Registered No. 03690830
LUXFER HOLDINGS PLC
Annual Report and Financial Statements
31 December, 2017
LUXFER HOLDINGS PLC ¦ Lumns Lane ¦ Manchester ¦ M27 8LN
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, 2017
Environmental Matters and Corporate Social Responsibility
Principal Risks and Uncertainties
GOVERNANCE
The Board of Directors
Executive Leadership Team
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
3
3
4
4
5
10
15
19
19
22
25
31
32
35
37
64
65
65
71
72
73
74
75
76
141
142
143
144
1
LUXFER HOLDINGS PLC
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
American Depositary Receipt which evidences an ADS, being the uncertificated form in
which the Company’s ordinary shares were traded on the NYSE. One ordinary share was
represented by one ADR.
American Depositary Share, the uncertificated form in which the Company’s ordinary
shares were traded on the NYSE. One ordinary share was represented by one ADS.
Annual General Meeting of the Company.
Articles
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
£0.50 Ordinary
shares
SEC
Year
LTiP
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.
The Company’s ordinary shares of £0.50 each.
Securities and Exchange Commission of the U.S.
1 January, 2017, to 31 December, 2017.
Long-Term Umbrella Incentive Plan.
2
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
transportation, defence and emergency response, healthcare and general industrial 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.
Luxfer Group is comprised of two reporting divisions:
Our Elektron Division focuses on specialty materials based primarily on magnesium and zirconium. Our key
product lines under the Elektron Division include:
• Advanced lightweight, corrosion-resistant and heat- and flame-resistant magnesium alloys including our new
bioresorbable SynerMag® alloy and our dissolvable Solumag® alloys.
• Magnesium powders used in countermeasure flares that protect aircraft from heat-seeking missiles and also
for heating pads for self-heating meals used by military and first responders.
• Magnesium, copper, and zinc photo-engraving plates for graphic arts used in the packaging industry.
• High performance zirconium-based materials and oxides used as catalysts and also used in the manufacture
of advanced ceramics, fibre optic fuel cells, and many other performance products.
Our Gas Cylinders Division manufactures and markets specialized products using aluminum, titanium and
carbon composites. Our key product lines under the Gas Cylinders Division include:
• Carbon composite cylinders for self-contained breathing apparatus (SCBA), used by firefighters and other
emergency-responders. Our products are also used by SCUBA divers and personnel in potentially hazardous
environments such as mines.
• Containment of medical oxygen and other medical gases used by patients, healthcare facilities and
laboratories.
• Carbon composite cylinders for compressed natural gas (CNG) and hydrogen containment in alternative fuel
(AF) vehicles.
•
•
Light-weight aluminium-based products for a variety of industrial applications such as fire extinguishers and
containment of high-purity specialty gases.
Light-weight aluminium and titanium panels are superformed into highly complex shapes predominantly for
the transportation industry.
3
LUXFER HOLDINGS PLC
Strategy and Business Model
Our business strategy is underpinned by the "Luxfer B.E.S.T. Model," which consists of the following key themes:
• A common set of values that drives accountability, innovation, customer first, personal development,
teamwork and integrity.
• Disciplined capital allocation to maximize organic growth and also maximize the portfolio value through value
enhancing acquisitions and divestitures.
• Balanced score-card used to continuously improve employee performance in an effort to help translate our
vision into actionable individual goals and ensure that employee compensation is commensurate with
individual performance.
• A published customer charter that enables us to retain and grow our customer base and capture additional
market share.
• A lean enterprise philosophy that helps drive operational process excellence in all functions including, sales,
marketing, innovation, human resources, supply, manufacturing, information technology and finance.
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.
Operating performance
Revenue
Trading profit8
Adjusted net income1
Basic earnings per share7
Adjusted net income basic earnings per share1, 7
Adjusted EBITDA2
Revenue per employee
Return on revenue3
Return on invested capital4
Financial performance
Net cash flow from operating activities
Net debt to EBITDA9
$m
$m
$m
$
$
$m
$'000s
%
%
$m
times
Non-financial performance
Number of days lost following accidents at work5
work-days
ISO 14001 environmental management system certification6
%
Economic indicators
2017
441.3
40.5
27.6
0.47
1.04
61.8
266
9.3
15.3
44.8
1.6
197
90.0
2016
414.8
35.3
24.7
0.83
0.93
55.3
246
8.5
11.8
29.2
1.9
215
91.8
2015
460.3
42.3
29.5
0.6
1.1
62.2
270
9.2
12.4
52.8
1.5
285
87.6
2014
2013
489.5
481.3
44.8
30.9
1.1
1.2
64.8
290
9.2
14.1
23.0
1.6
261
88.0
59.2
39.8
1.3
1.5
76.6
300
12.3
21.6
37.1
0.5
973
90.8
Average aluminium price (three-month LME)
$/tonne
1,819
Average U.S. dollar to GBP sterling exchange rate
Average Euro to GBP sterling exchange rate
$:£
€:£
1.30
1.14
1,609
1.34
1.22
1,674
1.52
1.38
1,896
1,887
1.65
1.27
1.57
1.18
1.
2.
3.
4.
5.
6.
7.
8.
9.
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.
A non-GAAP measure for earnings before income tax expense, finance income (which comprises interest received), finance costs (which comprises interest costs,
IAS 19R retirement benefits finance charge, and the unwind of the discount on deferred contingent consideration from acquisitions), net gain / (loss) on acquisitions
and disposals, profit on sale of redundant site, changes to defined benefit pension plans, restructuring and other expense, other share based compensation charges,
depreciation and amortization and loss on disposal of property, plant and equipment. Reconciliation to GAAP measure is disclosed in Note 2 to the consolidated
financial statements.
Return on revenue is measured as trading profit divided by revenue.
Return on invested capital is defined as the after-tax trading profit divided by shareholders’ equity plus net debt.
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.
Percentage of Group revenue originating from ISO14001-certified businesses.
Each American Depositary Share ("ADS") listed on the NYSE represents one ordinary share.
Trading profit (non-GAAP) 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. Reconciliation to GAAP measure is disclosed on face of consolidated income statement.
Net debt is defined as cash and cash equivalents less non-current bank and other loans.
4
LUXFER HOLDINGS PLC
Review of the Year Ended 31 December, 2017
2017 was an improved year for the Group, with trading performance up on Company and market expectations.
The Group is looking to continue to improve revenue and profitability further whilst also focusing on the long-term
position through LEAN manufacturing processes and stream-lining businesses. Group revenue, net of exchange
rate translation, increased by $20.1 million from the previous year.
Trading profit in 2017 of $40.5 million represented an increase of 14.7% over the reported $35.3 million in
2016. Net income for 2017 was $11.5 million and adjusted earnings were $27.6 million, compared to $24.7 million
in 2016. The increase in profitability was a result of stronger trading in our Elektron Division, primarily the
magnesium business; however, our Gas Cylinders Division’s performance declined when compared to 2016,
predominantly as a result of decreased sales in the alternative fuel (AF) business. The decline in net income is a
result of increased restructuring and other expenses in 2017.
Cash generated from operating activities was $45.2 million in 2017, up from $29.2 million in 2016, due to
movements in working capital and provisions alongside an increase in EBITDA, partially offset by restructuring
cash payments. The Group has continued to return funds to its shareholders in the form of regular dividends each
quarter throughout 2017.
The ratio of Net Debt to adjusted EBITDA at the end of 2017 was 1.6x compared to 1.9x at the end of 2016, mainly
as a result of the increase in adjusted EBITDA compared to 2016.
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 2017, GBP sterling was, on average, weaker
against the U.S. dollar than in 2016, 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 2016,
resulting in unfavourable movements when translating the operating results of European operations into U.S.
dollars. The net effect was a loss of $1.6 million on revenue and a loss of $1.1 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 $441.3 million, an
increase of $26.5 million from $414.8 million in 2016. Compared to 2016, revenue reflected a $6.4 million gain
from favourable average exchange rates ($8.0 million transaction gain offset by $1.6 million translation loss). Thus,
underlying revenue, net of exchange, grew by $20.1 million. Reasons for the revenue change are discussed in
detail by division, but in general, there were higher sales of Luxfer Magtech products, as well as of our SoluMag®
alloy in the Elektron Division, partially offset by reduced sales of composite AF and SCBA cylinders as well as a
delay in Superform automotive tooling projects in the Gas Cylinders Division.
Elektron Division revenue in 2017 was $221.1 million compared to $189.0 million in 2016. Exchange differences
were favourable by $4.9 million, and underlying revenue was $27.2 million, or 14.0%, higher than 2016. Revenue
was higher in the Division primarily due to increased sales for Flameless Ration Heaters (FRH), used in Meals,
Ready-to-EatTM, (MRE), which reflected increased disaster-relief shipments to hurricane affected areas in the
United States and Caribbean during the second half of the year. Sales of our proprietary SoluMag® alloy continued
to grow as we gained traction in the oil and gas market, reflecting success in broadening the product line. The
military powders business has experienced moderate growth as the budgetary pressure on U.S. defense spending
loosened and the business recovered from an outage suffered by a key customer in 2016. Graphic Arts and
zirconium products have also benefited from year-on-year increases in revenue.
Gas Cylinders Division revenue was lower at $220.2 million compared to $225.8 million in 2016. Exchange
differences were favourable by $1.5 million, and underlying revenue was $7.1 million, or 3.1% lower than 2016.
Revenue was lower in the Division largely due to depressed sales of our AF cylinders following the loss of a major
customer, and lower sales of SCBA cylinders, partially offset by an increase in European medical composite
cylinders, as well as shipments of aluminum cylinders. Superform sales were also down in the year following
unusually high tooling sales in 2016. Sales of formed parts remained relatively flat from 2016 as we continued to
deliver our products pursuant to our existing contracts.
5
LUXFER HOLDINGS PLC
Cost of Sales and Gross Profit
The gross profit margin for 2017 of 24.6% was up on 2016 at 22.5%.
The average LME price for aluminium was $1,819 per metric ton in 2017, an increase of $210 per metric ton, or
13.1%, from the 2016 equivalent figure. Magnesium costs increased in 2017 compared to the previous year with
the average price of Chinese magnesium on a free on-board basis being $2,245 per metric ton, a $48 per metric
ton increase in 2017 compared to 2016.
Distribution Costs, Administrative Expenses and Other Trading Items
The total of these costs in 2017 was $68.1 million, compared to $58.1 million in 2016. Administrative expenses
increased by $8.1 million mainly due to the increased staff costs as well as a small underlying increase due to
inflation. Distribution costs also increased by $1.5 million, reflecting increased levels of exports from the U.K. to
the U.S. In 2017, there was a profit of $0.1 million attributable to the joint ventures and associates, compared to a
profit of $0.5 million in 2016.
Trading Profit
Trading profit for 2017 was $40.5 million compared to $35.3 million for 2016, an increase of 14.7%.
Trading profit in the Elektron Division was $31.8 million in 2017, an increase of $7.9 million, or 33.1% from $23.9
million in 2016. Translating our non-U.S. operations into U.S. dollars resulted in an exchange rate gain of $3.1
million in the Elektron Division's trading profit in 2017. Trading variances in the Elektron Division were favourable
by $4.8 million, or 17.8% compared to 2016.
The increase in the Elektron Division's trading profit can be attributed, partially, to the increased sales in the
Division, in particular, sales of FRHs relating to disaster-relief shipments and SoluMag®, as explained above.
There was a positive variance of $11.2 million from 2016 due to changes in sales volumes and mix across the
division. These were partially offset by a $1.2 million adverse variance from price changes and a $5.2 million
adverse variance in total costs included within cost of sales and administrative expenses.
Trading profit in the Gas Cylinders Division was $8.7 million in 2017, a decrease of $2.7 million, or 23.7% from
$11.4 million in 2016. Translating our non-U.S. operations into U.S. dollars resulted in an exchange rate gain of
$1.2 million in the Gas Cylinders Division's trading profit in 2017. Gas Cylinders Division's trading variances were
unfavourable by $3.9 million, or 31.0%.
Sales of AF cylinders decreased significantly in the year, following the loss of a major customer, compared to 2016,
and Superform tooling revenue was also down compared to 2016 when we recognized unusually high tooling
revenue. Volume and sales mix variances had a total negative impact of $0.6 million compared to 2016 and
depreciation, employment and other fixed costs expenses increased by $3.0 million. These were partially offset by
pricing increases, resulting in a $0.3 million favorable effect on trading profit.
Further adverse variances arose for $0.4 million as a result of production inefficiencies noted within our
Superform division.
Adjusted EBITDA
Adjusted EBITDA, as defined in footnote 2 of page 4, was $61.8 million in 2017, resulting in a margin on sales of
14.0%, compared to $55.3 million and 13.3%, respectively, in 2016.
6
LUXFER HOLDINGS PLC
Operating Profit
During 2017, there was a release of a provision in relation to the sale in 2016 of the redundant site at Redditch,
resulting in a credit of $0.4 million.
The restructuring and other expense charge increased from $2.2 million in 2016 to $21.6 million in 2017. The
charge in 2017 relates to the rationalization of our operations, $12.1 million and fixed asset impairments, $3.7
million. We also incurred a charge of $3.5 million relating to a litigation claim against a competitor and
professional fees in connection with converting our ADR listing to a direct listing.
After these items, operating profit was $19.3 million, down from $35.8 million in 2016.
Net Gain / Loss on Acquisitions and Disposals
In 2017, we incurred a non-operating credit of $1.3 million compared to a $0.2 million credit in 2016. Included in
the $1.3 million is a gain on bargain purchase of $1.2 million offset by acquisition costs of $0.5 million in relation
to the Group's acquisition of the trade and assets of the Specialty Metals business of ESM Group Inc. As part of
the acquisition an environmental provision of $0.4 million has been established, with funds placed in escrow, to
clean up low level chemical contamination on the land acquired, with any remaining funds remitted to the seller.
There was also a $1.0 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 December 31, 2017.
Finance Costs
Net interest costs were $6.7 million in 2017 compared to $5.6 million in 2016. The increase in costs can be
attributable to the exchange loss of $0.3 million, (2016: $0.7 million exchange gain), on the loan to Luxfer-GTM
Technologies. The IAS 19R retirement benefits finance charge was $1.8 million compared to $2.1 million in 2016,
as a result of the deficit being lower for the majority of 2017 than it was for 2016. In 2017, there was a $0.2 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, ($0.4 million in 2016).
Profit before Taxation
Our profit before taxation was $11.9 million in 2017, a decrease of 57.3% compared to the $27.9 million in 2016.
Our margin on profit before tax was 2.7% in 2017 and 6.7% in 2016.
Taxation
In 2017, our tax expense was $0.4 million on profit before tax of $11.9 million with a statutory effective tax rate
was 3.4%. Of the charge of $0.4 million, $5.2 million related to current tax payable and a credit of $4.8 million
was related to deferred income tax. In 2016, our tax expense was $6.0 million on profit before tax of $27.9
million equating to a statutory effective tax rate of 21.5%. Of the charge of $6.0 million, $3.7 million related to
current tax payable and $2.3 million was a deferred income tax charge. In recent years our statutory effective tax
rate has been affected by various non-trading items, the largest of which in 2017 related to the increase in the
deferred tax asset of $6.0 million as a result of U.S. tax reform.
Net Income for the Period
Net income for the period was $11.5 million, compared to $21.9 million in 2016. The reduction can be attributed to
higher restructuring and other expenses, partially offset by a higher trading profit figure as a result of increased
sales activity in 2017. Adjusted net income, which excludes the after-tax impact of non-trading items, was $27.6
million, up on the adjusted net income for 2016 of $24.7 million.
7
LUXFER HOLDINGS PLC
Cash Flow
In 2017, net cash flows from operating activities increased by $16.0 million to $45.2 million from $29.2 million in
2016. The $16.0m increase in operating cash flow was largely due to the $5.6m inflow from improvement in
working capital compared to a $7.6m outflow in 2016, combined with a $6.5m improvement in adjusted EBITDA,
offset by restructuring cash payments of $7.0m.
Net cash used in investing activities increased by $3.0 million, or 19.9%, to $18.1 million in 2017 from $15.1
million in 2016. Capital expenditure in 2017 was $9.6 million, a decrease of $6.9 million from the $16.5 million
expenditure in 2016. In addition, we incurred $1.7 million of intangible capital expenditure in 2017, compared to
$2.4 million in 2016. We had an inflow of $0.1 million in 2017 in relation to sales of property, plant and
equipment, compared to $0.4 million in 2016. Investment in joint ventures and associates was a $1.0 million
outflow, compared with a $0.2 million inflow in 2016. Interest income from joint ventures decreased to $0.1
million compared with $0.3 million in 2016. We had a net cash outflow of $6.0 million (including acquisition costs)
in relation to purchase of businesses compared to $0.3 million in 2016. In 2016, we received $3.0 million in
relation to the sale of a redundant site.
Net cash outflows from financing activities decreased by $1.9 million to a $33.6 million outflow in 2017 from a
$35.5 million outflow in 2016. Cash outflows in respect of dividend payments to holders of our ordinary shares
were $13.3 million, in line with 2016 payments. Total interest paid on borrowings was $6.2 million, down $0.2
million on the $6.4 million paid in 2016. Repayments of $13.4 million were made to the banking facilities,
compared to $8.5 million of repayments in 2016, a movement of $4.9 million. There was also $1.2 million of
financing costs in relation to the extension of our long-term debt. In 2016, there was a $7.3 million outflow in
respect of share purchases.
Non-current assets
Non-current assets have decreased from an opening position of $235.4 million to $231.3 million. This decrease of
$4.1 million is due to a decrease in property, plant and equipment due to impairments and a decline in investments
following the impairment of an associate.
Working Capital
Trading working capital (defined as current trade and other receivables plus inventories less current trade and
other payables) have increased to $93.5 million at the 31 December 2017 from $89.0 million at the end of 2016.
The reason for the increase has resulted from an increase in trade and other receivables from $57.6 million to
$72.6 million, offset by an increase in trade and other payables from $51.1 million to $61.3 million.
Retirement benefits
The retirement liability has decrease from $66.5 million at the end of 2016 to $55.3 million at 31 December 2017.
The main reason for the decreased deficit is a decrease in long-term UK inflation expectations, coupled with asset
returns being higher than assumed. This is partially offset by decreases in corporate bond yields and a
strengthening of the GBP sterling against the U.S. dollar.
Shareholder Equity and Borrowings
Shareholder equity as at 31 December 2017 has increased from an opening position of $141.9 million to $162.3
million, an increase of $20.4 million. Net income contributed $11.5 million, whilst $11.6 million relates to FX
translation gains on net assets. The reduction in the net pension deficit contributed $4.3 million after tax (when
taking into account the impact of U.S. tax reform on the reduction in associated actuarial deferred tax assets)
with $3.1 million resulting from cash flow hedges. Partly offsetting these gains is the payment of dividends of
$13.3 million which reduces both net assets and equity.
The Group had gross debt of $108.8 million and net debt of $100.3 million as at 31 December 2017. Invested
capital, defined as total shareholder equity plus net debt, was $262.7 million as at 31 December 2017; this
compares to an equivalent figure of $249.3 million in 2016. The ratio of the return on invested capital (defined as
trading profit for the year, less notional tax, divided into invested capital) was 15.3% in 2017.
8
LUXFER HOLDINGS PLC
Future Developments
We had a relatively encouraging 2017, especially our results for the second half of 2017 which were significantly
better than 2016. In the Gas Cylinders Division, a pick-up in demand for oxygen cylinders has resulted in higher
European cylinder shipments. North American SCBA demand finished strongly with a positive momentum that is
expected to continue in 2018.
In the Elektron division, the performance of our zirconium chemicals units was slightly improved as we continued
the turn-around plan. Sales of high-performance magnesium alloys, which had fallen in the prior two years
recovered. We remain optimistic about the growth potential of our proprietary SoluMag® alloy for oil and gas and
our SynerMag® alloy for medical applications.
We remain optimistic that exchange rates and our currency hedges, which have been unhelpful since 2016, will
be a benefit in 2018 and beyond.
We have seen some continued momentum in order rate for both military flares that use our atomised magnesium
powders and military meals that use our flameless heaters, with new awards or contracts covering 2018
requirements for these products having been placed by U.S. government agencies in Q4 2017. We have also
received improved forecasts from European customers for medical cylinders.
Given a healthy order book and positive impact from ongoing productivity initiatives, management expects full-
year 2018 adjusted earnings per share to increase by 10% -15% from 2017, including operational performance
and the favorable impact from the U.S. Tax Cuts and Jobs Act of 2017.
Based on the tax enacted during 2017 and our anticipated mix of profits across the globe, we expect our effective
tax rate to be approximately 18% in 2018.
We expect 2018 capital expenditure to be in the range of $20 million to $25 million.
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.
9
LUXFER HOLDINGS PLC
Environmental Matters and Corporate Social Responsibility
Many of our corporate values are reflected in the Strategy and Business Model described on page 4 of this
Strategic Report.
Helping Create a Greener World
We supply a range of environmental product solutions. 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 $0.7 million in 2018.
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. 15 of our 23 sites had achieved certification by
the end of 2017. 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 is 90%.
Our U.K. MEL Technologies business comes 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 MEL Technologies 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.
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 2017.
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 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.
10
LUXFER HOLDINGS PLC
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);
• 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, 2017, compared to 2016.
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 combustion of gas;
Scope 2 emissions:
Indirect emissions attributable to the Group due to its consumption of electricity.
We do not collect details of emissions from travel.
Greenhouse Gas Emission Statement
Baseline year
Full year 2017
Consolidation Approach
Operational control.
Boundary
Consolidated factories operated by us to manufacture Group products.
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.
Emission factor data source
Intensity ratio
Sites in other countries have used their relevant countries conversion factor.
CO2 equivalent tonnes per $1 million of sales value ($1mSV).
Group Metric - Sales value
$441.0 million in 2017 (2016: $414.8 million)
11
LUXFER HOLDINGS PLC
Greenhouse Gas Emission Source
Scope 1
Fuel combustion (natural gas and
propane) and operation of facilities
Scope 2
Purchased electricity
Statutory total (Scope 1 & 2) 2
Notes:
(tCO2e) 1
2017
(tCO2e/$1mSV)
(tCO2e) 1
2016
(tCO2e/$1mSV)
103,590
41,401
144,991
234.7
93.8
328.5
62,707
43,011
105,718
153.2
105.1
258.3
1.
2.
Tonnes of CO2 equivalent.
Statutory carbon reporting disclosure required by the Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013.
Overall our total CO2 emissions increased by 37.1%, although our CO2 sales per $million of sales only rose by
27.2% as some of the increase in emissions is a result of the increased revenue generated by our sites. Whilst
purchased electricity fell by 3.7%, there was a significant increase in scope 1 fuel of 65%.
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.
12
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.
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.
Further information on employee policies, communication and engagement can be found in the Directors’ Report
on pages 31 to 34.
At 31 December, 2017, the number of employees was as follows:
Employees *
Directors of Luxfer Holdings PLC
Senior Managers
Employees
Male
6
44
1,184
Female
0
11
326
*The Directors of Luxfer Holdings PLC include 5 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.
13
LUXFER HOLDINGS PLC
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 4.
We are pleased to report that 2017 has been another good year for safety. The 197 working days lost through
accidents in 2017 maintained the very significant improvements seen in recent years compared to 2013 (973
days). The number of LTAs during the year was 12, which has decreased from 18 in 2016.
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 2017 amounting to $32,000 (2016: $29,000), 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 2017, our businesses continued their links with
universities and schools to develop young talent.
14
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.
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.
Environment - The Group remains committed to a high standard of environmental management to ensure
legislative compliance across all operations.
Internal Financial Controls
Internal Audit - During 2017, 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, 2017, the Executive Director in his capacity as Chief Executive Officer, has 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 Leadership Team, which is responsible for the management of
the internal controls, and which includes the Chief Executive Officer. In accordance with the requirements of
Section 404 of the Sarbanes-Oxley Act, 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, 2017, 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 2017 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.
15
We set out in the tables below our principal risks and uncertainties and how we seek to mitigate or eliminate
them.
LUXFER HOLDINGS PLC
Area of Risk
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. With oil prices remaining
low, this has had a continued impact on 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. On June 23, 2016, the U.K. held a referendum in which
voters approved an exit from the European Union (the "E.U.").,
commonly referred to as 'Brexit'. On March 29, 2017, the U.K.
Government invoked Article 50 of the Treaty on the European
Union, which is likely to result in the U.K. exiting the E.U. on March
29, 2019. The U.K. Government has commenced negotiating the
terms of the U.K.'s future relationship with the E.U. although there is
still considerable uncertainty as to the outcome. It is possible that
there will be greater restrictions on imports and exports between the
U.K. and other countries and increased regulatory complexity.
These changes may adversely affect our operations and financial
results such as revenue, trading profit and adjusted EBITDA.
Competition - Markets for many of the Group’s products are now
increasingly global and highly competitive, 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
revenue and profit margins. More generally, the Group may also
face potential 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.
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.
Mitigating Activity
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 to invest in research and development
and to innovate, working closely with its
customers, to develop next generation products in
these end markets.
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 the outcome of
negotiations following the U.K.’s decision to leave
the E.U.
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.
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 products and
manufacturing processes and maintains this
investment through the business cycle.
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
revenue and have an adverse effect on the Group’s financial
position. The Group’s top 10 customers accounted for, in
aggregate, approximately 25% of Group revenue in 2017.
Long-term relationships with customers are
especially important, and 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.
16
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 unavoidable occurrences
including major equipment failure. Although the Group carries
insurance, the cover on certain catastrophic events or natural
disasters, including earthquakes and certain other events, could be
limited.
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.
Exposure to fluctuations in raw material - The Group is exposed
to fluctuations in costs of the raw materials and utilities that are
used to manufacture its products and can incur unexpected cost
changes. The primary raw material used in the 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 trading profit.
Product liability and regulatory risks - The Group is exposed to
possible claims for personal injury, fatality 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
routinely carry insurance to cover the expense of product recalls,
and litigation involving significant product recalls or product liability
could have a materially adverse effect on the Group’s financial
position / performance.
LUXFER HOLDINGS PLC
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 monitored. The Group carries
comprehensive business interruption insurance.
The Group regularly enters into forward foreign
currency exchange contracts to manage currency
risks and a Treasury Committee, overseen by the
Chief Financial Officer / Group Financial
Controller, 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. 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.
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.
17
LUXFER HOLDINGS PLC
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 to
progressively improve and eliminate these historic
issues.
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.
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 to meet
certain information security standards that may be
required by our customers, all of which increases
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.
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 environmental laws and regulations
in each of the jurisdictions in which it operates. An increase in
environmental costs and liabilities could have a materially adverse
effect on the Group in any given year, which could negatively affect
the Group’s cash flow from operating activites.
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 2017 ($0.4 million
in 2016). Regulations in this area can also constrain the level of
debt incurred and restrict the Group’s ability to pay dividends.
Exposure to risks related to cybersecurity threats and general
security 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 gain unauthorised access to information
systems to sophisticated and targeted measures known as
advanced persistent threats, none of which have materially affected
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 third
parties), reputational damage, regulatory fines, litigation with third
parties, diminution in the value of our investment in research and
development, data privacy issues and increased cybersecurity
protection and remediation costs. Future cybersecurity breaches or
incidents or further increases in cybersecurity protection costs may
have a materially adverse effect on our business, financial condition
or results of operations. we are subject to the European Union’s
General Data Protection Regulation ("GDPR"). Among other things,
the GDPR places subject companies under obligations relating to
the security of the personally identifiable information they process.
Approval
The Strategic Report is set out on pages 3 to 18 and incorporates the sections titled Environmental Matters and
Corporate Social Responsibility and Principal Risks and Uncertainties.
Signed on behalf of the Board by:
A Maskara
CHIEF EXECUTIVE OFFICER
19 March, 2018
18
LUXFER HOLDINGS PLC
GOVERNANCE
The Board of Directors
The Director of the Company who were in office during the year and up to the date of signing the financial
statements were:
Name
Age Position
Joseph A. Bonn
74 Non-Executive Chairman
Alok Maskara
46 Executive Director and Chief Executive Officer (appointed May 23, 2017)
Brian G. Purves
63 Executive Director and Chief Executive Officer (retired September 25, 2017)
Andrew M. Beaden
50 Executive Director and Group Finance Director (resigned October 2, 2017)
Kevin S. Flannery
73 Non-Executive Director (retired May 23, 2017)
David F. Landless
58 Non-Executive Director
Dr Brian Kushner
59 Non-Executive Director
Clive J. Snowdon
64 Non-Executive Director
Adam Cohn
46 Non-Executive Director
Biographical information concerning the members of our Board of Directors is set forth below:
Biographies:
Joseph A. Bonn
Joseph (Joe) was appointed as a Non-Executive Director on March 1, 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. Joe was appointed as Non-Executive Chairman on 6 December, 2016. Joe was a
member of the Audit Committee until and including January 30, 2017. He was also Chair of the Remuneration
Committee until and including November 23, 2017 after which he stepped down as Chair, but remained a member
of the Committee. Joe has informed the Board of his decision not to stand for re-election to the board at the AGM
in 2019 and to step down as Chairman by early 2019.
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.
Alok Maskara (Appointed as Director on May 23, 2017 and as CEO July 1, 2018)
Alok was named as the next Chief Executive Officer of Luxfer and appointed to the Board of Directors on May
23, 2017 and later became Chief Executive Officer on July 1, 2017.
Experience: Before joining Luxfer, Alok was a business segment President at Pentair Plc for eight years where
he led businesses of progressively larger sizes. Prior to Pentair, he was at General Electric Corporation for four
years. Alok has also worked at McKinsey & Company, a management consultancy firm in Chicago, USA.
Alok holds an M.B.A. from the Kellogg Graduate School of Management, an M.S. from the University of New
Mexico and a Bachelor in Technology from Indian Institute of Technology, Mumbai.
19
LUXFER HOLDINGS PLC
Brian G. Purves (Resigned as CEO July 1, 2017 and retired as Director September 25, 2017)
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 or our current Group) from Alcan in
1996, serving as Finance Director from that date until 2001. Brian stepped down as Chief Executive Officer on
July 1, 2017 and retired as a Director on September 25, 2017.
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 M. Beaden (Resigned October 2, 2017)
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. Andy resigned from the Board and left Luxfer October 2,
2017.
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.
Kevin S. Flannery (Retired May 23, 2017)
Kevin was appointed as a Non-Executive Director on June 1, 2007, at which time he was also appointed to both
the Audit and Remuneration Committees. He was appointed to the Nominating Committee on its establishment in
July 2013, but stepped down on October 6, 2016. Kevin was a member of the Audit Committee until and including
January 30, 2017 and reappointed to the Nominating Committee from January 31, 2017. He retired as a Director
of Luxfer on May 23, 2017.
