Half year to 30 June
2015
£m
2014
£m
Revenue299.8312.3
Headline operating profit54.156.1
Amortisation of acquired intangible fixed assets(2.1)(1.9)
Operating profit prior to exceptional items52.054.2
Reorganisation costs(19.9)
Operating profit32.154.2

Revenue for the half year was £299.8m (2014: £312.3m), a decrease of 4.0% compared to the same period last year. At constant exchange rates, revenue decreased by 1.1% (£3.5m). Adverse foreign exchange rate movements resulted in a £9.0m negative exchange rate effect.

Headline operating profit decreased to £54.1m (2014: £56.1m) and headline operating margin remained constant at 18.0% (2014: 18.0%). The decrease in headline operating profit of £2.0m is largely a result of a negative exchange rate effect of £1.2m.

The amortisation of acquired intangible assets arises from acquisitions in prior years. The charge has increased to £2.1m (2014: £1.9m).

Operating profit decreased to £32.1m (2014: £54.2m) and operating margin was 10.7% (2014: 17.4%), primarily due to reorganisation costs of £19.9m incurred in the first six months of 2015.

Exceptional costs

Exceptional costs for the first six months of 2015 amounted to £19.9m (2014: £nil). The charge comprises reorganisation costs relating to the closure of the business in Brazil and restructuring initiatives in Europe. The decision to exit the Group's activities in Brazil is the consequence of a prolonged and substantial reduction in demand in the business's core markets. The commencement of restructuring programmes in Europe is driven by the fall in global oil prices along with widespread soft economic conditions, both of which have coincided to cause a notable fall in demand for many types of industrial equipment and machinery, affecting a number of European AGI plants.

Profit before taxation

Half year to 30 June
2015
£m
2014
£m
Headline operating profit54.156.1
Net finance charge(1.5)(1.6)
Headline profit before taxation52.654.5
Amortisation of acquired intangible fixed assets(2.1)(1.9)
Headline profit before taxation prior to exceptional items50.552.6
Reorganisation costs(19.9)
Profit before taxation30.652.6

Finance charge

The net finance charge for the Group was £1.5m compared to £1.6m in 2014, with the movement relating to lower pension finance charges.

Half year to 30 June
2015
£m
2014
£m
Net interest payable0.10.1
Financing costs0.80.8
Other charges0.40.4
Pension finance charge0.20.3
Net finance charge1.51.6

Cash flow

Half year to 30 June
2015
£m
2014
£m
Headline operating profit54.156.1
Add back non-cash items:
Depreciation and amortisation26.026.4
Share-based payments0.81.9
Headline EBITDA180.984.4
Net capital expenditure(29.2)(31.5)
Net working capital movement(11.5)(8.9)
Headline operating cash flow40.244.0
Cash cost of restructuring(3.5)(1.2)
Operating cash flow36.742.8
Interest(1.2)(1.3)
Taxation(14.9)(9.4)
Free cash flow20.632.1

Free cash flow for the period was £20.6m compared to £32.1m in the first six months of 2014. The decrease is mainly as a result of increased net working capital outflows and higher tax payments.

The net working capital outflow for the six month period amounted to £11.5m (2014: £8.9m). Receivables increased by £6.7m (2014: £8.7m) as a result of the normal seasonally higher revenues in May and June in comparison to November and December. Receivable days at 30 June 2015 are 61 days (31 December 2014: 60 days and 30 June 2014: 58 days). Payables decreased by £5.6m (2014: £2.5m) and inventory decreased by £0.9m (2014: £nil).

The utilisation of environmental and restructuring provisions resulted in a cash outflow of £3.5m (2014: £1.2m), £3.0m of which related to existing provisions, with £0.5m reflecting cash flows in respect of new restructuring programmes.

The Group has continued to manage carefully its capital expenditure programme and is focused on growing the Group's new technology offerings and expanding capacity in emerging markets. Net capital expenditure for the first half was £29.2m (2014: £31.5m) and the ratio to depreciation was 1.1 times (2014: 1.2 times). Major capital projects that were in progress during the first half of 2015 included expansion of our production facilities in Mexico, continued investment in the implementation of a new ERP system, increased aerospace heat treatment capacity in France and ongoing expansion of our specialist technologies capability.

Income taxes paid during the first six months at £14.9m were £5.5m greater than the same period last year. In 2014, a refund of £4.9m was received relating to tax overpaid in previous years.

Taxation

The tax charge in the first half of 2015 was £10.4m, compared to a charge of £12.4m for the same period of 2014. The effective tax rate of 34.1% (2014: 23.5%) results from the impact of differing tax rates in each of the numerous jurisdictions in which the Group operates and from the impact and phasing of the reorganisation costs, particularly in respect of Brazil, which do not give rise to a corresponding tax credit in the territories to which they relate. Consequently this has raised the interim effective rate of tax for the six months to 30 June 2015.

The headline tax rate, excluding the impact of reorganisation costs, is 23.7% in the first six months of 2015 (2014: 22.8%). The Group expects that this headline tax rate will not differ significantly in the second half of 2015.

Earnings per share

Basic headline earnings per share from operations for the half year were 21.1p (2014: 22.1p). Basic earnings per share from operations for the half year were 10.6p (2014: 21.1p). Diluted earnings per share were 10.6p (2014: 21.1p).

Dividend

The Board has declared an interim dividend of 4.8p (2014: 4.6p) which represents an increase of 4.3% over the prior year. The interim dividend will be paid on 6 November 2015 to all shareholders on the register at the close of business on 2 October 2015.

Net (debt)/cash

Group net debt at 30 June 2015 was £7.0m (31 December 2014: net cash £35.7m and 30 June 2014: net cash £5.5m). Loans and letters of credit drawn under the committed facilities at 30 June 2015 totalled £13.8m, compared to £1.7m at 31 December 2014 and £4.6m at 30 June 2014. The Group continues to be able to borrow at competitive rates and therefore currently deems this to be the most effective means of funding.

Borrowing facilities

The Group is financed by a mix of cash flows from operations, short-term borrowings, longer-term loans and finance leases. The Group's funding policy aims to ensure continuity of finance at reasonable cost, based on committed and uncommitted facilities and loans from several sources over a spread of maturities. At 30 June 2015, the Group had the following committed facilities:

FacilityExpiry dateFacility
£m
Loan and
letter of
credit
utilisation
£m
Facility
headroom
£m
$10m Letter of Credit31 August 20166.41.74.7
236.413.8222.6

Defined benefit pension schemes

The Group's principal defined benefit pension obligations have been reviewed as at 30 June 2015. The deficit in the UK scheme decreased to £0.8m (31 December 2014: £1.0m). In France, the deficit in relation to the primarily unfunded cash lump sum obligation is £8.2m (31 December 2014: £8.9m). The sum of the deficits for all other Group schemes is £6.8m (31 December 2014: £7.1m). These amounts are fully provided at 30 June 2015. The principal actuarial assumptions are unchanged from those used as at 31 December 2014.

  1. Earnings before interest, tax, depreciation, amortisation, impairment, profit or loss on disposal of property, plant and equipment and share-based payments.