Partner. Package. Protect.
Unaudited Condensed Consolidated Interim Financial
Statements
For the three-month periods ended March 31, 2020 and 2019
CONTENTS | Page |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME | 2 |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OTHER COMPREHENSIVE INCOME | 3 |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION | 4 |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY | 5-6 |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | 7 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS | 8-20 |
1
IPL Plastics Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
For the three-month periods ended March 31, 2020 and 2019 (unaudited) (In thousands of U.S. dollars except per share data)
Three months ended March 31
Notes | 2020 | 2019 | |
Revenue | 2 | $141,053 | $141,781 |
Cost of sales | (114,655) | (115,598) | |
Gross profit | 26,398 | 26,183 | |
Operating expenses (net) | (19,525) | (19,737) | |
Transaction, reorganization and integration costs | 3 | (2,836) | (2,207) |
Operating profit | 4,037 | 4,239 | |
Other income (net) | 4 | 663 | 20 |
Share of loss of equity-accounted investee | 5 | - | (360) |
Finance costs (net) | 6 | (4,340) | (3,927) |
Profit/(loss) before income taxes | 360 | (28) | |
Income tax credit | 7 | 1,500 | 1,105 |
Net income: all attributable to equity holders of the Company | $1,860 | $1,077 | |
Earnings per share: | |||
Basic earnings per share | 8 | $0.03 | $0.02 |
Diluted earnings per share | 8 | $0.03 | $0.02 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
2
IPL Plastics Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
For the three-month periods ended March 31, 2020 and 2019 (unaudited)
(In thousands of U.S. dollars)
Three months ended March 31
2020 | 2019 | |
Comprehensive income | ||
Net income for the period | $1,860 | $1,077 |
Items that are or may be reclassified subsequently to profit and loss | ||
Foreign operations - foreign currency translation adjustments | (11,878) | 2,676 |
Changes in fair value of the effective portion of commodity price hedge | (2,292) | (1,250) |
Tax impact of changes in fair value of commodity price hedge | 543 | 303 |
Total other comprehensive (loss)/income | (13,627) | 1,729 |
Total comprehensive (loss)/income: all attributable to equity holders of | ||
the Company | $(11,767) | $2,806 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3
IPL Plastics Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
As at March 31, 2020 and December 31, 2019 (unaudited) (In thousands of U.S. dollars)
March 31, | December 31, | ||
2020 | 2019 | ||
Notes | Recast (1) | ||
Assets | |||
Current assets | |||
Cash and cash equivalents | $83,677 | $77,731 | |
Trade and other receivables | 117,282 | 95,846 | |
Derivative financial assets | 9 | 2,770 | 8 |
Inventories | 80,645 | 85,569 | |
284,374 | 259,154 | ||
Non-current assets | |||
Trade and other receivables | 13,292 | 13,021 | |
Equity-accounted investees | 5 | 110 | 112 |
Property, plant and equipment | 10 | 303,903 | 314,603 |
Right-of-use asset | 10 | 20,732 | 22,136 |
Investment property | 1,194 | 1,251 | |
Goodwill and intangible assets | 11 | 276,991 | 291,412 |
616,222 | 642,535 | ||
Total assets | $900,596 | $901,689 | |
Liabilities and shareholders' equity | |||
Current liabilities | |||
Trade and other payables | $90,375 | $99,329 | |
Income taxes payable | 7 | 5,085 | 4,800 |
Provisions | - | 413 | |
Government grants deferred | 293 | 68 | |
Derivative financial liabilities | 9 | 2,690 | 1,292 |
Lease liabilities | 12 | 2,939 | 1,062 |
Loans and borrowings | 12 | 3,013 | 12,357 |
104,395 | 119,321 | ||
Non-current liabilities | |||
Trade and other payables | 1,212 | 4,419 | |
Provisions | 6,327 | 4,377 | |
Government grants deferred | 1,897 | 2,463 | |
Lease liabilities | 12 | 18,996 | 23,006 |
Loans and borrowings | 12 | 372,475 | 337,351 |
Deferred tax liabilities | 34,310 | 38,615 | |
435,217 | 410,231 | ||
Total liabilities | 539,612 | 529,552 | |
Shareholders' equity | |||
Share capital | 384,019 | 384,019 | |
Other reserves | (37,638) | (24,625) | |
Retained earnings | 14,603 | 12,743 | |
Total shareholders' equity | 360,984 | 372,137 | |
Total liabilities and shareholders' equity | $900,596 | $901,689 | |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
- The 2019 consolidated statement of financial position has been recast for fair value adjustments in connection with the Loomans acquisition as discussed in Note 15.