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 specializes 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, 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 F. Landless
David was appointed as a Non-Executive Director in March 2013 and was appointed to the Audit Committee on
March 28, 2013, and the Nomination Committee on July 23, 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 May 28, 2015, he was appointed Chair of the Audit
Committee. David was a member of the Nomination Committee until and including January 30, 2017 and from
December 5, 2017. He was a member of the Remuneration Committee until and including November 23, 2017.
20
LUXFER HOLDINGS PLC
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 was appointed Group
Finance of Bodycote plc in 1999 until he retired from the position on January 1, 2017. He is a Non-Executive
Director of Innospec, Inc. and was appointed a Non-Executive Director of Renold plc on January 9, 2017 and a
Non-Executive Director of European Metal Recycling Limited on June 30, 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 May 24, 2016, at which time he was also appointed to the
Remuneration and Nomination committees. He was appointed to the Audit Committee on August 5, 2016. During
2017, Brian was a member of the Nomination Committee until and including 30 January, 2017 and he was
appointed Chair of the Remuneration Committee from November 24, 2017.
Experience: Brian co-founded CXO, LLC, a management consulting firm acquired by FTI Consulting, ("FTI",
NYSE:FCN) a global business advisory firm in 2008. Brian is now Senior Managing Director at FTI, and leads
the Private Capital practice. Over the past two decades, he has served as the CEO, Chief Restructuring Officer
or non-executive Director of more than two dozen public and private technology, manufacturing, telecom and
defense companies. Brian began his career in 1982 at BDM International, and was part of the management
team that completed a leveraged buyout of BDM in 1990 by Carlyle.
Brian serves as a Non-Executive Director and Audit Committee Chair of Mudrick Capital Acquisition Corporation
(NASDAQ:MUDS), Non-Executive Director and Audit Committee Chair of Dex Media (OTC: DMDA), and Non-
Executive Director and member of the Audit and Governance Committees at Zodiac Interactive. Brian holds a
doctorate in applied physics / electrical engineering from Cornell University.
Clive J. Snowdon
Clive was appointed as a Non-Executive Director on July 29, 2016, at which time he was also appointed to the
Remuneration and Nomination committees. He was appointed to the Audit Committee on August, 5 2016. Clive
was a member of the Remuneration Committee until and including January 30, 2017 and became Chair of the
Nominating Committee from December 5, 2017.
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 July 18, 2016, at which time he was also appointed to the
Remuneration Committee. Adam was appointed to the Nomination Committee from January 31, 2017.
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 served on the board of k12, Inc, where he was also
Chairman of the Compensation Committee. In addition, he serves on several other private company boards.
21
Executive Leadership Team
The members of the Executive Leadership Team (previously Executive Management Board) of Luxfer are
responsible for the day-to-day management of our company.
The following table lists the names and positions of the current members of the Executive Leadership Team as
well as those who served during the year.
LUXFER HOLDINGS PLC
Name
Age Position
Alok Maskara
Brian Gordon Purves
Andrew Michael Beaden
46
63
50
Executive Director and Chief Executive Officer
Executive Director and Chief Executive Officer
Executive Director and Group Finance Director
Heather Harding
49 Chief Financial Officer
Edward John Haughey
62 Divisional Managing Director of MEL Chemicals
David Terence Rix
49 Divisional Managing Director of Magnesium Elektron
Andrew William John Butcher
49
President of Luxfer Gas Cylinders
Graham Wardlow
James Gardella
Chris Barnes
Simon P. Tarmey
Claire Swarbrick
Peter Gibbons
Peter Dyke
Biographies:
50 Managing Director of Luxfer MEL Technologies
61
63
President of Luxfer Magtech
President of Magnesium Elektron North America
55 Managing Director of Luxfer Superform
43 General Counsel and Legal Adviser
47 Director of Sourcing and IT
47 Chief Human Resource Officer
Alok Maskara, Brian Gordon Purves and Andrew Michael Beaden
Please refer to the main Board biographies on pages 19 and 20.
Heather C. Harding
Chief Financial Officer
Heather was named Chief Financial Officer of Luxfer on January 1, 2018.
Before joining Luxfer, Heather was vice president, finance, for Eaton Lighting, a business unit of Eaton
Corporation. Prior to that, she was vice president, finance, for various operating units within Cooper Industries
and Emerson Electric.
Heather is a Certified Public Accountant and has received a Bachelor of Science in accounting from Southern
Illinois University at Carbondale.
Edward J. Haughey
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 retired from Luxfer in May 2017.
22
LUXFER HOLDINGS PLC
David T. Rix
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, UAE, 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. David left Luxfer in June 2017.
Andrew W. J. 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 January 1, 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.
Graham D. Wardlow
Managing Director of Luxfer MEL Technologies
Graham was appointed MD of Luxfer MEL Technologies in October 2017 following the merger of MEL Chemicals
with the Magnesium Elektron Alloys business. Graham joined Magnesium Elektron in 1991 and undertook a
number of technical and commercial roles before becoming MD of the Alloys business in 2008. Graham led the
transformation of this business before his appointment to Divisional MD of MEL Chemicals in May 2017, at which
time he became a member of the Executive Leadership Team.
Graham holds a degree in Materials Engineering from Imperial College, University of London, and an MBA from
Keele University.
James G. Gardella
President of Luxfer Magtech
James (Jim) was appointed President of Luxfer Magtech and became a member of the Executive Leadership
Team in July 2017. Prior to that, he was appointed President of Magnesium Elektron Powders in 2007 which he
originally joined in 1990 as Financial Controller.
Jim holds a B.S. Degree in Accounting from Villanova University, an MBA in Finance and is a Certified Public
Accountant.
Chris A. Barnes
President of Magnesium Elektron North America
Chris has been President of Magnesium Elektron North America, Inc. since 2009. Prior to joining Magnesium
Elektron in 2003, Chris held several key leadership positions in serving the Graphic Arts Market and
manufacturing magnesium wrought products.
Chris has a Bachelor of Science Degree from Michigan State University and an MBA from Washington University
in St. Louis, Missouri.
23
LUXFER HOLDINGS PLC
Simon P. Tarmey
Managing Director of Luxfer Superform
Simon was initially appointed Managing Director of Superform Worcester and then took responsibility for both
the Worcester and Riverside, California plants in 2009 when he became the Divisional head. After graduating
from South Bank Polytechnic with a degree in Engineering, Simon has worked in R&D, Engineering and
Operational management roles within GKN, Federal Mogul and Unipart before joining Luxfer Superform in 2004.
Claire L. 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, specializing in corporate and
commercial law.
Peter N. Gibbons
Director of Sourcing and IT
Peter was appointed Director of Sourcing and IT and became a member of the Executive Leadership Team in
July 2017. He joined Luxfer in 2003 as European Financial Controller at Magnesium Elektron, before moving to
Group Head Office to take up the Group Financial Controller role. He returned to Magnesium Elektron in 2014 as
Divisional Finance Director. Peter is a qualified accountant.
Peter S. Dyke
Chief Human Resources Officer
Peter (Pete) was named Chief Human Resources Officer of Luxfer on January 2, 2018.
Before joining Luxfer, Pete was Vice President Human Resources for Pentair Water, a business segment of
Pentair PLC. Prior to that, he served as Vice President Human Resources for various operating units within
Pentair and as Senior Manager, Human Resources with General Electric’s Aircraft Engines Division.
Pete attended Michigan State University where he received a Masters of Labor and Industrial Relations degree
and a Bachelor of Arts degree in International Relations and Economics.
24
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 ordinary shares 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 2017, (as in 2016) 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. 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.
Board Members
During 2017, the Board comprised a Non-Executive Chairman, between five and six Non-Executive Directors and
between one and three 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 37 to 63.
25
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 2018 annual general meeting (“AGM”).
Brief biographical details of the Directors who served during 2017 are provided on pages 19 to 21.
LUXFER HOLDINGS PLC
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 Leadership Team
The Executive Leadership Team (previously Executive Management Board) meets at least once a month. It is
chaired by the Chief Executive Officer and consists of the Chief Financial Officer and senior management at group
and divisional levels. The members of the Executive Leadership Team during 2017 are listed on page 22. The
Executive Leadership Team 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.
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.
26
Attendance at Board and Committee Meetings during 2017
LUXFER HOLDINGS PLC
Main
Board
6
4
6
1
6
6
4
4
6
6
1
Telephone
Board
3
3
1
—
1
3
1
3
3
Total
Board
9
7
7
1
7
9
5
7
9
3
—
9
1
Joseph Bonn
Andrew Beaden
Adam Cohn
Kevin Flannery
Brian Kushner
David Landless
Alok Maskara
Brian Purves
Clive Snowdon
Total number of
meetings
No. of meetings held
at operational sites in
the U.K. or U.S.
Audit
Committee
-i
Non-memberii
Non-member
-i
8
8
Non-memberii
Non-memberii
8
Remuneration
Committee
8
Non-member
8
1
8
6iv
Non-memberii
Non-memberii
-i
Nominating and
Governance Committee
2
Non-member
1vi
-iii
-i
1v
Non-memberii
Non-memberii
2
8
8
2
i The director was a member of the Committee until and including 30 January, 2017. During his period of membership in 2017,
no meetings were held.
ii Although not a member of the Committee the director attended the meeting to present to the Committee.
iii The director was a member of the Committee from 31 January, 2017 until 23 May, 2017. During his period of membership in
2017, no meetings were held.
iv The director was a member of the Committee until and including 23 November, 2017.
v The director was a member of the Committee until and including 30 January, 2017 and then from 5 December, 2017.
vi The director was a member of the Committee from 31 January, 2017.
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 Chief Financial Officer 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 and General Counsel 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 business reviews at
operational sites throughout the year, and any appropriate information gathered on those visits will be reported to
the Board.
27
LUXFER HOLDINGS PLC
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 64 and the Independent Auditor’s Report on
pages 65 to 70.
Audit Committee
The members of our Audit Committee during the year were:
David Landless
Joseph Bonn
Kevin Flannery
Brian Kushner
Clive Snowdon
Member and Chairman
Member until and including January 30, 2017
Member until and including January 30, 2017
Member
Member
The Company Secretary acts as secretary to the Audit Committee. The Chief Financial Officer 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.
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
28
LUXFER HOLDINGS PLC
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 Chief Financial Officer 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;
• 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
37 to 63. Its terms of reference appear under the Governance section on the Company’s website.
Nominating and Governance Committee
The members of our Nominating and Governance Committee during the year were:
Joseph Bonn
Member throughout entire year and Chairman (Chair) until and
including December 4, 2017
David Landless
Kevin Flannery
Brian Kushner
Clive Snowdon
Adam Cohn
Member
Member until and including May 23, 2017
Member until and including January 30, 2017
Member and Chairman (Chair) from December 5, 2017
Member
Meetings attended
2
1i
-ii
-iii
2
1
i The director was a member of the Committee until and including January 30, 2017 and from December 5, 2017.
ii The director was a member of the Committee from January 31, 2017 until May 23, 2017. During his period of
membership in 2017, no meetings were held.
iii The director was a member of the Committee until and including January 30, 2017. During his period of membership
in 2017, no meetings were held.
The Company Secretary acts as secretary to the Nominating and Governance Committee. The Chief Executive
Officer attends as required.
The responsibility and duties of the Nominating and Governance 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.
Its duties include:
•
Identify and review individuals qualified to become Directors and fill vacancies;
29
LUXFER HOLDINGS PLC
• Select and approve Directors to stand for re-election pursuant to the retirement provisions under our
Articles;
• To identify and review individuals qualified to become Senior Officers of the Company, (other than its
Board members), consistent with criteria approved by the Board;
• 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;
• Develop and recommend to the Board a set of corporate governance principles applicable to the
Company;
• Annually review the Company's corporate governance processes and its governance principles;
• Play a leadership role in the Company's corporate governance.
Its terms of reference appear under the Governance section on the Company's website.
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 Chief Financial Officer 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 Chief Financial Officer also attend investor conferences.
30
LUXFER HOLDINGS PLC
Directors’ Report
The Directors of Luxfer Holdings PLC (the “Company”), a public listed company limited by shares, present their
annual report together with the audited financial statements of the Group and the Company for the year ended
31 December, 2017. This Directors’ Report should be read together with, and incorporates, the Corporate
Governance section on pages 25 to 30.
Results
The profit for the year, after taxation, amounted to $11.5 million (2016: $21.9 million); please see the Strategic
report on pages 3 to 18 for more detail.
Dividends per Share
Quarterly interim dividends of $0.125 each £0.50 ordinary share, each quarter totalling $13.3 million, were paid
in 2017 (2016: $13.3 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 19 to 21.
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.
On 11 December, 2017, the Company terminated its ADS facility and converted all outstanding ADSs into ordinary
shares. The conversion is a one-for-one exchange with one ADS converted into one ordinary share.
As at 31 December, 2017, 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.
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, 2017, the Group had purchased 780,989 shares, with $6.3 million of the purchases made in
2016; these are presented as treasury shares in the balance sheet.
31
LUXFER HOLDINGS PLC
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
Nantahala Capital Management LLC
FMR LLC
T. Rowe Price Associates, Inc.
Paradice Investment Management LLC
DePrince, Race & Zollo, Inc
Archer Capital Management, L.P.
3,729,953
2,587,341
2,290,632
2,057,890
2,026,960
1,724,650
1,045,913
13.7%
9.5%
8.4%
7.6%
7.5%
6.4%
3.9%
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 2017, and those of their families, in the share
capital of the Company, including share options are set out in the Remuneration Report on pages 37 and 63. 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 (2016: $7.6 million) in research and development on new and
improved products and processes. 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 9.
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.
32
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 10.
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 10. 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 where the Luxfer Group strategy, 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 2017 or 2016.
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
pages 11 to 12 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.
Post balance sheet events
See note 33 for details of post balance sheet events.
33
LUXFER HOLDINGS PLC
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
19 to 21. 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.
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:
J Savage
Secretary
19 March, 2018
34
LUXFER HOLDINGS PLC
DIRECTORS' REMUNERATION REPORT
Chairman's Letter
Dear Shareholder,
Following my appointment as Chairman of the Remuneration Committee in November 2017, 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.
During the year, the Remuneration Committee (“the Committee”) dedicated considerable time to the re-
evaluation of its remuneration policy (“the Policy”) with the help of independent external advisors. The updated
Policy is to be presented to Shareholders for approval at the 2018 AGM and is enclosed as part of the
Remuneration Report.
Major Decisions on Remuneration during the Year
Decisions made affecting 2017 remuneration
The Committee’s overall approach to remuneration packages remained the same and followed the Policy
approved by shareholders in 2017.
Overall, 2017 was a strong year, with recoveries in both revenue and reported trading profit, from the previous
year. The main targets of the annual bonus for 2017 related to management trading profit and net cash flow,
weighted towards the management trading profit metric. For the new Chief Executive Officer, Alok Maskara, the
bonus plan also contained a number of non-financial objectives relating to the achievement of certain strategic
milestones. These non-financial objectives were achieved in 2017 which generated a bonus payable of 50% of
base salary (pro-rata) for the new CEO. For the main financial targets for 2017, trading profit in excess of
budget was achieved, but less than the stretch target, and net cash flow in excess of the stretch target was
achieved. The outgoing Executive Directors were entitled to the annual bonus for the achievement of the
financial targets of the Company, pro-rata for their length of service during the year. The total annual bonus
awarded to Alok Maskara was therefore 145% of his base salary, out of a potential 150%, pro-rata from the
commencement of his employment. 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 39.
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. The budget target set for 2017 was achieved and therefore share
awards are to be made in respect of this in 2018. The targets set for 2016 were not achieved and therefore no
awards were made in 2017 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.
As part of his appointment, the Board approved the awarding of 225,000 share awards to the new Chief
Executive Officer, Alok Maskara. These include a mix of time-based restricted stock units and performance-
based restricted stock units. The time-based awards vest in equal tranches across three and four year periods
and the performance-based awards would vest on the achievement of various earnings per share targets being
met. Alok Maskara must achieve a shareholding in the Company equivalent to one hundred and fifty percent of
his initial base salary within a three-year period from the date of appointment to the Company, and the
availability of these awards help facilitate this opportunity and in targeting the achievement of certain
performance metrics. These awards were made in accordance with the ‘Approach to Recruitment
Remuneration- Executive Directors’ section of the existing Policy. A summary of the Executive Directors’
outstanding share awards during 2017 can be found under the section headed Outstanding Share Awards
During 2017 on page 45 of the Remuneration Report.
35
LUXFER HOLDINGS PLC
Decisions affecting 2018
The Committee reviewed the Executive Director's salary at its January 2018 meeting in accordance with the
Policy. It was recognized that Alok Maskara had made a strong start in his role as Chief Executive Officer and
had helped deliver the 2017 budget and the achievement of the Company’s non-financial objectives. On this
basis, the Committee proposed and the Board agreed to increase his salary by 2.5% effective January 1, 2018.
The new salary is still at or below the external benchmark as reported by our independent advisory consultants.
The Committee has also determined the Executive Director’s variable remuneration arrangements for 2018,
with the maximum cash bonus award available increasing to 200% of base salary and the maximum share
award available increasing to 220% of base salary. The focus very much remains on improving trading profit
and net cash flow. A series of non-financial bonus targets have also been approved by the Board for 2018. A
summary of the Executive Director's salary and incentive arrangements for the financial year 2018 can be
found under the section headed Implementation of the Remuneration Policy for the Year Ending 31 December
2018 on pages 61 to 62 of the Remuneration Report.
The Committee has also reviewed the compensation of the Non-Executive Directors. As part of the proposed
Board approved Remuneration Policy each Non-Executive Director, at their discretion, can forgo the proposed
2.5% increase in base fee, effective January 1, 2018, in lieu of equivalent value of share awards, valued at up
to 55% of annual base fee, at the date of award. Pending shareholder approval, all Non-Executive Directors
have elected to receive additional share awards in the Company and forgo the annual increase to their base
fee in 2018.
The Committee looks forward to gaining your support for the updated Remuneration Policy and the Annual
Remuneration Report at the 2018 AGM.
B G Kushner
CHAIRMAN OF THE REMUNERATION COMMITTEE
March 19, 2018
36
LUXFER HOLDINGS PLC
Remuneration Report
2017 Remuneration Report
(subject to advisory vote by the shareholders at the 2018 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 2018 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
The members of the Committee during the year are set out below.
Members of Committee during
2017
Joseph Bonn
Brian Kushner
Adam Cohn
Kevin Flannery
David Landless
Total number of meetings in 2017
Member throughout entire year and Chairman (Chair) until and
including November 23, 2017
Member and Chairman (Chair) from November 24, 2017
Member
Member until and including May 23, 2017
Member until and including November 23, 2017
Meetings
attended
8
8
8
1
6
8
The Company Secretary acts as secretary to the Committee. The Chief Executive Officer 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/.
37
LUXFER HOLDINGS PLC
During 2017, the Committee dealt with some of the following matters:
January 2017 • Consideration as to whether, and to what extent, the Executive Directors' bonus targets for 2016 had
been met;
• Determination of the Executive Directors' annual bonus targets for 2017;
• Annual review of the Executive Directors' and Company Secretary salaries;
• Setting of goals to be met by the Executive Directors and Senior Managers which if met would lead
to time-based share awards in 2018;
• 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 of vesting of LTiP awards and extension of exercise periods for IPO
and LTiP awards held by impending retirees.
• Review of 2016 Remuneration Report for subsequent approval by the Board;
• Review of Revised Remuneration Policy for subsequent approval by the Board;
• Review and approve remuneration package for new Managing Director at MEL Chemicals;
• Review of Awards under the LTiP made to junior and middle management.
• Consideration of the remuneration package for the new Chief Executive Officer.
• Review the final remuneration package and contract of the new Chief Executive Officer prior to main
Board approval.
• Consider a benchmarking study prepared by external consultants on Senior Executive
Compensation. Review recommendations and formulate proposed framework.
• Change in Remuneration Committee Chairman.
• Consideration of changes to be made for newly proposed Remuneration Policy.
March 2017
(two
meetings)
April 2017
May 2017
October,
November,
December
2017
Advisors to the Committee
The Committee has access to independent advice when it considers it requires such advice.
PricewaterhouseCoopers LLP (“PwC”) HR Services provided a review of the revised Remuneration Policy, prior
to it being put before Shareholders for approval at the 2017 AGM, and remuneration advice in respect of the
Chief Executive Officer recruitment process. PwC were appointed as the Company’s auditor in the middle of
2015 after a competitive tender. Any work that PwC HR Services continues to provide is 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 2017 was $8,635 (2016: $20,355). 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. The Company has also engaged with Meridian Compensation Partners, LLC ("Meridian") to
provide advisory and benchmarking surveys with regards to its proposed Remuneration Policy. The cost of
advice provided by Meridian during 2017 was $20,492.
38
LUXFER HOLDINGS PLC
REMUNERATION RECEIVED BY THE DIRECTORS FOR THE YEAR ENDED DECEMBER 31, 2017
(Up to and including page 49 is subject to audit unless stated otherwise)
Single Figure
The tables below set out an analysis of each Director’s total remuneration for 2017. Total remuneration reflects
both the performance of the Company and the contribution made by each Director to the continued success of
the Company during their period of tenure.
Executive Directors' Remuneration
Single Total Figure Table
U.S.$(1)
Year Salary(2)
Brian Purves
Andrew Beaden (7)
Alok Maskara
2017
2016
2017
2016
2017
320,168
534,802
201,952
281,114
365,826
Taxable
Benefits(3)
Annual
Bonus(4)
Long-Term
Incentive
Awards(5)
Other Share
Awards(6)
Pensions
Contributions
Total
20,017
27,635
319,145
—
16,358
161,045
22,492
—
36,524
530,448
464,366
135,134
297,272
56,456
628,869
711
1,236
711
1,159
1,141,098
80,042 1,204,449
137,510
836,317
50,489
70,674
431,895
91,457 2,794,222
727,827
Table compiled in accordance with the U.K. 'The Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008', as amended by '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 for Brian Purves and Andy
Beaden are determined and paid in GBP sterling and translated into U.S. dollars at the average
exchange rate for the first nine months of the year of $1.2877:£ as used for the Consolidated Financial
Statements. For consistency, the 2016 amounts remain as reported last year translated at the average
exchange rate used for that full year of $1.3444:£. The Salary, Taxable Benefits, Awards and Pension
Contributions of Alok Maskara are determined and paid in U.S. dollars.
Salaries-Brian Purves remained on the Board of Directors of the Company up to and including
September 25, 2017. His salary in 2017 reflects the amounts paid in respect of his duties and
responsibilities during this period. Andrew Beaden resigned from his position as Group Finance Director
and as a director Luxfer Holdings PLC with effect from October 2, 2017. Alok Maskara was appointed as
a director of Luxfer Holdings PLC on May 23, 2017 and upon the retirement of Brian Purves, he was
appointed CEO of Luxfer Holdings PLC with effect from July 1, 2017. During 2017, the actual GBP
sterling salary amount for Brian Purves was £248,625 (2016: £397,800) and for Andrew Beaden
£156,825 (2016: £209,100).
Taxable Benefits-During the year an amount was paid to each director, pro rata to their period in office,
in respect of expenses relating to car allowance, and medical and dental insurance. Taxable benefits for
Brian Purves and Andrew Beaden are valued at their GBP sterling taxable value. During 2017, the actual
GBP sterling amount for Brian Purves was £15,544 (2016: £20,556) and for Andrew Beaden £12,703
(2016: £16,730). All payments made to Alok Maskara in respect of these allowances were determined
and paid in U.S. dollars.
Annual Bonus-For the 2017 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 bonus was weighted towards the
39
LUXFER HOLDINGS PLC
achievement of the management profit target, which required a material improvement over the prior year
outcome and a cash target which was equally set at a much higher level than achieved in 2016.
Alok Maskara had also been set a further series of strategic project targets to achieve. These strategic
project targets were achieved. In 2016, the main financial targets were not achieved and no bonus was
payable. A number of the non-financial objectives were achieved during the year, however given that no
bonus was generated from main financial targets, both Brian Purves and Andy Beaden thought it
appropriate to waive any bonus payable in respect of the achievement of non-financial targets under the
2016 plan.
Summary of the annual bonus potential as a percentage of base salary of each of the Executive
Directors for 2017:
Sliding scale between
threshold, target and stretch
Maximum Annual bonus
(number of points
available and % of salary)
1,800
Management
Trading
Profit(3)
0 - 800
150% 0.0% - 66.7%
Net Cash Flow
(after tax)
0 - 400
0.0% - 33.3%
Non-
financial
objectives
600
50.0%
Bonus
outcome
2017(1)(2)
1,740
145.0%
1,200
0 - 800
100% 0.0% - 66.7%
80% 0.0% - 53.3%
0 - 400
0.0% - 33.3%
0.0% - 26.7%
—
—
—
1,140
95.0%
76.0%
Number of points available
Alok Maskara
Number of points available
Brian Purves
Andrew Beaden
(1)
(2)
(3)
In 2017 Luxfer achieved a level of trading performance which resulted in 740 points being available
in respect of the Management Trading Profit Target. Net cash flow generation in 2017 resulted in all
400 points being made available for the bonus calculations. In addition to these targets, Alok
Maskara achieved all his non-financial targets in 2017.
The level of bonus for 2017 has been calculated pro rata to the length of time in office during the
year.
Management trading profit is defined as operating profit or loss before profit on disposal of
redundant site, restructuring expense, amortization on acquired intangibles and share based
compensation charges.
In 2017 the Company generated a trading profit of $40.5 million (2016: $35.3 million) and net cash flows from
continuing operations of $45.2 million (2016: $29.2 million).
The Board has considered whether to include in this report the targets which applied to the bonus
arrangements for the Executive Directors in 2017 but has determined that these amounts are commercially
sensitive.
(5)
The Long Term Incentive Awards—the 2017 Single Figure:
In 2017, the Remuneration Committee targets for the year were based solely upon EPS targets as
described in Executive Director Awards Under the LTiP on page 44. The target level was achieved in
2017 resulting in the granting of time-based awards, reduced on a pro-rated basis to the length of time
served as an Executive Director in 2017, in 2018 as follows:
40
LUXFER HOLDINGS PLC
Number of Awards
Possible
Awards
48,550
53,780
34,425
Awards to
be made
in 2018
48,550
35,850
22,950
% of
possible
awards
made in
2018
100.0%
66.7%
66.7%
Value of
Awards
$ (1)
628,869
464,366
297,272
Alok Maskara
Brian Purves
Andrew Beaden
(1) These awards will be granted in March 2018. The value of the awards in the above table has been estimated by using the
average closing share price of the Company during the fourth quarter of 2017 ($13.63) and deducting the nominal cost value of
£0.50 each share (68 cents each share at an exchange rate of $1.3512:£).
For Brian Purves and Andrew Beaden, as a result of their departure from the Board during 2017, the
Remuneration Committee agreed that, in accordance with provisions in the Remuneration Policy, the
above share awards will vest and be made fully available at the date of grant in 2018. For Alok Maskara,
the share awards will commence vesting from the anniversary of their grant date, over the next three
subsequent years.
In addition, upon appointment, Alok Maskara was awarded share options and was subsequently awarded
further options upon attainment of a specified shareholding in the Company. For additional information
refer to the section of this report headed Outstanding Share Awards During 2017 on page 45.
In 2016 the Remuneration 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. None of the targets during 2016 were achieved so no awards in 2017 based on 2016
performance were granted. On attainment of the cash flow target for 2015 being met at the threshold
level, an award under the LTiP was made in 2016 to Brian Purves and Andrew Beaden.
(6)
Other Share Awards—The awards made to Brian Purves and Andrew Beaden relate to the value
ascribed to the Matching Shares awarded under the Company’s U.K. All Employee Share Investment
Plan (“SIP”), as further detailed below: -
Monthly
contribution
from salary
during 2017 (£)
150
150
Brian Purves
Andrew Beaden
No. of Partnership Shares
purchased June 2017
@ average price of $11.742
each ordinary share
No. of Matching
Shares awarded
June 2017
Dividends shares
acquired from
dividend reinvestment
during 2017
Total shares
accumulated
in SIP during
2017
95
95
47
47
33
30
175
172
In May 2017 Alok Maskara was granted share options in respect of his appointment to the role of Chief
Executive Officer. These time-based options were outside the terms of reference of the LTiP but granted in
accordance with the provisions of the Remuneration Policy. The value of the grants appears in the Single
Figure table for 2017. The number, and details of the terms, of the grants are set out in the table in Outstanding
Share Awards During 2017 and the accompanying notes, on pages 45 to 46.
(7)
Andrew Beaden resigned from his position as Group Finance Director and as a director of Luxfer
Holdings PLC with effect from October 2, 2017. He received a compensation payment of $338,064 and
the proportion of his outstanding awards under the LTiP were allowed to vest, as set out in the tables in
Payment to Past Directors and Payment for Loss of Office on page 48.
(8)
For details of pension arrangements see page 47.
41
LUXFER HOLDINGS PLC
Non-Executive Directors' Remuneration
None of the Non-Executive Directors (including the Chairman) received taxable benefits, annual bonus, long-
term incentive awards (exceeding one year) or pension-related benefits during the year.
Single Total Figure Table
U.S.$(1)
Year
Base Fee(1)
Joseph Bonn
Adam Cohn
Brian Kushner
David Landless
Clive Snowdon
Kevin Flannery
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
98,812
80,702
79,050
32,940
79,050
46,116
79,050
79,050
79,050
32,940
32,940
79,050
Other Fees (Fees in the
form of share awards)(2)
48,484
38,704
69,134
—
39,116
37,246
39,116
38,704
68,006
—
1,623
38,704
Total
147,296
119,406
148,184
32,940
118,166
83,362
118,166
117,754
147,056
32,940
34,563
117,754
Table compiled in accordance with the U.K. 'The Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008', as amended by 'The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013'.
(1)
Kevin Flannery did not offer himself for re-election to the Board at the 2017 AGM and consequently he
ceased to be a Director of the Company with effect from May 23, 2017. His base fee in 2017 reflects the
period of service as a Non-Executive Director.
The Chairman's fee of Joseph Bonn and the Non-Executive Directors' fees of Adam Cohn, Brian Kushner
and Kevin Flannery are all determined in U.S. dollars.
The Non-Executive Directors' fees 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
2017 aggregated to £61,245 (2016: £58,117) and £61,245 (2016: £25,739) respectively.
