20-F 1 luxfer20-f2017.htm 20-F Document
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paAs filed with the Securities and Exchange Commission on March 19, 2018
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35370
LUXFER HOLDINGS PLC
(Exact name of Registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
Lumns Lane, Manchester, M27 8LN
(Address of principal executive offices)
Heather Harding, Chief Financial Officer
Lumns Lane, Manchester, M27 8LN
Telephone No. 001 951 341 2375, E-Mail: investor.relations@luxfer.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
 
Name of each exchange on which registered
Ordinary Shares, nominal value £0.50 each
 
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 26,504,474 Ordinary Shares of £0.50 each and 769,413,708,000 Deferred Ordinary Shares of £0.0001 each.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes    o No    x






If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes    o No    x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    x No    o 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    x No    o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o 
Accelerated filer x
Non-accelerated filer o 
Emerging growth company o

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o 
International Financial Reporting Standards as issued
by the International Accounting Standards Board x
Other o 
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17    o  Item 18    o 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes    o  No    x
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
 





TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




GENERAL INFORMATION
In this Annual Report on Form 20-F ("Annual Report"), references to "Company," "Luxfer," "Group," "Luxfer Group," "we," "us" and "our" are to Luxfer Holdings PLC and, except as the context requires, its consolidated subsidiaries.
PRESENTATION OF FINANCIAL AND OTHER DATA
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") as they apply to the consolidated financial statements of the Group. The consolidated financial statements have been prepared on a historical cost basis, except where IFRS requires or permits fair value measurement.
All references in this Annual Report to (i) "U.S. dollar," "USD" or "$" are to the currency of the United States (the "U.S."), (ii) "pounds sterling," "GBP sterling," "pence," "p" or "£" are to the currency of the United Kingdom (the "U.K.") and (iii) "euro" or "€" are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains certain statements, statistics and projections that are, or may be, forward-looking. These forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. The accuracy and completeness of all such statements, including, without limitation, statements regarding our future financial position, strategy, plans and objectives for the management of future operations, is not warranted or guaranteed. These statements typically contain words such as "believes," "intends," "expects," "anticipates," "estimates," "may," "will," "should" and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, factors identified in "Risk factors," "Information on the Company" and "Operating and Financial Review and Prospects," or elsewhere in this Annual Report, as well as:
general economic conditions, or conditions affecting demand for the services offered by us in the markets in which we operate, both domestically and internationally, being less favorable than expected;
worldwide economic and business conditions and conditions in the industries in which we operate;
fluctuations in the cost of raw materials and utilities;
currency fluctuations and other financial risks;
our ability to protect our intellectual property;
the significant amount of indebtedness we have incurred and may incur, and the obligations to service such indebtedness and to comply with the covenants contained therein;
relationships with our customers and suppliers;
increased competition from other companies in the industries in which we operate;
changing technology;
claims for personal injury, death or property damage arising from the use of products produced by us;
the occurrence of accidents or other interruptions to our production processes;
changes in our business strategy or development plans, and our expected level of capital expenditure;
our ability to attract and retain qualified personnel;
restrictions on the ability of Luxfer Holdings PLC to receive dividends or loans from certain of its subsidiaries;
regulatory, environmental, legislative and judicial developments; and
our intention to pay dividends.
You are urged to read the sections "Risk Factors," "Information on the Company" and "Operating and Financial Review and Prospects" of this Annual Report for a more complete discussion of the factors that could affect our performance and the industries in which we operate, as well as those discussed in other documents we file or furnish with the SEC.




PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2.
Offer Statistics and Expected Timetable
Not applicable.
Item 3.
Key Information
A.     Selected financial data.
The following selected consolidated financial data of Luxfer as of December 31, 2017, 2016, 2015, 2014 and 2013, and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, have been derived from our consolidated financial statements and the related notes appearing elsewhere in this Annual Report (or prior Annual Reports), which have been prepared in accordance with IFRS as issued by the IASB. Our historical results are not necessarily indicative of results to be expected for future periods.
This financial data should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report (or prior Annual Reports) and Item 5, "Operating and Financial Review and Prospects" below.
Summary Consolidated Data
 
 
Year Ended December 31,
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
 
(in $ million, except per share data)
 
 
Revenue
$
441.3

 
$
414.8

 
$
460.3

 
$
489.5

 
$
481.3

 
 
Trading profit(1):
$
40.5

 
$
35.3

 
$
42.3

 
$
44.8

 
$
59.2

 
 
 Trading margin
9.2
%
 
8.5
%
 
9.2
%
 
9.2
%
 
12.3
%
 
 
Operating profit
$
19.3

 
$
35.8

 
$
37.9

 
$
40.9

 
$
56.5

 
 
Net income
$
11.5

 
$
21.9

 
$
16.1

 
$
29.2

 
$
34.1

 
 
 Earnings per share - basic(2)
0.43

 
0.83

 
0.60

 
1.09

 
1.27

 
 
 Earnings per share - diluted(2)
0.43

 
0.82

 
0.59

 
1.05

 
1.22

 
 
Net cash flows from operating activities
$
45.2

 
$
29.2

 
$
52.8

 
$
23.0

 
$
37.1

 

Segmental Information
 
 
As of December 31,
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
 
(in $ million)
 
 
Revenue:
 

 
 

 
 

 
 

 
 

 
 
Elektron
$
221.1

 
$
189.0

 
$
221.2

 
$
230.6

 
$
219.7

 
 
Gas Cylinders
220.2

 
225.8

 
239.1

 
258.9

 
261.6

 
 
 
$
441.3

 
$
414.8

 
$
460.3

 
$
489.5

 
$
481.3

 
 
Trading profit(1):
 

 
 

 
 

 
 

 
 

 
 
Elektron
$
31.8

 
$
23.9

 
$
33.7

 
$
38.9

 
$
40.2

 
 
Gas Cylinders
8.7

 
11.4

 
8.6

 
5.9

 
19.0

 
 
 
$
40.5

 
$
35.3

 
$
42.3

 
$
44.8

 
$
59.2

 





1



Consolidated Balance Sheet Data
 
 
As of December 31,
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
 
(in $ million)
 
 
Total assets
$
402.6

 
$
391.5

 
$
435.7

 
$
459.8

 
$
396.1

 
 
Total liabilities
(240.3
)
 
(249.6
)
 
(266.0
)
 
(284.4
)
 
(204.4
)
 
 
Total equity
$
162.3

 
$
141.9

 
$
169.7

 
$
175.4

 
$
191.7

 
 
Cash and cash equivalents
13.3

 
13.6

 
36.9

 
14.6

 
28.4

 
 
Overdrafts
(4.2
)
 

 

 

 

 
 
Restricted cash
(0.7
)
 

 

 

 

 
 
Bank and other loans
(108.8
)
 
(121.0
)
 
(131.6
)
 
(121.4
)
 
(63.8
)
 
 
Net debt (non-GAAP)(3)
$
(100.4
)
 
$
(107.4
)
 
$
(94.7
)
 
$
(106.8
)
 
$
(35.4
)
 
Non-GAAP Financial Measures
 
 
Year ended December 31,
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
 
(in $ million, except per share data)
 
 
Adjusted EBITDA(3):
 

 
 

 
 

 
 

 
 

 
 
Elektron
$
44.5

 
$
35.6

 
$
45.7

 
$
50.1

 
$
49.8

 
 
Gas Cylinders
17.3

 
19.7

 
16.5

 
14.7

 
26.8

 
 
 
$
61.8

 
$
55.3

 
$
62.2

 
$
64.8

 
$
76.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income(3)
$
27.6

 
$
24.7

 
$
29.5

 
$
30.9

 
$
39.8

 
 
Adjusted net income per ordinary share(4):
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.04

 
$
0.93

 
$
1.10

 
$
1.15

 
$
1.48

 
 
Diluted
$
1.02

 
$
0.92

 
$
1.08

 
$
1.11

 
$
1.42

 

(1) 
Trading profit is defined as operating profit or loss before profit on sale of redundant site, changes to defined benefit pension plans and restructuring and other expense. For the purposes of our divisional segmental analysis, IFRS 8 requires the use of "segment profit" performance measures that are used by our chief operating decision maker. Trading profit is the "segment profit" measure used by our chief operating decision maker for divisional segmental analysis. See "Note 2—Revenue and segmental analysis" in our consolidated financial statements included elsewhere in this Annual Report (or prior Annual Reports).

(2) 
Basic and diluted earnings per ordinary share
For further information, see "Note 10—Earnings per share" to our consolidated financial statements. We calculate earnings per share in accordance with IAS 33. Basic earnings per share is calculated based on the weighted average of ordinary shares outstanding for the period presented. The weighted average of ordinary shares outstanding is calculated by time-apportioning the shares outstanding during the year. For the purpose of calculating diluted earnings per share, the weighted average of ordinary shares outstanding during the period presented has been adjusted for the dilutive effect of all share options granted to employees. In calculating the diluted weighted average of ordinary shares outstanding, there are no shares that have not been included for anti-dilution reasons.
(3)    Non-GAAP financial measures
The following table presents a reconciliation of adjusted net income and adjusted EBITDA to net income, the most comparable IFRS measure. A reconciliation of adjusted EBITDA to trading profit on a segmental basis is included in "Note 2—Revenue and segmental analysis" in our consolidated financial statements included elsewhere in this Annual Report (or prior Annual Reports).

2


 
 
Year Ended December, 31
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
 
(in $ million)
 
 
Net income for the year
$
11.5

 
$
21.9

 
$
16.1

 
$
29.2

 
$
34.1

 
 
Acquisition and disposal charges
 
 
 
 
 
 
 
 
 
 
 
Unwind of discount on deferred contingent consideration from acquisitions
0.2

 
0.4

 
0.4

 
0.3

 

 
 
Net (gain) / loss on acquisitions and disposals
(1.3
)
 
(0.2
)
 
2.0

 
(4.5
)
 
0.1

 
 
Amortization on acquired intangibles
1.2

 
1.0

 
1.4

 
0.6

 

 
 
IAS 19R retirement benefits finance charge
1.8

 
2.1

 
3.0

 
2.7

 
3.8

 
 
Profit on sale of redundant site
(0.4
)
 
(2.1
)
 

 

 

 
 
Changes to defined benefit pension plans

 
(0.6
)
 
(18.0
)
 

 
1.7

 
 
Restructuring and other expense
21.6

 
2.2

 
22.4

 
3.9

 
1.0

 
 
Other share based compensation charges
2.2

 
1.4

 
1.3

 
1.6

 
1.3

 
 
Tax thereon
(3.2
)
 
(1.4
)
 
0.9

 
(2.9
)
 
(2.2
)
 
 
Impact of U.S. tax reform
(6.0
)
 

 

 

 

 
 
Adjusted net income
$
27.6

 
$
24.7

 
$
29.5

 
$
30.9

 
$
39.8

 
 
Add back:
 
 
 
 
 
 
 
 
 
 
 
Impact of U.S tax reform
6.0

 

 

 

 

 
 
Tax thereon
3.2

 
1.4

 
(0.9
)
 
2.9

 
2.2

 
 
Tax expense
0.4

 
6.0

 
9.5

 
7.1

 
12.6

 
 
Net interest costs
6.7

 
5.6

 
6.9

 
6.1

 
5.9

 
 
Depreciation and amortization
19.0

 
18.4

 
18.6

 
18.1

 
15.8

 
 
Amortization on acquired intangibles
(1.2
)
 
(1.0
)
 
(1.4
)
 
(0.6
)
 

 
 
Loss on disposal of property, plant and equipment
0.1

 
0.2

 

 
0.3

 
0.3

 
 
Adjusted EBITDA
$
61.8

 
$
55.3

 
$
62.2

 
$
64.8

 
$
76.6

 
Adjusted net income consists of net income for the period adjusted for the post tax impact of non-trading items, including certain accounting charges relating to acquisitions and disposals of businesses (comprising net gain / (loss) from acquisitions and disposals, the unwind of the discount on deferred contingent consideration from acquisitions and the amortization on acquired intangibles), IAS 19R retirement benefits finance charge, profit on sale of redundant site, changes to defined benefit pension plans, restructuring and other expense and other share based compensation charges.
Adjusted EBITDA is defined as net income for the period before income tax expense, finance income (which comprises interest receivable), finance costs (which comprises interest costs, IAS 19R retirement benefits finance charge, and the unwind of the discount on deferred contingent consideration from acquisitions), net gain / (loss) on acquisitions and disposals, profit on sale of redundant site, changes to defined benefit pension plans, restructuring and other expense, other share based compensation charges, depreciation and amortization and loss on disposal of property, plant and equipment.
We prepare and present adjusted net income and adjusted EBITDA to eliminate the effect of items that we do not consider indicative of our core operating performance. Management believes that adjusted net income and adjusted EBITDA are key performance indicators used by the investment community, and that the presentation of adjusted net income and adjusted EBITDA will enhance investors' understanding of our results of operations. However, adjusted net income and adjusted EBITDA should not be considered in isolation by investors as an alternative to net income for the year as an indicator of our operating performance or as a measure of our profitability. Adjusted net income and adjusted EBITDA are not measures of financial performance under IFRS, may not be indicative of historic operating results and are not meant to be predictive of potential future results. Adjusted net income and adjusted EBITDA measures presented herein may not be comparable to other similarly titled measures of other companies. While adjusted net income and adjusted EBITDA are not measures of financial performance under IFRS, adjusted net income and adjusted EBITDA presented have been computed using IFRS amounts.
We use net debt as a measure of our financial leverage. We believe that investors may also find net debt to be helpful in evaluating our financial leverage.



3


(4)    Basic and diluted adjusted earnings per ordinary share
For further information, see "Note 10—Earnings per share" to our consolidated financial statements. We believe that the use of non-GAAP financial measures, such as adjusted earnings per ordinary share more closely reflects the underlying earnings per ordinary share performance and is a financial measure widely used by both investors and financial analysts of the Company's ordinary shares.
B.     Capitalization and indebtedness.
Not applicable.
C.     Reasons for the offer and use of proceeds.
Not applicable.
D.    Risk factors.
You should carefully consider the following risk factors described below, together with all of the other information in this Annual Report, including our consolidated financial statements and the related notes appearing elsewhere in this Annual Report, before investing in our ordinary shares. The risks and uncertainties described below are those significant risk factors currently known and specific to us that we believe are relevant to an investment in our securities. If any of these risks materialize, our business, financial position or results of operations could suffer, the price of our ordinary shares could decline and you could lose part or all of your investment. Additional risks and uncertainties not currently known to us or those we now deem immaterial, may also harm us and adversely affect your investment in our ordinary shares.
Risks Relating to Our Operations
We depend on certain end-markets, including automotive, alternative fuels, self-contained breathing apparatus, aerospace and defense, medical, and printing and paper. An economic downturn, or regulatory changes, in any of those end-markets, could reduce sales and margins on those sales.
We have significant exposures to certain key end-markets, including some end-markets that are cyclical in nature or subject to high levels of regulatory control. For example, 20% of our 2017 sales were related to automotive end-markets, 12% to the self-contained breathing apparatus ("SCBA") end-market, 21% to aerospace and defense end-markets, 6% to alternative fuel and 11% to printing and paper end-markets. Together, these five markets accounted for 70% of our 2017 revenue. Dependence of either of our divisions on certain end-markets is even more pronounced. For example, in 2017, 34% of the Elektron Division's sales were to customers in aerospace and defense end-markets which were depressed during 2016 with partial recovery in 2017.
To the extent that any of these cyclical end-markets are in decline, at a low point in their economic cycle, or subject to regulatory change, sales and margins on those sales may be adversely affected. It is possible that all or most of these end-markets could be in decline at the same time, such as during a recession. Any significant reduction in sales could have a material adverse impact on our results of operations, financial position and cash flows.
Our global operations expose us to economic conditions, political risks and specific regulations in the countries in which we operate, which could have a material adverse impact on our results of operations, financial position and cash flows.
We derive our revenue and earnings from operations in many countries and are subject to risks associated with doing business internationally. We have wholly-owned operations in the U.S., the U.K., Canada, France, the Czech Republic, China and Australia; joint venture facilities in India, Japan and the U.S.; and an associate in Australia. Doing business in different countries has risks, including the potential for adverse changes in the local political, financial or regulatory climate, difficulty in staffing and managing geographically diverse operations, and the costs of complying with a variety of laws and regulations. For example the change in the political climate in the U.S. could make it more challenging or expensive to import products manufactured in Europe.