4
IPL Plastics Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
For the three-month period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars)
Share- | |||||||
based | Convertible | ||||||
Share | Translation | payment | loan note | Hedging | Retained | ||
capital | reserve | reserve | reserve | reserve | earnings | Total | |
Balance at January 1, 2020 | $384,019 | $(28,440) | $4,164 | $100 | $(449) | $12,743 | $372,137 |
Total comprehensive income | |||||||
Net income for the period | - | - | - | - | - | 1,860 | 1,860 |
Other comprehensive income | |||||||
Foreign operations - foreign currency translation | - | - | - | - | - | ||
adjustments | (11,878) | (11,878) | |||||
Changes in fair value of the effective portion of | - | - | - | - | - | ||
commodity price hedge | (2,292) | (2,292) | |||||
Tax impact on changes in fair value of | - | - | - | - | - | ||
commodity price hedge | 543 | 543 | |||||
Total other comprehensive (loss)/income | - | (11,878) | - | - | (1,749) | - | (13,627) |
Total comprehensive (loss)/income | |||||||
- | (11,878) | - | - | (1,749) | 1,860 | (11,767) | |
Transactions with owners of the Company | |||||||
Equity-settledshare-based payment reserve - | - | - | - | - | - | ||
charge for the period | 614 | 614 | |||||
Total transactions with owners of the Company | |||||||
- | - | 614 | - | - | - | 614 | |
Balance at March 31, 2020 | $384,019 | $(40,318) | $4,778 | $100 | $(2,198) | $14,603 | $360,984 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
IPL Plastics Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
For the three-month period ended March 31, 2019 (unaudited)
(In thousands of U.S. dollars)
Share- | |||||||
based | Convertible | ||||||
Share | Translation | payment | loan note | Hedging | Retained | ||
capital | reserve | reserve | reserve | reserve | earnings | Total | |
Balance at January 1, 2019 | $381,340 | $(35,426) | $3,123 | $100 | $- | $(1,895) | $347,242 |
Total comprehensive income | |||||||
Net income for the period | - | - | - | - | - | 1,077 | 1,077 |
Other comprehensive income | |||||||
Foreign operations - foreign currency translation | |||||||
adjustments | - | 2,676 | - | - | - | - | 2,676 |
Changes in fair value of the effective portion of | |||||||
commodity price hedge | - | - | - | - | (1,250) | - | (1,250) |
Tax impact on changes in fair value of | |||||||
commodity price hedge | - | - | - | - | 303 | - | 303 |
Total other comprehensive income | - | 2,676 | - | - | (947) | - | 1,729 |
Total comprehensive income | - | 2,676 | - | - | (947) | 1,077 | 2,806 |
Transactions with owners of the Company | |||||||
Issue of common shares - exercise of share | |||||||
options | 1,331 | - | (299) | - | - | 299 | 1,331 |
Equity-settledshare-based payment reserve - | |||||||
charge for the period | - | - | 322 | - | - | - | 322 |
Total transactions with owners of the Company | 1,331 | - | 23 | - | - | 299 | 1,653 |
Balance at March 31, 2019 | $382,671 | $(32,750) | $3,146 | $100 | $(947) | $(519) | $351,701 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6
IPL Plastics Inc.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
For the three-month periods ended March 31, 2020 and 2019 (unaudited)
(In thousands of U.S. dollars)
Three months ended March 31
Notes | 2020 | 2019 | |
Net cash flows from operating activities before working capital movements | 13 | $14,307 | $16,307 |
Movements in working capital | 13 | (23,183) | (21,445) |
Net cash flows used in operating activities | (8,876) | (5,138) | |
Cash flows from investing activities | |||
Acquisition of subsidiary undertakings including associated costs and net of | |||
cash acquired | 15 | (4,137) | (52,478) |
Acquisition of property, plant and equipment | 10 | (12,365) | (14,641) |
Dividends received from financial assets | 4 | 852 | - |
Proceeds from disposal of equity-accounted investee | 5 | - | 9,458 |
Disposal of subsidiary undertakings | 102 | 103 | |
Government grant received | - | 60 | |
Net cash flows used in investing activities | (15,548) | (57,498) | |
Cash flows from financing activities | |||
Drawdown of bank borrowings
Repayment of bank borrowings
Finance costs paid
Repayment of lease liabilities
Net proceeds from equity issued
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period Effect of movements in exchange rates on cash held
Cash and cash equivalents at period end
57,797 101,206
(18,232) (38,379)
(4,470) (3,355)
(1,035) (1,013)
- 1,331
34,060 59,790
9,636 (2,846)
77,731 49,857
(3,690)41
$83,677 $47,052
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
7
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
1. GENERAL INFORMATION, BASIS OF PREPARATION AND USE OF JUDGEMENTS AND ESTIMATES
IPL Plastics Inc. (the 'Company') is incorporated in Canada. The financial statements for the period ended March 31, 2020 consolidate the individual financial statements of the Company and its subsidiaries (together referred to as the 'Group,' 'IPLP,' 'IPLP Inc.' or 'IPL Plastics') and show the Group's interests in its equity-accounted investees under the equity method of accounting.
The unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors of the Company on May 13, 2020.