(2)
2017 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 units (“RSUs”). 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 share of £0.50
translated into U.S. dollars at the exchange rate on the grant date of $1.2949:£ (65 cents). Awards
were made immediately after the 2017 AGM and vest immediately before the 2018 AGM. The number
of RSUs was calculated using the closing share price on the NYSE ($12.52) the day before the award
was made. Additional RSUs were awarded to Adam Cohn and Clive Snowdon to reflect the period from
the date of their appointment until the date of the grant of the 2017 awards. 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) on page 44.
42
LUXFER HOLDINGS PLC
• The RSU awards carry with them the right to receive accumulated dividends 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 2016 RSU fee awards that vested
immediately before the 2017 AGM. The value of the awards themselves were included in the Single
Figure for 2016 as they were time-based awards (see below). The dividend shares were valued at the
closing share price on the NYSE on the date of vesting, being $12.50, less the issue price of £0.50
translated at the date of vesting at an exchange rate of $1.3016:£ (65 cents). The number of dividend
shares allocated and their value were:
Non-Executive Director
Joseph Bonn
Brian Kushner
David Landless
Kevin Flannery
LUXFER SHARE INCENTIVE PROGRAMS
Dividend shares
allocated
137
137
137
137
Value of dividend less
nominal cost of share $
1,623
1,623
1,623
1,623
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 U.K.
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 operate. The maximum value of
awards under the rules of the LTiP that can be granted to the Chief Executive Officer and Other Executive
Directors are defined in the Remuneration Policy.
ESOP 2007: In 2007, prior to the 2012 I.P.O. and as part of the re-organization 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 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 31 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 shares 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 share.
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
43
LUXFER HOLDINGS PLC
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.
AWARDS GRANTED DURING THE YEAR
Executive Directors' Awards Under the LTiP
The Remuneration Committee set a scorecard of goals for 2016 to assess performance consisting of net cash
flow, accretive EBITDA generated by acquisitions in the year and fully diluted EPS, which if attained at the end
of 2016, would have led to the granting of nominal cost options to both Brian Purves and Andrew Beaden in
2017. None of the threshold targets for any of the goals were achieved for 2016 so no awards were earned and
granted.
The Remuneration Committee set Executive Directors performance targets for 2017 based solely upon the
achievement of adjusted diluted EPS to be measured at threshold, target and stretch levels. The reported EPS
for 2017 resulted in the target level being achieved which will result in Alok Maskara earning 100% of the
available awards. Brian Purves and Andrew Beaden will also be eligible to receive awards under the LTiP for
the attainment of the EPS metric at target, earning 66.6% of the total awards available. These awards will be
made pro rata to the length of time served as an Executive Director during 2017. Estimates of the value of the
grants to be made based on 2017 performance are included in the Single Figure table for 2017.
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
Date of
Grant
Basis of
Aggregate
Awards
Granted
Joseph
Bonn
May 24,
2017
50% of annual
fee for 2017
Share
Price
at Date of
Grant $
12.52
Type of
Award
Restricted
Stock Unit
No. of
Shares
Granted
Face
Value of
Award $
3,947
49,416
Adam
Cohn
May 24,
2017
50% of annual
fee for 2017 &
from date of
appointment in
2016
12.52
Restricted
Stock Unit
5,823
72,904
Brian
Kushner
May 24,
2017
50% of annual
fee for 2017
12.52
Restricted
Stock Unit
3,158
39,538
David
Landless
May 24,
2017
50% of annual
fee for 2017
12.52
Restricted
Stock Unit
3,158
39,538
Clive
Snowdon
May 24,
2017
50% of annual
fee for 2017 &
from date of
appointment in
2016
12.52
Restricted
Stock Unit
5,728
71,715
(1)Issue
Price per
share & in
Aggregate $
$0.65 each
share
$0.65 each
share
$0.65 each
share
$0.65 each
share
$0.65 each
share
% of Face
Value
That Vest
On vesting
date 100%
On vesting
date 100%
On vesting
date 100%
On vesting
date 100%
On vesting
date 100%
Vesting
Date
Day
before
2018 AGM
Day
before
2018 AGM
Day
before
2018 AGM
Day
before
2018 AGM
Day
before
2018 AGM
(1) The issue price of £0.50 each share has been translated at the U.S. dollar Financial Times exchange rate for 25 May 2017, the date of
grant, of $1.2949:£.
44
LUXFER HOLDINGS PLC
OUTSTANDING SHARE AWARDS DURING 2017
Executive and Non-Executive Directors
Awards will be granted in 2018 in respect of 2017 performance. No awards were made in 2017 in respect of
2016 performance.
Awards
Available
Jan 1,
2017
Granted
During
Year
(Lapsed) /
(Exercised)
During
Year
Available
Dec 31,
2017
Vested
Awards
Jan 1,
2017
Vested
Awards
During
Year
Options
(Lapsed) /
(Exercised)
During
Year
Vested
Awards
Dec 31,
2017
Available
Unvested
Awards
— 179,200
—
13,500
(22,100) 192,700
(22,100)
—
—
(9,100)
(2,166)
(5,640)
(16,906)
69,000
—
—
—
69,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
45,000
60,000
120,000
225,000
—
(3,130)
—
(3,130)
20,000
—
—
20,000
—
—
(3,130)
—
(3,130)
(3,130)
—
(3,130)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,947
3,947
5,823
5,823
—
3,158
3,158
—
3,158
3,158
5,728
5,728
179,200
22,100
13,500
214,800
69,000
9,100
2,166
5,640
85,906
—
—
—
—
—
—
—
—
—
—
179,200
179,200
(22,100)
—
22,100
—
13,500
—
(22,100)
192,700
201,300
—
69,000
69,000
(9,100)
(2,166)
(5,640)
—
—
—
9,100
2,166
—
(16,906)
69,000
80,266
Awards
Brian Purves
IPO Options(1)
M.V.(2)
LTiP 2016(4)
Totals
Andrew Beaden
IPO Options(1)
M.V.(2)
LTiP 2013(3)
LTiP 2016(4)
Totals
Alok Maskara
Upon Appointment(7)
Upon Appointment(8)
Upon Appointment(9)
Totals
Joseph Bonn
IPO Options(1)
EIP 2016(5)
EIP 2017(6)
Totals
Adam Cohn
EIP 2017(6)
Totals
Brian Kushner
EIP 2016(5)
EIP 2017(6)
Totals
David Landless
EIP 2016(5)
EIP 2017(6)
Totals
Clive Snowdon
EIP 2017(6)
Totals
—
45,000
60,000
—
— 120,000
— 225,000
20,000
3,130
—
23,130
—
—
3,130
—
3,130
3,130
—
3,130
—
—
—
—
3,947
3,947
5,823
5,823
—
3,158
3,158
—
3,158
3,158
5,728
5,728
—
—
13,500
13,500
—
—
—
5,640
5,640
—
—
—
—
—
—
—
—
—
—
45,000
60,000
120,000
225,000
—
—
—
—
20,000
20,000
(3,130)
—
—
3,947
—
—
3,130
—
(3,130)
23,947
20,000
3,130
—
—
—
—
—
—
—
—
—
—
—
—
3,130
—
3,130
3,130
—
3,130
—
—
—
—
(3,130)
—
(3,130)
(3,130)
—
(3,130)
—
—
5,823
5,823
—
3,158
3,158
—
3,158
3,158
5,728
5,728
45
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Key to table:
Award
Award Scheme, Type & Grant
I.P.O. Options
Market Value
LTiP 2013—Performance-Based—EPS
and TSR targets (ii)
LTiP 2016 Options—Time-Based (iv)
EIP 2016—Restricted Stock Units(iii)
EIP 2017—Restricted Stock Units(iii)
Upon appointment – Time-Based
Restricted Stock Units (v)
Upon appointment – Time-Based
Restricted Stock Units (vi)
Upon appointment – Performance-
Based - EPS Targets Restricted Stock
LUXFER HOLDINGS PLC
Grant Date
Oct 2, '12
Jan 31, '13
Jan 31, '13
Mar 21, '16
May 25, '16
May 24, '17
Aug 23, '17
Aug 23, '17
Aug 23, '17
Exercise Price /
Nominal Cost
Each Award
$10.00
$12.91
£0.50(i)
£0.50(i)
£0.50(i)
£0.50(i)
£0.50(i)
£0.50(i)
£0.50(i)
Remaining Vesting/
Settlement Dates
Exercise
Period
All vested
All vested
All lapsed
Mar 21, 2017, 2018,
2019
Day before 2017 AGM
Day before 2018 AGM
Jun 13, 2018, 2019,
2020
May 23, 2018, 2019,
2020, 2021
Achievement of EPS
targets
To October 2019
To Jan 30, 2018
No longer applicable
To Mar 21, 2021
—
—
To Aug 12, 2020
To Jul 22, 2021
To Mar 1, 2021,
2023, 2025
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: One sixth of the total awards were granted based upon the achievement of the TSR goal in 2013. All options which
vested due to the achievement of this goal have now been fully exercised. The remaining targets were not achieved and
therefore all other options under this award have lapsed.
EIP 2016 and EIP 2017 annual awards are settled immediately on vesting, together with dividends which have been
accumulated during the vesting period. The 2016 awards were settled in 2017 net of payroll taxes.
LTiP 2016: Awards made on attainment of 2015 performance goals and include “holding period” and “claw back” provisions.
Time-based option awards accumulate dividend shares until vesting only; shares are then added to the award when the option
is exercised. In respect of both Brian Purves and Andrew Beaden, who stepped down from their roles as Chief Executive
Officer and Group Finance Director respectively during the year, the Remuneration Committee agreed to the acceleration of
the unvested element of their awards, which allowed them to be made fully available following their departure.
Upon Appointment - The Remuneration Committee determined that the new Chief Executive Officer should acquire a
minimum quantity of 22,500 shares within twelve months of appointment. Upon the Chief Executive Officer acquiring the
shares, the Company matched the purchase by granting an award over 45,000 nominal cost RSUs, to vest over three years.
Upon Appointment - The Remuneration Committee determined to make a one-off share award to the new CEO, outside the
terms of the LTiP, over 60,000 time-based nominal cost RSUs, to vest over four years.
Upon Appointment – Performance-Based Awards made to the new Chief Executive Officer vest upon achievement of attaining
a specified adjusted diluted EPS target at each annual measurement date. Three levels of targets have been set:
•
•
•
The lower target must be achieved by the measurement date at the end of 2020 and will result in the vesting of 30,000
shares.
The mid-point target must be achieved by the measurement date at the end of 2022 and will result in the vesting of a further
40,000 shares.
The top target must be achieved by the measurement date at the end of 2024 and will result in the vesting of a further
50,000 shares.
If the targets are not achieved by the appropriate measurement date, the associated awards will lapse. For the Restricted Stock
Units to vest following the achievement of the target, the Return on Capital Employed of the Company must equal or exceed 10%
after tax in the calendar year for which the EPS achievement is measured. Any award grants are subject to “holding period” and
“claw back” provisions. The Board has concluded that the targets set are commercially sensitive and should not be disclosed.
46
LUXFER HOLDINGS PLC
Kevin Flannery held options over 3,130 shares which were granted as part of the 2016 EIP awards. These
vested the day before the 2017 AGM and were subsequently exercised and settled in 2017, net of payroll
taxes. As he did not seek re-election as a Director at the AGM in 2017 no further awards have been made. At
the end of 2017, Kevin also held 20,000 IPO $10.00 options.
PENSION ARRANGEMENTS
Prior to April 5, 2016, the pensions for the Executive Directors 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 April 5, 2016, following the
agreement, reached during 2015, to close the Plan to future accrual from this date. Following the closure of the
Plan, the Company also decided members would cease to accrue further benefits in the UURBS. In lieu of
contributions into these plans, the Company offers a salary supplement. Reflecting the cost of previous defined
benefit arrangements, now withdrawn, Executive Directors are paid the equivalent of 25% of base salary, with
additional funding into the U.S. funded defined contribution scheme for Alok Maskara.
Details of the payments made to the defined contribution arrangement and salary supplement during years
2017 and 2016, and the accrued pension entitlements for the Executive Directors under the defined benefit
arrangement for 2016, are set forth in the tables below.
Directors' Remuneration and Benefits for the Year Ended December 31, 2017 and 2016
Executive
Directors
Brian Purves
$
Andrew Beaden $
$
Alok Maskara
Executive
Directors
$
Brian Purves
Andrew Beaden $
Defined
Benefit
2017
Funded Defined
Contribution(1)
Unfunded Defined
Contribution
— $
— $
— $
— $
9,658 $
16,200 $
Cash
Supplement
80,042 $
40,831 $
75,257 $
— $
— $
— $
Defined
Benefit
Funded Defined
Contribution(1)
2016
Unfunded Defined
Contribution
— $
6,536 $
— $
17,702 $
Cash
Supplement
100,276 $
42,627 $
37,233 $
3,809 $
Total
80,042
50,489
91,457
Total
137,509
70,674
Exchange rate used above: $1.2877:£ for the first nine months of 2017 and $1.3444:£ for the full year
2016.
(1) During 2017, the Funded Defined Contribution for Andrew Beaden was made through a salary
sacrifice arrangement. The Funded Defined Contribution for Alok Maskara relates to amounts paid in
respect of a 401K matching program.
47
LUXFER HOLDINGS PLC
Payment to Past Directors and Payment for Loss of Office (audited)
Group Finance Director, Andrew Beaden, resigned from the Board of Luxfer Holdings PLC on October 2, 2017.
He was awarded a partial bonus for the period of his employment during 2017 and share awards will be
granted in March 2018 based on the achievement of EPS during 2017, which are set out in the Single Total
Figure Table on page 39, as well as compensation for the loss of office representing his salary and benefits for
an eleven month period (as set forth in his service contact) and the early vesting of his outstanding long-term
incentive awards under the LTiP, as agreed by the Remuneration Committee.
Andrew Beaden's Compensation Payment
Eleven months
Salary
Holidays accrued but not taken
Other benefits
Total paid in cash
Early Vesting of LTiP Awards
$
$
$
$
255,167
3,205
79,692
338,064
Awards
LTiP 2016 (1)
% of Shares Vested
and Exercised
% Balance of
Award Accelerated
Number of Options
Accelerated
Value of shares
vested $(2)
33.3
66.7% 3,760 award shares plus 239
dividend shares
55,790
(1) All of the shares vested were exercised before the end of 2017. The value ascribed is calculated using the share price at the time of
exercise, less the option cost. For further detail on the share awards, please see the table Outstanding Awards During 2017 on page
45.
(2) The value of the full award, calculated with reference to the share price at the time of grant, is disclosed in Single figure table under
Long-Term Incentive Awards for 2016.
No payments to past Directors or payment for loss of office were made during 2016.
Directors' Interests in Shares in the Company (audited)
Joseph Bonn (1)
Adam Cohn (2)
Brian Kushner (3)
David Landless (4)
Alok Maskara (5)
Clive Snowdon (6)
Number of Ordinary Shares
Held at Dec 31, 2017
Number of Ordinary Shares
Held at Jan 1, 2017
7,800
—
1,823
7,633
25,712
2,000
5,783
—
—
5,581
—
2,000
(1) The additional 2,017 shares acquired by Joseph Bonn during the year were as the result of his 2016
“Other Fees” award of 3,130 shares vesting prior to the 2017 AGM together with accrued dividend of
137 shares. He also purchased a further 213 shares on market. The shares delivered are net of
those sold to pay the 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 pages
42 to 43.
48
LUXFER HOLDINGS PLC
(2) The additional 1,823 shares acquired by Brian Kushner during the year were as the result of his 2016
“Other Fees” award of 3,130 shares vesting prior to the 2017 AGM together with accrued dividend of
137 shares. The shares delivered are net of those sold to pay the 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 pages 42 to 43.
(3) The additional 2,052 shares acquired by David Landless during the year were as the result of his
2016 “Other Fees” awards of 3,130 shares vesting prior to the 2017 AGM together with accrued
dividend of 137 shares. The shares delivered are net of those sold to pay the option costs and tax
due on the value of the awards. Additional shares were also acquired in the year through the
operation of a Dividend Reinvestment Plan (DRIP) which allows the reinvestment of cash dividends
to purchase additional shares. Further details of his awards can be found in Notes to Single Figure-
Non-Executive Directors’ Remuneration on pages 42 to 43.
(4) The shares held by Alok Maskara were all purchased on market in the period following his
appointment as an Executive Director.
(5) The shares identified as held by Clive Snowdon are held by a connected person.
Executive Director Shareholding Requirements Upon Appointment
Upon appointment, an Executive Director is required to hold and maintain ordinary shares equal in value to
150% of base salary. The Director is allowed a period of three years from date of appointment to acquire the
holding. 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 2017
Shares Owned
Beneficially
Options Vested but
not Exercised(1)
Restricted Stock Units Not Yet Vested
(assuming will be settled in Shares not
Cash)(1)
Alok Maskara
Non-Executive
Joseph Bonn
Adam Cohn
Brian Kushner
David Landless
Clive Snowdon
25,712
7,800
—
1,823
7,633
2,000
—
20,000
—
—
—
—
225,000
3,947
5,823
3,158
3,158
5,728
(1)
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 2017 table on page 45 of this report.
49
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 ten-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
was 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 a period 3 October 2012 to 31 December 2017. 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 $100 invested in the S&P
SmallCap 600 (Industrial) on the same date. The S&P SmallCap 600 (Industrial) was chosen as the index as it
comprises companies that most closely resemble Luxfer. The TSR is calculated in U.S. dollars.
50
LUXFER HOLDINGS PLC
History of Total Remuneration Figure for Chief Executive Officer
We have included the total remuneration figure for the Chief Executive Officer for a seven year period as
required by legislation despite the TSR graph only reflecting the TSR from the date of the I.P.O.
U.S.$
Year ended
December 31
Total remuneration
Annual bonus %
Share awards vesting %
2011
998,638
2012
1,050,878
2013
985,076
2014
853,320
2015
1,021,357
2016
836,317
2017(1)
3,396,615
100%
N/A
71%
100%
—%
59%
—%
59%
39%
21%
—%
—%
124%
37%
(1)
The 2017 figures include Brian Purves' remuneration for the first six months of 2017 and Alok Maskara's remuneration for the
second six months of 2017.
(2)
Percentage of salary.
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.
(To assist with conformity and transparency we have used staff costs as set out in Note 6 to the Consolidated Financial Statements.)
51
LUXFER HOLDINGS PLC
Percentage Change in Chief Executive Officer's Remuneration
For 2017, we have selected U.S. employees as the most appropriate comparator as the Chief Executive Officer
is based in the U.S. and the benefits structure is similar. The comparative information for 2016 is based on U.K.
employees as during 2016 the Chief Executive Officer was based in the U.K. The 2016 amounts were adjusted
for the impact of translation and have been calculated using the 2017 average exchange rate of $1.3018:£.
U.S.$
Salary
Chief Executive Officer
Employee average
Benefits
Chief Executive Officer
Employee average
Annual Bonus
Chief Executive Officer
Employee average
Statement of voting at AGM
2017
2016
% change
557,744
65,953
44,980
635
690,316
3,742
534,802
42,535
27,635
639
—
1,176
4.3 %
55.1 %
62.8 %
(0.6)%
n/a
218.2 %
The Annual Remuneration Implementation Report and an updated Remuneration Policy was put to an advisory
vote at the 2017 AGM.
Annual Remuneration
Implementation Report
Adoption of Revised
Remuneration Policy
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
16,654,955
86.45%
16,703,150
86.72%
2,609,852
13.55%
2,556,852
13.28%
72.50%
5,231
72.50%
10,036
The vote received in favour of the Remuneration Report was 86.45%, 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, an updated Remuneration Policy will be presented at the 2018 AGM for shareholder
approval.
52
LUXFER HOLDINGS PLC
Remuneration Policy Report
The Remuneration Committee presents the proposed Executive Directors’ Remuneration Policy Report for
2018. This policy will take effect immediately, following approval at the 2018 annual general meeting and will
apply until a further policy is approved by an ordinary resolution of the shareholders. The Committee believes
that this Policy continues in being competitive for current and successor Executive Directors.
The Committee has determined that to maintain top performance levels in the Company they should be
targeting at least median level remuneration packages for the Chief Executive Officer, other Executive Directors
and Senior Management. However, the Committee recognizes that this will be achieved by adjusting
remuneration packages over a number of years. The Committee has agreed that a competitive benchmarking
study will be commissioned every three years in order to maintain independent guidance on the overall
remuneration of the Chief Executive Officer, other Executive Directors and Senior Management.
Under the Remuneration Policy, the Committee has discretion in a number of areas as set out in the relevant
section of the policy. In addition, certain operational and administrative discretions may be exercised under
relevant standalone deeds of grant or plan rules, including LTiP and EIP implemented for the I.P.O., the rules of
which we have previously filed with the SEC.
Proposed policy changes
The 2018 policy that is being presented to shareholders for approval has been drafted to take into account the
latest findings from a recent competitive benchmarking study over the existing policy. The key changes from the
2017 policy, which are described in the chairman’s letter, can be summarized as follows:
• The maximum annual cash bonus opportunity for the Chief Executive Officer is increased from 150% to
200% of base salary. Included within this, the Additional Percentage Bonus (APB) set at a maximum of
50% of base salary under the existing remuneration policy, attributable to the achievement of specific
additional non-financial targets, will now be set at the start of each year at the discretion of the
Remuneration Committee.
• The maximum annual cash bonus opportunity for other Executive Directors remains unchanged at 120% of
base salary. Included within this, the APB set at a maximum of 40% of base salary under the existing
remuneration policy, attributable to the achievement of specific additional non-financial targets, will now be
set at the start of each year at the discretion of the Remuneration Committee.
• The maximum value of share incentive awards under the Company’s Long-term incentive plan (‘LTiP’)
available for the achievement of certain financial targets for the Chief Executive Officer is increased from
150% to 220% of base salary and for the other Executive Directors increased from 120% to 150% of base
salary.
• The Non-Executive Directors, at their discretion, may choose to forgo annual or periodic increases to cash
fee, in lieu of an equivalent value of share awards. Awards will continue to be made annually immediately
after the annual general meeting, however, as a result, the maximum value of these awards will be
increased from 50% up to 55% of the Non-Executive Directors existing annual fee. Pending shareholder
approval, for 2018, all Non-Executive Directors have elected to receive additional share awards in the
Company and forgo the annual increase to their base fee.
The above proposed changes to policy will be effective immediately following the 2018 annual general meeting.
The impact of these changes to the remuneration of the Executive Directors is demonstrated in the illustrative
remuneration chart on page 60.
53
LUXFER HOLDINGS PLC
The tables below sets out the main components of the remuneration packages for the Chief Executive Officer
and other Executive Directors.
CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVE DIRECTORS Fixed Remuneration
Base salary
Operation:
Purpose and Link to Strategy:
To attract, retain and incentivize high caliber individuals who can deliver the company’s strategy and reward
performance.
To be competitive.
Reviewed annually and normally fixed for 12 months from 1 January in each year.
Paid in 12 equal monthly installments.
Reviews take account of a variety of different factors including:
- The rise in the cost of living, market rates, responsibility of the position,
experience and contribution of the individual, the scale of the Group’s operations,
group performance and affordability, remuneration levels and increases in the rest
of the Group;
- The Executive pay packages of comparable companies; Pay and practices in
both the US and the UK.
Maximum Opportunity:
No prescribed maximum to avoid setting expectations.
The Committee retain discretion to re-adjust salaries as part of the
overall package to, at or about median of the external comparator
group deemed appropriate by them to maximize the Group’s objective
of top quartile performance. Where it is satisfied that salaries are at or
about the median of the external comparator group, annual increases
will normally be limited to the increases granted to the wider
workforce, but may be higher in certain circumstances such as a
change in the role or an increase in the responsibilities of the role
where it will increase salaries in its discretion.
Benefits in kind
Operation:
Purpose and Link to Strategy:
To aid recruitment and retention of high caliber individuals and to remain competitive in the market.
Benefits received by directors will generally include car allowance or mileage
reimbursement, medical and dental insurance. Additional benefits may be provided
where required by legislation or to align the remuneration package with market
practice where these are not significant in value.
The company may introduce new benefits that are or become prevalent in the
jurisdiction in which it operates or in which the director is based.
Where an individual director is relocated benefits such as relocation expenses, travel
expenses, accommodation, tax equalization; professional advice, and post-retirement
medical expenses may be provided.
Performance Metric:
None
Maximum Opportunity:
No maximum value is set but the Committee periodically monitors the
overall cost of the benefits to ensure they are affordable, competitive
and in line with market practice in the UK and the US.
Provisions for Recovery or Withholding of
Payment:
None
Pension or 401K Contributions Purpose and Link to Strategy:
To provide funding for retirement and aid recruitment and retention of high caliber individuals.
Operation:
Maximum Opportunity:
Following the closure of the defined benefits scheme to future accrual in April 2016,
all Directors will have benefits provided by the registered defined contribution
scheme.
For those directors whose pension planning is restricted by one or more tax
allowance, an equivalent allocation or payment may be made to an unregistered
alternative savings vehicle, or as a salary supplement in lieu of pension contributions.
Arrangements are reviewed annually to ensure consistency with market practice and
take account of the effect of regulatory change on an individual’s benefits.
For directors based in other jurisdictions they will be offered arrangements
appropriate to that jurisdiction.
Performance Metric:
None
Under the Defined contribution arrangements the Company makes an
annual contribution into a personal pension plan, 401K plan or salary
supplement in lieu of pension or 401K contributions up to a maximum
of 25% of basic salary.
Provisions for Recovery or Withholding of
Payment:
None
54
LUXFER HOLDINGS PLC
CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVE DIRECTORS Variable Remuneration
Annual bonus
Operation:
Purpose and Link to Strategy:
To retain, motivate, incentivize high caliber individuals and promote the achievement of key financial and
strategic goals and targets of the Company in the financial year to which it relates.
Maximum Opportunity:
Cash bonus for performance over the previous financial year.
Maximum bonus is capped (including APB) at:
Targets are set at the beginning of the financial year and normally based on achievement of a
mix of financial targets (typically profit before tax and net cash flow) measured against the
approved annual budget for the bonus year and usually awarded for achieving on a sliding scale
between Threshold, Target, and Stretch. The Committee has retained the flexibility to determine
one or more elements may be earned for attaining target and stretch or a single target.
The Remuneration Committee has flexibility to use non-financial and personal targets if deemed
appropriate in addition to financial targets.
In addition the Committee has reserved discretion to offer an Additional Percentage Bonus
(APB) on achievement of specific additional targets set by them at their discretion aligned with
the strategic goals of the Company for that year.
The bonus for achieving threshold is at the discretion of the Committee but will normally be one
quarter of the potential.
- 200% of salary for the Chief Executive;
- 120% of salary for Other Executive Directors.
The APB discretionary award offered will be set at the start
of each year at the discretion of the Remuneration
Committee.
Performance Metric:
Weighting of measures and between measures for achieving financial and non-financial targets are
adjusted annually and are discretionary being driven by the Company’s strategy, financial goals and
requirement to maintain and improve operating efficiencies.
The APB performance metric is discretionary based on the associated strategic objective for which the
APB is offered.
Provisions for Recovery or Withholding of
Payment:
None. If the Director qualifies as a “good leaver”
during the year to which the bonus relates, it is
payable retrospectively pro-rata to the time in
service during the calendar year.
Long-term incentive plan (‘LTiP’)
Purpose and Link to Strategy:
Attract and retain high quality senior employees in an environment where compensation levels are based
on a global market.
Align rewards for employees with returns to shareholders through personal financial investment.
Reward achievement of business targets and key strategic objectives.
Operation:
Maximum Opportunity:
The type and level of award made and the criteria for vesting are considered annually to ensure
they continue to support shareholder alignment and group strategy.
The LTiP maximum awards in any calendar year may not
exceed:
- Chief Executive 220% of base salary;
- Other Executive Directors 150% of base salary.
The maximum amount of dividend paid will be the dividends
paid on the regular share over which the awards are granted
between grant and vesting.
The LTiP provides the Remuneration Committee the discretion to grant time-based, market value
or performance-based awards in the form of Options, Stock Appreciation Rights (SARs)
Restricted Stock, Restricted Stock Units (RSUs) and Other stock based awards or a combination
of such awards. The discretion over what type or combination of types of award to be made will
be exercised by the Remuneration Committee based on what they consider to be the market
norms in the UK and US and the particular circumstance in which the award is made.
Awards are made and are satisfied through the use of existing treasury shares or through the
issue of new shares. Participants are required to pay at a minimum the nominal cost of the
regular share.
The Committee has the discretion (which will be used as deemed appropriate to a good leaver in
a particular circumstance, such as retirement of long serving employees or leaving due to
sickness or disability) to:
- Accelerate vesting and exercise dates;
- Waive conditions to vesting or exercise or transferability;
- Extend exercise periods after termination of employment.
RSU’s can be settled in cash or shares or a combination of both at the discretion of the
Committee. This discretion will be exercised based on what is in the best interests of the
Company.
Awards may accrue dividends either under the rules of the Plan or at the discretion of the
Committee, payable in cash or shares. Options and RSUs that vest accrue a dividend until
vesting payable in cash or shares as determined at the discretion of the Committee.
Performance Metric:
Under the LTiP the Committee has the discretion to use a range of performance targets. Performance
targets for performance awards will be those deemed appropriate by the Committee to support the long
term strategy of the group set at the time of grant and in the best interests of the Company. For recent
performance awards the Committee has used profit, cash flow, EPS and TSR in various combinations of
each.
Provisions for Recovery or Withholding of
Payment
If, during the preparation of the current year’s
accounts, a material misstatement of the previous
year’s accounts is discovered, a clawback of the
awards granted in respect of the misstated element
of the previous year’s accounts shall apply. Leavers
are treated as set out in the section of this report
titled Policy on Payment for Loss of Office.
55
All employee share incentive plans
Purpose and Link to Strategy:
To encourage share ownership by all employees in the group and increase alignment with shareholders.
LUXFER HOLDINGS PLC
Operation:
The UK all employee share incentive plan is an HMRC approved plan, subject to prescribed
limits, to provide all eligible employees (including executive directors) with a tax-efficient way of
purchasing regular shares out of monthly savings over a 6 monthly accumulation period. The
Company currently provides 1 matching share free for every 2 share purchased.
A tax-efficient share purchase program is offered to our US colleagues, and additional share
incentive schemes may be offered where practical on a cost-efficient basis.
Maximum Opportunity:
Participants in the UK plan, including the executive
directors, can invest up to £150 per month (£1,800 p.a.) or
10% of salary, if lower, in any tax year to purchase regular
stock shares. Regular shares are purchased using the
participants’ contributions at the end of each accumulation
period at the lower of the price at the start of the
accumulation period and the price immediately before
purchase. The maximum number of shares matched is 1:1,
but the matching is currently 1:2. Dividends on both
purchased shares and matching shares are used to
purchase additional shares.