4


Due to the fact we have operations in many countries, we are also liable to pay taxes in many fiscal jurisdictions. Our tax burden depends on the interpretation of local tax regulations, bilateral or multilateral international tax treaties and the administrative doctrines in each jurisdiction. Changes in these tax regulations may increase our tax burden, or otherwise affect our accounting for taxes. For example, as a result of the reduction in the statutory corporate income tax rate in the U.S. pursuant to the tax reform bill enacted on December 22, 2017, discussed below, we have recorded a reduction in the value of our deferred tax assets in the U.S. of $6.0 million. Moreover, the principal markets for our products are located in North America, Europe and Asia, and any financial difficulties experienced in these markets may have a material adverse impact on our businesses. For example, the maturity of some of our markets, particularly the U.S. medical oxygen cylinder market and the European fire extinguisher market, could require us to increase sales in developing regions, which may involve greater economic and political risks. We cannot provide any assurances that we will be able to expand sales in these regions. Any of these factors could have a material adverse impact on our results of operations, financial position and cash flows.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union (the "E.U.")., commonly referred to as 'Brexit'. On March 29, 2017, the U.K. Government invoked Article 50 of the Treaty on the European Union, which is likely to result in the U.K. exiting the E.U. on March 29, 2019. The U.K. Government has commenced negotiating the terms of the U.K.'s future relationship with the E.U. although there is still considerable uncertainty as to the outcome. It is possible that there will be greater restrictions on imports and exports between the U.K. and other countries and increased regulatory complexity. These changes may adversely affect our operations and financial results. See also "—Changes in foreign exchange rates could reduce margins on our sales and reduce the reported revenue of our non-U.S. operations and have a material adverse effect on our results of operations."
On December 22, 2017, President Trump signed into law legislation known as the “Tax Cuts and Jobs Act” (the “Act”) that significantly reforms the Internal Revenue Code of 1986, as amended. The Act, among other things, reduces the U.S. federal corporate income tax rate from 35% to 21%, imposes new limitations on the deductibility of interest and net operating loss carry forwards, allows for the expensing of capital expenditures, and makes other significant changes to the U.S. international tax system. The U.S. Internal Revenue Service to date has issued only limited guidance with respect to certain of the new provisions, and there are numerous interpretive issues that are expected to require clarification. Such future guidance could significantly affect the impact of the Act on us.
Our operations rely on a number of large customers in certain areas of our business, and the loss of any of our major customers could negatively impact our results of operations.
If we fail to maintain our relationships with our major customers, or fail to replace lost customers, or if there is reduced demand from our customers or for products produced by our customers, such failures or reduced demand could materially reduce our sales. In addition, we could experience a reduction in sales if any of our customers fail to perform or default on any payment pursuant to our contracts with them. Long-term relationships with customers are especially important for suppliers of intermediate materials and components such as ourselves. We often work closely with customers to develop products that meet particular specifications as part of the design of a product intended for an end-user market. The bespoke nature of many of our products could make it difficult to replace lost customers. Our top 10 customers accounted for 25% of our revenue in 2017. Any significant reduction in sales or customer payment default could have an adverse material impact on our results of operations, financial position and cash flows.
Competitive pressures could materially and adversely affect our sales and margins.
The markets for many of our products are now increasingly global and highly competitive, especially in terms of quality, price and service. Due to the highly competitive nature of some markets in which we operate, we may have difficulty raising customer prices to offset increases in the costs of raw materials. For example, the U.S. medical oxygen cylinder market has a number of dedicated producers with excess capacity, making it very difficult for us to raise customer prices to offset aluminum cost increases. In addition, rising aluminum costs could lead to the development of alternative products that use lower cost materials, which could become favored by end-market users.
We also experience competition from developing markets where manufacturers may benefit from lower labor costs. We are also affected by Western-based competitors that have chosen to relocate production to Asia to take advantage of lower labor costs. Competitors with operations in these regions may be able to produce goods at a relatively lower cost, which may enable them to offer highly competitive selling prices.
Competition with respect to less-complex zirconium chemicals has been particularly intense, with Chinese suppliers providing low-cost feedstock to specialist competitors, making it especially difficult to compete in commodity products such as paper-making additives. Chinese magnesium also continues to be imported into

5


Europe in large volumes, which may impact our competitive position in Europe regarding certain magnesium alloys. More generally, we may face potential competition from producers that manufacture products similar to our aluminum-based, magnesium-based and zirconium-based products using other materials, such as steel, plastics, composite materials or other metals, minerals and chemicals. Products manufactured by competitors using different materials might compete with our products in terms of price, weight, engineering characteristics, recyclability or other grounds.
We may also enter new markets with established competitors. We expect to face new and significant challenges in our effort to enter into these highly competitive markets in which we did not have a presence historically. For example, in recent years, we have entered markets focused on the containment of compressed natural gas (CNG) and incurred startup costs along with strong competitive pressures from existing providers of similar cylinder technologies. Even if we are able to enter into these new markets initially, we may not be able to sustain the effort on a long-term basis or establish sufficient market share to achieve meaningful returns from our investment.
Other parts of our operations manufacture and sell products that satisfy customer specifications. Competitors may develop lower cost or better performing products, and customers may not be willing to pay a premium for advantages offered by our products.
In addition, governments may impose import and export restrictions, grant subsidies to local companies and implement tariffs and other trade protection regulations and measures that may give competitive advantages to certain of our competitors and adversely affect our business.
Any of these factors could have a material adverse impact on our results of operations, financial position and cash flows.
We depend upon our larger suppliers for a significant portion of our raw materials, and a loss of one of these suppliers, or a significant supply interruption could negatively impact our financial performance.
We rely, to varying degrees, on major suppliers for some of the principal raw materials of our engineered products, including aluminum, zirconium and carbon fiber. For example, in 2017, we obtained 73% of our aluminum, the largest single raw material purchased by the Gas Cylinders Division, from Rio Tinto Alcan and its associated companies. Moreover, demand for carbon fiber is increasing, which has led to occasional periods of short supply in recent years with a number of expanding applications competing for the same supply of this specialized raw material. Our largest suppliers of carbon fiber are Toray and Grafil, a subsidiary of Mitsubishi Chemical. For additional details of some of our major suppliers, see "Item 4.B. Business Overview."
We generally purchase raw materials from suppliers on a spot basis under standard terms and conditions. In 2017, we entered into a three-year supply contract with Rio Tinto Alcan for a substantial portion of our aluminum requirements. In addition, we have in place one-year and five-year magnesium supply contracts with U.S. Magnesium for a portion of our requirements that expire in December 2018 and December 2019 respectively.
An interruption in the supply of essential raw materials used in our production processes or an increase in the costs of raw materials due to market shortages, supplier financial difficulties, government quotas or natural disturbances, could significantly affect our ability to provide competitively priced products to customers in a timely manner. In the event of a significant interruption in the supply of any materials used in our production processes, or a significant increase in their prices (as we have experienced, for example, at different times with aluminum, magnesium and rare earths), we may have to purchase these materials from alternative sources, build additional inventory of raw materials, increase our prices, reduce our margins or possibly fail to fill customer orders by deadlines required in contracts, which could result in, among other things, contractual penalties. We can provide no assurance that we would be able to obtain replacement materials quickly on similar terms or at all. Failure to maintain relationships with key suppliers or to develop relationships with alternative suppliers could have a material adverse effect on our results of operations, financial position and cash flows.
We are exposed to fluctuations in the costs of the raw materials that are used to manufacture our products, and such fluctuations could lead us to incur unexpected costs and could affect our margins and / or working capital requirements.
The primary raw material we use to manufacture gas cylinders and superformed panels is aluminum supplied in billet and sheet form. The cost of aluminum is subject to both significant short-term price fluctuations and to longer-term cyclicality as a result of international supply and demand relationships. In 2017, the London Metal Exchange ("LME") three month cost of aluminum reached a high of just below $2,300 per metric ton and a low of just below $1,700 per metric ton. The delivery premiums added by suppliers to the LME price also fluctuate, for example: the Midwest Aluminum Premium for physical supply of aluminum billet in the U.S. has historically averaged around $200 per metric ton, but in 2015 rose to a high of $535 per metric ton then fell to a low of $155

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per metric ton. We have experienced significant volatility in other raw material costs in the last few years, such as primary magnesium, carbon fiber, zircon sand and rare earths. See "Item 4.B. Business Overview."
Fluctuations in the costs of these raw materials could affect margins and working capital requirements in the businesses in which we use them. See "Item 5. Operating and Financial Review and Prospects." We cannot always pass on cost increases or increase our prices to offset these cost increases immediately or at all, whether because of fixed-price agreements with customers, competitive pressures that restrict our ability to pass on cost increases or increase prices, or other factors. It can be particularly difficult to pass on cost increases or increase prices in product areas such as gas cylinders, where competitors offer similar products made from alternative materials, such as steel, if those materials are not subject to the same cost increases. Higher prices necessitated by large increases in raw material costs could make our current or future products unattractive compared to competing products made from alternative materials that have not been so affected by raw material cost increases, or compared to products produced by competitors who have not incurred such large increases in their raw material costs.
In addition, pricing of raw materials, such as aluminum, may be impacted by the level of tariffs imposed on imports. President Trump announced in March, 2018 that the U.S. is to impose a 10% tariff on aluminum imported into the U.S. The Company uses a substantial amount of aluminum in its products, with imports into the U.S. primarily originating from Canada. Whilst details regarding the applicability of the tariffs have not been fully established at this time, we believe there will be no direct and immediate impact on our business since there will be an initial exemption for Canada (and Mexico) whilst the North American Free Trade Agreement (NAFTA) is renegotiated. If the exemption were to be lifted, then the price of such imported materials would increase substantially and the price of U.S.-made aluminum can also be expected to increase substantially.
If the cost of aluminum were to rise, we may not be able pass those cost increases on to our customers or manage the exposure effectively through hedging instruments. Currently we use derivative financial instruments to hedge our exposures to fluctuations in aluminum costs. Although it is our treasury policy to enter into these transactions only for hedging and not for speculative purposes, we are exposed to market risk and credit risk with respect to the use of these derivative financial instruments. See "Item 11. Quantitative and Qualitative Disclosures About Market Risk." In addition, if we have hedged our metal position, a fall in the cost of aluminum might give rise to hedging margin calls to the detriment of our borrowing position.
In the past several years we have made additional purchases of large stocks of magnesium chemicals in an effort to delay the effect of potentially increased costs in the future. However, even though such purchases are not made for speculative purposes, there can be no assurance that costs will move as expected.
Moreover, these strategic purchases increase our working capital needs, thus reducing our liquidity and cash flow.
Accordingly, a substantial increase in raw material costs could have a material adverse effect on our results of operations, financial position and cash flows.
We are exposed to fluctuations in costs of utilities that are used in the manufacture of our products, and such fluctuations could lead us to incur unexpected costs and could affect our margins and results of operations.
Our utility costs, which constitute another major input cost of our total expenses and include costs related to electricity, natural gas and water, may be subject to significant variations. Increased taxation and other factors have contributed in the past to a significant increase in utility costs for us, particularly with respect to the price that we pay for our U.K. energy supplies.
Fluctuations in the costs of these utilities could affect margins in our businesses in which we use them. We cannot always pass on cost increases or increase our prices to offset cost increases immediately or at all, whether because of fixed-price agreements with customers, competitive pressures that restrict our ability to pass on cost increases or increase prices, or other factors. It can be particularly difficult to pass on cost increases or increase prices in product areas such as gas cylinders, where competitors offer similar products made from alternative materials, such as steel, if those materials are not subject to the same cost increases. As a result, a substantial increase in utility costs could have a material adverse effect on our results of operations, financial position and cash flows.
Changes in foreign exchange rates could reduce margins on our sales and reduce the reported revenue of our non-U.S. operations and have a material adverse effect on our results of operations.
We conduct a large portion of our commercial transactions, purchases of raw materials and sales of goods in various countries and regions, including the U.S., the U.K., continental Europe, Australia and Asia. Our manufacturing operations based in the U.S., continental Europe and Asia usually purchase raw materials and

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sell goods denominated in their local currency, but our manufacturing operations in the U.K. often purchase raw materials and sell products in different currencies. Changes in the relative values of currencies can decrease the profits of our subsidiaries when they incur costs in currencies that are different from the currencies in which they generate all or part of their revenue. These transaction risks principally arise as a result of purchases of raw materials in U.S. dollars, coupled with sales of products to customers in euros. This impact is most pronounced in our exports to continental Europe from the U.K. In 2017, our U.K. operations sold approximately €46 million of goods into the Eurozone. Our policy is to hedge a portion of our net exposure to fluctuations in exchange rates with forward foreign currency exchange contracts. Therefore, we are exposed to market risk and credit risk through the use of derivative financial instruments. Moreover, any failure of hedging policies could negatively impact our profits, and thus damage our ability to fund our operations and to service our indebtedness. Whilst exchange rates have been more stable in 2017 than in 2016 (following the E.U. referendum in the U.K.), until the terms of the U.K.'s future relationship with the E.U. are known, further exchange rate volatility is to be expected.
In addition to subsidiaries and joint ventures in the U.S., we have subsidiaries located in the U.K., Canada, France, the Czech Republic, China, Germany and Australia, as well as joint ventures in Japan and India, and an associate in Australia, whose revenue, costs, assets and liabilities are denominated in local currencies. As our consolidated financial statements are reported in U.S. dollars, we are exposed to fluctuations in those currencies when those amounts are translated to U.S. dollars for purposes of reporting our consolidated financial statements, which may cause declines in results of operations. The largest risk is from our operations in the U.K., which in 2017 generated an operating loss of $5.1 million and sales revenue of $139.5 million. Fluctuations in exchange rates, particularly between the U.S. dollar and GBP sterling (which has been subject to significant fluctuations, as described above), can have a material effect on our consolidated income statement and consolidated balance sheet. In 2017, movements in the average U.S. dollar exchange rate had a positive impact on revenue of $6.4 million, while in 2016; movements in the average U.S. dollar exchange rate had a negative impact on reported revenue of $13.4 million. Changes in translation exchange rates increased net assets by $11.6 million in 2017, compared to a decrease of $13.1 million in 2016.
These foreign exchange risks could have a material adverse effect on our results of operations, financial position and cash flows. For additional information on these risks, and the historical impact on our results, see "Item 11. Quantitative and Qualitative Disclosure About Market Risk."
Our defined benefit pension plans have significant funding deficits and are exposed to market forces that could require us to make increased ongoing cash contributions in response to changes in market conditions, actuarial assumptions and investment decisions, and that could expose us to significant short-term liabilities if a wind-up trigger occurred in relation to such plans, each of which could have a material adverse impact on our results of operations and financial position.
We have defined benefit pension arrangements in the U.K., the U.S. and France. See "Note 29—Retirement benefits" of the consolidated financial statements appearing elsewhere in this Annual Report. Our largest defined benefit plan, the Luxfer Group Pension Plan, which closed to new members in 1998, remained open for accrual of future benefits based on career-average salary until April 5, 2016. However, following a consultation, it was agreed with the trustees and plan members to close the Luxfer Group Pension Plan in the U.K. to future accrual of benefits, effective from April 5, 2016. Moreover, for the purpose of increasing pensions in payment, it was agreed to use the CPI as the reference index, in place of the RPI where applicable. The Luxfer Group Pension Plan is funded according to the regulations in effect in the U.K. and, as of December 31, 2017, and December 31, 2016, had an IAS 19R accounting deficit of $43.4 million and $54.5 million, respectively. Luxfer Group Limited is the principal employer under the Luxfer Group Pension Plan, and other U.K. subsidiaries also participate under the plan. Our other defined benefit plans are less significant than the Luxfer Group Pension Plan and, as of December 31, 2017, and December 31, 2016, had aggregate IAS 19R accounting deficits of $11.9 million and $12.0 million, respectively. The largest of these additional plans is the BA Holdings, Inc. Pension Plan in the U.S., which was closed to further benefit accruals in December 2005, and merged with the much smaller Luxfer Hourly Pension Plan, effective January 1, 2016. According to the actuarial valuation of the Luxfer Group Pension Plan as of April 5, 2015, but after reflecting the reduction in liabilities from closing the plan to future accrual and changing the reference index (for the purpose of increasing pensions in payment), the Luxfer Group Pension Plan had a deficit of £32.5 million on a plan-specific basis. Should a wind-up trigger occur in relation to the Luxfer Group Pension Plan, the buy-out deficit of that plan will become due and payable by the employers. The aggregate deficit of the Luxfer Group Pension Plan on a buy-out basis was estimated at £117.0 million as of April 5, 2015. The trustees have the power to wind-up the Luxfer Group Pension Plan if they consider that in the best interests of members there is no reasonable purpose in continuing the Luxfer Group Pension Plan.
As a result of the actuarial valuation as of April 5, 2015, we are required to continue to make ongoing cash contributions, over and above normal contributions required to meet the cost of future accrual, to the Luxfer Group Pension Plan. These additional payments are intended to reduce the funding deficit. We have agreed with