Acquisition of trade and assets of a U.K. based injection molding company
On January 10, 2020, the Company acquired the trade and assets of a U.K. based injection molding company. The primary nature of the business acquired is the manufacture of materials handling products. The assets acquired included injection molding machines, materials handling molds and ancillary molding equipment. The consideration paid was $4.1 million (£3.1 million). The company is located in the U.K. and is part of the Large Format & Packaging ("LF&E") business in Europe.
Acquisition of Loomans Group N.V.
On March 28, 2019, the Group completed the acquisition of 100% of the share capital of Loomans Group N.V. ("Loomans"). The total consideration for the acquisition transferred to former owners of $54.5 million (€48.5 million) and the repayment of outstanding borrowings and related party debt amounting to $40.0 million (€35.6 million) at the date of acquisition, was financed from the Company's cash on hand and existing credit facilities. Loomans has its operations and headquarters in Belgium and is part of the Consumer Packaging Solutions ("CPS") business in Europe. Loomans is a well invested, single site plastic business, operating for over fifty years. The acquisition of Loomans is consistent with IPL Plastics' acquisition strategy. It diversifies the Group's geographic footprint, adding new capacity and capabilities to serve a broader customer base such as the cosmetic / personal care and beverage sectors in the consumer space.
Basis of preparation
The interim financial information, which is presented in U.S. dollars ("USD" or "$") rounded to the nearest thousand (except where stated), included in this report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB"). All references to "$" and "USD" are to U.S. dollars and all references to "C$", "£" and "€", are to Canadian dollars, Pounds sterling and euro, respectively.
This report should be read in conjunction with the consolidated financial statements of IPLP for the year ended December 31, 2019. The accounting policies, methods of computation and presentation including the associated basis of determination of judgments, estimates and assumptions as adopted in the preparation of the interim financial information are consistent with those described and applied in the IPLP financial statements for the financial year ended December 31, 2019, except as described below:
- Taxes on income in the interim periods are accrued using the effective tax rate that would be applicable to expected annual earnings.
New standards and interpretations
The impact of new standards, amendments to existing standards and interpretations issued and effective for the period beginning on or after January 1, 2020 have been assessed by the Directors and as a result, no new standards or amendments to existing standards effective January 1, 2020 are expected to have a material impact for the Group. At March 31, 2020, there are no IFRS standards that are not yet effective that would be expected to have a material impact on the Group.
8
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
1. GENERAL INFORMATION, BASIS OF PREPARATION AND USE OF JUDGEMENTS AND ESTIMATES (Continued)
Impact of COVID-19 on operations
The Directors are monitoring developments in relation to the COVID-19 pandemic, associated containment measures and governmental response measures. The pandemic has significant implications for the economies and markets in which the Group operates. The Directors have implemented an extensive range of business continuity measures as IPLP continues to keep all 14 of the manufacturing facilities operational. These include maintaining higher levels of free cash balances and undrawn committed bank lines, suspending and deferring non-essential capital expenditures, monitoring and reducing working capital, restructuring and cost reduction measures, temporary layoffs and furloughing employees in areas of the business where demand has reduced. The Company have also prepared a number of business projections and sensitivities attempting to model various assumptions as to how the revenues and cashflows of the business develop depending on how COVID-19 and the associated containment measures affect various end markets which the business serves. To the extent that the pandemic and the associated market slowdown impacts the Groups performance and future prospects, this may impact on the ultimate valuation and amount realized from the carrying value of the assets of the Group. During the quarter ended March 31, 2020, a restructuring charge of $1.2 million was recognized with respect to the rightsizing of the RPS fixed overhead cost base in response to the assessment of the impact of COVID-19 on the RPS business division, further details of which are included in Note 3. In addition, management completed an impairment test of Goodwill in response to COVID-19, the details of which are set out in Note 11.
Going Concern
The financial position of the Group, its cash generation, capital resources and liquidity continue to provide a stable financing platform. Having made enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the consolidated interim financial statements.
Judgements and estimates
In preparing these unaudited condensed consolidated interim financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2019.
Exchange rates
The principal non-USD currencies applicable to the Group are Pound Sterling, Canadian Dollar, Chinese Renminbi and euro. The average and closing rates to the U.S. dollar as at and for the three-month periods ended March 31, 2020 and 2019 for these currencies were:
Average rate | Closing rate | |||||
2020 | 2019 | 2020 | 2019 | |||
Pound Sterling | 0.7820 | 0.7682 | 0.8091 | 0.7640 | ||
Canadian Dollar | 1.3439 | 1.3296 | 1.4254 | 1.3351 | ||
Chinese Renminbi | 6.9791 | 6.7474 | 7.0997 | 6.7109 | ||
euro | 0.9069 | 0.8805 | 0.9127 | 0.8901 | ||
9
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
2. OPERATING SEGMENTS
Basis for segmentation
The Board of Directors of IPL Plastics Inc. is deemed as the Chief Operating Decision-Maker ("CODM") within the Group. The Group is organized into three strategic business units, which are its reportable segments. These segments offer different products and services and are managed separately. The Board reviews quarterly internal management reports of each business unit. The Group structures the Company and the operating segments across the three-primary market facing activities: Large Format Packaging and Environmental Solutions ("LF&E"), Consumer Packaging Solutions ("CPS"), and Returnable Packaging Solutions ("RPS"), all of which primarily serve the North American and European markets.
