the
Audit Committee under the listing rules of the New York Stock Exchange. He was appointed as a member of
the Remuneration Committee in January 2015 and on 28 May, 2015, he was appointed Chair of the Audit
Committee.
Experience: David started his career with Bowater and Carrington Viyella and joined Courtaulds plc in 1984.
He was appointed a Finance Director in the U.K. and U.S. divisions of Courtaulds plc from 1989 to 1997 and
Finance Director of Courtaulds Coatings (Holdings) Limited from 1997 to 1999. He retired from the position
of Group Finance Director of Bodycote plc on 1 January, 2017. He was appointed a Non-Executive Director of
Innospec, Inc. on 1 January, 2016, and a Non-Executive Director of Renold plc on 9 January, 2017.
David is a Chartered Management Accountant. He graduated from the University of Manchester Institute of
Science and Technology.
Dr Brian Kushner
Brian was appointed as a Non-Executive Director on 24 May, 2016, at which time he was also appointed to
the Remuneration and Nomination committees. He was appointed to the Audit Committee on 5 August, 2016.
Experience: Brian, who holds a doctorate in applied and engineering physics from Cornell University, was co-
founder of CXO LLC (“CXO”), a management consulting firm headquartered in Austin, Texas. In 2008, CXO
was acquired by FTI Consulting, a global business advisory firm. Dr. Kushner is now senior managing director,
corporate finance, for FTI and a co-leader in activities related to technology practices and aerospace, defence
and government contracting practices.
Brian began his career in 1982 at BDM International, a defence firm, as part of the management team that
completed a leveraged buyout of BDM in 1990 by the Carlyle Group. Over the past two decades, he has
served as chief executive, chief restructuring officer or director of more than 20 public and private technology,
manufacturing, telecom and defence companies.
Brian currently serves as a director and chair of the audit committee of Everyware Global, the parent company
of the Oneida and Anchor Hocking brands. He is also a member of the executive committee of the Advisory
Council of the College of Natural Sciences at the University of Texas at Austin, chairman of the Physics
Advisory Council at the University of Texas at Austin and a member of the Engineering College Council at
Cornell University in Ithaca, New York.
25
LUXFER HOLDINGS PLC
Clive Snowdon
Clive was appointed as a Non-Executive Director on 29 July, 2016, at which time he was also appointed to the
Remuneration and Nomination committees. He was appointed to the Audit Committee on 5 August, 2016.
Experience: Clive has served as chairman of the Midlands Aerospace Alliance since 2007 and is a trustee of
the Stratford Town Trust. He is also the aerospace industry advisor to Cooper Parry Corporate Finance. In
May 2016, Mr. Snowdon stepped down from the board of Hill & Smith Holdings PLC, where he had been
senior non-executive director since May 2007 and chair of the remuneration committee, as well as a member
of the audit and nomination committees. Mr. Snowdon retired from Umeco PLC in June 2011 after serving as
chief executive since April 1997, and he was executive chairman of Shimtech Industries Group Limited until
the sale of the business in May 2015. From 1992 to 1997, Mr. Snowdon served as managing director of
Burnfield PLC after being promoted to that position from finance director. He has also held senior positions
with Vickers PLC, BTR PLC and Hawker Siddeley Group. Mr. Snowdon is qualified as a chartered accountant.
Adam Cohn
Adam was appointed as a Non-Executive Director on 18 July, 2016, at which time he was also appointed to
the Remuneration committee.
Experience: Mr. Cohn is Co-CEO of Stone Canyon Industries LLC (SCI), a company he co-founded in
September 2014. SCI has a small investment in Luxfer. Prior to SCI, from March 2000 to September 2014, Mr.
Cohn was a partner at Knowledge Universe (KU), where he served as head of mergers and acquisitions and
business development for KU and its portfolio companies. Prior to joining KU, he was a senior associate with
Whitney & Co., a private equity firm. Before that, Mr. Cohn was an investment banker in the Financial
Sponsors Group at Bankers Trust Company and Deutsche Bank. He has a B.S. in business from Skidmore
College and an M.B.A. from Columbia University. Mr. Cohn serves on the board of k12, Inc. (NYSE: LRN),
where he is also chairman of the compensation committee. In addition, he serves on several other private
company boards.
Executive Management Board
Members of the Executive Management Board - 1 January, 2016, to 31 December, 2016.
Name
Age
Position
Brian Gordon Purves
Andrew Michael Beaden
Edward John Haughey
David Terence Rix
Andrew William John Butcher
Linda Frances Seddon*
62
49
61
48
48
65
Executive Director and Chief Executive Officer
Executive Director and Group Finance Director
Divisional Managing Director of MEL Chemicals
Divisional Managing Director of Magnesium
Elektron
President of Luxfer Gas Cylinders
Company Secretary and General Counsel
*Linda Frances Seddon retired from Luxfer Holdings PLC on 4 March, 2016 and was replaced as Company Secretary by David Nicholas
Fletcher.
Biographies:
Brian Gordon Purves and Andrew Michael Beaden
Please refer to the main Board biographies on page 24.
26
LUXFER HOLDINGS PLC
Edward John Haughey
Divisional Managing Director of MEL Chemicals
Edward (Eddie) became a member of the Executive Management Board on his appointment as Managing
Director of Luxfer’s zirconium business in 2003. Prior to joining Luxfer Group, he was Managing Director of
Croda Colloids Limited for Croda International Plc from 1994 to 2003, and has held a series of senior
management positions in the Croda Group, BASF and Rhone Poulenc. He holds a BA (Honours) degree in
Chemistry. Eddie is to retire in 2017 with a replacement to be announced in due course.
David Terence Rix
Divisional Managing Director of Magnesium Elektron
David was appointed to the Executive Management Board in 2013 on assuming responsibility for Luxfer’s
magnesium businesses. He joined Alcan Wire and Conductor in 1991 and moved to Luxfer Gas Cylinders in
1994, holding various sales and marketing positions in Germany, France and Dubai, U.A.E., before returning
to the U.K. He was appointed Managing Director of Luxfer Gas Cylinders in Europe after serving as European
Sales Director and was also a member of the Gas Cylinders Divisional Team with strategic responsibility for
global marketing. David holds a BA (Honours) degree in business studies and a diploma from the Chartered
Institute of Marketing. He is fluent in French and German.
Andrew William John Butcher
President of Luxfer Gas Cylinders
Andrew (Andy) was appointed as President of Luxfer Gas Cylinders in April 2014. He became a member of
the Executive Management Board on 1 January, 2014, on his appointment as President designate. He joined
Luxfer Gas Cylinders in Nottingham in 1991, before moving to California in 2002, where he led our composite
businesses. He was President of Luxfer Gas Cylinders North America from 2009 to 2014. Andy holds an MA
degree in Engineering from Cambridge University, and an MBA from Keele University.
Linda Frances Seddon
Company Secretary and General Counsel
Linda was a member of the Executive Management Board from 2001 until her retirement on 4 March 2016.
She was Secretary of the Group holding company and legal adviser to the Luxfer Group from 1997 until her
retirement. After qualifying as a solicitor in England and Wales in 1976, she spent 14 years in private practice
as a solicitor before becoming a legal adviser with Simon Engineering plc and subsequently legal adviser and
company secretary at British Fuels upon its privatisation. She has a BA (Honours) degree in Business Law.
Other Officers of the Company
Other officers of the Company are also responsible for the day-to-day management of our Company but are
not members of the Executive Management Board.
David Fletcher
Company Secretary
David joined the Luxfer Group in 2001, being appointed the Financial Controller of Magnesium Elektron. He
then joined the Head Office Accounting Team in 2004, being made Group Financial Controller in 2011, a
position he held during the Group’s IPO in 2012. He was appointed the Divisional Finance Director of the
Zirconium Division in 2013 before being appointed as Company Secretary in March 2016.
David is a Chartered Management Accountant and Chartered Company Secretary.
Claire Louise Swarbrick
General Counsel and Legal Adviser
Claire has been legal adviser to the Luxfer Group since joining the business in January 2012. She was
appointed general counsel in March 2016. After graduating from the University of Nottingham with a degree
in law, Claire completed the legal practice course at Chester Law College and qualified as a solicitor in
September 2000. Before taking the role at Luxfer, Claire spent 12 years in private practice, specialising in
corporate and commercial law.
27
LUXFER HOLDINGS PLC
Corporate Governance
In this section we explain our corporate governance and what informs and influences our corporate
governance practices.
Overview of Corporate Governance
The Company is incorporated in England and Wales and has a single listing of ADSs on the NYSE.
Accordingly, our corporate governance is informed by the relevant aspects of two regulatory regimes, the U.K.
and the U.S.
As a company incorporated in England and Wales, our corporate governance practices primarily are governed
by our articles of association (our “Articles”) and the Companies Act 2006 (the “Companies Act”). For
example, as a company listed on the NYSE we are a “quoted company” for the purposes of the Companies
Act and therefore required to comply with its “quoted company” requirements. Significant aspects of these
requirements include the production of a yearly report on Directors’ remuneration, details of which are
prescribed by English corporate law, an annual advisory shareholder vote on whether to approve such
remuneration and a binding shareholder vote every three years on our remuneration policy with respect to
the Directors. These requirements in turn influence aspects of how we report remuneration.
As we are not, however, listed on the London Stock Exchange, the Company is not required to comply with
the U.K. Corporate Governance Code (the “Code”). Nevertheless, we choose to follow aspects of the Code,
insofar as it is appropriate, relevant and practical to a company of the size and status of the Company.
In 2016, (as in 2015) we were a foreign private issuer (an “FPI”) as defined in the SEC’s rules and regulations
and consequently, in many aspects of corporate governance we rely on a provision in the NYSE’s Listed
Company Manual (“NYSE’s Manual”) that permits us to follow home-country practice in lieu of certain NYSE
corporate governance requirements. For example, although each member of our Audit Committee must be
independent within the meaning of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), each such member does not need to satisfy the requirements for independence set out in
Section 303A.02 of the NYSE’s Manual. Our Nomination Committee and Remuneration Committee each
consist entirely of Non-Executive Directors; however, each such Non-Executive Director is not required to
satisfy the requirements for independence set out in Section 303A.02 of the NYSE’s Manual. The Companies
Act does not require us to establish, and we have not established, a corporate governance committee, as
would otherwise be required for U.S. listed companies pursuant to the NYSE’s Manual. As an FPI we are not
subject to all of the disclosure requirements applicable to companies organised within the U.S. that relate to
corporate governance. For example, we are exempt from certain rules under the Exchange Act that regulate
disclosure obligations and procedural requirements related to the solicitation of proxies, consents or
authorisations applicable to a security registered under the Exchange Act.
However, because our shares are listed on the NYSE, we are required to comply with certain U.S. law
requirements, including certain provisions of the Sarbanes-Oxley Act that affect our corporate governance.
For example, Section 404(a) requires our management to identify in our Annual Report on Form 20-F a
framework used by management to evaluate the effectiveness of our internal controls over financial reporting.
Such evaluation must be based on a suitable, recognised control framework that is established by a body or
group that has followed due-process procedures, such as the framework established in “Internal Control—
Integrated Framework (2013)” issued by the Committee of Sponsoring Organisations of the Treadway
Commission (the “COSO framework”). We are required to and have updated our framework for the
evaluation of the effectiveness of our internal controls over financial reporting in accordance with the COSO
2013 framework.
In developing corporate governance practices for the Group, the Directors have taken note of all of these
different regulatory requirements, as well as reflecting best practice as the Directors consider appropriate.
28
LUXFER HOLDINGS PLC
Board Members
During 2016, the Board comprised an independent Non-Executive Chairman, between four and five
independent Non-Executive Directors and two Executive Directors. The maximum number of Directors
permitted under the Articles is eight. A number of Directors have an interest in the shares of the Company as
set out in the Remuneration Report on pages 38 to 54.
Our Articles contain a provision requiring a third of the Directors to retire by rotation each year. In line with
best practice, the Nomination Committee has proposed, and the Board has agreed, that all directors should
offer themselves for re-election at the 2017 annual general meeting (“AGM”).
Brief biographical details of the Directors who served during 2016 are provided on pages 23 to 26.
Roles
The Board
The Board has responsibility for the overall leadership of the Company, its long-term success and helping to
develop and approve its strategic aims. The Directors have determined a schedule of matters reserved to the
Board. Reserved matters are comprehensive and reviewed as the Board considers appropriate, normally
annually. A review was undertaken during the year, following a comprehensive review in 2013 in the context
of a newly listed company. The Directors determined no further amendments were necessary. Matters
reserved to the Board are set out in the Governance section of the Company’s website.
Executive Management Board
The Executive Management Board meets at least eight times a year. It is chaired by the Chief Executive
Officer. The Executive Management Board consists of the Group Finance Director and senior management at
group and divisional levels. The members of the Executive Management Board during 2016 are listed on
page 26. The Executive Management Board acts in an advisory capacity to the Chief Executive Officer and
provides a forum where matters of interest or concern to the Group can be reviewed and discussed, strategy
debated, policies developed and agreed, best practice discussed and appropriate measures implemented. It
also provides an opportunity for senior management to receive updates on progress in other areas of the
Group outside their remit.
Division of Responsibilities
Due to the size of the Board, the Directors have determined it is not necessary to appoint a Senior
Independent Director.
The division of responsibilities between the Chief Executive Officer and the Chairman is clear and it has not
been considered necessary to record it in writing.
The Chief Executive Officer is responsible to the Board for the management and performance of the
business within the framework of the matters reserved to the Board and for developing strategy and
then implementing the strategy he has agreed with the Board;
The Chairman is responsible for the leadership of the Board and ensuring its effectiveness. He ensures
that Board discussions are conducted taking into account all views, promoting openness and debate by
facilitating the effective contribution of the Non-Executive Directors and ensuring no individual or group
dominates the Board.
The Chairman maintains a dialogue with the Non-Executive Directors in the absence of the Executive
Directors, and where appropriate, canvasses their opinion on issues and meets with them in the absence of
the Executive Directors on a regular basis.
29
LUXFER HOLDINGS PLC
The Nomination Committee annually reviews succession planning for senior appointments in the Group and to
the Board, with recommendations made to the Board.
Meetings
There are normally six main scheduled meetings of the Board each year and additional scheduled telephone
meetings timed to approve the release of financial information. Additional meetings are called as appropriate.
The Board will normally meet at least once a year at one of the Group’s operational plants, including overseas
locations, as part of their monitoring role and to ensure a better understanding of the Group’s operations. At
these meetings the Board tours the plant and has an opportunity to meet local and divisional management on
both a formal and informal basis and discuss the progress of their operations with them.
Attendance at Board and Committee Meetings during 2016
Peter Haslehurst
Joseph Bonn
Andrew Beaden
Adam Cohn
Kevin Flannery
Brian Kushner
David Landless
Brian Purves
Clive Snowdon
Total number of meetings
No. of meetings held at operational
sites in the U.K. or U.S.
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
3
10
11
5
10
6
10
11
5
11
1
3
8
2
2
—
2
Non-member*
Non-member
Non-member
Non-member
8
3
8
—
2
—
2
Non-member
1
1
2
Non-member*
Non-member*
Non-member*
3
8
—
2
1
2
*Although not a member of the Committee the director attended the meeting to present to the Committee.
Information and Support
The Company Secretary normally distributes Board and Committee agendas and materials to the Board and
Committees seven days before a scheduled meeting.
There is a written procedure for decisions to be taken between scheduled Board and Committee meetings
that also deals with information distribution in such cases.
The Board receives both financial and operational information to assist it in discharging its duties. The Chief
Executive Officer and the Group Finance Director provide monthly reports to the Board which together cover
all aspects of the business and which are then elaborated or commented upon at scheduled Board meetings
as appropriate. Additional topics for review and discussion are added in these reports from time to time at
the request of the Directors. In addition, specific items are scheduled into the Board agenda for report and
review on a regular basis, such as health and safety and environmental matters and current topical issues.
There is a written procedure in place to cover circumstances when the Directors either individually or
collectively determine that they require independent professional advice at the Company’s expense.
The Company Secretary updates the Board on issues and changes of a legal and regulatory nature of which it
and the individual Directors should be aware to refresh their skills and knowledge. There is a culture of
information exchange on various matters of interest to the Group and its operations between Directors and
senior managers to keep Directors abreast of relevant developments. In addition to meetings held at sites as
described above, the Non-Executive Directors may independently visit operational sites to enlarge their
knowledge of the individual businesses that make up the Group. The Executive Directors have regular
30
LUXFER HOLDINGS PLC
business reviews at operational sites throughout the year, and any appropriate information gathered on those
visits will be reported to the Board.
Newly appointed directors undergo an induction program.
The Board evaluates its information and support procedures periodically to ensure they remain appropriate.
Accountability
The Directors are responsible for preparing the financial statements to satisfy U.K. law. This responsibility is
explained further in the Directors’ Responsibilities Statement on page 55 and the Independent Auditor’s
Report on pages 56 to 57.
Audit Committee
The members of our Audit Committee during the year were:
David Landless
Non-Executive Director and Chairman
Joseph Bonn
Non-Executive Director
Kevin Flannery
Non-Executive Director
Peter Haslehurst
Non-Executive Director (retired from Luxfer on 24 May 2016)
Brian Kushner
Non-Executive Director (appointed on 5 August 2016)
Clive Snowdon
Non-Executive Director (appointed on 5 August 2016)
The Company Secretary acts as secretary to the Audit Committee. The Group Finance Director and the Chief
Executive Officer attend as required. The Company’s external auditor is invited to attend most meetings of
the Audit Committee.
The responsibility and duties of the Audit Committee are set out in written terms of reference which appear
on the Company’s website under the Governance section. The terms of reference were reviewed during the
year. The Committee has the responsibility of overseeing corporate accounting and financial reporting in the
Group.
Its duties include:
External Auditors: Engagement and retention of our independent auditors, pre-approval of audit and
non-audit services, approving fees paid, monitoring independence and performance, discussing audit
findings with auditors;
Financial Reporting: Monitoring the integrity of the financial information to be included in all
consolidated financial statements and announcements, reviewing and challenging critical accounting
policies, the manner in which major elements of judgement are reflected in the consolidated financial
statements, disclosures, significant adjustments and compliance with standards;
Internal Controls and Risk Management System: Reviewing systems of internal control and risk
management and adequacy of disclosure controls and procedures. Maintaining a record of complaints
regarding accounting and audit matters;
Whistleblowing: Establishment and monitoring of the Group Whistleblowing Policy and procedures;
and
Oversight of the Code of Ethics.
The Board considers that all the members have appropriate financial experience to enable them to contribute
to the Audit Committee’s work. The Board also considers that each member of the Audit Committee satisfies
the requirements for independence set out in Section 303A.02 of the NYSE rules and Rules 10A-3 under the
Exchange Act. David Landless is the ‘Audit Committee Financial Expert’ as defined in Item 407(d) of
Regulation S-K.
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LUXFER HOLDINGS PLC
Each year, normally prior to the commencement of the financial year, the Committee establishes a schedule
of meetings to coincide with the key events in the Company’s financial reporting and audit cycle to ensure it
has sufficient time on its agendas to deal with matters for which it has responsibility. Agendas and
appropriate papers are issued for each meeting. The Chairman speaks to the external auditors as he
considers appropriate and necessary in preparation for meetings at which matters are discussed that have
been audited by the Company’s external auditors or are relevant to them.
The Audit Committee has adopted and implemented a ‘Policy on the Provision of Audit and Non-Audit Services
by Auditors’ (the “Pre-approval Policy”) to comply with auditor independence requirements contained in Rule
2-01 of Regulation S-X under the Exchange Act. The policy requires the Audit Committee to pre-approve all
matters upon which the Company’s external auditors are requested to advise (audit and non-audit work),
including fees, subject to certain pre-approvals made annually by the Audit Committee. A pre-approved sum
to be spent on audit and tax matters is delegated to the Group Finance Director and there is a procedure for
approval of urgent items by the Chairman between meetings. The policy also affirmatively proscribes the
Company’s external auditors from advising on certain matters.
During the year the Audit Committee met on eight occasions and among other matters they undertook the
following:
A specific review of the Company’s external auditors’ independence with the Company’s external auditors
and the Company’s management, which confirmed the independence of the external auditors both in
connection with the former external auditors before their resignation and the newly appointed external
auditors before their appointment;
A discussion of matters pertaining to, and approval of, work to be undertaken by the Company’s external
auditors under the Pre-approval Policy;
A review with the Head of Corporate Review and senior management of the internal audit work, the
system of internal controls and monitored the implementation of internal controls over financial reporting
pursuant to Section 404 of the Sarbanes-Oxley Act and the progress of the update to the internal
controls over financial reporting framework to reflect the 2013 COSO framework throughout the Group;
A review of how Group risks are assessed, the Group’s risk profile and how the Group mitigates its risks;
A review of the Company’s annual SEC filing, statutory report and consolidated financial statements and
the quarterly financial releases made by the Company;
An evaluation of the work of the Audit Committee.
Remuneration Committee
Membership of the Remuneration Committee and details of its work appear in the Remuneration Report on
pages 38 to 54. Its terms of reference appear under the Governance section on the Company’s website.
Nomination Committee
Members of the Committee consist of Non-Executive Directors and the Chairman of the Board chairs the
Committee. The committee met twice during the year.
The Committee operates to written terms of reference under which its main duties are to:
Identify and review individuals qualified to become Directors and fill vacancies;
Select and approve Directors to stand for re-election pursuant to the retirement provisions under our
Articles;
Develop a process for annual evaluation of the Board and its Committees;
Develop and recommend to the Board a succession plan, and review management’s succession plan.
Its terms of reference appear under the Governance section on the Company’s website.
32
LUXFER HOLDINGS PLC
Whistleblowing Arrangements
We have established policies, subject to individual legal requirements in the countries in which the Group
operates, which encourage and enable employees to report in confidence any possible impropriety in either
financial reporting or, where permitted in the relevant jurisdiction, other matters. An independent third party
telephone line is provided for reporting matters where the individual believes they cannot report any issue
through their line management. The Audit Committee oversees the operation of the Whistleblowing Policy and
receives a report from the Company Secretary at each meeting of the Audit Committee.
Anti-Corruption Policy
We have an established policy and procedures to enable compliance with current legislation.
Relations with Shareholders
Directors seek to develop an understanding of the views of our shareholders in various ways and from time to
time engage with them on a one-to-one basis, as appropriate, taking into account the need to treat
shareholders equally. The Chief Executive Officer and the Group Finance Director hold quarterly investor
conference calls as part of the Group’s reporting cycle. From time to time we consult with our major
shareholders in an effort to seek feedback on various matters of corporate governance, including our Director
remuneration policy. The Chief Executive Officer and the Group Finance Director also attend investor
conferences.
33
LUXFER HOLDINGS PLC
Directors’ Report
The Directors of Luxfer Holdings PLC (the “Company”) present their annual report together with the audited
financial statements of the Group and the Company for the year ended 31 December, 2016. This Directors’
Report should be read together with, and incorporates, the Corporate Governance section on pages 28 to 33.
Results
The profit for the year, after taxation, amounted to $21.9 million (2015: $16.1 million); please see the
Strategic report on pages 2 to 22 for more detail.
Dividends per Share
Quarterly interim dividends of $0.125 each £0.50 ordinary share ($0.125 each ADS), each quarter totalling
$13.3 million, were paid in 2016 (2015: $10.8 million).
A further interim dividend was paid in February 2017 of $0.125 each £0.50 ordinary share totalling $3.3
million.
Directors
The names of the people who were Directors during the year and their brief biographical details are set out in
the Governance section on pages 23 to 27.
Capital Structure
Following shareholder approval at the 2014 AGM, on 9 June, 2014, the Company sub-divided each £1
ordinary share into two ordinary shares of £0.50 each so as to match the individual nominal value of the
Company’s ordinary shares with that of its ADSs. Sub-dividing the ordinary shares in this way did not affect
the rights attached to the ordinary shares or the aggregate nominal value of the Company’s issued share
capital. On the same date the depository amended the ratio of ordinary shares from a ratio of 0.5 ordinary
shares for each ADS to 1 ordinary share for each ADS.
As at 31 December, 2016, the Company’s issued share capital comprised of 27,136,799 ordinary shares of
£0.50 each and 769,413,708,000 deferred shares of £0.0001 each as set out in Note 18 to the financial
statements. As at 31 December, 2016, 25,180,726 of the £0.50 ordinary shares were represented
by 25,180,726 ADS, one £0.50 ordinary share being represented by one ADS.
In June 2015, the Board announced a share buy-back program of up to $10.0 million to cover the needs of
employee share plans. Shareholder approval for this program was granted at the 2014 Annual General
Meeting (for repurchases up to an aggregate amount of 2,700,000 ordinary shares or ADSs). The extent of
the program will be kept under review and will depend on continued good operating cash flows, applicable
securities laws, regulatory considerations and other factors.
As at 31 December, 2016, the Group had purchased 780,989 shares, with $6.3 million of the purchases made
in 2016 and $1.9 million in 2015; these are presented as treasury shares in the balance sheet.
Substantial shareholdings
The Company had been notified of the following interests amounting to 3% or more of its issued share capital
as at the end of the financial year:
Shareholder
Number of shares
Percent
Wellington Management Group LLP
Canton Group
3,494,798
2,147,910
13.2%
8.1%
34
LUXFER HOLDINGS PLC
T. Rowe Price Associates, Inc
Paradice Investment Management LLC
Stonehill Group
Nantahala Capital Management LLC
GMT Capital Group
Fidelity Management & Research Co.
DePrince, Race & Zollo, Inc
Greywolf Capital Management LP
1,927,590
1,732,363
1,542,783
1,537,293
1,406,920
1,162,209
954,131
860,000
7.3%
6.6%
5.8%
5.8%
5.3%
4.4%
3.6%
3.3%
Directors’ Interests and Related Party Transactions
No Director had a material interest in, nor was any Director party to, any contract or arrangement to which
the Company or any subsidiary is or was party to either during the year or at the end of the year, with the
following exceptions: in the case of the Executive Directors, their individual service contract; in the case of the
Non-Executive Directors, their engagement letters.
The interests of the Directors who held office at 31 December, 2016, and those of their families, in the share
capital of the Company, including share options are set out in the Remuneration Report on pages 38 and 54.
All of the interests were beneficial. There has been no change in the interests of the directors between the
balance sheet date and the date of approval of the financial statements.
Going Concern
After making enquiries, the Directors have a reasonable expectation that the Company has adequate
resources and borrowing facilities to continue operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the consolidated financial statements.
Research and Development
During the year, the Group invested $7.8 million (2015: $8.3 million) in research and development on new
and improved products and processes. Significant activities during the year were on the development and
launch of new magnesium alloy variants such as Elektron®43, designed for use in aircraft seating and further
development of our AOS® medical oxygen delivery device and SmartFlow® valve contained therein which
obtained full CE certification in November 2016. Once a project is reasonably certain to deliver a commercial
product, certain of the development costs are capitalised. The Group continues to maintain links in fields of
research with both leading universities in various countries and outside agencies to support and supplement
its own in-house expertise. The Group also continues to gain significant tax benefit from the U.K. Patent Box
regime.
Future Developments
An indication of the future developments of the business of the Group can be found in the Strategic Report on
page 10.
Disabled Employees
Where an employee has developed a disability whilst employed in his or her business that impacts on his or
her ability to carry out a certain job effectively, the relevant business unit will make arrangements where
possible to retrain that employee and continue his or her employment. Applicants for job vacancies who are
disabled are given full and fair consideration, bearing in mind requirements of the particular job and the
particular aptitude and abilities of the candidate.
35
LUXFER HOLDINGS PLC
Employee Involvement
Many employees are directly involved in the performance of the Group and divisions through the use of
various incentive schemes. These include bonus schemes and various share-related schemes, details of which
can be found in the Corporate Social Responsibility (“CSR”) section of the Strategic Report on page 14.
A combination of newsletters, regular line manager and team briefings, exchanges and consultations, at both
Group and site level (as appropriate) are used to systematically communicate with employees and develop
their awareness of matters that concern them, their business unit, division and the Group. As required,
employees are consulted on matters that concern them in an appropriate manner and through appropriate
channels.
The Group continues to offer training and development opportunities to employees at all levels and to all
abilities, providing benefit to both the Group and the individual employee. Further details can be found in the
CSR section of the Strategic Report on page 14. Periodically we undertake a succession planning review to
ensure that we develop suitable candidates for critical leadership roles within the Group.
For more senior management we hold an annual management conference at the beginning of each year
where the Luxfer Group strategy for the year at Group and divisional level is presented and discussed and
workshops undertaken on subjects that have been determined will promote the Group strategy during the
year. Meetings of employees carrying out the same function within the Group companies are also held to
convey Group policy, to exchange best practice and to undertake training.
We have an equal opportunities policy, which is intended to promote good employment practices throughout
the Group in the treatment of both employees and job applicants.
Political Donations
The Company and its subsidiaries made no political donations in either 2016 or 2015.
Directors’ Liabilities
The Company maintains liability insurance for Directors and officers that gives appropriate cover for any legal
action brought against Directors. During the year the Company had in force provision in the Articles allowing
the Company to indemnify the Directors against liability incurred in the proper conduct of the Company’s
business, subject to the conditions set out in the Companies Act 2006.
Greenhouse Gas Emissions
A statement regarding the greenhouse gas emissions resulting from the Company’s activities can be found on
page 13 of the Strategic Report.
Treasury and the Use of Financial Derivatives
Details of our financing and treasury policies, along with the management of treasury risks and use of
financial derivatives can be found in Notes 27 and 28 to the consolidated financial statements.
Directors’ Statement as to Disclosure of Information to the Auditors
The Directors who were members of the Board at the time of approving this Directors’ Report are listed on
page 23 to 27. Having made enquiries of fellow Directors and of the Company’s auditors, each of those
Directors confirms that:
To the best of each Director’s knowledge and belief, there is no information relevant to the preparation
of their report of which the Company’s auditors are unaware;
Each Director has taken all steps a Director may be reasonably expected to have taken to be aware of
relevant audit information and to establish that the Company’s auditors are aware of that information.
36
LUXFER HOLDINGS PLC
Independent Auditors
A resolution will be put to the Annual General Meeting of the Company to re-appoint PricewaterhouseCoopers
LLP as auditors.
By order of the Board:
D N Fletcher
SECRETARY
14 March, 2017
37
LUXFER HOLDINGS PLC
DIRECTORS’ REMUNERATION REPORT
Chairman’s Letter
Dear Shareholder,
Following my appointment as Chairman of the Remuneration Committee in 2016, I present my first report to
the shareholders pursuant to U.K. regulations governing the way remuneration for directors of quoted U.K.
companies is reported and voted upon.
As our Remuneration Policy (“the Policy”) was last approved by our shareholders at the 2014 Annual General
Meeting (“AGM”) and in accordance with U.K. regulations governing the way remuneration for Directors is
reported and voted on, we are required to put the policy before you for a binding vote at the 2017 AGM. The
Remuneration Committee (“the Committee”) is satisfied with the way the Directors are remunerated but
following a review, the Policy has been amended to bring it in line with current practices and policies and to
reflect the changes made to the pension and various equity award schemes since 2014. The Policy to be
presented to Shareholders for approval in 2017 will not differ in substance or content from the Policy
previously approved in 2014.
The Company’s Remuneration Policy can be found in a standalone document in the Governance section of the
Company’s web site www.luxfer.com/governance/.
The Annual Remuneration Report starting on page 40 sets out how the Directors were remunerated in 2016
in accordance with the Policy. As the Committee generally reviews Directors’ pay and incentives at the
beginning of the financial year, the second half of the report on page 48 also contains details of the decisions
already made on the remuneration of our Directors for 2017. The Annual Remuneration Report will be
proposed for an advisory vote at the Company’s 2017 AGM as required by the relevant U.K. regulations.
The Context of Decisions Made During the Year
Despite a strong start, 2016 proved to be a difficult year with reported trading profit being lower than 2015.
The Elektron Division suffered in the second half of 2016 from lower demand for our U.S magnesium
products, reflecting the tightness of U.S. defence budgets and destocking by certain distributors of photo-
engraving products as a result of increasing the number of customers with whom we deal directly. Elektron
was also impacted by lower sales of automotive catalysis products, currently in transition to a new generation
of technology. Mitigating the impact of these was increased demand for high performance aerospace
magnesium alloys in Europe and industrial catalysis chemical products. 2016 also saw the launch of our bio-
resolvable magnesium alloy, SoluMag® into the medical market. Gas Cylinders trading profit increased by
32.6% in 2016 over the previous year largely due to a combination of our actions to reduce the AF cost base,
and increased AF sales.
Major Decisions on Remuneration During the Year
Decisions made affecting 2016 remuneration
The Committee’s overall approach to remuneration packages remained the same and followed the Policy
approved by shareholders in 2014. In recognising the Company’s sole listing on the NYSE and, as a
consequence, its significant U.S. shareholder base, the Committee and the Board continue to believe that in
structuring remuneration packages for the Directors they should consider remuneration practices not only in
the U.K. but also in the U.S. This philosophy is not used in relation to executive salaries, which reflect salaries
in the country in which the Director resides, but it does influence the structure of the Group’s share incentive
schemes.
In accordance with the Policy, the Committee undertook a review of the Executive Directors’ salaries at the
beginning of 2016. In line with the policy of adjusting the packages of Executive Directors to at least the
median of external comparators and recognising that no increase had been applied in 2015, it was agreed
that the Executive Directors’ base salaries should be increased in 2016 by 2%.
38
LUXFER HOLDINGS PLC
We closed the Luxfer Group Pension Plan to future accruals from 6 April, 2016, removing that pension benefit
from all remaining members, including the Directors. Having reviewed the various alternatives and
considering the increasingly complicated and restrictive regulations being imposed on higher earners in the
U.K., it was decided, in line with the practice of many other U.K. companies, to offer the senior executives
salary supplements in lieu of direct contributions into a pension scheme. The salary supplement is no higher
cost to the company than continuing with the previous arrangements would have been. The current
remuneration policy will be amended to reflect this change prior to putting before shareholders at the 2017
AGM.
