Annual Report and Notice of AGM

Source: RNS
RNS Number : 7392I
Melrose Industries PLC
03 April 2020
 

The 2019 Annual Report and Notice of Annual General Meeting

Melrose Industries PLC (the "Company") announces that its Annual Report and financial statements for the year ended 31 December 2019 (the "Annual Report"), Notice of Annual General Meeting (the "AGM"), and Form of Proxy for the AGM have each been sent to shareholders, under the cover of a letter from our Chairman, Mr Justin Dowley ("Chairman's Letter"), and subject to the trading update released on 30 March 2020 ("Trading Update") which together confirmed that the previously proposed resolutions in relation to approval of the final dividend and the new long term incentive scheme have been withdrawn due to the continuing impact of the global outbreak of COVID-19. Please refer to those documents for further information. The Annual Report, Notice of AGM, Chairman's Letter and the Trading Update are available to view or download from the Company's website at https://www.melroseplc.net/investors/.

The Company's AGM will be held at 11.00 a.m. on 7 May 2020 at Leconfield House, Curzon Street, London W1J 5JA.

PLEASE NOTE THAT IN LINE WITH UK GOVERNMENT GUIDANCE AT THE TIME OF PUBLICATION OF THE NOTICE OF AGM, THE COMPANY URGES ALL SHAREHOLDERS NOT TO ATTEND THE AGM IN PERSON, BUT TO MAKE USE OF PROXIES TO EXERCISE THEIR VOTING RIGHTS AND TO SUBMIT ANY QUESTIONS PRIOR TO THE MEETING USING THE SERVICE THAT THE COMPANY HAS SET UP FOR THESE PURPOSES.

If, despite this request, any shareholder nonetheless seeks to attend in person, the Chairman reserves the right to introduce further appropriate safety measures such as temperature checks and self-certifications, as well as to suspend the meeting immediately and seek an alternative time when it can be held safely and in accordance with UK Government guidance.

The Company's preliminary results announcement on 5 March 2020 included, in addition to the preliminary financial results, the text of the Chairman's statement, Chief Executive's review (including the Divisional review) and Finance Director's review, in each case as contained in the Annual Report. In the few short weeks since we announced our very successful set of 2019 financial results, the global situation has completely changed and we all face very difficult health and economic circumstances. As we release our Annual Report, the impact of this outbreak is still uncertain. However, it is clear that the language and tone of our preliminary results announcement, as reflected in our Annual Report, are no longer appropriate for 2020.

The appendix to this announcement sets out the required disclosures with regard to the Directors' responsibility statement, the principal risks and uncertainties and related party transactions, in each case as contained in the Annual Report. Together, this information is provided in accordance with Disclosure & Transparency Rule 6.3.5(2). This information is not a substitute for reading the full Annual Report for the year ended 31 December 2019.

The Company confirms that, in compliance with Listing Rule 9.6.1, an electronic copy of each of the Company's Annual Report for the year ended 31 December 2019, Notice of AGM and Form of Proxy for the AGM have been submitted to the National Storage Mechanism, appointed by the Financial Conduct Authority, and will be available shortly for inspection at www.morningstar.co.uk/uk/NSM.

Enquiries:

Montfort Communications:

Nick Miles, +44 (0) 20 3514 0897

Charlotte McMullen, +44 (0) 7973 130 669 / +44 (0) 7921 881 800


APPENDIX

 

Directors' Responsibility Statement 

 

We confirm that to the best of our knowledge:

·     the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

·     the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

·     the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

Principal Risks and Uncertainties

 

This section outlines the principal risks and uncertainties that may affect the Group and highlights the mitigating actions that are being taken. This section is not intended to be an exhaustive list of all the risks and uncertainties that may arise, nor is the order of the content intended to be any indication of priority.

 

A risk management and internal controls framework is in place within the Group, which is continually reviewed and adapted where necessary to reflect the risk profile of the Group and to continue to ensure that such risks and uncertainties can be identified and, where possible, managed suitably. Each Group business unit maintains a risk register which is aggregated into an interactive data-driven dashboard reporting tool, to facilitate review by the Melrose senior management team, the Audit Committee and the Board.