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the trustees to a schedule of payments to reduce the deficit. This schedule has been provided to the U.K. Pensions Regulator (the "Pensions Regulator") and a response was received in 2016 stating there were no issues with the valuation methodology. The schedule of payments provides for minimum annual contributions of £3.8 million per year, together with additional variable contributions based on 15% of net earnings (in the previous calendar year) of Luxfer Holdings PLC between £12 million and £24 million, and 10% of net earnings (in the previous calendar year) of Luxfer Holdings PLC in excess of £24 million. The total contributions are not subject to an annual cap. These contribution rates are to apply until the deficit is eliminated (which is expected to take between 4 and 6 years from 2017, depending on variable contributions), but in practice the schedule will be reviewed and may be revised following the next triennial actuarial valuation. Regulatory burdens have also proven to be a significant risk, such as the U.K.'s Pension Protection Fund Levy, which was $0.3 million in 2017.
We are exposed to various risks related to our defined benefit plans, including the risk of loss of market value of the plan assets, the risk of actual investment returns being less than assumed rates of return, the trustees of the Luxfer Group Pension Plan switching investment strategy (which does require consultation with the employer) and the risk of actual experience deviating from actuarial assumptions for such things as mortality of plan participants. In addition, fluctuations in interest rates cause changes in the annual cost and benefit obligations. Any of these risks could have a material adverse impact on our results of operations, financial position and cash flows.
The Pensions Regulator in the U.K. has the power in certain circumstances to issue contribution notices or financial support directions that, if issued, could result in significant liabilities arising for us.
The Pensions Regulator may issue a contribution notice to the employers that participate in the Luxfer Group Pension Plan, or any person who is connected with, or is an associate of, these employers where the Pensions Regulator is of the opinion that the relevant person has been a party to an act, or a deliberate failure to act, which had as its main purpose (or one of its main purposes) the avoidance of pension liabilities or where such act has a materially detrimental effect on the likelihood of payment of accrued benefits under the Luxfer Group Pension Plan being received. A person holding alone or together with his or her associates, directly or indirectly, one-third or more of our voting power, could be the subject of a contribution notice. The terms "associate" and "connected person," which are taken from the Insolvency Act 1986, are widely defined and could cover our significant shareholders and others deemed to be shadow directors. If the Pensions Regulator considers that a plan employer is "insufficiently resourced" or a "service company" (which terms have statutory definitions), it may impose a financial support direction requiring such plan's employer or any member of the Group, or any person associated or connected with an employer, to put in place financial support in relation to the Luxfer Group Pension Plan. Liabilities imposed under a contribution notice or financial support direction may be up to the difference between the value of the assets of the Luxfer Group Pension Plan and the cost of buying out the benefits of members and other beneficiaries of the Luxfer Group Pension Plan. In practice, the risk of a contribution notice being imposed may restrict our ability to restructure or undertake certain corporate activities. Additional security may also need to be provided to the trustees of the Luxfer Group Pension Plan before certain corporate activities can be undertaken (such as the payment of an unusual dividend), and any additional funding of the Luxfer Group Pension Plan may have a material adverse effect on our financial position and cash flows.
Our ability to remain profitable depends on our ability to protect and enforce our intellectual property, and any failure to protect and enforce such intellectual property could have a material adverse impact on our results of operations and financial position.
We cannot ensure that we will always have the ability to protect proprietary information and our intellectual property rights. We protect our intellectual property rights (within the U.S., Europe and other countries) through various means, including patents and trade secrets. Due to the difference in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights may not receive the same degree of protection in other countries as they would in the U.S. or the U.K. The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Further, competitors may infringe our patents and the costs of protecting our patents could be significant. We cannot assure you that we will have adequate resources to enforce our patents. Our patents will only be protected for the duration of the patent. Some of our older key patents have expired, and others will expire over the next few years. As a result, our competitors may introduce products using the technology previously protected, and these products may have lower prices than our products, which may negatively affect our market share. To compete, we may need to reduce our prices for those products. Additionally, the expiry of certain of those patents has reduced, or will reduce, barriers to entry to possible competitors for certain products and end-markets. With respect to our unpatented proprietary technology, it is possible that others will independently develop the same or similar technology or obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements. Nevertheless, we cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how or other

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proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. We rely on our trademarks, trade names and brand names to distinguish our products from the products of our competitors, and we have registered or applied to register many of these trademarks. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.
Any failure to maintain, protect and enforce our intellectual property or the expiry of patent protection could have a material adverse impact on our results of operations, financial position and cash flows.
Expiration or termination of our right to use certain intellectual property granted by third parties, the right of those third parties to grant the right to use the same intellectual property to our competitors, and the right of certain third parties to use certain intellectual property used as part of our business, could have a material adverse impact on our results of operations, financial position and cash flows.
We have negotiated, and may from time to time in the future negotiate, licenses with third parties with respect to third party proprietary technologies used in certain of our manufacturing processes and products. If any of these licenses expire or terminate, we will no longer retain the rights to use the relevant third party proprietary technologies in our manufacturing processes and products, which could have a material adverse effect on our results of operations, financial position and cash flows. Further, the rights granted to us might be non-exclusive, which could result in our competitors gaining access to the same intellectual property.
Some of our patents may cover inventions that were conceived or first reduced to practice under, or in connection with, government contracts or other government funding agreements or grants. With respect to inventions conceived or first reduced to practice under such government funding agreements, a government may retain a non-exclusive, irrevocable, royalty-free license to practice, or have practiced for or on behalf of the relevant country, the invention throughout the world. In addition, if we fail to comply with our reporting obligations, or to adequately exploit the developed intellectual property under these government funding agreements, the relevant country may obtain additional rights to the developed intellectual property, including the right to take title to any patents related to government funded inventions or to license the same to our competitors. Furthermore, our ability to exclusively license or assign the intellectual property developed under these government funding agreements to third parties may be limited or subject to the relevant government's approval or oversight. These limitations could have a significant impact on the commercial value of the developed intellectual property.
We often enter into research and development agreements with academic institutions whereby they generally retain certain rights to the developed intellectual property. The academic institutions generally retain rights over the technology for use in non-commercial academic and research fields, including in some cases the right to license the technology to third parties for use in those fields. It is difficult to monitor and enforce such non-commercial academic and research uses, and we cannot predict whether the third party licensees would comply with the use restrictions of these licenses. We could incur substantial expenses to enforce our rights against such licensees. In addition, even though the rights that academic institutions obtain are generally limited to the non-commercial academic and research fields, they may obtain rights to commercially exploit developed intellectual property in certain instances. Under research and development agreements with academic institutions, our rights to intellectual property developed thereunder are not always certain, but instead may be in the form of an option to obtain license rights to such intellectual property. If we fail to exercise our option rights in a timely way and / or we are unable to negotiate a license agreement, the academic institution may offer a license to the developed intellectual property to third parties for commercial purposes. Any such commercial exploitation could adversely affect our competitive position and have a material adverse effect on our business.
If third parties claim that intellectual property used by us infringes upon their intellectual property, our operating profits could be adversely affected.
We may, from time to time, be notified of claims that we are infringing upon patents, copyrights, or other intellectual property rights owned by third parties, and we cannot provide assurances that other companies will not in the future pursue such infringement claims against us or any third party proprietary technologies we have licensed. If we were found to infringe upon a patent or other intellectual property right, or if we failed to obtain or renew a license under a patent or other intellectual property right from a third party, or if a third party from whom we are licensing technologies was found to infringe upon a patent or other intellectual property rights of another third party, we may be required to pay damages, suspend the manufacture of certain products or re-engineer or rebrand our products, if feasible, or we may be unable to enter certain new product markets. Any such claims could also be expensive and time consuming to defend and could divert management's attention and resources. In addition, if we have omitted to enter into a valid non-disclosure or assignment agreement for any reason, we

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may not own the invention or our intellectual property and may not be adequately protected. Our competitive position could suffer as a result of any of these events and have a material adverse impact on our results of operations, financial position and cash flows.
Any failure of our research and development activity to improve our existing products and develop new products could cause us to lose market share.
Our products are highly technical in nature, and in order to maintain and improve our market position, we depend on successful research and development activity to continue to improve our existing products and develop new products. We cannot be certain that we will have sufficient research and development capability to respond to changes in the industries in which we operate. These changes could include changes in the technological environment in which we currently operate, increased demand for new products or the development of alternatives to our products. For example, the development of lighter weight steel alloys has made the use of steel in gas cylinders a more competitive alternative to aluminum than it had been previously. In addition, our superformed aluminum components compete with new high-performance composite materials developed for use in the aerospace industry. In our efforts to develop and market new products and enhancements to our existing products, we may fail to identify new product opportunities or timely bring new products to market. We may also experience delays in completing development of, enhancements to or new versions of our products and product innovations may not achieve the market penetration or price stability necessary for profitability. In addition to benefiting from our research collaboration with universities, we spent $7.8 million, $7.6 million and $8.3 million (including revenue and capital items but before funding grants received) in 2017, 2016 and 2015 respectively, on our own research and development activities. We expect to fund our future research and development expenditure requirements through operating cash flows and restricted levels of indebtedness, but if operating profit decreases, we may not be able to invest in research and development or continue to develop new products or enhancements.
Without the timely introduction of new products or enhancements to existing products, our products could become obsolete over time, in which case our results of operations, financial position and cash flows could be adversely affected.
Some of our key operational equipment is relatively old and may require significant capital expenditures for repair or replacement.
We incur considerable expense on maintenance, including preventative maintenance and repairs. Higher levels of maintenance and repair costs could result from the need to maintain our older plants, property and equipment, and machinery breakdowns could result in interruptions to the business, causing lost production time and reduced output. Machinery breakdowns or equipment failures may hamper or cause delays in the production and delivery of products to our customers and increase our operating costs, thus reducing cash flows from operations. In particular, the breakdown of some of our older equipment, such as the large hot-rolling mill at our Madison, Illinois plant, could be difficult to repair and would be very costly should it need to be replaced. Any failure to deliver products to our customers in a timely manner could adversely affect our customer relationships and reputation. Any failure to implement required investments, due to the need to divert funds to repair existing physical infrastructure, service debt obligations, unanticipated liquidity constraints or other factors, could have a material adverse effect on our results of operations, financial position and cash flows.
Our operations may prove harmful to the environment resulting in reputational damage and clean-up or other related costs.
We are exposed to substantial environmental costs and liabilities, including liabilities associated with divested assets and prior activities performed on sites before we acquired an interest in them. Our operations, including the production and delivery of our products, are subject to a broad range of continually changing environmental laws and regulations in each of the jurisdictions in which we operate. These laws and regulations increasingly impose more stringent environmental protection standards on us with respect to, among other things, air emissions, wastewater discharges, the use and handling of hazardous materials, noise levels, waste disposal practices, soil and groundwater contamination and environmental clean-up. Complying with these regulations involves significant and recurring costs. See "Item 4.B. Business Overview" for details of our environmental management program and the environmental issues that we are currently addressing.
We cannot predict our future environmental liabilities and cannot assure investors that our management is aware of every fact or circumstance regarding potential liabilities, or that the amounts provided and budgeted to address such liabilities will be adequate for all purposes. In addition, future developments, such as changes in regulations, laws or environmental conditions, may result in reputational damage or increase environmental costs and liabilities that could have a material adverse effect on our results of operations, financial position and cash flows.

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The health and safety of our employees and the safe operation of our business is subject to various health and safety regulations in each of the jurisdictions in which we operate. These regulations impose various obligations on us, including the provision of safe working environments and employee training on health and safety matters. Complying with these regulations involves recurring costs.
Certain of our operations are highly regulated by different agencies that require products to comply with their rules and procedures and can subject our operations to penalties or adversely affect production.
Certain of our operations are in highly regulated industries that require us to maintain regulatory approvals and, from time to time, obtain new regulatory approvals from various countries. This can involve substantial time and expense. In turn, higher costs of compliance reduce our cash flows from operations. For example, manufacturers of gas cylinders throughout the world must comply with high local safety and health standards and obtain regulatory approvals in the markets in which they sell their products. Furthermore, military organizations require us to comply with applicable government regulations and specifications when providing products or services to them directly or as subcontractors. In addition, we are required to comply with U.S. and other export regulations with respect to certain products and materials. The E.U. has also passed legislation governing the registration, evaluation and authorization of chemicals, known as REACH, pursuant to which we are required to register chemicals and gain authorization for the use of certain substances. In the U.S. there is similar legislation under the Toxic Substance Control Act 1976 ("TSCA") which was substantially amended in 2016. Although we make reasonable efforts to obtain all licenses and certifications that are required by countries in which we operate, there is always a risk that we may be found not to comply with certain required procedures. This risk grows with increased complexity and variance in regulations across the globe. As regulatory schemes vary by country, we may also be subject to regulations of which we are not presently aware and could be subject to sanctions by a foreign government that could materially and adversely affect our operations in the relevant country.
Governments and their agencies have considerable discretion to determine whether regulations have been satisfied. They may also revoke or limit existing licenses and certifications or change the laws and regulations to which we are subject at any time. If our operations fail to obtain, experience delays in obtaining or lose a needed certification or approval, we may not be able to sell our products to our customers, expand into new geographic markets or expand into new product lines. In addition, new or more stringent regulations, if imposed, could result in us incurring significant costs in connection with compliance. Non-compliance with these regulations could result in administrative, civil, financial, criminal or other sanctions against us, which could have negative consequences on our business and financial position. Furthermore, if we begin to operate in new countries, we may need to obtain new licenses, certifications and approvals.
Our customers are also often subject to similar regulations and risks. We therefore face the risk that our customers may have the demand for their products reduced as a result of regulatory matters that fall outside our direct control. This would in turn reduce demand for our products and have a negative financial impact on our operating results.
Any of these factors could have a material adverse impact on our results of operations, financial position and cash flows.
We are subject to legislation and regulations to reduce carbon dioxide and other greenhouse gas emissions.
Although we are working to improve our energy efficiency, our manufacturing processes and the manufacturing processes of many of our suppliers and customers are still energy-intensive and use or generate, directly or indirectly, greenhouse gases ("GHGs"). Political and scientific debates related to the effects of emissions of carbon dioxide and other greenhouse gases on the global climate are ongoing. In recent years, current regulatory programs impacting GHG emissions from large industrial plants and other sources include the E.U. Emissions Trading Scheme, the CRC Energy Efficiency Scheme in the U.K. and certain federal and state programs in the U.S., including GHG reporting and permitting rules issued by the U.S.E.P.A and the California Cap and Trade Program. Moreover, in December 2015, 195 countries participating in the United Nations Framework Convention on Climate Change, at its 21st Conference of the Parties meeting held in Paris, adopted a new global agreement on the reduction of climate change (the "Paris Agreement"). The Paris Agreement sets a goal of holding the increase in global average temperature to well below 2 degrees Celsius and pursuing efforts to limit the increase to 1.5 degrees Celsius, to be achieved by commitments by the participating countries to set emissions reduction targets, referred to as "nationally determined contributions." The Paris Agreement came into effect on November 4, 2016, after it was ratified the previous month, with the intent that emissions reductions will occur beginning in 2020 or sooner. As it is implemented, the Paris Agreement is anticipated to result in more stringent requirements relating to greenhouse gas emissions. Due to the costs of compliance and the potential impact on our energy costs, these programs and additional future legislation and regulations aimed at reducing GHG emissions could have a material adverse effect on our results of operations, financial position and cash flows.