The main targets of the annual bonus for 2016 related to management trading profit and net cash flow,
weighted towards the management trading profit metric. The bonus plan also contained a number of
non-financial objectives relating to organic revenue growth, generating positive PR and achievement of
strategic project milestones. Certain of these non-financial objectives were achieved in 2016 which generated
a bonus payable of 25% and 20% of base salary for the CEO and FD respectively. However, as both of the
main financial targets for 2016 were not achieved, the Executive Directors thought it appropriate to waive
their right to any bonus in respect of the 2016 non-financial targets. Further details of the bonus
arrangements and the bonus paid can be found in Single Figure, Executive Directors’ Remuneration of the
Remuneration Report on page 41 and Note 4 to that table.
The Committee believe they set challenging targets for the performance-based awards to motivate the
executives and align the interests of the executive with those of shareholders. Stretch targets required
exceptional performance to be achieved. Sufficient goals were met at the end of 2015 to justify award of
ADSs to both Executive Directors in 2016. The targets set for 2016 were not achieved and therefore no
awards were made in respect of these. Further details are set out in the section headed Remuneration
Report, Awards Granted During the Year and the section headed Implementation of the Remuneration Policy
for the Year Ending 31 December 2017 under Long Term Incentives and its associated Notes.
Decisions affecting 2017
The Committee reviewed the Executive Directors’ salaries at its January 2017 meeting in accordance with the
Policy. It was recognised that the achievement of the 2017 budget is paramount and while we believe that
the reasons behind the downturn in 2016 were in the main temporary, at the present time we are focused on
efficiency improvements and cost reductions to improve the robustness of our forecasts. Accordingly, the
Board is taking a very cautious approach on base remuneration, and has frozen executive director salaries
and benefits and non-executive director fees for 2017. On the other hand, to support and encourage the
difficult actions now being taken, it was felt appropriate to offer an enhanced equity potential award for 2017,
entirely performance-based - on generating improved shareholder returns.
The Committee has also determined the Executive Directors’ variable remuneration arrangements for 2017.
No change has been made to the basic structure of how bonuses are earned or share awards made. The
focus remains on improving trading profit and net cash flow. Unlike previous years there are no non-financial
bonus targets for 2017. A summary of the Executive Directors’ salary and incentive arrangements for the
financial year 2017 can be found under the section headed Implementation of the Remuneration Policy for the
Year Ending 31 December, 2017 on pages 48 to 50 of the Remuneration Report.
The Committee looks forward to gaining your support for the updated Remuneration Policy and the Annual
Remuneration Report at the 2017 AGM.
J A Bonn
CHAIRMAN OF THE REMUNERATION COMMITTEE
14 March, 2017
39
LUXFER HOLDINGS PLC
Remuneration Report
2016 Remuneration Report
(subject to advisory vote by the shareholders at the 2017 AGM)
This report has been compiled in accordance with the U.K. ‘The Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendments) Regulations 2013’. As required by the Regulations, the report
will be proposed for an advisory vote at the 2017 AGM. The approved Remuneration Policy can be
found on the Company’s website at www.luxfer.com/governance/.
The Remuneration Committee, its Activities and Responsibilities
Peter Haslehurst retired from the Luxfer Board at the AGM on 24 May, 2016. The members of the Committee
during the year are set out below.
Members of Committee during 2016
Peter Haslehurst .............................................. Non-Executive Director and Chairman (Chair) until 24
May, 2016
Joseph Bonn .................................................... Non-Executive Director, Interim Chairman (Chair)
from 24 May, 2016 and Chairman (Chair) from 6
December, 2016
Kevin Flannery ................................................. Non-Executive Director
David Landless ................................................. Non-Executive Director
Total number of meetings in 2016 ..............
Meetings
attended
2
2
2
2
2
The Company Secretary acts as secretary to the Committee. Brian Purves normally attends all the meetings,
at least in part.
The Committee is responsible for determining and agreeing with the Board the framework on executive
remuneration and its costs. The Committee’s written Terms of Reference can be accessed in the Governance
section of the Company’s website www.luxfer.com/governance/.
During 2016, the matters dealt with by the Committee were the following:
January 2016 ............................. • Consideration as to whether, and to what extent, the Executive
Directors’ bonus targets for 2015 had been met;
• Determination of the Executive Directors’ annual bonus targets for
2016;
• Annual review of the Executive Directors’ and Company Secretary
salaries;
• Review of UK Executive Pension Provisions;
• Setting of goals to be met by the Executive Directors and Senior
Managers which if met would lead to time-based share awards in
2017;
• Determination to settle RSU granted under the LTiP by combination
of cash and shares;
• Delegation of authority to Chief Executive Officer to make awards
under the LTiP over a defined number of shares to junior and middle
management in his sole discretion;
• Consideration of accelerating vesting of LTiP awards and extension
of exercise periods for IPO and LTiP awards held by impending
retirees.
40
LUXFER HOLDINGS PLC
March 2016 ................................
• Review of 2015 Remuneration Report for subsequent approval by
the Board;
• Approval of amendments to the schedule of the U.K. Umbrella
Incentive Plan;
• Review of Awards under the LTiP made to junior and middle
management.
Advisors to the Committee
independent advice when
The Committee has access to
it requires such advice.
PricewaterhouseCoopers LLP (“PwC”) HR Services provided advice on remuneration reporting and long term
incentive design during 2016 and early 2017. PwC were appointed as the Company’s auditor in the middle of
2015 after a competitive tender. It was determined that PwC HR Services could continue to provide advisory
and benchmarking services, subject to a case-by-case independence review and the Company’s non-audit
service approval process. The cost of advice by PwC HR Services provided during 2016 was $24,425 (2015:
$33,774). Although the Committee has not made a specific determination to the effect, they are satisfied that
PwC HR Services provides independent and professional advice. PwC is a member of the Remuneration
Consultants Group and is signed up to the Group’s Code of Conduct.
it considers
REMUNERATION RECEIVED BY THE DIRECTORS FOR THE YEAR ENDED 31 DECEMBER, 2016
(Information in this part of the Remuneration Report is audited unless stated otherwise)
Single Figure
The tables below set out an analysis of each Director’s total remuneration for 2016. Total remuneration
reflects both the performance of the Company and the contribution made by each Director to the continued
success of the Company.
Executive Directors’ Remuneration
U.S.$ (1)
Year Salary (2)
Brian Purves ............ 2016 534,802
594,672
Andrew Beaden ....... 2016 281,114
312,584
2015
2015
Taxable
Benefits (3)
27,635
30,469
22,492
24,414
Annual
Bonus
(4)
0
0
0
0
Long-Term
Incentive
Awards (5)
135,134
0
56,456
0
Other
Share
Awards (6)
1,236
232,779
1,159
116,869
Pensions
Contributions
137,510
163,437
70,674
66,109
Total
836,317
1,021,357
431,895
519,976
Table compiled in accordance with the U.K. ‘The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013’.
(1)
(2)
(3)
(4)
Exchange rates—Salary, Taxable Benefits, Awards and Pension Contributions are determined and paid in GBP sterling and
translated into U.S. dollars at the average exchange rate for the year $1.3444:£ as used for the Consolidated Financial
Statements. For consistency, the 2015 amounts remain as reported last year translated at the average exchange rate used for
that year of $1.5248:£.
Salaries—As Brian Purves and Andrew Beaden are paid in GBP sterling and their salaries are translated as set out in Note 1,
the salary amounts will differ from those shown in the 2015 Annual Remuneration Implementation Report for the coming year
2016 which were based on the 2015 year-end exchange rate. The actual GBP sterling amounts in 2016 were Brian Purves
£397,800 (2015: £390,000) and Andrew Beaden £209,100 (2015: £205,000) reflecting the change in their base salary 2015 to
2016 as reported in the Chairman’s letter.
Taxable Benefits—For Brian Purves, this comprised: car allowance $24,392, medical insurance $2,782, and dental insurance
$461, and for Andrew Beaden comprised car allowance $18,553, medical insurance $3,478, and dental insurance $461.
Taxable benefits are valued at their GBP sterling taxable value. The actual GBP sterling amounts in 2016 were Brian Purves
£20,556 (2015: £19,982) and Andrew Beaden £16,730 (2015: £16,011).
Annual Bonus—For the 2016 financial year, the annual bonus plan was based on the achievement of two financial
performance goals, profit performance and cash performance (two of the key strategic performance indicators used by the
Company to assess its development against its financial objectives during the year), measured against the annual budget. The
strategic goal related to organic revenue growth and the achievement of strategic project milestones. The bonus was weighted
towards the achievement of the management profit target, which required a material improvement over the prior year
41
LUXFER HOLDINGS PLC
outcome. The cash target set was aggressive. While several of the strategic milestones were achieved, the financial targets
were missed and the Executive Directors agreed to waive any bonus. For the 2015 financial year, the annual cash bonus was
waived in favour of an award of restricted shares, with these being included under ‘Other Share Awards’.
Summary of the annual bonus potential as a percentage of base salary of each of the Executive Directors for 2016:
Maximum Annual
bonus (number of
points available
and % of salary)
Management Trading
Profit (sliding scale
between threshold,
target and stretch) (2)
Net Cash Flow
(sliding scale
target and
stretch)
Non-financial
objectives
Bonus
outcome
2016(1)
Number of points
available ...................
Brian Purves ..................
Andrew Beaden .............
1,800
150%
120%
200 – 800
100 - 400
16.7% - 66.7% 8.3% - 33.3%
13.3% - 53.3% 6.7% - 26.7%
600
50.0%
40.0%
300
—(1)
—(1)
(1)
(2)
A number of the non-financial objectives were achieved during 2016, resulting in a bonus of 25% and 20% being
payable to the CEO and FD respectively. Given that no bonus was generated from main financial targets, both the
CEO and the FD thought it appropriate to waive any bonus payable in respect to achievement of non-financial targets
under the 2016 scheme.
Management trading profit is defined as operating profit or loss before profit on sale of redundant site, changes to
defined benefit pension plans, restructuring and other expense, amortisation on acquired intangibles and share based
compensation charges.
The performance of the Company during the year included trading profit of $35.3 million (2015: $42.3 million) and net cash
flows from operations of $29.2 million (2015: $52.8 million).
The Board has considered whether to include in this report the targets which applied to the bonus arrangements for the
Executive Directors in 2016 but has determined that these amounts are commercially sensitive.
(5)
(6)
The Long Term Incentive Awards—the 2016 Single Figure: In 2015, the Committee set profit, cash flow and EPS targets
with all three metrics being measured at threshold, target and stretch. Greater weighting was assigned to the cash flow and
EPS targets. On attainment of the cash flow target for 2015 being met at the threshold level, an award under the LTiP was
made in 2016. For additional information refer to the section of this report headed Outstanding Share Awards During 2016 on
page 46. Details of the grants made can be found in the Implementation of the Remuneration Policy for the Year Ending 31
December, 2017, Long Term Incentives on page 49 of this report. No performance awards vested in 2016 relating to 2016
awards, so no value is ascribed to them in the Single Figure table.
Other Share Awards— Apart from the shares awarded in lieu of 2015 cash bonus (see note 4 above), this relates to the
value ascribed to the Matching Shares awarded to Brian Purves and Andrew Beaden under the Company’s U.K. All Employee
Share Investment Plan (“SIP”), as further detailed below: -
No. of
Partnership
Shares
purchased
June 2016
@ average
price of
$9.648
each ADS
No. of
Matching
Shares
awarded
June
2016
No. of
Partnership
Share
purchased
December
2016
@ average
price of
$11.020
each ADS
No. of
Matching
Shares
awarded
December
2015
Monthly
contribution
from salary
during
2016 (£)
Brian Purves ................
Andrew Beaden ...........
150
140
141
125
70
62
102
102
51
51
Dividends
shares
acquired
from
dividend
reinvestment
during 2016
34
30
Total shares
accumulated
in SIP
during 2016
398
370
42
LUXFER HOLDINGS PLC
Non-Executive Directors’ Remuneration
None of the Non-Executive Directors (including the Chairman) received taxable benefits, annual bonus,
long-term incentive awards (exceeding one year) or pension contributions during the year.
U.S.$ (1)
Peter Haslehurst .................................................................
YEAR
Joseph Bonn .......................................................................
Kevin Flannery ....................................................................
David Landless ..................................................................
Brian Kushner .....................................................................
Clive Snowdon ...................................................................
Adam Cohn ........................................................................
BASE FEE (1)
62,690
157,054
80,702
77,500
79,050
77,500
79,050
77,500
46,116
—
32,940
—
32,940
—
Other Fees (Fees in the
form of share awards) (2)
2,976
75,202
38,704
36,945
38,704
36,945
38,704
37,451
37,246
—
—
—
—
—
Total
65,666
232,256
119,406
114,445
117,754
114,445
117,754
114,951
83,362
—
32,940
—
32,940
—
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Table compiled in accordance with the U.K. ‘The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendments) Regulations 2013.
(1)
Peter Haslehurst stepped down as Chairman on 24 May, 2016. His base fee was determined and paid in GBP sterling and
translated at the average exchange rate of $1.4321:£ being the rate applicable for the first five months of 2016 (full year
2015:$1.5248:£). The actual GBP sterling figure paid for the five months to May 2016 was £43,775 (full year 2015: £103,000).
The base fees of Joseph Bonn, Kevin Flannery, Adam Cohn and Brian Kushner are all determined in U.S. dollars.
The base fee of David Landless, and Clive Snowdon, although determined in U.S. dollars, is paid in GBP sterling translated at
the exchange rate reported in the Financial Times on the 5th of each month prior to payment. Actual payments received by
David Landless and Clive Snowdon for 2016 aggregated to £58,117 (2015: £50,586) and £25,739 (2015: nil) respectively.
(2)
2016 Single figure:
The value of the Other Fees in the Single Figure table is calculated as follows:
•
An element of the fees received by the Chairman and the other Non-Executive Directors are delivered as time-based
restricted stock unit (“RSU”). The award value is a fixed percentage of their Base Fee (50%) as provided in the Director
Equity Incentive Plan (“EIP”) less the issue price per ADS of £0.50 translated into U.S. dollars at the exchange rate on the
grant date of $1.4609:£ (73 cents). Awards were made immediately after the 2016 AGM and vest immediately before the
2017 AGM. The number of RSU was calculated using the closing price of each ADS on the NYSE ($12.63) the day before
the award was made. The number of awards received by each Non-Executive Director is set out in Awards Granted During
the Year—Non-Executive Directors Under the Director Equity Incentive Plan (EIP).
The RSU awards carry with them the right to receive accumulated dividend during the period of the award, in shares. The
dividends are not credited until the award vests. The Other Fees amount includes the value of the dividends vested and
paid on the 2015 RSU fee awards that vested immediately before the 2016 AGM. The value of the awards themselves was
included in the Single Figure for 2015 as they were time-based awards (see below). The dividend shares were valued at
the Closing Price of each ADS on the NYSE on the date of vesting, being $12.77, less the issue price of £0.50 translated at
the date of vesting at an exchange rate of $1.4463:£ (72 cents). The number of dividend shares and their value were:
Non-Executive Director
Peter Haslehurst .............................................................................................
Joseph Bonn ...................................................................................................
Kevin Flannery ................................................................................................
David Landless ...............................................................................................
Dividend shares allocated
247
121
121
121
Value of dividend less nominal cost of share $
2,976
1,458
1,458
1,458
43
LUXFER HOLDINGS PLC
LUXFER SHARE INCENTIVE PROGRAMS
Luxfer has a number of share incentive plans designed to align the interests of its Directors, managers and
employees, with the interests of its shareholders, and to act as retention tools.
The plan under which awards are granted to the Executive Directors on an on-going basis is the Luxfer
Holdings PLC Long-Term Umbrella Incentive Plan (“LTiP”). Awards, which are considered part of their fees,
are made to the Non-Executive Directors under the Non-Executive Directors Equity Incentive Plan (“EIP”). The
Executive Directors also participate in the Company’s All Employee Share Plan (“SIP”) open to all U.K.
employees. In the U.S. the Company has established an Employee Share Purchase Plan (“ESPP”) which is
open to all U.S. employees and U.S. based Executive Directors.
LTiP: The LTiP was adopted for the I.P.O. in 2012. It is used to grant awards not only to the Executive
Directors but also senior and junior managers in the Luxfer Group. A variety of different awards can be
granted under the LTiP. To date, it has been used to grant time-based nominal cost options to U.K.
employees including the Executive Directors, performance-based nominal cost options and market value
options to the Executive Directors and other senior U.K. employees and time-based and performance
restricted stock units to U.S. managers and managers from other countries in which the Luxfer Group
operates. The maximum value of awards under the rules of the LTiP that can be granted to the Chief
Executive Officer is 150% of salary, and 120% of salary to the Group Finance Director. These maximum
values are reflected in the Policy.
ESOP 2007: In 2007, prior to the 2012 I.P.O. and as part of the re-organisation the Company underwent in
that year, it implemented The Luxfer Holdings Executive Share Options Plan (“ESOP 2007”). All the options
made available under the 2007 Plan have been exercised, the remaining option holder, Andrew Beaden,
exercising all of his options during 2016. The Trustees have agreed to make available for use under the
various LTiP grants the remaining shares held in the employee benefit trust (“EBT”). Further details on the
EBT and the 2007 Plan can be found in Note 30 to the Consolidated Financial Statements.
I.P.O. Options: As part of the I.P.O. in October 2012, stand-alone option grants were made over ADSs to
the Executive Directors, Non-Executive Directors and certain other key executives seen as critical to the
Company’s future success on completion of the I.P.O. All these options have fully vested and are exercisable
up to October 2019, being seven years from the date of grant. No dividend shares are allocated on these
awards, either before or after vesting, whilst unexercised. Both Brian Purves and Andrew Beaden have I.P.O.
options. The exercise price is the I.P.O. price of $10 per ADS.
EIP: Annual awards are made under the EIP to Non-Executive Directors as part of their fees. The value of
the award is 50% of the base fee of a Non-Executive Director. These awards are made the day after the
Annual General Meeting (“AGM”) of the Company in each year and vest the day before the following AGM.
Annual awards are usually made as restricted stock units. They are paid out immediately on vesting, together
with dividends which have been accumulated during the vesting period. New Non-Executive Directors cannot
participate in the annual awards until they have served six months, however, the awards they would have
earned from the date of appointment are added to the next annual award provided they are re-elected at the
AGM.
Copies of the LTiP, ESOP 2007, I.P.O. Options and EIP plans mentioned above are filed on the Company’s file
at the SEC.
44
LUXFER HOLDINGS PLC
AWARDS GRANTED DURING THE YEAR
Executive Directors’ Awards Under the LTiP
During 2015 the Remuneration Committee set a score card of goals to assess performance consisting of
management trading profit, net cash flow and fully diluted EPS which if attained at the end of 2015 would
lead to the granting of nominal cost options to both Brian Purves and Andrew Beaden in 2016. The
Committee decided it was inappropriate for 2015 to include a non-financial goal particularly as there was one
included for the 2015 annual bonus. All three metrics were measurable at interim, goal and stretch, the
achievement of which would allow between 50% and 150% of the potential awards to be earned.
The 2015 performance resulted in the threshold targets for management trading profit and fully diluted EPS
not being attained. There was a strong conversion of profit into cash during 2015 resulting in the attainment
of the threshold target for net cash flow being achieved. The weighting applicable to this metric resulted in
20% of the available awards being earned.
The value of the grants appears in the Single Figure table for 2016. The number, and details of the terms, of
the grants are set out in the section headed Implementation of the Remuneration Policy for the Year Ending
31 December, 2016 under Long Term Incentives and its Notes.
The Committee believe they set challenging targets to motivate the executives and align the interests of the
executives with those of shareholders. Achievement of stretch targets would require exceptional performance.
Non-Executive Directors under the Director EIP
Chairman or Non-
Executive Director
Joseph Bonn ........................
Date of
Grant
25 May,
2016
Basis of
Aggregate
Awards
Granted
50% of annual
fee for 2016
Share
Price at
Date of
Grant $
Type of
Award
12.63 Restricted
Stock Unit
Kevin Flannery ....................
25 May,
2016
50% of annual
fee for 2016
12.63 Restricted
Stock Unit
No. of
Shares
Granted
3,130
Face Value
of Award $
(1)Issue Price
per ADS & in
Aggregate $
39.532 0.73 each ADS
Aggregate
2,286
3,130
39,532 0.73 each ADS
Aggregate
2,286
David Landless ....................
25 May,
2016
Brian Kushner......................
25 May,
2016
50% of annual
fee for 2016
50% of annual
fee for 2016
12.63 Restricted
3,130
39,532 0.73 each ADS
Stock
Aggregate
2,286
12.63 Restricted
3,130
39,532 0.73 each ADS
Stock
Aggregate
2,286
% of Face
Value
that
would
vest
On vesting
date 100%
Vesting
Date
Day before
2017 AGM
Day before
2017 AGM
On vesting
date 100%
Day before
2017 AGM
Day before
2017 AGM
Each
vesting
date 100%
Each
vesting
date 100%
(1) The issue price of £0.50 each ADS has been translated at the U.S. dollar Financial Times exchange rate for 25 May, 2016, the
date of grant, of $1.4609:£
45
Award
Brian Purves
IPO Options
(2)
LTiP 2013
(3)
(4)
M.V.
LTiP 2013
(5)
LTiP 2014
(6)
LTiP 2016
(7)
Andrew Beaden
(1)
ESOP
IPO Options
(2)
LTiP 2013
(3)
(4)
M.V.
LTiP 2013
(5)
LTiP 2014
(6)
LTiP 2016
(7)
Joseph Bonn
IPO Options
(2)
EIP 2015
EIP 2016
(8)
(9)
Kevin Flannery
IPO Options
(2)
EIP 2015
EIP 2016
(8)
(9)
LUXFER HOLDINGS PLC
OUTSTANDING SHARE AWARDS DURING 2016
Executive and Non-Executive Directors
Awards earned on 2015 performance were granted during 2016 to the Executive Directors. No Awards were
granted in 2017 in respect of 2016 performance. All awards are over ADS not the underlying ordinary shares.
Awards
Options
Available
1 Jan,
2016
Granted
During
Year
(Lapsed) /
(Exercised)
During Year
Available
31 Dec,
2016
Vested
Awards
1 Jan,
2016
Vested
Awards
During Year
(Lapsed) /
(Exercised)
During Year
Vested
Awards
31 Dec,
2016
Available
Unvested
Awards(4)
179,200
7,900
22,100
26,250
14,000
—
—
—
—
—
—
179,200
179,200
(7,900)
—
5,266
—
22,100
14,733
(26,250)
(14,000)
—
—
—
13,500
—
13,500
—
2,634
7,367
—
—
—
—
179,200
(7,900)
—
—
22,100
(5,250)
—
—
—
—
—
—
—
—
—
—
13,500
Totals
249,450
13,500
(48,150)
214,800
204,449
10,001
(13,150)
201,300
13,500
—
59,020
69,000
69,000
59,020
69,000
3,200
9,100
10,833
5,900
—
—
—
—
—
—
(59,020)
—
(3,200)
—
—
9,100
(8,667)
2,166
(5,900)
—
—
5,640
—
5,640
—
—
1,067
3,034
—
—
—
(59,020)
—
—
69,000
(3,200)
—
—
—
—
—
9,100
2,166
—
—
Totals
157,053
5,640
(76,787)
85,906
138,385
4,101
(62,220)
80,266
20,000
3,168
—
—
(3,168)
—
—
3,130
—
3,130
—
20,000
20,000
—
—
20,000
—
—
3,168
(3,168)
—
—
—
—
Totals
23,168
3,130
(3,168)
23,130
20,000
3,168
(3,168)
20,000
20,000
3,168
—
—
(3,168)
—
—
3,130
—
3,130
—
20,000
20,000
—
—
20,000
—
—
3,168
(3,168)
—
—
—
—
Totals
23,168
3,130
(3,168)
23,130
20,000
3,168
(3,168)
20,000
David Landless
EIP 2015
EIP 2016
(8)
(9)
3,168
—
(3,168)
—
—
3,130
—
3,130
Totals
3,168
3,130
(3,168)
3,130
Brian Kushner
EIP 2016
(9)
—
3,130
Totals
—
3,130
—
—
3,130
3,130
—
—
—
—
—
3,168
(3,168)
—
—
3,168
(3,168)
—
—
—
—
—
—
—
—
—
46
—
—
—
—
—
—
5,640
5,640
—
—
3,130
3,130
—
—
3,130
3,130
—
3,130
3,130
3,130
3,130
5,250
—
—
2,133
6,066
2,166
0
0
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(i)
(ii)
(iii)
(iv)
LUXFER HOLDINGS PLC
Exercise
Period
No longer
applicable
To October
2019
Key to table:
Award
Award Scheme, Type & Grant
Grant Date
Exercise Price /
Nominal Cost Each
Award
Remaining Vesting
/Settlement Dates
ESOP 2007
I.P.O. Options
3 Aug, ‘11
2 Oct, ‘12
LTiP 2013 Options - Time Based (ii)
31 Jan, ‘13
Market Value
LTiP 2013 - Performance based - EPS
and TSR targets
LTiP 2014 Options Performance Based
- EPS Targets
31 Jan, ‘13
31 Jan, ‘13
20 Mar, ‘14
LTiP 2016 Options - Time Based (iv)
21 Mar, ‘16
EIP 2015 - Restricted Stock Units(iii)
29 May, ‘15
EIP 2016 - RSU (iii)
24 May, ‘16
£2.00(i)
$10.00
£0.50(i)
$12.91
£0.50(i)
£0.50(i)
£0.50(i)
£0.50(i)
£0.50(i)
All Vested & Settled
All vested
All Vested
To 30 Jan, 2018
All Vested
To 30 Jan, 2018
All Lapsed
All Lapsed
21 March,
2017,2018,2019
Day before 2016 AGM
Day before 2017 AGM
No longer
applicable
No longer
applicable
To 21 March,
2021
—
—
Where the exercise price / nominal cost is indicated in GBP sterling, in so far as it is required to be translated into U.S. dollars
for the purpose of the exercise / settlement, it is translated at the $:£ exchange rate reported in the Financial Times for the
date of exercise / settlement.
LTiP 2013: Time-based awards accumulated dividend shares until vesting only, which shares are added to the award when the
option is exercised.
EIP 2015 and EIP 2016 annual awards are settled immediately on vesting, together with dividends which have been
accumulated during the vesting period. The 2015 awards were settled in 2016 net of payroll taxes.
LTiP 2016: Awards made on attainment of 2015 performance goals and include a “claw back” provision. Time-based option
awards accumulate dividend shares until vesting only, which shares are added to the award when the option is exercised.
PENSION ARRANGEMENTS
Pension arrangements for the Executive Directors are reviewed annually to ensure that the benefits are
consistent with market practice. The Group’s contributory pension arrangements consist of both defined
benefit and defined contribution arrangements. The pensions for the Executive Directors who were Directors
during the year were provided partly by the defined benefit and partly by registered defined contribution
arrangements and an allocation to an unfunded unapproved retirement benefit plan (“UURBS”) accrued by
the Company.
Benefits provided by the Luxfer Group Pension Plan (“the Plan”) ceased to accrue on 5 April, 2016, following
the agreement, reached during 2015, to close the Plan to future accrual from this date. The main features of
the defined benefit arrangements prior to closure were:
•
•
•
A normal retirement age of 65;
Accrual on a career average basis each year of 1.50% of pensionable earnings for a member
contribution of 9.8% or 1.31% for a member contribution of 7.4%;
Pensionable earnings are limited to a plan-specific annual earnings cap of $107,700 p.a. (£76,000) to
6 April, 2016;
•
A spouse’s pension on death and a lump sum payment on death in service.
Following the closure to future accrual of the defined benefit Luxfer Group Pension Plan, the Company also
decided members would cease to accrue further benefits in the unfunded unapproved retirement benefit plan
(“UURBS”). In lieu of contributions into these schemes, the Company now offers a salary supplement.
Reflecting the cost of previous defined benefit arrangements, now withdrawn, both Executive Directors have
been paid the equivalent to 25% of base salary from the date of closure to future accrual of the Luxfer Group
Pension Plan.
47
LUXFER HOLDINGS PLC
Details of the accrued pension entitlements of the Executive Directors under the defined benefit arrangement
during 2016, payments made to the defined contribution arrangement and salary supplement during 2016,
are set out in the tables below.
Directors’ Remuneration and Benefits for the Year Ended 31 December, 2016 and 2015
Executive Directors
Brian Purves ................................... —
$6,536
Andrew Beaden ..............................
Defined
Benefit (1)
Funded Defined
Contribution
Unfunded Defined
Contribution
Cash
Supplement
Total
—
$17,702
$37,233
$3,809
$100,276
$42,627
$137,509
$70,674
2016
Executive Directors
Brian Purves ....................................... —
$16,078
Andrew Beaden ..................................
Defined
Benefit (1)
Funded Defined
Contribution
Unfunded Defined
Contribution
Cash
Supplement
—
$45,972
$163,437
$4,059
—
—
Total
$163,437
$66,109
2015
Exchange rate used above: $1.3444:£ over 2016
Exchange rate used above: $1.5248:£ over 2015
(1)
The values of the increase in the defined benefit pension in excess of inflation has been calculated on the basis
set by U.K. legislation, less contributions paid by the Directors themselves.
Pension Benefits for the Years Ended 31 December, 2016 and 2015
Andrew Beaden ........................................................
$28,752 p.a.
$33,897 p.a.
Accrued Pension as at
31 December, 2016
Accrued Pension as at
31 December, 2015
Exchange rates used in the table above: $1.2336:£ as at 31 December, 2016, $1.4738:£ as at 31 December,
2015.
(1)
The accrued benefit is the total defined benefit pension which would be paid annually on retirement based on service to, and
salary, at the end of the date of closure of the Plan (5 April, 2016). It includes the longevity adjustment factor that applies to
benefits earned from 6 October, 2007.
Implementation of the Remuneration Policy for the Year Ending 31 December 2017 (Information
not subject to audit unless stated otherwise)
Set out below is a summary of how the Directors’ Remuneration Policy will be applied during the year ending
31 December, 2017.
Base Salary
Brian Purves(1) .......................................................
Andrew Beaden(1) ...................................................
2017
$
534,802
281,114
2016
$
534,802
281,114
% increase(2)
0%
0%
(1)
(2)
The 2017 salary of Brian Purves and Andrew Beaden has been translated at the 2016 average U.S. dollar exchange rate of
$1.344:£, the same exchange rate as the 2016 salary to aid comparison. Further details on the 2016 salaries can be found in
the Notes 1 & 2 to Single Figure Executive Directors’ Remuneration.
Neither of the Executive Directors will receive any pay increase during 2017 which is consistent with wage control measures
currently in place in many areas of the Group. Base Salaries rose by 2% in 2016 over 2015.
48
LUXFER HOLDINGS PLC
Pension Arrangements
As explained in the Chairman’s letter, the Group’s U.K. contributory defined benefit pension plan closed to
future accrual on 5 April, 2016. Andrew Beaden continued to participate in the Group’s defined benefit
pension plan up to the salary cap applied by the rules of the plan and the Group U.K. defined contribution
pension plan until 5 April, 2016, at which point he became a deferred member of the defined benefit pension
plan. Until 5 April, 2016, Brian Purves continued to receive an allocation or payment to an unregistered
unapproved savings arrangement based on contributions the Company would have made to the defined
benefit and defined contribution pension plans had he continued to be a member of those pension plans.
After 5 April, 2016, the Executive Directors received a cash supplement calculated at a flat rate percentage of
base salary.
Annual Bonus
In line with the Policy, the standard annual bonus for Brian Purves, as Chief Executive Officer, will continue to
be capped at 100% of base salary and for Andrew Beaden, as Group Finance Director, 80% of base salary. As
in previous years the bonus targets are based on a combination of two financial performance targets,
management trading profit and net cash flow after tax. It will be calculated on a points system with a
maximum of 1,200 points available to be earned. Points are earned on a sliding scale that commences only
once threshold has been achieved and rises through the target performance up to a stretch target. On profit,
threshold approximates to beating prior-year. Target is the annual profit budget, while stretch is beating the
annual profit budget by a considerable margin.
The Committee intends to disclose the actual financial performance targets retrospectively in a subsequent
year’s Annual Remuneration Report once they are no longer considered commercially sensitive.
Maximum
Annual Bonus
(% of salary)
Points
100%
80%
Sliding scale between threshold, target and stretch
Management Trading Profit
Net Cash Flow (after
tax)
0 – 800
0% - 66.7%
0% - 53.3%
0 - 400
0% - 33.3%
0% - 26.7%
Brian Purves ..........................................
Andrew Beaden .....................................
Long Term Incentives
In 2016 the Committee set profit, cash flow and EPS targets as described in Executive Directors’ Awards
Under the LTiP on page 45. These targets were missed, and consequently, no grants have been made in
2017.
The Committee has set goals which if attained in 2017 will lead to the granting of nominal cost options to
both Brian Purves and Andrew Beaden in 2018. The Committee has concentrated solely on a range of EPS
targets for 2017.
The options to be granted in 2018, if the 2017 goals are achieved, will be time-based nominal cost options
vesting in equal tranches over three years from the date of grant and will be subject to claw back in the event
of a misstatement of the Consolidated Financial Statements on which they were earned leading to an
incorrect award. Subject to Committee discretion, all ADSs resulting from the awards must be held for a
minimum of three years from the date of grant whether or not vested, effectively four years from the setting
of the targets (other than to fund the exercise price and tax liabilities on a vesting or exercise). The maximum
value of awards that can be granted is 150% of base salary for the Chief Executive Officer and 120% of base
salary for the Group Finance Director as set out in LTiP rules and the approved Policy Report.
49
LUXFER HOLDINGS PLC
Non-Executive Directors
Summary of how the Directors’ Remuneration Policy for the Non-Executive Directors will be
applied during the year ending 31 December, 2017.
The Board decides on the approach to compensating the Non-Executive Directors. The percentage of awards
made as fees is fixed in the EIP.