 

Key risk

Description and impact

Mitigation

Responsibility

Risk trend

Trend commentary

Strategic priorities

Strategic risks

Acquisition of new businesses

and improvement strategies

The success of the Group's acquisition strategy depends on

identifying available and suitable targets, obtaining any consents or authorisations required to carry out an acquisition, and procuring the necessary financing, be this from equity, debt or a combination of the two. In making acquisitions, there is a risk of unforeseen liabilities being later discovered which were not uncovered or known at the time of the due diligence process, particularly in the context of limited access in public bids. Further, as per the Group's strategy to buy and improve good but underperforming manufacturing businesses, once an acquisition is completed, there are risks that the Group will not succeed in driving strategic operational improvements to achieve the expected post-acquisition trading results or value which were originally anticipated, that the acquired products and technologies may not be successful, or that the business may require significantly greater resources and investment than anticipated. If anticipated benefits are not realised or trading by acquired businesses falls below expectations, it may be necessary to impair the carrying value of these assets. The Group's return on shareholder investment may fall if acquisition hurdle rates are not met. The Group's financial performance may suffer from goodwill or other acquisition-related impairment charges, or from the identification of additional liabilities not known at the time of the acquisition.

Structured and appropriate due diligence undertaken on potential new targets where permitted and practicable.

 

Focus on acquisition targets that have strong headline fundamentals, high-quality products, leading market share but which are underperforming their potential and ability to generate sustainable cash flows and profit growth.

 

Hands-on role taken by executive Directors and other senior employees of the Group.

 

Development of strategic plans, restructuring opportunities, capital expenditure, procurement and working capital management.

 

Proper incentivisation of operational management teams to align with Melrose strategy.

Executive management

 

 

Following the acquisition of GKN in 2018, the Group remains focused principally on improvement. Whilst no large acquisitions

were made in 2019 relative to the 2018 GKN acquisition, some

small bolt-on acquisitions were made by certain businesses and

are expected to improve those businesses.

Buy

Improve

Timing of disposals

In line with our strategy and depending where the Group is within the "Buy, Improve, Sell" cycle, the expected timing of any disposal of businesses is considered as a principal risk which could have a material impact on the Group strategy. Further, due to the Group's global operations, there may be a significant impact on the timings of disposals due to political and macro-economic

factors. Depending on the timings of disposals and nature of the businesses' operations there may be long-term liabilities which could be retained by the Group following a disposal. Insufficient allowance for such retained liabilities may affect the Group's financial position.

 

 

Directors are experienced in judging and regularly reviewing the appropriate time in a business cycle for a disposal to realise maximum value for shareholders.

 

Each disposal is assessed on its merits, with a key focus on a clean disposal.

Executive management

 

Although global M&A markets continue to experience some uncertainty there remain opportunities for value realisation. Some non-core businesses were placed under strategic review during 2019. However, management continue to remain disciplined and there is no obligation to sell before it is appropriate to do so.

Sell

Operational risks

Economic and political

The Group operates, through manufacturing and/or sales facilities, in numerous countries and is affected by global economic conditions. Businesses are also affected by government spending priorities and the willingness of governments to commit substantial resources. Current global economic and financial market conditions, including continued headwinds in the automotive sector and a continued slowdown in US new-build residential housing markets, any fluctuation in commodity prices, the potential for a significant and prolonged global recession and any uncertainty in the political environment, may materially and adversely affect the Group's operational performance and

financial condition, and could have significant impact on the timing of acquisitions and disposals.

 

A recession may also materially affect customers, suppliers and other parties with which the Group does business. Adverse economic and financial market conditions may cause customers to terminate existing orders, to reduce their purchases from the Group, or to be unable to meet their obligations to pay outstanding debts to the Group. These market conditions may also cause our suppliers to be unable to meet their commitments to the Group or to change the credit terms they

extend to the Group's businesses.

 

Since the period under review, the UK left the EU on 31 January 2020. There continues to be uncertainty in the UK regarding the nature of the UK's future trading relationship with the EU and other international trading partners with which the UK intends to establish new terms on which to trade, and what this will mean for business and the UK economy following expiry of the initial Brexit transition period on 31 December 2020. Whilst the long-term impact of Brexit is not isolated as a principal risk to the Group as a whole, it does present potential risks that the business units continue to monitor and assess closely relating to potential changes to the cross-border trade and regulatory environment. The Board continues to assess and review mitigation plans.