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Due to the nature and use of the products that we manufacture, we may in the future face large liability claims.
We are subject to litigation in the ordinary course of our business, which could be costly to us and which may arise in the future. We are exposed to possible claims for personal injury, death or property damage, which could result from a failure of a product manufactured by us or of a product integrating one of our products. For example, improperly manufactured gas cylinders could explode at high pressure, which can cause substantial personal and property damage. This risk may be increased through the use of new technologies, materials and innovations. We also supply many components into aerospace applications in which the potential for significant liability exposures necessitates additional insurance costs.
Many factors beyond our control could lead to liability claims, including:
the failure of a product manufactured by a third party that incorporated components manufactured by us;
the reliability and skills of persons using our products or the products of our customers; and
the use by customers of materials or products that we produced for applications for which the material or product was not designed.
If we cannot successfully defend ourselves against claims, we may incur substantial liabilities. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
decreased demand for our products;
reputational injury;
initiation of investigation by regulators;
costs to defend related litigation;
diversion of management time and resources;
compensatory damages and fines;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
loss of revenue;
exhaustion of any available insurance and our capital resources; and
a decline in our stock price.
We could be required to pay a material amount if a claim is made against us that is not covered by insurance or otherwise subject to indemnification or that exceeds the insurance coverage that we maintain. Moreover, we do not currently carry insurance to cover the expense of product recalls, and litigation involving significant product recalls or product liability could have a material adverse effect on our results of operations, financial position and cash flows.
Our businesses could suffer if we lose certain employees or cannot attract and retain qualified employees.
We rely upon a number of key executives and employees, particularly members of the Executive Leadership Team. If these and certain other employees ceased to work for us, we would lose valuable expertise and industry experience and could become less profitable. We do not carry "key-man" insurance covering the loss of any of our executives or employees.
In addition, future operating results depend in part upon our ability to attract and retain qualified engineering and technical personnel. As a result of intense competition for talent in the market, we cannot ensure that we will be able to continue to attract and retain such personnel. While our key employees are generally subject to non-competition agreements for a limited period of time following the end of their employment, if we were to lose the services of key executives or employees, it could adversely impact our ability to maintain our technological position, and / or have a material adverse effect on our results of operations, financial position and cash flows.
We may not be able to consummate, finance or successfully integrate future acquisitions into our business, or expand our existing business, which could hinder our strategy or result in unanticipated expenses, losses or charges.
As part of our strategy, we have supplemented and may continue to supplement organic growth by acquiring companies or operations engaged in similar or complementary businesses. If the consummation of acquisitions and integration of acquired companies and businesses excessively diverts management's attention from the operations of our core businesses, operating results could suffer. Any acquisition made could be subject to a number of risks, including:

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failing to discover liabilities of the acquired company or business for which we may be responsible as a successor owner or operator, including environmental costs and liabilities;
difficulties associated with the assimilation of operations and personnel of the acquired company or business;
increased debt service requirements as a result of increased indebtedness to complete acquisitions;
the loss of key personnel in the acquired company or business; and / or
a negative effect on our financial results resulting from an impairment of acquired intangible assets, the creation of provisions, or write downs.
Goodwill represents the amount of acquisition cost over the fair value of net assets we acquired in the purchase of other businesses. We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying amount of the asset might be impaired. We determine impairment by comparing the implied fair value of the reporting unit with the carrying amount of that reporting unit (including goodwill). If the carrying amount of the reporting unit (including goodwill) exceeds the implied fair value of that reporting unit, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of operations in the periods in which they become known. As of December 31, 2017, our goodwill totaled $59.6 million. While we have recorded few impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write downs.
We cannot ensure that every acquisition will ultimately provide the benefits originally anticipated.
We also face certain challenges as a result of organic growth. For example, in order to grow while maintaining or decreasing per unit costs, we will need to improve efficiency, effectively manage operations and employees and hire enough qualified technical personnel. We may not be able to adequately meet these challenges. Any failure to do so could result in costs increasing more rapidly than any growth in sales, thus resulting in lower operating income from which to finance operations and indebtedness. In addition, we may need to incur indebtedness to finance organic growth, which will increase our debt service requirements. There can be no assurance that we will be able to incur indebtedness in the future on favorable terms or at all.
Any of these events could have a material adverse impact on our results of operations, financial position and cash flows.
We could suffer a material interruption in our operations as a result of unforeseen events or operating hazards.
Our production facilities are located in a number of different locations around the world. Any of our facilities could suffer an interruption in production, either at separate times or at the same time, because of various and unavoidable occurrences, such as severe weather events (for example, hurricanes and floods), earthquakes, casualty events (for example, explosions, fires or material equipment breakdowns), acts of terrorism, pandemic disease, labor disruptions or other events (for example, required maintenance shutdowns). For example, our operations in California are subject to risks related to earthquakes. Further disruption occurred during 2015 at our Riverside, California, facility when an electrical arc caused damage to electrical equipment which triggered a power outage at the facility. In addition, some of our products are highly flammable, and there is a risk of fire inherent in their production process. Such hazards could cause personal injury or death, serious damage to, or destruction of, property and equipment, suspension of operations, substantial damage to the environment and / or reputational harm. The risk is particularly high in the production of ultra-fine magnesium powders, which are highly flammable and explosive in certain situations. Similar disruptions in the operations of our suppliers and / or customers could materially affect our business and operations. Although we carry certain levels of business interruption insurance, the coverage on certain catastrophic events or natural disasters, including earthquakes, a failure of energy supplies and certain other events, is limited, and it is possible that the occurrence of such events may have a significant adverse impact on our results of operations, financial position and cash flows.
We are exposed to risks related to cybersecurity threats and general information security incidents which may also expose us to liability under data protection laws including the GDPR.
In the conduct of our business, we increasingly collect, use, transmit and store data on information technology systems. This data includes confidential information belonging to us our customers and other business partners, as well as personally identifiable information of individuals, including our employees. Like other global companies, we have experienced, and expect to continue to be subject to, cybersecurity threats and incidents, ranging from employee error or misuse to individual attempts to gain unauthorized access to information technology systems, to sophisticated and targeted measures known as advanced persistent threats, none of which have been material to the Group to date.

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Although we devote significant resources to network security, data encryption and other measures to protect our information technology systems and data from unauthorized access or misuse, including those measures necessary to meet certain information security standards that may be required by our customers, there can be no assurance that these measures will be successful in preventing a cybersecurity or general information security incident. We also rely in part on the reliability of certain tested third parties' cybersecurity measures, including firewalls, virus solutions and backup solutions, and our business may be affected if these third-party resources are compromised.
Cybersecurity incidents may result in business disruption, the misappropriation, corruption or loss of confidential information (including personally identifiable information) and critical data (ours or that of third parties), reputational damage, litigation with third parties, regulatory fines, diminution in the value of our investment in research and development and data privacy issues and increased information security protection and remediation costs. As these cybersecurity threats, and government and regulatory oversight of associated risks continue to evolve, we may be required to expend additional resources to remediate, enhance or expand upon the cybersecurity protection and security measures we currently maintain. For example, we are subject to the European Union’s General Data Protection Regulation ("GDPR"), which is enforceable from May 25, 2018. The GDPR introduces a number of new obligations for subject companies and over the coming months (as well as following May 25, 2018), we will need to continue dedicating financial resources and management time to GDPR compliance. Among other things, the GDPR places subject companies under obligations relating to the security of the personally identifiable information they process; while we have taken steps to ensure compliance with the GDPR, there can be no assurance that the measures we have taken will be successful in preventing an incident, including a cybersecurity incident or other data breach, which results in a breach of the GDPR. Fines for non-compliance with the GDPR may be levied by supervisory authorities in the European Union up to a maximum of €20,000,000 or 4% of the subject company’s annual, group-wide turnover (whichever is higher). Individuals who have suffered damage as a result of a subject company’s non-compliance with the GDPR also have the right to seek compensation from such a company.
Future cybersecurity breaches, general information security incidents, further increases in data protection costs or failure to comply with relevant legal obligations regarding protection of data could therefore have a material adverse effect on our results of operations, financial position and cash flows.
Employee strikes and other labor-related disruptions may adversely affect our operations.
Several of our production facilities depend on employees who are members of various trade union organizations. Strikes by, or labor disputes with, our employees may adversely affect our ability to conduct business. We cannot assure you that there will not be any strike, lock-out or material labor dispute in the future. Work interruptions or stoppages could have a material adverse effect on our results of operations, financial position and cash flows.
We could incur future liability claims arising from previous businesses now closed or sold.
We have sold or closed down a number of businesses over the years, but the products or services provided when the businesses were open and under our ownership could still result in potential liabilities which could have a material adverse effect on our operations, financial position and cash flows.
As a holding company, Luxfer Holdings PLC's main source of cash is distributions from our operating subsidiaries.
Our ultimate parent company, Luxfer Holdings PLC, conducts all of its operations through the subsidiaries of Luxfer Group. Accordingly, its main cash source is dividends from these subsidiaries. The ability of each subsidiary to make distributions depends on the funds that a subsidiary receives from its operations in excess of the funds necessary for its operations, obligations or other business plans. Since Luxfer Group subsidiaries are wholly-owned, claims of Luxfer Holdings PLC will generally rank junior to all other obligations of the subsidiaries. If Luxfer Group operating subsidiaries are unable to make distributions, Luxfer Group's growth may slow, unless we are able to obtain additional debt or equity financing. In the event of a subsidiary's liquidation, there may not be assets sufficient for us to recoup our investment in the subsidiary.
Our failure to perform under purchase or sale contracts could result in the payment of penalties to customers or suppliers, which could have a negative impact on our results of operations, financial position or cash flows.
A failure to perform under purchase or sale contracts could result in the payment of penalties to suppliers and / or customers, which could have a negative impact on our results of operations, financial position or cash flows. Certain contracts with suppliers could also obligate us to purchase a minimum product volume (clauses known as "take or pay") or contracts with customers may impose firm commitments for the delivery of certain quantities of products within certain time periods. The risk of incurring liability under a take or pay supply contract would increase during an economic crisis, which in turn would increase the likelihood of a sharp drop in demand for our

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products, which could have a material adverse effect on our results of operations, financial position and cash flows.
We could be adversely affected by violations of the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.
The U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making or receiving improper payments to, or from, government officials or, third parties, for the purpose of obtaining or retaining business. Failing to prevent bribery is also an offense under the U.K. Bribery Act. Our policies mandate compliance with these laws. Despite our compliance program, we cannot assure you that our internal control policies and procedures will always protect us from reckless, negligent or improper acts committed by our employees or agents. The costs of violations of these laws or allegations of such violations could have a material adverse effect on our results of operations, financial position and cash flows.
We have a significant amount of indebtedness, which may adversely affect our cash flows and our ability to operate our business, remain in compliance with debt covenants, make payments on our indebtedness, pay dividends and respond to changes in our business or take certain actions.
As of December 31, 2017, we had $90.0 million of indebtedness under our senior notes (the "Loan Notes") divided into tranches of $15.0 million, $25.0 million, $25.0 million and $25.0 million due 2018, 2021, 2023 and 2026 respectively; and $21.3 million of indebtedness under the Revolving Credit Facility. See item 5 "Operating and Financial Review and Prospects—Financing."
Our indebtedness could have important consequences to you. For example, it could make it more difficult for us to satisfy obligations with respect to indebtedness, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under agreements governing our indebtedness. Further, our indebtedness could require us to dedicate a substantial portion of available cash flows to pay principal and interest on our outstanding debt, which would reduce the funds available for working capital, capital expenditures, dividends, acquisitions and other general corporate purposes. Our indebtedness could also limit our ability to operate our business, including the ability to engage in strategic transactions or implement business strategies. Factors related to our indebtedness could materially and adversely affect our business and our results of operations. Furthermore, our interest expense could increase if interest rates rise, because certain portions of our debt facilities bear interest at floating rates. If we do not have sufficient cash flows to service our debt, we may be required to refinance all or part of our existing debt, sell assets, incur further indebtedness or sell securities, none of which we can guarantee we will be able to do.
In addition, the agreements that govern the terms of our indebtedness contain, and any future indebtedness would likely contain, a number of restrictive covenants imposing significant operating and financial restrictions on us, including restrictions that may limit our ability to engage in acts that may be in our long-term best interests, including:
incurring or guaranteeing additional indebtedness;
capital expenditures;
paying dividends (including to fund cash interest payments at different entity levels) or making redemptions, repurchases or distributions with respect to ordinary shares or capital stock;
creating or incurring certain security interests;
making certain loans or investments;
engaging in mergers, acquisitions, investment in joint ventures, amalgamations, asset sales and sale and leaseback transactions; and
engaging in transactions with affiliates.
These restrictive covenants are subject to a number of qualifications and exceptions. The operating and financial restrictions and covenants in our existing debt agreements and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.
We may be able to incur significant additional indebtedness in the future. Although the agreements governing our indebtedness contain restrictions on the incurrence of certain additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. If we incur new indebtedness, the related risks, including those described above, could intensify.
Any of these factors could have a material adverse impact on our results of operations, financial position and cash flows.

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Certain factors beyond our control may affect the market price of our ordinary shares.
Certain factors, some of which are beyond our control, may have a material effect on the market price of our ordinary shares, including:
fluctuations in our results of operations;
negative publicity;
changes in stock market analyst recommendations regarding our company, sectors in which we operate, the securities market generally and conditions in the financial markets;
regulatory developments affecting our industry;
announcements of studies and reports relating to our products or those of our competitors;
changes in economic performance or market valuations of our competitors;
actual or anticipated fluctuations in our quarterly results;
conditions in industries in which we operate;
announcements by us or our competitors of new products, acquisitions, strategic relations, joint ventures or capital commitments;
additions to or departures of our key executives and employees;
fluctuations of exchange rates;
release of transfer restrictions on our outstanding ordinary shares; and
sales or perceived sales of additional ordinary shares.
During recent years, securities markets in the U.S. and worldwide have experienced significant volatility in prices and trading volumes. This volatility could have a material effect on the market price of our ordinary shares, which could adversely impact our ability to access equity markets and have a material adverse impact on our results of operations, financial position and cash flows.
Our ability to pay regular dividends on our ordinary shares is subject to the discretion of our Board of Directors and will depend on many factors, including our results of operations, cash requirements, financial position, contractual restrictions, applicable laws and other factors, and may be limited by our structure and statutory restrictions and restrictions imposed by the Revolving Credit Facility and the Loan Notes, as well as any future agreements.
We may declare cash dividends on our ordinary shares as described in "Item 8. Financial Information." However, the payment of future dividends will be at the discretion of our Board of Directors. Any recommendation by our Board to pay dividends will depend on many factors, including our results of operations, cash requirements, financial position, contractual restrictions, applicable laws and other factors, including availability of future debt facilities. Under English law, any payment of dividends would be subject to the Companies Act 2006 of England and Wales (the "Companies Act"), which requires, among other things, that we can only pay dividends on ordinary shares out of profits available for distribution determined in accordance with the Companies Act. Additionally, any change in the level of our dividends or the suspension of the payment thereof could adversely affect the market price of our ordinary shares.
As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the Securities and Exchange Commission than a U.S. company. This may limit the information available to holders of the ordinary shares.
We are a "foreign private issuer," as defined in the Securities and Exchange Commission ("SEC") rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to companies organized within the U.S. For example, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, our officers and directors are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and consolidated financial statements with the SEC as frequently or as promptly as U.S. public companies. Accordingly, there may be less publicly available information concerning our company than there is for U.S. public companies.
As a foreign private issuer, we are not subject to certain New York Stock Exchange corporate governance rules applicable to U.S. listed companies.
We rely on a provision in the New York Stock Exchange's Listed Company Manual that allows us to follow English corporate law and the Companies Act with regard to certain aspects of corporate governance. This

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allows us to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on the New York Stock Exchange ("NYSE").
For example, we are exempt from NYSE regulations that require a listed U.S. company, among other things, to:
have a majority of the board of directors consisting of independent directors;
require non-management directors to meet on a regular basis without management present;
establish a nominating and compensation committee composed entirely of independent directors;
adopt and disclose a code of business conduct and ethics for directors, officers and employees; and
promptly disclose any waivers of the code for directors or executive officers that should address certain specified items.
In accordance with our NYSE listing, our Audit Committee is required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and Rule 10A-3 of the Exchange Act, both of which are also applicable to NYSE listed U.S. companies. As we are a foreign private issuer, however, our Audit Committee is not subject to additional NYSE requirements applicable to listed U.S. companies, including:
an affirmative determination that all members of the Audit Committee are "independent," using more stringent criteria than those applicable to us as a foreign private issuer;
the adoption of a written charter specifying, among other things, the Audit Committee's purpose and including an annual performance evaluation; and
the review of an auditor's report describing internal quality control issues and procedures and all relationships between the auditor and us.
Furthermore, the New York Stock Exchange's Listed Company Manual requires listed U.S. companies to, among other things, seek shareholder approval for the implementation of certain equity compensation plans and issuances of common stock.
We expect to lose our foreign private issuer status which will require us to comply with the U.S. domestic reporting regime under the Exchange Act and result in significant additional compliance activity and increased costs and expenses.
We are currently a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act, and, therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2018. We expect to lose our foreign private issuer status on the next determination date as the majority of our executive officers and directors are U.S. citizens, which we do not expect this to change before the next determination date, and separately, we may have more than 50% of our assets located in the U.S. As a result, we expect to be required to comply with U.S. domestic issuer requirements, most of which will apply from January 1, 2019.
The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We will be required under current SEC rules to prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers; these requirements will be additional to, and not in place of, those under U.K. law to prepare consolidated financial statements under International Financial Reporting Standards as issued by the European Union ("IFRS") and comply with U.K. corporate governance laws. Such conversion and modifications will involve additional costs, both one‑off in nature on conversion and also extra ongoing costs to meet reporting in both U.S. GAAP and IFRS, which will reduce our operating profit. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers, such as the ones described above, and exemptions from requirements related to the preparation and solicitation of proxies (including compliance with full disclosure obligations regarding executive compensation in proxy statements and the requirements of holding a nonbinding advisory vote on certain executive compensation matters, such as “say on pay” and “say on frequency”). Moreover, we will no longer be exempt from certain of the provisions of U.S. securities laws, such as Regulation FD (which restricts the selective disclosure of material information),