2017
$
Base Fee
2016
$
Base Fee
%
Increase
Base Fee
Joseph Bonn (1) ..................................
Kevin Flannery (3) ..............................
David Landless ..................................
Brian Kushner (2)................................
Clive Snowdon (2) ...............................
Adam Cohn (2) ....................................
98,812
79,050
79,050
79,050
79,050
79,050
80,702
79,050
79,050
46,116
32,940
32,940
0%
0%
0%
0%
0%
0%
Value of Share
Awards % of
Base Fee 2017
50%
50%
50%
50%
50%
50%
Value of Share
Awards % of
Base Fee 2016
50%
50%
50%
50%
50%
50%
(1)
(2)
(3)
Base fee increase reflects additional supplement for Chairman Fees from December 2016. Joseph Bonn did not take this
supplement during his period as interim Chairman.
Fee for 2016 part year only.
Kevin Flannery will not offer himself for re-election to the Board at the 2017 AGM.
Payment to Past Directors and Payment for Loss of Office (audited)
No payments to past Directors or payment for loss of office were made during 2016 and 2015.
Directors’ Interests in Shares in the Company (audited)
Brian Purves (1) (2) (8) ...................................
Andrew Beaden(1) (3) (8) ...............................
Joseph Bonn(4)............................................
Kevin Flannery(5) .........................................
David Landless(6) ........................................
Brian Kushner .............................................
Adam Cohn .................................................
Clive Snowdon(7) .........................................
American Depository Shares
(1 ADS=£0.50 ord.)
Held at 31 Dec, 2016 No.
American Depository Shares
(1ADS=£0.50 ord.)
Held at 1 Jan, 2016 No.
670,160
103,406
5,783
14,355
5,581
—
—
2,000
650,662
91,604
3,300
12,533
3,295
—
—
—
(1)
(2)
(3)
(4)
Brian Purves and Andrew Beaden hold a substantial portion of their shares as ordinary shares not yet having translated them to
ADS. For ease of comparison the table shows their interests as ADS. Those shares acquired during the year have been acquired
as ADS.
The shares identified as held by Brian Purves include his beneficial holding through connected persons and the 1,062 shares
held in the SIP (2015: 664). The SIP shareholding includes 387 Matching Shares. Certain of the ADS held in the SIP are subject
to forfeiture as explained in Note 6 to the Single Figure table on page 42.
The shares identified as held by Andrew Beaden include shares held by connected persons and the 974 shares held in the SIP
(2015: 604). The SIP shareholding includes 359 Matching Shares. Certain of the ADS held in the SIP are held subject to
forfeiture as explained in Note 2 above.
The additional 2,483 ADS acquired by Joseph Bonn during the year were as the result of his 2015 “Other Fees” share award of
3,168 ADS vesting prior to the 2016 AGM together with accrued dividend of 121 shares. He also purchased a further 661 ADS
on the market. The ADS delivered are net of shares not issued to pay option costs and tax due on the value of the awards.
Further details on these awards can be found in the Notes to Single Figure—Non-Executive Directors’ Remuneration on page
43.
50
LUXFER HOLDINGS PLC
(5)
(6)
(7)
(8)
The additional 1,822 ADS acquired by Kevin Flannery during the year were as the result of his 2015 “Other Fees” share awards
of 3,168 ADS vesting prior the 2016 AGM, together with accrued dividend of 121 shares. The ADSs delivered are net of shares
not issued to pay option costs and tax due on the value of the awards. Further details on these awards can be found in the
Notes to Single Figure—Non-Executive Directors’ Remuneration on page 43.
The additional 2,286 ADS acquired by David Landless during the year were as the result of his 2015 “Other Fees” share awards
of 3,168 ADS vesting prior to the 2016 AGM, together with accrued dividend of 121 shares and 642 ADS comprising restricted
stock ADS from those awarded to him on appointment, which vested in equal thirds over three years, the final tranche being
released in March 2016. The ADSs delivered are net of shares not issued to pay option costs and tax due on the value of the
awards. Further details of his awards can be found in Notes to Single Figure—Non-Executive Directors’ Remuneration on page
43.
The shares identified as held by Clive Snowdon are held by a connected person and were ADS purchased on the market during
the year.
In addition to the above interests, Brian Purves and Andrew Beaden also have interests in the deferred shares of £0.0001 of
the Company as follows:
Brian Purves ...................................................................................................................................................
Andrew Beaden ..............................................................................................................................................
29,602,995,623
4,144,419,390
There was no movement in their interest in these shares during the year. Further details on the deferred shares can be found in Note 18
to the Consolidated Financial Statements.
Executive Director Shareholding Requirements
The Executive Directors are required to hold the number of shares (ordinary shares or the equivalent ADS)
equal in value to 100% of base salary. This requirement was maintained by both Brian Purves and Andrew
Beaden during the year. Both Executive Directors are required to obtain the Chairman’s permission before
they or their connected persons can deal in the Company’s shares, providing an effective way of ensuring
their shareholding requirements are maintained.
Total Directors’ Shareholdings and Interests at 31 December, 2016
Brian Purves ............
Andrew Beaden .......
Non-Executive
Joseph Bonn ............
Kevin Flannery .........
David Landless ........
Brian Kushner ..........
Adam Cohn ..............
Clive Snowdon .........
Shares Owned
Beneficially
(1x ADS=£0.50 ord.)
670,160
103,406
5,783
14,355
5,581
—
—
2,000
Shares Subject to
Forfeiture
387
359
—
—
—
—
—
—
Options Vested
but not Exercised
201,300
80,266
Restricted Stock
Units Not Yet Vested (Assuming
will be settled in Shares not Cash)
—
—
20,000
20,000
—
—
—
—
3,200
3,200
3,200
3,200
—
—
(1)
(2)
A breakdown of the vested and unvested awards and brief details of the plans under which the awards were made can be
found in Outstanding Share Awards During 2016 table on page 46 of this report.
In addition to the above shareholdings and interests Brian Purves and Andrew Beaden also have interests in the deferred
shares of £0.0001 of the Company details of which can be found in the Notes Directors’ Interests in Shares in the Company
(audited) table above.
51
LUXFER HOLDINGS PLC
Performance Graph
U.K. legislation requires the Annual Remuneration Report to contain a line graph that shows the total
shareholder return (TSR) over a seven year period for both a holding of the Company’s listed shares and a
hypothetical comparator holding of shares representing a specified broad equity market index. As the
Company’s ADSs were only listed on the NYSE at the beginning of October 2012, we are only able to provide
TSR for the Company’s shares in a listed environment for the period 3 October, 2012 to 31 December, 2016.
We have used the S&P SmallCap 600 (Industrial) index as the most appropriate to where we are placed as a
small cap company in the U.S. and the industrials sub-sector includes most of our comparable companies. The
graph shows the value of $100 vested in Luxfer in October 2012 at the I.P.O., compared to $100 invested in
the S&P SmallCap 600 (Industrial) on the same date. The S&P SmallCap 600 (Industrial) was chosen as the
index as it comprises companies that most closely resemble Luxfer. The TSR is calculated in U.S. dollars.
History of Total Remuneration Figure for Chief Executive Officer
We have included the total remuneration figure for the Chief Executive Officer for a seven year period as
required by legislation despite the TSR graph only reflecting the TSR from the date of the I.P.O.
U.S.$ Year ended 31 December
Total remuneration ..............................
Annual bonus % ................................... 100%
Share awards vesting % ...................... N/A
2013
897,421 998,638 1,050,878 985,076 853,320 1,021,357 884,593
0%
0%
71%
100%
100%
N/A
0%
59%
39%
21%
0%
59%
2015
2012
2014
2011
2016
2010
Relative Importance of Spend on Pay
The following chart sets out the Group’s actual spend on pay (for all employees) relative to dividends paid in
the current and prior year.
52
LXFR, 124S&P SmallCap 600 (Industrial), 1920.050.0100.0150.0200.0250.0index (Oct 2, 2012 = 100)TSR Oct 3, 2012 (IPO) to Dec 31, 2016
LUXFER HOLDINGS PLC
Total Staff Costs vs Dividends Paid ($m)
$111.7
$119.0
$13.3
$10.8
2016
2015
Total Staff Costs
Dividend Paid
(To assist with conformity and transparency we have used staff costs as set out in Note 6 to the Consolidated Financial Statements.)
Percentage Change in Chief Executive Officer’s Remuneration
We have selected U.K. employees as the most appropriate comparator as the Chief Executive Officer is based
in the U.K. and the benefits structure is similar. The 2015 amounts were adjusted for the impact of translation
and have been calculated using the 2016 average exchange rate of $1.3444:£.
U.S.$
Salary
Chief Executive Officer ................................................................................ 534,802
U.K. employee average ............................................................................... 43,927
Benefits
Chief Executive Officer ................................................................................ 27,635
U.K. employee average ...............................................................................
660
Annual Bonus
0
Chief Executive Officer (bonus value taken in shares) ....................................
U.K. employee average ............................................................................... 1,215
2016
2015
% change
524,316
43,598
2.0%
0.8%
26,864
706
2.9%
(6.5)%
203,992
1,621
(100.0%)
(25.0)%
Statement of voting at AGM
The Annual Remuneration Implementation Report was put to an advisory vote at the 2016 AGM.
Annual Remuneration
Implementation Report ......
Votes for (and
percentage of votes
cast)
Votes against (and
percentage of votes
cast)
Proportion of
share capital
voting
Shares on
which votes
were withheld
18,986,432
97.29%
528,850
2.71%
73.77%
3,130
The vote received in favour of the Remuneration Report was 97.29%, and the larger shareholders with whom
the Directors liaise with from time to time did not make any negative comments in those conversations
concerning Directors’ pay and incentives. As referred to in the Chairman’s letter at the beginning of the
Remuneration Report, the remuneration policy is currently under review and will be presented at the 2017
AGM for Shareholder approval.
53
LUXFER HOLDINGS PLC
Approval of Report
Joseph Bonn, the Chairman of the Committee, will attend the forthcoming AGM and will be available to
answer any questions shareholders may have concerning the Directors’ remuneration. This Remuneration
Report will be submitted for approval by an advisory vote at the forthcoming AGM.
Signed on behalf of the Board by:
J A Bonn
CHAIRMAN
14 March, 2017
For and on behalf of the Board
54
LUXFER HOLDINGS PLC
Directors’ Responsibilities Statement
The directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have prepared the group and company financial statements in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the European Union. Under company law the directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and the Company and of the profit or loss of the Company and Group for that
period. In preparing these financial statements, the directors are required to:
Select suitable accounting policies and then apply them consistently;
Make judgements and accounting estimates that are reasonable and prudent;
State whether applicable IFRSs as adopted by the European Union have been followed, subject to any
material departures disclosed and explained in the financial statements;
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006 and, as regards the Group consolidated financial
statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for the maintenance and integrity of the Company’s website (www.luxfer.com).
Legislation in the U.K. governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The directors consider that the annual financial statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess a company’s performance,
business model and strategy.
Each of the directors, whose names and functions are listed in the Governance section of this report confirm
that, to the best of their knowledge:
The Group consolidated financial statements, which have been prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of
the group; and
The Strategic and Directors’ Reports contained in this Annual Report include a fair review of the
development and performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that it faces.
55
Independent auditors’ report to the members of Luxfer
Holdings PLC
Report on the financial statements
Our opinion
In our opinion:
Luxfer Holdings PLC’s group financial statements and company financial statements (the “financial statements”)
give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2016 and of the
group’s profit and the group’s and the company’s cash flows for the year then ended;
the group financial statements have been properly prepared in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union;
the company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), comprise:
the Consolidated Balance Sheet as at 31 December 2016;
the Company Balance Sheet as at 31 December 2016;
the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the year then
ended;
the Consolidated Cash Flow Statement for the year then ended;
the Company Cash Flow Statement for the year then ended;
the Consolidated Statement of Changes in Equity for the year then ended;
the Company Statement of Changes in Equity for the year then ended;
the Notes to the Consolidated Financial Statements, which include a summary of significant accounting policies
and other explanatory information; and
the Notes to the Company Financial Statements, which include a summary of significant accounting policies and
other explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial
statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted
by the European Union and, as regards the company financial statements, as applied in accordance with the provisions of
the Companies Act 2006, and applicable law.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in
respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future
events.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
In addition, in light of the knowledge and understanding of the group, the company and their environment obtained in the
course of the audit, we are required to report if we have identified any material misstatements in the Strategic Report and
the Directors’ Report. We have nothing to report in this respect.
56
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been
received from branches not visited by us; or
the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the group’s and the company’s circumstances and have been
consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and
the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our
own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If
we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
With respect to the Strategic Report and Directors’ Report, we consider whether those reports include the disclosures
required by applicable legal requirements.
Graham Parsons (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
March 2017
57
CONSOLIDATED INCOME STATEMENT
All amounts in millions, except share and per share data
Note
REVENUE .......................................................................................................... 2
Cost of sales .........................................................................................................
Gross profit ..........................................................................................................
Distribution costs .................................................................................................
Administrative expenses ......................................................................................
Share of results of joint ventures and associates .................................................. 14
TRADING PROFIT .......................................................................................... 2
Profit on sale of redundant site ............................................................................ 5
Changes to defined benefit pension plan ............................................................. 5
Restructuring and other expense .......................................................................... 5
OPERATING PROFIT ..................................................................................... 3
Other income / (expense):
Acquisitions and disposals ............................................................................... 5
Finance income:
Interest received ........................................................................................... 7
Finance costs:
Interest costs ................................................................................................ 8
IAS 19R retirement benefits finance charge ................................................ 8
Unwind of discount on deferred contingent consideration from
acquisitions .............................................................................................. 8
Total finance costs ...........................................................................................
PROFIT ON OPERATIONS BEFORE TAXATION ....................................
Income tax expense .............................................................................................. 9
NET INCOME FOR THE YEAR ....................................................................
Attributable to:
Equity shareholders..............................................................................................
Earnings per share:
Basic
Unadjusted ........................................................................................................... 10
Diluted
Unadjusted ........................................................................................................... 10
LUXFER HOLDINGS PLC
2016
$M
2015
$M
2014
$M
414.8
(321.4)
93.4
(7.8)
(50.8)
0.5
35.3
2.1
0.6
(2.2)
35.8
0.2
1.2
(6.8)
(2.1)
(0.4)
(9.3)
27.9
(6.0)
21.9
21.9
460.3
(356.3)
104.0
(7.9)
(52.6)
(1.2)
42.3
—
18.0
(22.4)
37.9
(2.0)
0.5
(7.4)
(3.0)
(0.4)
(10.8)
25.6
(9.5)
16.1
489.5
(376.6)
112.9
(8.1)
(59.7)
(0.3)
44.8
—
—
(3.9)
40.9
4.5
0.5
(6.6)
(2.7)
(0.3)
(9.6)
36.3
(7.1)
29.2
16.1
29.2
$0.83
$0.60
$1.09
$0.82
$0.59
$1.05
58
LUXFER HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
All amounts in millions, except share and per share data
Net income for the year ................................................................................................
Other comprehensive income movements
Items that may be reclassified to the consolidated income statement:
Exchange differences on translation of foreign operations .............................................
Fair value movements in cash flow hedges .....................................................................
Transfers to consolidated income statement on cash flow hedges ..................................
Exchange differences on translation of hedging reserve .................................................
Deferred income taxes on cash flow hedges ...................................................................
Hedge accounting income / (expense) adjustments ....................................................
Total hedge accounting and translation of foreign operations movements .............
Items that will not be reclassified to the consolidated income statement:
Remeasurement of defined benefit retirement plans .......................................................
Deferred income taxes on retirement benefits remeasurements ......................................
Retirement benefits changes ........................................................................................
Total other comprehensive loss movements for the year ...........................................
Total comprehensive (loss) / income for the year .......................................................
Attributed to:
Equity shareholders .........................................................................................................
Note
2016
$M
2015
$M
2014
$M
21.9
16.1
29.2
(13.1)
1.1
(0.9)
—
—
0.2
(12.9)
(21.7)
4.3
(17.4)
(30.3)
(8.4)
(8.6)
(5.4)
(0.1)
—
1.1
(4.4)
(13.0)
4.4
(1.5)
2.9
(10.1)
6.0
(10.8)
1.4
0.1
0.2
(0.5)
1.2
(9.6)
(35.4)
8.9
(26.5)
(36.1)
(6.9)
(8.4)
6.0
(6.9)
29
23
59
CONSOLIDATED BALANCE SHEET
All amounts in millions, except share and per share data
LUXFER HOLDINGS PLC
31 December,
2016
$M
31 December,
2015
$M
Note
ASSETS
Non-current assets
Property, plant and equipment ........................................................................................... 11
Intangible assets ................................................................................................................. 12
Investments ........................................................................................................................ 14
Deferred income tax assets ................................................................................................ 23
Trade and other receivables ............................................................................................... 16
Current assets
Inventories ......................................................................................................................... 15
Trade and other receivables ............................................................................................... 16
Income tax receivable ........................................................................................................
Cash and cash equivalents ................................................................................................. 17
TOTAL ASSETS .............................................................................................................
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital ........................................................................................................ 18
Deferred share capital ........................................................................................................ 18
Share premium account ..................................................................................................... 18
Treasury shares .................................................................................................................. 18
Retained earnings............................................................................................................... 20
Own shares held by ESOP ................................................................................................. 18
Share based compensation reserve ..................................................................................... 20
Hedging reserve ................................................................................................................. 20
Translation reserve............................................................................................................. 20
Merger reserve ................................................................................................................... 20
Capital and reserves attributable to the Group’s equity shareholders ................................
Total equity ........................................................................................................................
Non-current liabilities
Bank and other loans ......................................................................................................... 21
Retirement benefits ............................................................................................................ 29
Deferred income tax liabilities ........................................................................................... 23
Deferred contingent consideration ..................................................................................... 25
Provisions .......................................................................................................................... 22
Trade and other payables ................................................................................................... 24
Current liabilities
Trade and other payables ................................................................................................... 24
Current income tax liabilities .............................................................................................
Deferred consideration ....................................................................................................... 25
Provisions .......................................................................................................................... 22
Total liabilities ...................................................................................................................
TOTAL EQUITY AND LIABILITIES ..........................................................................
SIGNED ON BEHALF OF THE BOARD
127.9
80.6
10.0
16.6
0.3
235.4
82.5
57.6
2.4
13.6
156.1
391.5
25.3
150.9
56.4
(7.1)
308.1
(0.5)
3.8
(3.3)
(57.9)
(333.8)
141.9
141.9
121.0
66.5
4.9
1.5
1.1
0.6
195.6
51.1
0.1
1.3
1.5
54.0
249.6
391.5
136.0
87.0
7.2
13.8
—
244.0
91.8
62.3
0.7
36.9
191.7
435.7
25.3
150.9
56.4
(1.3)
316.6
(0.2)
4.1
(3.5)
(44.8)
(333.8)
169.7
169.7
131.6
58.9
1.7
2.9
1.5
196.6
65.5
0.1
—
3.8
69.4
266.0
435.7
Brian Purves
March 14, 2017
Andrew Beaden
Company Registration no. 03690830
60
CONSOLIDATED CASH FLOW STATEMENT
All amounts in millions, except share and per share data
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year ............................................................................................................
Adjustments to reconcile net income for the year to net cash flows from operating
activities:
LUXFER HOLDINGS PLC
Note
2016
$M
2015
$M
2014
$M
21.9
16.1
29.2
Income taxes .............................................................................................................................
Depreciation and amortisation ..................................................................................................
Loss on disposal of property, plant and equipment ..................................................................
Profit on sale of redundant site .................................................................................................
Share based compensation charges net of cash settlement .......................................................
Net interest costs ......................................................................................................................
Non-cash restructuring charges ................................................................................................
Curtailment and past service credits on retirement benefits obligations ...................................
IAS 19R retirement benefits finance charge .............................................................................
Acquisitions and disposals costs...............................................................................................
Unwind of discount on deferred contingent consideration from acquisitions ...........................
Share of results of joint ventures and associates ....................................................................... 14
Changes in operating assets and liabilities:
9
3
3
5
6
5
5
Sale of assets classified as held for sale ...............................................................................
(Increase) / decrease in receivables ......................................................................................
Decrease / (increase) in inventories......................................................................................
Decrease in payables ............................................................................................................
Movement in retirement benefits obligations ...........................................................................
Movement in provisions ........................................................................................................... 22
Acquisitions and disposals costs paid ....................................................................................... 25
Income taxes paid .....................................................................................................................
NET CASH FLOWS FROM OPERATING ACTIVITIES ................................................
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment .............................................................................
Purchases of intangible assets ..................................................................................................
Proceeds from sale of redundant site ........................................................................................
Receipts from sales of property, plant and equipment ..............................................................
Cash received as compensation for insured assets ....................................................................
Investment in joint ventures and associates ..............................................................................
Interest income received from joint ventures and associates ....................................................
Net cash flows on purchase of businesses ................................................................................ 25
NET CASH FLOWS FROM INVESTING ACTIVITIES ..................................................
NET CASH FLOWS BEFORE FINANCING .....................................................................
CASH FLOWS FROM FINANCING ACTIVITIES
Interest and similar finance costs paid on banking facilities .....................................................
Interest paid on Loan Notes ......................................................................................................
Bank interest received ..............................................................................................................
(Repayment) / draw down on banking facilities .......................................................................
Issue of Loan Notes due 2021 ..................................................................................................
Repayment of other loans .........................................................................................................
Amendment to banking facilities—financing costs ..................................................................
Extension to Loan Notes – financing costs ...............................................................................
Issue of Loan Notes due 2021—financing costs.......................................................................
Dividends paid.......................................................................................................................... 19
ESOP cash movements ............................................................................................................. 18
Proceeds from issue of shares ...................................................................................................
Purchase of treasury shares ...................................................................................................... 18
NET CASH FLOWS FROM FINANCING ACTIVITIES .................................................
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS ....................
Net foreign exchange differences .............................................................................................
Cash and cash equivalents at 1 January .................................................................................... 17
Cash and cash equivalents at 31 December .......................................................................... 17
61
6.0
18.4
0.2
(2.1)
1.1
5.6
—
(0.6)
2.1
(0.2)
0.4
(0.5)
—
(1.8)
4.5
(10.3)
(6.3)
(2.6)
(1.2)
(5.4)
29.2
(16.5)
(2.4)
3.0
0.4
0.2
0.2
0.3
(0.3)
(15.1)
14.1
(1.9)
(4.5)
0.2
(8.5)
—
—
—
(0.2)
—
(13.3)
(1.0)
—
(6.3)
(35.5)
(21.4)
(1.9)
36.9
13.6
9.5
18.6
—
—
1.3
6.9
17.7
(18.2)
3.0
2.0
0.4
1.2
1.2
5.0
3.0
(0.9)
(8.6)
0.3
(0.6)
(5.1)
52.8
(15.3)
(2.1)
—
—
—
(4.2)
0.4
—
(21.2)
31.6
(1.7)
(4.9)
0.2
9.6
—
—
—
—
—
(10.8)
0.1
0.2
(1.9)
(9.2)
22.4
(0.1)
14.6
36.9
7.1
18.1
0.3
—
1.8
6.1
—
—
2.7
(4.5)
0.3
0.3
(1.2)
(7.8)
(8.5)
(1.9)
(10.4)
—
(1.6)
(7.0)
23.0
(20.4)
(1.9)
—
—
—
0.2
0.3
(58.0)
(79.8)
(56.8)
(1.3)
(4.2)
0.2
35.2
25.0
(0.3)
(1.5)
—
(0.2)
(10.8)
0.1
0.6
—
42.8
(14.0)
0.2
28.4
14.6
LUXFER HOLDINGS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
All amounts in millions, except share and per share data
Equity attributable to the equity shareholders of the parent
Ordinary
share
capital
$M
Note
At 1 January, 2014 ......................................................
Net income for the year .................................................
Currency translation differences ....................................
Increase in fair value of cash flow hedges .....................
Transfer to consolidated income statement on cash
flow hedges ..............................................................
Remeasurement of defined benefit retirement plans ......
Deferred income taxes on items taken to other
comprehensive income .............................................
Total comprehensive income for the year ..................
Equity dividends ........................................................... 19
Arising from issue of share capital
18
Equity settled share based compensation charges.......... 18
Deferred income taxes on items taken to equity ............ 23
Purchase of shares from ESOP ...................................... 18
Other changes in equity in the year ...........................
At 31 December, 2014 .................................................
Net income for the year .................................................
Currency translation differences ....................................
Decrease in fair value of cash flow hedges ....................
Transfer to consolidated income statement on cash
flow hedges ..............................................................
Remeasurement of defined benefit retirement plans ......
Deferred income taxes on items taken to other
comprehensive income ............................................. 23
Total comprehensive income for the year ..................
Equity dividends ........................................................... 19
Equity settled share based compensation charges.......... 18
Arising from issue of share capital ................................ 18
Purchase of own shares ................................................. 18
Purchase of shares from ESOP ...................................... 18
Utilisation of treasury shares ......................................... 18
Deferred income taxes on items taken to equity ............ 23
Exchange movement on ESOP ...................................... 18
Other changes in equity in the year ...........................
At 31 December, 2015 .................................................
Net income for the year .................................................
Currency translation differences ....................................
Increase in fair value of cash flow hedges .....................
Transfer to consolidated income statement on cash
flow hedges ..............................................................
Remeasurement of defined benefit retirement plans ......
Deferred income taxes on items taken to other
comprehensive income ............................................. 23
Total comprehensive income for the year ..................
Equity dividends ........................................................... 19
Equity settled share based compensation charges.......... 18
Purchase of own shares ................................................. 18
Purchase of shares into ESOP ....................................... 18
Utilisation of treasury shares ......................................... 18
Utilisation of shares from ESOP ................................... 18
Other changes in equity in the year ...........................
At 31 December, 2016 .................................................
25.3
-
-
-
-
-
-
-
-
-
-
-
-
-
25.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25.3
Deferred
share
capital
$M
150.9
-
-
-
-
-
-
-
-
-
-
-
-
-
150.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150.9
Share
premium
account
$M
Treasury
shares
$M
55.6
-
-
-
-
-
-
-
-
0.6
-
-
-
0.6
56.2
-
-
-
-
-
-
-
-
-
0.2
-
-
-
-
-
0.2
56.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.9)
-
0.6
-
-
(1.3)
(1.3)
-
-
-
-
-
-
-
-
-
(6.3)
-
0.5
-
(5.8)
(7.1)
Retained
earnings
$M
317.3
29.2
-
-
-
(35.4)
8.9
2.7
(10.8)
-
-
(0.4)
-
(11.2)
308.8
16.1
-
-
-
4.4
(1.5)
19.0
(10.8)
-
-
-
-
(0.1)
(0.3)
-
(11.2)
316.6
21.9
-
-
-
(21.7)
4.3
4.5
(13.3)
-
-
-
0.1
0.2
(13.0)
308.1
Own shares
held by
ESOP
$M
(0.5)
-
-
-
-
-
-
-
-
-
-
-
0.1
0.1
(0.4)
-
-
-
-
-
-
-
-
-
-
-
0.1
-
-
0.1
0.2
(0.2)
-
-
-
-
-
-
-
-
-
-
(1.0)
-
0.7
(0.3)
(0.5)
Other
reserves(1)
$M
(356.9)
-
(10.6)
1.4
Total
equity
$M
191.7
29.2
(10.6)
1.4
0.1
-
0.1
(35.4)
(0.5)
(9.6)
-
-
1.1
-
-
1.1
(365.4)
-
(8.6)
(5.4)
(0.1)
-
1.1
(13.0)
-
0.9
-
-
-
(0.5)
-
-
0.4
(378.0)
-
(13.1)
1.1
8.4
(6.9)
(10.8)
0.6
1.1
(0.4)
0.1
(9.4)
175.4
16.1
(8.6)
(5.4)
(0.1)
4.4
(0.4)
6.0
(10.8)
0.9
0.2
(1.9)
0.1
-
(0.3)
0.1
(11.7)
169.7
21.9
(13.1)
1.1
(0.9)
-
(0.9)
(21.7)
-
(12.9)
-
1.2
-
-
(0.6)
(0.9)
(0.3)
(391.2)
4.3
(8.4)
(13.3)
1.2
(6.3)
(1.0)
-
-
(19.4)
141.9
(1)
Other reserves include a hedging reserve of a loss of $3.3 million (2015: a loss of $3.5 million and 2014: a gain
of $0.9 million), a translation reserve of $57.9 million (2015: $44.8 million and 2014: $36.2 million), a merger
reserve of $333.8 million (2015 and 2014: $333.8 million) and a share based compensation reserve of
$3.8 million (2015: $4.1 million and 2014: $3.7 million).
62
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies
Basis of preparation and statement of compliance with IFRS
The consolidated financial statements have been prepared in accordance with the International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board and as adopted by the European Union as
they apply to the financial statements of the Group for the year ended 31 December, 2016. The consolidated financial
statements have been prepared on a historical cost basis, except where IFRS requires or permits fair value measurement.
The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the foreseeable future. Therefore the directors continue to apply the going concern basis for accounting in the
preparation of the consolidated financial statements.
For the purpose of the accompanying consolidated financial statements, subsequent events have been evaluated through
to March 14, 2017, which is the date the consolidated financial statements were authorised by the Board. The
consolidated financial statements were issued on March 14, 2017.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Luxfer Holdings PLC and its subsidiaries (the
“Group”) at 31 December each year. The financial statements of the subsidiaries are prepared for the same reporting year
as the parent company, using consistent accounting policies. All inter-company balances and transactions, including
unrealised profits arising from intra-Group transactions, have been eliminated in full.
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated
from the date on which control is transferred out of the Group.
The accounting policies which follow, set out those polices which apply in preparing the consolidated financial
statements for the years ended 31 December, 2014, 31 December, 2015 and 31 December, 2016.
Presentation currency
The consolidated financial statements are presented in U.S. dollars and all values are rounded to the nearest $0.1 million
except when otherwise indicated. The books of the Group’s non-U.S. entities are converted to U.S. dollars at each
reporting period date in accordance with the accounting policy below. The functional currency of the holding company
Luxfer Holdings PLC and its U.K. subsidiaries remains GBP sterling, being the most appropriate currency for those
particular operations.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling
interest in the acquiree. The choice of measurement of non-controlling interest, either at fair value or at the proportionate
share of the acquiree’s identifiable net assets, is determined on a transaction by transaction basis. Acquisition costs are
expensed as incurred.
Goodwill is initially measured at cost, being the excess of the aggregate of the acquisition-date fair value of the
consideration transferred and the amount recognised for the non-controlling interest over the net identifiable amounts of
the assets acquired and the liabilities assumed in exchange for the business combination. After initial recognition,
goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill
acquired in a business combination is, from the acquisition date, allocated to the Group’s cash generating units that are
expected to benefit from the combination. Where goodwill forms part of a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying value of
the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is
measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous U.K. GAAP
amounts subject to being tested for impairment at that date and in subsequent years.
63
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Negative goodwill is measured at cost being the excess of the net identifiable amounts of the assets acquired and the
liabilities assumed in exchange for the business combination over the aggregate of the acquisition-date fair value of the
consideration transferred and the amount recognised for the non-controlling interest. Any amount of negative goodwill is
recognised immediately as income.
Contingent consideration arising as a result of a business combination is recognised at fair value at the acquisition date.
Subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in
accordance with the relevant IFRSs.
Other intangible assets
Other intangible assets excluding development costs, are measured initially at purchase cost, or where acquired in a
business combination at fair value, and are amortised on a straight-line basis over their estimated useful lives as shown in
the table below.
Research expenditure is expensed as incurred. Internal development expenditure is charged as administrative costs to the
consolidated income statement in the year it is incurred unless it meets the recognition criteria of IAS 38 “Intangible
Assets”. Where the recognition criteria are met, intangible assets are capitalised and amortised over their estimated useful
economic lives from product launch, as shown in the table below. Intangible assets relating to products in development
are subject to impairment testing at each balance sheet date or earlier upon indication of impairment.
14 – 20 years
Technology and patents ................................................................................................................................................
Tradenames and trademarks .........................................................................................................................................
20 – 25 years
Customer relationships ................................................................................................................................................. 12.5 years
5 – 6 years
Backlogs and non-compete agreements ........................................................................................................................
5 – 10 years
Development costs ........................................................................................................................................................
4 – 7 years
Software ........................................................................................................................................................................
The carrying values are reviewed for impairment when events or changes in circumstances indicate that the carrying
value may not be recoverable. Reviews are made annually of the estimated remaining lives and residual values of the
patents and trademarks.
Revenue
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for
goods supplied, less inter-company revenue, estimated rebates, returns, settlement discounts and value added tax.
Sale of goods
Revenue for the sale of goods is recognised when all of the following conditions are satisfied:
The significant risks and rewards of ownership of the goods have been transferred to the buyer;
The Group retain neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold;
The amount of revenue can be reliably measured;
It is probable that future economic benefits will flow to the entity; and
The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreements, provided
that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.
64
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Tooling revenue
Revenue recognition associated with the contracts is recognised in proportion to the progress and costs incurred as a
percentage of total expected costs. Payments made in advance of work performed and raw materials purchased for which
no work has been performed are excluded from the calculations and are accounted for as deferred income and inventory
respectively. Where customer acceptance is on final completion and handover of the tool, revenue is recognised at the
point the customer accepts ownership of the tool.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation
is initially calculated on a straight-line basis over the estimated useful life of the particular asset. As a result of the
complexity of our manufacturing process, there is a wide range of plant and equipment in operation. The rate of annual
charge is summarised as follows:
Freehold buildings ............................................................................................................................................... 3% – 10%
The lesser of life of
Leasehold land and buildings...............................................................................................................................
lease or freehold rate
Plant and equipment............................................................................................................................................. 4% – 30%
Including:
Heavy production equipment (including casting, rolling, extrusion and press equipment) ................................. 4% – 6%
Chemical production plant and robotics .............................................................................................................. 10% – 15%
Other production machinery ................................................................................................................................ 10% – 20%
Furniture, fittings, storage and equipment ........................................................................................................... 10% – 30%
Freehold land is not depreciated.
