LUXFER HOLDINGS PLC

Previous wording

Macro-economic conditions have continued to impact our general industrial end-market with demand softening for our products across all segments. We have also experienced variability of demand for certain products in our defense, first response & healthcare end-market, particularly defense applications, including countermeasure flares and flameless ration heaters. We have been able to navigate these challenges through productivity and cost management initiatives resulting in improved margins. Legal recoveries and inventory management contributed to solid cash conversion and reduced net debt levels.

Current wording

Macro-economic conditions have continued to impact our general industrial end-market with demand softening for our products across all segments. We have also experienced variability of demand for certain products in our defense, first response & healthcare end-market, particularly defense applications, including countermeasure flares and flameless ration heaters, although we have seen the former improve in the third quarter. We have been able to navigate these challenges through productivity and cost management initiatives resulting in improved margins. Legal recoveries and inventory management contributed to solid cash conversion and reduced net debt levels.

Previous wording

•Addressing general macro uncertainty and building resilience into the outlook, especially in our General Industrial end-market;

Current wording

•Addressing continuing general macro uncertainty and building resilience into the outlook;

Previous wording

•Ongoing focus on cost control, new product launches and productivity improvements across the business;

Current wording

•Ongoing focus on cost control, new product launches and productivity improvements across the business, driving margin improvement;

Previous wording

•Execution of actions identified upon completion of the recently-announced expanded and accelerated strategic review, including the divestiture of Graphic Arts;

Current wording

•Execution of actions identified upon completion of the previously announced expanded and accelerated strategic review, including the divestiture of Graphic Arts;

Previous wording

•Execution of selected capital investment projects to support our strategy of profitable growth while maintaining our infrastructure;

Current wording

•Execution of selected capital investment projects, especially those related to clean energy, to support our strategy of profitable growth while maintaining our infrastructure;

Previous wording

The consolidated results of operations for the second quarter of 2024 and 2023 of Luxfer were as follows:

Current wording

The consolidated results of operations for the third quarter of 2024 and 2023 of Luxfer were as follows:

Previous wording

The consolidated results of operations for the first six months of 2024 and 2023 of Luxfer were as follows:

Current wording

The consolidated results of operations for the first nine months of 2024 and 2023 of Luxfer were as follows:

Previous wording

Adjusting for a foreign exchange headwind of $0.3 million and a tailwind of $0.4 million in the Second Quarter and first six months of 2024, respectively, net sales have decreased by 9.4% and 10.9% respectively.

Current wording

Adjusting for a foreign exchange tailwind of $1.8 million and $2.2 million in the third quarter and first nine months of 2024, respectively, net sales have increased by 0.2% and decreased 7.4% respectively.

Previous wording

•Significant decrease in sales of MRE and chemical response kits in our Magtech division compared to an unusually strong prior year quarter;

Current wording

•Increased sales of MRE and chemical response kits in our Magtech division;

Previous wording

•Subdued sales of magnesium alloys, especially those used in aerospace and automotive applications;

Current wording

•Strong sales of magnesium alloys, particularly those used in aerospace and automotive applications; and

Previous wording

•Lower sales for our AF cylinders, off the back of strong comparative performance, coupled with weaker demand for our industrial cylinders.

Current wording

•Lower sales for our AF cylinders, off the back of strong comparative performance, coupled with weaker demand for our SCBA cylinders.

Previous wording

Further to the above, the first six months of the year were also affected by:

Current wording

Further to the above, the first nine months of the year were also affected by;

Previous wording

The 0.2 percentage point increase in gross profit as a percentage of sales in the second quarter of 2024 from 2023 was primarily the result of contract renegotiation and manufacturing efficiencies having a positive impact on margins within the Gas Cylinders and Elektron Divisions respectively. This has been partially offset by adverse volume and mix. Gross profit as a percentage of sales for the first half of 2024 remained flat against the first half of 2023 with contract renegotiations and manufacturing efficiencies being offset by adverse volume and mix..