The plan or plans implemented for other jurisdictions in
which the Group operates may have maximum opportunity
commensurate with the UK plan or their legislation if
deemed appropriate by the Committee.
Provisions for Recovery or Withholding of
Payment:
Under the UK plan, matching shares are forfeited if
not held for 3 years except if the participant leaves
employment as a good leaver through redundancy,
retirement, disability, or TUPE transfer.
Performance Metric:
None
Non-Executive Directors
Fees
Operation:
Purpose and Link to Strategy:
Reflects the time commitment required for the role.
To attract and retain executive directors with the skill set and experience required by the Company.
To be in line with UK and US market practice.
Maximum Opportunity:
There is no prescribed maximum for the cash element for
the fees to avoid setting expectations. Fees are and will be
increased in line with the market.
Non-Executive Directors serving for at least six months
from appointment receive share based fee awards valued
at up to 55% of annual fees at date of award.
Fees may be paid in cash, shares or a combination of both cash and shares.
Neither the Board Chairman nor the Non-Executive Directors are paid supplemental fees for any
of their committee responsibilities, however, the discretion is reserved to do so if it is deemed
appropriate and in line with market practice.
The cash element of the fees is reviewed annually. Reviews take account of a variety of
different factors including:
- Inflation, market rates, affordability, remuneration levels and increases in the rest of the
Group;
- Pay and practices in both the US and the UK.
Non-Executive Directors may choose to forgo annual or periodic increases to their cash fee, in
lieu of an equivalent value of share awards at their individual discretion.
Fees for the Non-Executive Directors and Chairman are denominated in USD.
The share based element of the fees is a non-discretionary grant of share awards in the form of
options, restricted stock or restricted stock units.
Awards are made annually immediately after the Annual General Meeting (AGM) and vest the
day before the following years AGM.
Differences between Policy for Directors and Employees
There are differences in the remuneration policy for Executive Directors and the approach to remuneration of
other employees which reflect differing levels of responsibility and seniority within the organization and market
norms in the jurisdictions in which the employees are employed. The following are differences in the remuneration
policy for Executive Directors and the approach to remuneration for other employees generally:
• The bonus arrangements for the executives, directors and senior, middle and lower management are
structured broadly on the same basis to ensure commonality of objectives but at a lower percentage level
depending on the seniority of the manager in the group. There is a greater emphasis on performance-
56
LUXFER HOLDINGS PLC
related pay for management levels, and lower levels of bonus opportunity or no bonus opportunity may
apply to other employees in the group, depending on local policies;
• Benefits are generally offered that meet market norms in the jurisdiction in which employees are employed
and take into account the position in which they are employed;
• Pension arrangements are offered where it is the market norm to offer such arrangements in the jurisdiction
in which the employee is employed. Where such arrangements are in place membership is encouraged.
Where local regulation permits, higher contributions may be put in place for more senior management if
that is the market norm. The main pension plans that the group operates are described in Note 29 of the
financial statements;
• Participation in the LTiP is limited to Executive Directors and a selected number of senior officers and
senior managers. At the discretion of the Committee, market value share awards or time-based share
awards may be awarded to employees in recognition of outstanding performance or achievement and to
encourage share ownership and retention. U.K. employees, if eligible, can participate in the U.K. SIP.
Approach to Recruitment Remuneration
Executive Directors
When setting a remuneration package for new Executive Directors, including internal promotions, the Committee
will apply similar principles to those set out in the most recent approved remuneration policy for both short term
and long term incentives depending on the experience of the new executive. The table below sets out the
maximum variable pay opportunities.
Maximum Variable Pay Opportunities
Element of
Remuneration
Base salary
Approach
Set in line with policy at a level appropriate to the role and experience of the new
executive. This may include, if appropriate, an agreement to increase base salary
over a defined period up to a pre-defined level on acquiring experience and having
delivered satisfactory performance in the role, in which case the salary increases
may exceed inflation or increases given to the general work force in the country in
which the executive is based.
Maximum Opportunity
In line with existing policy.
Benefits
Pension
In line with existing policy.
In line with existing policy.
In line with existing policy.
In line with existing policy.
Annual Bonus
In line with existing policy. May be pro-rated to reflect the proportion of the year served. In line with existing policy
Long-term Incentives
In line with existing policy.
In line with existing policy
Upon Appointment
In relation to external appointments, the Committee may consider compensating candidates in cash or shares
for remuneration relinquished on leaving their former employment if they consider it to be in the best interests of
the Company and the shareholders. In considering such payments, the Committee would take into consideration
the amount of remuneration forgone, the nature, vesting dates and performance requirements attached to the
remuneration foregone.
In respect of internal promotions, any commitments made to the new executive before his/her promotion will
continue to be honoured by the Committee even if not consistent with the approved policy outlined above in terms
of short term and long-term incentives awarded but yet to be earned.
New Executive Directors will be required to hold shares to the value of 150% of their annual basic salary. The
Chief Executive Officer will be allowed a period of three years from date of appointment to acquire this holding.
57
LUXFER HOLDINGS PLC
The Committee may award an incoming Executive Director up to 100% of basic salary in time-based options
outside of the terms of reference of the LTiP. These options would vest in three equal tranches over the three
anniversaries of award.
The Committee may award an incoming Executive Director up to three hundred percent of basic salary in
performance-based options outside of the terms of reference of the LTiP. These options may be made available
in tranches with different performance targets and over a period of up to seven years to allow for the delivery of
strategic objectives. Shares acquired under this element must be retained for a minimum of five years from date
of appointment.
Non-Executive Directors
New Non-Executive Directors will be paid fees on the same basis as the existing Non-Executive Directors. They
will also participate in the Non-Executive Directors Incentive Plan under which the annual awards are non-
discretionary. The form of the award can be in the form of Options, Restricted Stock, or Restricted Stock Units,
given at the discretion of the Board and based on the value of each type of award and the number of shares left
in the plan. The vesting period is in the discretion of what the relevant committee of the Board believes is in the
best interests of the Company.
Service Contracts
Executive Directors
The Company has entered into a service contract with the single current Executive Director that is not for a fixed
term. Executive Directors have service contracts that ordinarily are terminable by twelve months’ notice by either
the Company or the director, which notice can be given at any time. The Company may terminate an Executive
Director’s contract without notice on the occurrence of certain events identified in their contract which would
normally consist of conduct justifying summary dismissal, including gross misconduct.
Executive Directors’ Service Contracts
Director
Date of Current
Contract
Notice
Period
Remuneration Entitlement
Alok
Maskara
23 May 2017
12 months Payment in lieu of notice in the event of early termination. This may include base salary
benefits and pension payable for the notice period. A bonus may be paid if the period for
which pay in lieu of notice is made extends past the year end subject to targets being met.
Executive Directors have the same employment rights as any other employee in the case of redundancy or if the
termination of their employment was determined by a relevant tribunal to be unfair under English law.
In the event of a change in control, and their contract is not assumed by the acquiring entity or a materially
different position is offered to Executive Directors, on termination of their contract a severance payment based
on the group standard severance policy will be payable, but calculated by doubling the highest annual base salary
prior to the change of control instead of using the last twelve months’ salary under their normal notice provisions.
The LTiP provisions provide that upon a change in control, all unvested time-based awards will fully vest and
become exercisable as applicable and unless determined by the Committee, shall lapse on the first anniversary
of the change of control if not exercised as applicable. Under the rules of the LTiP all performance-based awards
will vest pro-rata based on the performance results to the date of change and the elapsed portion of the
performance period.
58
LUXFER HOLDINGS PLC
Service agreements for new recruits to the Board and internal promotions will be on the same basis as the current
Executive Director with no fixed term and will be terminable by either party on twelve months’ notice. Executive
Directors may make provision, at the discretion of the Company for pay in lieu of notice for early termination
which will include base salary, benefit and pension contributions and may include payment of the annual bonus.
They may also make provision for similar change of control provisions as offered to the current Executive Director
if the Committee considers it is market practice or in the best interests of the Company.
Non-Executive Directors
The Company has entered into letters of appointment with the Non-Executive Directors and the Chairman that
are not for a fixed term.
Non-Executive Directors’ Letters of Appointment
Date of Current Letter
of Appointment
Notice Period and Entitlement to Fees
Joseph Bonn
28 February, 2007
David Landless
20 February, 2013
3 months, except if the director fails to be re-elected at an AGM when the
contract terminates immediately without notice or compensation.
3 months, except if the director fails to be re-elected at an AGM when the
contract terminates immediately without notice or compensation.
Brian Kushner
24 May, 2016
3 months, except if the director fails to be re-elected at an AGM when the
contract terminates immediately without notice or compensation.
Adam Cohn
18 July, 2016
3 months, except if the director fails to be re-elected at an AGM when the
contract terminates immediately without notice or compensation.
Clive Snowdon
29 July, 2016
3 months, except if the director fails to be re-elected at an AGM when the
contract terminates immediately without notice or compensation.
The Chairman and the Non-Executive Directors do not have any employment rights. New appointees to the
Board will generally be appointed on the same basis as the current Non-Executive Directors.
Directors’ service agreements and letters of appointment are available for inspection at the registered office of
the Company.
Policy on Payment for Loss of Office
Contractual entitlements to the date of termination will be honoured and the Company will pay any amounts it is
required to pay in accordance with the Directors statutory employment or contractual rights and to settle those
rights. The Company will seek to apply the principles of mitigation to ensure it is not paying more than is required.
In the event of a compromise or severance agreement, the Committee may make payments it considers
reasonable in settlement of potential legal claims. It may include in such payments reasonable incidental and
professional fees paid by a director.
There is generally no entitlement to annual bonus on cessation of employment for leavers in the first half of the
calendar year. Good leavers in the second half of the calendar year may, at the Committee's discretion, be
retrospectively paid a time pro-rated bonus. Leavers departing after the year-end, but before completion of the
audit, will be paid the actual bonus earned on the normal bonus payment date. Leavers are not eligible for bonus
payments if they are in breach of any obligations of their contract of employment, including the period of notice
On termination of employment, outstanding share awards will be treated in accordance with the relevant plan
rules:
59
LUXFER HOLDINGS PLC
LTiP: The default treatment under the LTiP is that subject to the Committee’s discretion, after a participant ceases
to be employed by the Company, for any reason other than termination for Cause, all unvested time-based awards
will immediately lapse or be forfeited and all vested unexercised options and stock appreciation rights (SARs)
will lapse on the first anniversary of the date of leaving. In the case of termination of the participant’s employment
for Cause, all time-based awards will immediately lapse or be forfeited as at the date of termination and all
unexercised options will immediately lapse or be forfeited as at the date of termination. If employment of a
participant is terminated for any reason, other than for Cause, performance-based awards will vest on a pro-rated
basis based on the performance results to the date of termination. In case of termination of employment for
Cause, all unvested performance-based awards will lapse as of the date of termination.
IPO Options: The default treatment under the I.P.O. standalone option grants for both Executive and Non-
Executive Directors is that subject to the relevant Committees’ discretion, after a participant's termination of
employment for any reason other than for Cause, the vested unexercised portion of the options will lapse on the
first anniversary of the date of termination unless exercised beforehand. If a participant’s employment is
terminated for Cause, all unexercised options will immediately lapse.
The definition of Cause for both the LTiP and the I.P.O. options is as defined in the participant's service contract
or, if not so defined, would be conduct that would constitute grounds for summary dismissal.
The Committee has the discretion to accelerate vesting and exercise dates, waive conditions to vesting or
exercise or extend exercise periods after termination of employment. The Committee may exercise their
discretion to allow accelerated vesting or extended exercise periods, which discretion it will normally exercise in
such circumstances as long serving directors retiring before the last vesting date or leaving employment through
ill health or redundancy. This graph seeks to demonstrate how pay varies with performance. The graph is
reflective of the remuneration policy that is being presented for approval at the 2018 AGM.
60
LUXFER HOLDINGS PLC
Notes:
1. The base salary of the Executive Directors used is the 2018 confirmed salary in U.S. dollars for the year ending 31 December, 2018.
2. The Remuneration Committee sets bonus targets early in 2018. Annual cash bonus is earned only when Company performance
exceeds a threshold level. ‘On plan’ bonus is generally set to be half the potential and is paid for achievement of the annual budget.
Maximum bonus is earned for hitting a stretch target considerably above the Board-approved budget, and represents exceptional
performance.
3. The LTiP is a combination of performance and time-based awards with targets being set by the Committee. Within each year, there is
a threshold level, an 'on plan’; level, and a stretch level. Performance below the threshold would mean no performance element of the
LTiP would be awarded in the following year. Hitting the plan targets would result in granting total awards at maximum value of 150%
of base salary for the Chief Executive Officer and at 100% of base salary for the Other Executive Director. Each subsequent year’s
target represents a material improvement on the prior-year target. Reaching stretch targets would mean that the Company had
considerably out-performed the Board’s expectations, would result in a maximum granting at 220% of the value of base salary for the
Chief Executive Officer and at 150% of the value of base salary for the Other Executive Director.
4. The above illustration excludes remuneration in the form of taxable benefits and pension contributions.
Consideration of Conditions Elsewhere in the Group
While the major influence in setting the Executive Directors’ pay and benefits is benchmarking of comparable
companies, consideration is given to pay and benefits throughout the Group, so that there is a clear structure of
pay and benefits layer by layer. Benchmarking studies commissioned by the Committee normally include other
senior executive positions. When undertaking annual reviews of basic salary, the general level of cost-of-living
increases throughout the Group is taken into account.
The Committee does not consult with employees when drawing up the Directors’ Remuneration Policy. No
internal comparison metrics were used, but the Committee is aware of average pay and benefits packages within
the Group.
Shareholders’ Views
The Committee take into consideration the views expressed by institutional shareholder bodies when formulating
the terms of the awards to Executive Directors.
Implementation of the Remuneration Policy for the Year Ending December 31, 2018 (Information not
subject to audit)
The proposed Directors’ Remuneration Policy is subject to a binding shareholder vote at the 2018 AGM. If
approved, the Policy will take effect immediately and will continue to apply, unless the Company seeks
shareholder approval for changes to the Policy in the meantime. If shareholders do not vote to approve the
proposed new Policy then the current Policy will continue to apply.
Set out below is a summary of how the proposed Directors’ Remuneration Policy will be applied during the year
ending 31 December 2018.
Base Salary
Alok Maskara (1)
2018
$
2017
$
615,000
365,826
% increase(2)
2.5%
(1)
The 2017 salary of Alok Maskara is for part year only, calculated from his date of appointment. The annualized salary for 2017
is $600,000 per annum.
(2)
The increase in base salaries in 2018 over 2017 was approved by the Remuneration Committee.
61
LUXFER HOLDINGS PLC
Pension Arrangements
The Executive Director will receive a cash supplement calculated at a flat rate of 25% of base salary.
Annual Bonus
In accordance with the proposed Policy, the maximum annual bonus for Alok Maskara, as Chief Executive
Officer, will be capped at 200% of base salary. Included within this is the Additional Percentage Bonus to be
awarded on achievement of specific targets set by the Remuneration Committee. At the start of each year, the
Remuneration Committee reserve the discretion to set the Additional Percentage Bonus and related specific
targets that are aligned with the strategic goals of the Company.
As in previous years, the financial performance target element of the annual bonus will be based on a
combination of two financial performance metrics, management EBITA (previously referred to as management
trading profit) and the ratio of management EBITA to pre-interest cash flow conversion “Cash Conversion”
(previously net cash flow after tax was used as the second performance target). It will be on a sliding scale that
commences only once threshold has been achieved and rises through the target performance up to a stretch
target. For management EBITA; threshold approximates to exceeding prior-year; target is the annual EBITA
budget and stretch is exceeding the annual EBITA budget by at least a 10%. The financial performance award
element of the annual bonus opportunity will be split evenly between the above two financial metrics:
Financial metric annual bonus opportunity
Alok Maskara
Long Term Incentives
Split; sliding scale between threshold,
target and stretch
Management
EBITA
Cash Conversion
0% - 50%
0% - 50%
The Remuneration Committee has then set targets for 2018 which, if attained, would lead to the granting of
nominal cost options for Alok Maskara in 2019. The Committee has set a scorecard of metrics to assess the
performance of the Company based upon Total Shareholder Return (“TSR”) and a Group adjusted EPS. A
greater weighting has been assigned to the attainment of the TSR target which earns 60% of the performance
awards available, compared to the EPS target which has a 40% weighting.
The Remuneration Committee is also proposing that Alok Maskara be granted time-based nominal cost
options, which vest in equal tranches commencing on the first anniversary of the grant date at the value of 40%
of the total target share award available.
The options to be granted in 2019 based on the achievement of 2018 performance will be time-based nominal
cost options which vest in equal tranches, commencing on the first anniversary of the grant date. The grants
will incorporate “claw back” provisions in the event of a material misstatement in the consolidated financial
statements on which the basis of the grant was made. The shares acquired from the granting of the awards to
Alok Maskara must be held for a minimum of three years from the date of grant whether vested or not,
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 in accordance with the proposed Policy is up to 220% of
base salary for the Chief Executive Officer.
62
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 December 31, 2018.
The Board decides the approach to compensating the Non-Executive Directors. As part of the proposed Board
approved Remuneration Policy each Non-Executive Director, at their discretion, can forgo the proposed 2.5%
increase in base fee, effective 1 January 2018, in lieu of equivalent value of share awards, valued at up to 55%
of their annual base fee, at the date of award.
2018
$
2017
$
%
Value of Share
Value of Share
Increase Awards % of Base Fee Awards % of Base Fee
Base Fee
Base Fee Base Fee
2018
2017
Joseph Bonn (1) 98,812-101,282
79,050-81,026
Adam Cohn
79,050-81,026
Brian Kushner
David Landless 79,050-81,026
79,050-81,026
Clive Snowdon
98,812
79,050
79,050
79,050
79,050
2.5%
2.5%
2.5%
2.5%
2.5%
50% - 55%
50% - 55%
50% - 55%
50% - 55%
50% - 55%
(1)
Base fee increase reflects additional supplement for Chairman Fees.
50%
50%
50%
50%
50%
Pending shareholder approval, for 2018, all Non-Executive Directors have elected to receive additional share
awards in the Company and forgo the annual increase to their base fee.
Approval of Report
Brian Kushner, 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:
B G Kushner
CHAIRMAN OF THE RUMENERATION COMMITTEE
March 19, 2018
For and on behalf of the Board
63
LUXFER HOLDINGS PLC
Directors’ Responsibilities Statement
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have prepared the group financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union 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 company and of the profit or loss of the group and company for that period.
In preparing the financial statements, the directors are required to:
Select suitable accounting policies and then apply them consistently;
state whether applicable IFRSs as adopted by the European Union have been followed for the group
financial statements and IFRSs as adopted by the European Union have been followed for the company
financial statements, subject to any material departures disclosed and explained in the financial
statements;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the group and company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the group and company's transactions and disclose with reasonable accuracy at any time the financial position
of the group and company 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 financial statements,
Article 4 of the IAS Regulation.
The directors are also responsible for safeguarding the assets of the group and company 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. Legislation in the
United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the group and 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 company financial statements, which have been prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the
company;
the group financial statements, which have been prepared in accordance with IFRSs as adopted by the
European Union, give a true and fair view of the assets, liabilities, financial position and profit of the
group; and
the Strategic and Directors' Reports includes a fair review of the development and performance of the
business and the position of the group and company, together with a description of the principal risks and
uncertainties that it faces.
64
Independent auditors’ report to the members of Luxfer Holdings PLC
Report on the audit of the financial statements
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 2017 and of the group’s
profit and the group’s and the company’s cash flows for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union and, as regards the company’s
financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which
comprise: the consolidated and company balance sheets as at 31 December 2017; the consolidated income statement and consolidated
statement of comprehensive income, the consolidated and company cash flow statements, and the consolidated and company statements
of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of
our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Our audit approach
Overview
Overall group materiality: $1.5 million (2016: $1.6 million), based on 5% of profit before tax, adjusted
for exceptional items.
Overall company materiality: £1.1 million (2016: £1.3 million), based on 1% of total assets capped at
group materiality.
We conducted audit work across thirteen reporting units in three countries in which the Group has
operations.
The reporting units we audited accounted for 80% of Group revenue and 92% of profit before tax,
adjusted for exceptional items.
Valuation of retirement benefits in relation to defined benefit schemes (Group).
The recoverability of deferred tax assets (Group and parent).
Carrying value of non-current assets (Group and parent).
Inventory costing and valuation (Group).
Restructuring and other expenses (Group).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
65
Key audit matter
How our audit addressed the key audit matter
Valuation of retirement benefits in relation to defined benefit schemes
Refer to pages 81 and 85 within the accounting policies and note 29
of the consolidated financial statements.
The Group operates material defined benefit pension plans principally
in the UK and the US. A net deficit of $55.3m is recognised in the
financial statements.
We focused on this area because the magnitude of the gross pension
plan liabilities, and the associated changes compared to the prior year
balances, are significant in the context of the balance sheet and the
results of the Group.
Measurement of the pension plan liabilities requires a significant level
of judgement and technical expertise in selecting appropriate
assumptions. Changes in key assumptions can have a material impact
on the gross liability recorded.
Group
The recoverability of deferred tax assets
Refer to pages 81 and 85 within the accounting policies, note 23 of
the consolidated financial statements and note 37 of the company
financial statements.
The group has a deferred income tax asset recognised in the balance
sheet of $16.2m relating to trading and capital losses, retirement
benefit obligations and other temporary differences. There is an
inherent level of estimation and judgement in the forecasts used to
assess recoverability of these assets. The company has a deferred
income tax asset recognised in the balance sheet of £8.4m relating to
tax losses and other timing differences and retirement benefit
obligations.
We focused on the judgements made by the directors in assessing the
quantification and the likelihood of recovering these potential assets
and therefore the level that could be recognised.
Group and parent
Carrying value of non-current assets
Refer to pages 79, 83 and 85 within the accounting policies, note 13
of the consolidated financial statements and note 36 in the company
financial statements.
The group has recognised goodwill assets of $59.6m as at 31
December 2017 which are required to be tested for impairment on an
annual basis. The directors have allocated these assets to individual
cash-generating units (‘CGUs’). The company has investments of
£318.3m as at 31 December 2017.
66
Our audit procedures included understanding and evaluating
the controls and processes related to the pension process and
selectively testing those controls we identified as being key and
on which we planned to rely. Testing of controls included
checking sufficient review of the key assumptions and
appropriate approval of any changes to pension plans. No
significant control deficiencies were identified.
For the UK and US defined benefit pension plans, we tested the
reasonableness of key actuarial assumptions as follows:
We compared the discount and inflation rates to our internally
developed benchmarks based on market conditions and
expectations at the balance sheet date;
we assessed other assumptions, including pension increases,
salary increases and mortality rates, based on market conditions
and comparison across the wider pensions industry;
we also tested whether the methods used by the directors to
determine key assumptions had been consistently applied year-
on-year and evaluated the rationale for any changes in
approach. We tested the reconciliation of the opening to closing
liability for accuracy, taking into account the movements in key
assumptions over the year and any changes made to benefits
provided within the plans; and
we have obtained confirmations from fund managers over the
pension asset values and reviewed the validity of pension
scheme member data used.
As part of the procedures above, we have used PwC pensions
as an audit expert supporting the audit team.
The results of our audit work indicated that the valuation of the
retirement benefits held was appropriate.
Our audit procedures included understanding and evaluating
the controls and processes related to the tax process and
selectively testing those controls we identified as being key and
on which we planned to rely. Testing of controls included
checking sufficient review of the key assumptions and
appropriate review of tax estimates and judgements. No
significant control deficiencies were identified.
We obtained a detailed understanding of the Group’s tax
strategy and assessed key tax risks related to business and
legislative developments. Audit work performed has included
reviewing the Group’s deferred tax calculations to assess their
reasonableness in line with relevant tax regulations. We were
satisfied that while complex, the area was well understood and
sufficient focus was place on this risk.
As part of the procedures above we have used PwC Tax as an
audit expert supporting the audit team.
We evaluated the process by which the directors prepared their
cash flow forecasts and compared them against the latest Board
approved forecasts and found them to be consistent. We
evaluated the assumptions used in the profit and cash flow
forecasts in line with our work performed over impairment to
determine the recoverability of deferred tax assets currently
recognised. On this basis we concluded that the directors'
assessment that the deferred tax assets recognised are
recoverable is appropriate.
We evaluated the process by which the directors prepared their
cash flow forecasts and compared them against the latest Board
approved forecasts and found them to be consistent. Our audit
procedures included understanding and evaluating the controls
and processes related to the goodwill process and selectively
testing those controls we identified as being key and on which
we planned to rely. Testing of controls included checking
sufficient review of the key assumptions and appropriate
review of forecast estimates and judgements. No significant
control deficiencies were identified.
There is further judgement around the determination of the
recoverable amount of the CGUs, being the higher of value-in-use and
fair value less costs to dispose. We focused on this area because the
determination of the recoverable amounts involves judgements and
estimates based on the directors’ assessment of the future results and
prospects of the CGUs, the appropriate discount rates and other key
assumptions, including profit and cash flow growth rates in the short
and long term, to be applied and specific risk factors applied to each
CGU.
The Group's goodwill relates to six CGUs each with operations
located in different geographies. Therefore specific considerations
need to be given to macroeconomic and CGU specific risks in
determining the most appropriate assumptions to adopt.
Group and parent
Inventory costing and valuation
Refer to pages 80 and 86 within the accounting policies and note 15
of the consolidated financial statements.
The group holds inventory with a value of $82.2m as at 31 December
2017. There are complexities in the methods used to value inventory
across the various group divisions. Those include judgements in the
labour and overhead cost absorption, and the calculation for reserves
for slow moving/obsolete inventory.
Group
67
We evaluated the historical accuracy of forecasts by comparing
the forecasts used in the prior year value-in-use models to the
actual performance of the CGUs in the current year. These
procedures enabled us to determine the accuracy of the
directors’ forecasting process. When comparing the prior year
forecasts to the actual performance in 2017, we considered why
some forecasts were not met and factored this into other areas
of our work.
We evaluated the assumptions used in the profit and cash flow
forecasts included in the directors’ value in use calculations. We
compared forecast growth rates with historical performance as
well as gaining an understanding of key factors and judgements
applied in determining the future growth rates. We inspected
detailed forecasts for each CGU which provided evidence of
the key drivers for growth included within the profit and cash
flow forecasts.
We assessed the appropriateness of the directors’ discount rates
by comparing the rate used for each CGU to our own
independently determined range of what we would consider to
be acceptable. The discount rates used by directors were
broadly in line with our expectation. We have considered any
changes to the assumptions through our own sensitivity
analysis, and whilst using a higher discount rate would reduce
the headroom within each CGU, it would not result in an
impairment for four of the six CGUs noted being Luxfer Gas
Cylinders, Luxfer MEL Technologies, Luxfer Magtech and
Luxfer Graphic Arts. The changes would cause impairments in
two of the CGUs: Luxfer Superform and Luxfer Czech
Republic.
We have assessed the appropriateness of the assumptions made
in calculating the value of the recognised impairment over the
property, plant and equipment of the Luxfer Czech Republic
CGU. We have assessed the assumptions over the Luxfer
Superform CGU to ensure that it is appropriate for management
not to recognise an impairment.
We challenged the directors on the appropriateness of their
sensitivity calculations and also applied our own sensitivity
analysis to the forecast cash flows and long term growth rates
to ascertain the extent to which reasonable adverse changes
would, either individually, or in aggregate, require the
impairment of goodwill and other intangible assets.
On this basis we concluded that the directors' assessment that
an asset impairment over the plant, property and equipment of
the Luxfer Czech Republic CGU of $2.2m should be
recognised and no other CGU impairment was required to be
appropriate.
Our audit procedures included understanding the processes and
controls related to the inventory costing process. As part of our
involvement in component teams’ work, the Group engagement
team was specifically involved in determining the audit
approach in this area to be satisfied that sufficient focus was
placed on the more judgemental areas. As a result of this
involvement we were satisfied that, whilst complex, the area
was well understood and sufficient focus was placed on this
area of risk.
Audit procedures performed by individual component audit
teams included the following testing on a sample basis:
Evaluating the inventory costing methods including absorption
of overheads and labour recalculating the amounts to ensure
appropriateness;
testing of the cost of raw materials to determine they had been
recognised for the correct amount;
testing of post year-end sales compared to the carrying value of
the inventory to assess valuation at the lower of cost and net
realisable value; and
testing of inventory provisioning including review of ageing
profiles of inventories.
Testing performed highlighted no material differences.
Restructuring and other expenses
Refer to page 82 within the accounting policies and note 5 of the
consolidated financial statements.
The Group has items of restructuring and other income / (expense)
which are disclosed separately within the Consolidated Income
Statement and are excluded from the directors' reporting of the
underlying performance of the Group.
The nature and reporting of these exceptional items is explained
within the Group accounting policy and includes restructuring costs,
gains or losses arising on acquisitions or disposals and gains and
losses resulting from non-recurring and one off events.
This year the Group identified, before taxation, $19.9m of exceptional
costs which relate to:
$12.1m of costs in relation to the rationalization of the
Group;
$3.5m of costs in relation to a patent infringement litigation
which was settled;
$3.7m of costs in relation to non-current asset impairments;
$2.3m of costs incurred in relation to the Group converting
the ADR listing to a direct listing;
The release of an environmental provision in the year giving
a $0.4m credit; and
Net gains on acquisitions and disposals in the year which
gave rise to a $1.3m credit.
Group
We challenged the directors’ rationale for the disclosure of
items outside of ‘Trading Profit’ and assessed such items
against the Group’s accounting policy and consistency of
treatment with prior periods. We considered the items identified
to meet the Group’s definition of these items.
The separate disclosure of expenses relating to the
rationalization of the Group was deemed appropriate due to the
introduction of the new CEO which led to a number of changes
across the Group as part of his plans which are deemed
significant and non-recurring.
Patent infringement litigation costs were due to the settlement
of a litigation over a long-term legal case. This was deemed
outside the normal course of business and in line with the
Group policy.
The non-current asset impairments were caused by the present
value of the free cash flows not covering the enterprise value of
the assets and were deemed non-recurring and significant for
separate disclosure.
The costs incurred as part of the direct listing were deemed
non-recurring and not trade-related and therefore we are
comfortable with management’s disclosure of these items
separately.
The release of the environmental provision is consistent with
the previous items disclosed in relation to the sale of a
redundant site and therefore we are comfortable with
management’s disclosure.
The costs in relation to acquisitions and disposals of businesses
are generally not within the business operations and are
therefore disclosed separately from the trading results of the
business. We are not uncomfortable with this disclosure.