The following summary describes the operations of each reportable segment:
Reportable segment | Operations |
Large Format Packaging | This segment comprises the manufacture of a range of large containers, crates and pails |
and Environmental | for the food, environmental, industrial, agricultural and retail end-markets in North America and |
Solutions | Europe. |
Consumer Packaging | This segment primarily consists of value-add specialty, customized thin-wall injection molded |
Solutions | containers, lids and over caps primarily for branded and private label consumer products and |
custom packaging solutions in North America, Europe and China. | |
Returnable Packaging | This segment is primarily in the manufacture and sale of rigid plastic bulk packaging |
Solutions | components and instruments to the agriculture and automotive sectors primarily in North |
America and Europe. | |
The CODM monitors the results of the reportable segments separately in order to allocate resources between them and assess performance. Divisional performance is predominantly evaluated based on Adjusted EBIT and Adjusted EBITDA (see below for definition and calculations).
Information about reportable segments
Information related to each reportable segment is set out below. Segmental performance is evaluated based on Revenue, Adjusted EBIT and Adjusted EBITDA. The Board believes that Adjusted EBIT/EBITDA, while not defined under IFRS, provides a fair reflection of the underlying trading performance of the Group. Adjusted EBITDA represents net income before income tax credit, finance costs, other (income)/expense, share of loss of equity-accounted investee, transaction, reorganization, and integration costs and depreciation and amortization. Adjusted EBIT is Adjusted EBITDA as described, less depreciation and amortization. Adjusted EBIT/EBITDA are therefore measured differently from net income or operating profit in the condensed consolidated interim financial statements as explained and reconciled to net income in the table below.
10
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
2. OPERATING SEGMENTS (Continued)
Three months ended March 31
2020 | 2019 | |
Net Income | $1,860 | $1,077 |
Adjusted for: | ||
Other income (net) | (663) | (20) |
Finance costs | 4,340 | 3,927 |
Share of loss of equity-accounted investee | - | 360 |
Income tax credit | (1,500) | (1,105) |
Operating profit | 4,037 | 4,239 |
Transaction, reorganization and integration costs | 2,836 | 2,207 |
Adjusted EBIT | 6,873 | 6,446 |
Depreciation and amortization | 12,196 | 10,820 |
Adjusted EBITDA | $19,069 | $17,266 |
Three months ended March 31 | ||||||||||||||||
LF&E | CPS | RPS | Other (1) | Total | ||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||
External Revenue | $63,044 | $74,192 | $58,274 | $45,284 | $15,680 | $16,588 | $4,055 | $5,717 | $141,053 | $141,781 | ||||||
Adjusted EBITDA | 9,566 | 10,848 | 11,062 | 7,656 | 1,138 | 953 | (2,697) | (2,191) | 19,069 | 17,266 | ||||||
Depreciation and amortization | (4,830) | (4,535) | (4,509) | (3,164) | (2,329) | (2,732) | (528) | (389) | (12,196) | (10,820) | ||||||
Adjusted EBIT | 4,736 | 6,313 | 6,553 | 4,492 | (1,191) | (1,779) | (3,225) | (2,580) | 6,873 | 6,446 | ||||||
Transaction, reorganization | ||||||||||||||||
and integration | - | |||||||||||||||
costs (note 3) | - | - | - | - | - | - | - | (2,836) | (2,207) | |||||||
Other income (net) (note 4) | - | - | - | - | - | - | - | - | 663 | 20 | ||||||
Share of loss of equity-accounted | ||||||||||||||||
investee (note 5) | - | - | - | - | - | - | - | - | - | (360) | ||||||
Finance costs (net) (note 6) | - | - | - | - | - | - | - | - | (4,340) | (3,927) | ||||||
Income tax credit (note 7) | - | - | - | - | - | - | - | - | 1,500 | 1,105 | ||||||
Net income for the period | - | - | - | - | - | - | - | - | $1,860 | $1,077 | ||||||
Other segment information | ||||||||||||||||
Capital additions (note 10) | 6,718 | 6,891 | 2,814 | 3,074 | 701 | 1,519 | 310 | 56 | 10,543 | 11,540 | ||||||
- Includes central overhead costs and the results of the Metals U.K. recycling business.