Current wording

The 7.5 and 2.4 percentage point increase in gross profit as a percentage of sales in the third quarter and first nine months of 2024 from 2023 was primarily the result of contract renegotiation and manufacturing efficiencies having a positive impact on margins within the Gas Cylinders and Elektron Divisions respectively. This has been partially offset by adverse volume and mix.

Previous wording

SG&A costs as a percentage of sales in 2024 from 2023 has increased by 0.3 percentage points and 0.4 percentage points in the quarter and first six months respectively, primarily due to reduced revenue. SG&A costs in the second quarter and first half of 2024 have actually decreased by 7.0% and 7.1%, respectively, compared to the same periods in 2023. The SG&A costs in 2023 included $1.2 million and $2.3 million, respectively, in legal fees which did not re-occur in 2024, these predominantly related to the case described in Note 16 - Commitments and Contingencies.

Current wording

SG&A costs as a percentage of sales in 2024 from 2023 has increased by 0.1 percentage points and 0.3 percentage points in the quarter and first nine months respectively. This is primarily the result of movement in variable management compensation in 2024 compared to 2023. SG&A costs in 2023 included $2.2 million and $4.5 million, respectively, in legal fees which did not re-occur in 2024, these predominantly related to the case described in Note 16 - Commitments and Contingencies.

Previous wording

Research and development costs as a percentage of sales increased by 0.2 percentage points in the second quarter and first six months of 2024 respectively. The slight increase is a result of the reduction in sales as absolute expenditures remained relatively flat.

Current wording

Research and development costs as a percentage of sales reduced by 0.2 percentage points in the third quarter although remained flat for first nine months of 2024 respectively. The slight reduction in the third quarter is a result of timing of research and development spend.

Previous wording

The $1.1 million and $1.8 million restructuring charge in the second quarter and first six months respectively of 2024 predominantly relates to the execution of cost savings initiatives affecting our North American Gas Cylinders business. This amounted to $0.6 million and $1.0 million in the second quarter and first six months of the year respectively. There was a further $0.5 million and $0.6 million in the second quarter and first six months of the year primarily relating to site clean-up costs associated with the closure of Luxfer Gas Cylinders France, which ceased operations in 2019. Additionally, there were clean-up costs of $0.2 million in the first six months of the year within our Elektron Division relating to the consolidation of production facilities in the Magnesium Powders operations.

Current wording

The $0.5 million and $2.3 million restructuring charge in the third quarter and first nine months respectively of 2024 predominantly relates to the execution of cost savings initiatives affecting our North American Gas Cylinders business. This amounted to $0.4 million and $1.4 million in the third quarter and first nine months of the year respectively. There was a further $0.1 million and $0.7 million in the third quarter and first nine months of the year primarily relating to site clean-up costs associated with the closure of Luxfer Gas Cylinders France, which ceased operations in 2019. Additionally, there were clean-up costs of $0.2 million in the first nine months of the year within our Elektron Division relating to the consolidation of production facilities in the Magnesium Powders operations.

Previous wording

The $2.5 million and $2.8 million restructuring charge in the second quarter and first six months of 2023 relates predominantly to asset impairments in relation to rationalization of our North American Gas Cylinders businesses to reduce our fixed cost base. This amounted to $2.3 million in both the second quarter and first half of the year respectively. There was an additional $0.1 million and $0.4 million of other expenses in the second quarter and first half respectively, in relation to the aforementioned rationalization.

Current wording

The $1.6 million and $4.4 million restructuring charge in the third quarter and first nine months of 2023 relates predominantly to asset impairments in relation to rationalization of our North American Gas Cylinders businesses to reduce our fixed cost base. This amounted to $0.3 million in the third quarter and $2.6 million in the first nine months of the year respectively. There was an additional $0.9 million and $1.3 million of other expenses in the third quarter and first nine months of the year in relation to the aforementioned rationalization.