We considered whether there were items that were recorded
within underlying profit that we determined to be ‘exceptional’
in nature and should have been included within ‘exceptional
items’ and found no such items.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which
they operate.
The Group is split into two main reporting divisions being Elektron and Gas Cylinders. These are further split into six business units as
Luxfer Gas Cylinders, Luxfer Superform, Luxfer MEL Technologies, Luxfer Graphic Arts, Luxfer Magtech and Luxfer Czech Republic.
Each business unit has multiple management reporting units in a range of different geographies and is structured mainly across Europe
(UK, France and Czech Republic) and North America (USA and Canada).
Each business unit consists of a number of management reporting units which are consolidated by the Group. The financial statements are
a consolidation of a number of management reporting units representing the Group’s operating businesses within these business units and
the centralized functions.
The management reporting units vary in size and we identified thirteen reporting units from across three countries which required an audit
of their financial information due to their individual size or risk characteristics. These reporting units accounted for 80% of the Group’s
revenue and 92% of the Group’s profit before tax, adjusted for exceptional items.
Ten of the thirteen reporting units were audited by three component auditor teams, with the remaining three audited by the Group
engagement team. The Group engagement team have visited component teams at eight of the reporting units including the largest
overseas component in the U.S., to meet with local management, discuss the audit approach and findings with the local audit team, as
well as attending the audit clearance meetings for the components. For the components not visited, we attended the audit clearance
meetings via conference call and had regular communication with the local teams during their audit. Our attendance at the clearance
meetings, review and discussion of reporting received from local component teams, together with the work performed at a Group level,
gave us the evidence we needed for our opinion on the consolidated financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
68
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Group financial statements
Company financial statements
$1.5 million (2016: $1.6 million).
£1.1 million (2016: £1.3 million).
5% of profit before tax, adjusted for exceptional items.
1% of total assets capped at group
materiality.
Based on the benchmarks used in the annual report, profit before tax is
the primary measure used by the shareholders in assessing the
performance of the group, and is a generally accepted auditing
benchmark. Exceptional items were adjusted for as this provides us with a
consistent year on year basis for determining materiality.
We believe that total assets is the most
indicative measure for the company as a
not-for-profit holding entity however
have capped this at 90% overall group
materiality.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between $250,000 and $1,425,000. Certain components were audited to a local statutory
audit materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $75,000 (Group audit)
(2016: $100,000) and £56,000 (Company audit) (2016: £65,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the group’s and company’s ability to continue to adopt the going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s and company’s
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 and ISAs (UK)
require us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’
Report for the year ended 31 December 2017 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic Report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
69
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
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.
Other required reporting
Companies Act 2006 exception reporting
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
certain disclosures of directors’ remuneration specified by law are not made; or
the company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Graham Parsons (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
March 2018
70
CONSOLIDATED INCOME STATEMENT
All amounts in millions, except share and per share data
REVENUE
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Share of results of joint ventures and associates
TRADING PROFIT
Profit on sale of redundant site
Changes to defined benefit pension plans
Restructuring and other expense
OPERATING PROFIT
Other income / (expense):
Net gain / (loss) on acquisitions and disposals
Finance income:
Interest received
Finance costs:
Interest costs
IAS 19R retirement benefits finance charge
Unwind of discount on deferred contingent consideration from
acquisitions
Total finance costs
PROFIT ON OPERATIONS BEFORE TAXATION
Income tax expense
NET INCOME FOR THE YEAR
Attributable to:
Equity shareholders
Earnings per share:
Basic
Unadjusted
Diluted
Unadjusted
LUXFER HOLDINGS PLC
2017
$M
441.3
(332.7)
108.6
(9.3)
(58.9)
0.1
40.5
0.4
—
(21.6)
19.3
1.3
0.5
(7.2)
(1.8)
(0.2)
(9.2)
11.9
(0.4)
11.5
11.5
2016
$M
2015
$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
16.1
Note
2
14
2
5
5
5
3
5
7
8
8
8
9
10
10
$
$
0.43 $
0.83 $
0.60
0.43 $
0.82 $
0.59
71
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
Deferred income taxes on cash flow hedges
Hedge accounting income / (loss) 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 income / (loss) movements for the year
Total comprehensive income / (loss) for the year
Attributed to:
Equity shareholders
LUXFER HOLDINGS PLC
Note
2017
$M
2016
$M
2015
$M
11.5
21.9
16.1
11.6
3.1
0.6
(0.6)
3.1
(13.1)
1.1
(0.9)
—
0.2
(8.6)
(5.4)
(0.1)
1.1
(4.4)
14.7
(12.9)
(13.0)
9.5
(5.2)
4.3
19.0
30.5
30.5
(21.7)
4.3
(17.4)
(30.3)
(8.4)
4.4
(1.5)
2.9
(10.1)
6.0
(8.4)
6.0
29
23
72
CONSOLIDATED BALANCE SHEET
All amounts in millions, except share and per share data
LUXFER HOLDINGS PLC
December 31,
2017
$M
December 31,
2016
$M
Note
11
12
14
23
16
14
15
16
17
18
18
18
18
18
20
20
20
20
20
21
29
23
25
22
24
24
21
25
25
22
17
125.5
81.7
7.6
16.2
0.3
231.3
1.6
82.2
72.6
1.6
13.3
171.3
402.6
25.3
150.9
56.4
(5.8)
(1.0)
311.4
(0.2)
(46.3)
5.4
(333.8)
162.3
162.3
93.8
55.3
3.6
0.2
1.1
1.9
155.9
61.3
0.3
15.0
0.5
0.3
2.8
4.2
84.4
240.3
402.6
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)
(0.5)
308.1
(3.3)
(57.9)
3.8
(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
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Deferred income tax assets
Trade and other receivables
Current assets
Current investments
Inventories
Trade and other receivables
Income tax receivable
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital
Deferred share capital
Share premium account
Treasury shares
Own shares held by ESOP
Retained earnings
Hedging reserve
Translation reserve
Share based compensation reserve
Merger reserve
Capital and reserves attributable to the Group's equity shareholders
Total equity
Non-current liabilities
Bank and other loans
Retirement benefits
Deferred income tax liabilities
Deferred contingent consideration
Provisions
Trade and other payables
Current liabilities
Trade and other payables
Current income tax liabilities
Bank and other loans
Deferred contingent consideration
Deferred consideration
Provisions
Overdrafts
Total liabilities
TOTAL EQUITY AND LIABILITIES
SIGNED ON BEHALF OF THE BOARD
Alok Maskara
March 19, 2018
Company Registration no. 03690830
73
CONSOLIDATED CASH FLOW STATEMENT
All amounts in millions, except share and per share data
LUXFER HOLDINGS PLC
Note
2017
$M
2016
$M
2015
$M
RECONCILIATION OF CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES
Net income for the year
Adjustments to reconcile net income for the year to net cash flows from continuing operating activities:
Income taxes
Depreciation and amortization
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
3
9
3
5
Property, plant and equipment impairment
Intangible assets impairment
Investment impairment
Other 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
Changes in operating assets and liabilities:
Sale of assets classified as held for sale
(Increase) / decrease in receivables
Decrease in inventories
Increase / (decrease) in payables
Movement in retirement benefits obligations
Movement in provisions
Acquisition approach costs paid
Income taxes paid
NET CASH FLOWS FROM CONTINUING 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
Acquisition and disposal costs paid
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
Extension to long term debt—financing costs
Dividends paid
ESOP cash movements
Proceeds from issue of shares
Treasury shares cash movements
NET CASH FLOWS FROM FINANCING ACTIVITIES
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS
Net foreign exchange differences
Net cash and cash equivalents at January 1
Net cash and cash equivalents at December 31
74
11
12
14
5
6
5
8
14
22
14
25
19
18
17
17
11.5
0.4
19.0
0.1
(0.4)
1.7
6.7
5.0
2.0
2.2
1.8
—
1.8
(1.3)
0.2
(0.1)
—
(9.1)
5.0
9.7
(8.0)
1.1
—
(4.1)
45.2
(9.6)
(1.7)
—
0.1
—
(1.0)
0.1
(5.6)
(0.4)
(18.1)
27.1
(1.9)
(4.3)
0.2
(13.4)
(1.2)
(13.3)
—
—
0.3
(33.6)
(6.5)
2.0
13.6
9.1
21.9
16.1
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
1.7
3.7
4.6
7.7
(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
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
LUXFER HOLDINGS PLC
Ordinary
share
capital
Deferred
share
capital
Share
premium
account
Treasury
shares
Retained
earnings
Note
$M
$M
$M
$M
At January 1, 2015
25.3
150.9
56.2
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
Equity settled share based compensation charges
Arising from issue of share capital
Purchase of own shares
Purchase of shares from ESOP
Utilization of treasury shares
Deferred income taxes on items taken to equity
Exchange movement on ESOP
Other changes in equity in the year
At December 31, 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
Total comprehensive income for the year
Equity dividends
Equity settled share based compensation charges
Purchase of own shares
Purchase of shares into ESOP
Utilization of treasury shares
Utilization of shares from ESOP
Other changes in equity in the year
At December 31, 2016
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
Equity settled share based compensation charges
Purchase of shares into ESOP
Utilization of treasury shares
Utilization of shares from ESOP
Deferred income taxes on items taken to equity
Other changes in equity in the year
19
18
18
18
18
23
18
23
19
18
18
18
18
23
19
18
18
18
23
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
25.3
150.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.2
—
—
—
—
—
0.2
56.4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
25.3
150.9
56.4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1.9)
—
0.6
—
—
(1.3)
(1.3)
—
—
—
—
—
—
—
—
—
(6.3)
—
0.5
—
(5.8)
(7.1)
—
—
—
—
—
—
—
—
—
0.8
0.5
—
—
1.3
At December 31, 2017
25.3
150.9
56.4
(5.8)
$M
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
11.5
—
—
—
9.5
(5.2)
15.8
(13.3)
—
—
0.1
0.1
0.6
(12.5)
311.4
Own
shares
held
by ESOP
$M
Other
Reserves(1)
$M
Total
equity
$M
(0.4)
—
—
—
—
—
—
—
—
—
—
—
0.1
—
—
0.1
0.2
(0.2)
—
—
—
—
—
—
—
—
—
—
(1.0)
—
0.7
(0.3)
(0.5)
—
—
—
—
—
—
—
—
—
(0.8)
—
0.3
—
(0.5)
(1.0)
(365.4)
175.4
—
16.1
(8.6)
(5.4)
(8.6)
(5.4)
(0.1)
(0.1)
—
4.4
1.1
(0.4)
(13.0)
6.0
— (10.8)
0.9
—
—
—
(0.5)
—
—
0.9
0.2
(1.9)
0.1
—
(0.3)
0.1
0.4
(11.7)
(378.0)
169.7
—
(13.1)
21.9
(13.1)
1.1
1.1
(0.9)
(0.9)
— (21.7)
—
4.3
(12.9)
(8.4)
— (13.3)
1.2
—
—
(0.6)
(0.9)
1.2
(6.3)
(1.0)
—
—
(0.3)
(19.4)
(391.2)
141.9
—
11.6
3.1
0.6
—
11.5
11.6
3.1
0.6
9.5
(0.6)
(5.8)
14.7
30.5
— (13.3)
2.6
—
(0.6)
(0.4)
—
1.6
2.6
—
—
—
0.6
(10.1)
(374.9)
162.3
75
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
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 as adopted by the EU (“Adopted IFRSs”), The Companies Act 2006 as applicable to
companies using IFRS, interpretations issued by the International Accounting Standards Board as they apply to
the consolidated financial statements of the Group and interpretations issued by IFRS Interpretation Committee,
for the year ended December 31, 2017. 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 19, 2018, which is the date the consolidated financial statements were authorized by
the Board. The consolidated financial statements were issued on March 19, 2018.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Luxfer Holdings PLC and its
subsidiaries (the "Group") at December 31 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 unrealized 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 December 31, 2015, December 31, 2016 and December 31, 2017.
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 recognized 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.
76
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
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.
A bargain purchase 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 recognized for the non-controlling interest. Any
amount of a bargain purchase is recognized immediately as income.
Contingent consideration arising as a result of a business combination is recognized 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 amortized 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 capitalized and
amortized 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.
Technology and patents
Tradenames and trademarks
Customer relationships
Backlogs and non-compete agreements
Development costs
Software
14 – 20 years
20 – 25 years
10 – 15 years
5 – 6 years
5 – 10 years
4 – 7 years
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
sales tax.
Sale of goods
Revenue for the sale of goods is recognized 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.
77
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1.
Accounting policies (Continued)
Royalties
Royalty revenue is recognized 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.
Tooling revenue
Revenue recognition associated with tooling contracts is recognized 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 recognized 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 summarized as follows:
Freehold buildings
Leasehold land and buildings
Plant and equipment
Including:
Heavy production equipment (including casting, rolling, extrusion and press equipment)
Chemical production plant and robotics
Other production machinery
Furniture, fittings, storage and equipment
Freehold land is not depreciated.
3% – 10%
The lesser of life of
lease or freehold rate
4% – 30%
4% – 6%
10% – 15%
10% – 20%
10% – 30%
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 recognized
in the consolidated income statement as part of the profit or loss on operations before taxation.
An item of property, plant and equipment is derecognized 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 derecognized.
Maintenance costs in relation to an item of property, plant and equipment are expensed as incurred.
78
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
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 realizable 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 labour 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
realizable 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 realizable 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 recognized 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 recognized 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 recognized directly in equity is recognized 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.
79
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
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 are accounted for using the balance
sheet liability method. Deferred income tax liabilities are generally recognized for all taxable temporary
differences. Deferred income tax assets are recognized to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilized. Such assets and liabilities are not
recognized 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.
Deferred income tax liabilities are recognized 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 realized 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
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 recognized 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 recognized 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 recognized 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.
80
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Provisions
Provisions are recognized 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.
Share based compensation
The cost of equity settled transactions is recognized, 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 recognized 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
recognized 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:
• Restructuring of the activities of the Group and reversals of any provisions for the costs of restructuring;
• write-downs of inventories to net realizable 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, but net of bank overdrafts.
81
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
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 recognized at cost and adjusted thereafter to recognize 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 recognize 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 recognizes 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 recognized in the Group's consolidated financial statements only to the extent of unrelated investor's
interests in the joint venture. Unrealized 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 recognized at cost, and the carrying value is increased or decreased to recognize 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 recognized in other comprehensive income is reclassified to profit or loss where
appropriate.
The Group's share of post-acquisition profit or loss is recognized in the consolidated income statement, and its
share of post-acquisition movements in other comprehensive income is recognized 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 recognize 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 recognizes the amount as
'restructuring and other expense' in the consolidated income statement.
the asset transferred. Accounting policies of associates have been changed where necessary to ensure
consistency with the policies adopted by the Group.
82
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Gains or losses resulting from upstream and downstream transactions between the Group and its associate are
recognized in the Group's consolidated financial statements only to the extent of unrelated investor's interests in
the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of
Dilution gains and losses arising in investments in associates are recognized 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 recognized 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 recognized directly in equity and the ineffective portion is recognized 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 recognized directly in equity and the
ineffective portion is recognized in the consolidated income statement. Amounts taken to equity are transferred
to the consolidated income statement when the hedged transaction affects profit or loss.
83
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
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.
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. Further details are given in Note 13.
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 December 31, 2017 are $55.3
million (2016: $66.5 million). Further details are given in Note 29.
Deferred income taxes
Deferred income tax assets are recognized for unabsorbed tax losses and unutilized capital allowances to the
extent that it is probable that taxable profit will be available against which the losses and capital allowances can
be utilized. Judgment is required to determine the amount of deferred income tax assets that can be recognized,
based upon the likely timing and level of future taxable profits together with future tax planning strategies.
Further details are given in Note 23.
84
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
Inventories obsolescence and inventories write down
Inventories are stated at the lower of cost and net realizable value. Inventories are reviewed on a regular basis,
and we will make allowance for excess or obsolete inventories and write down to net realizable value based
primarily on committed sales prices and our estimates of expected and future product demand and related
pricing. Further details are given in Note 15.
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. Further details are given in Note 25.
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
Effective date
IAS 7
IAS 12
Statement of cash flows (Amendments)
Income taxes (Amendments)
January 1, 2017
January 1, 2017
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 January 1, 2018:
International Financial Reporting Standards
Mandatory effective date
IFRS 2
IFRS 15
IFRS 9
IFRS 16
Share based payments (Amendments)
Revenue from Contracts with Customers
Financial Instruments
Leases
The Group applies IFRS as issued by the IASB.
No earlier than January 1, 2018
No earlier than January 1, 2018
No earlier than January 1, 2018
No earlier than January 1, 2019
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—A five step approach will be taken in respect to recognizing revenue. Having undertaken a
detailed review of our material revenue streams within the Group, revenue will continue to be recognized
over the same profile as currently under IAS 18 and therefore there will be no change to the timing of
revenue recognition. Incremental and contract fulfillment costs will need to be assessed on an ongoing
basis, but at present there are no applicable costs. As a result, there is not expected to be any material
difference in our reported revenue numbers under IFRS 15 compared to what is currently reported under
IAS 18;
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
1. Accounting policies (Continued)
LUXFER HOLDINGS PLC
•
•
IFRS 9—Financial assets will continue to be classified and measured at amortized 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, with an
offsetting liability and a depreciation charge and a finance charge would replace the lease expense
charge to operating income, with the latter going through finance costs. The current level of operating
lease commitments is disclosed in Note 26. These will be included within the balance sheet at a
discounted amount, once the standard is adopted. These leases relate to company cars, real property
leases and other vehicles. Low value assets (less than $5,000) and short-term (less than twelve months)
leases do not need to be brought onto the balance sheet in the same way and can continue to be
expensed through the income statement in line with current IAS 17 treatment. An assessment will also
need to be carried out for any implicit leases which we have within any of our contracts.
86
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
2. Revenue and segmental analysis
For management purposes, the Group is organized into two reporting divisions, Gas Cylinders and Elektron.
These divisions are aggregated from the six identified operating segments in the Group; Luxfer Gas Cylinders
and Luxfer Superform aggregate to Gas Cylinders; and Luxfer MEL Technologies, Luxfer Magtech, Luxfer
Graphic Arts and Luxfer Czech Republic aggregate to Elektron. The change in operating segments has come
about with the change of CEO during 2017, and the way the group has been re-organized to reflect the common
elements within the group. 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.
For the purposes of impairment testing, the cash generating units (CGUs) have been assessed to be at the
same level as the operating segments. The tables below set out information on the results of these two
reportable divisions.
Management monitors the operating results of its operating segments 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 CEO, based on trading profit or loss (defined as operating
profit or loss before profits on sale of redundant site, 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 foreign exchange gains) and costs (which comprises interest
costs, IAS 19R retirement benefits finance charge and the unwind of the discount on deferred contingent
consideration from acquisitions), net gain / loss on acquisitions and disposals of businesses, changes to defined
benefit pension plans, restructuring and other expense, other share based compensation charges, depreciation
and amortization 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.
87
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
REPOTING SEGMENTS:
Year ended December 31, 2017
Gas
Cylinders
Elektron Unallocated
$M
$M
$M
Total
Continuing
Activities
$M
Revenue
Segment revenue
Inter-segment revenue
Revenue to external customers
Result
Adjusted EBITDA
Other share based compensation charges
Loss on disposal of property, plant and equipment
Depreciation and amortization
Trading profit—segment result
Profit on sale of redundant site
Restructuring and other expense (Note 5)
Operating profit
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
Other segment information
Segment assets
Segment liabilities
Net assets / (liabilities) employed(2)
Capital expenditure: Property, plant and equipment
Capital expenditure: Intangible assets
220.2
—
220.2
17.3
(1.0)
—
(7.6)
8.7
—
(6.6)
2.1
—
—
—
—
2.1
150.5
(22.6)
127.9
3.5
1.4
221.6
(0.5)
221.1
44.5
(1.2)
(0.1)
(11.4)
31.8
—
(12.7)
19.1
1.3
—
—
(0.2)
20.2
207.6
(22.3)
185.3
5.7
0.3
—
—
—
—
—
—
—
—
0.4
(2.3)
(1.9)
—
(6.7)
(1.8)
—
(10.4)
44.6
(195.5)
(150.9)
—
—
441.8
(0.5)
441.3
61.8
(2.2)
(0.1)
(19.0)
40.5
0.4
(21.6)
19.3
1.3
(6.7)
(1.8)
(0.2)
11.9
(0.4)
11.5
402.7
(240.4)
162.3
9.2
1.7
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
Year ended December 31, 2016
LUXFER HOLDINGS PLC
Gas
Cylinders
Elektron Unallocated
$M
$M
$M
Total
Continuing
Activities
$M
Revenue
Segment revenue
Inter-segment revenue
Revenue to external customers
Result
Adjusted EBITDA
Other share based compensation charges
Loss on disposal of property, plant and equipment
Depreciation and amortization
Trading profit—segment result
Profit on sale of redundant site
Changes to defined benefit pension plans (Note 5)
Restructuring and other expense (Note 5)
Operating profit
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
Other segment information
Segment assets
Segment liabilities
Net assets / (liabilities) employed(2)
Capital expenditure: Property, plant and equipment
Capital expenditure: Intangible assets
225.8
—
225.8
19.7
(0.6)
(0.1)
(7.6)
11.4
—
—
—
11.4
—
—
—
—
11.4
146.8
(21.7)
125.1
6.5
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
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
Year ended December 31, 2015
LUXFER HOLDINGS PLC
Gas
Cylinders
Elektron Unallocated
$M
$M
$M
Total
Continuing
Activities
$M
Revenue
Segment revenue
Inter-segment revenue
Revenue to external customers
Result
Adjusted EBITDA
Other share based compensation charges
Depreciation and amortization
Trading profit—segment result
Changes to defined benefit pension plans (Note 5)
Restructuring and other expense (Note 5)
Operating (loss)/profit
Acquisitions and disposals (Note 5)
Net interest costs
IAS 19R retirement benefits finance charge
Unwind of discount on deferred contingent consideration
from acquisitions
(Loss)/profit on operations before taxation
Tax expense
Net income for the year
Other segment information
Segment assets
Segment liabilities
Net assets/(liabilities) employed(2)
Capital expenditure: Property, plant and equipment
Capital expenditure: Intangible assets
239.1
—
239.1
16.5
(0.7)
(7.2)
8.6
—
(21.9)
(13.3)
(0.2)
—
—
—
(13.5)
158.3
(32.3)
126.0
6.0
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
90
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
GEOGRAPHIC ORIGIN
Year ended December 31, 2017
United
Kingdom
$M
Rest of
Europe
$M
North
America Australasia Asia Total
$M
$M
$M
$M
Revenue
Segment revenue
Inter-segment revenue
Revenue to external customers
Result
Adjusted EBITDA
Other share based compensation charges
Loss on disposal of property, plant and
equipment
Depreciation and amortization
Trading profit/(loss)—segment result
Sale of redundant site
Restructuring and other expense (Note 5)
Operating (loss) / profit
Other geographical segment information
Non-current assets(1)
Net assets employed(2)
Capital expenditure: Property, plant and
equipment
Capital expenditure: Intangible assets
162.6
(23.1)
139.5
16.2
(1.4)
—
(5.9)
8.9
0.4
(14.4)
(5.1)
74.3
10.0
4.4
1.4
48.6
(1.5)
47.1
1.3
—
(0.1)
(2.4)
(1.2)
—
(2.3)
(3.5)
14.2
30.7
0.7
—
275.9
(24.0)
251.9
44.1
(0.8)
—
(10.7)
32.6
—
(4.9)
27.7
142.5
118.8
4.1
0.3
0.1
—
0.1
0.1
—
—
—
0.1
—
—
0.1
—
—
—
—
2.7
489.9
— (48.6)
2.7
441.3
0.1
—
61.8
(2.2)
—
(0.1)
— (19.0)
0.1
—
40.5
0.4
— (21.6)
0.1
19.3
0.3
2.8
—
—
231.3
162.3
9.2
1.7
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
Year ended 31 December, 2016
LUXFER HOLDINGS PLC
United
Kingdom
$M
Rest of
Europe
$M
North
America Australasia Asia Total
$M
$M
$M
$M
Revenue
Segment revenue
Inter-segment revenue
Revenue to external customers
Result
Adjusted EBITDA
Other share based compensation charges
Loss on disposal of property, plant and
equipment
Depreciation and amortization
Trading profit/(loss)—segment result
Sale of redundant site
Changes to defined benefit pension plans
Restructuring and other expense (Note 5)
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
142.6
(28.6)
114.0
17.4
(1.0)
—
(5.7)
10.7
2.1
—
(0.6)
12.2
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
467.7
— (52.9)
3.4
414.8
0.4
—
55.3
(1.4)
—
(0.2)
(0.1)
(18.4)
0.3
—
—
—
0.3
0.2
2.7
—
—
35.3
2.1
0.6
(2.2)
35.8
235.4
141.9
16.5
2.4
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
2. Revenue and segmental analysis (Continued)
Year ended 31 December, 2015
LUXFER HOLDINGS PLC
United
Kingdom
$M
Rest of
Europe
$M
North
America Australasia Asia Total
$M
$M
$M
$M
Revenue
Segment revenue
Inter-segment revenue
Revenue to external customers
Result
Adjusted EBITDA
Other share based compensation charges
Depreciation and amortization
Trading profit/(loss)—segment result
Changes to defined benefit pension plans
Restructuring and other expense (Note 5)
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
145.0
(27.0)
118.0
13.6
(1.0)
(6.1)
6.5
18.0
(8.0)
16.5
67.8
19.7
5.5
1.7
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
511.0
— (50.7)
3.9
460.3
0.6
—
62.2
(1.3)
(0.1)
(18.6)
0.5
—
42.3
18.0
— (22.4)
0.5
37.9
0.3
3.4
—
—
230.2
169.7
15.3
2.1
(1) 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.
GEOGRAPHIC DESTINATION:
United
Kingdom
$M
Rest of
Europe Africa
$M
$M
North
America
$M
South
America
$M
Asia
Pacific
$M
Total
$M
Revenue—Continuing activities
Year ended December 31, 2017
Year ended December 31, 2016
Year ended December 31, 2015
40.7
36.4
53.5
102.9
94.2
98.9
3.0
2.4
2.7
238.7
226.3
245.9
8.6
9.9
13.4
47.4
45.6
45.9
441.3
414.8
460.3
93
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
3. Operating profit
Operating profit for continuing activities is stated after charging/ (crediting):
Research and development expenditure charged to the consolidated income
statement
Development capital expenditure included within non-current assets (Note 12)
Total research and development expenditure
Less development expenditure capitalized within non-current assets
Net research and development
Depreciation of property, plant and equipment (Note 11)
Amortization of intangible assets (Note 12)
Loss on disposal of property, plant and equipment
Operating lease expense (Note 26)
Restructuring and other expense (Note 5)
Net foreign exchange gains
Staff costs (Note 6)
Cost of inventories recognized as expense
2017
$M
2016
$M
2015
$M
6.9
0.9
7.8
(0.9 )
6.9
16.7
2.3
0.1
5.1
21.6 —
— —
120.1
282.9
5.5
2.1
7.6
(2.1)
5.5
16.7
1.7
0.2
4.8
2.2 —
(0.7)
111.7
287.3
5.8
2.5
8.3
(2.5)
5.8
16.6
2.2
—
5.6
22.4
(0.6)
119.0
316.2
4. Fees payable to auditors
The total remuneration of the Group's auditor, PricewaterhouseCoopers LLP and other member firms of
PricewaterhouseCoopers International Limited, for services provided to the Group during the years ended
December 31, 2017, December 31, 2016 and December 31, 2015 is analysed below.
Fees payable to auditors for the audit of the consolidated financial statements
and its subsidiaries
Fees payable to auditors for non-audit services:
Accounting advisory services
Total fees payable
2017
$M
2016
$M
2015
$M
1.3
1.1
0.1
1.4
—
1.1
1.1
—
1.1
Accounting advisory services fees incurred in 2017 relate to an ongoing GAAP conversion project.
The audit fee for the company financial statements of Luxfer Holdings PLC was $0.1 million (2016: $0.1 million
and 2015: $0.1 million).
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
5. Other income/ (expense) items
LUXFER HOLDINGS PLC
(a) Profit on sale of redundant site
Credited to operating profit:
Profit on sale of redundant site
(b) Changes to defined benefit pension plans
Credited to operating profit:
Changes to defined benefit pension plans
(c) Restructuring and other expense
Charged to operating profit:
Rationalization of operations
Patent infringement litigation costs
Direct listing costs
Non-current asset impairments
Receivable impairment provision
I.P.O. related share based compensation charges
(d) Net gain / (loss) on acquisitions and disposals
(Charged)/credited to non-operating profit:
Merger and acquisition costs
Gain on bargain purchase
Remeasurement of deferred contingent consideration
Profit on sale of redundant site
2017
2016
2015
$M
$M
$M
0.4
0.4
2.1
2.1
—
—
—
—
0.6
0.6
18.0
18.0
(12.1)
(3.5)
(2.3)
(3.7)
—
—
(21.6)
(0.9)
1.2
1.0
1.3
(0.4)
(0.6)
—
—
(1.2)
—
(2.2)
(0.3)
—
0.5
0.2
(21.8)
(0.5)
—
—
—
(0.1)
(22.4)
(2.0)
—
—
(2.0)
In 2017, a credit of $0.4 million was recognized in relation to a provision that was no longer required. The
provision was held pending completion of remediation works at the former Redditch site, which was sold during
2016 to a company that specializes in remediating contaminated land. Given the remediation works were
completed at the end of March 2017, it was appropriate to release the provision.
In 2016, a profit of $2.1 million was recognized in relation to the sale of the Redditch site.
Changes to defined benefit pension plans
During 2016, a net credit of $0.6 million was recognized 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.
95
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
5. Other income/ (expense) items (Continued)
In 2015, a credit of $18.0 million has been recognized in relation to changes to the U.K. defined benefit pension
plan effective April 5, 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.
Rationalization of operations
In 2017, $6.6 million of costs were incurred in relation to rationalization costs in the Gas Cylinders Division and
$5.5 million in the Elektron Division. $2.2 million of the charge in the Gas Cylinders Division was in relation to an
impairment of the investment in our associate, Sub 161 Pty Limited, $2.1 million was incurred following the
decision to discontinue our Advanced Oxygen System (AOS) product line and $1.0 million following the
announcement to exit our Luxfer HEI business. These were offset in part by a $0.4 million credit relating to sales
of inventory that was previously written down as part of the closure of our German operation in 2015. In the
Elektron Division, $1.7 million of the charge related to the rationalization of its Magtech operations, which
includes $1.3 million in relation to the write down of land and buildings and $0.6 million related to an onerous
communications contract. There has also been a Group-wide effort to reduce headcount and streamline
management that has resulted in a $1.5 million and $3.0 million charge within the Gas Cylinders and Elektron
Divisions respectively. Other rationalization costs of $0.4 million has been incurred, split evenly between the two
Divisions.