11
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
3. TRANSACTION, REORGANIZATION AND INTEGRATION COSTS
Transaction, reorganization and integration costs consists of business reorganization, acquisition and integration costs and refinancing transaction costs. In accordance with the Group's accounting policy, the following items have been presented as transaction, reorganization and integration costs:
Three months ended March 31
2020 | 2019 | |
Transaction, reorganization and integration costs | ||
Business reorganization costs | $ (2,698) | $ (2,058) |
Acquisition related costs | (138) | (1,404) |
Gain on disposal of associate | - | 1,255 |
Total Transaction, Reorganization and Integration Costs | $(2,836) | $(2,207) |
Transaction, reorganization and integration costs were $2.8 million in Q1 2020 and related primarily to business reorganization costs with respect to restructuring and redundancy. Restructuring and redundancy costs of $1.2 million were recognized in Q1 2020 with respect to the rightsizing of the RPS fixed overhead cost base in response to the assessment of the impact of COVID-19 on the RPS business division, $1.3 million of costs were recognized in respect of the restructuring initiatives implemented in CPS Europe during Q1 2020 and $0.2 million of costs were recognized in respect of redundancy costs in our LF&E division in U.K.
Transaction, reorganization and integration costs were $2.2 million in Q1 2019 and related primarily to business reorganization costs with respect to restructuring and redundancy. Restructuring and redundancy costs related to the streamlining of the RPS fixed overhead cost base following the trading difficulties experienced by that division in Q1 2019 and other management restructuring costs amounted to $2.1 million in Q1 2019. Acquisition related costs of $1.4 million were recognized in Q1 2019 which primarily related to the acquisition of Loomans. These costs were offset by a gain of $1.3 million related to the early settlement of an unsecured vendor loan note following the disposal of a 25% investment in Rilta Environmental Ltd ("Rilta") in January 2019 (Note 5).
4. OTHER INCOME (NET)
Other income and expenses comprise the following (charges)/credits:
Three months ended March 31 | ||
2020 | 2019 | |
Other expenses | ||
Other (i) | $(291) | $(83) |
Other income | ||
Other (ii) | 102 | 103 |
Income received from financial asset (iii) | 852 | - |
954 | 103 | |
Total (net) | $663 | $20 |
- Other expenses
This principally comprises of costs with respect to the disposal of property, plant and equipment.
- Other income
This principally comprises of deferred consideration received from the disposal of Smith Metals Limited in 2016.
12
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
4. OTHER INCOME (NET) (Continued)
-
Income received from financial asset
This principally comprises of dividend income from the Group's investment in Pioneer Green Energy LLC.
5. EQUITY-ACCOUNTED INVESTEES
The Group has one associate undertaking at March 31, 2020; Altas Investments plc ("Altas"). The Group's interest in Altas, which is unlisted, is set out below.
The Group holds a 23.6% shareholding in Altas, an Irish company whose principal activity is that of an investment holding company in the road and energy sectors. On the basis of representation on the Board since June 2012 and the Group's 23.6% shareholding in Altas, the Group is deemed to have significant influence over the relevant activities of Altas and therefore Altas is an associate undertaking of the Group. The carrying value of the Group's investment in Altas at March 31, 2020 is $0.1 million.
The Group previously held a 25% interest in Rilta following the disposal of 75% of the Group's 100% shareholding effective January 1, 2017. The 25% shareholding was retained by the Group under a five-year put and call option agreement. On January 11, 2019, the Group sold its 25% shareholding in Rilta for total proceeds of €8.25 million ($9.5 million). The total proceeds include the settlement of both the 25% equity investment in the amount of €2.75 million ($3.2 million) and the vendor loan note instrument in the amount of €5.5 million ($6.3 million). The Group's loss on this equity-accounted investee of $0.4 million was recognized in the consolidated statements of income in 2019.
Associates | |
Balance at January 1, 2019 | $3,624 |
Disposal of associate | (3,149) |
Share of loss after tax | (360) |
Currency translation adjustment | (3) |
Balance at December 31, 2019 | $112 |
Currency translation adjustment | (2) |
Balance at March 31, 2020 | $110 |
The Group's share of associate profit or loss per the consolidated statement of income for Q1 2020 is $Nil (Q1 2019: $(0.4)
million) and the Group's share of other comprehensive income or expense is $Nil (Q1 2019: $Nil).
6. FINANCE COSTS (NET)
Three months ended March 31
2020 | 2019 | |
Financial liabilities measured at amortized cost - interest expense | $(4,091) | $(3,207) |
Other interest | (28) | (530) |
Interest expense on lease liabilities | (192) | (161) |
Convertible loan note interest | (29) | (29) |
Total Finance costs (net) | $(4,340) | $(3,927) |
13
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
7. INCOME TAXES
During the three-month period ended March 31, 2020, an income tax credit of $1.5 million was recognized based on management's best estimate of the weighted average annual tax rate expected for the full financial year in accordance with the requirements of IAS 34. There was a tax credit recognized in the three-month period ended March 31, 2019 of $1.1 million primarily driven by adjustments to the prior year estimates and the net loss incurred in that prior period.
8. EARNINGS PER SHARE
- Basic earnings per share
The calculation of basic earnings per share is based on the net income attributable to ordinary shareholders and the weighted- average number of common shares outstanding.