 

A significant amount of the Group's revenue is generated from operations located in North America, which this year has continued to (i) experience challenging tariffs relating to the US/China trade war; and (ii) require close monitoring of the expected short to medium- term impact of potential changes to international trading relationships following Brexit. The Group's exposure to these  factors as a whole has been inherently mitigated since acquiring GKN, which created a more geographically balanced manufacturing footprint, and resulted in a larger proportion of the Group's revenue being generated from the UK and European-based GKN Aerospace and GKN Automotive divisions. Further, the Group's businesses operating in North America continue to take regular specific

actions to mitigate the impact of new relevant North American tariffs and changes to international trading regulations by engaging with the relevant authorities prior to and after any such changes are implemented.

 

Since the period under review, the potential rapid spreading of COVID-19 has become a significant emerging risk to the global economy. The Board continues to monitor the impact of the virus on the Group as more information about the epidemic emerges, with particular focus on the potential for staff shortages and production delays that could arise and potentially affect Group businesses' China-based operations and their supply chains, as well as monitoring how other operations around the world could become affected depending on the extent to which the virus spreads outside of China.

Regular monitoring of order books, cash generation and other leading indicators, to ensure the Group and each of its businesses can respond quickly to any adverse trading conditions. This includes the identification of cost reduction and efficiency measures.

 

Finance for acquisitions is readily available to the Group from banking syndicates. This has proven to be available to the Group even during periods of economic downturn, for example during the global financial crisis in 2008.

 

Short-term inventory buffers are being planned to minimise the initial impact of Brexit on import costs and tariffs and border disruption.

 

Sales from the EU to the UK within the GKN Automotive and GKN Aerospace divisions are frequently on ex-works terms and therefore a cost to customers. This continues to be reviewed in light of the possible terms on which the UK fully departs from the EU.

 

Strong customer relationships built on long-term partnerships often with plants in close proximity, technical excellence and quality. Planning for potential discussions in respect of

increased tariff costs that materialise if a 'No Deal' Brexit emerges when the initial transition period expires.

 

The Group remains agile, diversified and well positioned to deal with any short-term uncertainty in the UK.

Executive management

 

Geopolitical uncertainty continued during 2019. However, the Board notes that economic uncertainty can depress business valuations and this may increase the number of potential acquisition opportunities for Melrose.

 

The Melrose senior management team continues to actively engage with the executive teams of each division to track the potential impacts of Brexit and imposition of future expected tariffs, engage actively with those who are working on the impact

assessments and mitigation actions, and report the material

findings to the Board. Melrose senior management team monitors key issues with the divisional management teams including the impact of geopolitical uncertainty on order books, cash generation, legal and regulatory threats and other key operational and commercial indicators, to ensure the Group and each of its businesses can respond appropriately to adverse trading conditions. Tactics for mitigating the potential impact of geopolitical uncertainty include identifying cost reduction and operational efficiency measures.

Buy

Improve

Sell

Commercial

The Group operates in competitive markets throughout the world and is diversified across a variety of industries and production and sales geographies. This provides a degree of Group-level impact mitigation from the potential commercial challenges and market disruptions that face each of the divisions.

 

Each division is exposed to particular commercial and market risks, which are primarily accentuated where customer/competitor concentration is high within their respective market segments.

 

Melrose operates a decentralised control and management structure which empowers divisional management teams to take full responsibility for planning, mitigating, navigating and responding to the specific commercial risks and challenges facing their respective businesses. The Melrose senior management team monitors the aggregated impact of such risks and provide active support and challenge to the divisional management teams in fulfilling their responsibilities.

 

Common commercial risk areas that potentially affect a large proportion of the Group's businesses include those related to production quality assurance, health and safety performance, customer concentration and uncertainties related to future customer demand, onerous customer and supplier contracts, the impact of increased competitive pressures on the maintenance/ improvement of market share, potential disruptions to supply chains and increases to the price of raw materials, technological innovation and market disruption, and the performance and management of programme partners (the "Common Commercial Risks").

The Group continued to actively invest in research and development activities in 2019 to augment its platforms for future product expansion, quality improvements, customer

alignment and achieving further production efficiencies. Details about some of the Group's research and development activities are provided in the ESG report on pages 58 to 69 of the 2019 Annual Report.