In 2016, $0.4 million of costs were incurred in relation to rationalization costs in the Elektron division.
In 2015, $21.8 million of costs have been incurred in relation to rationalization costs in the Gas Cylinders
Division. The $21.8 million of costs incurred related to the rationalization 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 February 2018, the Company reached an out-of-court settlement with regards to the patent infringement
litigation action taken against a competitor with us agreeing to pay an amount equivalent to $1.6 million. The
settlement has been recognized as an accrual at December 31, 2017. Additionally, our litigation costs incurred
during 2017 were $1.9 million resulting, in a total charge of $3.5 million (2016: $0.6 million and 2015: $0.5
million) all relating to the Elektron Division.
Direct listing costs
In 2017, $2.3 million of costs were incurred in relation to professional fees in connection with our project of
converting our ADR listing to a direct listing of our ordinary shares. The project was successfully implemented in
December 2017.
Non-current asset impairments
In 2017, a charge of $3.7 million has been recognized in relation to non-current asset impairments within the
Elektron Division. $2.2 million of this charge relates to our Czech business, $0.9 million in relation to our North
America business and $0.6 million in relation to our U.K. business.
96
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
5. Other income/ (expense) items (Continued)
Receivable impairment provision
In 2016, $1.2 million was incurred for an impairment charge on receivables in relation to an aerospace customer
that has entered Chapter 11 protection. This was an operating cost item but was separated out within the income
statement with other unusual operating items and included within the 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 was recognized 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.
Merger and acquisition costs
In 2017, acquisition costs of $0.5 million has been recognized in relation to the acquisition of the Specialty
Metals business of ESM Group Inc. In addition, as part of the acquisition, an environmental provision of $0.4
million has been established, with funds placed in escrow, to clean up low level chemical contamination on the
land acquired, with any remaining funds remitted to the seller.
In 2016, a charge of $0.3 million has been recognized 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. $0.2 million of legal costs have also been
incurred in relation to the investment in Sub161 Pty Limited; further details are given in Note 14.
Gain on bargain purchase
In 2017, the Group acquired the trade and assets of the Specialty Metals business of ESM Group Inc., for a total
consideration of $4.6 million. The fair value of the net assets acquired has been assessed at $5.8 million, with a
gain on bargain purchase of $1.2 million recognized. Further details are given in Note 25.
Remeasurement of deferred contingent consideration
In 2017, a credit of $1.0 million (2016: $0.5 million) has been recognized 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 triggers at December 31, 2017 and at December 31, 2016.
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
6.
Staff Costs
Wages and salaries
Social security costs
Retirement benefits costs
IAS 19R retirement benefits finance charge
Redundancy costs: Continuing activities
Share based compensation charges (Note 31)
LUXFER HOLDINGS PLC
2017
$M
2016
$M
2015
$M
96.1
11.0
4.8
1.8
4.5
3.1
121.3
92.2
10.5
4.8
2.1
0.7
1.4
111.7
96.3
11.2
5.9
3.0
1.5
1.1
119.0
The average monthly number of employees during the year was made up as follows:
Production and distribution
Sales and administration
Research and development
2017
No.
1,397
204
57
1,658
2016
No.
2015
No.
1,381
246
60
1,687
1,432
218
56
1,706
The compensation of the members of our Board of Directors (each, a "director") was:
Remuneration (short-term benefits)
Social security costs
Post-retirement benefits
Compensation for loss of office
Total short-term and post-retirement benefits
2017
$M
2016
$M
2015
$M
2.0
0.3
0.2
0.3
2.8
1.5
0.2
0.1
—
1.8
1.7
0.2
0.2
—
2.1
In 2017, compensation of key management personnel for the period they served on the Executive Leadership
Team, (formally, Executive Management Board),(including directors) was $4.7 million (2016: $2.2 million and
2015: $2.6 million) for short-term employee benefits, and $0.3 million (2016: $0.2 million and 2015: $0.4 million)
for post-employment benefits. Social security costs were incurred of $0.5 million (2016: $0.3 million and 2015:
$0.4 million).
During the year, one of the directors was a member of the Group's U.K. registered defined contribution and
defined benefit pension arrangements, another director was a participant in the unfunded unregistered
unsecured retirement benefits arrangement accrued by the Company and another director was a member of the
Group's U.S. registered defined contribution plan.
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. See Note 32 for related party transactions.
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
7. Finance income
Bank interest received
Other interest received
Foreign exchange gains on financing activities
Total finance income
8. Finance costs
Bank and other loan interest payable
Amortization of issue costs
Foreign exchange loss on financing activities
IAS 19R retirement benefits finance charge
Unwind of discount on deferred contingent consideration from acquisitions
Total finance costs
9.
Income taxes
(a) Analysis of taxation charge for the year
Current income taxes:
U.K. corporation tax
Adjustments in respect of previous years
Non-U.K. tax
Adjustments in respect of previous years
Total current tax charge
Deferred income taxes:
Origination and reversal of temporary differences
Adjustments in respect of previous years
Total deferred income taxes (credit) / charge
Tax on profit on operations
The income taxes charges relate to continuing activities.
LUXFER HOLDINGS PLC
2017
$M
2016
$M
2015
$M
0.2
0.3
—
0.5
0.2
0.3
0.7
1.2
0.2
0.3
—
0.5
2017
$M
2016
$M
2015
$M
6.3
0.6
0.3
1.8
0.2
9.2
6.3
0.5
—
2.1
0.4
9.3
6.5
0.9
—
3.0
0.4
10.8
2017
$M
2016
$M
2015
$M
—
(0.3)
(0.3)
6.3
(0.8)
5.2
(5.3)
0.5
(4.8)
0.4
—
0.2
0.2
3.5
—
3.7
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
99
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
9.
Income taxes (Continued)
(b) Factors affecting the taxation charge for the year
The tax assessed for the year differs from the standard rate of 19.25% (2016: 20% and 2015: 20.25%) for
corporation tax in the U.K.
The differences are explained below:
Profit on operations before taxation
Profit on operations at 2017 standard rate of corporation tax in the U.K. of
19.25% (2016: 20% and 2015: 20.25%)
Effects of:
(Income not taxable) / non-deductible expenses
Unprovided deferred income taxes
Foreign tax rate differences
Effect of U.S. tax reform
Adjustment in respect of previous years
Tax expense
2017
$M
2016
$M
2015
$M
11.9
27.9
25.6
2.3
5.6
5.2
0.1
0.3
4.3
(6.0)
(0.6)
0.4
0.2
(2.9)
2.7
—
0.4
6.0
2.4
—
2.6
—
(0.7)
9.5
The 2017 deferred tax credit includes a non-cash accounting adjustment of $6.0 million following the enactment
of U.S. tax reform on December 22, 2017. The non-cash adjustment is due to the reduction in the U.S. federal
corporate income tax rate from 35% to 21%, which necessitated a re-measurement of the existing U.S. deferred
tax position in 2017.
(c) Factors that may affect future taxation charge
At December 31, 2017, the Group had carried forward tax losses of $81.9 million (U.K.: $43.6 million, non-U.K.:
$38.3 million). Carried forward tax losses for 2016 were $72.1 million (U.K.: $35.3 million, non-U.K.: $36.8
million) and for 2015 were $82.9 million (U.K.: $52.9 million, non-U.K.: $30.0 million). To the extent that these
losses are not already recognized as deferred income taxes assets, 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 unrecognized deferred tax assets relating to certain trading and capital losses
and other temporary timing difference of $13.3 million (2016: $12.3 million, 2015: $14.2 million), potentially
available for offset against future profits.
Changes to the U.K. corporation tax rates were substantively enacted as part of Finance Bill 2017 (on
September 6, 2016) to reduce the main rate down to 17% from April 1, 2020. Deferred taxes at the balance
sheet date have been measured using the enacted tax rates and reflected in the Group's consolidated financial
statements at December 31, 2017.
100
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
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 decision to terminate Luxfer Holdings PLC's ADS facility, each £0.50 ordinary share of Luxfer
Holdings PLC are now listed and traded directly on the New York Stock Exchange (NYSE).
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.
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)
Amortization on acquired intangibles
IAS 19R retirement benefits finance charge
Profit on sale of redundant site (Note 5)
Changes to defined benefit pension plans (Note 5)
Restructuring and other expense (Note 5)
Other share based compensation charges
Impact from U.S. tax reform
Income tax thereon
Adjusted net income
Weighted average number of £0.50 ordinary shares:
For basic earnings per share
Exercise of share options
For diluted earnings per share
Earnings per share using weighted average number of
ordinary shares outstanding:
Basic
Adjusted
Unadjusted
Diluted
Adjusted
Unadjusted
2017
$M
2016
$M
2015
$M
11.5
21.9
16.1
0.2
(1.3)
1.2
1.8
(0.4)
—
21.6
2.2
(6.0)
(3.2)
27.6
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
26,460,947
541,223
27,002,170
26,443,662
270,997
26,714,659
26,918,987
453,736
27,372,723
$
$
$
$
1.04 $
0.43 $
1.02 $
0.43 $
0.93 $
0.83 $
0.92 $
0.82 $
1.10
0.60
1.08
0.59
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
11. Property, plant and equipment
LUXFER HOLDINGS PLC
Cost:
At January 1, 2016
Additions
Disposals
Transfers
Exchange difference
At December 31, 2016
Additions
Acquired via acquisition
Disposals
Exchange difference
At December 31, 2017
Accumulated depreciation and
impairment:
At January 1, 2016
Provided during the year
Disposals
Transfers
Exchange difference
At December 31, 2016
Provided during the year
Disposals
Impairment
Exchange difference
At December 31, 2017
Net book values:
At December 31, 2017
At December 31, 2016
At January 1, 2016
Freehold
$M
Long
leasehold
$M
Short
leasehold
$M
Plant and
equipment
$M
Total
$M
56.1
1.9
(3.8)
3.8
(1.6)
56.4
0.9
2.0
(0.1)
3.2
62.4
20.1
2.0
(2.8)
7.9
(0.6)
26.6
2.2
(0.1)
2.5
1.3
32.5
29.9
29.8
36.0
6.4
0.6
—
(0.2)
(0.9)
5.9
0.3
—
(0.1)
0.1
6.2
3.9
0.3
—
(0.5)
(0.6)
3.1
0.3
(0.1)
—
0.2
3.5
2.7
2.8
2.5
10.3
0.5
—
—
(0.3)
10.5
0.9
—
—
0.8
12.2
4.7
0.8
—
0.2
(0.2)
5.5
0.9
—
—
0.3
6.7
5.5
5.0
5.6
314.6
13.5
(23.0)
(3.6)
(25.3)
276.2
7.1
3.2
(4.7)
14.2
296.0
222.7
13.6
(22.8)
(7.6)
(20.0)
185.9
13.3
(4.5)
2.5
11.4
208.6
87.4
90.3
91.9
387.4
16.5
(26.8)
—
(28.1)
349.0
9.2
5.2
(4.9)
18.3
376.8
251.4
16.7
(25.6)
—
(21.4)
221.1
16.7
(4.7)
5.0
13.2
251.3
125.5
127.9
136.0
As at December 31, 2017 and December 31, 2016, no assets were held under finance leases.
Impairment of property, plant and equipment
$2.2 million of the impairment in 2017 relates to the Luxfer Czech Republic operating segment, as a result of the present
value of the free cash flows not covering the enterprise value of the segment. The impairment has been allocated equally
across all asset groups based on their respective net book values. The impairment review was carried out as there were
indicators of impairment at this level.
$1.3 million of the freehold impairment in 2017 relates to the write-down of land and buildings within the Luxfer Magtech
operating segment, as a result of the announced exit from one of our sites. The land and buildings have been written down to
their net realizable value, as determined by an independent valuation specialist.
$1.5 million of the impairment in 2017 relates to the write down of assets across all operating segments as part of an annual
exercise to review the use of our non-current assets. These assets are either no longer in use or are part of a site which we
have announced we are exiting.
Long and short leasehold
The long and short leasehold costs relate to leasehold property improvements.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
12. Intangible assets
LUXFER HOLDINGS PLC
Goodwill
Customer
related
$M
$M
Technology
and trading
related
$M
Development
costs
Software
Total
$M
$M
$M
Cost:
At January 1, 2016
Additions
Disposals
Exchange difference
At December 31, 2016
Additions
Disposals
Exchange difference
At December 31, 2017
Accumulated amortization
and impairment:
At January 1, 2016
Provided during the year
Disposals
Exchange difference
At December 31, 2016
Provided during the year
Disposals
Impairment
Exchange difference
At December 31, 2017
Net book values:
At December 31, 2017
At December 31, 2016
At January 1, 2016
83.4
0.1
—
(8.2)
75.3
—
—
4.1
79.4
21.2
—
—
(2.8)
18.4
—
—
—
1.4
19.8
59.6
56.9
62.2
13.4
0.1
—
—
13.5
—
(0.1)
—
13.4
1.5
0.7
—
(0.1)
2.1
0.9
(0.1)
—
—
2.9
10.5
11.4
11.9
9.3
—
—
(1.3)
8.0
—
—
0.6
8.6
1.8
0.4
—
(0.3)
1.9
0.4
—
0.5
0.2
3.0
5.6
6.1
7.5
4.0
2.4
—
(0.4)
6.0
0.9
—
0.5
7.4
0.1
0.3
—
0.1
0.5
0.7
—
1.5
0.1
2.8
4.6
5.5
3.9
3.5
0.1
(0.6)
(0.3)
2.7
0.8
(0.4)
0.3
3.4
2.0
0.3
(0.3)
—
2.0
0.3
(0.4)
—
0.1
2.0
1.4
0.7
1.5
113.6
2.7
(0.6)
(10.2)
105.5
1.7
(0.5)
5.5
112.2
26.6
1.7
(0.3)
(3.1)
24.9
2.3
(0.5)
2.0
1.8
30.5
81.7
80.6
87.0
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 $4.6 million (2016: $5.5 million) relating to internally generated intangible assets, all
other intangible assets are externally generated.
Impairment of intangible assets
The $0.5 million impairment of technology and trading related intangibles relates to the announcement to exit of
our Luxfer HEI business. The $1.5 million impairment of the development costs has resulted following the
decision to discontinue our Advanced Oxygen System (AOS) product line. These impairments are both within
our Gas Cylinders operating segment.
103
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
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 six identified CGUs (Luxfer Gas Cylinders,
Luxfer Superform, Luxfer MEL Technologies, Luxfer Magtech, Luxfer Graphic Arts and Luxfer Czech Republic)
represent the lowest level within the Group at which goodwill is monitored for internal management reporting
purposes. The six CGUs are aggregated to form the Group's two defined reportable divisions: Gas Cylinders
Division and Elektron Division. The table below summarizes the carrying value of goodwill by division:
At January 1, 2016
Additions
Exchange difference
At December 31, 2016
Exchange difference
At December 31, 2017
Gas Cylinders
Division
$M
Elektron
Division
$M
Total
$M
22.3
—
(3.4)
18.9
1.6
20.5
39.9
0.1
(2.0)
38.0
1.1
39.1
62.2
0.1
(5.4)
56.9
2.7
59.6
The Gas Cylinders Division goodwill of $20.5 million (2016: $18.9 million) includes goodwill attributable to our
Luxfer Gas Cylinders operations of $19.5 million (2016: $17.9 million) and goodwill attributable to our Luxfer
Superform operations of $1.0 million (2016: $1.0 million). During the year, our Elektron Division split operations
from MEL Chemicals and Magnesium Elektron to Luxfer MEL Technologies, Luxfer Magtech, Luxfer Graphic Arts
and Luxfer Czech Republic. The Elektron Division goodwill of $39.1 million (2016: $38.0 million) included
goodwill attributable to our Luxfer MEL Technologies operations of $5.4 million and goodwill attributable to our
Luxfer Magtech operations of $33.7 million, no goodwill is allocated to Luxfer Graphic Arts or Luxfer Czech
Republic. The goodwill figure was allocated based on which operating segments historical acquisitions were
allocated to and the value of the acquired goodwill on those historical acquisitions. As at December 31, 2016, the
goodwill of $38.0 million included goodwill attributable to our MEL Chemicals of $3.9 million and goodwill
attributable to our Magnesium Elektron operations of $34.1 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 3-year
business plan prepared at a detailed level by each CGU. The results of these plans were then extrapolated to
give a terminal value based on a growth rate of 2.1% (2016: 2.1%). The 3-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 8.5% and 10.9% was
used for the individual CGUs (2016: between 10.1% and 10.7% 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 USD: GBP of $1.35 and USD: EUR of $1.19.
104
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
13. Impairment of goodwill (Continued)
Based on the current three-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 with the exception of the Superform operations. For the
Superform operations, the recoverable amount exceeds its carrying amount by $0.3 million, 1.1%. To reduce the
recoverable amount to the carrying amount, the terminal value growth rate would need to reduce by 0.2pp to
1.9%. In addition, by increasing the pre-tax discount rate by 0.2pp to 10.4%, this would have the same impact
and reduce the recoverable amount to the carrying amount. Furthermore, the cash flows derived from the 3-year
business plans would need to fall by $0.3 million to reduce the recoverable amount to the carrying amount. If,
among other factors, the adverse impacts of economic, competitive, regulatory or other factors were to cause
our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that
impairment charges are required in order to reduce the carrying values of our goodwill.
14. Investments
At January 1, 2016
Debt funding
Transfer from trade receivables
Share of results
Exchange difference
At December 31, 2016
Debt funding
Share of results
Impairment
Exchange difference
At December 31, 2017
Shares in joint
ventures
$M
Loans to joint ventures
and associates
$M
Total
$M
2.4
—
—
0.5
(0.2)
2.7
—
0.1
—
0.1
2.9
4.8
(1.0)
3.7
—
(0.2)
7.3
0.9
—
(2.2)
0.3
6.3
7.2
(1.0)
3.7
0.5
(0.4)
10.0
0.9
0.1
(2.2)
0.4
9.2
The loans to joint ventures and associates are repayable in 2018, with interest being charged on $4.7 million at
8.0% and $1.6 million incurring interest at 6.0%.
See section 4.C "Organizational Structure" for a full list of Luxfer Holdings PLC subsidiaries.
Investment in joint ventures and associates
At December 31, 2017, 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.
105
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
14. Investments (Continued)
Name of company
Dynetek Cylinders
India Private Limited
Dynetek Korea Co.
Limited
Luxfer Holdings
NA, LLC
Luxfer Uttam India
Private Limited
Nikkei-MEL Co.
Limited
Sub161 Pty Limited
Country of
incorporation
Holding
Proportion of
voting rights and
shares held
Classification
Nature of
business
India Ordinary shares
49%
Joint venture Engineering
South Korea Ordinary shares
49%
Joint venture Engineering
U.S.
Membership
interest
49%
Joint venture Engineering
India Ordinary shares
51%
Joint venture Engineering
Japan Ordinary shares
Australia Ordinary shares
50%
26.4%
Joint venture Distribution
Associate Engineering
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. An impairment of this investment was
recognized as part of the review of AF assets following this business stream's restructuring. This write-down
would be reversed on any sale or realization 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, this was subsequently extended to July 1, 2018.
During 2017, a further impairment of $2.2 million was recognized in relation to the Sub161 Pty Limited
investment following continued weakness in this sector. The remaining $1.6 million carrying value is based on
the net realizable value of the assets secured against the loan.
The main trading activity in 2017 was in Luxfer Holdings NA, LLC, Luxfer Uttam India Private Limited and Nikkei
MEL Co. Limited.
The Group has made available 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 $4.7 million (2016: $3.8 million) was drawn down at
December 31, 2017.
The share of profits of all joint ventures and associates was $0.1 million (2016: $0.5 million), with no items
recognized in other comprehensive income in 2017 or 2016.
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.
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
15. Inventories
LUXFER HOLDINGS PLC
Raw materials and consumables
Work in progress
Finished goods and goods for resale
December 31,
2017
$M
December 31,
2016
$M
31.0
28.1
23.1
82.2
28.3
30.5
23.7
82.5
Inventories above are disclosed net of any provisions for obsolete and excess inventories. The provision against
obsolete and excess inventories at December 31, 2017 was $8.4 million (2016: $6.5 million). The cost of
inventories recognized as an expense during the year was $282.9 million (2016: $287.3 million). The cost of
inventories written-off during 2017 was $1.6 million (2016: $0.1 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
December 31,
2017
$M
December 31,
2016
$M
0.3
0.3
54.0
1.8
4.2
10.5
2.1
72.6
0.3
0.3
40.5
2.8
3.1
9.4
1.8
57.6
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.
During 2016, a loan for $3.6 million to Sub 161 was converted into a secured loan note. This was subsequently
reclassified into investments (Note 14).
At December 31, 2017, trade receivables with a nominal value of $4.1 million (2016: $2.1 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 January 1
Charge in the year
Utilized in the year
Exchange difference
At December 31
107
2017
$M
2016
$M
2.1
2.7
(0.8)
0.1
4.1
4.8
1.3
(3.6)
(0.4)
2.1
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
17. Cash and cash equivalents
Cash at bank and in hand
Overdrafts
December 31,
2017
$M
December 31,
2016
$M
13.3
(4.2 )
9.1
13.6
—
13.6
In 2017, $0.7 million (2016: nil) of the $13.3 million cash at bank and in hand balance was held in escrow, as
described further in Note 25.
18. Share capital
(a) Ordinary share capital
December 31,
2017
No.
December 31,
2016
No.
December 31,
2017
$M
December 31,
2016
$M
Authorized:
Ordinary shares of £0.50 each
Deferred ordinary shares of
£0.0001 each
Allotted, called up and fully paid:
Ordinary shares of £0.50 each
Deferred ordinary shares of
£0.0001 each
40,000,000
40,000,000
769,423,688,000
769,423,688,000
769,463,688,000
769,463,688,000
27,136,799
27,136,799
769,413,708,000
769,413,708,000
769,440,844,799
769,440,844,799
35.7 (1)
(1)
150.9
186.6 (1)
25.3 (1)
(1)
150.9
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.
108
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
18. Share capital (Continued)
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. The ordinary shares were allotted and issued to satisfy share awards which vested under the
Group's share award and share incentive plans.
At December 31, 2017, there were 25,929,312 ordinary shares of Luxfer Holdings PLC listed on the New York
Stock Exchange (NYSE) following the decision to terminate its ADR facility and to convert outstanding ADSs into
ordinary shares.
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 December 31, 2017, there were no ADSs (2016: 25,180,726 ADSs) of Luxfer Holdings PLC listed on the New
York Stock Exchange (NYSE) following the decision to terminate its ADR facility and to convert outstanding
ADSs into ordinary shares. The Depositary for the ADSs held one £0.50 ordinary share for every ADS traded,
through American Depositary Receipts.
ADS holders were 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 January 1, 2016
At December 31, 2016
At December 31, 2017
$M
56.4
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 January 1, 2016
Purchase of own shares
Utilization of treasury shares
At December 31, 2016
Transfer of treasury shares into ESOP
Utilization of treasury shares
At December 31, 2017
$M
(1.3)
(6.3)
0.5
(7.1)
0.8
0.5
(5.8)
109
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
18. Share capital (Continued)
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 were repurchased under the share buy-back program at a cost of $6.3
million; these repurchased shares are presented as treasury shares. At December 31, 2016, there were 665,424
treasury shares held at a cost of $7.1 million.
During 2017, no ordinary shares were repurchased under the share buy-back program. At December 31, 2017,
there were 527,616 treasury shares held at a cost of $5.8 million.
(e) Own shares held by ESOP
At January 1, 2016
Purchases of shares into ESOP
Utilization of ESOP shares
At December 31, 2016
Transfer of treasury shares into ESOP
Utilization of ESOP shares
At December 31, 2017
$M
(0.2)
(1.0)
0.7
(0.5)
(0.8)
0.3
(1.0)
At December 31, 2017, there were 104,709 ordinary shares of £0.50 each (2016: 55,816 ordinary shares of
£0.50 each) held by The Luxfer Group Employee Share Ownership Plan (the "ESOP").
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
19. Dividends paid and proposed
LUXFER HOLDINGS PLC
Dividends declared and paid during the year:
Interim dividend paid February 4, 2015 ($0.10 per ordinary share)
Interim dividend paid May 6, 2015 ($0.10 per ordinary share)
Interim dividend paid August 5, 2015 ($0.10 per ordinary share)
Interim dividend paid November 4, 2015 ($0.10 per ordinary share)
Interim dividend paid February 3, 2016 ($0.125 per ordinary share)
Interim dividend paid May 4, 2016 ($0.125 per ordinary share)
Interim dividend paid August 3, 2016 ($0.125 per ordinary share)
Interim dividend paid November 2, 2016 ($0.125 per ordinary share)
Interim dividend paid February 1, 2017 ($0.125 per ordinary share)
Interim dividend paid May 3, 2017 ($0.125 per ordinary share)
Interim dividend paid August 2, 2017 ($0.125 per ordinary share)
Interim dividend paid November 1, 2017 ($0.125 per ordinary share)
Dividends declared and paid after December 31 (not recognized as a
liability at December 31):
Interim dividend paid February 3, 2016: ($0.125 per ordinary share)
Interim dividend paid February 1, 2017: ($0.125 per ordinary share)
Interim dividend paid February 7, 2018: ($0.125 per ordinary share)
2017
$M
2016
$M
2015
$M
—
—
—
—
—
—
—
—
3.3
3.3
3.3
3.4
13.3
—
—
—
—
3.4
3.3
3.3
3.3
—
—
—
—
13.3
2.7
2.7
2.7
2.7
—
—
—
—
—
—
—
—
10.8
2017
$M
2016
$M
2015
$M
—
—
3.4
3.4
—
3.3
—
3.3
2.7
—
—
2.7
111
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
20. Reserves
Retained
earnings
Hedging
reserve
Translation
reserve
$M
$M
$M
At January 1, 2015
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
Equity dividends
Equity settled share based compensation charges
Cash settled share based compensation charges
Deferred income taxes on items taken to equity
Utilization of treasury shares
At December 31, 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
Equity dividends
Equity settled share based compensation charges
Utilization of treasury shares
Utilization of ESOP shares
At December 31, 2016
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
Equity dividends
Equity settled share based compensation charges
Utilization of treasury shares
Utilization of ESOP shares
Deferred income taxes on items taken to equity
At December 31, 2017
308.8
16.1
—
—
—
4.4
(1.5)
(10.8)
—
—
(0.3)
(0.1)
316.6
21.9
—
—
—
(21.7)
4.3
(13.3)
—
0.1
0.2
0.9
—
—
(5.4)
(0.1)
—
1.1
—
—
—
—
—
(3.5)
—
—
1.1
(0.9)
—
—
—
—
—
—
308.1
(3.3)
11.5
—
—
—
9.5
(5.2)
(13.3)
—
0.1
0.1
0.6
—
—
3.1
0.6
—
(0.6)
—
—
—
—
—
(36.2)
—
(8.6)
—
—
—
—
—
—
—
—
—
(44.8)
—
(13.1)
—
—
—
—
—
—
—
—
(57.9)
—
11.6
—
—
—
—
—
—
—
—
—
311.4
(0.2)
(46.3)
112
Share based
compensation
reserve
$M
Merger
reserve
$M
3.7
(333.8)
—
—
—
—
—
—
—
1.4
(0.5)
—
(0.5)
4.1
—
—
—
—
—
—
—
1.2
(0.6)
(0.9)
3.8
—
—
—
—
—
—
—
2.6
(0.6)
(0.4)
—
5.4
—
—
—
—
—
—
—
—
—
—
—
(333.8)
—
—
—
—
—
—
—
—
—
—
(333.8)
—
—
—
—
—
—
—
—
—
—
—
(333.8)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
LUXFER HOLDINGS PLC
20. Reserves (Continued)
Nature and purpose of reserves
Hedging reserve
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 December 31, 2017 of $3.1 million (2016: $0.2 million)
includes an increase in the fair value of cash flow hedges of $3.1 million (2016: increase of $1.1 million) and a
gain of $0.6 million of cash flow hedges being transferred to the consolidated income statement (2016: loss of
$0.9 million). This is partially offset by $0.6 million of deferred taxes on items taken to other comprehensive
income. For further information regarding the Group's forward foreign currency exchange rate contracts, forward
aluminum commodity contracts and forward interest rate agreements refer to Note 28 section (a)—Financial
Instruments: Financial Instruments of the Group.
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 recognize the fair value of options and performance shares
granted under IFRS 2. For further information refer to Note 31. The charges in 2015, 2016 and 2017 related to
options over ordinary shares.
During the year, no shares were purchased on the open market on behalf of one of the share based
compensation schemes (2016: no shares 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 recapitalization of Luxfer Group Limited during the year ended December 31,
1999. Pursuant to the recapitalization 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
December 31, 1999 was subsequently renamed LGL 1996 Limited and remains dormant. The recapitalization
was accounted for using merger accounting principles.
The accounting treatment reflected the fact that ownership and control of Luxfer Group Limited, after the
recapitalization, remained with the same institutional and management shareholders as before the
recapitalization. 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.
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
21. Bank and other loans
LUXFER HOLDINGS PLC
Loan Notes due 2018—gross
Unamortized finance costs
Loan Notes due 2018—net
Loan Notes due 2021—gross
Unamortized finance costs
Loan Notes due 2021—net
Loan Notes due 2023—gross
Unamortized finance costs
Loan Notes due 2023—net
Loan Notes due 2026—gross
Unamortized finance costs
Loan Notes due 2026—net
Revolving credit facility—gross
Unamortized finance costs
Revolving credit facility—net
Included in current liabilities
Included in non-current liabilities
December 31,
2017
$M
December 31,
2016
$M
15.0
—
15.0
25.0
(0.1 )
24.9
25.0
(0.3 )
24.7
25.0
(0.3 )
24.7
21.3
(1.8 )
19.5
108.8
15.0
93.8
108.8
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
—
121.0
121.0
On July 31, 2017, an extension to the Senior Facilities Agreement was agreed which provides $150 million in
committed debt facilities, in the form of a multi-currency revolving credit facility, with an additional $50 million of
uncommitted facilities through an accordion facility. The Senior Facilities Agreement was due to mature in April
2019, but has now been extended until the end of July 2022. Finance costs of $1.2 million were capitalized
following this extension and were deemed to be a modification of the existing facility. The Senior Facility
Agreement bears interest equal to a margin based upon the Group's leverage plus either EURIBOR or LIBOR,
depending on the currency drawn down.
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 utilization of the Shelf Facility.