Reviews are made annually of the estimated remaining lives and residual values of individual productive assets, taking
account of commercial and technological obsolescence as well as normal wear and tear.
For any individual asset the carrying value is reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the
estimated recoverable amount, the asset is written-down to its recoverable amount. The recoverable amount of property,
plant and equipment is the greater of the fair value less costs of disposal and the value in use. In assessing the value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset
belongs. Impairment losses are recognised in the consolidated income statement as part of the profit or loss on operations
before taxation.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying value of the item) is included in the consolidated
income statement in the year the item is derecognised.
Maintenance costs in relation to an item of property, plant and equipment are expensed as incurred.
65
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Inventories
Inventories are stated at the lower of cost and net realisable value. Raw materials are valued on a first-in, first-out basis.
Strategic purchases of inventories in order to secure supply and reduce the impact of price volatility on the cost of
inventories are valued on an average cost basis. Work in progress and finished goods costs comprise direct materials and,
where applicable, direct labor costs, an apportionment of production overheads and any other costs that have been
incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs to be incurred in selling and distribution. Inventories are
reviewed on a regular basis, and we will make allowance for excess or obsolete inventories and write-down to net
realisable value based primarily on committed sales prices and our estimates of expected and future product demand and
related pricing.
Foreign currencies
Transactions in currencies other than an operation’s functional currency are initially recorded in the functional currency
at the rate of exchange prevailing on the dates of transactions. At each balance sheet date, the foreign currency monetary
assets and liabilities are translated into the functional currency at the rates prevailing on the balance sheet date.
All differences are taken to the consolidated income statement with the exception of differences on foreign currency
borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the
disposal of the net investment, at which time they are recognised in the consolidated income statement. Tax charges and
credits attributable to exchange differences on those borrowings are also dealt with in equity.
On consolidation, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on
the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange
differences that arise, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation
differences are recognised in the consolidated income statement in the period in which the operation is disposed or
partially disposed.
Income taxes
Current income taxes
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or
substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.
Current income taxes relating to items recognised directly in equity is recognised in equity and not in the consolidated
income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income taxes
Deferred income taxes are the future income taxes expected to be payable or recoverable on differences between the
carrying values of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred income tax
liabilities are generally recognised for all taxable temporary differences. Deferred income tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
66
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Deferred income tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries,
investments in associates, and interests in joint ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying value of a deferred income tax asset is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred income taxes are calculated at the tax rate that is expected to apply in the period when the liability is settled or
the asset is realised based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet
date. Deferred income taxes are charged or credited to the consolidated income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred income taxes are also dealt with in equity.
Leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased
items, are capitalised as a fixed asset at the inception of the lease at the fair value of the leased asset or, if lower, at the
present value of the minimum lease payments.
The capital element of the leasing commitment is shown as obligations under finance leases. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are recognised as an expense in the consolidated income statement.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line
basis over the lease term.
Retirement benefits costs
In respect of defined benefit plans, obligations are measured at the present value whilst plan assets are recorded at fair
value. The cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations
being carried out at each balance sheet date.
The charge to the consolidated income statement is based on an actuarial calculation of the Group’s portion of the annual
expected costs of the benefit plans and the net interest cost, which is calculated by applying the discount rate to the net
defined benefit obligation, taking into account contributions and benefits paid. Remeasurements are recognised in the
statement of comprehensive income.
When a settlement or curtailment occurs the obligation and related plan assets are remeasured using current actuarial
assumptions and the resultant gain or loss recognised in the consolidated income statement in the period in which the
settlement or curtailment occurs.
Payments to defined contribution plans are charged as an expense as they fall due.
Government grants
Government grants relating to property, plant and equipment are treated as deferred income and released to the
consolidated income statement over the expected useful lives of the asset concerned.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that a transfer
of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
67
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Share based compensation
The cost of equity settled transactions is recognised, based upon the fair value at grant date, together with a
corresponding increase in the share based compensation reserve in equity, over the period in which the performance or
service conditions are fulfilled. The cumulative expense recognised for equity settled transactions at each reporting date
until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the
number of equity instruments that will ultimately vest. The consolidated income statement expense or credit for a period
represents the movement in cumulative expense recognised at the beginning and end of that period.
Separate disclosure of expenses or income
Certain items of expense or income are presented separately based on management’s judgment that they need to be
disclosed by virtue of their size, nature or incidence in order to provide a proper understanding of our results of
operations and financial condition. Such items of expense or income incurred during a period are disclosed under
identifiable headings in the consolidated income statement and further explained in Note 5 to the consolidated financial
statements. Examples of such items include but are not limited to:
• Restructurings of the activities of the Group and reversals of any provisions for the costs of restructuring;
• write-downs of inventories to net realisable value or of property, plant and equipment to recoverable
amount, as well as reversals of such write-downs;
disposals of items of property, plant and equipment;
disposals of investments and subsidiaries;
discontinued operations;
litigation settlements; and
other material reversals of provisions.
•
•
•
•
•
The nature of the items of expense or income is considered to determine whether the item should be presented as part of
operating profit or loss or as other expenses or income. The trading profit and adjusted earnings per share calculations,
presented by the Group exclude the impact of these items. Management believes that the use of adjusted measures such
as this provides additional useful information on underlying trends to shareholders.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an
original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above.
Discontinued operations and assets and liabilities held for sale
Discontinued operations are those operations that represent a separately identifiable major line of business that has either
been disposed of, or is classified as held for sale.
For those activities classified as discontinued, the post-tax profit or loss is disclosed separately on the face of the
consolidated income statement. The cash flows associated with the discontinued operations are also separately disclosed.
68
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Assets (or disposal groups) held for sale are classified as assets held for sale and stated at the lower of their carrying
value and fair value costs to sell, if their carrying value is recovered principally through a sale transaction rather than
through continuing use. Assets held for sale are no longer amortised or depreciated from the time they are classified as
such.
Interest in joint ventures
The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are
classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor.
The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are
accounted for using the equity method of accounting. Under the equity method of accounting, interests in joint ventures
are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or
losses and movements in other comprehensive income.
When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes
any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does
not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the
joint ventures.
The Group determines at each reporting date whether there is any objective evidence that the investment in the joint
venture is impaired. If the investment is impaired, the Group calculates the amount of impairment as the difference
between the recoverable amount of the joint venture and its carrying value and recognises the amount as ‘restructuring
and other expense’ in the consolidated income statement.
Gains or losses resulting from upstream and downstream transactions between the Group and its joint venture are
recognised in the Group’s consolidated financial statements only to the extent of unrelated investor’s interests in the joint
venture. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Interest in associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity
method of accounting. Under the equity method of accounting, the investment is initially recognised at cost, and the
carrying value is increased or decreased to recognise the investor’s share of the profit or loss and movements in other
comprehensive income of the investee after the date of acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the
amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the consolidated income statement, and its share of
post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a
corresponding adjustment to the carrying value of the investment. When the Group’s share of losses in an associate
equals or exceeds its interest in the associate, including other unsecured receivables, the Group does not recognise further
losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate
is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable
amount of the associate and its carrying value and recognises the amount as ‘restructuring and other expense’ in the
consolidated income statement.
Gains or losses resulting from upstream and downstream transactions between the Group and its associate are recognised
in the Group’s consolidated financial statements only to the extent of unrelated investor’s interests in the associates.
69
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Dilution gains and losses arising in investments in associates are recognised in the consolidated income statement.
Financial assets and liabilities
Trade and other receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Bank and other loans
Bank and other loans are recorded at the fair value of the proceeds received net of directly attributable transaction costs.
Issue costs relating to revolving credit facilities are charged to the consolidated income statement over the estimated life
of the facility on a periodic basis and are added to the carrying value of the facility. Issue costs relating to fixed term
loans are charged to the consolidated income statement using the effective interest method and are added to the carrying
value of the fixed term loan.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Derivative financial instruments
The Group uses derivative financial instruments such as foreign currency contracts to hedge its risks associated with
foreign currency fluctuations. Such derivative financial instruments are stated at fair value.
Hedges are classified as cash flow hedges when they hedge exposure to variability in cash flows either attributable to a
particular risk associated with a recognised asset or liability or a highly probable forecast transaction.
In relation to cash flow hedges to hedge the foreign currency risk of firm commitments which meet the conditions for
special hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective
hedge is recognised directly in equity and the ineffective portion is recognised in the consolidated income statement.
In relation to derivative financial instruments used to hedge a forecast transaction, the portion of the gain or loss on the
hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective portion
is recognised in the consolidated income statement. Amounts taken to equity are transferred to the consolidated income
statement when the hedged transaction affects profit or loss.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Group are recorded at the proceeds received, net of direct issue
costs.
Financial liabilities and equity instruments are all instruments that are issued by the Group as a means of raising finance,
including shares, loan notes, debentures, debt instruments and options and warrants that give the holder the right to
subscribe for or obtain financial liabilities and equity instruments.
70
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. All equity instruments are included in shareholders’ funds. The finance costs incurred in respect of an equity
instrument are charged directly to the consolidated income statement. Other instruments are classified as financial
liabilities if they contain a contractual obligation to transfer economic benefits.
Critical accounting judgments and key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that
have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next
financial year, are discussed below. The judgments used by management in the application of the Group’s accounting
policies in respect of these key areas of estimation are considered to be the most significant. The below policies include
both elements of judgments and estimates.
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date.
Goodwill is tested for impairment annually and at other times when such indicators exist. Other non-financial assets are
tested for impairment when there are indicators that the carrying value may not be recoverable.
When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset
or cash generating unit, including suitable sales growth and terminal growth rates, and choose a suitable discount rate in
order to calculate the present value of those cash flows. Details regarding goodwill and assumptions used in carrying out
the impairment review are given in Note 13.
Pensions
Determining the present value of future obligations of pensions requires an estimation of future mortality rates, future
salary increases, future pension increases, future inflation increases and discount rates. These assumptions are determined
in association with qualified actuaries. Due to the long-term nature of these plans, such estimates are subject to
significant uncertainty. The pension liabilities at 31 December, 2016 are $66.5 million (2015: $58.9 million). Further
details are given in Note 29.
Deferred income taxes
Deferred income tax assets are recognised for unabsorbed tax losses and unutilised capital allowances to the extent that it
is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Judgment
is required to determine the amount of deferred income tax assets that can be recognised, based upon the likely timing
and level of future taxable profits together with future tax planning strategies. Further details are given in Note 23.
Inventories obsolescence and inventories write down
Inventories are stated at the lower of cost and net realisable value. Inventories are reviewed on a regular basis, and we
will make allowance for excess or obsolete inventories and write down to net realisable value based primarily on
committed sales prices and our estimates of expected and future product demand and related pricing.
Measurement of contingent consideration
Contingent consideration arising from business combinations is valued at fair value at the acquisition date. When the
contingent consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each
reporting date. The determination of the fair value is based on an estimate of the future profitability of the acquired
businesses.
71
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year except for the following new and
amended standards and interpretations during the year that are applicable to the Group. Adoption of these revised
standards and interpretations did not have any significant effect on the consolidated financial statements of the Group.
International Financial Reporting Standards
Annual Improvements to IFRSs: 2013 Cycle ..................................................................... 1 January, 2015
IFRSs
Annual Improvements to IFRSs: 2014 Cycle ..................................................................... 1 January, 2016
IFRSs
IFRS 11
Joint Arrangements (Amendments) .................................................................................... 1 January, 2016
IAS 16, IAS 38 Property, Plant and Equipment, Intangible Assets (Amendments) .................................... 1 January, 2016
IFRS 10, IAS 28 Consolidated Financial Statements, Investments in Associates and
Effective date
IAS 1
Joint Ventures (Amendments) ............................................................................................ 1 January, 2016
Presentation of Financial Statements (Amendments) ......................................................... 1 January, 2016
New standards and amendments to standards not applied
The IASB has issued the following standards and amendments to standards with a mandatory effective date on or after 1
January, 2017:
International Financial Reporting Standards
IAS 7
IAS 12
IFRS 2
IFRS 15
IFRS 9
IFRS 16
Statement of cash flows (Amendments) .............................................................................
Income taxes (Amendments) ..............................................................................................
Share based payments (Amendments)................................................................................
Revenue from Contracts with Customers ...........................................................................
Financial Instruments .........................................................................................................
Leases .................................................................................................................................
Mandatory effective date
No earlier than 1 January, 2017
No earlier than 1 January, 2017
No earlier than 1 January, 2018
No earlier than 1 January, 2018
No earlier than 1 January, 2018
No earlier than 1 January, 2019
The Group applies IFRS as issued by the IASB.
The directors do not expect that the adoption of the standards listed above will have a material impact on the consolidated
financial statements of the Group in future periods, except as follows:
•
•
•
IFRS 15 – This may affect the timing of the recognition of our tooling revenue, although the directors do
not believe that this will have a significant impact;
IFRS 9 – Financial assets will continue to be classified and measured at amortised cost under IFRS 9. The
directors anticipate that the timing of the recognition of impairments will change rather than the size of the
balance. Foreign currency exchange contracts should not be impacted although the ability to hedge
component parts of the commodity hedges should allow us to decrease the risk of ineffectiveness; and
IFRS 16 – Currently disclosed operating leases would be brought on to the balance sheet, and rather than a
lease expense charge going through operating income, a depreciation charge and a finance charge would
replace this, with the latter going through finance costs. The current level of operating lease commitments is
disclosed in Note 26.
Beyond the information above it is not practicable to provide a reasonable estimate of the effect of these standards until a
detailed review has been completed.
72
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
2. Revenue and segmental analysis
For management purposes, the Group is organised into two reporting divisions, Gas Cylinders and Elektron. These
divisions are aggregated from the four identified cash generating units, (CGUs) in the Group; Luxfer Gas Cylinders and
Superform aggregate to Gas Cylinders; and Magnesium Elektron and MEL Chemicals aggregate to Elektron. This
rationale is in line with IFRS 8 which allows for aggregation of operating segments on the basis they share similar
economic characteristics for the nature of the products and services; the nature of the production processes; the type or
class of customer for their products and services; the methods used to distribute their products or provide their services;
and the nature of the regulatory environment. The tables below set out information on the results of these two reportable
segments.
Management monitors the operating results of its divisions separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated by the chief operating decision maker, who is
responsible for allocating resources and assessing performance of the operating segments and has been identified as the
Board, based on trading profit or loss (defined as operating profit or loss before changes to defined benefit pension plans
and restructuring and other expense), and adjusted EBITDA (defined as profit on operations before taxation for the
period, finance income (which comprises interest received) and costs (which comprises interest costs, IAS 19R
retirement benefits finance charge and the unwind of the discount on deferred contingent consideration from
acquisitions), other income / (expense) from acquisitions and disposals of businesses, changes to defined benefit pension
plans, restructuring and other expense, other share based compensation charges, depreciation and amortisation and loss
on disposal of property, plant and equipment). For the purposes of our divisional segmental analysis, IFRS 8 requires the
use of “segment profit” performance measures that are used by our chief operating decision maker. Trading profit is the
“segment profit” used to satisfy this requirement in the below analysis.
Unallocated assets and liabilities include those which are held on behalf of the Group and cannot be allocated to a
division, such as taxation, investments, cash, retirement benefits obligations, bank and other loans and holding company
assets and liabilities.
All inter-segment revenue is made on an arm’s length basis.
73
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
REPORTING SEGMENTS:
Year ended 31 December, 2016
Gas
Cylinders
$M
Elektron
$M
Unallocated
$M
Total
$M
Revenue
Segment revenue ............................................................................................. 225.8
Inter-segment revenue ..................................................................................... —
Revenue to external customers ....................................................................... 225.8
Result
Adjusted EBITDA .......................................................................................... 19.7
Other share based compensation charges ........................................................ (0.6)
Loss on disposal of property, plant and equipment ......................................... (0.1)
Depreciation and amortisation ........................................................................ (7.6)
Trading profit—segment result ....................................................................... 11.4
Profit on sale of redundant site ....................................................................... —
Changes to defined benefit pension plans (Note 5) ........................................ —
Restructuring and other expense (Note 5) ....................................................... —
Operating profit .............................................................................................. 11.4
Acquisitions and disposals (Note 5) ............................................................... —
Net interest costs ............................................................................................. —
IAS 19R retirement benefits finance charge ................................................... —
Unwind of discount on deferred contingent consideration from
acquisitions ................................................................................................. —
Profit / (loss) on operations before taxation .................................................... 11.4
Tax expense ....................................................................................................
Net income for the year ..................................................................................
Other segment information
Segment assets ................................................................................................ 146.8
(21.7)
Segment liabilities ..........................................................................................
Net assets / (liabilities) employed(2) ................................................................ 125.1
Capital expenditure: Property, plant and equipment ....................................... 6.5
Capital expenditure: Intangible assets............................................................. 1.5
189.1
(0.1)
189.0
35.6
(0.8)
(0.1)
(10.8)
23.9
—
—
(2.2)
21.7
0.2
—
—
(0.4)
21.5
190.6
(14.2)
176.4
10.0
0.9
—
—
—
—
—
—
—
—
2.1
0.6
—
2.7
—
(5.6)
(2.1)
—
(5.0)
54.1
(213.7)
(159.6)
—
—
414.9
(0.1)
414.8
55.3
(1.4)
(0.2)
(18.4)
35.3
2.1
0.6
(2.2)
35.8
0.2
(5.6)
(2.1)
(0.4)
27.9
(6.0)
21.9
391.5
(249.6)
141.9
16.5
2.4
74
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
Year ended 31 December, 2015
Gas
Cylinders
$M
Elektron
$M
Unallocated
$M
Total
$M
Revenue
Segment revenue ............................................................................................. 239.1
Inter-segment revenue ..................................................................................... —
Revenue to external customers ....................................................................... 239.1
Result
Adjusted EBITDA .......................................................................................... 16.5
Other share based compensation charges ........................................................ (0.7)
Depreciation and amortisation ........................................................................ (7.2)
Trading profit—segment result ....................................................................... 8.6
Changes to defined benefit pension plans (Note 5) ........................................ —
(21.9)
Restructuring and other expense (Note 5) .......................................................
Operating (loss)/profit.....................................................................................
(13.3)
Acquisitions and disposals (Note 5) ............................................................... (0.2)
Net interest costs ............................................................................................. —
IAS 19R retirement benefits finance charge ................................................... —
Unwind of discount on deferred contingent consideration from
acquisitions ................................................................................................. —
(13.5)
(Loss)/profit on operations before taxation .....................................................
Tax expense ....................................................................................................
Net income for the year ..................................................................................
Other segment information
158.3
Segment assets ...................................................................................................
Segment liabilities .............................................................................................
(32.3)
Net assets/(liabilities) employed(2) .....................................................................
126.0
Capital expenditure: Property, plant and equipment .......................................... 6.0
Capital expenditure: Intangible assets................................................................ 1.2
221.8
(0.6)
221.2
45.7
(0.6)
(11.4)
33.7
—
(0.5)
33.2
—
—
—
(0.4)
32.8
208.5
(21.4)
187.1
9.3
0.9
—
—
—
—
—
—
—
18.0
—
18.0
(1.8)
(6.9)
(3.0)
—
6.3
68.9
(212.3)
(143.4)
—
—
460.9
(0.6)
460.3
62.2
(1.3)
(18.6)
42.3
18.0
(22.4)
37.9
(2.0)
(6.9)
(3.0)
(0.4)
25.6
(9.5)
16.1
435.7
(266.0)
169.7
15.3
2.1
75
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
Year ended 31 December, 2014
Gas
Cylinders
$M
Elektron
$M
Unallocated
$M
Total
$M
Revenue
258.9
Segment revenue ................................................................................................
Inter-segment revenue ........................................................................................ —
258.9
Revenue to external customers ..........................................................................
Result
Adjusted EBITDA ............................................................................
Other share based compensation charges ..........................................
Loss on disposal of property, plant and equipment ...........................
Depreciation and amortisation ..........................................................
Trading profit—segment result .........................................................
Restructuring and other expense (Note 5) .........................................
Operating profit/(loss).......................................................................
Acquisitions and disposals (Note 5) .................................................
Net interest costs ...............................................................................
IAS 19R retirement benefits finance charge .....................................
Unwind of discount on deferred contingent consideration from
acquisitions ...................................................................................
Profit/(loss) on operations before taxation ........................................
Tax expense ......................................................................................
Net income for the year employed ....................................................
Other segment information
Segment assets ..................................................................................
Segment liabilities ............................................................................
Net assets/(liabilities) employed(2) ....................................................
Capital expenditure: Property, plant and equipment .........................
Capital expenditure: Intangible assets...............................................
14.7
(0.8)
(0.2)
(7.8)
5.9
(1.1)
4.8
1.2
—
—
(0.1)
5.9
189.5
(33.0)
156.5
8.2
1.0
231.5
(0.9)
230.6
50.1
(0.8)
(0.1)
(10.3)
38.9
(2.6)
36.3
3.3
—
—
(0.2)
39.4
216.8
(25.1)
191.7
12.3
0.9
—
—
—
—
—
—
—
—
(0.2)
(0.2)
—
(6.1)
(2.7)
—
(9.0)
53.5
(226.3)
(172.8)
—
—
490.4
(0.9)
489.5
64.8
(1.6)
(0.3)
(18.1)
44.8
(3.9)
40.9
4.5
(6.1)
(2.7)
(0.3)
36.3
(7.1)
29.2
459.8
(284.4)
175.4
20.5
1.9
76
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
GEOGRAPHIC ORIGIN:
Year ended 31 December, 2016
United
Kingdom
$M
Rest of
Europe
$M
North
America
$M
Australasia
$M
Asia
$M
Total
$M
Revenue
Segment revenue .............................................................. 142.6
Inter-segment revenue ...................................................... (28.6)
Revenue to external customers ........................................ 114.0
Result
17.4
Adjusted EBITDA ...........................................................
Other share based compensation charges .........................
(1.0)
Loss on disposal of property, plant and equipment .......... —
(5.7)
Depreciation and amortisation .........................................
10.7
Trading profit/(loss)—segment result ..............................
Sale of redundant site .......................................................
2.1
Changes to defined benefit pension plans ........................ —
(0.6)
Restructuring and other expense (Note 5) ........................
12.2
Operating profit/(loss)......................................................
Other geographical segment information
Non-current assets(1) ........................................................
Net assets employed(2)......................................................
Capital expenditure: Property, plant and equipment ........
Capital expenditure: Intangible assets..............................
77.5
6.9
6.7
2.0
39.1
(1.6)
37.5
(0.4)
—
(0.1)
(2.3)
(2.8)
—
—
—
(2.8)
13.8
19.7
1.2
—
282.5
(22.7)
259.8
37.8
(0.4)
(0.1)
(10.3)
27.0
—
0.6
(1.6)
26.0
143.9
112.3
8.6
0.4
0.1
—
0.1
0.1
—
—
—
0.1
—
—
—
0.1
—
0.3
—
—
3.4
—
3.4
467.7
(52.9)
414.8
0.4
—
—
(0.1)
0.3
—
—
—
0.3
0.2
2.7
—
—
55.3
(1.4)
(0.2)
(18.4)
35.3
2.1
0.6
(2.2)
35.8
235.4
141.9
16.5
2.4
77
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
Year ended 31 December, 2015
United
Kingdom
$M
Rest of
Europe
$M
North
America
$M
Australasia
$M
Asia
$M
Total
$M
Revenue
Segment revenue .................................................................... 145.0
Inter-segment revenue ............................................................ (27.0)
Revenue to external customers .............................................. 118.0
Result
Adjusted EBITDA ................................................................. 13.6
Other share based compensation charges ............................... (1.0)
Depreciation and amortisation ............................................... (6.1)
Trading profit/(loss)—segment result .................................... 6.5
Changes to defined benefit pension plans .............................. 18.0
Restructuring and other expense (Note 5) .............................. (8.0)
Operating profit/(loss)............................................................ 16.5
Other geographical segment information
Non-current assets(1) .............................................................. 67.8
Net assets employed(2)............................................................ 19.7
Capital expenditure: Property, plant and equipment .............. 5.5
Capital expenditure: Intangible assets.................................... 1.7
Year ended 31 December, 2014
62.4
(2.9)
59.5
1.3
—
(2.3)
(1.0)
—
(7.8)
(8.8)
14.5
23.7
1.4
—
299.6
(20.8)
278.8
46.5
(0.3)
(10.1)
36.1
—
(6.6)
29.5
147.6
122.6
8.4
0.4
0.1
—
0.1
0.2
—
—
0.2
—
—
0.2
—
0.3
—
—
3.9
—
3.9
511.0
(50.7)
460.3
0.6
—
(0.1)
0.5
—
—
0.5
62.2
(1.3)
(18.6)
42.3
18.0
(22.4)
37.9
0.3
3.4
—
—
230.2
169.7
15.3
2.1
United
Kingdom
$M
Rest of
Europe
$M
North
America
$M
Australasia
$M
Asia
$M
Total
$M
Revenue
Segment revenue ...........................................................
Inter-segment revenue ...................................................
Revenue to external customers .....................................
181.9
(38.2)
143.7
Result
Adjusted EBITDA ........................................................
Other share based compensation charges ......................
Loss on disposal of property, plant and equipment .......
Depreciation and amortisation ......................................
Trading profit/(loss)—segment result ...........................
Restructuring and other expense (Note 5) .....................
Operating profit/(loss)...................................................
Other geographical segment information
Non-current assets(1) .....................................................
Net (liabilities)/assets employed(2) ................................
Capital expenditure: Property, plant and equipment .....
Capital expenditure: Intangible assets...........................
(1)
24.4
(1.1)
(0.1)
(6.5)
16.7
(0.9)
15.8
70.8
(14.8)
8.0
0.9
81.9
(4.6)
77.3
(1.9)
—
—
(2.9)
(4.8)
(0.3)
(5.1)
18.5
45.2
2.0
0.4
292.1
(29.2)
262.9
41.1
(0.5)
(0.2)
(8.6)
31.8
(2.7)
29.1
154.8
139.6
10.5
0.6
0.1
—
0.1
0.1
—
—
—
0.1
—
0.1
—
0.1
—
—
5.5
—
5.5
561.5
(72.0)
489.5
1.1
—
—
(0.1)
1.0
—
1.0
64.8
(1.6)
(0.3)
(18.1)
44.8
(3.9)
40.9
0.4
5.3
—
—
244.5
175.4
20.5
1.9
The Group’s non-current assets analysed by geographic origin include property, plant and equipment, intangible assets and
investments.
(2)
Represents net assets employed—excluding inter-segment assets and liabilities.
78
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
GEOGRAPHIC DESTINATION:
Revenue
Year ended 31 December, 2016 ..........
Year ended 31 December, 2015 ..........
Year ended 31 December, 2014 ..........
3. Operating profit
United
Kingdom
$M
Rest of
Europe
$M
Africa
$M
North
America
$M
South
America
$M
Asia
Pacific
$M
Total
$M
36.4
53.5
54.7
94.2
98.9
109.1
2.4
2.7
4.6
226.3
245.9
231.0
9.9
13.4
16.2
45.6
45.9
73.9
414.8
460.3
489.5
Operating profit is stated after charging/ (crediting):
2016
$M
2015
$M
2014
$M
Research and development expenditure charged to the consolidated income statement ..................
5.5
Development capital expenditure included within non-current assets ..............................................
2.1
Total research and development expenditure ....................................................................................
7.6
less development expenditure capitalised within non-current assets ................................................ (2.1)
Net research and development ..........................................................................................................
5.5
Depreciation of property, plant and equipment (Note 11) ................................................................ 16.7
Amortisation of intangible assets (Note 12)......................................................................................
1.7
Loss on disposal of property, plant and equipment ...........................................................................
0.2
Net foreign exchange gains ............................................................................................................... (0.7)
Staff costs (Note 6) ........................................................................................................................... 111.7
Cost of inventories recognised as expense ........................................................................................ 287.3
5.8
2.5
8.3
(2.5)
5.8
16.6
2.2
—
(0.6)
119.0
316.2
8.4
2.2
10.6
(2.2)
8.4
16.9
1.2
0.3
(0.5)
122.7
329.9
4. Fees payable to auditors
total remuneration of
The
the Group’s auditor, PricewaterhouseCoopers LLP and other member firms of
PricewaterhouseCoopers International Limited, for services provided to the Group during the year ended 31 December,
2016 is analysed below.
PricewaterhouseCoopers LLP was appointed as the Group’s auditor for the year ended 31 December, 2015. Accordingly,
comparative figures in the table below for the year ended 31 December, 2014 are in respect of remuneration paid to the
Group’s previous auditor, Ernst & Young LLP and other member firms of Ernst & Young Global Limited.
Fees payable to auditors for the audit of the consolidated financial statements ................................. 1.1
Fees payable to auditors for non-audit services:
Tax compliance services ................................................................................................................. —
Tax advisory services ...................................................................................................................... —
—
Total fees payable ............................................................................................................................... 1.1
1.1
—
—
—
1.1
1.1
0.3
0.2
0.5
1.6
2016
$M
2015
$M
2014
$M
The audit fee for the company financial statements of Luxfer Holdings PLC was $0.1 million (2015: $0.1 million and
2014: $0.2 million).
79
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
5. Other income/ (expense) items
(a)
Profit on sale of redundant site
Credited to operating profit:
Profit on sale of redundant site .......................................................................................................
(b)
Changes to defined benefit pension plan
Credited to operating profit:
Changes to defined benefit pension plan ........................................................................................
2016
$M
2015
$M
2014
$M
2.1
2.1
—
—
—
—
0.6
0.6
18.0
18.0
—
—
(c)
Restructuring and other expense
Charged to operating profit:
Rationalisation of operations .............................................................................................................. (0.4)
Patent infringement litigation costs .................................................................................................... (0.6)
Receivable impairment provision ....................................................................................................... (1.2)
I.P.O. related share based compensation charges ............................................................................... —
Environment costs .......................................................................................................................... —
(2.2)
(21.8)
(0.5)
—
(0.1)
—
(22.4)
(1.7)
—
—
(0.2)
(2.0)
(3.9)
(d)
Acquisitions and disposals
(Charged)/credited to non-operating profit:
Merger and acquisition costs .............................................................................................................. (0.3)
Remeasurement of deferred contingent consideration ........................................................................ 0.5
0.2
(2.0)
—
(2.0)
(1.8)
6.3
4.5
Profit on sale of redundant site
In 2016, a profit of $2.1 million has been recognised in relation to the sale of the redundant Redditch site to a company
that specialises in remediating contaminated land.
Changes to defined benefit pension plans
During 2016, a net credit of $0.6 million was recognised following the sale of $10.0 million of U.S. deferred pensioner
liabilities to an insurer, and lump sum payments of $4.9 million offered to certain U.S. deferred pensioners.
In 2015, a credit of $18.0 million has been recognised in relation to changes to the U.K. defined benefit pension plan
effective 5 April, 2016 in respect of closure of the plan to future accrual and changing the reference index from the Retail
Prices Index (“RPI”) to the Consumer Prices Index (“CPI”) when increasing pensions in payment. This credit comprises
a past service credit of $14.9 million and a curtailment credit of $3.3 million, offset by associated advisory costs of
$0.2 million.
80
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
5. Other income/ (expense) items (Continued)
Rationalisation of operations
In 2016, $0.4 million (2015: $nil and 2014: $0.6 million) of costs have been incurred in relation to rationalisation costs in
the Elektron division and $nil (2015: $21.8 million and 2014: $1.1 million) have been incurred in the Gas Cylinders
division.
In 2015, $21.8 million (2014: $1.1 million and 2013: $0.3 million) of costs have been incurred in relation to
rationalisation costs in the Gas Cylinders division and $nil (2014: $0.6 million and 2013: $0.2 million) have been
incurred in the Elektron division. The $21.8 million of costs incurred in the Gas Cylinders division related to the
rationalisation of its Alternative Fuel (“AF”) operations, including closure of two manufacturing facilities (in Germany
and Utah) and a review of related assets and investments for obsolescence and impairment. The charge comprises asset
write-downs of $17.7 million, redundancy costs of $2.2 million, closure costs of $1.7 million and legal costs of
$0.2 million.
Patent infringement litigation costs
In 2016, $0.6 million (2015: $0.5 million and 2014: $nil) of legal costs have been incurred in relation to a patent
infringement litigation action taken against a competitor; all such costs relate to the Elektron division.
Receivable impairment provision
In 2016, $1.2 million has been incurred for an impairment charge on receivables in relation to an aerospace customer that
has entered Chapter 11 protection during the year. This is an operating cost item but has been separated out within the
income statement with other unusual operating items and included within restructuring and other expenses line due to the
nature of the customer entering Chapter 11.
I.P.O. related share based compensation charges
In 2015, a charge of $0.1 million (2014: $0.2 million) was recognised in the consolidated income statement under IFRS 2
in relation to share options granted as part of the initial public offering. The share options are described in further detail
in Note 31.
Environmental costs
In 2014, $2.0 million of additional costs were incurred in relation to the remediation of an effluent pond contaminated
with low-level radioactive material in our Elektron division. On planned removal and safe disposal of normal effluent
from one of our Elektron sites, an unusual contamination of sludge waste was discovered that did not relate to the current
operations and most likely related to historical contamination of raw materials from over 15 years ago. The material was
removed and safely disposed of in late 2014.
Merger and acquisition costs
In 2016, a charge of $0.3 million has been recognised in the consolidated income statement in relation to a potential
acquisition which was subsequently aborted.
In 2015, a charge of $1.8 million related to two approaches to acquire the company. Neither of these approaches resulted
in an executable offer that could be put to shareholders. In 2015, $0.2 million of legal costs have been incurred in relation
to the investment in Sub161 Pty Limited; further details are given in Note 14. In 2014, acquisition costs of $1.5 million
were recognised by the Elektron division and $0.3 million by the Gas Cylinders division in relation to acquisitions in the
year. The acquisitions are described in further detail in Note 25.