Previous wording

Acquisition and disposal related costs of $9.2 million and $9.4 million in the second quarter and first six months respectively of 2024 were incurred in relation to the divestiture of our Graphic Arts segment. $7.5 million represents a loss on held-for-sale asset group and $1.7 million and $1.9 million respectively, represents professional fees incurred and accrued in relation to the planned divestiture of the Graphic Arts segment. No acquisition and disposal related costs were incurred during 2023.

Current wording

Acquisition and disposal related costs of $0.1 million and $9.5 million in the third quarter and first nine months respectively of 2024 were incurred in relation to the divestiture of our Graphic Arts segment. $7.5 million represents a loss on held-for-sale asset group, recognized in the first half of 2024 and $0.1 million and $2.0 million respectively, represents professional fees. No acquisition and disposal related costs were incurred during 2023.

Previous wording

Other Income of $5.3 million and $5.1 million in the second quarter and first six months of 2024 relate to the recovery of legal costs from our insurer related to the previously disclosed US Ecology case.

Current wording

Other Income of $1.9 million and $7.2 million in the third quarter and first nine months of 2024 relate to the recovery of legal costs from our insurer related to the previously disclosed US Ecology case.

Previous wording

Net interest expense of $1.3 million in the Second Quarter of 2024 decreased 27.8% from $1.8 million in the Second Quarter of 2023, due to a decrease in drawings. Interest expense of $2.7 million in the first six months of 2024 was also lower than the $3.1 million in the first six months of 2023.

Current wording

Net interest expense of $1.4 million in the Third Quarter of 2024 decreased 12.5% from $1.6 million in the Third Quarter of 2023, due to a decrease in drawings and average lower interest rates. Interest expense of $4.1 million in the first nine months of 2024 was also lower than the $4.7 million in the first nine months of 2023.

Previous wording

There was a defined benefit credit of $0.2 million and $0.5 million in the second quarter and first six months respectively for the U.K. plan, consistent with 2023. 2023 was also impacted by the sale of the U.S. pension plan liability to an insurer, which included $2.3 million cash and $6.9 million in relation to the derecognition of the U.S. pension liability and reallocation of accumulated actuarial losses from other comprehensive income. In the second quarter of 2023, we received a $0.2 million contribution refund, resulting in a net cash outflow of $2.1 million and a half year charge of $9.0 million.

Current wording

There was a defined benefit credit of $0.3 million and $0.8 million in the third quarter and first nine months respectively for the U.K. plan, consistent with 2023. 2023 was also impacted by the sale of the U.S. pension plan liability to an insurer, which included $2.3 million cash and $6.9 million in relation to the derecognition of the U.S. pension liability and reallocation of accumulated actuarial losses from other comprehensive income. In the second quarter of 2023, we received a $0.2 million contribution refund, resulting in a net cash outflow of $2.1 million and a half year charge of $9.0 million.

Previous wording

The movement in the year to date statutory effective tax rate from negative 50.0% in 2023, to 63.1% in 2024, was primarily due to non-deductible expenses and deferred tax credit, predominantly in relation to the previously mentioned pension buy-out and impairment charges. When stripping out the impact of this, as well as other less significant adjusting items, the adjusted effective tax rate has increased to 23.7% in 2024 from 22.0% in 2023, largely as a result of the statutory tax rate increase in the U.K. from 19% to 25%, which came into effect in April 2023.

Current wording

The movement in the year to date statutory effective tax rate from negative 39.3% in 2023, to positive 34.2% in 2024, was primarily due to non-deductible expenses and deferred tax credit, predominantly in relation to the previously mentioned pension buy-out and impairment charges. When stripping out the impact of this, as well as other less significant adjusting items, the adjusted effective tax rate has increased to 23.4% in 2024 from 21.9% in 2023, largely as a result of the statutory tax rate increase in the U.K. from 19% to 25%, which came into effect in April 2023.

Previous wording

The 2.7% increase in Gas Cylinders sales in the second quarter of 2024 from 2023 was primarily the result of increased sales of SCBA cylinders which benefited from pricing agreed through contract renegotiation. These increases have been partially offset by reduced sales of industrial and alternative fuel cylinders.