The $25.0 million 7 year private placement will be repayable in full in 2021 and bears interest at a fixed rate of
3.67%.
The maturity profile of the Group's undiscounted contractual payments is disclosed in Note 27.
114
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
22. Provisions
At January 1, 2016
Charged to consolidated income statement
Credited to consolidated income statement
Cash payments
Translation
At December 31, 2016
Charged to consolidated income statement
Credited to consolidated income statement
Cash payments
At December 31, 2017
At December 31, 2017
Included in current liabilities
Included in non-current liabilities
At December 31, 2016
Included in current liabilities
Included in non-current liabilities
Rationalization
and
redundancy
$M
Employee
benefits
Environmental
provisions
$M
$M
Total
$M
2.6
1.4
(0.2)
(3.0)
—
0.8
4.3
—
(3.0)
2.1
2.1
—
2.1
0.8
—
0.8
1.5
—
(0.4)
—
—
1.1
0.5
—
(0.5)
1.1
—
1.1
1.1
—
1.1
1.1
1.2
—
—
(0.3)
(0.2)
0.7
0.4
(0.4)
—
0.7
0.7
—
0.7
0.7
—
0.7
5.3
1.4
(0.6)
(3.3)
(0.2)
2.6
5.2
(0.4)
(3.5)
3.9
2.8
1.1
3.9
1.5
1.1
2.6
Rationalization and redundancy
At December 31, 2017, the Group had $2.1 million of provisions relating to redundancy and the rationalization of
its operations (2016: $0.8 million). $1.3 million (2016: $0.3 million) and $0.8 million ($2016: $0.5 million) of this
provision in 2017 related to the Elektron and Gas Cylinders divisions respectively. Of the $1.3 million within the
Elektron division, $0.6 million related to an onerous contract and $0.5 million to the rationalization of its Magtech
operations.
Employee benefits
At December 31, 2017, 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 in the U.S. (2016:
$1.1 million).
Environmental provisions
At December 31, 2017, the Group had environmental provisions totaling $0.7 million relating to environmental
clean-up costs (2016: $0.7 million). $0.4 million relates to a provision for disbursement of environmental liabilities
as part of the acquisition of the trade and assets of the Specialty Metals business of ESM Group Inc., $0.2
million relates to work required at the U.K. Elektron division site and $0.1 million relates to work required at a
Elektron business in the U.S. acquired during 2014.
115
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
23. Deferred income taxes
Accelerated
tax
depreciation
$M
Other
temporary
differences
$M
Tax
losses
$M
Retirement
benefit
obligations Total
$M
$M
At January 1, 2016
Credited/(charged) to consolidated
income statement
Credited to other comprehensive income
Exchange difference
At December 31, 2016
Credited/(charged) to consolidated
income statement
Charged to other comprehensive income
Credited to equity
Exchange difference
At December 31, 2017
(11.0)
0.1
—
—
(10.9)
5.2
—
—
—
(5.7)
5.1
(2.1)
—
(0.2)
2.8
(1.0)
(0.6)
0.6
0.2
2.0
4.7
0.9
—
(0.5)
5.1
—
—
—
0.3
5.4
13.3
12.1
(1.2)
4.3
(1.7)
14.7
0.6
(5.2)
—
0.8
10.9
(2.3)
4.3
(2.4)
11.7
4.8
(5.8)
0.6
1.3
12.6
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:
Deferred income tax liabilities
Deferred income tax assets
Net deferred income tax assets
December 31,
2017
$M
December 31,
2016
$M
(3.6 )
16.2
12.6
(4.9)
16.6
11.7
At the balance sheet date, the Group has unrecognized deferred income tax assets relating to certain trading
and capital losses and other temporary differences of $13.3 million (2016: $12.3 million) potentially available for
offset against future profits. No deferred income tax assets have been recognized in respect of this amount
because of the unpredictability of future qualifying profit streams in the relevant entities. Of the total
unrecognized deferred income tax assets of $13.3 million (2016: $12.3 million), $10.3 million (2016: $8.8 million)
relates to losses that can be carried forward indefinitely under current legislation and the remaining $3.0 million
(2016: $3.5 million) are due to expire between 2028 and 2034.
At the balance sheet date, there were unremitted earnings of overseas subsidiaries and joint ventures and
associates of $42.7 million (2016: $54.9 million), for which there are no deferred income tax liabilities recognized
or unrecognized (2016: $nil).
The 2017 deferred tax credit includes a non-cash accounting adjustment of $6.0 million following the enactment
of U.S. tax reform on December 22, 2017. The non-cash adjustment is due to the reduction in the U.S. federal
corporate income tax rate from 35% to 21%, which necessitated a re-measurement of the existing U.S. deferred
tax position in 2017.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
24. Trade and other payables
LUXFER HOLDINGS PLC
Non-current Liabilities
Accruals
Derivative financial instruments
Current Liabilities
Trade payables
Other taxation and social security
Accruals
Interest payable
Derivative financial instruments
December 31,
2017
$M
December 31,
2016
$M
1.5
0.4
1.9
28.4
1.3
29.7
0.4
1.5
61.3
—
0.6
0.6
24.0
1.3
20.4
0.2
5.2
51.1
The directors consider that the carrying value of trade payables approximates to their fair value.
25. Acquisitions
On December 5, 2017, the Group acquired the trade and assets of the Specialty Metals business of ESM Group
Inc., incorporating a manufacturing facility in Saxonburg PA. The plant manufactures a range of magnesium-
based chips, granules, ground powders and atomized powders. The acquired business will be integrated with
Luxfer’s existing business that currently offers similar products under the Luxfer Magtech brand. On closing, an
initial consideration of $4.3 million was paid as well as an amount placed in general escrow of $0.3 million as
deferred consideration. There was a further $0.4 million placed in escrow for disbursement of environmental
liabilities which has not been included as part of the purchase consideration.
The fair value of net assets acquired has been assessed as $5.8 million, resulting in a gain on bargain purchase
of $1.2 million. The principal assets acquired are land and buildings, $2.0 million, plant and equipment, $3.2
million and inventory, $0.7 million, with assumed liabilities of $0.1 million. No separately identifiable intangibles
have been identified. There gain on bargain purchase resulted because the Specialty Metals business was not
considered to be part of ESM Group's core business activities as it has adopted a strategy to focus on its steel
industry customers. In implementing this strategy, ESM Group was eager to divest this non-core business, which
was reflected in the transaction price. The Group believes that it can extract additional value from the site due to
synergies with our existing Luxfer Magtech business.
In addition to the purchase consideration, $0.3 million of acquisition costs were incurred and a $0.4 million
provision was set up for the disbursement of the environmental liabilities.
On April 29, 2016, the Group acquired a business, Canland UK (Hotpack) Limited ("Canland") specializing in the
assembly, packing, distribution and export of self-heating meals and import and distribution of flameless ration
heaters. 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 recognized for $0.1 million, goodwill for $0.1 million was
also recognized 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 were expected to arise.
Following the Group-wide rationalization which took place during 2017, the operation was closed and sold for
consideration of $0.1 million.
117
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
25. Acquisitions (Continued)
Deferred consideration
The deferred consideration for the acquisition of the Specialty Metals business was shown in the balance sheet
at December 31, 2017 at $0.3 million.
The deferred consideration for Luxfer Utah was fixed and all of it was paid on March 31, 2017. The deferred
consideration was shown in the balance sheet at December 31, 2016 at $1.3 million.
Deferred contingent consideration
The deferred contingent consideration for Luxfer Magtech is linked to 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 December 31, 2017 at $0.7 million (2016: $1.5 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 $1.0
million (2016: credit of $0.5 million), net of an unwind of discount on deferred contingent consideration of $0.2
million (2016: $0.2 million). $0.5 million of the $0.7 million consideration is deemed to be current as it is based
on the performance of Luxfer Magtech for the year ending December 31, 2017. The potential undiscounted
future payment has been estimated at $0.7 million. The maximum undiscounted amount payable under the sale
agreement is $10.0 million.
Net cash flows on purchase of business:
Included in net cash flows from investing activities:
Consideration paid
Deferred consideration paid
Cash receipt on disposal of business
Cash acquired
26. Commitments and contingencies
December 31,
2017
$M
December 31,
2016
$M
4.3
1.4
(0.1)
—
5.6
0.5
—
—
(0.2)
0.3
December 31,
2017
$M
December 31,
2016
$M
December 31,
2015
$M
Operating lease commitments—Group as a lessee
Minimum lease payments under operating leases recognized in
the consolidated income statement
5.1
4.8
5.6
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
December 31,
2017
$M
December 31,
2016
$M
December 31,
2015
$M
5.4
14.5
14.5
34.4
4.6
11.8
10.7
27.1
4.9
13.5
12.4
30.8
118
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
26. Commitments and contingencies (Continued)
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 December 31, 2017, the Group had capital expenditure commitments of $0.6 million (2016: $3.6 million and
2015: $3.1 million) for the acquisition of new plant and equipment.
Contingencies
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.
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 Chief Financial Officer, oversees the implementation of the Group's
hedging policies, including the risk management of currency and aluminum 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, aluminum 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 December 31, 2017, this would impact the interest cost
by approximately $0.2 million.
Total debt and debt funding to joint ventures and associates, at December 31, 2017, all related to fixed interest
rate debt and so there was no interest rate risk at that date.
119
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
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 6 and 18 months forward. The Group also prepares, at least annually, a longer-term
strategic cash forecast. 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 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 September 30,
2011 to December 31, 2017.
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 summarizes the maturity profile of the Group's financial liabilities at
December 31, based on contractual payments.
December 31, 2017
December 31, 2016
Loan Notes due 2018
Loan Notes due 2021
Loan Notes due 2023
Loan Notes due 2026
Revolving credit facility
Deferred contingent
consideration
Deferred consideration
Trade payables
Accruals
Interest payable
Derivative financial instruments
Overdrafts
Within
12
months
$M
1-5
years
> 5
years
$M
$M
Within
12
months
$M
Total
$M
15.0
—
—
—
—
0.5
0.3
28.4
29.7
0.4
1.5
4.2
80.0
—
25.0
—
—
21.3
0.2
—
—
1.5
—
0.4
—
—
—
25.0
25.0
—
—
—
—
—
—
—
—
15.0
25.0
25.0
25.0
21.3
0.7
0.3
28.4
31.2
0.4
1.9
4.2
—
—
—
—
—
—
1.3
24.0
20.4
0.2
5.2
—
48.4
50.0
178.4
51.1
1-5
years
> 5
years
$M
—
—
25.0
25.0
—
—
—
—
—
—
—
—
$M
15.0
25.0
—
—
32.8
1.5
—
—
—
—
0.6
—
74.9
Total
$M
15.0
25.0
25.0
25.0
32.8
1.5
1.3
24.0
20.4
0.2
5.8
—
50.0
176.0
The table below summarizes the maturity profile of the Group's financial liabilities at December 31 based on
contractual undiscounted payments. Interest rates on the Group's variable rate debt have been based on a
forward curve.
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
LUXFER HOLDINGS PLC
Undiscounted contractual maturity of financial liabilities:
Amounts payable:
Within 12 months
1-5 years
> 5 years
Less: future finance charges
Capital risk management
December
31, 2017
$M
December
31, 2016
$M
84.5
63.6
54.9
203.0
(24.6)
178.4
56.4
90.5
57.4
204.3
(28.3)
176.0
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;
• Optimizing shareholder return; and
• 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
ratio. The table below sets out the calculations for 2017, 2016 and 2015:
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
LUXFER HOLDINGS PLC
For continuing operations:
Operating profit
Deduct:
Profit on sale of redundant site (Note 5)
Changes to defined benefit pension plans (Note 5)
Add back:
Restructuring and other expense (Note 5)
Loss on disposal of property, plant and equipment
Other share based compensation charges
Depreciation and amortization
Adjusted EBITDA
Bank and other loans
Total debt
Less: Cash and cash equivalents
Add: Overdrafts
Add: Restricted cash
Net debt
Net debt: Adjusted EBITDA ratio
Reconciliation of net debt
2017
$M
2016
$M
2015
$M
19.3
(0.4)
—
21.6
0.1
2.2
19.0
61.8
108.8
108.8
(13.3)
4.2
0.7
100.4
1.6x
35.8
37.9
(2.1)
(0.6)
—
(18.0)
2.2
0.2
1.4
18.4
55.3
121.0
121.0
(13.6)
—
—
107.4
1.9x
22.4
—
1.3
18.6
62.2
131.6
131.6
(36.9)
—
—
94.7
1.5x
Cash at bank
and in hand
Overdrafts
$M
$M
Bank and other
loans due
within one year
$M
Bank and other
loans due after
one year
$M
Total
$M
Net debt at January 1, 2016
Cash flows
Foreign exchange adjustments
Other non-cash movements
Net debt at January 1, 2017
Cash flows
Reclassification
Foreign exchange adjustments
Restricted cash
Other non-cash movements
Net debt at December 31, 2017
(36.9)
21.4
1.9
—
(13.6)
6.5
(4.2)
(2.0)
0.7
—
(12.6)
—
—
—
—
—
—
4.2
—
—
—
4.2
—
—
—
—
—
—
14.9
—
—
0.1
15.0
131.6
(9.0)
(2.1)
0.5
121.0
(14.5)
(14.9)
1.7
—
0.5
94.7
12.4
(0.2)
0.5
107.4
(8.0)
—
(0.3)
0.7
0.6
93.8
100.4
122
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
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 sales are
also protected through the use of credit insurance. At December 31, 2017, the Group has a provision for bad and
doubtful debtors of $4.1 million (2016: $2.1 million) and a charge of $2.7 million (2016: $1.3 million) has been
made to the consolidated income statement in relation to bad debts recognized in 2017.
The analysis of trade receivables that were past due but not impaired is as follows:
Neither
past due
nor
impaired
$M
37.3
33.4
Total
$M
54.0
40.5
Past due but not impaired
< 31
days
$M
11.0
5.5
31-60
days
$M
61-90
days
$M
91-121
days
$M
> 121
days
$M
3.2
1.0
1.7
0.5
0.8
0.1
—
—
At December 31, 2017
At December 31, 2016
The Group also monitors the spread of its customer base with the objective of trying to minimize exposure at a
Group and divisional level to any one customer. The top 10 customers in 2017 represented 25% (2016: 27% and
2015: 27%) of total revenue. There were no customers in 2017, 2016 or 2015 that represented over 10% of total
revenue.
Foreign currency translation risk
With substantial operations in 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 2017 the
Group had revenue of $139.5 million derived from U.K. operations, an operating loss of $5.1 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 amortization, an adjusted EBITDA
of $16.2 million. During 2017, the average exchange rate for GBP sterling was £0.7682 compared to the 2016
average of £0.7438. This resulted in a negative impact of $4.4 million on revenue, $0.2 million on operating profit
and $0.5 million on adjusted EBITDA. Based on the 2017 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 $8.5
million in revenue, $0.3 million in operating loss and $1.0 million in adjusted EBITDA.
The capital employed at December 31, 2017 in the U.K. was $81.8 million translated at an exchange rate of
£0.7401. A £0.05 change in exchange rates would change capital employed by approximately $5.2 million.
During 2017, the average exchange rate for the Euro was €0.8788, compared to the 2016 average of €0.9061.
This resulted in a positive impact of $0.9 million on revenue, nil on operating profit and $0.1 million on adjusted
EBITDA. Based on the 2017 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 $1.5 million in revenue, no change to operating
profit and $0.1 million in adjusted EBITDA.
123
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
27. Financial risk management objectives and policies (Continued)
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 $14.0 million net sales risk after offsetting raw material
purchases made in U.S. dollars and a substantial Euro sales risk, with approximately $54.0 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 2017 our Elektron division has incurred a transaction gain of $5.6 million, and
the transaction impact at our Gas Cylinders division was a gain of $2.4 million.
Based on a $14.0 million net exposure to the U.S. dollar, a $0.10 increase in exchange rates would have a $1.1
million annual decrease in Group operating profit and based on a €54.0 million Euro sales risk a €0.10 increase
in exchange rates would have a $5.5 million annual decrease in Group operating profit.
Commodity price risks
The Group is exposed to a number of commodity price risks, including primary aluminum, 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 aluminum and
magnesium and the Group will spend annually approximately $80 million to $100 million on these two raw
materials.
Unlike the other major commodities purchased, aluminum 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 2017 the
Group purchased approximately 12,500 metric tons of primary aluminum. The processed waste can be sold as
scrap aluminum at prices linked to the LME price. The price risk on aluminum is mitigated by the use of LME
derivative contracts. At December 31, 2017, the Group had hedged 32% of its main primary aluminum
requirements for 2018. Before hedging the risk, a $100 increase in the LME price of aluminum would increase
our Gas Cylinders division's costs by approximately $1.3 million.
In the long-term, the Group has sought to recover the cost of increased commodity costs through price increases
and surcharges. Any hedging of aluminum risk is performed to protect the Group against short-term fluctuations
in aluminum costs.
In 2017 the Group purchased approximately 6,000 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.
124
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
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
Overdrafts
Deferred contingent consideration
Deferred consideration
Book value
December 31,
2017
$M
Fair value
December 31,
2017
$M
Book value
December 31,
2016
$M
Fair value
December 31,
2016
$M
13.3
15.0
25.0
25.0
25.0
21.3
4.2
0.7
0.3
13.3
15.3
25.2
26.6
27.1
21.3
4.2
0.7
0.3
13.6
15.0
25.0
25.0
25.0
32.8
—
1.5
1.3
13.6
15.9
25.0
26.3
26.5
32.8
—
1.5
1.3
(1)
(2)
The financial instruments included in financial liabilities are shown gross of unamortized 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 some derivative financial instruments. The maturity of the
financial liabilities is disclosed in Note 27.
At December 31, 2017, the amount drawn in bank and other loans was $111.3 million (2016: $122.8 million), of
which $105.5 million was denominated in U.S. dollars with the remainder being denominated in GBP sterling
(2016: $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:
Forward foreign currency exchange rate contracts
LME derivative contracts
Book value
December
31, 2017
$M
Fair value Book value Fair value
December
December
December
31, 2016
31, 2016
31, 2017
$M
$M
$M
(0.7)
1.2
(0.7)
1.2
(3.1)
(0.6)
(3.1)
(0.6)
The fair value calculations were performed on the following basis:
125
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
Cash at bank and in hand / overdrafts
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 December 31, 2017, bank and other loans of $111.3 million (2016: $122.8 million) were outstanding. At
December 31, 2017, bank and other loans are shown net of issue costs of $2.5 million (2016: $1.8 million) and
these issue costs are to be amortized to the expected maturity of the facilities. At December 31, 2017, $21.3
million (2016: $32.8 million) of the total $111.3 million (2016: $122.8 million) 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.
Deferred consideration
Disclosure of the basis of calculation of the fair value of deferred consideration is included within Note 25 of the
consolidated financial statements.
Fair value hierarchy
At December 31, 2017, 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.
126
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
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
Deferred consideration
December
31, 2017
$M
Level 1
Level 2
Level 3
$M
$M
$M
0.7
(1.2)
15.3
25.2
26.6
27.1
21.3
0.7
0.3
—
—
—
—
—
—
—
—
—
0.7
(1.2)
15.3
25.2
26.6
27.1
21.3
—
—
—
—
—
—
—
—
—
0.7
0.3
During the year ended December 31, 2017, 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 December 31, 2017 and
2016.
Balance at January 1
Payments made during year
New deferred consideration
Gains recognized in profit or loss
Balance at December 31
Total gains for the period included in profit and loss for assets held at the end
at December 31
Change in unrealized (gains) or losses for the period included in profit and loss
for assets held at the end at December 31
2017
$M
2016
$M
2.8
(1.3)
0.3
(0.8)
1.0
(0.8)
(0.8)
2.9
—
—
(0.1)
2.8
(0.1)
(0.1)
The deferred contingent consideration relates to estimations of amounts payable in the future regarding
acquisitions made in prior years. This is based upon an estimate of the future profitability of the businesses
versus targets agreed upon as part of the acquisitions.
127
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
(b) Interest rate risks
Interest rate risk profile on financial assets
This table shows the Group's financial assets at December 31, 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
Overdraft by currency:
U.S. dollar
GBP sterling
December
31, 2017
$M
December
31, 2016
$M
5.4
3.6
1.0
0.6
1.0
1.2
0.5
13.3
1.3
9.1
1.4
0.5
0.8
0.3
0.2
13.6
December
31, 2017
$M
December
31, 2016
$M
(3.0)
(1.2)
(4.2)
—
—
—
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, with the exception of the restricted cash of $0.7 million, interest earned is
at approximately ICELIBOR 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.
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
LUXFER HOLDINGS PLC
December 31, 2017
December 31, 2016
Within
12
months
$M
1-5
years
> 5
years
$M
$M
Within
12
months
$M
Total
$M
1-5
years
> 5
years Total
$M
$M
$M
Floating interest rate
risk:
Revolving credit facility
(including interest
payments)
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)
0.7
24.2
—
24.9
0.9
34.1
—
35.0
15.5
—
0.9
27.5
—
—
15.5
0.9
15.5
—
16.4
28.4
1.0
28.7
—
29.7
1.2
4.9
25.6
31.7
1.2
4.9
26.8
32.9
1.2
19.5
5.0
61.6
29.3
54.9
35.5
136.0
1.2
5.2
5.0
88.2
30.6
57.4
36.8
150.8
(c) Hedging activities
Forward foreign currency exchange contracts
The Group utilizes 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 December 31, 2017, the fair value of forward foreign currency exchange contracts deferred in equity was a
loss of $0.7 million (2016: loss of $3.1 million and 2015: loss of $0.4 million). During 2017, a gain of $0.6 million
(2016: loss of $0.9 million and 2015: loss of $0.1 million) has been transferred to the consolidated income
statement in respect of contracts that have matured in the year.
At December 31, 2017 and 2016, 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 overleaf:
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
LUXFER HOLDINGS PLC
December 31, 2017
Sales hedges
Contract totals/£m
Maturity dates
Exchange rates
Purchase hedges
Contract totals/£m
Maturity dates
Exchange rates
December 31, 2016
Sales hedges
Contract totals/£m
Maturity dates
Exchange rates
Purchase hedges
Contract totals/£m
Maturity dates
Exchange rates
U.S. dollars
Euros
Australian dollars
17.1
01/18 to 07/19
$1.2433 to $1.3444
27.5
01/18 to 07/19
€1.0949 to €1.1803
2.8
06/18
$1.7667
U.S. dollars
Euros
12.5
01/18 to 07/19
$1.2414 to $1.3389
0.1
01/18
€1.1084
Australian dollars
1.7
06/18
$1.7161
U.S. dollars
Euros
Australian dollars
27.6
01/17 to 11/18
$1.2310 to $1.5638
39.4
01/17 to 11/18
€1.0951 to €1.4200
2.9
09/17
$1.7237
U.S. dollars
Euros
25.7
01/17 to 10/18
$1.2311 to $1.5618
2.5
01/17 to 06/17
€1.1121 to €1.1804
Aluminum commodity contracts
The Group did not hold any forward aluminum commodity contracts at December 31, 2017 or December 31,
2016.
Forward interest rate agreements
The Group did not hold any forward interest rate agreements at December 31, 2017 or December 31, 2016.
LME derivative contracts
At December 31, 2017, the Group has hedged 3,000 metric tons of aluminum for supply in 2018, using its
ancillary banking facilities. The fair value of LME derivative contracts deferred in equity was a gain of $1.2 million
(2016: loss of $0.6 million and 2015: loss of $3.7 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 2017, a gain of $11.6 million (2016: loss of $13.1
million and 2015: loss of $8.6 million) was recognized in translation reserves.
(e) Un-drawn committed facilities
At December 31, 2017, 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 December 31, 2017 was £7.0
million ($9.5 million). Of the committed facilities, $21.3 million of loans were drawn and $nil for letters of credit
were utilized. The Group also has a separate bonding facility for bank guarantees denominated in GBP sterling
of £3.0 million ($4.1 million), of which £1.0 million ($1.4 million) was utilized at December 31, 2017.
130
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
28. Financial instruments (Continued)
At December 31, 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 December 31, 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 utilized. 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 utilized at December 31, 2016.
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 recognized in full in the period in which they occur. The liability recognized 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 April 5, 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 and is managed by an
independent set of Trustees. 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 plan 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 January 1, 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 2017 for retirement benefits was a cost of
$6.6 million (2016: cost of $6.4 million, 2015: credit of $9.3 million).
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
The movement in the pension liabilities is shown below:
Balance at January 1
(Credited) / charged to the consolidated income statement:
Curtailment credit
Current service cost
Net interest on net liability
Administrative costs
Total charge for defined contribution plans
Cash contributions
(Credited) / charged to the consolidated statement of comprehensive income
Exchange difference
Balance at December 31
The financial assumptions used in the calculations were:
LUXFER HOLDINGS PLC
2017
$M
2016
$M
66.5
—
0.1
1.8
0.7
4.0
(12.9)
(9.5)
4.6
55.3
58.9
(0.6)
0.4
2.0
0.9
3.7
(10.9)
21.7
(9.6)
66.5
Projected Unit Credit Valuation
Discount rate
Retail Price Inflation
Inflation related assumptions:
Salary inflation
Consumer Price Inflation
Pension increases—pre 6 April 1997
—1997 - 2005
—post 5 April 2005
2017
%
U.K.
2016
%
2015
%
2.40
3.10
n/a
2.10
1.90
2.10
1.70
2.60
3.20
n/a
2.20
2.00
2.20
1.80
3.70
3.00
4.00
2.00
1.80
2.10
1.70
Other principal actuarial assumptions:
Non-U.K.
2016
%
2015
%
4.20
—
4.50
—
2017
%
3.60
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2017
Years
2016
Years
Life expectancy of male / female in the U.K. aged 65 at accounting date
Life expectancy of male / female in the U.K. aged 65 at 20 years after accounting date 23.3 / 26.5 23.2 / 26.4
21.6 / 24.6 21.5 / 24.5
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.
132
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
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.
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 April 5, 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 recognized 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 recognized in the consolidated income statement in respect of the pension plans were as
follows:
2017 2017
Non-
U.K.
$M
U.K.
$M
2017
2016
Total U.K.
$M
$M
2016
Non-
U.K.
$M
2016 2015 2015 2015
Total
U.K.
$M
$M
Non-
U.K. Total
$M
$M
In respect of defined benefit
plans:
Current service cost
Net interest on net liability
Administrative expenses
Past service credit
Curtailment credit
Total charge / (credit) for defined
benefit plans
In respect of defined contribution
plans:
Total charge for defined
contribution plans
Total charge / (credit) for pension
plans
—
1.4
0.2
—
—
1.6
1.9
3.5
0.1
0.4
0.5
—
—
1.0
2.1
3.1
0.1
1.8
0.7
—
—
2.6
4.0
6.6
0.3
1.5
0.4
—
—
2.2
1.6
3.8
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)
0.5
2.7
(13.3)
0.9
(12.4)
2.1
2.6
3.7
1.3
1.8
3.1
6.4
(12.0)
2.7
(9.3)
Of the total charge for the year (2016: charge for the year and 2015: credit for the year), charges of $4.1 million
and $0.7 million (2016: $4.1 million and $0.9 million and 2015: $4.6 million and $1.3 million); have been included
in cost of sales and administrative costs, respectively; a charge of $nil (2016: credit of $0.6 million and 2015:
credit of $18.0 million) has been recognized as changes to defined benefit pension plans in the consolidated
income statement and a charge of $1.8 million (2016: $2.0 million and 2015: $3.0 million) has been included in
finance costs.
133
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
For the year, the amount of gain recognized in the Consolidated Statement of Comprehensive Income is $9.5
million (2016: loss of $21.7 million and 2015: gain of $4.4 million).
The actual return of the plans assets was a gain of $33.2 million (2016: gain of $56.4 million and 2015: loss of
$0.6 million).
The value of the plans assets were:
2017
U.K.
$M
2017
Non-U.K.
$M
2017
Total
$M
2016
U.K.
$M
2016
2016
Non-U.K. Total
$M
$M
Assets in active markets:
Equities and growth funds
Government bonds
Corporate bonds
Cash
Total market value of assets
Present value of plan liabilities
Deficit in the plans
Related deferred income tax assets
Net pension liabilities
203.4
49.9
72.7
0.3
326.3
(369.7)
(43.4)
7.8
(35.6)
22.9
—
18.3
—
41.2
(53.1)
(11.9)
3.1
(8.8)
226.3
49.9
91.0
0.3
367.5
(422.8)
(55.3)
10.9
(44.4)
171.6
44.3
64.5
(0.1)
280.3
(334.8)
(54.5)
10.2
(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)
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:
At January 1
Service cost
Interest on obligation
Contributions from plan members
Actuarial gains on financial
assumptions
Actuarial gains on plan experience
Exchange difference
Benefits paid
Curtailment credit
At December 31
2017
U.K.
$M
334.8
—
8.9
—
6.9
3.5
31.7
(16.1)
—
369.7
2017
Non-U.K.
$M
2017
Total
$M
48.6
0.1
1.9
—
3.8
0.5
0.3
(2.1)
—
53.1
383.4
0.1
10.8
—
10.7
4.0
32.0
(18.2)
—
422.8
2016
U.K.
$M
334.4
0.3
10.9
0.1
67.5
(3.3)
(59.3)
(15.8)
—
334.8
2016
2016
Non-U.K. Total
$M
$M
61.0
0.1
2.6
—
2.6
(0.2)
(0.1)
(2.6)
(14.8)
48.6
395.4
0.4
13.5
0.1
70.1
(3.5)
(59.4)
(18.4)
(14.8)
383.4
The defined benefit obligation comprises $2.1 million (2016: $2.6 million) arising from unfunded plans and
$420.7 million (2016: $380.8 million) from plans that are funded.
134
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
29. Retirement benefits (Continued)
The sensitivities regarding the principal assumptions used to measure the present value of the defined benefit
obligations are set out below:
Assumption
Change in assumption
Increase/decrease by 1.0%
Discount rate
CPI inflation (and related increases) Increase/decrease by 1.0%
Post retirement mortality
Increase by 1 year
Impact on total defined
benefit obligations
Decrease/increase by 18%
Increase/decrease by 10%
Increase by 4%
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.
Analysis of movement in the present value of the fair value of plan assets:
2017
U.K.
$M
2017
Non-U.K.
$M
2017
Total
$M
2016
U.K.