81
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
5. Other income/ (expense) items (Continued)
Remeasurement of deferred contingent consideration
In 2016, a credit of $0.5 million has been recognised in the consolidated income statement in relation to the
remeasurement of deferred contingent consideration arising from the acquisition of Luxfer Magtech Inc. where an
element of deferred contingent consideration is no longer payable due to the acquired business failing to achieve a profit
trigger at 31 December, 2016.
In 2014, a credit of $6.3 million was recognised in the consolidated income statement in relation to the remeasurement of
deferred contingent consideration arising from acquisitions. Of the $6.3 million, $4.8 million related to the Elektron
division and specifically to the acquisition of Luxfer Magtech Inc. where an element of deferred contingent consideration
was considered no longer payable due to the acquired business narrowly failing to achieve a profit trigger at 31
December, 2014. In addition, $1.5 million related to the Gas Cylinders division, being the acquisition of Luxfer Utah and
a subsequent reassessment of the potential profitability of this acquisition in the light of our then revised expectations for
the demand of CNG systems following the fall in oil prices at that time.
6. Staff Costs
Wages and salaries .............................................................................................................................. 92.2
Social security costs ............................................................................................................................ 10.5
Retirement benefits costs .................................................................................................................... 4.8
IAS 19R retirement benefits finance charge ....................................................................................... 2.1
Redundancy costs: Continuing activities ............................................................................................ 0.7
Share based compensation charges ..................................................................................................... 1.4
111.7
The average monthly number of employees during the year was made up as follows:
2016
$M
Production and distribution ............................................................................................................... 1,381
Sales and administration ................................................................................................................... 246
Research and development ...............................................................................................................
60
1,687
The compensation of the members of our Board of Directors (each, a “director”) was:
2016
No.
2015
$M
96.3
11.2
5.9
3.0
1.5
1.1
119.0
2014
$M
98.0
12.3
6.6
2.7
1.3
1.8
122.7
2015
No.
1,432
218
56
1,706
2014
No.
1,435
198
57
1,690
2016
$M
2015
$M
2014
$M
Remuneration (short-term benefits) .................................................................................................... 1.5
Social security costs ............................................................................................................................ 0.2
Post-retirement benefits ...................................................................................................................... 0.1
Total short-term and post-retirement benefits ..................................................................................... 1.8
1.7
0.2
0.2
2.1
1.4
0.2
0.3
1.9
In 2016, compensation of key management personnel (including directors) was $2.2 million (2015: $2.6 million and
2014: $2.5 million) for short-term employee benefits, and $0.2 million (2015: $0.4 million and 2014: $0.5 million) for
post-employment benefits. Social security costs were incurred of $0.3 million (2015: $0.4 million and 2014:
$0.3 million).
Details of the share awards granted are included in the remuneration report in tables 3 and 4 of the Remuneration Report.
82
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
6. Staff costs (Continued)
During the year, one of the directors was a member of the Group’s registered defined contribution and defined benefit
pension arrangements and another director was a participant in the unfunded unregistered unsecured retirement benefits
arrangement accrued by the Company.
Directors’ interests and related party transactions
No directors had a material interest in, nor were they a party to, any contract or arrangement to which the parent
company, Luxfer Holdings PLC (the “Company”) or any of its subsidiaries is or was party to either during the year or at
the end of the year, with the following exceptions: in the case of the executive directors their individual service contract
and the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan; in the case of the non-executive directors their
engagement letters or the contract for services under which their services as a director of the Company are provided; in
the case of the executive directors and the chairman, the Luxfer Holdings PLC Non-Executive Directors Equity Incentive
Plan. Information regarding the share options exercised during the year is included within the Remuneration Report.
On 5 February, 2014, as a part of a relocation, one of the subsidiary companies of the Group purchased outright the
residential property of David Rix, a member of our Executive Management Board. The property was valued on an arm’s
length basis by third parties with a purchase price of $1.2 million. This asset was held as a current asset in the Group
balance sheet at 31 December, 2014. On 3 July, 2015, the property was sold for proceeds of $1.2 million.
The son of the Chief Executive Officer is employed by the Group, having joined through our normal recruitment
channels.
7. Finance income
Bank interest receivable ...................................................................................................................... 0.2
Other interest receivable ..................................................................................................................... 0.3
Foreign exchange gains on financing activities .................................................................................. 0.7
Total finance income .......................................................................................................................... 1.2
0.2
0.3
—
0.5
0.2
0.3
—
0.5
2016
$M
2015
$M
2014
$M
8. Finance costs
Bank and other loan interest payable .................................................................................................. 6.3
Amortisation of issue costs ................................................................................................................. 0.5
IAS 19R retirement benefits finance charge ....................................................................................... 2.1
Unwind of discount on deferred contingent consideration from acquisitions ..................................... 0.4
Total finance costs .............................................................................................................................. 9.3
6.5
0.9
3.0
0.4
10.8
5.2
1.4
2.7
0.3
9.6
2016
$M
2015
$M
2014
$M
83
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
9. Income taxes
(a)
Analysis of taxation charge for the year
2016
$M
2015
$M
2014
$M
Current income taxes:
U.K. corporation tax .......................................................................................................................... —
Adjustments in respect of previous years ..........................................................................................
0.2
0.2
Non-U.K. tax .....................................................................................................................................
3.5
Adjustments in respect of previous years .......................................................................................... —
Total current tax charge .....................................................................................................................
3.7
Deferred income taxes:
Origination and reversal of temporary differences ............................................................................
Adjustments in respect of previous years ..........................................................................................
Total deferred income taxes charge ...................................................................................................
Tax on profit on operations ................................................................................................................
2.1
0.2
2.3
6.0
0.3
(0.4)
(0.1)
7.2
(0.9)
6.2
2.7
0.6
3.3
9.5
0.4
—
0.4
6.8
(0.1)
7.1
0.1
(0.1)
—
7.1
The income taxes charges relate to continuing activities and there is no tax charge in relation to discontinued activities.
In 2015, the non-U.K. tax figure was distorted primarily due to the $21.8 million of AF restructuring and other expenses
did not lead to a full tax credit due to losses in the AF business.
(b)
Factors affecting the taxation charge for the year
The tax assessed for the year differs from the standard rate of 20% (2015: 20.25% and 2014: 21.5%) for corporation tax
in the U.K.
The differences are explained below:
Profit on operations before taxation .................................................................................................... 27.9
Profit on operations at 2016 standard rate of corporation tax in the U.K. of 20%
2016
$M
2015
$M
25.6
2014
$M
36.3
(2015: 20.25% and 2014: 21.5%) ................................................................................................... 5.6
5.2
7.8
Effects of:
Non-deductible expenses / (income not taxable) ................................................................................ 0.2
Unprovided deferred income taxes ..................................................................................................... (2.9)
Foreign tax rate differences ................................................................................................................ 2.7
Adjustment in respect of previous years ............................................................................................. 0.4
Tax expense ........................................................................................................................................ 6.0
2.4
—
2.6
(0.7)
9.5
(1.7)
(1.2)
2.4
(0.2)
7.1
84
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
9. Income taxes (Continued)
(c)
Factors that may affect future taxation charge
At 31 December, 2016, the Group had carried forward tax losses of $72.1 million (U.K.: $35.3 million, non-U.K.:
$36.8 million). Carried forward tax losses for 2015 were $82.9 million (U.K.: $52.9 million, non-U.K.: $30.0 million)
and for 2014 were $91.8 million (U.K.: $62.4 million, non-U.K.: $29.4 million). To the extent that these losses are not
already recognised for as deferred income taxes, and available to offset against future taxable profits, it is expected that
the future effective tax rate would be below the standard rate in the country where the profits are offset. The Group has
unrecognised deferred tax assets relating to certain trading and capital losses and other temporary timing difference of
$12.3 million (2015: $14.2 million, 2014: $17.8 million), potentially available for offset against future profits.
In his Budget announcement of March 16, 2016, the Chancellor of the Exchequer announced certain tax changes which
will have a significant effect on the Group’s future tax position. The proposals include further reductions in the U.K.
corporation tax rate to 17% from 1 April, 2021.
At 31 December, 2016, the previously announced reductions in the rate had been ‘substantively enacted’ and this has
been reflected in the Group’s consolidated financial statements at 31 December, 2016.
10. Earnings per share
The Group calculates earnings per share in accordance with IAS 33. Basic income per share is calculated based on the
weighted average common shares outstanding for the period presented. The weighted average number of shares
outstanding is calculated by time-apportioning the shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding
during the financial year has been adjusted for the dilutive effects of all potential ordinary shares and share options
granted to employees.
Following the approval of a two-for-one share split at the Annual General Meeting on May 29, 2014, the nominal value
of each ordinary share is £0.50 and now represents 1 American Depositary Share (“ADS”), resulting in the earnings per
ordinary share being equivalent to the earnings per ADS.
The ADSs of Luxfer Holdings PLC are listed on the New York Stock Exchange following an initial public offering on 3
October, 2012. The company’s £0.50 ordinary shares are not traded on any recognised stock exchange. The Depositary
for the ADSs holds 1 £0.50 ordinary share for every 1 ADS traded, through American Depositary Receipts.
Under IAS 33, the number of shares used in the earnings per share calculations for the prior periods shown has been
adjusted to achieve comparability.
Management believe the use of non-GAAP financial measures such as adjusted earnings, as reconciled in the table
below, per share more closely reflects the underlying earnings per share performance.
85
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
10. Earnings per share (Continued)
Basic earnings:
Net income ..............................................................................................................
Adjusted earnings:
Accounting charges relating to acquisitions and disposals of businesses
Unwind of discount on deferred contingent consideration from
acquisitions ..................................................................................................
Acquisitions and disposals (Note 5) .................................................................
Amortisation on acquired intangibles ..............................................................
IAS 19R retirement benefits finance charge ........................................................
Profit on sale of redundant site (Note 5) ..............................................................
Changes to U.K defined benefit pension plan (Note 5) .......................................
Restructuring and other expense (Note 5) ............................................................
Other share based compensation charges .............................................................
Tax thereon ..........................................................................................................
Adjusted net income ............................................................................................
2016
$M
2015
$M
2014
$M
21.9
16.1
29.2
0.4
(0.2)
1.0
2.1
(2.1)
(0.6)
2.2
1.4
(1.4)
24.7
0.4
2.0
1.4
3.0
—
(18.0)
22.4
1.3
0.9
29.5
0.3
(4.5)
0.6
2.7
—
—
3.9
1.6
(2.9)
30.9
Weighted average number of £0.50 ordinary shares:
For basic earnings per share ................................................................................. 26,443,662
Exercise of share options .....................................................................................
270,997
For diluted earnings per share ................................................................................. 26,714,659
Earnings per share using weighted average number of ordinary shares
26,918,987
453,736
27,372,723
26,889,330
846,463
27,735,793
outstanding:
Basic
Adjusted ..................................................................................................................
Unadjusted ..............................................................................................................
Diluted
Adjusted ..................................................................................................................
Unadjusted ..............................................................................................................
$0.93
$0.83
$0.92
$0.82
$1.10
$0.60
$1.08
$0.59
$1.15
$1.09
$1.11
$1.05
86
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
11. Property, plant and equipment
Freehold
$M
Long
leasehold
$M
Short
leasehold
$M
Plant and
equipment
$M
Total
$M
389.4
15.3
(2.9)
(14.4)
387.4
16.5
(26.8)
—
(28.1)
349.0
245.6
16.6
1.7
(2.8)
(9.7)
251.4
16.7
(25.6)
—
(21.4)
221.1
318.1
11.8
(2.7)
(12.6)
314.6
13.5
(23.0)
(3.6)
(25.3)
276.2
219.3
13.4
1.7
(2.7)
(9.0)
222.7
13.6
(22.8)
(7.6)
(20.0)
185.9
90.3
91.9
98.8
127.9
136.0
143.8
Cost:
At 1 January, 2015 .................................................................
Additions ...............................................................................
Disposals ................................................................................
Exchange difference ..............................................................
At 31 December, 2015 ...........................................................
Additions ...............................................................................
Disposals ................................................................................
Transfers ................................................................................
Exchange difference ..............................................................
At 31 December, 2016 ...........................................................
Accumulated depreciation and impairment:
At 1 January, 2015 .................................................................
Provided during the year ........................................................
Impairment .............................................................................
Disposals ................................................................................
Exchange difference ..............................................................
At 31 December, 2015 ...........................................................
Provided during the year ........................................................
Disposals ................................................................................
Transfers ................................................................................
Exchange difference ..............................................................
At 31 December, 2016 ...........................................................
Net book values:
At 31 December, 2016 ...........................................................
At 31 December, 2015 ...........................................................
At 1 January, 2015 .................................................................
56.7
0.9
(0.1)
(1.4)
56.1
1.9
(3.8)
3.8
(1.6)
56.4
19.0
1.6
—
(0.1)
(0.4)
20.1
2.0
(2.8)
7.9
(0.6)
26.6
29.8
36.0
37.7
6.3
0.4
—
(0.3)
6.4
0.6
—
(0.2)
(0.9)
5.9
3.4
0.7
—
—
(0.2)
3.9
0.3
—
(0.5)
(0.6)
3.1
2.8
2.5
2.9
8.3
2.2
(0.1)
(0.1)
10.3
0.5
—
—
(0.3)
10.5
3.9
0.9
—
—
(0.1)
4.7
0.8
—
0.2
(0.2)
5.5
5.0
5.6
4.4
As at 31 December, 2016 and 31 December, 2015, no assets were held under finance leases.
Long and short leasehold
The long and short leasehold costs relate to leasehold property improvements.
87
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
12. Intangible assets
Goodwill
$M
Customer
related
$M
Technology and
trading related
$M
Development
costs
$M
Software
$M
Total
$M
Cost:
At 1 January, 2015 ..................................................... 86.4
Additions ................................................................... —
Exchange difference .................................................. (3.0)
At 31 December, 2015 ............................................... 83.4
Additions ................................................................... 0.1
Disposals .................................................................... —
Exchange difference .................................................. (8.2)
At 31 December, 2016 ............................................... 75.3
Accumulated amortisation and
impairment:
At 1 January, 2015 .................................................. 18.5
Provided during the year ......................................... —
Impairment ..............................................................
3.7
Exchange difference ............................................... (1.0)
At 31 December, 2015 ............................................ 21.2
Provided during the year ......................................... —
Disposals ................................................................. —
Exchange difference ............................................... (2.8)
At 31 December, 2016 ............................................ 18.4
Net book values:
At 31 December, 2016 ..........................................
At 31 December, 2015 ..........................................
At 1 January, 2015 ................................................
56.9
62.2
67.9
13.4
—
—
13.4
0.1
—
—
13.5
0.4
1.1
—
—
1.5
0.7
—
(0.1)
2.1
11.4
11.9
13.0
9.8
—
(0.5)
9.3
—
—
(1.3)
8.0
1.4
0.5
—
(0.1)
1.8
0.4
—
(0.3)
1.9
6.1
7.5
8.4
2.1
2.1
(0.2)
4.0
2.4
—
(0.4)
6.0
—
0.1
—
—
0.1
0.3
—
0.1
0.5
5.5
3.9
2.1
3.5
0.2
(0.2)
3.5
0.1
(0.6)
(0.3)
2.7
1.6
0.5
—
(0.1)
2.0
0.3
(0.3)
—
2.0
0.7
1.5
1.9
115.2
2.3
(3.9)
113.6
2.7
(0.6)
(10.2)
105.5
21.9
2.2
3.7
(1.2)
26.6
1.7
(0.3)
(3.1)
24.9
80.6
87.0
93.3
Customer related intangibles include customer relationships, order backlogs and non-compete agreements. Technology
and trading related intangibles include technology, patents, tradenames and trademarks.
Development costs include $5.5 million (2015: $3.9 million) relating to internally generated intangible assets, all other
intangible assets are externally generated.
13. Impairment of goodwill
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are
expected to benefit from the business combination. The four identified CGUs (Luxfer Gas Cylinders, Superform,
Magnesium Elektron and MEL Chemicals) represent the lowest level within the Group at which goodwill is monitored
for internal management reporting purposes. The four CGUs are aggregated to form the Group’s two defined reportable
divisions: Gas Cylinders division and Elektron division. The table below summarises the carrying value of goodwill by
division:
Gas Cylinders division
$M
Elektron division
$M
At 1 January, 2015 .................................................................................................
Impairment .............................................................................................................
Exchange difference ..............................................................................................
At 31 December, 2015 ...........................................................................................
Additions ...............................................................................................................
Exchange difference ..............................................................................................
At 31 December, 2016 ...........................................................................................
27.3
(3.7)
(1.3)
22.3
—
(3.4)
18.9
40.6
—
(0.7)
39.9
0.1
(2.0)
38.0
Total
$M
67.9
(3.7)
(2.0)
62.2
0.1
(5.4)
56.9
88
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
13. Impairment of goodwill (Continued)
The Gas Cylinders division goodwill of $18.9 million (2015: $22.3 million) included goodwill attributable to our Luxfer
Gas Cylinders operations of $17.9 million (2015: $21.1 million) and goodwill attributable to our Superform operations of
$1.0 million (2015: $1.2 million). The Elektron division goodwill of $38.0 million (2015: $39.9 million) included
goodwill attributable to our MEL Chemicals operations of $3.9 million (2015: $4.8 million) and goodwill attributable to
our Magnesium Elektron operations of $34.1 million (2015: $35.1 million).
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be
impaired. The recoverable amount of each of the cash-generating units has been determined based on a value in use
calculation using a discounted cash flow method. The cash flows were derived from a five-year business plan prepared at
a detailed level by individual businesses within each CGU. The results of these plans were then extrapolated to give a
terminal value based on a growth rate of 2.1% (2015: 2.5%). The five-year business plans were driven by detailed sales
forecasts by product type and best estimate of future demand by end market, using current margins. The cash flows
included allowance for capital maintenance costs, along with working capital requirements based on the projected level
of sales. A pre-tax discount rate of between 10.1% and 10.7% was used for the individual CGUs (2015: 11.4% for all
CGUs), which was considered a best estimate for the risk-adjusted cost of capital for the CGUs. The long-term
projections assumed product prices and costs were at current levels, but the exchange rates used were: U.S. dollars: GBP
sterling exchange of $1.30 and U.S. dollars: Euro exchange of €1.20.
In March 2015, as part of the review of the AF business within the Gas Cylinders division, the goodwill attributable to
the manufacturing site in Utah, which was closed during the year, with a carrying value of $3.7 million was impaired in
full.
Based on the current five-year business plans used in the impairment testing, it is believed no reasonable changes in the
pre-tax discount and sales growth rates or forecast future cash flows are expected to result in an impairment of the
carrying value of the goodwill.
14. Investments
Shares in joint
ventures*
$M
Shares in associates
$M
Loans to joint ventures
and associates
$M
Total
$M
At 1 January, 2015 ................................................................... 3.1
Debt funding ............................................................................ —
Additions ................................................................................. —
Share of results ........................................................................ (0.7)
Impairment ............................................................................... —
Exchange difference ................................................................ —
At 31 December, 2015 ............................................................. 2.4
Debt funding ............................................................................ —
Transfer from trade receivables ............................................... —
Share of results ........................................................................ 0.5
Exchange difference ................................................................ (0.2)
At 31 December, 2016 ............................................................. 2.7
—
—
5.4
(0.5)
(4.6)
(0.3)
—
—
—
—
—
—
4.3
0.5
—
—
—
—
4.8
(1.0)
3.7
—
(0.2)
7.3
7.4
0.5
5.4
(1.2)
(4.6)
(0.3)
7.2
(1.0)
3.7
0.5
(0.4)
10.0
* The current year shares in joint ventures balance also includes the amounts which were disclosed as other in the prior
year financial statements.
The loans to joint ventures and associates are repayable in 2018, with interest being charged on $3.8 million at 8.0% and
$3.5 million incurring interest at 6.0%.
See note 35 for a full listing of Luxfer Holdings PLC’s subsidiaries.
89
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
14. Investments (Continued)
Investment in joint ventures and associates
At 31 December, 2016, the Group had the following joint ventures and associates which affect the profit of the Group.
Unless otherwise stated, the Group’s joint ventures and associates have share capital which consists solely of ordinary
shares and are indirectly held, and the country of incorporation or registration is also their principal place of operation.
Country of
incorporation
Name of company
Dynetek Cylinders India Private Limited .........
India Ordinary shares
Dynetek Korea Co. Limited ................................. South Korea Ordinary shares
N/A
Luxfer Holdings NA, LLC .............................
U.S.
India Ordinary shares
Luxfer Uttam India Private Limited...............
Nikkei-MEL Co. Limited ..............................
Japan Ordinary shares
Sub161 Pty Limited ....................................... Australia Ordinary shares
Holding
Proportion of voting
rights and shares held
Classification
Nature of
business
49%
49%
49%
51%
50%
26.4%
Joint venture Engineering
Joint venture Engineering
Joint venture Engineering
Joint venture Engineering
Joint venture Distribution
Associate Engineering
During 2012, the Group acquired two joint ventures in India and South Korea through its acquisition of Dynetek
Industries and at the end of 2012 established a third in the U.S. The objective of these joint ventures is to promote and
support the use of large composite cylinders for use by end customers in CNG and hydrogen gas transportation
applications. Only the U.S. joint venture had any significant trading activity in 2014 and there was a break-even
contribution to net income by Luxfer Holdings NA, LLC.
During 2015, the Group acquired 26.4% of the share capital of Sub161 Pty Limited, an associate, which is a start-up
virtual pipeline operator based in Western Australia, for a cash consideration of $3.7 million and the contribution of a
number of AF assets with a value of $1.7 million. The business is actively pursuing new opportunities in the Australian
mining market, but given the weakness in this sector, those opportunities are likely to take time to realise. Therefore an
impairment of this investment has been recognised as part of the review of AF assets following this business stream’s
restructuring. This write-down would be reversed on any sale or realisation of value of these assets in future years.
During 2016, a receivable from Sub161 Pty Limited was converted into a secured loan note which is repayable by March
31, 2018 or before the event of a substantial equity injection, a sale of the business, a material new customer or at the
request of Sub161.
The main trading activity in 2016 was in Luxfer Holdings NA, LLC, Luxfer Uttam India Private Limited and Nikkei
MEL Co. Limited.
The Group has committed up to $12.5 million of future funding to aid expansion of the U.S. joint venture in the coming
years, via $2.5 million of equity into Luxfer Holdings NA, LLC and a $10.0 million secured credit line for working
capital and supplier finance of which $3.8 million (2015: $4.8 million) was drawn down at 31 December, 2016.
The share of profits of all joint ventures and associates were $0.5 million and $nil, respectively (2015: losses of
$0.7 million and $0.5 million, respectively), with no items recognised in other comprehensive income in 2016 or 2015.
The Group has looked in detail at the ownership agreements of its joint ventures and associates in order to determine the
level of control that it has. The Group has determined that it has joint control of its joint ventures mainly based upon the
number of members on each company board of directors and their associated voting rights. In relation to the associate
undertaking, the Group has significant influence but not joint control based on the proportion of directors on the company
board and associated voting rights. The Group therefore accounts for all material joint ventures and associates on an
equity basis.
Related party transactions with joint ventures and associates have been disclosed in Note 32 to the Group’s consolidated
financial statements.
90
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
15. Inventories
31 December,
2016
$M
31 December,
2015
$M
Raw materials and consumables ...........................................................................................
Work in progress ...................................................................................................................
Finished goods and goods for resale .....................................................................................
28.3
30.5
23.7
82.5
32.5
30.9
28.4
91.8
The provision against obsolete and excess inventories at 31 December, 2016 was $6.5 million (2015: $10.4 million). The
cost of inventories recognised as an expense during the year has been disclosed in Note 3. The cost of inventories
written-off during 2016 was $0.1 million (2015: $4.8 million).
16. Trade and other receivables
Non-current Assets
Derivative financial instruments .........................................................................................
Current Assets
Trade receivables ................................................................................................................
Amounts owed by joint ventures and associates .................................................................
Other receivables ................................................................................................................
Prepayments and accrued income .......................................................................................
Derivative financial instruments .........................................................................................
31 December,
2016
$M
31 December,
2015
$M
0.3
0.3
40.5
2.8
3.1
9.4
1.8
57.6
—
—
43.9
6.2
3.7
8.5
—
62.3
The directors consider that the carrying value of trade and other receivables approximates to their fair value. Trade
receivables are non-interest bearing and are generally on 30-90 day terms. Trade receivables above are disclosed net of
any provisions for doubtful receivables.
Included within amounts owed by joint ventures and associates in 2015 was a receivable from Sub161 Pty Limited for
$3.6 million, which are secured over certain assets in the business. During 2016, Sub161 Pty Limited converted the loan
into a secured loan note thereby re-phasing the repayment but increasing the amount ultimately repayable.
At 31 December, 2016, trade receivables with a nominal value of $2.1 million (2015: $4.8 million) were impaired and
fully provided for. Movements in the provision for impairment of trade receivables and amounts owed by joint ventures
and associates were as follows:
At 1 January ....................................................................................................................................................
Charge in the year ...........................................................................................................................................
Utilised in the year ..........................................................................................................................................
Exchange difference .......................................................................................................................................
At 31 December ..............................................................................................................................................
4.8
1.3
(3.6)
(0.4)
2.1
2.6
2.5
—
(0.3)
4.8
2016
$M
2015
$M
17. Cash and cash equivalents
Cash at bank and in hand ......................................................................................................
13.6
36.9
31 December,
2016
$M
31 December,
2015
$M
91
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
18. Share capital
(a)
Ordinary share capital
Following the approval of a two-for-one share split at the Annual General Meeting on May 29, 2014, the nominal value
of each ordinary share is £0.50 and now represents 1 ADS. The number of shares for the prior periods shown has been
adjusted to achieve comparability.
31 December,
2016
No.
31 December,
2015
No.
31 December,
2016
$M
31 December,
2015
$M
Authorised:
Ordinary shares of £0.50 each ........................
40,000,000
Deferred ordinary shares of £0.0001 each ......... 769,423,688,000
769,463,688,000
Allotted, called up and fully paid:
Ordinary shares of £0.50 each ...........................
27,136,799
Deferred ordinary shares of £0.0001 each ......... 769,413,708,000
769,440,844,799
40,000,000
769,423,688,000
769,463,688,000
27,136,799
769,413,708,000
769,440,844,799
35.7(1)
150.9(1)
186.6(1)
25.3(1)
150.9(1)
176.2(1)
35.7(1)
150.9(1)
186.6(1)
25.3(1)
150.9(1)
176.2(1)
(1)
The Group’s ordinary and deferred share capital are shown in U.S. dollars at the exchange rate prevailing at the
month end spot rate at the time of the share capital being issued. This rate at the end of February 2007 was
$1.9613:£1 when the first 20,000,000 shares were issued; the rate at the end of October 2012 was $1.6129:£1
when 7,000,000 shares were issued; the rate at the end of March 2013 was $1.5173:£1 when 1,924 shares were
issued; the rate at the end of January 2014 was $1.6487:£1 when 12,076 shares were issued; the rate at the end
of May 2014 was $1.6760:£1 when 24,292 shares were issued; the rate at the end of August 2014 was
$1.6580:£1 when 58,399 shares were issued; the rate at the end of February 2015 was $1.5436:£1 when 8,563
shares were issued; the rate at the end of March 2015 was $1.4847:£1 when 3,866 shares were issued; and the
rate at the end of June 2015 was $1.5715:£1 when 27,679 shares were issued.
The rights of the shares are as follows:
Ordinary shares of £0.50 each
The ordinary shares carry no entitlement to an automatic dividend but rank pari passu in respect of any dividend declared
and paid.
During 2016, the Group has not allotted and issued any ordinary shares of £0.50 each (2015: 40,108 ordinary shares of
£0.50 each) pursuant to an ordinary resolution empowering the directors to allot equity securities for cash up to an
aggregate nominal amount of £20,000,000, passed by shareholders on 26 October, 2011. The ordinary shares were
allotted and issued to satisfy share awards which vested under the Group’s share award and share incentive plans.
Deferred ordinary shares of £0.0001 each
The deferred shares have no entitlement to dividends or to vote. On a winding up (but not otherwise) the holders of the
deferred shares shall be entitled to the repayment of the paid up nominal amount of the deferred shares, but only after any
payment to the holders of ordinary shares of an amount equal to 100 times the amount paid up on such ordinary shares.
(b)
American Depositary Shares
At 31 December, 2016, there were 25,180,726 ADSs (2015: 25,704,815 ADSs) of Luxfer Holdings PLC listed on the
New York Stock Exchange following an initial public offering on 3 October, 2012. The Depositary for the ADSs holds 1
£0.50 ordinary share for every ADS traded, through American Depositary Receipts.
ADS holders are entitled to instruct their Depositary to vote and to receive a dividend as per the ordinary shareholders,
after deducting the fees and expenses of the Depositary.
92
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
18. Share capital (Continued)
(c)
Share premium account
At 1 January, 2015 ......................................................................................................................................................
Arising from issue of share capital .............................................................................................................................
At 31 December, 2015 ................................................................................................................................................
At 31 December, 2016 ................................................................................................................................................
$M
56.2
0.2
56.4
56.4
The share premium account is used to record the excess of proceeds over nominal value on the issue of shares. Share
issue costs directly related to the issue of shares are deducted from share premium.
(d)
Treasury shares
At 1 January, 2015 ........................................................................................................................................................... —
Purchase of own shares .................................................................................................................................................... (1.9)
Utilisation of treasury shares ........................................................................................................................................... 0.6
At 31 December, 2015 ..................................................................................................................................................... (1.3)
Purchase of own shares .................................................................................................................................................... (6.3)
Utilisation of treasury shares ........................................................................................................................................... 0.5
At 31 December, 2016 ..................................................................................................................................................... (7.1)
$M
In June 2015, the Board announced a share buy-back program of up to $10 million, to cover the needs of employee share
plans. Shareholder approval for this program was granted at the 2014 Annual General Meeting (for repurchases up to an
aggregate amount of 2,700,000 ordinary shares or ADSs).
During 2016, 634,185 ordinary shares had been repurchased under the share buy-back program at a cost of $6.3 million;
these repurchased shares are presented as treasury shares. At 31 December, 2016, there were 665,424 treasury shares held
at a cost of $7.1 million.
During 2015, 146,804 ordinary shares had been repurchased under the share buy-back program at a cost of $1.9 million;
these repurchased shares are presented as treasury shares. At 31 December, 2015, there were 104,537 treasury shares held
at a cost of $1.3 million.
(e)
Own shares held by ESOP
At 1 January, 2015 ........................................................................................................................................................ (0.4)
0.1
Purchases of shares from ESOP ....................................................................................................................................
0.1
Exchange difference .....................................................................................................................................................
At 31 December, 2015 .................................................................................................................................................. (0.2)
Purchases of shares into ESOP ..................................................................................................................................... (1.0)
Utilisation of ESOP shares ...........................................................................................................................................
0.7
At 31 December, 2016 .................................................................................................................................................. (0.5)
$M
At 31 December, 2016, there were 55,816 ordinary shares of £0.50 each (2015: 115,348 ordinary shares of £0.50 each)
held by The Luxfer Group Employee Share Ownership Plan (the “ESOP”).
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
19. Dividends paid and proposed
LUXFER HOLDINGS PLC
2016
$M
2015
$M
2014
$M
Dividends declared and paid during the year:
Interim dividend paid 5 February, 2014 ($0.10 per ordinary share(1)) ...................................................... — —
2.7
Interim dividend paid 7 May, 2014 ($0.10 per ordinary share(1)) ............................................................. — —
2.7
2.7
Interim dividend paid 6 August, 2014 ($0.10 per ordinary share) ............................................................ — —
2.7
Interim dividend paid 5 November, 2014 ($0.10 per ordinary share) ....................................................... — —
2.7 —
Interim dividend paid 4 February , 2015 ($0.10 per ordinary share) ........................................................ —
2.7 —
Interim dividend paid 6 May, 2015 ($0.10 per ordinary share) ................................................................ —
2.7 —
Interim dividend paid 5August, 2015 ($0.10 per ordinary share) ............................................................. —
Interim dividend paid 4November, 2015 ($0.10 per ordinary share) ........................................................ —
2.7 —
Interim dividend paid 3 February, 2016 ($0.10 per ordinary share) ......................................................... 3.4 — —
Interim dividend paid 4 May, 2016 ($0.10 per ordinary share) ................................................................ 3.3 — —
Interim dividend paid 3 August, 2016 ($0.10 per ordinary share) ............................................................ 3.3 — —
Interim dividend paid 2 November, 2016 ($0.10 per ordinary share) ..................................................... 2 3.3 — —
10.8
10.8
13.3
Dividends declared and paid after 31 December (not recognised as a liability at 31
December):
2016
$M
2015
$M
2014
$M
2.7
Interim dividend paid 4 February, 2015: ($0.10 per ordinary share) ........................................................... — —
Interim dividend paid 3 February, 2016: ($0.125 per ordinary share) ......................................................... —
3.4 —
Interim dividend paid 1 February, 2017: ($0.125 per ordinary share) ......................................................... 3.3 — —
2.7
3.4
3.3
(1)
The amount paid per ordinary share has been adjusted for prior periods to achieve comparability, following the
approval of a two-for-one share split at the Annual General Meeting on 29 May, 2014.
94
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
20. Reserves
Retained
earnings
$M
At 1 January, 2014 .......................................................................................
317.3
Net income for the year ............................................................................... 29.2
Currency translation differences .................................................................. —
Increase in fair value of cash flow hedges ................................................... —
Transfer to consolidated income statement on cash flow hedges ................ —
Remeasurement of defined benefit retirement plans ....................................
(35.4)
Deferred income taxes on items taken to other comprehensive
income...................................................................................................... 8.9
Equity dividends ..........................................................................................
(10.8)
Equity settled share based compensation charges ........................................ —
(0.4)
Deferred income taxes on items taken to equity ..........................................
At 31 December, 2014 .................................................................................
308.8
Net income for the year ............................................................................... 16.1
Currency translation differences .................................................................. —
Decrease in fair value of cash flow hedges .................................................. —
Transfer to consolidated income statement on cash flow hedges ................ —
Remeasurement of defined benefit retirement plans .................................... 4.4
Deferred income taxes on items taken to other comprehensive
(1.5)
income......................................................................................................