Three months ended March 31
2020 | 2019 | |||
Net income attributable to ordinary shareholders | $1,860 | $1,077 | ||
Number of common shares in thousands: | ||||
Issued common shares at January 1 | 54,382 | 53,563 | ||
Effect of treasury shares held | (87) | (87) | ||
Weighted-average number of shares issued | - | 282 | ||
Weighted-average number of common shares at March 31 | 54,295 | 53,758 | ||
Basic earnings per share | $0.03 | $0.02 | ||
(b) | Diluted earnings per share |
The calculation of diluted earnings per share is based on the net income attributable to ordinary shareholders noted in
- above and the weighted-average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares noted below.
Three months ended March 31
2020 | 2019 | |
Net income attributable to ordinary shareholders | $1,860 | $1,077 |
Number of common shares in thousands: | ||
Weighted-average number of common shares (basic) | 54,295 | 53,758 |
Equity instruments with a dilutive effect - share options | 39 | 606 |
Weighted-average number of common shares (diluted) at March 31 | 54,334 | 54,364 |
Diluted earnings per share | $0.03 | $0.02 |
The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options was based on market prices for the year during which the options were outstanding.
14
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
9. FINANCIAL INSTRUMENTS
Measurement of fair values and fair value hierarchy
There have been no changes to the methods and assumptions used in estimating the fair values of assets and liabilities disclosed in note 34 to the IPLP audited consolidated financial statements for the year ended December 31, 2019.
As regards the fair value hierarchy, the Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
At March 31, 2020 and December 31, 2019, the Group recognized and measured the following financial instruments at fair value using the level 2 valuation technique as described above:
March 31, 2020
Derivative financial assets
At fair value through profit and loss
Foreign exchange contracts
Derivative financial liabilities
At fair value through profit or loss
Foreign exchange contracts
At fair value through other comprehensive income Commodity price contracts used in hedging
December 31, 2019
Derivative financial assets
At fair value through profit and loss
Foreign exchange contracts
Derivative financial liabilities
At fair value through profit and loss Foreign exchange contracts
At fair value through other comprehensive income Foreign exchange contracts
Level 1 Level 2 Level 3Total
- | $2,770 | - | $2,770 |
- | $(398) | - | $(398) |
- | $(2,292) | - | $(2,292) |
$(2,690) | $(2,690) | ||
- | $8 | - | $8 |
- | $(479) | - | $(479) |
- | $(813) | - | $(813) |
$(1,292) | $(1,292) |
10. PROPERTY, PLANT AND EQUIPMENT AND RIGHT OF USE ASSET
During the three-month period ended March 31, 2020, the Group had additions of $10.5 million to property, plant and equipment (Q1 2019: $11.5 million), which included $4.1 million of plant & machinery acquired as part of the acquisition of the trade and assets of a U.K. based injection molding company in Q1 2020 (Note 15). The depreciation charge was $9.3 million for the period ended March 31, 2020 (Q1 2019: $8.2 million). Other movements include foreign currency exchange movements of $11.0 million (Q1 2019: $1.6 million) and disposals of $0.9 million (Q1 2019: $0.7 million). The cash outflow for the purchase of property, plant and equipment was $12.4 million for the period ended March 31, 2020 (Q1 2019: $14.5 million) which includes movement in capital creditors.
15
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
10. PROPERTY, PLANT AND EQUIPMENT AND RIGHT OF USE ASSET (Continued)
During the three-month period ended March 31, 2020, the Group recognized depreciation charges on right-of-use assets of $0.9 million (Q1 2019: $0.8 million). The remaining movement during the period was a foreign exchange movement of $0.5 million (Q1 2019: $1.1 million).
11. GOODWILL AND INTANGIBLE ASSETS
During the three-month period ended March 31, 2020, the Group had additions of $Nil to intangible assets (Q1 2019: $0.1
million). The amortization charge was $2.0 million (Q1 2019: $1.8 million) for the period ended March 31, 2020 and a
foreign exchange movement of $10.0 million (Q1 2019: $1.6 million) was recognized during the same period. As part of the completion of the fair value assessment of Loomans, as permitted by IFRS 3, Business Combinations, adjustments to goodwill of $2.4 million were recognized at March 31, 2020 in respect of the business combination (Note 15).
Impairment test for goodwill
Goodwill is not amortized but is tested annually for impairment at December 31 each year, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Management has considered whether any impairment indicators existed at the reporting date, or subsequently to the date that the unaudited condensed consolidated interim financial statements were approved for issue by the board of directors, including assessing whether any cash- generating units ("CGUs") had experienced or are expected to experience prolonged cessation of operations or had suffered or are expected to suffer either an immediate decline in demand or prices and profitability, as a result of COVID-19. In addition, management assessed the likely impact of potential reduced economic activity in the markets in which the Group operates.