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exemptions for filing beneficial ownership reports under Section 16(a) for officers, directors and 10% shareholders and the Section 16(b) short swing profit rules. In light of our expectations, we have already started to prepare for the consequences of becoming a U.S. domestic issuer, including those described above, and we expect that the loss of foreign private issuer status will increase our legal and financial compliance costs and will make some activities highly time-consuming and costly. The additional costs could have an adverse impact on our results of operations, financial position and cash flows.
In addition, the transition to being treated as a U.S. domestic issuer may make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
The City Code on Takeovers and Mergers no longer applies to us and we and you therefore do not have the benefit of the protections that the Code affords.
Although we are a public limited company incorporated in England and Wales, our securities are not admitted to trading on a regulated market in the U.K. (or the Channel Islands or the Isle of Man) and, therefore, the City Code on Takeovers and Mergers (the “Code”) only applies to us if we are considered by the Panel on Takeovers and Mergers (the “Panel”) to have our place of central management and control in the U.K. (or the Channel Islands or the Isle of Man). Under the Code, the Panel looks to where the majority of our directors are themselves resident, among other factors, for the purposes of determining where we have our place of central management and control. In January 2018, the Panel confirmed to us, based on the residency of the members of our board of directors, that the Code does not apply to us and we and you will therefore not have the benefit of the protections the Code affords, including, for example, the requirement that a person who acquires an interest in our shares carrying 30% or more of the voting rights must make a cash offer to all other shareholders at the highest price paid in the 12 months before the offer was announced.
If we fail to establish or maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ordinary shares may, therefore, be adversely impacted.
We are subject to reporting obligations under U.S. securities laws. Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Our management is required to report on the effectiveness of our internal control over financial reporting as required by Section 404(a) of the Sarbanes-Oxley Act, for which we perform system and process evaluation and testing of our internal control over financial reporting.
Over time we may identify and correct deficiencies or weaknesses in our internal controls and, where and when appropriate, report on the identification and correction of these deficiencies or weaknesses. However, the internal control procedures can provide only reasonable, and not absolute, assurance that deficiencies or weaknesses are identified. Deficiencies or weaknesses that have not been identified by us could emerge, and the identification and correction of these deficiencies or weaknesses could have a material adverse impact on our results of operations. If our internal control over financial reporting are not considered adequate, this may adversely affect our ability to report our financial results on a timely and accurate basis, which may result in a loss of public confidence or have an adverse effect on the market price of our ordinary shares, which could adversely impact our ability to access equity markets and could have a material adverse impact on our results of operations, financial position and cash flows.
We ceased to be an "emerging growth company" as defined under the JOBS Act on December 31, 2017, and therefore the reduced disclosure requirements applicable to emerging growth companies no longer apply to us.
We ceased to be an "emerging growth company" on December 31, 2017. We are therefore no longer able to rely on those exemptions to reporting requirements available to "emerging growth companies." As a result, we need to comply with certain more burdensome reporting requirements and devote substantial management effort toward ensuring compliance with these requirements. For example, we need to comply with the independent auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, relating to the effectiveness of our internal control over financial reporting, beginning with this Annual Report.
Our inability to continue to take advantage of these exemptions may place additional strain on our resources and divert our management's attention from other business concerns. Moreover, we may incur additional expenses toward ensuring compliance with the requirements applicable to non-emerging growth companies.



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It may be difficult to effect service of U.S. process and enforce U.S. legal process against the directors of Luxfer.
Luxfer is a public limited company incorporated under the laws of England and Wales. A number of our directors and officers reside outside of the U.S., principally in the U.K. A substantial portion of our assets, and the assets of such persons, are located outside of the U.S. Therefore, it may not be possible to effect service of process within the U.S. upon Luxfer or these persons in order to enforce judgments of U.S. courts against Luxfer or these persons based on the civil liability provisions of the U.S. federal securities laws. There is doubt as to the enforceability in England and Wales, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities solely based on the U.S. federal securities laws.


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Item 4.
Information on the Company
A.
History and development of the company.
General
Although the origins of some of our operations date back to the early part of the 19th century, we trace our business as it is today back to the 1982 merger of The British Aluminium Company Limited and Alcan Aluminium U.K. Limited, which created British Alcan. The original Luxfer Group was formed in February 1996 in connection with the management buy-in (the "Management Buy-in") of certain downstream assets of British Alcan. The Management Buy-in was financed by a syndicate of private equity investors. Largely through a leveraged reorganization in 1999, and finally a capital reorganization in 2007, these investors fully exited their original investments in the business.
Our company was incorporated on December 31, 1998, with the name Neverealm Limited (we re-registered as a public limited company and changed our name to Luxfer Holdings PLC on April 1, 1999), for the purpose of acquiring all of the outstanding share capital of the original Luxfer Group Limited in connection with a leveraged recapitalization that occurred in April 1999. As part of the 1999 recapitalization, Luxfer Holdings PLC became the parent holding company of our operating subsidiaries around the world. To facilitate the 1999 recapitalization, Luxfer Holdings PLC issued £160 million of Senior Notes due 2009 and took on £140 million of bank debt.
In February 2007, Luxfer Holdings PLC completed a capital reorganization, which reduced its debt burden and realigned its share capital. A key part of this reorganization was the release and cancellation of the Senior Notes due 2009 in consideration for, among other things, the issuance of a lower principal amount of new senior notes due 2012 (the "Senior Notes due 2012"). Senior noteholders, other than Luxfer Group Limited, also acquired 87% of the voting share capital of Luxfer Holdings PLC from existing shareholders with management and the employee share ownership plan ("ESOP") retaining 13% of the voting share capital.
Since the 2007 capital reorganization, we have considerably improved the profitability of our businesses and reduced debt, repaying the Senior Notes due 2012 early.
In October 2012, Luxfer Holdings PLC successfully listed its shares (in the form of American Depositary Shares evidenced by American Depositary Receipts) on the NYSE.
We have re-shaped the company since 1996 through a significant number of acquisitions and disposals. The main acquisitions which have been made include:
the agreement to purchase Dynetek Industries Ltd, a Canadian business listed on the Toronto Stock Exchange which closed in September 2012;
the acquisition of the assets and businesses of Truetech Inc. and Innotech Products Limited in July 2014. These entities produce magnesium-based flameless heating pads for self-heating meals used by the U.S. military and emergency relief agencies; an extensive line of self-heating meals, soups and beverages used by military and civilian end-users; chemical agent detection kits and chemical decontamination equipment; and seawater desalinization kits; and
the acquisition on December 5, 2017 of the trade and assets of Specialty Metals business of ESM Group Inc., including a manufacturing facility in Saxonburg, PA, U.S.A. ESM Group’s Saxonburg plant manufactures a range of magnesium-based chips, granules, ground powders and atomized powders.
On December 11, 2017, Luxfer Holdings PLC terminated its ADR facility and arranged for the exchange of outstanding ADSs for the underlying ordinary shares. The exchange allows Luxfer shareholders to directly own and publicly trade ordinary shares on the New York Stock Exchange under the symbol "LXFR".
Corporate
Luxfer Holdings PLC is registered as a public limited company under the laws of England and Wales with its registered office at Lumns Lane, Manchester, M27 8LN, England. Our telephone number is +44(0) 161 300 0600.
Our agent in the U.S. is Corporation Service Company, 2711 Centreville Road, Wilmington, Delaware 19808.

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B.    Business overview
Luxfer is a global materials technology company specializing in the innovation and manufacture of high-performance materials, components and devices for transportation, defense and emergency response, healthcare and general industrial applications. Our customers include both end-users of our products and manufacturers that incorporate our products into finished goods. Details about our products are found below in descriptions of our two reporting divisions and their brands.
We focus primarily on innovations related to magnesium alloys, zirconium alloys, aluminum alloys and carbon composites. For example, we were the first to develop and patent a rare-earth-containing magnesium alloy (EZ33A) for use in high-temperature aerospace applications, including helicopter gearboxes; we were at the forefront of the commercial development of zirconia-rich mixed oxides for use in automotive catalysis; we were the first to manufacture a high-pressure gas cylinder out of a single piece of aluminum using cold-impact extrusion; and we developed and patented the superforming process and the first superplastic aluminum alloy (AA2004). We have a long history of innovation derived from our strong technical expertise, and we work closely with customers to apply innovative solutions to their most demanding product needs. Our proprietary technologies and technical expertise, coupled with best-in-class customer service and global presence, provide significant competitive advantages and have established us as leaders in the global markets we serve. We believe that we have leading positions, technically and by market share, in key product areas, including magnesium aerospace alloys, photo-engraving plates, zirconium chemicals for automotive catalytic converters and high-pressure aluminum and composite cylinders for breathing applications and a wide variety of other uses.
We have a global presence, operating 23 manufacturing plants in the U.S., the U.K., Canada, France, the Czech Republic and China, and our average total headcount was 1,769 people, including temporary staff, in 2017. We also have joint ventures in Japan, India, and the U.S. In 2017, our total revenue was $441.3 million, net income was $11.5 million and our adjusted EBITDA was $61.8 million. See "Item 3A. Selected Financial Data" for the definition of adjusted EBITDA and reconciliations to net income for the year. In 2017, we manufactured and sold approximately 16,600 metric tons of our magnesium products, approximately 3,300 metric tons of our zirconium products (excluding water weight as sold as a solution) and approximately 1.8 million high-pressure gas cylinders. For a breakdown of our total revenue in 2017, 2016 and 2015 by segment and geographic origin, see "Note 2—Revenue and segmental analysis" to our consolidated financial statements included in this Annual Report.
Our company is organized into two reporting divisions, Elektron and Gas Cylinders, each of which produced 50% of our total revenue in 2017. Elektron represented 79% of our total trading profit for the year, and Gas Cylinders represented 21%.
Elektron Division
Our Elektron Division focuses on specialty materials based primarily on magnesium and zirconium. Key product lines include:
Advanced lightweight, corrosion-resistant and heat- and flame-resistant magnesium alloys including our new bioresorbable SynerMag® alloy and our dissolvable SoluMag® alloy.
Magnesium powders used in countermeasure flares that protect aircraft from heat-seeking missiles and also for heating pads for self-heating meals used by the military and emergency-relief agencies.
Magnesium, copper, and zinc photoengraving plates for graphic arts and luxury packaging.
High-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advanced ceramics, fiber-optic fuel cells, and many other performance products.
Gas Cylinders Division
Our Gas Cylinders Division manufactures and markets specialized products using aluminum, titanium and carbon composites. Key product lines include:
Carbon composite cylinders for self-contained breathing apparatus (SCBA), used by firefighters and other emergency-responders. Our products are also used by scuba divers and personnel in potentially hazardous environments such as mines.
Aluminum and composite cylinders used for containment of oxygen and other medical gases used by patients, healthcare facilities and laboratories.
Carbon composite cylinders for compressed natural gas (CNG) and hydrogen containment in alternative fuel (AF) vehicles.
Lightweight aluminum cylinders for a variety of industrial applications such as fire extinguishers and containment of high-purity specialty gases.

22


Lightweight aluminum and titanium panels superformed into highly complex shapes used mainly in the transportation industry.
Our end-markets
Key end-markets for Luxfer Group products fall into four categories:
Transportation (29% of 2017 revenue): Many Luxfer products serve a growing need to improve and safeguard the environment in the field of transportation, including our zirconium-based products that clean up automotive exhausts; our lightweight magnesium alloys used in fuel-efficient aerospace and automotive designs; and our lightweight, high-pressure carbon composite alternative fuel cylinders that contain clean-burning compressed natural gas. We also superform single sheets of aluminum, magnesium or titanium to create complex, three-dimensional shapes used in automotive, aerospace and rail components. As recycling metals is an essential environmental and economic practice, we have a dedicated site specifically for recycling magnesium alloys, as well as recycling capabilities at all our production sites.
 
Area of Focus
 
Product
 
End-market drivers
 
 
Alternative fuels
 
• Alternative fuel cylinders
 
• Exhaust catalysts
 
• Bulk gas transportation cylinders
 
• "Clean air" initiatives
 
• Abundance of natural gas
 
• Favorable tax treatment
 
• Increasing CNG filling infrastructure
 
 
Environmental catalysts (cleaning of exhaust emissions)
 
•    Zirconium compounds with specific properties used in auto-catalysis washcoats
 
• Emissions legislation generally
 
• Application of tighter regulations on diesel engines in U.S. and Europe
 
• Cost effective for vehicle manufacturers as they reduce the use of precious metals
 
 
Specialty / high-end automotive
 
•    Superformed complex body panels, doors and trunk assemblies and other high-strength components
 
• Magnesium extrusions
 
• Fuel efficiency for a given level of performance
 
• Increased flexibility for vehicle designers in terms of complex shapes and strength
 
• Strong demand for top-end cars from affluent customers, typically in emerging markets
 
 
Sensors, piezoelectrics and electro-ceramics
 
•    Zirconium-based ceramic materials used in sensors of engine management systems
 
• Engine efficiency
 
• Control of exhaust gases
 
 
Rail transport
 
•    Superformed train front-cab and internal components
 
• Government investment in public transport
 
• Fuel efficiency
 
• Safety requirements for moving from plastic to metal for internal components
 
 
Military and civil aerospace
 
•    Superform (wing leading edges, engine nacelle skins, winglets)
 
•    Elektron® aerospace alloys in cast, extruded, and sheet form
 
• Growing aircraft build rate
 
• Increasing cost of fuel
 
 
Helicopters
 
•    Magnesium sand-casting alloys, superformed panels
 
• Lightweighting
 
• Fuel efficiency
 
 
Recycling
 
•    Recycling service converting magnesium scrap into good die-casting ingot
 
• Marketing "whole-of-life" costing for vehicles
 
• Legislation requiring recycling at end of vehicle's life cycle
 


23


Defense and emergency response (30% of 2017 revenue) : Luxfer offers a number of products that address principal factors driving growth in this market, such as heightened societal expectations regarding protection of people, equipment and property during conflicts and emergencies. Our products include magnesium powders for countermeasure flares that defend aircraft against heat-seeking missile attack, life-support cylinders for firefighters and other emergency-service personnel, fire extinguisher cylinders, and chemical agent detection and decontamination products.
 
Area of Focus
 
Product
 
End-market drivers
 
 
Life-support breathing apparatus
 
• Composite cylinders used in SCBA
 
• Increased awareness of importance of properly equipping firefighting services post 9/11
 
• Demand for lightweight products to upgrade from heavy all-metal cylinders
 
• Periodic upgrade of new U.S. National Institute for Occupational Safety and Health (NIOSH) standards and natural replacement cycles
 
• Asian and European fire services looking to adopt more modern SCBA equipment
 
 
Fire protection
 
• Cylinders (CO2 fire extinguishers)
 
• New commercial buildings
 
• Cylinder replacement during annual servicing
 
 
Countermeasures
 
• Ultra-fine magnesium powders for flares used to protect aircraft from attack by heat-seeking missiles
 
• Use in combat and training
 
• Maintenance of countermeasures reserves (shelf-life restrictions)
 
 
Military vehicles
 
• Elektron® magnesium alloys in cast rolled, and extruded forms
 
• Maintaining high level of protection while reducing weight to improve maneuverability and fuel economy
 
 
Military personnel and emergency relief agencies
 
• Self-heating meals used by military personnel and emergency-relief agencies
 
• Chemical detection and chemical decontamination kits
 
• Ensuring protection and well-being for military personnel and victims of natural disasters
 
• Use in combat and training and in response to terrorist activities
 
Healthcare (8% of 2017 revenue): Luxfer has a long history in the healthcare end-market, and we see this as a major area for the introduction of new technologies. These include lightweight aluminum and composite cylinders for containment of medical and laboratory gases; magnesium powders for pharmaceutical products; magnesium materials for lightweight orthopedic devices; specialized magnesium alloys for cardiovascular stents and implants; and zirconium materials for biomedical applications and dental implants.
 
Area of Focus
 
Product
 
End-market drivers
 
 
Medical gases
 
•    Portable aluminum and composite cylinders

•    Portable oxygen concentrators
 
• Growing use of medical gases
 
• Shift to paramedics, who need portable, lightweight products
 
• Growing trend to provide oxygen therapy in the home and to keep patients mobile
 
• Increasingly aging population
 
• Increase in respiratory diseases
 
 
Medical equipment casings
 
•    Superformed panels (e.g., for MRI scanners)
 
• Growing use of equipment using powerful magnets and consequent need for non-ferrous, hygienic casings
 
 
Pharmaceutical industry
 
•    Magnesium powders as a catalyst for chemical synthesis (Grignard process)
 
• Growth in pharmaceutical industry
 
 
Orthopedics
 
•    Magnesium sheets
 
• Improved mobility through use of easy-to-wear, lightweight braces and trusses
 
 
Sorbents
 
•    MELsorb® material being developed as active ingredient in dialysis equipment and enterosorbents
 
• Growth in kidney problems
 
• New technologies to remove noxious elements from the body
 



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General industrial (33% of 2017 revenue): Our core technologies have enabled us to exploit various other niche markets and applications. Our products include zirconium-based compounds to purify drinking water and clean up industrial exhausts; magnesium alloys shaped for use in various general engineering applications; and high-pressure gas cylinders used for high-purity specialty gases, beverage dispensing, scuba diving and performance racing. Metal foil-stamping and embossing dies are used primarily for luxury packaging, labels and greeting cards. Our high-quality magnesium, copper and zinc plates are ideal for these and other graphic applications.
 