 

Health and safety awareness initiatives and performance enhancements continued to be implemented in alignment with regulation, market practice and site-based risk assessments and requirements. Further details are provided in the nonfinancial KPIs on pages 36, 37, 65 of the 2019 Annual Report.

 

Since acquiring GKN, the Melrose senior management team has actively engaged with and supported the GKN businesses' divisional management teams in identifying embedded contractual and business conduct risks relating to key supply chain and production programme partners. Those management teams have continued to implement and direct a series of operational change management programmes to mitigate the risks they have identified.

 

The Melrose senior management team, in collaboration with Ernst & Young, enhanced the Board and Audit Committee's visibility of the Group's Common Commercial Risks during

2019 by building and implementing an intelligent, data-driven Group reporting dashboard to automate the aggregation and reporting of numerous Common Commercial Risks across each of the Group's divisions, including those identified from the diligence efforts and site visits undertaken to prepare the GKN opening Balance Sheet during 2018, and ongoing

divisional risk reporting.

Executive management

 

The Melrose senior management team actively engages with the

divisional executive teams to track, monitor and support strategic planning activities and impact mitigation assessments in respect of ongoing commercial risks.   Particular focus is placed on certain GKN Aerospace and GKN Automotive end-markets where customer and/or competitor concentration is high and heavier reliance is placed on supply chain efficiency and programme partner management. The divisional CEOs report material updates directly to members of the Melrose senior management team which maintains a number of contact points throughout the Group to increase awareness. The Group continued to actively invest in research and development initiatives during 2019 to augment its platforms for future expansion, to benefit product quality improvements and increased customer alignment, and to achieve

further production efficiencies.

Improve

Loss of key management and capabilities

The success of the Group is built upon strong management teams. As a result, the loss of key personnel could have a significant impact on performance, at least for a time. The loss of key personnel or the failure to plan adequately for succession or develop new talent may impact the reputation of the Group or lead to a disruption in the leadership of the business. Competition for personnel is intense and the Group may not be successful in attracting or retaining qualified personnel, particularly engineering professionals.

Succession planning within the Group is coordinated via the Nomination Committee in conjunction with the Board and includes all Directors and senior Group employees. In line with the Group's decentralised structure, each divisional CEO, in consultation with the Chief Executive, is responsible for the appointment of their respective executive team members, with disclosure to the Nomination Committee via the Melrose senior management team.

 

The Company recognises that, as with most businesses, particularly those operating within a technical field, it is dependent on Directors and employees with particular managerial, engineering or technical skills. Appropriate remuneration packages and long-term incentive arrangements are offered in an effort to attract and retain such individuals.

Executive management

 

Succession planning remains a core focus for the Nomination Committee and the Board. Succession planning of executive Directors and senior management, together with visibility of potential successors within the Group, will remain an area of particular management focus in 2020.

Buy

Improve

Sell

Compliance and ethical risks

Legal, regulatory and environmental

Considering the breadth, scale and complexity of the Group, there is a risk that the Group may not always be in complete compliance with laws, regulations or permits. The Group could be held responsible for liabilities and consequences arising from (i) past or future environmental damage, including potentially significant

remedial costs; (ii) employee matters including liability for employee accidents in the workplace or consequences of environmental liabilities, which may be susceptible to class action law suits, particularly but not exclusively with respect to Group businesses operating in North America; (iii) restrictions arising from economic sanctions, export controls and customs, which can result in fines, criminal penalties, adverse publicity, payment of back duties and suspension or revocation of the Melrose Group's import or export privileges; and (iv) product liability claims, which can result in significant total liability or remedial costs, particularly for products supplied to large volume global production programmes spanning multiple years, for example in the aerospace and automotive industries, or to consumer end-markets for example in the air management industry. There can also be no assurance that any provisions for expected environmental liabilities and remediation costs will adequately cover these liabilities or costs.

 

The Group operates in highly regulated sectors, which has been accentuated by the GKN acquisition. In addition, new legislation, regulations or certification requirements may require additional expense, restrict commercial flexibility and business strategies or introduce additional liabilities for the Group or Directors. For example, the Group's operations are subject to anti-bribery and anti-corruption, anti-money laundering, competition, anti-trust and trade compliance laws and regulations. Failure to comply with certain regulations may result in significant financial penalties, debarment from government contracts and/or reputational damage, and may impact our business strategy.