(10.8)
Equity dividends ..........................................................................................
Equity settled share based compensation charges ........................................ —
Cash settled .................................................................................................. —
(0.3)
Deferred income taxes on items taken to equity ..........................................
(0.1)
Utilisation of treasury shares .......................................................................
At 31 December, 2015 .................................................................................
316.6
Net income for the year ............................................................................... 21.9
Currency translation differences .................................................................. —
Increase in fair value of cash flow hedges ................................................... —
Transfer to consolidated income statement on cash flow hedges ................ —
Remeasurement of defined benefit retirement plans ....................................
(21.7)
Deferred income taxes on items taken to other comprehensive
income...................................................................................................... 4.3
Equity dividends ..........................................................................................
(13.3)
Equity settled share based compensation charges ........................................ —
Utilisation of treasury shares ....................................................................... 0.1
Utilisation of ESOP shares .......................................................................... 0.2
At 31 December, 2016 .................................................................................
308.1
Hedging
reserve
$M
(0.3)
—
0.2
1.4
0.1
—
(0.5)
—
—
—
0.9
—
—
(5.4)
(0.1)
—
1.1
—
—
—
—
—
(3.5)
—
—
1.1
(0.9)
—
—
—
—
—
—
(3.3)
Translation
reserve
$M
(25.4)
—
(10.8)
—
—
—
—
—
—
—
(36.2)
—
(8.6)
—
—
—
—
—
—
—
—
—
(44.8)
—
(13.1)
—
—
—
—
—
—
—
—
(57.9)
Nature and purpose of reserves
Hedging reserve
Share based
compensation
reserve
$M
Merger
reserve
$M
2.6 (333.8)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.1
—
—
3.7 (333.8)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.4
(0.5)
—
(0.5)
—
—
—
4.1 (333.8)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.2
(0.6)
(0.9)
—
—
3.8 (333.8)
The hedging reserve contains the effective portion of the cash flow hedge relationships entered into by the Group at the
reporting date. The movement in the year to 31 December, 2016 of $0.2 million (2015: $4.4 million) includes an increase
in the fair value of cash flow hedges of $1.1 million (2015: decrease of $5.4 million) and a loss of $0.9 million of cash
flow hedges being transferred to the consolidated income statement (2015: loss of $0.1 million). During 2015, the
movement also included an increase in deferred income taxes of $1.1 million. For further information regarding the
Group’s forward foreign currency exchange rate contracts, forward aluminium commodity contracts and forward interest
rate agreements refer to Note 28 section (a)—Financial Instruments: Financial Instruments of the Group.
95
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
20. Reserves (Continued)
Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of operations which do not have U.S. dollars as their functional currency.
Share based compensation reserve
The share based compensation reserve is used to recognise the fair value of options and performance shares granted
under IFRS 2. For further information refer to Note 31. The charges in 2014, 2015 and 2016 related to options over
ADSs and not directly in ordinary shares.
During the year, no shares were purchased on the open market on behalf of one of the share based compensation schemes
(2015: shares for the value of $0.2 million were purchased). These shares were held by the scheme, in the names of the
employees who are members of the scheme until the end of the holding period.
Merger reserve
The merger reserve relates to the recapitalisation of Luxfer Group Limited during the year ended 31 December, 1999.
Pursuant to the recapitalisation of Luxfer Group Limited, Luxfer Holdings PLC acquired the entire share capital of
Luxfer Group Limited. The company known as Luxfer Group Limited during the year ended 31 December, 1999 was
subsequently renamed LGL 1996 Limited and remains dormant. The recapitalisation was accounted for using merger
accounting principles.
The accounting treatment reflected the fact that ownership and control of Luxfer Group Limited, after the
recapitalisation, remained with the same institutional and management shareholders as before the recapitalisation. Under
merger accounting principles the consolidated financial statements of Luxfer Holdings PLC appear as a continuation of
those for Luxfer Group Limited and therefore as if it had been the parent of the Group from its incorporation.
21. Bank and other loans
Non-current
Loan Notes due 2018—gross ..............................................................................................
Unamortised finance costs ..................................................................................................
Loan Notes due 2018—net .................................................................................................
Loan Notes due 2021—gross ..............................................................................................
Unamortised finance costs ..................................................................................................
Loan Notes due 2021—net .................................................................................................
Loan Notes due 2023—gross ..............................................................................................
Unamortised finance costs ..................................................................................................
Loan Notes due 2023—net .................................................................................................
Loan Notes due 2026—gross ..............................................................................................
Unamortised finance costs ..................................................................................................
Loan Notes due 2026—net .................................................................................................
Revolving credit facility—gross .........................................................................................
Unamortised finance costs ..................................................................................................
Revolving credit facility—net.............................................................................................
31 December,
2016
$M
31 December,
2015
$M
15.0
(0.1)
14.9
25.0
(0.1)
24.9
25.0
(0.3)
24.7
25.0
(0.3)
24.7
32.8
(1.0)
31.8
121.0
65.0
(0.7)
64.3
25.0
(0.1)
24.9
—
—
—
—
—
—
43.5
(1.1)
42.4
131.6
96
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
21. Bank and other loans (Continued)
On June 29, 2016, Luxfer agreed to extend the maturity date of $50 million of its existing $65 million Loan Notes due
2018. The extension includes a lower long-term fixed interest rate on the debt. The maturity date on $25 million was
extended from June 2018 to June 2023 with a reduction in the fixed interest rate from 6.19% to 4.88%; and the maturity
date on $25 million was extended to June 2026 at a fixed interest rate of 4.94%. This was facilitated through the
utilisation of the Shelf Facility.
The $25.0 million seven year private placement will be repayable in full in 2021 and bears interest at a fixed rate of
3.67%. The banking facilities mature at the end of April 2019 and bear interest equal to a margin based upon the Group’s
leverage plus either EURIBOR or LIBOR, depending on the currency drawn down.
On 23 December, 2016, restrictions were amended to relax the terms of the Senior Facilities Agreement, and remove
permitted distributions restrictions and the debt service covenant. The Senior Facilities Agreement has an uncommitted
accordion facility which provides for a mechanism for the Revolving Credit Facility to be expanded further by up to an
additional $50 million (representing up to $200 million in aggregate).
The maturity profile of the Group’s undiscounted contractual payments is disclosed in Note 27.
22. Provisions
Rationalisation
and redundancy
$M
Employee
benefits
$M
Environmental
provisions
$M
Total
$M
At 1 January, 2015 ...................................................................
Charged to consolidated income statement ..............................
Cash payments .........................................................................
At 31 December, 2015 .............................................................
Charged to consolidated income statement ..............................
Credited to consolidated income statement .............................
Cash payments .........................................................................
Translation ...............................................................................
At 31 December, 2016 .............................................................
At 31 December, 2016
Included in current liabilities ......................................................
Included in non-current liabilities ...............................................
At 31 December, 2015
Included in current liabilities ...................................................
Included in non-current liabilities ............................................
Rationalisation and redundancy
0.9
4.7
(3.0)
2.6
1.4
(0.2)
(3.0)
—
0.8
0.8
—
0.8
2.6
—
2.6
1.7
0.3
(0.5)
1.5
—
(0.4)
—
—
1.1
—
1.1
1.1
—
1.5
1.5
1.6
—
(0.4)
1.2
—
—
(0.3)
(0.2)
0.7
0.7
—
0.7
1.2
—
1.2
4.2
5.0
(3.9)
5.3
1.4
(0.6)
(3.3)
(0.2)
2.6
1.5
1.1
2.6
3.8
1.5
5.3
At 31 December, 2016, the Group had $0.8 million of provisions relating to redundancy and the rationalisation of its
operations (2015: $2.6 million). $0.5 million of this provision in 2016 relates to a rationalisation and restructuring
program across the Gas Cylinders division.
Employee benefits
At 31 December, 2016, the Group had $1.1 million of employee benefit liabilities (in addition to retirement benefits), as
calculated on an actuarial basis, relating to a provision for workers’ compensation at the Gas Cylinders division in the
U.S. (2015: $1.5 million).
97
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
22. Provisions (Continued)
Environmental provisions
At 31 December, 2016, the Group had environmental provisions of $0.7 million relating to environmental clean-up costs
(2015: $1.2 million). $0.3 million of the provision is for future remediation costs required at the Speciality Aluminium
site, in relation to an incident before Luxfer Group’s ownership, $0.3 million relates to work required at the U.K.
Elektron division site and $0.1 million relates to work required at the Elektron business in the U.S. acquired during 2014.
23. Deferred income taxes
Accelerated tax
depreciation
$M
Other temporary
differences
$M
Tax
losses
$M
Retirement
benefit obligations
$M
At 1 January, 2015 ........................................................
Credited/(charged) to consolidated income
statement ...................................................................
(Charged)/credited to other comprehensive income
Charged to equity .............................................................
Exchange difference ........................................................
At 31 December, 2015 .....................................................
Credited/(charged) to consolidated income
statement ......................................................................
Credited to other comprehensive income .........................
Exchange difference ........................................................
At 31 December, 2016 .....................................................
(12.8)
1.8
—
—
—
(11.0)
0.1
—
—
(10.9)
6.2
3.1
(1.9)
1.1
(0.3)
—
5.1
(2.1)
—
(0.2)
2.8
2.0
—
—
(0.4)
4.7
0.9
—
(0.5)
5.1
20.7
(5.2)
(1.5)
—
(0.7)
13.3
(1.2)
4.3
(1.7)
14.7
Total
$M
17.2
(3.3)
(0.4)
(0.3)
(1.1)
12.1
(2.3)
4.3
(2.4)
11.7
The amount of deferred income taxes accounted for in the Group balance sheet, after the offset of balances within
countries for financial reporting purposes, comprised the following deferred income tax assets and liabilities:
31 December,
2016
$M
31 December,
2015
$M
Deferred income tax liabilities ............................................................................................
Deferred income tax assets .................................................................................................
Net deferred income tax assets ...........................................................................................
(4.9)
16.6
11.7
(1.7)
13.8
12.1
At the balance sheet date, the Group has unrecognised deferred income tax assets relating to certain trading and capital
losses and other temporary differences of $12.3 million (2015: $14.2 million) potentially available for offset against
future profits. No deferred income tax assets have been recognised in respect of this amount because of the
unpredictability of future qualifying profit streams in the relevant entities. Of the total unrecognised deferred income tax
assets of $12.3 million (2015: $14.2 million), $8.8 million (2015: $10.4 million) relates to losses that can be carried
forward indefinitely under current legislation.
At the balance sheet date, there were unremitted earnings of overseas subsidiaries and joint ventures and associates of
$54.9 million (2015: $64.1 million), for which there are no deferred income tax liabilities recognised or unrecognised
(2015: $nil).
98
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
24. Trade and other payables
31 December,
2016
$M
31 December,
2015
$M
Non-current Liabilities
Derivative financial instruments ..............................................................................................
Current Liabilities
Trade payables .........................................................................................................................
Other taxation and social security ............................................................................................
Accruals ...................................................................................................................................
Interest payable ........................................................................................................................
Derivative financial instruments ..............................................................................................
0.6
0.6
24.0
1.3
20.4
0.2
5.2
51.1
—
—
34.9
1.7
24.6
0.2
4.1
65.5
The directors consider that the carrying value of trade payables approximates to their fair value.
25. Acquisitions
On 29 April, 2016, the Group acquired a business, Canland UK (Hotpack) Limited (“Canland”) specialising in the
assembly, packing, distribution and export of self-heating meals and import and distribution of flameless ration heaters.
Accordingly, Canland will become the European arm of Magtech, our existing meals and heaters business (known as
“Magtech International”). On closing, an initial consideration of $0.5 million was paid, and with the acquired business
having $0.2 million of cash, the net cost was $0.3m.
Based on the assessment of the assets which were acquired and liabilities assumed, customer related intangibles were
recognised for $0.1 million, goodwill for $0.1 million was also recognised and $0.1 million of other net assets.
Goodwill included the fair value of the expertise of the acquired workforce following the business combination and also
the synergies that are expected to arise.
Deferred consideration
The deferred consideration for Luxfer Utah is fixed and substantially all of it will be payable at March 31, 2017. The
deferred consideration is shown in the balance sheet at 31 December, 2016, at $1.3 million (2015: $1.1 million), resulting
in a debit to the consolidated income statement of $0.2 million (2015: $0.1 million). The balance in 2015 was net of an
unwind of discount on deferred consideration of $0.2 million. The undiscounted future payment is $1.3 million.
Deferred contingent consideration
The contingent consideration for Luxfer Magtech is linked into the future profitability of the company and where
appropriate will be payable annually from 2015 to 2020. The deferred contingent consideration is shown in the balance
sheet at 31 December, 2016, at $1.5 million (2015: $1.8 million), following a remeasurement of deferred contingent
consideration at the year-end based upon the estimated future cash flows and the weighted probability of those cash flows
being achieved, resulting in a credit to the consolidated income statement of $0.5 million (2015: credit of $nil), net of an
unwind of discount on deferred contingent consideration of $0.2 million (2015: $0.2 million). The potential undiscounted
future payment has been estimated at $1.8 million. The maximum undiscounted amount payable under the sale agreement
is $10 million.
99
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
25. Acquisitions (Continued)
Net cash flows on purchase of business:
Included in net cash flows from investing activities:
Amounts paid .............................................................................................................................................................
Cash acquired ............................................................................................................................................................
0.5
(0.2)
0.3
Total
$M
26. Commitments and contingencies
31 December,
2016
$M
31 December,
2015
$M
31 December,
2014
$M
Operating lease commitments—Group as a lessee
Minimum lease payments under operating leases recognised in the
consolidated income statement ................................................................
4.8
5.6
5.2
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under
non-cancellable operating leases, which fall due as follows:
Within one year ......................................................................................
In two to five years ................................................................................
In over five years ...................................................................................
31 December,
2016
$M
31 December,
2015
$M
31 December,
2014
$M
4.6
11.8
10.7
27.1
4.9
13.5
12.4
30.8
5.1
13.6
15.3
34.0
Operating lease payments represent rentals payable by the Group for certain of its properties and items of machinery.
Leasehold land and buildings have a life between 2 and 65 years. Plant and equipment held under operating leases have
an average life between 2 and 5 years. Renewal terms are included in the lease contracts.
Capital commitments
At 31 December, 2016, the Group had capital expenditure commitments of $3.6 million (2015: $3.1 million and 2014:
$2.3 million) for the acquisition of new plant and equipment.
Contingencies
The U.S. E.P.A. and a number of chemical companies are in dispute over the technicalities of the types of chemicals
required to be registered under the Toxic Substances Control Act 1976 (“TSCA”). The dispute is over the classification
of chemical mixtures. We manufacture mixed oxides, the components of which are registered, but until recently we
believe, along with other industry participants, there has been no apparent requirement to also register these mixtures, and
therefore we are involved in this dispute. We expect the matter to be resolved without any major disruption in our supply
chain or any material additional cost, but there remains a risk that the dispute escalates to more formal legal proceedings.
During February 2014, a cylinder was sold to a long term customer and ruptured at one of their gas facilities. As a result
of this rupture, three people were noted to have minor injuries such as loss of hearing. There was no major damage to
assets of the customer. A claim has been launched by the three people who were injured in the incident and a prosecutor
has been appointed. We have reviewed our quality control checks from around the time which the cylinder was produced
and no instances of failures have been noted. It has also been noted by the investigator that the customer has poor quality
and safety checks. As a result we do not believe that we are liable for the incident.
100
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies
The Group’s financial instruments comprise bank and other loans, senior loan notes, derivatives and trade payables.
Other than derivatives, the main purpose of these financial instruments is to raise finance for the Group’s operations. The
Group also has various financial assets such as trade receivables and cash and cash equivalents, which arise directly from
its operations.
A Treasury Committee, chaired by the Group Finance Director, oversees the implementation of the Group’s hedging
policies, including the risk management of currency and aluminium risks and the use of derivative financial instruments.
It is not the Group’s policy or business activity to trade in derivatives. They are only used to hedge underlying risks
occurring as part of the Group’s normal operating activities.
The main risks arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk, foreign
currency translation and transaction risk, aluminium price risk and credit risk on trade receivables.
The Group regularly enters into forward currency contracts to manage currency risks and when considered suitable will
use other financial derivatives to manage commodity and interest rate risks.
Interest rate risk
The Group has exposure to variable interest rates when it draws down on the revolving credit facilities. As a result of this
exposure, the Group may decide to hedge interest payable based on a combination of forward rate agreements, interest
rate caps and swaps. It has also used fixed rate debt within its financing structure to mitigate volatility in interest rate
movements as disclosed in Note 21. If the interest rates were to change by 1%, based on the balance on the revolving
credit facilities at 31 December, 2016, this would impact the interest cost by approximately $0.3 million.
Total debt and debt funding to joint ventures and associates, at 31 December, 2016, all related to fixed interest rate debt
and so there was no interest rate risk at that date.
Liquidity risk
To understand and monitor cash flows, the Group uses a combination of a short-term rolling six week cash forecast,
based on expected daily liquidity requirements and longer term monthly rolling forecasts, covering forecast periods of
between six and 18 months forward. The Group also prepares, at least annually, longer-term strategic cash forecasts.
Together this system of control is used to ensure the Group can fund its ongoing operations, including working capital,
capital expenditure and interest payments and to ensure that bank covenant targets will be met. Short and medium term
changes in liquidity needs are funded from the Group’s $150.0 million revolving bank facility, as disclosed in Note 21,
which provides the ability to draw down and repay funds on a daily basis. In monitoring liquidity requirements and
planning its working capital and capital expenditure programs, the Group aims to maintain a sufficiently prudent level of
headroom against its banking facilities and forecast covenant position as protection against any unexpected or sudden
market shocks.
The Group also uses forecasts to manage the compliance with any associated covenant tests in relation to the Group’s
financing arrangements. The Group is subject to maintaining net debt to EBITDA levels of below three times, EBITDA
to net interest above four times, and a number of other debt service tests which include EBITDA, taxation, capital
expenditure and pension payments.
The Group has been in compliance with the covenants under the Loan Notes due 2018, 2021, 2023 and 2026 and the
banking facilities throughout all of the quarterly measurement dates from and including 30 September, 2011 to 31
December, 2016.
The maturity of the Group’s liabilities is also monitored to ensure sufficient funds remain available to meet liabilities as
they fall due. The table below summarises the maturity profile of the Group’s financial liabilities at 31 December based
on contractual payments.
101
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
Loan Notes due 2018 ........................
Loan Notes due 2021 ........................
Loan Notes due 2023 ........................
Loan Notes due 2026 ........................
Revolving credit facility ...................
Deferred contingent consideration ....
Trade payables ..................................
Other taxation and social security .....
Accruals ............................................
Interest payable .................................
Derivative financial instruments .......
31 December, 2016
31 December, 2015
Within 12
months
$M
1-5 years
$M
> 5 years
$M
Total
$M
Within 12
months
$M
1-5 years
$M
> 5 years
$M
Total
$M
—
—
—
—
—
1.3
24.0
1.3
20.4
0.2
5.2
52.4
15.0
25.0
—
—
32.8
1.5
—
—
—
—
0.6
74.9
—
—
25.0
25.0
—
—
—
—
—
—
—
50.0
15.0
25.0
25.0
25.0
32.8
2.8
24.0
1.3
20.4
0.2
5.8
177.3
—
—
—
—
—
—
34.9
1.7
24.6
0.2
4.1
65.5
65.0
—
—
—
43.5
2.9
—
—
—
—
—
111.4
—
25.0
—
—
—
—
—
—
—
—
—
25.0
65.0
25.0
—
—
43.5
2.9
34.9
1.7
24.6
0.2
4.1
201.9
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December based on contractual
undiscounted payments. Interest rates on the Group’s variable rate debt have been based on a forward curve.
31 December,
2016
$M
31 December,
2015
$M
Undiscounted contractual maturity of financial liabilities:
Amounts payable:
Within 12 months .................................................................................................................
1-5 years ...............................................................................................................................
> 5 years ................................................................................................................................
Less: future finance charges................................................................................................
57.7
90.5
57.4
205.6
(28.3)
177.3
71.6
124.3
25.7
221.6
(19.7)
201.9
Capital risk management
The capital structure of the Group consists of shareholders’ equity, debt and cash and cash equivalents. For the
foreseeable future, the Board will maintain a capital structure that supports the Group’s strategic objectives through
Managing funding and liquidity
Optimising shareholder return
Maintaining a strong, investment-grade credit rating
The Group monitors its adjusted EBITDA, as reconciled in the table below, for continuing activities to net debt(1) ratio
and has sought to reduce this over time from 6x to below 2x. The table below sets out the calculations for 2016, 2015 and
2014:
102
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
2016
$M
2015
$M
2014
$M
For continuing operations:
Operating profit................................................................................................................................ 35.8
Deduct:
Profit on sale of redundant site (Note 5) .......................................................................................... (2.1)
Changes to defined benefit pension plans (Note 5).......................................................................... (0.6)
Add back:
Restructuring and other expense (Note 5) ........................................................................................ 2.2
Loss on disposal of property, plant and equipment .......................................................................... 0.2
Other share based compensation charges ......................................................................................... 1.4
Depreciation and amortisation ......................................................................................................... 18.4
Adjusted EBITDA.......................................................................................................................... 55.3
Bank and other loans ........................................................................................................................ 121.0
Total debt ......................................................................................................................................... 121.0
Less: Cash and cash equivalents ...................................................................................................... (13.6)
Net debt ........................................................................................................................................... 107.4
Net debt: EBITDA ratio ................................................................................................................... 1.9x
37.9
40.9
—
(18.0)
22.4
—
1.3
18.6
62.2
—
—
3.9
0.3
1.6
18.1
64.8
131.6
131.6
(36.9)
94.7
121.4
121.4
(14.6)
106.8
1.5x
1.6x
Credit risk
The Group only provides trade credit to creditworthy third parties. Credit checks are performed on new and existing
customers along with monitoring payment histories of customers. Outstanding receivables from customers are closely
monitored to ensure they are paid when due, with both outstanding overdue days and total days of sales outstanding
reported as a business unit key performance measure. Where possible export sales are also protected through the use of
credit export insurance. At 31 December, 2016, the Group has a provision for bad and doubtful debtors of $2.1 million
(2015: $4.8 million) and a charge of $1.3 million (2015: $2.5 million) has been made to the consolidated income
statement in relation to bad debts recognised in 2016.
The analysis of trade receivables that were past due but not impaired is as follows:
Total
$M
Neither past due nor
impaired
$M
< 31 days
$M
31-60 days
$M
61-90 days
$M
91-121 days
$M
> 121 days
$M
Past due but not impaired
At 31 December,
2016 ............................... 40.5
At 31 December,
2015 ............................... 43.9
33.4
37.1
5.5
5.3
1.0
1.1
0.5
0.3
0.1
0.1
—
—
The Group also monitors the spread of its customer base with the objective of trying to minimise exposure at a Group and
divisional level to any one customer. The top 10 customers in 2016 represented 27% (2015: 27% and 2014: 27%) of total
revenue. There were no customers in 2016, 2015 or 2014 that represented over 10% of total revenue.
Foreign currency translation risk
With substantial operations in the U.K. and Rest of Europe, the Group is exposed to translation risk on both its
consolidated income statement, based on average exchange rates, and its balance sheet with regards to period end
exchange rates.
The Group’s results and net assets are reported by geographic region in Note 2. This analysis shows in 2016 the Group
had revenue of $114.0 million derived from U.K. operations, operating profit of $12.2 million and when deducting
changes to defined benefit pension plans and adding back restructuring and other expense, profit on the sale of a
redundant site, share based compensation, and depreciation and amortisation, an adjusted EBITDA of $17.4 million.
103
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
During 2016, the average exchange rate for GBP sterling was £0.7438 compared to the 2015 average of £0.6558. This
resulted in a negative impact of $15.0 million on revenue, $1.6 million on operating profit and $2.3 million on adjusted
EBITDA. Based on the 2016 level of sales and profits a weakening in GBP sterling leading to a £0.05 increase in the
GBP sterling to U.S. dollar exchange rate would result in a decrease of $7.0 million in revenue, $0.8 million in operating
profit and $1.1 million in adjusted EBITDA.
The capital employed at 31 December, 2016 in the U.K. was $72.2 million translated at an exchange rate of £0.8106. A
£0.05 change in exchange rates would change capital employed by approximately $4.5 million.
During 2016, the average exchange rate for the Euro was €0.9061, compared to the 2015 average of €0.9070. This
resulted in a $nil impact on revenue, operating profit and on adjusted EBITDA. Based on the 2016 level of sales and
profits a weakening in the Euro leading to a €0.05 increase in the Euro to U.S. dollar exchange rate would result in a
decrease of $1.2 million in revenue, $0.1 million increase in operating profit and $nil in adjusted EBITDA.
Foreign currency transaction risk
In addition to currency translation risk, the Group incurs currency transaction risk whenever one of the Group’s operating
subsidiaries enters into either a purchase or sales transaction in a currency other than its functional currency. Currency
transaction risk is reduced by matching sales revenues and costs in the same currency. The Group’s U.S. operations have
little currency exposure as most purchases, costs and revenues are conducted in U.S. dollars. The Group’s U.K.
operations are exposed to exchange transaction risks, mainly because these operations sell goods priced in Euros and U.S.
dollars, and purchase raw materials priced in U.S. dollars. The Group also incurs currency transaction risk if it lends
currency other than its functional currency to one of its joint venture partners.
The U.K. operations within the Group have approximately $15.0 million net sales risk after offsetting raw material
purchases made in U.S. dollars and a substantial Euro sales risk, with approximately €40.0 million of exports priced in
Euros. These risks are being partly hedged through the use of forward foreign currency exchange rate contracts, but we
estimate that in 2016 our Elektron division has incurred a transaction gain of $1.8 million, and the transaction impact at
our Gas Cylinders division was a loss of $2.1 million.
Based on a $15.0 million net exposure to the U.S. dollar, a $0.10 increase in exchange rates would have a $1.2 million
annual decrease in Group operating profit and based on a €40.0 million Euro sales risk a €0.10 increase in exchange rates
would have a $3.3 million annual decrease in Group operating profit.
Commodity price risks
The Group is exposed to a number of commodity price risks, including primary aluminium, magnesium, rare earth
chemicals, zircon sand and other zirconium basic compounds. All have been subject to substantial increases in recent
years. Historically the two largest exposures to the Group have been the prices of aluminium and magnesium and the
Group will spend annually approximately $65 million to $85 million on these two raw materials. In recent years the costs
of rare earth chemicals had been subject to significant commodity inflation.
Unlike the other major commodities purchased, aluminium is traded on the London Metal Exchange (“LME”) and
therefore the Group is able to use LME derivative contracts to hedge a portion of its price exposure. In 2016 the Group
purchased approximately 11,000 metric tons of primary aluminium. The processed waste can be sold as scrap aluminium
at prices linked to the LME price. The price risk on aluminium is mitigated by the use of LME derivative contracts. At 31
December, 2016, the Group had hedged 63% of its main primary aluminium requirements for 2017. Before hedging the
risk, a $100 increase in the LME price of aluminium would increase our Gas Cylinders division’s costs by approximately
$1.1 million.
104
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
In the long-term the Group has sought to recover the cost of increased commodity costs through price increases and
surcharges. Any hedging of aluminium risk is performed to protect the Group against short-term fluctuations in
aluminium costs.
In 2016 the Group purchased approximately 4,500 metric tons of primary magnesium. Magnesium is not traded on the
LME so we are not able to maintain a hedge position of its price exposure.
The Group purchases various rare earth chemicals which it uses in the production of various materials produced by its
Elektron division and when these chemicals became subject to significant price volatility it used surcharges on its
products to maintain its product margins.
28. Financial instruments
The following disclosures relating to financial instruments have been prepared on a basis which excludes short-term
debtors and creditors which have resulted from the Group’s operating activities.
(a)
Financial instruments of the Group
The financial instruments of the Group other than short-term debtors and creditors and non-current derivative
financial instruments were as follows:
Financial instruments:
Financial assets:
Cash at bank and in hand ..............................................
Financial liabilities(1):
Loan Notes due 2018 ....................................................
Loan Notes due 2021 ....................................................
Loan Notes due 2023 ....................................................
Loan Notes due 2026 ....................................................
Revolving credit facility ...............................................
Deferred contingent consideration ................................
Book value
31 December,
2016
$M
Fair value
31 December,
2016
$M
Book value
31 December,
2015
$M
Fair value
31 December,
2015
$M
13.6
15.0
25.0
25.0
25.0
32.8
2.8
13.6
15.9
25.0
26.3
26.5
32.8
2.8
36.9
65.0
25.0
—
—
43.5
2.9
36.9
69.1
25.0
—
—
43.5
2.9
(1)
The financial instruments included in financial liabilities are shown gross of unamortised finance costs. The fair
value of these financial instruments is calculated by discounting the future cash flows, including interest
payments due.
All financial assets mature within one year except derivative financial instruments. The maturity of the financial
liabilities is disclosed in Note 27.
At 31 December, 2016, the amount drawn in bank and other loans was $122.8 million (2015: $133.5 million), of which
$117.0 million was denominated in U.S. dollars with the remainder being denominated in GBP sterling (2015:
$117.0 million was denominated in U.S. dollars with the remainder being denominated in GBP sterling).
Derivative financial instruments are as follows:
Held to hedge purchases and sales by trading
businesses:
Book value
31 December,
2016
$M
Fair value
31 December,
2016
$M
Book value
31 December,
2015
$M
Fair value
31 December,
2015
$M
Forward foreign currency exchange rate contracts .......
LME derivative contracts ..............................................
(3.1)
(0.6)
(3.1)
(0.6)
(0.4)
(3.7)
(0.4)
(3.7)
105
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
The fair value calculations were performed on the following basis:
Cash at bank and in hand
The carrying value approximates to the fair value as a result of the short-term maturity of the instruments. Cash at bank
and in hand are subject to a right to offset.
Bank loans
At 31 December, 2016, bank and other loans of $122.8 million (2015: $133.5 million) were outstanding. At 31
December, 2016, bank and other loans are shown net of issue costs of $1.8 million and these issue costs are to be
amortised to the expected maturity of the facilities. At 31 December, 2016, $32.8 million of the total $122.8 million of
bank and other loans was variable interest rate debt and subject to floating interest rate risk, with the remainder being
fixed rate debt.
Forward foreign currency exchange rate contracts
The fair value of these contracts was calculated by determining what the Group would be expected to receive or pay on
termination of each individual contract by comparison to present market prices.
LME derivative contracts
The fair value of these contracts has been calculated by valuing the contracts against the equivalent forward rates quoted
on the LME.
Deferred contingent consideration
Disclosure of the basis of calculation of the fair value of deferred contingent consideration is included within Note 25 of
the consolidated financial statements.
Fair value hierarchy
At 31 December, 2016, the Group used the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based
on observable market data.
106
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
31 December,
2016
$M
Level 1
$M
Level 2
$M
Level 3
$M
Net derivative financial assets / liabilities at fair value through
profit or loss:
Forward foreign currency exchange rate contracts ...................................
LME derivative contracts ..........................................................................
Interest bearing loans and borrowings:
Loan Notes due 2018 ................................................................................
Loan Notes due 2021 ................................................................................
Loan Notes due 2023 ................................................................................
Loan Notes due 2026 ................................................................................
Revolving credit facility ...........................................................................
Other financial liabilities:
Deferred contingent consideration ............................................................
3.0
0.6
15.9
25.0
26.3
26.5
32.8
2.8
—
—
—
—
—
—
—
—
3.0
0.6
15.9
25.0
26.3
26.5
32.8
—
—
—
—
—
—
—
—
2.8
During the year ended 31 December, 2016, there were no transfers between Level 1 and Level 2 fair value measurements.
The following table presents the changes in Level 3 instruments for the year ended 31 December 2016 and 2015.
Balance at 1 January ...............................................................................................................................
(Gains) / losses recognised in profit or loss ............................................................................................
Balance at 31 December .........................................................................................................................
Total (gains) or losses for the period included in profit and loss for assets held at the end at 31
December under ‘Other gains / losses’ ...................................................................................................
Change in unrealised (gains) or losses for the period included in profit and loss for assets held at
the end at 31 December ..........................................................................................................................
2016
$M
2015
$M
2.9
(0.1)
2.8
(0.1)
(0.1)
2.6
0.3
2.9
0.3
0.3
The deferred contingent consideration relates to estimations of amounts payable in the future on acquisitions. This is
based upon an estimate of the future profitability of the businesses versus targets agreed upon as part of the acquisitions.
(b)
Interest rate risks
Interest rate risk profile on financial assets
This table shows the Group’s financial assets at 31 December, which are cash and cash equivalents. These assets are all
subject to floating interest rate risk.
Cash by currency:
U.S. dollar ...................................................................................................................................
GBP sterling................................................................................................................................
Euro ............................................................................................................................................
Australian dollar .........................................................................................................................
Chinese renminbi ........................................................................................................................
Czech koruna ..............................................................................................................................
Canadian dollar ...........................................................................................................................
Japanese yen ...............................................................................................................................
31 December,
2016
$M
31 December,
2015
$M
14.9
14.1
2.7
0.4
1.3
2.9
0.5
0.1
36.9
1.3
9.1
1.4
0.5
0.8
0.3
0.2
—
13.6
107
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
The Group earns interest on cash balances through either deposit accounts or placing funds on money markets at
short-term fixed rates. In all cases, interest earned is at approximately LIBOR rates during the year.
Interest rate risk profile on financial liabilities
The following table sets out the carrying value, by original maturity, of the Group’s financial instruments that were
exposed to both fixed and variable interest rate risk. The carrying values include interest payments to be made and
interest rates on the Group’s variable rate debt have been based on a forward curve.
31 December, 2016
31 December, 2015
Within
12 months
$M
1-5 years
$M
> 5 years
$M
Total
$M
Within
12 months
$M
1-5 years
$M
> 5 years
$M
Total
$M
Floating interest rate risk:
Revolving credit facility (including
interest payments) ..............................