Area of Focus
 
Product
 
End-market drivers
 
 
Specialty gases
 
•    Inert-interior aluminum cylinders for high-purity gases
 
• Semiconductor and electronics industries
 
• Pharmaceutical industry growth
 
• Specialized laboratory requirements
 
• Oil exploration
 
 
Leisure activities
 
•    Cylinders for SCUBA diving, car and boat racing
 
• Leisure time
 
• Growth of middle class in emerging markets
 
 
General engineering
 
•    Magnesium billets, sheets, coil, tooling plates
 
•    Zirconium ceramic compounds for hard working components
 
• Economic growth
 
• Need for components to operate in more extreme environments for longer periods, such as underground or in the ocean
 
 
Water purification
 
•    Isolux® (removal of heavy metals from drinking water) and MELsorb® (wastewater treatment)
 
• Tightened World Health Organization guidelines on levels of heavy metals in water and associated legislation
 
 
Paper
 
•    Bacote™ and Zirmel™, both formaldehyde-free insolubilizers that aid high-quality printing
 
• Elimination of toxic chemicals
 
 
Graphic arts
 
•    Photo-engraving plates
 
• Luxury packaging as part of marketing high-end products
 

Our strengths
Focus on innovation and product development for growing specialized end-markets.     We continue to produce a steady stream of new products, including those developed in close collaboration with our customers.
Strong technical expertise and know-how.    Using our expertise in metallurgy and material science, we specialize in advanced materials, developing products and materials with superior performance to satisfy the most demanding requirements in the most extreme environments. Further, we benefit from the fact that a growing number of our products, including many of our alloys and compounds, are patented.
Diversified blue chip customer base with long-standing relationships.    We put the customer at the heart of our strategy, and we have long-standing relationships with many of our customers, including global leaders in our key markets.
Our Business Excellence Standard Toolkit. The "Luxfer B.E.S.T. Model," consists of the following key themes:
A common set of values that drives accountability, innovation, customer first, personal development, teamwork and integrity.
Disciplined capital allocation with the aim of maximizing organic growth and the product portfolio value through value-enhancing acquisitions and divestitures.
Balanced score-card used in an effort to continuously improve employee performance in an effort to help translate our vision into actionable individual goals and ensure that employee compensation is commensurate with individual performance.
A published Customer Charter designed to enable us to retain and grow our customer base and capture additional market share.
A lean enterprise philosophy that helps drive operational process excellence in all functions including, sales, marketing, innovation, human resources, supply, manufacturing, information technology and finance.


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Our business divisions
We are organized into two reporting divisions, Elektron and Gas Cylinders. The following tables illustrate the revenue, trading profit and adjusted EBITDA of each division in 2017, 2016 and 2015.
 
 
Year ended December 31, 2017
 
 
 
Revenue
 
Trading profit(1)
 
Adjusted EBITDA(2)
 
 
 
Amount
 
Percentage
 
Amount
 
Percentage
 
Amount
 
Percentage
 
 
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
 
Elektron
$
221.1

 
50.1
%
 
$
31.8

 
78.5
%
 
$
44.5

 
72.0
%
 
 
Gas Cylinders
220.2

 
49.9
%
 
8.7

 
21.5
%
 
17.3

 
28.0
%
 

 
 
Year ended December 31, 2016
 
 
 
Revenue
 
Trading profit(1)
 
Adjusted EBITDA(2)
 
 
 
Amount
 
Percentage
 
Amount
 
Percentage
 
Amount
 
Percentage
 
 
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
 
Elektron
$
189.0

 
45.6
%
 
$
23.9

 
67.7
%
 
$
35.6

 
64.4
%
 
 
Gas Cylinders
225.8

 
54.4
%
 
11.4

 
32.3
%
 
19.7

 
35.6
%
 

 
 
Year ended December 31, 2015
 
 
 
Revenue
 
Trading profit(1)
 
Adjusted EBITDA(2)
 
 
 
Amount
 
Percentage
 
Amount
 
Percentage
 
Amount
 
Percentage
 
 
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
 
Elektron
$
221.2

 
48.1
%
 
$
33.7

 
79.7
%
 
$
45.7

 
73.5
%
 
 
Gas Cylinders
239.1

 
51.9
%
 
8.6

 
20.3
%
 
16.5

 
26.5
%
 

(1) 
Trading profit is defined as operating profit before profit on sale of redundant site, changes to defined benefit pension plans and restructuring and other expense. For purposes of our divisional segmental analysis, IFRS 8 requires the use of "segment profit" performance measures that are used by our chief operating decision maker. Trading profit is the "segment profit" measure used by our chief operating decision maker for divisional segmental analysis. See "Note 2—Revenue and segmental analysis" in our consolidated financial statements included elsewhere in this Annual Report.

(2) 
Adjusted EBITDA is defined as net income for the period before income tax expense, finance income (which comprises interest receivable), finance costs (which comprises interest costs, IAS 19R retirement benefits finance charge, and the unwind of the discount on deferred contingent consideration from acquisitions), net gain / (loss) on acquisitions and disposals, profit on sale of redundant site, changes to defined benefit pension plans, restructuring and other expense, other share based compensation charges, depreciation and amortization and loss on disposal of property, plant and equipment. See footnote (3) of Item 3.A. ("Selected financial data") of this Annual Report for a reconciliation to net income.


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Elektron Division
The Elektron Division represented 50% of our total revenue and 79% of our trading profit in 2017. The table below provides a summary of products, applications / principal markets and illustrative customers and end-users.
 
Products
 
Application / principal
markets supplied
 
Illustrative customers
and end-users
 
 
Magnesium alloys
 
Aerospace, oil and gas and specialist automotive
 
United Technologies, Fansteel-Wellman, Boeing, Lockheed Martin
 
 
Magnesium powders and powder-based products
 
Defense countermeasure flares and self-heating meals for military personnel and emergency-relief agencies

 
Esterline Defense Technologies, Chemring, US armed forces, FEMA, Red Cross, The Wornick Company, AmeriQual Group, LLC, Sopakco

 
 
Magnesium plates
 
Photo-engraving for packaging and decorative printing
 
American Greetings
 
 
Zirconium compounds
 
Catalysts
 
Umicore, Johnson Matthey, BASF, Sud Chemie, Dinex, UOP (Honeywell)
 
 
 
 
Ceramics
 
Bosch, EPCOS, Imerys, Oerlikon Metco, Ask-Hi Tech
 
 
 
 
Chemical synthesis
 
BASF
 
 
 
 
Reflective coatings
 
3M
 
The principal geographic markets for the Elektron Division are North America and Europe. Shown below are 2017 percentages of revenue by geographic destinations and geographic origins.
Elektron Division—Revenue by geographic destination
2017
 
Geographic Region
 
Percentage of Elektron revenue
 
 
North America
59
%
 
 
Europe, other than U.K.
25
%
 
 
Asia Pacific
9
%
 
 
U.K. 
4
%
 
 
Rest of World
3
%
 

Elektron Division—Revenue by geographic origin
2017
 
Geographic Region
 
Percentage of Elektron revenue
 
 
North America
64
%
 
 
U.K. 
28
%
 
 
Europe, other than U.K.
8
%
 
Magnesium alloys: These offer significant advantages over aluminum alloys, since magnesium alloys are approximately a third lighter in weight while exhibiting similar strength and stability. Customers typically use our specialized alloys when lightness of weight, high strength and high temperature stability are important, such as in jet fighters and helicopter gearboxes, which operate under extreme conditions.
We have developed a large percentage of high-performance magnesium alloys available in major markets, including the U.S. For example, we developed 12 of the 18 magnesium alloys approved by the American Society for Testing Material ("ASTM") Standard Specification for Magnesium-Alloy Sand Castings. In the last 30 years, we developed and patented five out of six new alloys added to the list. The ASTM Standard Specification for Magnesium-Alloy Extruded Bars, Rods, Profiles, Tubes, and Wire lists nine currently used alloys, and we developed five of them.
Recently we have commercialized two new alloys, SynerMag®, for use in bioresorbable cardio stents and SoluMag®, a dissolvable alloy for use in the oil and gas industry.
Magnesium powders and powder based products: We believe that we are the largest manufacturer of atomized magnesium powders in the U.S. Our magnesium powder facilities have been manufacturing ground magnesium powders since 1941 and atomized powders since 1966.

27


We also produce magnesium-based flameless heating pads for self-heating meals used by the U.S. military and emergency relief agencies, as well as magnesium-based chemical agent detection kits and chemical decontamination equipment.
In 2017, we acquired the trade and assets of Specialty Metals business of ESM Group Inc., including a manufacturing facility in Saxonburg, PA. The acquired business is being integrated with our existing powder business that currently offers similar products.
Magnesium plates: We believe that we are the largest manufacturer of magnesium plates used for photo-engraving for packaging and decorative printing.
Our magnesium-based products serve a wide range of customers globally and we have close, collaborative relationships with our customers. We compete in various specialty niches, as highlighted above. Competition, which is fragmented and varies from sector to sector, includes Chinese suppliers of magnesium die-casting alloys. We do not normally compete directly against primary magnesium producers, which supply pure magnesium and simple alloys.
We have a number of patented and off-patent products that help us maintain our competitive position. Due to the significant complexity of producing our specific alloys, we believe that competitors are likely to have difficulty manufacturing these alloys even after our patents expire.
Zirconium chemicals: We believe that our zirconium chemicals business is a leader in the manufacture of specialty zirconium compounds. Chemically derived zirconium products are more versatile, pure and suitable for demanding applications than thermally derived products or natural zirconia, and our products consequently command significantly higher value-added premiums. Sold in powder and solution forms, these products are used in a broad range of applications, including wash coats for catalytic converters, functional ceramics, chemical catalysis, and solid-oxide fuel cells.
Our zirconium plants use a multi-stage process based on proprietary technology to produce zirconium salts and zirconium oxides differentiated by their chemical purity and unique physical properties. Zircon sand is often the base raw material in our manufacturing process, and we also use a number of rare earths and commodity chemical products to produce our zirconium compounds.
The demand for our products is mainly driven by environmental concerns and legislation, since our environmentally-friendly products can replace toxic chemicals in many applications.
With a leading position in the zirconium compounds market, we have established ourselves over a number of years as an approved supplier to a number of blue-chip customers. These relationships have, in turn, facilitated the sharing of technical knowledge to develop new products and applications.
We have experienced significant competition in simple zirconium compounds from Chinese suppliers, either directly or through the availability of low-cost Chinese zirconium stock used by specialty competitors. Markets with relatively low technological needs, such as lead-replacement products for paint drying, now offer lower margins due to aggressive pricing by Chinese suppliers. Rather than compete in such lower margin markets, we have shifted our focus to more advanced markets that require our advanced technologies and know-how, which we use to develop customized products that meet the specific needs of our customers. We have a limited number of direct competitors in our chosen specialized markets that require complex chemical compounds with advanced catalytic, electrical and ceramic properties. In these markets, we compete primarily with Daiichi Kigenso Kagaku Kogyo of Japan, Solvay of France, Neo Performance Materials of the U.S. and Tosoh of Japan.

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Gas Cylinders Division
The Gas Cylinders Division represented 50% of our total revenue and 21% of our trading profit in 2017. The table below shows products, applications, principal markets and illustrative customers and end-users.
 
 
 
 
 
 
 
 
Products
 
Application / principal markets
supplied
 
Illustrative customers
and end-users
 
 
High-pressure aluminum and composite gas-containment cylinders and systems
 
Self-contained breathing apparatus (SCBA)
 
Scott Safety (3M), MSA, Honeywell
 
 
 
Alternative fuels
 
Creative Bus, MAN
 
 
 
Bulk gas transportation
 
GTM Technologies
 
 
 
Specialty gases
 
Linde, Air Liquide, Airgas
 
 
 
Medical
 
Linde, Air Products
 
 
 
Fire extinguisher
 
Ansul (Johnson Controls), Chubb / Kidde (UTC)
 
 
 
Beverage
 
Coca-Cola, Pepsi
 
 
 
Scuba
 
XS Scuba
 
 
 
Inflation (aerospace)
 
Goodrich (UTC)
 
 
Superplastically-formed aluminum, titanium and magnesium products
 
Aerospace
 
Exelis, Boeing, Bombardier, Honda, Spirit, UTC Aerospace, Honeywell, Embraer, Short Brothers Plc (Bombardier), BAE Systems, GKN Aerospace.
 
 
 
Automotive
 
Aston Martin, Morgan, Bentley (VW), Ferrari S.P.A., Chrysler / FnG, McLaren Automotive
 
 
 
Medical
 
Siemens, Varian
 
 
 
Rail
 
Bombardier, Kinki Sharyo, Hitachi, LUL.
 

The principal geographic markets for the Gas Cylinders Division are the U.S., Europe and Asia Pacific. Shown below are 2017 percentages of revenue by geographic destinations and geographic origins.

Gas Cylinders Division—Revenue by geographic destination
2017
 
Geographic Region
 
Percentage of Gas Cylinders revenue
 
 
North America
49
%
 
 
Europe, other than U.K.
21
%
 
 
Asia Pacific
12
%
 
 
U.K. 
14
%
 
 
Rest of World
4
%
 

Gas Cylinders Division—Revenue by geographic origin
2017
 
Geographic Region
 
Percentage of Gas Cylinders revenue
 
 
North America
61
%
 
 
U.K. 
27
%
 
 
Europe, other than U.K.
10
%
 
 
Asia Pacific
2
%
 
Luxfer Gas Cylinders manufactured and sold approximately 1.8 million cylinders in 2017, and we believe that we remain the largest global manufacturer of portable high-pressure aluminum and composite cylinders. The business achieved its leadership position through a long history of innovation and a commitment to setting a leading worldwide standard in product innovation and customer service.
Historically, overall growth in the Luxfer Gas Cylinders business has been driven by inherent benefits of aluminum over steel for high-pressure cylinders. In 2017, sales of aluminum cylinders accounted for approximately 34% of divisional revenue. Although steel was the first material used for the containment of high-pressure gas, aluminum cylinders have the following recognized benefits:
Aluminum cylinders are up to 40% lighter in weight than steel cylinders.

29


Non-corroding and non-reactive aluminum cylinders are ideal for maintaining the purity of many specialty gases used in critical manufacturing and laboratory applications.
Considered by many to be more cosmetically attractive than steel, aluminum cylinders are desirable for fire extinguishers, medical and scuba applications.
Non-magnetic aluminum cylinders may be safely used near diagnostic medical equipment containing powerful magnets.
Luxfer Gas Cylinders is also a leading supplier of carbon composite cylinders, including thin-walled, aluminum-lined cylinders fully-wrapped with aerospace-grade carbon fiber. Luxfer developed both the world's highest-pressure and lightest-weight composite life-support cylinders. In 2017, sales of composite cylinders accounted for approximately 44% of Gas Cylinders Division revenue. Over the last decade, our composite cylinder business has enjoyed higher growth rates and stronger margins than our aluminum cylinder business. We believe demand for carbon composite cylinders will continue to grow, driven by the following benefits when compared to aluminum and steel cylinders:
Carbon composite cylinders are about one-third the weight of comparable aluminum cylinders and about 70% lighter than comparable steel cylinders.
High strength-to-weight ratio enables increased pressure to be used for the same size cylinder, thereby increasing cylinder volume capacity.
Demand for composite cylinders has been driven in part by increased usage in the emergency services sector, which prefers lighter-weight, higher-pressure cylinders for life-support applications. The use of carbon composite cylinders to contain compressed natural gas (CNG) and other alternative fuels has also grown over the past decade. We make cylinders and systems for AF vehicles and for storage and transportation of bulk CNG, and we also specialize in cylinders and valves for hydrogen fuel-cell vehicles and other hydrogen applications. Our research shows further growth opportunities in composite cylinders and associated new specialty products.
Luxfer Gas Cylinders has a very broad customer base, both geographically and by number. Customers in medical, SCBA and fire extinguisher markets tend to be highly concentrated since there are relatively few end-user distributors. Within the SCBA market, we have achieved a very high level of market penetration by providing composite cylinders to the three major suppliers to the North American market: MSA, Scott Safety (3M) and Honeywell.
Due to our strong worldwide distribution network, we believe that Luxfer Gas Cylinders is the most global manufacturer of high-pressure aluminum and composite gas cylinders. Luxfer had specialized in Type 3 (aluminum-lined) composite cylinders for a number of years, but in 2014, we introduced a new line of Luxfer-designed Type 4 (polymer-lined) cylinders for the AF market.
In recent years, the high-pressure gas cylinder market has undergone some consolidation. Worthington Industries, originally a steel cylinder competitor in the U.S. and Europe, has over the past decade purchased composite cylinder manufacturers that compete directly with Luxfer Gas Cylinders. Other competitors include Catalina Cylinders, an aluminum cylinder manufacturer in the U.S.; Faber, a steel cylinder manufacturer in Italy; and MES Cylinders, an aluminum cylinder manufacturer based in Turkey. In the AF sector, our main competitor is the Norwegian-owned Hexagon Composites, which produces Type 4 composite cylinders for CNG containment and which has recently acquired Agility Fuel Solutions which competes in the same field.
In Asia, the market for aluminum cylinders is less developed, and larger competitors predominantly offer steel products. These include Everest Kanto Cylinder, based in India, and Beijing Tianhai Industry, based in China. However, the use of composite cylinders is growing in the Asia Pacific region, and several competitors are now also manufacturing composite cylinders.
Superform developed a superplastic-forming process that uses customized tooling and controlled heat and air pressure applied to special aluminum, magnesium or titanium alloy sheets to elongate and form them into complex, bespoke shapes. These lightweight components are principally used in automotive, aerospace, medical, rail transportation and architectural end-markets. Although these products currently represent a relatively small niche market, we believe that Superform, which has operations in England and the U.S., is the largest independent supplier of such components in the Western world. In 2017, Superform sales accounted for approximately 16% of Gas Cylinders Division revenue.
In 2017, we continued to develop new manufacturing processes and high-strength materials to form parts at faster speeds and also to form titanium parts. Complementary value-enhancing processes have been added to strengthen our customer offering. These new innovations are targeted at widening the sales potential of our technology.