The carrying value for the net assets of the CGUs including the attributable goodwill is calculated based on the sum of the net assets of the entities comprising the CGUs. The carrying value is compared to the expected recoverable value. The recoverable amount of each of the CGUs is determined by value-in-use calculations. The value-in-use calculations are sensitive to changes in assumptions, particularly relating to assumptions on cashflows generated by each of the group of CGUs, growth rates and discount rates applied to these cashflows. As a result of this exercise, no impairment charge was recognized for the period ended March 31, 2020.
12. LOANS AND BORROWINGS AND LEASE LIABILITIES
March 31, | December 31, | |
2020 | 2019 | |
Current | ||
Term Loans | $3,013 | $12,357 |
Lease Liabilities | 2,939 | 1,062 |
Total Current Loans and Borrowings and Lease Liabilities | $5,952 | $13,419 |
Non-current | ||
Term Loans and Revolving Credit Facility | $372,475 | $337,351 |
Lease Liabilities | 18,996 | 23,006 |
Total Non-Current Loans and Borrowings and Lease Liabilities | $391,471 | $360,357 |
Balance at period ended | $397,423 | $373,776 |
The Group is primarily funded by committed bank facilities and free cash flow generated from operations.
On April 17, 2018, IPLP entered into a facilities agreement (the "New Facilities Agreement") which replaced its then existing credit facilities with committed facilities of €400.0 million ($494.3 million) provided by way of a Term Loan Facility in the aggregate amount equal to €110.0 million ($135.9 million) and a Revolving Credit Facility in the aggregate amount equal to €290.0 million ($358.4 million). The New Facilities Agreement contains an accordion feature allowing IPLP to seek a maximum of two increases of the Revolving Credit Facility commitments in an aggregate maximum amount of
16
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
12. LOANS AND BORROWINGS AND LEASE LIABILITIES (Continued)
€100.0 million ($123.9 million) at any time during the availability period for the Revolving Credit Facility.
On March 13, 2019, the Company signed a Supplemental Facilities Agreement with its syndicate of banks to enable it to utilize the accordion feature contained in the New Facilities Agreement, thereby obtaining an increase of the Revolving Credit Facility in the amount of €90.0 million ($101.7 million). The increase in the Revolving Credit Facility was used to fund the acquisition of Loomans. The New Facilities Agreement permits the Company to seek one further increase of the Revolving Credit Facility under this accordion feature provided the combined increases sought do not exceed an aggregate amount of €100.0 million ($113.0 million) at any time during the availability period for the Revolving Credit Facility.
The Term Loan Facility matures on April 17, 2023. Repayments must be made in quarterly installments of €2.75 million ($3.0 million), the first of which occurred on October 17, 2019, being 18 months after the date of the New Facilities Agreement, with subsequent installments at three-month intervals thereafter. The balance must be repaid in full on April 17, 2023.
The Revolving Credit Facility matures on April 17, 2023. The outstanding balance must be repaid in full on April 17, 2023. The Group's bank facilities are secured by charges on the assets of IPL Plastics Inc. and its subsidiary undertakings, subject to exceptions (the "Subsidiary Guarantors"). The Company and the Subsidiary Guarantors have provided first ranking security interests, first fixed and floating charges, or negative pledge agreements, as the case may be, to the security agent for the benefit of the secured parties over all of their property, assets and undertakings. The Company and the Subsidiary Guarantors have also pledged, with few exceptions, all shares held by them as security.
The Facilities are available in euros, Pounds Sterling, U.S. dollars or Canadian dollars and subject to agreement with the lenders, some or all of the Facilities will be available in one or more alternative currencies. Subject to the terms of the New Facilities Agreement, the Facilities are available for five years from the date of the New Facilities Agreement. The Group's committed banking facilities total $530.8 million at March 31, 2020 (December 31, 2019: $550.5 million). At March 31, 2020, the Group's Net Debt was $315.1 million. Net Debt is defined as loans and borrowings, lease liabilities and convertible loan notes less cash and cash equivalents. As of March 31, 2020, the Company was in compliance with all covenants contained in the New Facilities Agreement, and no event of default (as defined in the New Facilities Agreement) had occurred or been waived.
17
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
13. CASH GENERATED FROM OPERATIONS
Three months ended March 31
2020 | 2019 | |
Net income for the period | $1,860 | $1,077 |
Adjustments for: | ||
Depreciation and amortization charges | 12,196 | 10,820 |
Amortization of government grants | (125) | (126) |
Exchange differences | (808) | (88) |
Gain on sale of property, plant and equipment | (71) | - |
Transaction, reorganization and integration costs | 2,518 | 165 |
Share of loss on equity-accounted investee | - | 360 |
Income received from financial assets | (852) | - |
Gain on disposal of subsidiary undertakings | (102) | (103) |
Finance costs (net) | 4,340 | 3,927 |
Movement on derivative financial instruments | (3,112) | 1,297 |
Equity-settledshare-based payment transactions | 614 | 322 |
Income tax credit | (1,500) | (1,105) |
Income taxes paid | (651) | (239) |
Net cash flows from operating activities before working capital movements | 14,307 | 16,307 |
Changes in: | ||
Inventories | 4,925 | (4,774) |
Trade and other receivables | (22,836) | (8,828) |
Trade and other payables | (5,272) | (7,843) |
Total movements in working capital | (23,183) | (21,445) |
Net cash flows used in operating activities | $(8,876) | $(5,138) |
14. RELATED PARTIES AND TRANSACTIONS Transactions with equity-accounted investees
Under IAS 24 Related Party Disclosures, the Group had a related party relationship with its associate undertaking, Altas (Note 5) during the current and prior year.