0.9
34.1
—
35.0
1.2
46.7
—
47.9
Fixed interest rate risk:
Loan Notes due 2018 (including
interest payments) ..............................
Loan Notes due 2021 (including
interest payments) ..............................
Loan Notes due 2023 (including
interest payments) ..............................
Loan Notes due 2026 (including
interest payments) ..............................
0.9
1.0
1.2
1.2
5.2
15.5
28.7
—
16.4
—
29.7
4.9
26.8
32.9
5.0
88.2
30.6
57.4
36.8
150.8
4.0
0.9
—
—
6.1
70.9
—
74.9
3.7
25.7
30.3
—
—
—
—
121.3
—
25.7
—
153.1
(c)
Hedging activities
Forward foreign currency exchange contracts
The Group utilises forward foreign currency exchange contracts to hedge significant future transactions and cash flows to
manage its exchange rate exposures. The contracts purchased are primarily denominated in GBP sterling, U.S. dollars,
Euros and Australian dollars. The Group is also exposed to a number of other currencies like Japanese yen and Canadian
dollars with hedges against these on a more ad hoc basis, when exposures are more significant.
At 31 December, 2016, the fair value of forward foreign currency exchange contracts deferred in equity was a loss of
$3.1 million (2015: loss of $0.4 million and 2014: gain of $0.8 million). During 2016, a loss of $0.9 million (2015: loss
of $0.1 million and 2014: gain of $0.1 million) has been transferred to the consolidated income statement in respect of
contracts that have matured in the year.
At 31 December, 2016 and 2015, the Group held various forward foreign currency exchange contracts designated as
hedges in respect of forward sales for U.S. dollars, Euros and Australian dollars for the receipt of GBP sterling or Euros.
The Group also held forward foreign currency exchange contracts designated as hedges in respect of forward purchases
for U.S. dollars by the sale of GBP sterling. The contract totals in GBP sterling and Euros, range of maturity dates and
range of exchange rates are disclosed below:
31 December, 2016
Sales hedges
27.6
Contract totals/£M ...........................................................................
Maturity dates ..................................................................................
01/17 to 11/18
Exchange rates ................................................................................. $1.2310 to $1.5638
U.S. dollars
Euros
Australian dollars
39.4
01/17 to 11/18
€1.0951 to €1.4200
2.9
09/17
$1.7237
108
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
Purchase hedges
Contract totals/£M ..........................................................................................................
Maturity dates .................................................................................................................
Exchange rates ................................................................................................................
U.S. dollars
25.7
01/17 to 10/18
$1.2311 to $1.5618
Euros
2.5
01/17 to 06/17
€1.1121 to €1.1804
31 December, 2015
Sales hedges
22.5
Contract totals/£M ........................................................................
Maturity dates ...............................................................................
01/16 to 06/17
Exchange rates .............................................................................. $1.4601 to $1.6250
U.S. dollars
Euros
Australian dollars
27.9
01/16 to 05/17
€1.2385 to €1.4200
2.6
09/16
$2.1292
Purchase hedges
13.3
Contract totals/£M .............................................................................................................
Maturity dates ....................................................................................................................
01/16 to 06/17
Exchange rates ................................................................................................................... $1.4573 to $1.6231
U.S. dollars
Euros
7.7
01/16 to 12/16
€1.3470 to €1.4186
Aluminium commodity contracts
The Group did not hold any forward aluminium commodity contracts at 31 December, 2016 or 31 December, 2015.
Forward interest rate agreements
The Group did not hold any forward interest rate agreements at 31 December, 2016 or 31 December, 2016.
LME derivative contracts
At 31 December, 2016, the Group has hedged 5,100 and 900 metric tons of aluminium for supply in 2017 and 2018
respectively, using its ancillary banking facilities. The fair value of LME derivative contracts deferred in equity was a
loss of $0.6 million (2015: loss of $3.7 million and 2014: gain of $0.5 million).
(d)
Foreign currency translation risk disclosures
Exchange gains and losses arising on the translation of the Group’s non-U.S. assets and liabilities are classified as equity
and transferred to the Group’s translation reserve. In 2016, a loss of $13.1 million (2015: loss of $8.6 million and 2014:
loss of $10.8 million) was recognised in translation reserves.
(e)
Un-drawn committed facilities
At 31 December, 2016, the Group had committed banking facilities of $150.0 million. The facilities were for providing
loans and overdrafts, with a separate facility for letters of credit which at 31 December, 2016 was £7.0 million
($8.6 million). Of the committed facilities, $32.8 million of loans were drawn and $nil for letters of credit were utilised.
The Group also has a separate bonding facility for bank guarantees denominated in GBP sterling of £3.0 million
($3.7 million), of which £1.0 million ($1.3 million) was utilised at 31 December, 2016.
At 31 December, 2015, the Group had committed banking facilities of $150.0 million. The facilities were for providing
loans and overdrafts, with a separate facility for letters of credit which at 31 December, 2015 was £7.0 million
($10.3 million). Of the committed facilities, $43.5 million of loans were drawn and $nil for letters of credit were utilised.
The Group also has a separate bonding facility for bank guarantees denominated in GBP sterling of £3.0 million
($4.4 million), of which £1.5 million ($2.2 million) was utilised at 31 December, 2015.
109
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
29. Retirement benefits
The Group has defined benefit pension plans in the U.K., the U.S. and France. The levels of funding are determined by
periodic actuarial valuations. The assets of the plans are generally held in separate trustee-administered funds. The Group
also operates defined contribution plans in the U.K., the U.S., Australia and Canada.
Remeasurements are recognised in full in the period in which they occur. The liability recognised in the balance sheet
represents the present value of the defined benefit obligation, as reduced by the fair value of plan assets. The cost of
providing benefits is determined using the Projected Unit Credit Method.
The principal defined benefit pension plan in the Group is the U.K. Luxfer Group Pension Plan (“the Plan”), which
closed to new members in 1998, new employees then being eligible for a defined contribution plan. With effect from
April 2004, the Plan changed from a final salary to a career average revalued earnings benefit scale. In August 2005, a
plan specific earnings cap of £60,000 per annum subject to inflation increases was introduced, the figure had risen to
£76,000 in 2015. In October 2007, the rate of the future accrual for pension was reduced and a longevity adjustment was
introduced to mitigate against the risk of further unexpected increases in life expectancies. In 2015, following a
consultation with the Trustees and members, it was agreed the Plan would close to future accrual of benefits effective
from 5 April, 2016 and for the purpose of increasing pensions in payment, to use the Consumer Prices Index (“CPI”) as
the reference index in place of the Retail Prices Index (“RPI”) where applicable. The remaining active members,
numbering approximately 160, were transferred into a defined contribution plan. The weighted average duration of the
expected benefit payments from the Plan is around 18 years. The pension cost of the Plan is assessed in accordance with
the advice of an independent firm of professionally qualified actuaries, Lane Clark & Peacock LLP. The Plan is
registered with HMRC for tax purposes, operates separately from the Group and is managed by an independent set of
Trustees. The Plan operates under U.K. trust law and the trust is a separate legal entity from the Group. The Plan is
governed by a board of Trustees, composed of two member nominated Trustees and four company appointed Trustees.
The Trustees are required by law to act in the best interests of scheme members and are responsible for setting certain
policies (e.g. investment funding) together with the Company. A schedule of payments provides for deficit funding,
which is based upon minimum annual contributions of £3.8 million per year, together with additional variable
contributions based on 15% of net earnings of Luxfer Holdings PLC between £12.0 million and £24.0 million, and 10%
of net earnings of Luxfer Holdings PLC in excess of £24.0 million.
The Group’s other arrangements are less significant than the Luxfer Group Pension Plan, the largest being the BA
Holdings, Inc. Pension Plan in the U.S. In December 2005, this plan was closed to further benefit accrual with members
being offered contributions to that company’s 401(k) plan. At 1 January, 2016, the U.S. pension plans (BA Holdings, Inc.
Pension Plan and Luxfer Hourly Pension Plan) merged into one plan.
The total charge to the Group’s consolidated income statement for 2016 for retirement benefits was $6.4 million (2015:
credit of $9.3 million, 2014: charge of $9.3 million).
110
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
The movement in the pension liabilities is shown below:
2016
$M
Balance at 1 January .................................................................................................................................... 58.9
(Credited) / charged to the consolidated income statement:
Past service credit .................................................................................................................................... —
Curtailment credit ....................................................................................................................................
(0.6)
Current service cost..................................................................................................................................
0.4
Net interest on net liability .......................................................................................................................
2.0
Administrative costs.................................................................................................................................
0.9
Total charge for defined contribution plans .............................................................................................
3.7
Cash contributions ....................................................................................................................................... (10.9)
Charged / (credited) to the statement of comprehensive income ................................................................. 21.7
Exchange difference ....................................................................................................................................
(9.6)
Balance at 31 December .............................................................................................................................. 66.5
2015
$M
90.9
(14.9)
(3.3)
1.5
3.0
1.3
3.1
(14.5)
(4.4)
(3.8)
58.9
The financial assumptions used in the calculations were:
Projected Unit Credit Valuation
Non-U.K.
U.K.
2015
2015
%
%
2016
%
2014
%
2014
%
2016
%
Discount rate .............................................................................................................. 2.60 3.70 3.50 4.20 4.50 4.10
Retail Price Inflation .................................................................................................. 3.20 3.00 2.90 — — —
Inflation related assumptions:
Salary inflation ........................................................................................................... n/a 4.00 3.90 — — —
Consumer Price Inflation ........................................................................................... 2.20 2.00 1.90 — — —
Pension increases—pre 6 April 1997 ......................................................................... 2.00 1.80 2.30 — — —
—1997 - 2005 ........................................................................................... 2.20 2.10 2.80 — — —
—post 5 April 2005 .................................................................................. 1.80 1.70 2.00 — — —
2014
Years
Other principal actuarial assumptions:
Life expectancy of male in the U.K. aged 65 at accounting date .............................................................. 21.5 21.5 20.6
Life expectancy of male in the U.K. aged 65 at 20 years after accounting date ....................................... 23.2 23.1 22.3
2016
Years
2015
Years
Investment strategies
For the principal defined benefit plan in the Group and the U.K., the Luxfer Group Pension Plan, the assets are invested
in a diversified range of asset classes and include matching assets (comprising fixed interest and index linked bonds and
swaps) and growth assets (comprising all other assets). The Trustees have formulated a de-risking strategy to help control
the short term risks of volatility associated with holding growth assets. The Trustees also monitor the cost of a buy-in to
secure pensioner liabilities with an insurance company to ensure they and the Company are able to act if such an
opportunity arises. Other options to progressively reduce the scale of the liabilities are discussed between the Trustees
and the Company.
Risk exposures
The Group is at risk of adverse experience relating to the defined benefit plans.
The plans hold a high proportion of assets in equity and other growth investments, with the intention of growing the
value of assets relative to liabilities. The Group is at risk if the value of liabilities grows at a faster rate than the plans
assets, or if there is a significant fall in the value of these assets not matched by a fall in the value of liabilities. If these
events occurred, this would be expected to lead to an increase in the Group’s future cash contributions.
111
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
Special events
In 2016 annuities were purchased settling $10.0 million of liabilities of the U.S. plan with an associated settlement charge
of $0.1 million. Lump sums were also paid of $4.2 million with an associated settlement credit of $0.7 million. The gross
amounts settled were $14.8 million and $14.2 million during this exercise.
In 2015, following a consultation with the Trustees and members, it was agreed that the Luxfer Group Pension Plan in
the U.K. would close to future accrual of benefits effective from 5 April, 2016 and for the purpose of increasing pensions
in payment, to use CPI as the reference index in place of RPI where applicable. As a result, in 2015 the Group has
recognised a curtailment credit of $3.3 million in respect of the closure of the Plan to future accrual and a past service
credit of $14.9 million in respect of the change in expected future pension increases in payment.
The amounts recognised in the consolidated income statement in respect of the pension plans were as follows:
2016
U.K.
$M
2016
Non-U.K.
$M
2016
Total
$M
2015
U.K.
$M
2015
Non-U.K.
$M
2015
Total
$M
2014
U.K.
$M
2014
Non-U.K.
$M
2014
Total
$M
In respect of defined benefit plans:
Current service cost ................................ 0.3
Net interest on net liability ...................... 1.5
Administrative expenses ......................... 0.4
Past service credit ................................... —
Curtailment credit ................................... —
Total charge / credit for defined
0.1
0.5
0.5
—
(0.6)
0.4
2.0
0.9
—
(0.6)
1.4
2.5
1.0
(14.9)
(3.3)
0.1
0.5
0.3
—
—
1.5
3.0
1.3
(14.9)
(3.3)
benefit plans ....................................... 2.2
0.5
2.7
(13.3)
0.9
(12.4)
In respect of defined contribution
plans:
Total charge for defined
contribution plans ............................... 1.6
Total charge / credit for pension
plans ................................................... 3.8
2.1
2.6
3.7
1.3
1.8
3.1
6.4
(12.0)
2.7
(9.3)
1.5
2.5
1.2
—
—
5.2
1.4
6.6
0.1
0.2
0.4
—
—
0.7
2.0
2.7
1.6
2.7
1.6
—
—
5.9
3.4
9.3
Of the total charge for the year (2015: credit for the year and 2014: charge for the year), charges of $4.1 million and
$0.9 million (2015: $4.6 million and $1.3 million and 2014: $4.6 million and $2.0 million); have been included in cost of
sales and administrative costs, respectively; a credit of $0.6 million (2015: $18.0 million and 2014: $nil) has been
recognised as changes to defined benefit pension plans in the consolidated income statement and a charge of $2.0 million
(2015: $3.0 million and 2014: $2.7 million) has been included in finance costs.
For the year, the amount of loss recognised in the Statement of Comprehensive Income is $21.7 million (2015: gain of
$4.4 million and 2014: loss of $35.4 million).
The actual return of the plans assets was a gain of $56.4 million (2015: loss of $0.6 million and 2014: gain of
$32.5 million).
112
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
The value of the plans assets were:
2016
U.K.
$M
2016
Non-U.K.
$M
2016
Total
$M
2015
U.K.
$M
2015
Non-U.K.
$M
2015
Total
$M
Assets in active markets:
Equities and growth funds ........................................... 171.6
Government bonds .......................................................
44.3
Corporate bonds ...........................................................
64.5
Cash .............................................................................
(0.1)
Total market value of assets ......................................... 280.3
Present value of plan liabilities .................................... (334.8)
Deficit in the plans ....................................................... (54.5)
Related deferred income tax assets ..............................
10.2
Net pension liabilities .................................................. (44.3)
20.6
—
16.0
—
36.6
(48.6)
(12.0)
4.4
(7.6)
192.2
44.3
80.5
(0.1)
316.9
(383.4)
(66.5)
14.6
(51.9)
179.5
40.2
67.0
0.4
287.1
(334.4)
(47.3)
9.0
(38.3)
27.3
—
22.1
—
49.4
(61.0)
(11.6)
4.3
(7.3)
206.8
40.2
89.1
0.4
336.5
(395.4)
(58.9)
13.3
(45.6)
The plans do not invest directly in property occupied by the Group or in financial securities issued by the Group.
Analysis of movement in the present value of the defined benefit obligations:
2016
U.K.
$M
2016
Non-U.K.
$M
At 1 January ................................................................................... 334.4
Service cost .................................................................................... 0.3
Interest on obligation ..................................................................... 10.9
Contributions from plan members.................................................. 0.1
Actuarial losses / (gains) on financial assumptions ........................ 67.5
Actuarial losses on demographic assumptions ............................... —
Actuarial gains on plan experience ................................................ (3.3)
Exchange difference ....................................................................... (59.3)
Benefits paid .................................................................................. (15.8)
Past service credit ........................................................................... —
Curtailment credit .......................................................................... —
At 31 December ............................................................................. 334.8
61.0
0.1
2.6
—
2.6
—
(0.2)
(0.1)
(2.6)
—
(14.8)
48.6
2016
Total
$M
395.4
0.4
13.5
0.1
70.1
—
(3.5)
(59.4)
(18.4)
—
(14.8)
383.4
2015
U.K.
$M
382.3
1.5
12.8
0.7
(11.1)
4.6
(7.8)
(16.8)
(13.6)
(14.9)
(3.3)
334.4
2015
Non-U.K.
$M
64.4
0.1
2.6
—
(3.1)
—
(0.1)
(0.1)
(2.8)
—
—
61.0
2015
Total
$M
446.7
1.6
15.4
0.7
(14.2)
4.6
(7.9)
(16.9)
(16.4)
(14.9)
(3.3)
395.4
The defined benefit obligation comprises $2.6 million (2015: $2.4 million) arising from unfunded plans and
$380.8 million (2015: $390.6 million) from plans that are funded.
The sensitivities regarding the principal assumptions used to measure the present value of the defined benefit obligations
are set out below:
Assumption
Discount rate
CPI inflation (and related increases)
Post retirement mortality
Change in assumption
Impact on total defined benefit obligations
Increase/decrease by 1.0%
Increase/decrease by 1.0%
Increase by 1 year
Decrease/increase by 19%
Increase/decrease by 9%
Increase by 3%
The sensitivities have been calculated to show the movement in the total defined benefit obligation in isolation, assuming
no other changes in market conditions at the accounting date. In practice, for example, a change in discount rate is likely
to be associated with a movement in the value of the invested assets held by the plans.
113
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
Analysis of movement in the present value of the fair value of plan assets:
2016
U.K.
$M
2016
Non-U.K.
$M
At 1 January ................................................................................... 287.1
Interest on plan assets .................................................................... 9.4
Actuarial losses / (gains) ................................................................ 43.7
Exchange difference ....................................................................... (49.8)
Contributions from employer ......................................................... 6.0
Contributions from plan members.................................................. 0.1
Administrative expenses ................................................................ (0.4)
Benefits paid .................................................................................. (15.8)
Settlement credit ............................................................................ —
At 31 December ............................................................................. 280.3
49.4
2.1
1.2
—
1.2
—
(0.5)
(2.6)
(14.2)
36.6
2016
Total
$M
336.5
11.5
44.9
(49.8)
7.2
0.1
(0.9)
(18.4)
(14.2)
316.9
2015
U.K.
$M
305.4
10.4
(10.6)
(13.1)
8.9
0.7
(1.0)
(13.6)
2015
Non-U.K.
$M
50.4
2.1
(2.5)
—
2.5
—
(0.3)
(2.8)
2015
Total
$M
355.8
12.5
(13.1)
(13.1)
11.4
0.7
(1.3)
(16.4)
287.1
49.4
336.5
The estimated amount of employer contributions expected to be paid to the defined benefit pension plans for the year
ending 31 December, 2017 is $7.4 million (2016: $7.2 million actual employer contributions).
30. The Luxfer Group Employee Share Ownership Plan
The trust
In 1997, the Group established an employee benefit trust (“the ESOP”) with independent Trustees, to purchase and hold
shares in the Group in trust to be used to satisfy options granted to eligible senior employees under the Group’s share
plans established from time to time.
The ESOP was established with the benefit of a gift equivalent to the set up and running costs. Purchase monies and costs
required by the ESOP Trustees to purchase shares for and under the provisions of the trust are provided by way of an
interest free loan from a Group subsidiary. The loan is repayable, in normal circumstances, out of monies received from
senior employees when they exercise options granted to them over shares. Surplus shares are held by the ESOP Trustees
to satisfy future option awards. The ESOP Trustees have waived their right to receive dividends on shares held in trust.
The Remuneration Committee is charged with determining which senior employees are to be granted options and in what
number subject to the relevant plan rules.
The current plan
The current share option plan, implemented by the Group in February 2007 is The Luxfer Holdings Executive Share
Option Plan (“the Plan”), which consists of two parts. Part A of the Plan is approved by HM Revenue & Customs and
Part B is unapproved. Options can be exercised at any time up to the tenth anniversary of their grant subject to the rules
of the relevant part of the Plan. As a result of the I.P.O. all leaver restrictions over the shares were released. There is no
other performance criteria attached to the options.
Movements in the year
The movement in the number of shares held by the Trustees of the ESOP and the number of share options held over those
shares are shown below:
114
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
30. The Luxfer Group Employee Share Ownership Plan (Continued)
Number of shares held by
ESOP Trustees
Number of options held over
£0.50 ordinary shares
£0.0001
deferred
shares
£0.50
ordinary
shares
£0.49
options
held
At 1 January, 2016 .......................................... 15,977,968,688
—
Shares utilised during the year ........................
Options exercised during the year ...................
—
At 31 December, 2016 .................................... 15,977,968,688
115,348
(59,532)
—
55,816
—
—
—
—
£1.50
options
held
£2.00
options
held
59,020
—
—
—
— (59,020)
—
—
Total
options
held
59,020
—
(59,020)
—
At 31 December, 2016, the loan outstanding from the ESOP was $2.6 million (2015: $3.1 million).
The market value of each £0.50 ordinary share held by the ESOP at 31 December, 2016 was $10.89 (2015: $9.84).
31. Share based compensation
Luxfer Holdings PLC Long-Term Umbrella Incentive Plan and Luxfer Holdings PLC Non-Executive Directors
Equity Incentive Plan
As an important retention tool and to align the long-term financial interests of our management with those of our
shareholders, the Group adopted the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan (the “LTiP”) for the
Group’s senior employees, and the Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan (the “Director
EIP”) for the Non-Executive Directors.
The equity or equity-related awards under the LTiP and the Director EIP are based on the ordinary shares or ADSs of the
Group. The Remuneration Committee administers the LTiP and have the power to determine to whom the awards will be
granted, the amount, type and other terms. Awards under the Director EIP are non-discretionary and purely time-based.
Share option and restricted stock awards
As a tool to retain key people and align their interests with those of shareholders, a one-off award of market-value
options was made to a small number of executives and the non-executive directors immediately prior to the I.P.O. in
2012. 40% of the options granted vested immediately and 20% of the options vest upon each of the first, second and third
anniversaries of the I.P.O.
In January 2013, 306,200 Restricted Stock Units and Options over ADSs, were granted under the LTiP and 9,252 ADS
Restricted Stock was granted under the Director EIP. In March 2013, 1,924 ADS Restricted Stock was granted under the
Director EIP. These awards were a mixture of time-based, market-based and performance-based awards.
In March 2014, 201,870 Restricted Stock Units and Options over ADSs were granted under the LTiP, which were all
performance-based awards. Following the Annual General Meeting on May 29, 2014, 12,517 Restricted Stock Units and
Options over ADSs were granted under the Director EIP, which were all time-based awards.
In June 2015, 46,800 Restricted Stock Units and Options over ADSs were granted under the LTiP, which were all time-
based awards. Following the Annual General Meeting on May 28, 2015, 15,943 Restricted Stock Units and Options over
ADSs were granted under the Director EIP, which were all time-based awards.
In March 2016, 95,140 Restricted Stock Units and Options over ADSs were granted under the LTiP, which were all
time-based awards. Following the Annual General Meeting on 24 May, 2016, 12,520 Restricted Stock Units and Options
over ADSs were granted under the Director EIP, which were all time-based awards.
115
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
31. Share based compensation (Continued)
I.P.O. related share based compensation charges ..................................................................................... —
Other share based compensation charges .................................................................................................. 1.4
1.4
0.1
1.3
1.4
2016
$M
2015
$M
2014
$M
0.2
1.6
1.8
There were no cancellations or modifications to the awards in 2016 or 2015.
The following table illustrates the number of, and movements in, share options during the year, with each option relating
to 1 ADS:
2016
Number
2016
Weighted average
exercise price
At 1 January ....................................................... 1,144,534
107,660
Granted during the year .....................................
(132,599)
Exercised during the year ..................................
12,572
Accrued dividend awards ..................................
Lapsed during the year .......................................
(168,378)
At 31 December .................................................
963,789
$7.26
$0.67
$0.67
$0.67
$0.67
$8.51
2015
Number
1,178,158
62,743
(38,377)
9,393
(67,383)
1,144,534
2015
Weighted average
exercise price
$7.13
$0.76
$(0.76)
$0.76
$(0.76)
$7.26
The weighted average remaining contractual life for the share options outstanding at 31 December, 2016 was 3 years
(2015: 4 years). The weighted average fair value of options granted during the year was $9.39 (2015: $11.42).
The following table illustrates the assumptions used in deriving the fair value of share options during the year:
Dividend yield (%)....................................................................................
Expected volatility range (%) ...................................................................
Risk-free interest rate (%) .........................................................................
Expected life of share options range (years) .............................................
Weighted average exercise price ($) .........................................................
Model used................................................................................................
2016
4.00
29.73 – 38.73
0.36 – 1.05
1 – 3.5
$0.67
Black-Scholes
2015
4.00
28.24 – 41.39
0.09 – 1.40
1 – 5
$0.76
Black-Scholes
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative
of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a
period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
Employee share incentive plans
The Group operates an all-employee share incentive plan in its U.K. and U.S. operations and will look to implement
plans in other geographic regions.
116
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions, except share and per share data
32. Related party transactions
Joint venture in which the Group is a venturer
During 2016, the Group maintained its 51% investment in the equity of the joint venture Luxfer Uttam India Private
Limited. During 2016, the Gas Cylinders division made $1.7 million (2015: $0.8 million) of sales to the joint venture. At
31 December, 2016, the amounts receivable from the joint venture amounted to $0.9 million (2015: $1.7 million). All
sales to the joint venture are made on similar terms to arm’s length transactions.
During 2016, the Group also maintained its 50% investment in the equity of the joint venture, Nikkei-MEL Company
Limited. During 2016, the Elektron division made $0.8 million of sales to the joint venture.
During 2016, the Group received $1.0 million in repayment (2015: provided $0.5 million in debt investment) to the joint
venture Luxfer Holdings NA, LLC, of which it holds 49% of the equity. The debt investment is provided through a
secured revolving credit facility that the Group has granted to the joint venture of which up to $10.0 million can be drawn
down until March 31, 2018 at an interest rate of 8% per annum. During 2016, the Gas Cylinders division made
$3.9 million (2015: $1.5 million) of sales to the joint venture. At 31 December, 2016, the amounts receivable from the
joint venture amounted to $1.0 million (2015: $0.8 million) of trade debt and $3.8 million (2015: $4.8 million) of debt
investment. All sales to the joint venture are made on similar terms to arm’s length transactions.
Associates in which the Group holds an interest
During 2015, the Group acquired 26.4% of the share capital of Sub161 Pty Limited. Following the investment, in 2016
the Group has made sales of $0.1 million (2015: $0.1 million) to the associate. At 31 December, 2016, the amounts
receivable from the associate denominated in Australian dollars was $0.1 million (2015: $3.6 million, net of a provision
of $3.8 million). The debtor recognised in the prior year has been converted into a secured loan note during 2016. The
secured loan note has interest accruing at 6.0%, of which $0.1 million was outstanding at the year end.
Transactions with other related parties
At 31 December, 2016, the directors and key management comprising the members of the Executive Management Board,
owned 1,062,672 £0.50 ordinary shares (2015: 1,089,949 £0.50 ordinary shares) and held awards over a further 476,839
£0.50 ordinary shares (2015: 685,503 £0.50 ordinary shares).
During the year ended 31 December, 2016, share options held by members of the Executive Management Board were
exercised; information relating to these exercises is disclosed in the Remuneration Report.
Stone Canyon Industries LLC represents a related party due to their association with Adam Cohn as co-CEO, and holds
570,000 ADSs in Luxfer Holdings PLC as at 31 December, 2016.
On 5 February, 2014, as a part of a relocation, one of the subsidiary companies of the Group purchased outright the
residential property of David Rix, a member of our Executive Management Board. The property was valued on an arm’s
length basis by third parties with a purchase price of $1.2 million. This asset was held as a current asset in the Group
balance sheet. On 3 July, 2015, the property was sold for proceeds of $1.2 million.
The son of the Chief Executive Officer was employed by the Group during the year, having joined through the normal
recruitment channels.
Other than the transactions with the joint ventures and associates disclosed above and key management personnel
disclosed above, no other related party transactions have been identified.
117
COMPANY BALANCE SHEET
All amounts in millions
LUXFER HOLDINGS PLC
31 December,
2016
£M
31 December,
2015
£M
Note
ASSETS
Non-current assets
Investments ....................................................................................................................
Deferred income taxes ...................................................................................................
Current assets
Trade and other receivables ...........................................................................................
Cash and cash equivalents .............................................................................................
TOTAL ASSETS .........................................................................................................
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital ....................................................................................................
Deferred share capital ....................................................................................................
Share premium account .................................................................................................
Treasury shares ..............................................................................................................
Retained earnings...........................................................................................................
Own shares held by ESOP .............................................................................................
Share based compensation reserve .................................................................................
Capital and reserves attributable to the Company’s equity shareholders .......................
Total equity ....................................................................................................................
Non-current liabilities
Bank and other loans .....................................................................................................
Retirement benefits ........................................................................................................
Current liabilities
Trade and other payables ...............................................................................................
Total liabilities ...............................................................................................................
35
36
37
38
39
39
39
39
39
39
40
44
41
315.6
10.3
325.9
3.8
1.4
5.2
305.1
8.0
313.1
5.3
1.1
6.4
331.1
319.5
13.5
76.9
35.3
(5.0)
115.3
(0.4)
2.4
238.0
238.0
46.0
43.6
89.6
3.5
93.1
13.5
76.9
35.3
(0.9)
118.6
(0.2)
2.9
246.1
246.1
39.2
31.6
70.8
2.6
73.4
TOTAL EQUITY AND LIABILITIES ......................................................................
331.1
319.5
The Group has taken advantage of the exemption provided under Section 408 of the Companies Act 2006 not to present
Luxfer Holding PLC’s Company income statement. Net income for the year was $18.2 million.
SIGNED ON BEHALF OF THE BOARD
Brian Purves
Andrew Beaden
March 14, 2017
Company Registration no. 03690830
118
LUXFER HOLDINGS PLC
COMPANY CASH FLOW STATEMENT
All amounts in millions
Note
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year
Adjustments to reconcile net income for the year to net cash flows from operating
activities:
Deferred income taxes ............................................................................................................
Share based compensation charges net of cash settlement......................................................
Net interest gained ..................................................................................................................
Dividends received .................................................................................................................
Exchange difference credited to income statement .................................................................
Changes in operating assets and liabilities:
Decrease in receivables ......................................................................................................
Increase in payables ...........................................................................................................
Movement in retirement benefits obligations .........................................................................
NET CASH FLOWS FROM OPERATING ACTIVITIES ..............................................
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received .................................................................................................................
Intercompany loans: debt funding ..........................................................................................
Intercompany loans: interest received ....................................................................................
NET CASH FLOWS FROM INVESTING ACTIVITIES ................................................
NET CASH FLOWS BEFORE FINANCING ...................................................................
FINANCING ACTIVITIES
Interest and similar finance costs paid on banking facilities ...................................................
Interest paid on Loan Notes ....................................................................................................
Dividends paid ........................................................................................................................
Proceeds from issues of shares ...............................................................................................
Purchase of treasury shares .....................................................................................................
ESOP cash movements ...........................................................................................................
NET CASH FLOWS FROM FINANCING ACTIVITIES ...............................................
NET DECREASE IN CASH AND CASH EQUIVALENTS .............................................
Cash and cash equivalents at 1 January ..................................................................................
Cash and cash equivalents at 31 December ........................................................................
39
39
38
38
2016
£M
18.2
0.6
0.1
(3.3)
(8.2)
(3.0)
1.6
0.4
(4.1)
2.3
8.2
0.8
5.3
14.3
16.6
(0.6)
(0.7)
(9.8)
—
(4.4)
(0.8)
(16.3)
0.3
1.1
1.4
2015
£M
16.2
2.9
0.5
(2.2)
—
(0.8)
—
0.1
(16.7)
—
—
0.7
4.8
5.5
5.5
(0.5)
(0.6)
(7.0)
0.1
(1.3)
—
(9.3)
(3.8)
4.9
1.1
119
COMPANY STATEMENT OF CHANGES IN EQUITY
All amounts in millions
LUXFER HOLDINGS PLC
Equity attributable to the equity shareholders of the parent
Ordinary
share
capital
£M
13.5
Deferred
share
capital
£M
76.9
Share
premium
account
£M
35.2
Treasury
shares
£M
—
Retained
earnings
£M
108.0
Own shares
held
by ESOP
£M
(0.2)
Share based
compensation
reserve
£M
2.4
Note
At 1 January, 2015 ...................
Net income for the year ..............
Remeasurement of defined
benefit retirement plan......
Deferred income taxes on items
taken to other
comprehensive income ..........
Total comprehensive income
for the year ...........................
Equity dividends ........................
Equity settled share based
compensation charges ...........
39
Arising from issue of share
capital ....................................
39
Deferred tax on items taken to
equity ....................................
Purchase of own shares ..............
Utilisation of treasury shares
Other changes in equity in
the year
At 31 December, 2015 ..............
Net income for the year ..............
Remeasurement of defined
benefit retirement plan...........
Deferred income taxes on items
taken to other
comprehensive income ..........
Total comprehensive income
for the year ...........................
Equity dividends ........................
Equity settled share based
compensation charges ...........
Purchase of own shares ..............
Purchases of shares from ESOP .
Utilisation of treasury shares ......
Utilisation of ESOP shares .........
Other changes in equity in
the year .................................
At 31 December, 2016 ..............
39
39
39
39
39
39
39
Total
equity
£M
235.8
16.2
2.3
(0.7)
17.8
(7.0)
0.8
0.1
(0.1)
(1.3)
—
(7.5)
246.1
18.2
—
—
—
—
—
0.8
—
—
—
(0.3)
0.5
2.9
—
—
(15.0)
—
—
—
0.8
—
—
(0.5)
(0.8)
(0.5)
2.4
2.9
6.1
(9.8)
0.8
(4.4)
(0.8)
—
—
(14.2)
238.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13.5
—
—
76.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.1
—
—
—
0.1
35.3
—
—
—
—
—
—
—
—
—
—
—
13.5
—
76.9
—
35.3
—
—
—
—
—
—
—
—
(1.3)
0.4
(0.9)
(0.9)
—
—
—
—
—
—
(4.4)
—
0.3
—
(4.1)
(5.0)
16.2
2.3
(0.7)
17.8
(7.0)
—
—
(0.1)
—
(0.1)
(7.2)
118.6
18.2
(15.0)
2.9
6.1
(9.8)
—
—
—
0.2
0.2
(9.4)
115.3
—
—
—
—
—
—
—
—
—
—
—
(0.2)
—
—
—
—
—
—
—
(0.8)
—
0.6
(0.2)
(0.4)
120
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
33. Significant accounting policies
Authorisation of financial statements
The Company financial statements for the year ended 31 December, 2016 were authorised for issue by the Board of
Directors on March 14, 2017 and the balance sheet was signed on the Board’s behalf by BG Purves and AM Beaden.