Current wording

The 4.7% decrease in Gas Cylinders sales in the third quarter of 2024 from 2023 was primarily the result of reduced sales of SCBA and alternative fuel cylinders, these reductions have been partially offset by increases in cylinders sold to our medical and industrial end markets.

Previous wording

The 5.8% increase in sales for the first six months of the year was primarily the benefit from renegotiated contracts, which previously constrained inflationary cost pass through in the first six months of 2023. These increases have been partially offset by reduced sales of aluminum cylinders used in our general industrial end market.

Current wording

The 2.3% increase in sales for the first nine months of the year was primarily the benefit from renegotiated contracts, which previously constrained inflationary cost pass through in the first six months of 2023. These increases have been partially offset by reduced sales of aluminum cylinders used in our general industrial end market.

Previous wording

The 0.3 percentage point decrease in adjusted EBITDA for Gas Cylinders as a percentage of net sales in the second quarter of 2024 relative to 2023 is predominantly the result of adverse sales mix and productivity partially offset by pricing improvements from new sales contracts . For the first six months there has been a 1.3 percentage point increase in adjusted EBITDA primarily due to the impact of new sales contracts, partially offset by adverse productivity, volume and mix.

Current wording

The 4.5 and 2.3 percentage point increase in adjusted EBITDA for Gas Cylinders as a percentage of net sales in the third quarter and first nine months of 2024 relative to 2023 is predominantly the result of pricing improvements from new sales contracts partially offset by adverse sales mix and volume.

Previous wording

The 20.8% and 24.4% decrease in Elektron sales in the second quarter and first six months of 2024 from 2023 was primarily the result of:

Current wording

The 7.0% increase in Elektron sales in the third quarter of 2024 from 2023 was primarily the result of:

Previous wording

•Significant decrease in MRE and chemical response kit sales in our Magtech division; and

Current wording

•Increased sales of MRE and chemical response kits in our Magtech division; and

Previous wording

•Subdued sales of magnesium alloys, especially those used in aerospace and automotive applications;

Current wording

•Strong sales of magnesium alloys, particularly those used in aerospace and automotive applications.

Previous wording

The 11.6 and 5.6 percentage point increase in adjusted EBITDA for Elektron as a percentage of net sales in the second quarter and first six months respectively of 2024 from 2023 was a result of the net recovery from the previously disclosed US Ecology case in 2024 of $5.1 million and $5.3 million, compared to the net cost of $1.2 million and $2.3 million in 2023.This was partially offset by adverse movement in volume and mix and $0.8m unfavorable FX in the first six months of 2024.

Current wording

The 8.9 and 6.4 percentage point increase in adjusted EBITDA for Elektron as a percentage of net sales in the third quarter and first nine months respectively of 2024 from 2023 was a result of the net recovery from the previously disclosed US Ecology case in 2024 of $1.9 million and $7.2 million, compared to the net cost of $2.2 million and $4.5 million in 2023.This was partially offset by adverse price and unfavorable FX.

Previous wording

The 11.2% decrease in Graphic Arts sales in the second quarter of 2024 from 2023 was primarily the result of decreased demand for photo-engraving plates, particularly outside the North American market.

Current wording

The 12.7% increase and 5.1% decrease in Graphic Arts sales in the third quarter and first nine months of 2024 from 2023 respectively was primarily the result of fluctuating demand for photo-engraving plates, particularly outside the North American market.

Previous wording

Graphic Arts made a small, positive EBITDA of $0.1 million for the second quarter of 2024, compared to breaking even in the second quarter of 2023. For the first six months of 2024 there was an increased EBITDA loss of $1.6 million, compared to a $0.7 million loss in the first six months of 2023, the reason being the result of lower volumes coupled with elevated cost of magnesium, linked to historic purchases. Given recent reductions in the magnesium purchase price, material cost is expected to reduce as we progress through the current year, consistent with the sequential improvement in adjusted EBITDA in the second quarter of 2024.