The following transactions took place during the period between the Group and Altas:
- Amounts totaling $1,991 (March 31, 2019: $2,712) were paid to the Group by Altas for fees relating to membership of that company's Board of Directors by IPLP employees during Q1 2020. No amounts were owing at March 31, 2020 (March 31, 2019: $Nil).
15. BUSINESS COMBINATIONS
Loomans Group N.V.
On March 28, 2019, the Group completed the acquisition of 100% of the share capital of Loomans. The total consideration for the acquisition transferred to former owners of $54.5 million (€48.5 million) and the repayment of outstanding borrowings and related party debt amounting to $40.0 million (€35.6 million) at the date of acquisition, was financed from the Company's cash on hand and existing credit facilities. Loomans has its operations and headquarters in Belgium and is part of the CPS business. Loomans is a well invested, single site plastic business, operating for over fifty years. The acquisition of Loomans is consistent with IPL Plastics' acquisition strategy. It diversifies the Group's geographic footprint, adding new capacity and capabilities to serve a broader customer base such as the cosmetic/personal care and beverage sectors in the consumer space.
18
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
15. BUSINESS COMBINATIONS (Continued)
The Group incurred acquisition-related expenses of $1.4 million in Q1 2019, primarily related to various professional fees incurred. These have been included in business reorganization, acquisition and integration costs (Note 3).
The Group completed the fair value assessment in Q1 2020, being twelve-months from the date of acquisition, as permitted by IFRS 3, Business Combinations. Adjustments in the amount of $2.5 million were made in Q1 2020 to the provisional fair values as presented at December 31, 2019, reducing goodwill by an equivalent amount. The following table summarizes the final recognized fair value of the identifiable net assets acquired at the date of acquisition.
At March 28, | |||
2019 | |||
Property, plant and equipment | $35,473 | ||
Intangible assets | 16,178 | ||
Cash and cash equivalents | 2,211 | ||
Trade and other receivables | 17,304 | ||
Inventories | 4,817 | ||
Loans and borrowings acquired | (28,182) | ||
Trade and other payables and provisions | (20,759) | ||
Income tax payable (net) | (3,349) | ||
Deferred tax liability | (10,003) | ||
Total identifiable net assets acquired | 13,690 | ||
Consideration transferred at date of acquisition - cash | 54,477 | ||
Goodwill at date of acquisition | $40,787 | ||
At the date of acquisition, goodwill comprised of amongst other considerations, market entry and management knowhow, workforce skills and development, plant design and layout, procurement and other synergies and savings.
The gross contractual value of trade and other receivables at the date of acquisition amounted to $17.3 million.
Acquisition of the trade and assets of a U.K. based injection molding company
On January 10, 2020, the Company acquired the trade and assets of a U.K. based injection molding company. The primary nature of the business acquired is the manufacture of materials handling products. The assets acquired included injection molding machines, materials handling molds and ancillary molding equipment. The consideration paid was $4.1 million (£3.1 million). The company is located in the U.K. and is part of the LF&E business in Europe.
16. CONTINGENCIES AND COMMITMENTS
There have been no significant changes since December 31, 2019 in any of the Group's contingent assets or liabilities and commitments (including purchase commitments) requiring additional separate disclosure as at March 31, 2020.
19
IPL Plastics Inc.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
As at and for the period ended March 31, 2020 (unaudited)
(In thousands of U.S. dollars except the number of shares and per share data and unless stated otherwise)
17. SEASONALITY OF OPERATIONS
IPLP's business exhibits moderate seasonality driven by the seasonality of its customers' end markets. While certain variable costs of the Group can be managed to match seasonal patterns, a significant portion of our costs are fixed and cannot be adjusted for seasonality. For example, customers in the agricultural market are typically busiest through the second and third quarter of the year, which coincides with key produce growing seasons. Certain products in the food and consumer end-market, such as yogurt and ice cream, are also impacted by seasonality. Demand is typically strongest during the second and third quarters of the year. The number and timing of municipal and public council tenders fluctuates by year and is dependent on local micro economic conditions which can also cause variances in the operational performance of the LF&E environmental container business. For these reasons, IPLP's revenue and Adjusted EBITDA tend to be lower in the first and fourth quarters of each year when compared with the second and third quarters of such year.
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IPL Plastics Inc. published this content on 13 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 May 2020 21:14:01 UTC