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Due to the fact that Superform invented the superplastic-forming process, direct competition with our technology is limited. Competition mainly comes from alternative technologies, such as cold pressing (which Superform is investing in), hydroforming and composite technologies, including those using carbon fiber. Hydroforming is a specialized type of die forming that uses a high-pressure hydraulic fluid to press material into a die at room temperature. The process is slower than cold pressing, and tooling costs are generally higher than for superforming.
Competitors include KTK in China, Magna International in Ireland, EBP in Sweden, Fontana in Italy and Verbom in Canada. Boeing, which purchased a license from Superform in 1998, has in-house aluminum superplastic-forming capability.

Suppliers and raw materials
Elektron Division
Key raw materials used by our Elektron Division are magnesium, zircon sand and rare earths.
The world market for magnesium is around one million metric tons per year. China provides about 70% of the world supply. Western primary production is, however, significant, from North American suppliers, Dead Sea Magnesium in Israel, RIMA Industrial in Brazil and two smelters in Russia. We purchase approximately half of our magnesium needs from China. We use only U.S.-sourced materials for our products sold to the U.S. military, for which U.S. and Canadian sourcing is mandatory.
We purchase and process zircon sand, which is found in heavy-minerals sand, titanium dioxide and other products. Global production of zircon is estimated at approximately 1.6 million metric tons. We source premium-grade zircon sand from Rio Tinto in South Africa and Iluka in Australia. We also purchase intermediate zirconium chemicals from suppliers in China; the level of these purchases is based on a number of factors, including required properties and relative market prices.
There are 17 rare earth metals that are reasonably common in nature. Usually found mixed together with other mineral deposits, these rare earths have magnetic and light-emitting properties that make them invaluable to high-technology manufacturers. As they are key ingredients in the manufacturing of our zirconium chemical and magnesium alloy products, our use of rare earths has expanded over the last few years. Our main requirement is for cerium, which we use in automotive catalysis compounds because of its unique oxygen-storage capabilities.
Gas Cylinders Division
The largest single raw material purchased by the Gas Cylinders Division is aluminum. In 2017, we purchased 73% of our aluminum from Rio Tinto Alcan and its associated companies, and aluminum represented 35% of the division's raw material costs in the year.
Since 2005, the price of aluminum has been somewhat volatile. While we pass on most price movements to our customers, sometimes through contractual cost-sharing formulas, doing so can be more difficult or time consuming with our higher-value products. Consequently, we have historically hedged a portion of our exposure to fluctuations in aluminum pricing.
As a means of hedging against aluminum price increases, we use LME derivative contracts. During 2017, such contracts covered approximately 60% of our estimated primary aluminum needs for the year.
Another key material is high-strength carbon fiber used in our composite products. Our main suppliers are Toray and Mitsubishi. In recent years, carbon fiber shortages have occurred due to increased demand for commercial aerospace and military applications. Consequently, we have built up relationships with our suppliers, providing them predictable requirements and fixed-price annual contracts to encourage successful procurement of our required quota of carbon fiber.
Environmental matters
Like most manufacturing facilities, our operations are subject to a range of environmental laws and regulations, including those relating to air emissions, wastewater discharges, handling and disposal of solid and hazardous wastes and remediation of contamination associated with current and historic use of hazardous substances or materials. If release of hazardous substances or materials occurs on or from our properties, from our processes or at any off-site disposal location we have used, or if contamination from previous activities is discovered at any of our locations, we may be held liable for costs of remediation, including response costs, natural resource damage costs and associated transaction costs. We devote considerable efforts to complying with and reducing our risk of liability under environmental laws, including maintaining an environmental management system.

31


Due to their long history of industrial use, some of our facilities have areas of soil and water contamination that require or are anticipated to require investigation or remediation, including:
Manchester, England.    A dedicated landfill has been adjacent to our Manchester plant for more than 60 years. Following a review, we decided to close the landfill and ship our continuing waste to commercial off-site landfills. A detailed closure plan for the landfill was approved in June 2011 with the U.K. Environment Agency as the relevant regulator. The remediation process has progressed well although progress in 2017 was slow due to the lack of availability of top-of-cap-grade material. This material has now been sourced and is on site. We have recognized a provision of $0.3 million that we estimate to be the cost to complete the closure, which we now expect to be realized during 2018.
Manchester, England.   In 1998, we identified radioactive scale in mineral buildup that was contaminating pipes, valves and tanks in a redundant ion-exchange plant. The zircon sand used by the operation contains low-level, naturally occurring radioactive material, which had concentrated in the scale. The ion-exchange plant has been assessed, and a disposal route for the contaminated pipes and valves has been identified. We have been advised that leaving the tanks in situ is a safe and suitable option with the building used for storage being isolated, clearly quarantined and declared off-limits to site personnel. The U.K. Environment Agency has been made aware of this and has confirmed that it does not have any objections to this proposal. We do not expect there to be any health or safety risks as long as the building remains sealed.
Saxonburg, Pennsylvania. As part of the due diligence regarding the acquisition of the Specialty Metals business of ESM Group Inc during 2017, we identified excess levels of manganese in water samples obtained from shallow depths. Even though this does not pose a health concern, we are going to participate in Pennsylvania Department of Environmental Protection's voluntary Act 2 program. As of December 31, 2017, the provision recognized with respect to this matter was $0.4 million.
Flemington, New Jersey.    We have requested permission to close a disused settling pond at this location and as a pre-condition to this closure, a program of remediation work to remove small amounts of contaminated soil and return the area to commercial land condition has been proposed to the New Jersey Department of Environmental Protection (NJDEP). Pursuant to the Industrial Site Recovery Act, we are pursuing an agreement with the previous owners to share in remediation costs. We have an accrual of $0.4 million related to this matter.
Flemington, New Jersey.    We have been investigating the presence of dissolved salts in groundwater adjacent to our plant to determine whether it was caused by activity on our site. At this point, we believe that most of the salts are naturally occurring, emanating from the local type of ground rock, and our consultants have submitted a report to the NJDEP for acceptance.
Riverhead, New York.    This site contains a small, redundant laboratory once used for testing chemical decontamination products. It is currently sealed, but as part of our acquisition due diligence, we determined to have the facility professionally removed and cleansed. During 2016, the expected work began and is expected to be completed in 2018. As of December 31, 2017, the remaining provision with respect to this matter was $0.1 million.
Redditch, England.    In 2000, civil works carried out at the BA Tubes plant in Redditch led to the discovery of significant sub-soil contamination. Further investigation suggested that two large trichloroethylene spillages had occurred before we owned the business. Over several years we have been implementing a long-term improvement plan at the site in line with an action plan for voluntary remediation that we presented to the U.K. Environment Agency. Since 2008, there has been no industrial activity on the Redditch site. On March 11, 2016, we sold our redundant Redditch site to a company that specializes in remediating contaminated land. The sale was with passage of statutory liability for environmental issues to the purchaser, but our protection from future liabilities was partly dependent on a pre-arranged insurance policy that came into force when the on-site remediation was completed. The on-site remediation was completed at the end of March 2017, and we consequently released a provision of $0.4 million held as at December 31, 2016, to cover potential future costs.
General Issues.   Under the U.S. Superfund Law or similar laws, we may be subject to liability with regard to on-site contamination and off-site waste disposals. The costs and liabilities associated with matters identified above are not currently expected to be material. However, because additional contamination could be discovered or more stringent remediation requirements could be imposed in the future, there can be no assurance that costs and liabilities associated with further environmental investigation and clean-up related to these matters will not be material.
We have made and will continue to make expenditures related to environmental compliance. In 2014, we spent $5.1 million on environmental remediation which included $4.0 million on the removal of sludge and clean-up of related contamination from a large pond at our Flemington, New Jersey, facility, which is now completed. We

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spent $0.3 million on environmental remediation in each of 2015 and 2016, but did not incur any environmental remediation related expenditures in 2017.
We estimate that our expenditures on general environmental matters could be approximately $0.7 million in 2018. These expenditures include finalizing the closure of the Manchester landfill and completing the decommissioning of the laboratory in Riverhead, New York. The exact timing of these expenditures is still uncertain, and they may be delayed, reducing the expenditures in 2018 and pushing work into 2019 and later years. Since the magnitude of environmental problems often becomes clearer as remediation is under way, the actual cost of such remediation could be higher than our estimate. The nature of the cost is also difficult to fully ascertain, and we may capitalize some costs because the remediation work enhances the value of the land we own.
We have taken the future estimated environmental remediation expenditures into account in our ongoing financial planning, and we expect to fund expenditures from operating cash we generate. Based on information currently available to us, we do not believe that there are any other environmental liabilities or issues of non-compliance that will have a material adverse effect on our results of operations, financial position or cash flows. Future changes in environmental laws and regulations or other developments could, however, increase environmental expenditures and liabilities, and there can be no assurance that such costs and liabilities in any given year will not be material.
Environmental Management Systems.    Following completion of the Management Buy-in in 1996, we retained independent environmental consultants RPS to design and implement an Environmental Management System ("EMS") for the purpose of monitoring and taking remedial action related to issues identified in the course of the acquisition due diligence. This work led to the adoption of a corporate environmental policy and the development of an EMS manual used by all facilities acquired at that time. Subsequent to the original Management Buy-in, all acquired facilities have been the subject of appropriate environmental due diligence.
On all sites, we continued during 2017 to take a proactive approach to environmental issues, and we completed a number of projects to reduce potential environmental impacts of issues identified in previous base-line reviews. We intend to certify all our larger sites as ISO 14001-compliant. As of December 31, 2017, 14 of our 23 sites had achieved this objective.
We report the proportion of our sales that comes from ISO 14001-compliant sites as a non-financial KPI. The figure for 2017 is 90%, which is 2% lower than in 2016 (92%).
Seasonality
In general, demand for our products is not seasonal. However, we have shutdown periods at most of our manufacturing sites during which we carry out important maintenance work. Shutdowns typically last two weeks in the summer and one to two weeks around the year-end holidays, resulting in reduced levels of activity in the second half of the year compared to the first half. Third-quarter and fourth-quarter revenue and operating profit can be affected by our own shutdowns and by shutdowns by various industrial customers. In particular, we have found that our fourth-quarter results are generally lower, since many customers reduce production activity from late November through December. However, less activity in December usually leads to lower levels of working capital and therefore stronger cash flows around year-end. We also operate in various areas that are susceptible to bad weather during winter months, such as Calgary, Canada, and various U.S. eastern states. Bad weather can unexpectedly disrupt production and shipments from our manufacturing facilities, which can lead to reduced sales revenue and operating profits. We also manufacture products used in graphic arts and premium packaging, demand for which increases in the run up to Christmas.

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C.    Organizational structure.
The following is a list of Luxfer Holdings PLC subsidiaries:
 
Name of company
 
Country of incorporation
 
Proportion of ownership interest
 
 
BA Holdings, Inc.*
U.S.
 
100
%
 
 
Biggleswick Limited*
England and Wales
 
100
%
 
 
Luxfer Group Services Limited*
England and Wales
 
100
%
 
 
LGL 1996 Limited*
England and Wales
 
100
%
 
 
BAL 1996 Limited*
England and Wales
 
100
%
 
 
Hart Metals, Inc.*
U.S.
 
100
%
 
 
Lumina Trustee Limited(1)
England and Wales
 
100
%
 
 
Luxfer Australia Pty Limited*
Australia
 
100
%
 
 
Luxfer Gas Cylinders Limited*
England and Wales
 
100
%
 
 
Luxfer Gas Cylinders China Holdings Limited*
England and Wales
 
100
%
 
 
Luxfer Gas Cylinders (Shanghai) Co., Limited*
People's Republic of China
 
100
%
 
 
Luxfer Group Limited
England and Wales
 
100
%
 
 
Luxfer Group 2000 Limited
England and Wales
 
100
%
 
 
Luxfer, Inc.*
U.S.
 
100
%
 
 
Luxfer Overseas Holdings Limited*
England and Wales
 
100
%
 
 
Magnesium Elektron Limited*
England and Wales
 
100
%
 
 
MEL Chemicals, Inc.*
U.S.
 
100
%
 
 
Magnesium Elektron North America, Inc.*
U.S.
 
100
%
 
 
Magnesium Elektron CZ s.r.o.*
Czech Republic
 
100
%
 
 
MEL Chemicals China Limited*
England and Wales
 
100
%
 
 
Niagara Metallurgical Products Limited*
Canada
 
100
%
 
 
Reade Manufacturing, Inc.*
U.S.
 
100
%
 
 
Luxfer Gas Cylinders S.A.S.*
France
 
100
%
 
 
Luxfer Canada Limited*
Canada
 
100
%
 
 
Luxfer Germany GmbH*
Germany
 
100
%
 
 
Luxfer Utah LLC*
U.S.
 
100
%
 
 
HyPerComp Engineering Inc.*
U.S.
 
100
%
 
 
Luxfer Magtech Inc.*
U.S.
 
100
%
 
 
Luxfer Magtech International Limited*
England and Wales
 
100
%
 
Other Investments:
 
Name of company
 
Country of incorporation
 
Proportion of voting rights and shares held
 
 
Nikkei-MEL Co Limited*
Japan
 
50
%
 
 
Luxfer Uttam India Private Limited*
India
 
51
%
 
 
Dynetek Cylinders India Private Ltd*
India
 
49
%
 
 
Dynetek Korea Co Limited*
South Korea
 
49
%
 
 
Luxfer Holdings NA, LLC*
U.S.
 
49
%
 
 
Sub161 Pty Limited*
Australia
 
26.4
%
 
Subsidiary undertakings are all held by the Company unless indicated.
*    Held by a subsidiary undertaking.
(1)Acts as bare trustee in connection with the 2007 share capital reorganization.

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D.    Property, plants and equipment
In 2017, we operated from 23 manufacturing plants in the U.K., U.S., France, Czech Republic, Canada and China. We also had joint ventures in Japan, India and the U.S. Our manufacturing plants for our operations, as of December 31, 2017, are shown in the table below:
 
Division
 
Property / Plant
 
Principal products
manufactured
 
Ownership
 
Approximate area (square feet)
 
 
Elektron
 
 
 
 
 
 
 
 
 
 
 
 
Manchester, England (3 plants)
 
Magnesium alloys / zirconium chemicals
 
Split Lease / Own
 
561,264

 
 
 
 
Madison, IL
 
Magnesium sheet
 
Lease
 
803,795

 
 
 
 
Findlay, OH
 
Photo-engraving sheet
 
Own
 
43,000

 
 
 
 
Tamaqua, PA
 
Magnesium powders
 
Own
 
64,304

 
 
 
 
Lakehurst, NJ
 
Magnesium powders
 
Own
 
78,926

 
 
 
 
Flemington, NJ
 
Zirconium chemicals
 
Own
 
65,000

 
 
 
 
Hamilton, Canada
 
Magnesium powders
 
Lease
 
16,335

 
 
 
 
Litvinov, Czech Republic
 
Magnesium recycling
 
Own
 
62,140

 
 
 
 
Riverhead, NY
 
Magnesium heating pads
 
Own
 
75,000

 
 
 
 
Cincinnati, OH
 
Magnesium heating pads
 
Lease
 
150,000

 
 
 
 
Saxonburg, PA
 
Magnesium powders
 
Own
 
68,000

 
 
Gas Cylinders
 
 
 
 
 
 
 
 

 
 
 
 
Nottingham, England
 
Aluminum cylinders
 
Lease
 
143,222

 
 
 
 
Gerzat, France
 
Cylinders
 
Own
 
327,535

 
 
 
 
Calgary, Canada
 
Composite cylinders
 
Lease
 
65,500

 
 
 
 
Worcester, England
 
Aluminum panels
 
Lease
 
97,315

 
 
 
 
Kidderminster, England
 
Aluminum panels
 
Lease
 
60,200

 
 
 
 
Riverside, CA
 
Composite cylinders
 
Lease / Own
 
125,738

 
 
 
 
Graham, NC
 
Aluminum cylinders
 
Own
 
121,509

 
 
 
 
Riverside, CA
 
Aluminum panels
 
Lease
 
68,240

 
 
 
 
Brigham City, UT
 
Cylinders
 
Lease
 
10,670

 
 
 
 
Shanghai, China
 
Cylinders
 
Lease
 
15,383

 
We also have locations in Australia and Italy that are involved in sales and distribution but not in manufacturing, as well as our headquarters in Salford, England. Our current headquarters office, which we hold under a short-term lease, is approximately 5,500 square feet, but is due to move to Manchester, England, in late March, 2018.
Utilization of our main production facilities is generally moderate to high across our businesses. We can adjust capacity relatively easily by varying shift patterns and / or manning levels, and we currently have few areas that require major capital investment to add capacity. Our strategic growth projects may require additional capacity over the next three years, depending on the degree to which these projects are successful.
Item 4A.
Unresolved Staff Comments
There are no written comments from the staff of the SEC that remain unresolved as of the date of filing this Annual Report with the SEC.