Current wording

Graphic Arts made a small, negative EBITDA of $0.1 million for the third quarter of 2024, compared to a loss of $2.8 million in the third quarter of 2023. For the first nine months of 2024 there was an EBITDA loss of $1.7 million, compared to a $3.5 million loss in the first nine months of 2023. 2023 was significantly impacted by material cost inflation resulting in competitive constraints. Magnesium purchase price has reduced as we progress through 2024, consistent with the improvement in adjusted EBITDA in the second and third quarter of 2024.

Previous wording

Cash generated by operating activities was $12.5 million inflow and $1.3 million outflow for the first six months in 2024 and 2023 respectively. It was primarily related to net income from operating activities, net decreases in working capital, and net of the following non-cash items: depreciation and amortization; share-based compensation charges; pension credit; loss on held-for-sale asset group and net changes to assets and liabilities. Cash flow was impacted by the $4.5 million receipt arising from the reimbursement of legal costs in relation to the previously disclosed US Ecology case, the first six months in 2023 had an equivalent outflow of $2.3 million. Also impacting the 2023 cash flow was the $2.1 million contribution the Company made in relation to the sale of the U.S. pension plan to an insurer.

Current wording

Cash generated by continuing operating activities was $25.4 million inflow and $10.2 million inflow for the first nine months in 2024 and 2023 respectively. It was primarily related to net income from operating activities, net of the following non-cash items: depreciation and amortization; share-based compensation charges; pension credit / (charge); gain on disposal of held for sale assets; loss on held-for-sale asset group and net changes to assets and liabilities. Cash flow was impacted by the $5.3 million receipt arising from the reimbursement of legal costs in relation to the previously disclosed US Ecology case, the first nine months in 2023 had an equivalent outflow of $4.5 million. Also impacting the 2023 cash flow was the $2.1 million contribution the Company made in relation to the sale of the U.S. pension plan to an insurer.

Previous wording

Net cash used by investing activities was $4.1 million for the first six months of 2024, compared to net cash used by investing activities of $4.9 million in 2023, as a result of reduced capital expenditure in the quarter.

Current wording

Net cash used by continuing investing activities was $7.7 million for the first nine months of 2024, compared to net cash used by investing activities of $7.5 million in 2023, comparable quarter on quarter.

Previous wording

In the first six months of 2024, net cash used by financing activities was $6.3 million, (2023: $1.2 million provided by financing activities). We made a net drawdown on our banking facilities of $2.0 million, having drawn $6.4 million on our revolving credit facility and paid back $4.4 million of short term debt (2023: $10.1 million drawdown). Dividend payments of $7.0 million (2022: $7.0 million), equating to $0.260 per ordinary share respectively and we paid out $0.3 million, (2023: $0.3 million) in settling share based compensation and $1.0 million, (2023: $1.6 million) in repurchasing our own shares as part of the share buyback program which equates to approximately 100,000 shares (2023: 100,000 shares).

Current wording

In the first nine months of 2024, net cash used by financing activities was $16.3 million, (2023: $15.5 million used by financing activities). We made a net repayment on our banking facilities of $3.8 million, having repaid $2.9 million on our revolving credit facility and paid back $0.9 million of short term debt (2023: $2.5 million net repayment). Dividend payments of $10.5 million (2022: $10.5 million), equating to $0.390 per ordinary share. We paid out $0.4 million, (2023: $0.3 million) in settling share based compensation and $1.6 million, (2023: $2.2 million) in repurchasing our own shares as part of the share buyback program which equates to approximately 150,000 shares (2023: 150,000 shares).

Previous wording

We paid year-to-date dividends in 2024 of $7.0 million and declared an additional $3.5 million (2023: $10.5 million declared year-to-date and $7.0 million paid year-to-date), or $0.260 per ordinary share (2023: $0.260).

Current wording

We paid year-to-date dividends in 2024 of $10.5 million and declared an additional $3.5 million in the fourth quarter of 2024 (2023: $14.0 million declared year-to-date and $10.5 million paid year-to-date), or $0.390 per ordinary share (2023: $0.390).