$M
2016
2016
Non-U.K. Total
$M
$M
At January 1
Interest on plan assets
Actuarial gains
Exchange difference
Contributions from employer
Contributions from plan members
Administrative expenses
Benefits paid
Settlement credit
At December 31
280.3
7.5
20.4
27.4
7.0
—
(0.2)
(16.1)
—
326.3
36.6
1.5
3.8
—
1.9
—
(0.5)
(2.1)
—
41.2
316.9
9.0
24.2
27.4
8.9
—
(0.7)
(18.2)
—
367.5
287.1
9.4
43.7
(49.8)
6.0
0.1
(0.4)
(15.8)
—
280.3
49.4
2.1
1.2
—
1.2
—
(0.5 )
(2.6 )
(14.2 )
36.6
336.5
11.5
44.9
(49.8)
7.2
0.1
(0.9)
(18.4)
(14.2)
316.9
The estimated amount of employer contributions expected to be paid to the defined benefit pension plans for the
year ending December 31, 2018 is $8.7 million (2017: $8.9 million actual employer contributions).
135
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
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 are 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:
At January 1, 2017
Shares utilized during the year
Shares transferred into ESOP during the year
At December 31, 2017
Number of shares held by ESOP Trustees
£0.0001 deferred
shares
15,977,968,688
—
—
15,977,968,688
£0.50 ordinary
shares
55,816
(34,594)
83,487
104,709
At December 31, 2017, the loan outstanding from the ESOP was $2.6 million (2016: $2.6 million).
The market value of each £0.50 ordinary share held by the ESOP at December 31, 2017 was $15.80 (2016:
$10.89).
136
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
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 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 vested 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 ordinary shares, 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 ordinary shares 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 ordinary shares were granted under the Director EIP, which were all
time-based awards.
In June 2015, 46,800 Restricted Stock Units and Options over ordinary shares 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 ordinary shares were granted under the Director EIP, which were all time-based
awards.
In March 2016, 95,140 Restricted Stock Units and Options over ordinary shares were granted under the LTiP,
which were all time-based awards. Following the Annual General Meeting on May 24, 2016, 12,520 Restricted
Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based
awards.
In March 2017, 139,800 Restricted Stock Units and Options over ordinary shares were granted under the LTiP,
which were all time-based awards. Following the Annual General Meeting on May 23, 2017, 21,814 Restricted
Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based
awards.
I.P.O. related share based compensation charges
Other share based compensation charges
Restructuring share based compensation charges
2017
$M
2016
$M
2015
$M
—
2.2
0.9
3.1
—
1.4
—
1.4
0.1
1.3
—
1.4
There were no cancellations or modifications to the awards in 2017, 2016 or 2015.
137
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
31. Share based compensation (Continued)
The following table illustrates the number of, and movements in, share options during the year, with each option
relating to 1 ordinary share:
At January 1
Granted during the year
Exercised during the year
Accrued dividend awards
Lapsed during the year
At December 31
2017
Number
963,789
386,614
(172,501)
12,258
(7,845)
1,182,315
2017
Weighted average
exercise price
$8.51
$0.65
$(5.03)
$0.65
$(0.65)
$6.42
2016
Number
1,144,534
107,660
(132,599 )
12,572
(168,378 )
963,789
2016
Weighted average
exercise price
$7.26
$0.67
$(0.67)
$0.67
$(0.67)
$8.51
Within the share options which were outstanding at the year-end of 1,182,315 (2016: 963,789), 740,253 (2016:
819,856), were able to be exercised. The weighted average remaining contractual life for the share options
outstanding at December 31, 2017 was 2.4 years (2016: 2.9 years). The weighted average fair value of options
granted during the year was $9.82 (2016: $9.39).
The following table illustrates the assumptions used in deriving the fair value of share options during the year:
2017
2016
Dividend yield (%)
Expected volatility range (%)
Risk-free interest rate (%)
Expected life of share options range (years)
Weighted average exercise price ($)
Model used
4.00
4.00
26.81 - 35.81
1.00 - 2.01
0.50 - 7.36
$0.65
29.73 – 38.73
0.36 – 1.05
1 - 3.5
$0.67
Black-Scholes 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.
138
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
32. Related party transactions
Joint venture in which the Group is a venturer
During 2017, the Group maintained its 51% investment in the equity of the joint venture, Luxfer Uttam India
Private Limited. During 2017, the Gas Cylinders division made $1.9 million (2016: $1.7 million) of sales to the
joint venture. At December 31, 2017, the gross amounts receivable from the joint venture amounted to $2.3
million (2016: $0.9 million) and the net amounts receivable amounted to $0.9 million (2016: $0.9 million). All
sales to the joint venture are made on similar terms to arms length transactions.
During 2017, the Group also maintained its 50% investment in the equity of the joint venture, Nikkei-MEL
Company Limited. During 2017, the Elektron division made $1.2 million of sales to the joint venture (2016:
$0.8 million).
During 2017, the Group provided $0.9 million in debt investment (2016: received $1.0 million in repayment) 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 2017,
the Gas Cylinders division made $5.0 million (2016: $3.9 million) of sales to the joint venture. At December 31,
2017, the amounts receivable from the joint venture amounted to $0.9 million (2016: $1.0 million) of trade debt
and $4.7 million (2016: $3.8 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. In 2017 the Group has
made $nil sales (2016: $0.1 million) to the associate. At December 31, 2017, the amounts receivable from the
associate denominated in Australian dollars was $nil (2016: $0.1 million). The debtor recognized in the 2015
was converted into a secured loan note during 2016. The secured loan note has interest accruing at 6.0%, of
which $nil was outstanding at the year end (net of $0.5 million provision).
Transactions with other related parties
At December 31, 2017, the directors and key management comprising the members of the Executive
Leadership Team, owned 170,297 £0.50 ordinary shares (2016: 1,062,672 £0.50 ordinary shares) and held
awards over a further 316,797 £0.50 ordinary shares (2016: 476,839 £0.50 ordinary shares).
During the year ended December 31, 2017, share options held by members of the Executive Leadership
Team were exercised; information relating to these exercises is disclosed in the Remuneration Report.
Stone Canyon Industries LLC represents a related party due to its association with Adam Cohn as co-CEO,
and holds 570,000 ordinary shares in Luxfer Holdings PLC as at December 31, 2017 (2016: 570,000 ADSs).
FTI consulting represents a related party due to its association with Brian Kushner as Senior Managing
Director, Corporate Finance. During 2017, we engaged with FTI consulting for IT services for the value of $0.1
million (2016: nil).
Cherokee Properties Inc. represents a related party due to its association with Chris Barnes, who is the
president of one of our operating segments and is the president of Cherokee Properties Inc. During 2017, we
engaged with Cherokee Properties Inc. for rental costs regarding our manufacturing site in Madison, IL for the
value of $1.0 million (2016: $1.0 million).
The son of the retired Chief Executive Officer was employed by the Group during 2017, 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.
139
LUXFER HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT (Continued)
All amounts in millions, except share and per share data
33. Post Balance Sheet Events
Since the balance sheet date, the Company has reached an out-of-court settlement with regards to the patent
infringement litigation which we had been pursuing. The settlement has been recognized as an accrual at
December 31, 2017.
Furthermore, post year end we have announced plans to close our plants in Brigham City, UT and Findley,
OH. The operations from our Brigham City operation will be moved to our Canadian gas cylinders facility and
the operations from Findlay will be moved to our Madison, IL facility.
140
COMPANY BALANCE SHEET
All amounts in millions
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
LUXFER HOLDINGS PLC
December 31,
2017
£M
December 31,
2016
£M
Note
36
37
38
39
40
40
40
40
40
40
41
45
42
318.3
8.4
326.7
3.5
0.8
4.3
315.6
10.3
325.9
3.8
1.4
5.2
331.0
331.1
13.5
76.9
35.3
(4.0)
139.2
(0.8)
3.5
263.6
263.6
32.8
32.1
64.9
2.5
67.4
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
TOTAL EQUITY AND LIABILITIES
331.0
331.1
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 £27.1 million.
SIGNED ON BEHALF OF THE BOARD
Alok Maskara
March 19, 2018
Company Registration no. 03690830
141
COMPANY CASH FLOW STATEMENT
All amounts in millions
LUXFER HOLDINGS PLC
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year
Adjustments to reconcile net income for the year to net cash flows from continuing
Deferred income taxes
Share based compensation charges net of cash settlement
Note
Net interest gained
Dividends received
Exchange difference charged / (credited) to income statement
Changes in operating assets and liabilities:
(Increase) / decrease in receivables
Decrease/(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
Repayment on banking facilities
Extension to banking facilities - financing costs
Dividends paid
Treasury shares cash movements
ESOP cash movements
NET CASH FLOWS FROM FINANCING ACTIVITIES
NET DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
39
39
2017
£M
27.1
0.8
0.1
(2.6)
(24.3)
1.7
(2.1)
(1.1)
(4.6)
(5.0)
24.3
(3.7)
5.8
26.4
21.4
(0.8)
(0.7)
(8.9)
(0.9)
(10.4)
(0.3)
—
(22.0)
(0.6)
1.4
0.8
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
142
COMPANY STATEMENT OF CHANGES IN EQUITY
All amounts in millions
LUXFER HOLDINGS PLC
Equity attributable to the equity shareholders of the parent
Note
Ordinary
share
capital
£M
13.5
—
—
—
—
—
—
—
—
—
—
—
13.5
—
—
—
—
—
—
—
—
—
—
—
13.5
40
40
40
40
40
40
40
40
40
37
Deferred
share
capital
£M
76.9
Share
premium
account
£M
35.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
76.9
35.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
76.9
35.3
Treasury
shares
£M
Retained
earnings
£M
(0.9)
—
—
—
—
—
—
(4.4)
—
0.3
—
(4.1)
(5.0)
—
—
—
—
—
—
0.6
0.4
—
—
118.6
18.2
(15.0)
2.9
6.1
(9.8)
—
—
—
0.2
0.2
(9.4)
115.3
27.1
8.1
(1.6)
33.6
(10.4)
—
—
0.1
0.1
0.5
1.0
(4.0)
(9.7)
139.2
At January 1, 2016
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
Purchase of shares from
ESOP
Utilization of treasury shares
Utilization of ESOP shares
Other changes in equity in
the year
At December 31, 2016
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 paid
Equity settled share based
compensation charges
Transfer from treasury
shares to ESOP shares
Utilization of treasury shares
Utilization of ESOP shares
Deferred income taxes on
items taken to equity
Other changes in equity in
the year
At December 31, 2017
Own shares
held by
ESOP
£M
(0.2)
—
—
—
—
—
—
—
(0.8)
—
0.6
(0.2)
(0.4)
—
—
—
—
—
—
(0.6)
—
0.2
—
(0.4)
(0.8)
Share based
compensation
reserve
£M
2.9
—
—
—
—
—
0.8
—
Total
equity
£M
246.1
18.2
(15.0)
2.9
6.1
(9.8)
0.8
(4.4)
—
(0.8)
(0.5)
(0.8)
—
—
(0.5)
(14.2)
2.4
—
—
—
—
—
1.9
—
(0.5)
(0.3)
—
1.1
3.5
238.0
27.1
8.1
(1.6)
33.6
(10.4)
1.9
—
—
—
0.5
(8.0)
263.6
143
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
34. Significant accounting policies
Authorization of financial statements
The Company financial statements for the year ended December 31, 2017 were authorized for issue by the
Board of Directors on March 19, 2018 and the balance sheet was signed on the Board’s behalf by A. Maskara.
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 and The Companies Act 2006 as
applicable to companies using IFRS.
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.
35. 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 37 to
63 and form part of these financial statements.
144
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
36. Investments
Cost and net book value:
At January 1, 2016
Additions
Repayments
Exchange difference
At December 31, 2016
Additions
Exchange difference
At December 31, 2017
Investments
in subsidiary
undertakings
Loans to
subsidiary
undertakings
£M
£M
Capital
contributions
£M
218.0
—
—
—
218.0
—
—
218.0
82.2
—
—
10.0
92.2
5.3
(5.2)
92.3
1.7
0.7
—
—
2.4
2.1
—
4.5
Loans to joint
ventures
£M
3.2
—
(0.8)
0.6
3.0
0.7
(0.2)
3.5
Total
£M
305.1
0.7
(0.8)
10.6
315.6
8.1
(5.4)
318.3
Details of the investments in which the Group or the Company holds share capital at 31 December, 2017, are
as follows:
Holding
Proportion of voting
rights and shares held
Nature of
business
Name of company
BA Holdings, Inc.*
Biggleswick Limited *
Country of
incorporation
U.S. 3
England and Wales2
Common stock
Ordinary shares
Luxfer Group Services Limited *
England and Wales2
Ordinary shares
LGL 1996 Limited *
England and Wales2
Ordinary shares /
BAL 1996 Limited *
Hart Metals, Inc. *
Preference shares
England and Wales2
Ordinary shares
U.S.5
Common stock
Lumina Trustee Limited 1
England and Wales2
Ordinary shares
Luxfer Australia Pty Limited *
Luxfer Gas Cylinders Limited *
Australia6
Ordinary shares
England and Wales2
Ordinary shares
Luxfer Gas Cylinders China Holdings Limited * England and Wales2
Ordinary shares
Luxfer Gas Cylinders (Shanghai) Co., Limited *
Luxfer Group Limited
Luxfer Group 2000 Limited
Luxfer, Inc.*
People’s Republic of
China7
England and Wales2
Ordinary shares
Ordinary shares
England and Wales2
Ordinary shares
U.S. 3
Common stock
Luxfer Overseas Holdings Limited *
England and Wales2
Ordinary shares
Magnesium Elektron Limited *
England and Wales2
Ordinary shares
MEL Chemicals, Inc.*
Magnesium Elektron North America, Inc. *
U.S.8
Common stock /
Preference shares
U.S.5
Common stock
Magnesium Elektron CZ s.r.o. *
Czech Republic13
Basic capital
MEL Chemicals China Limited *
England and Wales2
Ordinary shares
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.*
Canada9
Common stock
U.S.5
Common stock
France4
Ordinary shares
Canada10
Common stock
Germany11
Ordinary shares
U.S.12
U.S.12
U.S.5
Common stock
Common stock
Common stock
Luxfer Magtech International Limited *
England and Wales2
Common stock
145
100% Holding company
100%
Non trading
100% Property Services
100%
Dormant
100%
100%
Dormant
Manufacturing
100% Trustee company
100%
100%
Distribution
Engineering
100% Holding company
100%
Manufacturing
100% Holding company
100% Holding company
100%
Engineering
100% Holding company
100%
100%
Manufacturing
Manufacturing
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Manufacturing
Manufacturing
Dormant
Manufacturing
Manufacturing
Engineering
Engineering
Engineering
Manufacturing
Engineering
Manufacturing
Dormant
NOTES TO THE COMPANY FINANCIAL STATEMENT
LUXFER HOLDINGS PLC
All amounts in millions
36. Investments (Continued)
Name of company
Other Investments
Luxfer Uttam India Private Limited *
Nikkei-MEL Co Limited *
Dynetek Cylinders India Private Limited
Dynetek Korea Co Limited *
Luxfer Holdings NA, LLC *
GTM Technologies, LLC *
Gas Transport Leasing, LLC *
Sub161 Pty Limited *
Country of
incorporation
Holding
Proportion of voting
rights and shares held
Nature of
business
India14
Japan15
India16
Ordinary shares
Ordinary shares
Ordinary shares
South Korea17
Ordinary shares
U.S.18
U.S.18
U.S.18
Capital Interest
Capital Interest
Capital Interest
51%
50%
49%
49%
49%
49%
49%
Australia19
Ordinary shares
26.4%
Engineering
Distribution
Engineering
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: Lumns Lane, Manchester, M27 8LN, 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.
14 Registered address: 90/5 Okhla Industrial Area, Phase-1, New Delhi - 110020, Delhi, India
15 Registered address: NYK Tennoz Building, 2-20 Higashi-Shinagawa 2-chome, Shinagawa-ku, Tokyo, 140-8628, Japan
16 Registered address: B/201, Amrut Industrial Estate, Western Express Highway, Mira Road (East), Thane-401104, Maharashtra, India
17 Registered address: 606 Shinnam-ri, Dunpo-myun, Asan-si Chungnam, Korea 336-873
18 Registered address: Corporation Service Comp., 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, DE 19808, USA
19 Registered address: 112 Bluestone Circuit, Seventeen Mile Rocks, QLD 4073, Australia
37. Deferred income taxes
At January 1, 2016
Credited/(charged) to income statement
Charged to other comprehensive income
At December 31, 2016
Credited/(charged) to income statement
Credited to other comprehensive income
Credited to equity
At December 31, 2017
Tax losses and
other timing
differences
£M
2.0
0.1
—
2.1
(0.1)
—
0.5
2.5
Retirement
benefit
obligations
£M
6.0
(0.7)
2.9
8.2
(0.7)
(1.6)
—
5.9
Total
£M
8.0
(0.6)
2.9
10.3
(0.8)
(1.6)
0.5
8.4
At the balance sheet date, the Company has unrecognized deferred income tax assets relating to certain trading
and capital losses of £7.5 million (2016: £7.6 million) potentially available for offset against future profits. A
deferred tax asset of £2.5 million (2016: £2.1 million) has been recognized 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 utilized.
146
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
38. Trade and other receivables
Amounts owed by Group undertakings
LUXFER HOLDINGS PLC
December 31,
2017
£M
December 31,
2016
£M
3.5
3.8
The amounts owed by Group undertakings are unsecured, repayable on demand and no interest is charged.
39. Cash and cash equivalents
Cash at bank and in hand
December 31,
2017
December 31,
2016
£M
0.8
£M
1.4
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.
40. Share capital and Reserves
(a)
Ordinary share capital
December 31,
December 31,
December 31,
December 31,
Authorized:
Ordinary shares of £0.50 each
2017
No.
2016
No.
40,000,000
40,000,000
Deferred ordinary shares of £0.0001 each
769,423,688,000
769,423,688,000
Allotted, called up and fully paid:
Ordinary shares of £0.50 each
769,463,688,000
769,463,688,000
27,136,799
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
2017
£M
20.0
76.9
96.9
13.5
76.9
90.4
2016
£M
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 2017 and 2016, the Company has not allotted or issued any ordinary shares.
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.
147
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
40. Share capital and Reserves (Continued)
(b)
American Depositary Shares
At December 31, 2017, there were no ADSs (2016: 25,180,726 ADSs) of Luxfer Holdings PLC listed on the New
York Stock Exchange (NYSE) following the decision to terminate its ADR facility and to convert outstanding
ADSs into ordinary shares. The Depositary for the ADSs held one £0.50 ordinary share for every ADS traded,
through American Depositary Receipts.
ADS holders were 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 January 1, 2016
At December 31, 2016
At December 31, 2017
£M
35.3
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 January 1, 2016
Purchase of own shares
Utilization of treasury shares
At December 31, 2016
Transfer of treasury shares into ESOP
Utilization of treasury shares
At December 31, 2017
£M
(0.9)
(4.4)
0.3
(5.0)
0.6
0.4
(4.0)
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).
During 2016, 634,185 ordinary shares were repurchased under the share buy-back program at a cost of $4.4
million; these repurchased shares are presented as treasury shares.
At December 31, 2017, there were 527,616 treasury shares held at a cost of £4.0 million (2016: 665,424 treasury
shares held at a cost of £5.0 million).
(e)
Own shares held by ESOP
At January 1, 2016
Purchases of shares into ESOP
Utilization of ESOP shares
At December 31, 2016
Transfer of treasury shares into ESOP
Utilization of ESOP shares
At December 31, 2017
£M
(0.2)
(0.8)
0.6
(0.4)
(0.6)
0.2
(0.8)
At December 31, 2017, there were 104,709 ordinary shares of £0.50 each (2016: 55,816 ordinary shares of
£0.50 each) held by The Luxfer Group Employee Share Ownership Plan.
148
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
40. Share capital and Reserves (Continued)
(f)
Share based compensation reserve
At January 1, 2016
Equity settled share based compensation charges
Utilization of treasury shares
Utilization of ESOP shares
At December 31, 2016
Equity settled share based compensation charges
Utilization of treasury shares
Utilization of ESOP shares
At December 31, 2017
LUXFER HOLDINGS PLC
£M
2.9
0.8
(0.5)
(0.8)
2.4
1.9
(0.5)
(0.3)
3.5
The share based compensation reserve is used to recognize 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.
41. Bank and other loans
Non-current
Loan Notes due 2021 - gross
Unamortized finance costs
Loan Notes due 2021 - net
Revolving credit facility - gross
Unamortized finance costs
Revolving credit facility - net
December 31,
2017
December 31,
2016
£M
18.5
(0.1)
18.4
15.8
(1.4)
14.4
32.8
£M
20.3
(0.1)
20.2
26.6
(0.8)
25.8
46.0
The seven-year private placement will be repayable in full in 2021, bears interest at 3.67% and is unsecured. At
December 31, 2017, the total amount outstanding on the Loan Notes due 2021 was £18.5 million, which is
shown in bank and other loans net of unamortized 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
42. Trade and other payables
Amounts owed to Group undertakings
Accruals
December 31,
2017
December 31,
2016
£M
2.0
0.5
2.5
£M
3.1
0.4
3.5
The amounts owed to Group undertakings are unsecured, repayable on demand and no interest is charged.
149
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
43. 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
Fair value
Book value
Fair value
December 31,
2017
£M
December 31,
2017
£M
December 31,
2016
£M
December 31,
2016
£M
92.3
3.5
0.8
18.5
15.8
92.3
3.5
0.8
18.7
15.8
92.2
3.0
1.4
20.3
26.6
92.2
3.0
1.4
20.3
26.6
(1)
The financial instruments included in financial liabilities are shown gross of unamortized 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 December 31, 2017, the amount drawn in bank and other loans was £34.3 million (2016: £46.9 million), of which
£29.6 million was denominated in U.S. dollars with the remainder being denominated in GBP sterling (2016:
£42.2 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 and joint ventures
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 December 31, 2017, bank and other loans of £34.3 million (2016: £46.9 million) were outstanding. At
December 31, 2017, bank and other loans are shown net of issue costs of £1.5 million and these issue costs are
to be amortized to the expected maturity of the facilities. At December 31, 2017, £15.8 million of the total
£34.3 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.
Trade and other receivables / Trade and other payables
The carrying value approximates to the fair value.
150
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
43. Financial instruments (Continued)
(a)
Financial instruments of the Company (Continued)
Fair value hierarchy
At December 31, 2017, 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.
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
December 31, 2017
Level 1
Level 2
Level 3
£M
18.5
15.8
£M
—
—
£M
18.5
15.8
£M
—
—
During the year ended December 31, 2017, 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 December 31, which are cash and cash equivalents. These
assets are all subject to floating interest rate risk.
Cash by currency:
U.S. dollar
GBP sterling
December 31,
2017
£M
December 31,
2016
£M
0.7
0.1
0.8
0.8
0.6
1.4
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.
151
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
43. Financial instruments (Continued)
(b)
Interest rate risks (Continued)
Floating interest rate risk:
Revolving credit facility (including
interest payments)
Fixed interest rate risk:
Loan Notes due 2021
(including interest payments)
December 31, 2017
December 31, 2016
Within
12 months
£M
1 to 5
years
£M
> 5
years
£M
Total
£M
Within
12 months
£M
1 to 5
years
£M
> 5
years
£M
Total
£M
0.5
16.8
—
17.3
0.7
27.7
—
28.4
0.7
1.2
21.2
38.0
—
—
21.9
39.2
0.8
1.5
23.3
51.0
—
—
24.1
52.5
(c)
Un-drawn committed facilities
At December 31, 2017, the Group had committed banking facilities of $150.0 million (£111.0 million). The facilities
were for providing loans and overdrafts, with a separate facility for letters of credit which at December 31, 2017
was £7.0 million ($9.5 million). Of the committed facilities, $21.3 million (£15.8 million) of loans were drawn across
the Group and $nil for letters of credit were utilized.
At December 31, 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 December 31, 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 utilized.
44. 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 December 31, 2017, this would impact the interest cost by approximately £0.2 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 December 31, 2017 was £29.6 million translated at an exchange rate of $1.3512. 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 £95.8 million. None of the loans are past due or are been
deemed impaired.
152
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
44. Financial risk management objectives and policies (Continued)
Capital risk management
The capital structure of the Company consists of shareholders' equity, debt and cash and cash equivalents. For
the foreseeable future, the Board will maintain a capital structure for the Company that supports the Group's
strategic objectives through:
Managing funding and liquidity; and
Maintaining a strong, investment-grade credit rating.
Net debt reconciliation
Cash at bank and in hand Bank and other loans
£M
£M
Total
£M
Net debt at January 1, 2016
Cash flows
Other non-cash movements
Net debt at January 1, 2017
Cash flows
Other non-cash movements
Net debt at December 31, 2017
(1.1)
(0.3)
—
(1.4)
0.6
—
(0.8)
39.2
6.5
0.3
46.0
(13.5)
0.3
32.8
38.1
6.2
0.3
44.6
(12.9)
0.3
32.0
45. 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 recognized 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.
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,
the figure has 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 April 5, 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 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 Company and is managed by an independent set of trustees. The Plan is governed
by a Board of Trustees, composed of two member nominated Trustees and four company appointed Trustees.
153
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
45 Retirement benefits (Continued)
The Trustees are required by law to act in the best interests of plan 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 total charge to the Company’s income statement for 2017 for retirement benefits was £1.3 million (2016:
charge of £1.6 million).
The movement in the pension liabilities is shown below:
Balance at January 1
Charged/(credited) to the income statement
Current service cost
Net interest on net liability
Administrative expenses
Cash contributions
Charged/(credited) to the statement of comprehensive income
Balance at December 31
The financial assumptions used in the calculations were:
Discount rate
Retail Price Inflation
Inflation related assumptions:
Salary inflation
Consumer Price Inflation
Pension increases—pre 6 April 1997
—1997 - 2005
—post 5 April 2005
Other principal actuarial assumptions:
Life expectancy of male in the U.K. aged 65 at accounting date
Life expectancy of male in the U.K. aged 65 at 20 years after accounting date
Investment strategies
2017
£M
43.6
—
1.1
0.2
(4.7)
(8.1)
32.1
2016
£M
31.6
0.2
1.1
0.3
(4.6)
15.0
43.6
Projected Unit Credit
Valuation
United Kingdom
2017
%
2.40
3.10
n/a
2.10
1.90
2.10
1.70
2016
%
2.60
3.20
n/a
2.20
2.00
2.20
1.80
2015
%
3.70
3.00
4.00
2.00
1.80
2.10
1.70
2017
Years
21.6
23.3
2016
Years
21.5
23.2
2015
Years
21.5
23.1
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. Other options to progressively
reduce the scale of the liabilities are discussed between the Trustees and the Company.
154
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
45 Retirement benefits (Continued)
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.
The amounts recognized in the income statement in respect of the pension plan were as follows:
In respect of defined benefit plan:
Current service cost ...
Net interest on net liability
Administrative expenses
Total charge/(credit) for defined benefit plan
2017
£M
2016
£M
—
1.1
0.2
1.3
0.2
1.1
0.3
1.6
For the year, the amount of gain recognised in the Statement of Comprehensive Income is £8.1 million (2016: loss
of £15.0 million).
The actual return on the plan assets was a gain of £15.6 million (2016: gain of £32.7 million).
The value of the plan assets were:
Assets in active markets:
Equities and growth funds
Government bonds
Corporate bonds
Cash
Total market value of assets
Present value of plan liabilities
Deficit in the Plan
Related deferred income tax assets
Net pension liabilities
2017
£M
2016
£M
150.5
139.1
36.9
52.0
0.3
239.7
(271.8)
(32.1)
5.8
(26.3)
35.9
50.6
(0.1)
225.5
(269.1)
(43.6)
8.3
(35.4)
The Plan does not invest directly in property occupied by the Company or in financial securities issued by the
Company.
155
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
45. Retirement benefits (Continued)
Analysis of movement in the present value of the defined benefit obligations:
LUXFER HOLDINGS PLC
At January 1
Service cost
Interest on obligation
Contributions from plan members
Actuarial (gains)/losses
Benefits paid
At December 31
2017
£M
269.1
—
6.8
—
7.6
(11.7)
271.8
2016
£M
224.8
0.2
8.1
0.1
47.7
(11.8)
269.1
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)
Change in assumption
Increase/decrease by 1.0%
Increase/decrease by 1.0%
Impact on total defined
benefit obligations
Decrease/increase by 18%
Increase/decrease by 10%
Post retirement mortality
Increase by 1 year
Increase by 4%
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.
Analysis of movement in the present value of the fair value of plan assets:
At January 1
Interest on plan assets
Actuarial gains/(losses)
Contributions from employers
Contributions from plan members
Administrative expenses
Benefits paid
At December 31
2017
£M
225.5
5.8
15.6
4.7
—
(0.2)
(11.7)
239.7
2016
£M
193.2
7.0
32.7
4.5
0.1
(0.3)
(11.7)
225.5
The estimated amount of employer contributions expected to be paid to the defined benefit pension plan for the
year ending December 31, 2018 is £4.5 million (2017: £4.6 million actual employer contributions).
156
LUXFER HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENT
All amounts in millions
46. Related party transactions
During 2017, the Company has made the following transactions and has the following outstanding balances at
December 31, 2017 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
Balances outstanding
Interest
£M
Management
recharges
£M
Investments
£M
0.4
0.2
0.3
0.8
0.3
0.2
0.5
0.2
2.6
0.3
(0.4)
—
—
—
—
—
—
—
—
—
5.0
5.2
10.0
12.6
7.5
4.7
14.2
3.5
30.5
2.4
Trade and other
receivables
£M
2.8
—
—
0.1
0.1
0.1
0.1
—
0.1
0.3
Trade and other
payables
£M
(2.0)
—
—
—
—
—
—
—
—
—
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 is a loan to Luxfer Group Limited for £2.8 million. These loans are non-
interest bearing, unsecured and are repayable on demand.
During 2016, the Company has made the following transactions and has the following outstanding balances at
December 31, 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
Balances outstanding
Interest
£M
Management
recharges
£M
Investments
£M
0.4
0.2
0.3
0.8
0.3
0.2
0.5
0.2
2.5
—
(0.4)
—
—
—
—
—
—
—
—
—
5.0
5.7
7.0
13.8
8.3
4.7
14.2
3.0
33.5
—
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)
—
—
—
—
—
—
—
—
—
Included within trade and other receivables is a loan to Luxfer Group Limited for £0.7 million. These loans are non-
interest bearing, unsecured and are repayable on demand.
In addition to the transactions above, share based compensation recharges have been made to Luxfer, Inc., Luxfer
Gas Cylinders Limited, Luxfer Group Limited, BA Holdings, Inc. and Magnesium Elektron Limited for £0.3 million,
£0.2 million, £0.8 million, £0.3 million and £0.5 million respectively (2016: Luxfer, Inc., Luxfer Gas Cylinders Limited
and Magnesium Elektron Limited for £0.2 million, £0.2 million and £0.3 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.
157