Luxfer Holdings PLC is a company incorporated and domiciled in England and Wales.
Basis of preparation
The Company financial statements have been prepared in accordance with International Financial Reporting Standards as
adopted by the EU (“Adopted IFRSs”) and interpretations issued by the IFRS Interpretation Committee, and as such
comply with Article 4 of the EU IAS regulation.
The accounting policies set out in this note to the financial statements have been applied in preparing these financial
statements and comparative information.
The Company financial statements have been prepared on a historical cost basis, except where IFRS requires or permits
fair value measurement.
The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence
for the foreseeable future. Therefore the directors continue to apply the going concern basis for accounting in the
preparation of the Company financial statements.
Investments
Investments in subsidiary undertakings are stated at cost less, where appropriate, provisions for impairment.
Loans to subsidiary undertakings and joint ventures are initially recorded at fair value; they are then subsequently carried
at amortised cost. The loans are interest bearing.
The Company grants share-based payments to the employees of subsidiary companies. Each period the fair value of the
employee services received by the subsidiary as a capital contribution from the Company is reflected as an addition to
investments.
Functional and presentational currency
Items included in the financial statements of the Company are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”), which is GBP sterling. The presentational currency
of the Company is GBP sterling.
Other accounting policies
As applicable, the accounting policies of the Company follow those of the Group set out in Note 1 to the consolidated
financial statements. The critical accounting judgments and key sources of estimation uncertainty applicable for the
Company financial statements are impairment of non-financial assets, pensions and deferred income taxes.
34. Directors’ interests
Disclosure of individual directors’ remuneration, share interests, share options, long-term incentive schemes, pension
contributions and pension entitlements required by the Companies Act 2006 are shown on pages 40 to 54 and form part
of these financial statements.
121
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
35. Investments
Cost and net book value:
Investments
in subsidiary
undertakings
£M
Loans to
subsidiary
undertakings
£M
Capital
contributions
£M
Loans to joint
ventures
£M
At 1 January, 2015 ........................................................................................................................
Additions ......................................................................................................................................
Exchange difference .....................................................................................................................
At 31 December, 2015 ..................................................................................................................
Additions ......................................................................................................................................
Repayments ..................................................................................................................................
Exchange difference .....................................................................................................................
At 31 December, 2016 .................................................................................................................
218.0
—
—
218.0
—
—
—
218.0
79.4
—
2.8
82.2
—
—
10.0
92.2
1.3
0.4
—
1.7
0.7
—
—
2.4
2.7
0.3
0.2
3.2
—
(0.8)
0.6
3.0
Total
£M
301.4
0.7
3.0
305.1
0.7
(0.8)
10.6
315.6
Details of the investments in which the Group or the Company holds share capital at 31 December, 2016, are as follows:
Name of company
BA Holdings, Inc.*
Biggleswick Limited *
Luxfer Group Services Limited *
LGL 1996 Limited *
BAL 1996 Limited *
Hart Metals, Inc. *
Lumina Trustee Limited 1
Luxfer Australia Pty Limited *
Luxfer Gas Cylinders Limited *
Luxfer Gas Cylinders China Holdings
Limited *
Luxfer Gas Cylinders (Shanghai) Co.,
Limited *
Luxfer Group Limited
Luxfer Group 2000 Limited
Luxfer, Inc.*
Luxfer Overseas Holdings Limited *
Magnesium Elektron Limited *
MEL Chemicals, Inc.*
Magnesium Elektron North America, Inc. *
Magnesium Elektron CZ s.r.o. *
MEL Chemicals China Limited *
Niagara Metallurgical Products Limited *
Reade Manufacturing, Inc.*
Luxfer Gas Cylinders S.A.S. *
Luxfer Canada Limited *
Luxfer Germany GmbH *
Luxfer Utah LLC *
HyPerComp Engineering Inc.*
Luxfer Magtech Inc.*
Luxfer Magtech International Limited *
Country of
incorporation
U.S. 3
England and Wales2
England and Wales2
England and Wales2
England and Wales2
U.S.5
England and Wales2
Australia6
England and Wales2
England and Wales2
Holding
Proportion of voting
rights and shares held
Nature of
business
Common stock
Ordinary shares
Ordinary shares
Ordinary shares /
Preference shares
Ordinary shares
Common stock
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
100% Holding company
100%
Non trading
Property Services
100%
Dormant
100%
Dormant
100%
Manufacturing
100%
Trustee company
100%
Distribution
100%
100%
Engineering
100% Holding company
Republic of China7
Ordinary shares
100%
Manufacturing
England and Wales2
England and Wales2
U.S. 3
England and Wales2
England and Wales2
U.S.8
U.S.5
Czech Republic13
England and Wales2
Canada9
U.S.5
France4
Canada10
Germany11
U.S.12
U.S.12
U.S.5
England and Wales2
122
Ordinary shares
Ordinary shares
Common stock
Ordinary shares
Ordinary shares
Common stock /
Preference shares
Common stock
Basic capital
Ordinary shares
Common stock
Common stock
Ordinary shares
Common stock
Ordinary shares
Common stock
Common stock
Common stock
Common stock
100% Holding company
100% Holding company
Engineering
100%
100% Holding company
Manufacturing
100%
Manufacturing
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Manufacturing
Manufacturing
Dormant
Manufacturing
Manufacturing
Engineering
Engineering
Engineering
Manufacturing
Engineering
Manufacturing
Manufacturing
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
35. Investments (Continued)
Name of company
Other Investments
Nikkei-MEL Co Limited *
Luxfer Uttam India Private Limited *
Dynetek Cylinders India Private Limited
Dynetek Korea Co Limited *
Luxfer Holdings NA, LLC *
Sub161 Pty Limited *
Country of
incorporation
Japan
India
India
South Korea
U.S.
Australia
Holding
Proportion of voting
rights and shares held
Nature of
business
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
N/A
Ordinary shares
50%
51%
49%
49%
49%
26.4%
Distribution
Engineering
Engineering
Engineering
Engineering
Engineering
Subsidiary undertakings are all held directly by the Company unless indicated.
* Held by a subsidiary undertaking.
1 Acts as bare trustee in connection with the 2007 share capital reorganisation.
2 Registered address: Anchorage Gateway, 5 Anchorage Quay, Salford, M50 3XE, England.
3 Registered address: 1679 S. Dupont Hwy, Ste 100, Dover, DE 199091, U.S.
4 Registered address: 7 Rue de l’Industrie, 63360 Gerzat, France.
5 Registered address: The Corporation Trust Company, Corporate Trust Center, 1209 Orange Street, Wilmington, DE 19801, U.S.
6 Registered address: Unit 4, 171-175 Newton Road, Wetherill Park, NSW 2164, Australia.
7 Registered address: No. 123, Lane 150, Pingbei Road, Minghang District, Shanghai, PRC 201109, China.
8 Registered address: c/o CT Corporation, 830 Bear Tavern Road, Trenton, NJ 08628, U.S.
9 Registered address: David Toswell of Blake, Cassels & Graydon LLP, 1114 Harvest Drive, Pickering, ON, L1X 1B6, Canada.
10 Registered address: (Torys) 525-8th Avenue S.W, 46th Floor, Eighth Avenue Place East, Calgary, Alberta, T2P 1G1, Canada.
11 Registered address: Am Alten Stadtpark 37, 44791 Bochum, Germany.
12 Registered address: 1080 N. Main Street, Suite 2 Brigham City, UT 84302, U.S.
13 Registered address: Nádražní 214, 435 33 Louka u Litvínova, Czech Republic.
36. Deferred income taxes
Tax losses and
other timing
differences
£M
At 1 January, 2015 .............................................................................................................
1.9
0.2
Credited/(charged) to income statement .............................................................
—
Charged to other comprehensive income ............................................................
Charged to equity .....................................................................................
(0.1)
2.0
At 31 December, 2015 ...............................................................................................................
Retirement
benefit
obligations
£M
9.8
(3.1)
(0.7)
—
6.0
Credited/(charged) to income statement ..................................................
Credited to other comprehensive income ..........................................................
At 31 December, 2016 ...............................................................................
0.1
—
2.1
(0.7)
2.9
8.2
Total
£M
11.7
(2.9)
(0.7)
(0.1)
8.0
(0.6)
2.9
10.3
At the balance sheet date, the Company has unrecognised deferred income tax assets relating to certain trading and
capital losses of £7.6 million (2015: £16.2 million) potentially available for offset against future profits. A deferred tax
asset of £2.1 million (2015: £2.0 million) has been recognised in relation to timing differences and losses, to the extent
that it is deemed probable that sufficient taxable profit will be available against which the losses may be utilised.
37. Trade and other receivables
Amounts owed by Group undertakings......................................................................
31 December,
2016
£M
3.8
31 December,
2015
£M
5.3
The amounts owed by Group undertakings are unsecured, repayable on demand and no interest is charged.
123
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
38. Cash and cash equivalents
Cash at bank and in hand ...............................................................................................
31 December,
2016
£M
1.4
31 December,
2015
£M
1.1
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The directors consider that the
carrying value of cash and cash equivalents approximates to their fair value.
39. Share capital and Reserves
(a)
Ordinary share capital
Following the approval of a two-for-one share split at the Annual General Meeting on May 29, 2014, the nominal value
of each ordinary share is £0.50 and now represents 1 ADS. The number of shares for the prior periods shown has been
adjusted to achieve comparability.
31 December,
2016
No.
31 December,
2015
No.
31 December,
2016
£M
31 December,
2015
£M
Authorised:
Ordinary shares of £0.50 each ...................
40,000,000
Deferred ordinary shares of £0.0001 each . 769,423,688,000 769,423,688,000
769,463,688,000 769,463,688,000
40,000,000
Allotted, called up and fully paid:
Ordinary shares of £0.50 each ...................
27,136,799
Deferred ordinary shares of £0.0001 each . 769,413,708,000 769,413,708,000
769,440,844,799 769,440,844,799
27,136,799
20.0
76.9
96.9
13.5
76.9
90.4
20.0
76.9
96.9
13.5
76.9
90.4
The rights of the shares are as follows:
Ordinary shares of £0.50 each
The ordinary shares carry no entitlement to an automatic dividend but rank pari passu in respect of any dividend declared
and paid.
During 2016, the Company has not allotted or issued any ordinary shares (2015: 40,108 ordinary shares of £0.50 each).
During 2015, 40,108 ordinary shares of £0.50 each were pursuant to an ordinary resolution empowering the directors to
allot equity securities for cash up to an aggregate nominal amount of £20,000,000, passed by shareholders on 26 October,
2011. The ordinary shares were allotted and issued to satisfy share awards which vested under the Group’s share award
and share incentive plans in 2015.
Deferred ordinary shares of £0.0001 each
The deferred shares have no entitlement to dividends or to vote. On a winding up (but not otherwise) the holders of the
deferred shares shall be entitled to the repayment of the paid up nominal amount of the deferred shares, but only after any
payment to the holders of ordinary shares of an amount equal to 100 times the amount paid up on such ordinary shares.
124
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
39. Share capital and Reserves (Continued)
(b)
American Depositary Shares
At 31 December, 2016, there were 25,180,726 ADSs (2015: 25,704,815 ADSs) of Luxfer Holdings PLC listed on the
New York Stock Exchange following an initial public offering on 3 October, 2012. The Depositary for the ADSs holds 1
£0.50 ordinary share for every ADS traded, through American Depositary Receipts.
ADS holders are entitled to instruct their Depositary to vote and to receive a dividend as per the ordinary shareholders,
after deducting the fees and expenses of the Depositary.
(c)
Share premium account
At 1 January, 2015 ....................................................................................................................................................
Arising from issue of share capital ...........................................................................................................................
At 31 December, 2015 ..............................................................................................................................................
At 31 December, 2016 ..............................................................................................................................................
£M
35.2
0.1
35.3
35.3
The share premium account is used to record the excess of proceeds over nominal value on the issue of shares. Share
issue costs directly related to the issue of shares are deducted from share premium.
(d)
Treasury shares
At 1 January, 2015 ....................................................................................................................................................
Purchase of own shares .............................................................................................................................................
Utilisation of treasury shares ....................................................................................................................................
At 31 December, 2015 ..............................................................................................................................................
Purchase of own shares .............................................................................................................................................
Utilisation of treasury shares ....................................................................................................................................
At 31 December, 2016 ..............................................................................................................................................
£M
—
(1.3)
0.4
(0.9)
(4.4)
0.3
(5.0)
In June 2015, the Board announced a share buy-back program of up to $10.0 million, to cover the needs of employee
share plans. Shareholder approval for this program was granted at the 2014 Annual General Meeting (for repurchases up
to an aggregate amount of 2,700,000 ordinary shares or ADSs).
During 2016, 634,185 ordinary shares (2015: 146,804 ordinary shares) had been repurchased under the share buy-back
program at a cost of £4.4 million (2015: £1.3 million); these repurchased shares are presented as treasury shares. At 31
December, 2016 there were 665,424 treasury shares held at a cost of £5.0 million (2015: 104,537 treasury shares held at a
cost of £0.9 million).
(e)
Own shares held by ESOP
At 1 January, 2015 ....................................................................................................................................................
Purchases of shares from ESOP ................................................................................................................................
At 31 December, 2015 ..............................................................................................................................................
Purchases of shares into ESOP .................................................................................................................................
Utilisation of ESOP shares .......................................................................................................................................
At 31 December, 2016 ..............................................................................................................................................
£M
(0.2)
—
(0.2)
(0.8)
0.6
(0.4)
125
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
39. Share capital and Reserves (Continued)
At 31 December, 2016, there were 55,816 ordinary shares of £0.50 each (2015: 115,348 ordinary shares of £0.50 each)
held by The Luxfer Group Employee Share Ownership Plan.
(f)
Share based compensation reserve
At 1 January, 2015 ....................................................................................................................................................
Equity settled share based compensation charges .....................................................................................................
Cash settled ...............................................................................................................................................................
Utilisation of treasury shares ....................................................................................................................................
At 31 December, 2015 ..............................................................................................................................................
Equity settled share based compensation charges .....................................................................................................
Cash settled ...............................................................................................................................................................
Utilisation of treasury shares ....................................................................................................................................
Utilisation of ESOP shares .......................................................................................................................................
At 31 December, 2016 ..............................................................................................................................................
£M
2.4
1.0
(0.2)
(0.3)
2.9
0.8
—
(0.5)
(0.8)
2.4
The share based compensation reserve is used to recognise the fair value of options and performance shares granted
under IFRS 2. For further information refer to Notes 18 and 31 in the consolidated financial statements.
40. Bank and other loans
Non-current
Loan Notes due 2021 - gross .........................................................................................
Unamortised finance costs .............................................................................................
Loan Notes due 2021 - net .............................................................................................
Revolving credit facility - gross .....................................................................................
Unamortised finance costs .............................................................................................
Revolving credit facility - net ........................................................................................
31 December,
2016
£M
20.3
(0.1)
20.2
26.6
(0.8)
25.8
46.0
31 December,
2015
£M
17.0
(0.1)
16.9
23.0
(0.7)
22.3
39.2
The seven-year private placement will be repayable in full in 2021, bears interest at 3.67% and is unsecured. At 31
December, 2016, the total amount outstanding on the Loan Notes due 2021 was £20.3 million, which is shown in bank
and other loans net of unamortised finance costs of £0.1 million.
The maturity profile of the Group’s undiscounted contractual payments is disclosed in Note 27 in the consolidated
financial statements.
41. Trade and other payables
Amounts owed to Group undertakings ..........................................................................
Accruals .........................................................................................................................
31 December,
2016
£M
3.1
0.4
3.5
31 December,
2015
£M
2.5
0.1
2.6
The amounts owed to Group undertakings are unsecured, repayable on demand and no interest is charged.
126
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
42. Financial instruments
The following disclosures relating to financial instruments have been prepared on a basis which excludes short-term
debtors and creditors which have resulted from the Company’s operating activities.
(a)
Financial instruments of the Company
The financial instruments of the Company other than short-term debtors and creditors were as follows:
Financial instruments:
Financial assets:
Loans to subsidiary undertakings ...........................
Loans to joint ventures ...........................................
Cash at bank and in hand .......................................
Financial liabilities(1):
Loan Notes due 2021 .............................................
Revolving credit facility ........................................
Book value
31 December,
2016
£M
Fair value
31 December,
2016
£M
Book value
31 December,
2015
£M
Fair value
31 December,
2015
£M
92.2
3.0
1.4
20.3
26.6
92.2
3.0
1.4
20.3
26.6
82.2
3.2
1.1
17.0
23.0
82.2
3.2
1.1
17.0
23.0
(1)
The financial instruments included in financial liabilities are shown gross of unamortised finance costs. The fair
value of these financial instruments is calculated by discounting the future cash flows, including interest
payments due.
All financial assets mature within one year; however, there is no current intention to seek repayment of loans to
subsidiary undertakings. The maturity of the financial liabilities is disclosed in Note 27 in the consolidated financial
statements.
At 31 December, 2016, the amount drawn in bank and other loans was £46.9 million (2015: £40.0 million); of which
£42.2 million was denominated in U.S. dollars with the remainder being denominated in GBP sterling (2015:
£35.3 million was denominated in U.S. dollars with the remainder being denominated in GBP sterling).
The fair value calculations were performed on the following basis:
Loans to subsidiary undertakings
The carrying value approximates to the fair value.
Cash at bank and in hand
The carrying value approximates to the fair value as a result of the short-term maturity of the instruments.
Bank loans
At 31 December, 2016, bank and other loans of £46.9 million (2015: £40.0 million) were outstanding. At 31 December,
2016, bank and other loans are shown net of issue costs of £0.9 million and these issue costs are to be amortised to the
expected maturity of the facilities. At 31 December, 2016, £26.6 million of the total £46.9 million of bank and other
loans was variable interest rate debt and subject to floating interest rate risk, with the remainder being fixed rate debt.
Fair value hierarchy
At 31 December, 2016, the Company used the following hierarchy for determining and disclosing the fair value of
financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
127
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
42. Financial instruments (Continued)
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
Interest bearing loans and borrowings: .........................................
Loan Notes due 2021 .........................................................................
Revolving credit facility ....................................................................
31 December,
2016
£M
Level 1
£M
Level 2
£M
Level 3
£M
20.3
26.6
—
—
20.3
26.6
—
—
During the year ended 31 December, 2016, there were no transfers between Level 1 and Level 2 fair value measurements.
(b)
Interest rate risks
Interest rate risk profile on financial assets
This table shows the Company’s financial assets at 31 December, which are cash and cash equivalents. These assets are
all subject to floating interest rate risk.
Cash by currency:
U.S. dollar ............................................................................................................................
GBP sterling.........................................................................................................................
31 December,
2016
£M
0.8
0.6
1.4
31 December,
2015
£M
0.7
0.4
1.1
The Company earns interest on cash balances through either deposit accounts or placing funds on money markets at
short-term fixed rates. In all cases, interest earned is at approximately LIBOR rates during the year.
Interest rate risk profile on financial liabilities
The following table sets out the carrying value, by original maturity, of the Company’s financial instruments that were
exposed to both fixed and variable interest rate risk. The carrying values include interest payments to be made and
interest rates on the Company’s variable rate debt have been based on a forward curve.
31 December, 2016
31 December, 2015
Within
12 months
£M
1 to 5
years
£M
> 5
years
£M
Within
12 months
£M
Total
£M
1 to 5
years
£M
> 5
years
£M
Total
£M
Floating interest rate risk:
Revolving credit facility
(including interest payments) ........... 0.7
27.7
—
28.4
0.6
24.7
—
25.3
Fixed interest rate risk:
Loan Notes due 2021
(including interest payments) ........... 0.8
1.5
23.3
51.0
—
—
24.1
52.5
0.6
1.2
2.5
27.2
17.5
17.5
20.6
45.9
128
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
42. Financial instruments (Continued)
(c)
Un-drawn committed facilities
At 31 December, 2016, the Group had committed banking facilities of $150.0 million (£121.6 million). The facilities
were for providing loans and overdrafts, with a separate facility for letters of credit which at 31 December, 2016 was
£7.0 million ($8.6 million). Of the committed facilities, $32.8 million (£26.6 million) of loans were drawn across the
Group and $nil for letters of credit were utilised.
At 31 December, 2015, the Group had committed banking facilities of $150.0 million (£101.8 million). The facilities
were for providing loans and overdrafts, with a separate facility for letters of credit which at 31 December, 2015 was
£7.0 million ($10.3 million). Of the committed facilities, $43.4 million (£39.6 million) of loans were drawn across the
Group and $nil for letters of credit were utilised.
43. Financial risk management objectives and policies
The Company’s financial instruments comprise bank and other loans and cash and cash equivalents. The main risks
arising from the Company’s financial instruments are cash flow interest rate risk and foreign currency translation risk.
Interest rate risk
The Company has exposure to variable interest rates when it draws down on the revolving credit facilities. As a result of
this exposure, the Company may decide to hedge interest payable based on a combination of forward rate agreements. If
the interest rates were to change by 1%, based on the balance on the revolving credit facilities at 31 December, 2016, this
would impact the interest cost by approximately £0.3 million.
Foreign currency translation risk
The Company is exposed to translation risk on both its consolidated income statement, based on average exchange rates,
and its balance sheet with regards to period end exchange rates. The net exposure to USD loans at 31 December 2016
was £22.1 million translated at an exchange rate of $1.2336. A $0.10 change in exchange rates would change the net
exposure by approximately £2.0 million.
Credit risk
The Company is exposed to credit risk on the loans which have been provided to subsidiary undertakings and joint
ventures. The total exposure regarding these loans is £98.3 million. None of the loans are past due or are been deemed
impaired.
44. Retirement benefits
The Company is a member of the Luxfer Group Pension Plan (“the Plan”), a defined benefit scheme in the U.K. The
levels of funding are determined by periodic actuarial valuations. The assets of the Plan are generally held in separate
trustee administered funds.
Remeasurements are recognised in full in the period in which they occur. The liability recognised in the balance sheet
represents the present value of the defined benefit obligation, as reduced by the fair value of plan assets. The cost of
providing benefits is determined using the Projected Unit Credit Method.
The full deficit relating to the Plan has been included in the Company statement of financial position. This is because
there is no allocation of the deficit between the various subsidiary companies. The Directors consider the sponsor to be
the ultimate parent company in the Group.
129
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
44. Retirement benefits (Continued)
The Plan closed to new members in 1998, new employees then being eligible for a defined contribution plan. With effect
from April 2004, the Plan changed from a final salary to a career average revalued earnings benefit scale. In August
2005, a plan specific earnings cap of £60,000 per annum subject to inflation increases was introduced, effectively
replacing the statutory earnings cap. In October 2007, the rate of the future accrual for pension was reduced and a
longevity adjustment was introduced to mitigate against the risk of further unexpected increases in life expectancies. In
2015, following a consultation with the trustees and members, it was agreed the Plan would close to future accrual of
benefits effective from 5 April, 2015 and for the purpose of increasing pensions in payment, to use the Consumer Prices
Index (“CPI”) as the reference index in place of the Retail Prices Index (“RPI”) where applicable. The weighted average
duration of the expected benefit payments from the Plan is around 17 years. The pension cost of the Plan is assessed in
accordance with the advice of an independent firm of professionally qualified actuaries, Lane Clark & Peacock LLP. The
Plan is registered with HMRC for tax purposes, operates separately from the Company and is managed by an
independent set of trustees. The Plan is subject to U.K. regulations, which require the Company and trustees to agree a
funding strategy and contribution schedule for the Plan. Over and above the normal contributions required to meet the
cost of future accrual, the schedule of payments provides for deficit funding, which is based upon minimum annual
contributions of £3.8 million per year, together with additional variable contributions based on 15% of net earnings of
Luxfer Holdings PLC between £12 million and £24 million, and 10% of net earnings of Luxfer Holdings PLC in excess
of £24 million.
The total charge to the Company’s income statement for 2016 for retirement benefits was £1.6 million (2015: credit of
£9.3 million).
The movement in the pension liabilities is shown below:
Balance at 1 January ...............................................................................................................................
Charged/(credited) to the income statement
Current service cost ...........................................................................................................................
Net interest on net liability .................................................................................................................
Administrative expenses ....................................................................................................................
Curtailment credit ..............................................................................................................................
Past service credit ..............................................................................................................................
Cash contributions ..................................................................................................................................
Charged/(credited) to the statement of comprehensive income ..............................................................
Balance at 31 December .........................................................................................................................
The financial assumptions used in the calculations were:
2016
£M
31.6
0.2
1.1
0.3
—
—
(4.6)
15.0
43.6
2015
£M
49.0
0.8
1.6
0.6
(2.2)
(10.1)
(5.8)
(2.3)
31.6
Projected Unit Credit
Valuation
United Kingdom
2016
%
Discount rate ....................................................................................................................................... 2.60
Retail Price Inflation ........................................................................................................................... 3.20
Inflation related assumptions:
Salary inflation .................................................................................................................................... n/a
Consumer Price Inflation .................................................................................................................... 2.20
Pension increases—pre 6 April 1997 .................................................................................................. 2.00
—1997 - 2005 ......................................................................................................... 2.20
—post 5 April 2005 ................................................................................................ 1.80
2015
%
3.70
3.00
4.00
2.00
1.80
2.10
1.70
2014
%
3.50
2.90
3.90
1.90
2.30
2.80
2.00
130
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
44. Retirement benefits (Continued)
2016
Other principal actuarial assumptions:
Years
Life expectancy of male in the U.K. aged 65 at accounting date ........................................................ 21.5
Life expectancy of male in the U.K. aged 65 at 20 years after accounting date ................................. 23.2
2015
Years
21.5
23.1
2014
Years
20.6
22.3
Investment strategies
For the Plan, the assets are invested in a diversified range of asset classes and include matching assets (comprising fixed
interest and index linked bonds and swaps) and growth assets (comprising all other assets). The Trustees have
formulated a de-risking strategy to help control the short term risks of volatility associated with holding growth assets.
The Trustees also monitor the cost of a buy-in to secure pensioner liabilities with an insurance company to ensure they
are able to act if such an opportunity arises.
Risk exposures
The Company is at risk of adverse experience relating to the defined benefit plan.
The Plan holds a high proportion of assets in equity and other growth investments, with the intention of growing the
value of assets relative to liabilities. The Company is at risk if the value of liabilities grows at a faster rate than the plan
assets, or if there is a significant fall in the value of these assets not matched by a fall in the value of liabilities. If these
events occurred, this would be expected to lead to an increase in the Company’s future cash contributions.
Special events
In 2015, following a consultation with the trustees and members, it was agreed that the Plan would close to future accrual
of benefits effective from 5 April, 2015 and for the purpose of increasing pensions in payment, to use CPI as the
reference index in place of RPI where applicable. As a result, in 2015 the Company has recognised a curtailment credit
of £2.2 million in respect of the closure of the Plan to future accrual and a past service credit of £10.1 million in respect
of the change in expected future pension increases in payment.
The amounts recognised in the income statement in respect of the pension plan were as follows:
2016
£M
2015
£M
In respect of defined benefit plan:
Current service cost ........................................................................................................................ ...
Net interest on net liability ..................................................................................................................
Administrative expenses .....................................................................................................................
Past service credit ...............................................................................................................................
(Curtailment credit)/settlement ...........................................................................................................
Total charge/(credit) for defined benefit plan .....................................................................................
0.9
1.6
0.5
(10.1)
(2.2)
(9.3)
0.2
1.1
0.3
—
—
1.6
For the year, the amount of loss recognised in the Statement of Comprehensive Income is £15.0 million (2015: gain of
£2.3 million).
The actual return on the plan assets was a gain of £32.7 million (2015: gain of £0.5 million).
131
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
44. Retirement benefits (Continued)
The value of the plan assets were:
2016
£M
2015
£M
Assets in active markets:
Equities and growth funds ....................................................................................................................... 139.1
Government bonds .................................................................................................................................. 35.9
Corporate bonds ...................................................................................................................................... 50.6
Cash ........................................................................................................................................................ (0.1)
Total market value of assets .................................................................................................................... 225.5
Present value of plan liabilities ............................................................................................................... (269.1)
Deficit in the Plan ................................................................................................................................... (43.6)
Related deferred income tax assets .........................................................................................................
8.3
Net pension liabilities.............................................................................................................................. (35.4)
120.2
27.3
45.4
0.3
193.2
(224.8)
(31.6)
6.0
(25.6)
The Plan does not invest directly in property occupied by the Company or in financial securities issued by the Company.
Analysis of movement in the present value of the defined benefit obligations:
2016
£M
At 1 January ............................................................................................................................................ 224.8
Service cost ............................................................................................................................................. 0.2
Interest on obligation .............................................................................................................................. 8.1
Contributions from plan members .......................................................................................................... 0.1
Actuarial (gains)/losses ........................................................................................................................... 47.7
Benefits paid ...........................................................................................................................................
(11.8)
Past service credit ................................................................................................................................... —
Curtailment credit ................................................................................................................................... —
At 31 December ...................................................................................................................................... 269.1
2015
£M
244.9
0.9
8.4
0.4
(8.6)
(8.9)
(10.1)
(2.2)
224.8
The sensitivities regarding the principal assumptions used to measure the present value of the defined benefit obligations
are set out below:
Assumption
Discount rate
CPI inflation (and related increases)
Post retirement mortality
Change in assumption
Increase/decrease by 1.0%
Increase/decrease by 1.0%
Increase by 1 year
Impact on total defined
benefit obligations
Decrease/increase by 19%
Increase/decrease by 9%
Increase by 3%
The sensitivities have been calculated to show the movement in the total defined benefit obligation in isolation, assuming
no other changes in market conditions at the accounting date. In practice, for example, a change in discount rate is likely
to be associated with a movement in the value of the invested assets held by the Plan.
132
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
44. Retirement benefits (Continued)
Analysis of movement in the present value of the fair value of plan assets:
2016
£M
At 1 January ............................................................................................................................................ 193.2
Interest on plan assets ............................................................................................................................. 7.0
Actuarial gains/(losses) ........................................................................................................................... 32.7
Contributions from employers ................................................................................................................ 4.5
Contributions from plan members .......................................................................................................... 0.1
Administrative expenses ......................................................................................................................... (0.3)
Benefits paid ...........................................................................................................................................
(11.7)
At 31 December ...................................................................................................................................... 225.5
2015
£M
195.9
6.9
(6.3)
5.8
0.4
(0.6)
(8.9)
193.2
The estimated amount of employer contributions expected to be paid to the defined benefit pension plan for the year
ending 31 December, 2017 is £4.5 million (2016: £4.6 million actual employer contributions).
45. Related party transactions
During 2016, the Company has made the following transactions and has the following outstanding balances at 31
December, 2016 with related parties:
Name of related party
Luxfer Group Limited
MEL Chemicals, Inc.
Luxfer Overseas Holdings Limited
BA Holdings, Inc.
Magnesium Elektron North America, Inc.
Magnesium Elektron Limited
Luxfer Group 2000 Limited
Luxfer Holdings NA, LLC
Luxfer Magtech Inc.
Luxfer Gas Cylinders Limited
Income
Expenditure
Interest
£M
0.4
0.2
0.3
0.8
0.3
0.2
0.5
0.2
2.5
—
Management
recharges
£M
(0.4)
—
—
—
—
—
—
—
—
—
Balances outstanding
Trade and other
receivables
£M
0.7
—
—
0.1
0.1
0.1
0.3
—
0.1
2.4
Trade and
other payables
£M
(3.1)
—
—
—
—
—
—
—
—
—
Investments
£M
5.0
5.7
7.0
13.8
8.3
4.7
14.2
3.0
33.5
—
Of the balances outstanding held within investments, these balances are all interest bearing and are based on market rates
of interest.
Included within trade and other receivables are loans to Luxfer Group Limited and Luxfer Gas Cylinders Limited for
£0.7 million and £2.4 million respectively. These loans are non-interest bearing, unsecured and are repayable on demand.
During 2015, the Company has made the following transactions and has the following outstanding balances at 31
December, 2015 with related parties:
133
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
All amounts in millions
45. Related party transactions (Continued)
Name of related party
Luxfer Group Limited
MEL Chemicals, Inc.
Luxfer Overseas Holdings Limited
BA Holdings, Inc.
Magnesium Elektron North America, Inc.
Magnesium Elektron Limited
Luxfer Group 2000 Limited
Luxfer Holdings NA, LLC
Luxfer Magtech Inc.
Luxfer Gas Cylinders Limited
Income
Expenditure
Interest
£M
0.5
0.2
0.3
0.7
0.2
0.2
0.5
0.2
2.2
—
Management
recharges
£M
(0.4)
—
—
—
—
—
—
—
—
—
Balances outstanding
Trade and other
receivables
£M
2.4
—
—
0.1
—
—
0.4
—
0.1
2.3
Trade and
other payables
£M
(2.5)
—
—
—
—
—
—
—
—
—
Investments
£M
5.0
4.8
7.0
11.5
6.9
4.7
14.3
3.2
28.0
—
In addition to the transactions above, share based compensation recharges have been made to Luxfer, Inc., Luxfer Gas Cylinders
Limited and Magnesium Elektron Limited for £0.2 million, £0.2 million and £0.3 million respectively (2015: £0.1 million, £0.1
million and £0.1 million, respectively). These amounts are recognised as capital contributions in the year.
Other than the transactions mentioned above, no other related party transactions have been identified.
134