Regular monitoring of legal and regulatory matters at both a Group and business unit level. Consultation with external advisors where necessary.

 

Group-wide standard and enhanced application to trade authorisation procedures are in place and regularly reviewed against the ever-changing global trade compliance landscape, supported by access to external trade compliance legal and regulatory specialists and electronic counterparty screening systems.

 

Our businesses are validated and certified in respect of quality management, environmental management and health and safety with the appropriate bodies including ISO and BS OHSAS, where relevant to their operations. The Group's businesses are either already compliant with or working towards timely compliance with new and upcoming standards. This includes Group businesses that are

currently certified to BS OHSAS 18001 and are actively driving towards full transition to ISO 45001:2018.

 

A robust control framework is in place, underpinned by

comprehensive corporate governance and compliance procedures at both a Group and business unit level.

 

Where possible and practicable, due diligence processes during the acquisition stage seek to identify legal, regulatory

and environmental risks. At the business unit level, controls are in place to prevent such risks from crystallising.

 

Any environmental risks that crystallise are subject to mitigation by specialist consultants engaged for this purpose.

External consultants assist the Group in complying with new and emerging environmental regulations.

 

Insurance cover mitigates certain levels of risk and the Group's insurers are instructed to carry out external audits of specified areas of legal and compliance risk including health and safety.

Executive management

 

Each business has a fully developed legal function, headed by their respective General Counsel reporting to their executive management team, and are properly staffed and supported by

external advisors where necessary or helpful to ensure ongoing compliance in the jurisdictions in which they operate across the globe. This is augmented by central oversight from the Melrose legal team and robust annual reviews to ensure it has a strong legal and compliance framework and considers the risk to be consistent with prior years.

Improve

Information security and cyber threats

Information security and cyber threats are an increasing

priority across all industries and remain a key UK Government

agenda item.

 

Like many businesses, Melrose recognises that the Group may have a potential exposure in this area. Potential exposure to such risks remains high due to the scale, complexity and public-facing nature of the Melrose Group. In addition, Melrose recognises that the inherent security threat is considered highest in GKN Aerospace where data is held in relation to civil aerospace technology and controlled defense contracts.

Management continues to work with its business leaders and external security consultants to better understand the Group's increased exposure to cyber security risk and to ensure appropriate mitigation measures are in place for the Group.

 

In 2019, Melrose completed the deployment of its information security strategy and risk-based governance framework to all businesses within the Group. The framework follows the UK Government's recommended steps on cyber security. This strategy has enabled risk profiling and mitigation plans to be developed for each business to mitigate and reduce their exposure to cyber risk.

 

As part of Melrose's overall information security strategy, IT Security awareness training was deployed to all Melrose businesses.

 

The progress of each business is measured against the information security strategy and is monitored on a quarterly basis.

Executive management

 

Information security and cyber threats are an increasing priority across all industries. Cyber security breaches of the Group's IT systems could result in the misappropriation of confidential information belonging to it or its customers, suppliers or employees. In response to the increased sophistication of information security and cyber threats, the Group has worked, and continues to work, with external security companies to monitor, improve and refine its Group-wide strategy to aid the prevention, identification and mitigation of any threats.

Improve

Financial risks

Foreign exchange

Due to the global nature of operations and volatility in the foreign exchange market, exchange rate fluctuations have, and could continue to have, a material impact on the reported results of the Group.

 

The Group is exposed to three types of currency risk: transaction risk, translation risk, and the risk that when a business that is predominantly based in a foreign currency is sold, it is sold in that foreign currency. The Group's reported results will fluctuate as average exchange rates change. The Group's reported net assets will fluctuate as the year-end exchange rate changes.

The Group policy is to protect against the majority of foreign exchange risk which affects cash, by hedging such risks with financial instruments.

 

Protection against specific transaction risks is taken by the Board on a case-by-case basis.

Executive management

 

Group results are reported in Sterling but a large proportion of the revenues are denominated in currencies other than Sterling, primarily US Dollar and Euro. Following the GKN acquisition, the Group has exposure on both a transactional and translational basis to more currencies. Sensitivity to the key currency pairs is shown in the Finance Director's review on pages 38 to 44 of the 2019 Annual Report.

Buy

Improve

Sell

Pensions

Any shortfall in the Group's defined benefit pension schemes may require additional funding. As at 31 December 2019, the Group's pension schemes had an aggregate deficit, on an accounting basis, of £1,121 million (2018: £1,413 million). Changes in discount rates, inflation, asset values or mortality assumptions could lead to a materially higher deficit. For example, the cost of a buyout on a discontinued basis uses more conservative assumptions and is likely to be significantly higher than the accounting deficit.

 

Alternatively, if the plans are managed on an ongoing basis, there is a risk that the plans' assets, such as investments in equity and debt securities, will not be sufficient to cover the value of the retirement benefits to be provided under the plans. The implications of a higher pension deficit include a direct impact on valuation, implied credit rating and potential additional funding requirements at subsequent triennial reviews. In the event of a major disposal that generates significant cash proceeds which are returned to the shareholders, the Group may be required to make additional cash payments to the plans or provide additional security.

The Group's key funded UK defined benefit pension plans are closed to new entrants and future service accrual. Long-term funding arrangements are agreed with the trustees and reviewed following completion of actuarial valuations.

 

Active engagement with trustees on pension plan asset allocations and strategies.

 

On 1 July 2019 the large UK GKN defined benefit pension scheme was split into four new schemes, two of which have been allocated to GKN Aerospace and two to GKN Automotive, in order to more appropriately balance liabilities across supporting businesses.

Executive management

 

Although the risks are well understood and funding plans for the GKN Schemes have already been agreed with Scheme trustees, the size of the gross liabilities as a proportion of the Group's net assets remains significant. During the period, gross liabilities were reduced as a result of people leaving group schemes on the sale of their employer company, voluntarily or through an insurance buy-out, which together with contributions of £185 million (including the balance of the initial £150 million funding commitment to the GKN schemes) and the better hedging of interest and inflation risks decreased both the overall liability and volatility risk to the Group.

Buy

Improve

Sell

Liquidity

The ability to raise debt or to refinance existing borrowings in the bank or capital markets is dependent on market conditions and the proper functioning of financial markets. As set out in more detail in the Finance Director's review on pages 38 to 44 of the 2019 Annual Report, the Group has term loans of US$960 million and £100 million and revolving credit facilities comprising US$2.0 billion, €0.5 billion and £1.1 billion.

 

In addition, the GKN net debt at acquisition included capital market borrowings across three unsecured bonds that totalled £1.1 billion. Two of these bonds - totalling £750 million - remain outstanding as at 31 December 2019 and further detail is provided in the Finance Director's review on pages 38 to 44 of the 2019 Annual Report.

 

Furthermore, in line with the Group's strategy, investment is made in the businesses (capital expenditure in excess of depreciation) and there is a requirement to assess liquidity and headroom when new businesses are acquired. In addition, the Group may be unable to refinance its debt when it falls due.

To ensure it has comprehensive and timely visibility of the liquidity position, the Group conducts monthly reviews of its cash forecast, which are in turn revised quarterly.

 

The Group operates cash management mechanisms, including cash pooling across the Group and maintenance of revolving credit facilities to mitigate the risk of any liquidity issues.

 

The Group gained agreement from its lenders to a three-year extension, at the Group's option to be built into its multi-currency term loan denominated £100 million and US$960 million, exercisable at any time prior to 1 April 2021

that would extend the maturity date of the loan to April 2024.

 

The Group operates a conservative level of headroom across its financing covenants which is designed to avoid the need for any unplanned refinancing.

Executive management

 

The Group is satisfied that it has adequate resources available to meet its liabilities.

Buy

Improve

 

Related Party Transactions

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

In the ordinary course of business sales and purchases of goods take place between subsidiaries and equity accounted investment companies priced on an arm's length basis. Sales by subsidiaries to equity accounted investments in the year ended 31 December 2018 totalled £28 million (2017: £nil). Purchases by subsidiaries from equity accounted investments in the year ended 31 December 2018 totalled £14 million (2017: £nil). At 31 December 2018, amounts receivable from equity accounted investments totalled £6 million (31 December 2017: £nil) and amounts payable to equity accounted investments totalled £2 million (31 December 2017: £nil).

 

Sales to and purchases from Group companies are priced on an arm's length basis and generally are settled on 30-day terms.

 


Year ended

31 December 2019

£m

Year ended

31 December

2018

£m

Short-term employee benefits

4

3

Share-based payments

9

9


13

12

 


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