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Item 5.
Operating and Financial Review and Prospects
The following discussion of our financial position and results of operations should be read in conjunction with Item 3.A "Selected Financial Data", our consolidated financial statements and accompanying notes appearing elsewhere in this Annual Report. Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
The preparation of our consolidated financial statements required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods addressed and are subject to certain risks and uncertainties. See "Note 1—Accounting policies" to our consolidated financial statements included in this Annual Report for additional details on assumptions and estimates. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those identified under "Forward-Looking Statements" and "Risk factors" and other factors discussed in this Annual Report.
Overview
We are a global materials technology company specializing in the design, manufacture and supply of high-performance materials, components and high-pressure gas-containment devices for healthcare, environmental, protection and specialty end-markets. Our company is organized into two reporting divisions, Elektron and Gas Cylinders, which both represented 50%, of our total revenue in 2017. Our Elektron Division focuses on specialty materials based primarily on magnesium, zirconium and rare earths. Our Gas Cylinders Division manufactures and markets specialized products using aluminum, magnesium, carbon composites and steel. For a description of our products, see Item 4.B "Business Overview." Our customers include both end-users of our products and manufacturers that incorporate our products into their finished goods.
Key Factors Affecting our Results
A number of factors have contributed to our results of operations during recent periods, including the effects of fluctuations in raw material costs, effects of fluctuations in foreign exchange rates, changes in market sector demand, our development of new products, the global nature of our operations, our ability to improve operating efficiencies and costs associated with our retirement benefit arrangements.
Raw material costs
We are exposed to commodity price risks in relation to purchases of our raw materials. Raw materials we use include primary magnesium, rare earth metals and chemical compounds, zircon sand, zirconium oxychloride intermediates and other chemical inputs like soda ash for the Elektron Division and aluminum log and sheet and carbon fiber for the Gas Cylinders Division. Many of these raw materials have been subject to price rises and volatility over the last few years, some of which were substantial. We take certain actions to attempt to manage the impact of fluctuations in the costs of these commodities, including passing commodity prices through to certain customers through increasing prices and surcharges on certain products, entering into forward fixed purchase contracts and engaging in some hedging of aluminum prices. Changes in the costs of raw materials can nevertheless have a significant impact on our results of operations. For more information on the effect of commodity price movements on our results of operations, see "Item 11. Quantitative and Qualitative Disclosure About Market Risk—Effect of Commodity Price Movements on Results of Operations."
Exchange rates
As a result of our international operations, we are subject to risks associated with fluctuations among different foreign currencies. This affects our consolidated financial statements and results of operations in various ways:
As part of our consolidation each period, we translate the financial statements of those entities in our group that have functional currencies other than U.S. dollars into U.S. dollars at the period-end exchange rates (in the case of the balance sheet amounts) and the average exchange rates for the period (in the case of income statement and cash flow amounts). The translated values in respect of each entity fluctuate over time with the movement of the exchange rate for the entity's functional currency against the U.S. dollar. We refer to this as the currency translation risk;
Our operating subsidiaries make purchases and sales denominated in a number of currencies, including currencies other than their respective functional currencies. To the extent that an entity makes purchases in a currency that appreciates against its functional currency, its cost basis expressed in its functional currency will increase (or decrease if the other currency depreciates against its functional currency). Similarly, for sales in a currency other than the entity's functional currency, its revenues will increase to the extent that the other currency appreciates against the entity's functional currency and decrease to the extent that the currency depreciates against the entity's functional currency. These

36


movements can have a material effect on the gross profit margin of the entity concerned and on our consolidated gross profit margin. We refer to this as the currency transaction risk;
After a purchase or sale is completed, the currency transaction risk continues to affect foreign currency accounts payable and accounts receivable on the books of those entities that made purchases or sales in a foreign currency. These entities are required to remeasure these balances at market exchange rates at the end of each period; and
To mitigate our exposure to currency transaction risk, we have operated a policy of hedging all contracted commitments in foreign currency, although no new hedges were taken out in the second half of 2017. We also hedge a portion of non-contracted forecast currency receipts and payments for up to 12 months forward.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union (the "E.U."), commonly referred to as 'Brexit'. On March 29, 2017, the U.K. Government invoked Article 50 of the Treaty on the European Union, which is likely to result in the U.K. exiting the E.U. on March 29, 2019. The U.K. Government has commenced negotiating the terms of the U.K.'s future relationship with the E.U. although there is still considerable uncertainty as to the outcome. It is possible that there will be greater restrictions on imports and exports between the U.K. and other countries and increased regulatory complexity. These changes may adversely affect our operations and financial results.
In 2017, we sold €58.0 million from the U.K. into the Eurozone, and despite the fact that GBP sterling has remained weak against the euro, we were unable to take full advantage of this due to hedges being taken out during 2015 and the first half of 2016 at less favorable exchange rates (these hedges currently cover approximately 32% of 2018 forecast sales in euros). The Gas Cylinders Division, selling mainly aluminum cylinders priced in euros, is more affected than Elektron. Exports from U.S. business units, largely of composite cylinders, into Europe tend to be priced in U.S. dollars, as most of the competition also prices in dollars. However, if GBP sterling remains weak, we anticipate a potential transactional benefit once pre-existing hedges run off.
For more information on the effect of currency movement on our results of operations, and how we use foreign currency exchange derivative contracts to hedge this risk, see "Item 11. Quantitative and Qualitative Disclosure About Market Risk—Effect of Currency Movement on Results of Operations." We evaluate our results of operations on both an as-reported basis and a constant translation exchange rate basis. The constant translation exchange rate presentation is a non-GAAP measure, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant translation exchange rate percentages by converting our prior-period local currency financial results using the current-period foreign currency exchange rates and comparing these adjusted amounts to our current period reported results. This calculation may differ from similarly-titled measures used by others and, accordingly, the constant translation exchange rate presentation is not meant to be a substitution for recorded amounts presented in conformity with IFRS as issued by the IASB, nor should such amounts be considered in isolation.
Demand in end-markets
Our sales are driven by demand in the major end-markets for our products, which are transportation, defense and emergency response, healthcare and general industrial.
Transportation:  Many Luxfer products serve a growing need to improve and safeguard the environment in the field of transportation, including our zirconium-based products that clean up automotive exhausts; our lightweight magnesium alloys used in fuel-efficient aerospace and automotive designs; and our lightweight, high-pressure carbon composite alternative fuel cylinders that contain clean-burning compressed natural gas. We also superform single sheets of aluminum, magnesium or titanium to create a complex, three-dimensional shapes used in automotive, aerospace and rail components. As recycling metals is an essential environmental and economic practice, we have a dedicated site specifically for recycling magnesium alloys, as well as recycling capabilities at all our production sites.
Defense and emergency response: Luxfer offers a number of products that address principal factors driving growth in this market, such as heightened societal expectations regarding protection of people, equipment and property during conflicts and emergencies. Our products include magnesium powders for countermeasure flares that defend aircraft against heat-seeking missile attack, life-support cylinders for firefighters and other emergency-service personnel, inflation cylinders for aircraft escape slides and life rafts, fire extinguisher cylinders, and chemical agent detection and decontamination products.

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Healthcare: Luxfer has a long history in the healthcare end-market, and we see this as a major area for the introduction of new technologies. These include lightweight aluminum and composite cylinders for containment of medical and laboratory gases; magnesium powders for pharmaceutical products; magnesium materials for lightweight orthopedic devices; specialized magnesium alloys for cardiovascular stents and implants; and zirconium materials for biomedical applications and dental implants.
General industrial: Our core technologies have enabled us to exploit various other niche markets and applications. Our products include zirconium-based compounds to purify drinking water and clean up industrial exhausts; magnesium alloys shaped for use in various general engineering applications; and high-pressure gas cylinders used for high-purity specialty gases, beverage dispensing, scuba diving and performance racing. Metal foil-stamping and embossing dies are used primarily for luxury packaging, labels and greeting cards. Our high-quality magnesium, copper and zinc plates are ideal for these and other graphic applications.
Changes in the dynamics of any of these key end-markets could have a significant effect on our results of operations. For instance, governmental regulation, including government spending and delays in regulatory approvals, as well as decreased prices of substitute products, including falling oil prices, may affect our results of operations in any of these end-markets. See Item 3.D. "Risk factors—Risks Relating to Our Operations—We depend on certain end-markets, including automotive, alternative fuels, self-contained breathing apparatus, aerospace and defense, medical, and printing and paper. An economic downturn or regulatory changes in any of those end-markets could reduce sales, and margins on those sales." and "Risk factors—Risks Relating to Our Operations—Certain of our operations are highly regulated by different agencies that require products to comply with their rules and procedures and can subject our operations to penalties or adversely affect production." For a more detailed discussion of our key end-markets and the factors affecting our results of operations in each market, see Item 4 "Business Overview—Our End-markets."
Product development
Part of our strategy is to increase our focus on high-margin product lines and end-markets, and every year we re-evaluate and balance our investment in product development. In the near-term, we plan to focus on maximizing the potential of the following products that we have already introduced into the market: industrial catalysts and biomedical applications using our zirconia-based materials; L7X® higher-pressure medical oxygen cylinders; extruded magnesium alloy shapes; and soluble magnesium alloys for the oil and gas industry.
Global operations
We are a global company with operations and customers around the world. In 2017, our sales to Europe (including the U.K.), North America and the rest of the world accounted for 33%, 54% and 13% of our revenues respectively. Changes in global economic conditions have impacted, and will continue to impact, demand for our products. Further, our geographic diversity exposes us to a range of risks, such as compliance with different regulatory and legal regimes, exchange controls and regional economic conditions. For more information about potential risks we face, see Item 3.D. "Risk factors—Risks Relating to Our Operations—Our global operations expose us to economic conditions, political risks and specific regulations in the countries in which we operate, which could have a material adverse impact on our results of operations, financial position and cash flows."
We believe, however, that our geographic diversity also allows us to take advantage of opportunities arising in individual countries or regions. As a result of this diversity, demand for our products across sectors in which we operate can vary depending on the economic health and demographic shifts of our geographic markets. These macro factors can have a significant effect on our financial results. For instance, aging populations in the world's developed economies, along with increasing awareness of the importance of good healthcare in emerging markets, are driving an increase in the use of various medical technologies and applications, creating a growth opportunity for us. Economic expansion in developing economies such as Brazil, Russia, India and China has created increased demand in areas such as auto-catalysis chemicals and gas cylinders.
Operating efficiency
Our management seeks to improve long-term profitability and operating efficiencies to maintain our competitive position. These efforts include identifying operations with costs disproportionate to related revenues, especially operations with significant fixed costs that could negatively impact gross profit margin. In the past few years, we have taken more aggressive rationalization measures. Initiatives have included automation projects, employee redundancy exercises and undertaking temporary and permanent facility closings. Total charges for rationalization (which are a component of restructuring and other expenses) were $12.1 million, $0.4 million and $21.8 million in 2017, 2016 and 2015 respectively.


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Retirement benefit arrangements
We operate defined benefit arrangements in the U.K., the U.S. and France. Funding levels are determined by periodic actuarial valuations. Further, we also operate defined contribution plans in the U.K., the U.S. and Australia. Assets of the plans are generally held in separate trustee administered funds. We incur costs related to these retirement benefit arrangements, which can vary from year to year depending on various factors such as interest rates, valuations, regulatory burdens, life expectancy and investment returns. Total charges we incurred for all retirement benefit arrangements were $6.6 million, $7.0 million and $8.9 million in 2017, 2016 and 2015, respectively.
Key Line Items
Revenue
We generate revenue through sales of products that we have developed and manufactured for our customers. The main products that we sell are magnesium alloy powders, ingot, bar, extruded product, rolled plates and thin sheets, engraving plates, zirconium compounds in powder form, various forms of aluminum and carbon composite gas cylinders and superplastically-formed parts pressed using our vacuum pressing technology. We also generate revenue from designing and manufacturing special tools used with our Superform presses to make formed parts and from recycling magnesium alloy scrap for customers, along with sales of scrapped aluminum arising from the manufacture of gas cylinders. In general, for our magnesium and zirconium products, we charge our customers by weight sold, while for our gas cylinder and Superform products, we charge our customers by units and parts sold. For a description of our products, see Item 4.B "Business Overview."
Cost of sales
Our cost of sales primarily consists of a complex set of materials, energy, water and steam, direct shop-floor labor costs, supervisory management costs at our manufacturing facilities, engineering and maintenance costs, depreciation of property, plant and equipment, factory rents, security costs, property taxes and factory consumables, including machinery oils and protective equipment for employees. For a description of raw materials we use, see "Key Factors Affecting Our Results—Raw material costs" and Item 4.B "Business Overview—Suppliers and Raw Materials."
Distribution costs
As a global business, we transport and deliver our products to customers around the world. While some customers pay for their own transport, we can organize transportation through third parties. These distribution costs are recovered in the product price included in our revenue.
Administrative expenses
Our administrative expenses primarily consist of costs for staff working in sales, marketing, research and development, human resources, accounting, legal, information technology and general management. Administrative expenses also include sales commissions to agents, pension administration costs, legal costs, audit fees, directors' fees, taxation consultancy fees and other advisory costs. We also buy office consumables such as stationery, computer equipment and telecommunications equipment.
Restructuring and other income / (expense)
Our restructuring and other income / (expense) primarily consist of items of income and expense, which, because of their infrequent nature, merit separate presentation. In the past, these expenses have included costs related to redundancies, restructuring / rationalization of manufacturing operations, demolition and environmental remediation, litigation settlements, among others.
Other income / (expense)
Other income / (expense) consists of costs related to corporate finance activities, including business acquisitions and financing income and costs. Our finance costs consist of interest costs representing amounts accrued and paid on the outstanding balances under our indebtedness.






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Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with IFRS as issued by the IASB and the accounting policies that we use are set out under the heading "Note 1—Accounting policies" to our consolidated financial statements. In applying these policies, we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as well as our results of operations. The actual outcome could differ from these estimates. Some of these policies require a high level of judgment, either because they are especially subjective or complex. We believe that the most critical accounting policies and significant areas of judgment and estimation are with respect to impairment of goodwill, intangible assets and property, plant and equipment, retirement benefits, deferred income taxes, inventories obsolescence and write down and measurement of contingent consideration.
Impairment of goodwill, intangible assets and property, plant and equipment
Under IFRS as issued by the IASB, goodwill is held at cost less accumulated impairment and tested annually for impairment, or more frequently if events or changes in circumstances indicate the carrying amount of the asset might be impaired. Tests for impairment are based on discounted cash flow projections, which require us to estimate both future cash flows and an appropriate discount rate. Such estimates are inherently subjective.
For intangible assets other than goodwill, and property, plant and equipment, we assess whether there is any indication that an asset may be impaired at each balance sheet date or more frequently if events or changes in circumstances indicate the carrying amount of the asset might be impaired. If such an indication exists, we estimate the recoverable amount of the asset and charge any impairment directly to the income statement.
The process of reviewing and calculating impairments of fixed assets necessarily involves certain assumptions. It requires the preparation of cash flow forecasts for a particular set of assets, known as "cash generating units." These forecasts are based on, among other things, our current expectations regarding future industry conditions, our own operational plans and assumptions about the future revenues and costs of the unit under review. Accordingly, there can be no certainty that the cash flow forecasts are correct. Current turmoil in many financial and industrial markets will make this type of analysis far more difficult to perform and therefore subject to a greater risk of error.
Further analysis was performed to assess whether the remaining goodwill, intangible assets and property, plant and equipment in our consolidated balance sheet were impaired as of December 31, 2017. It was concluded that based on the commercial information available and applying an average discount rate of 10.0% across the group, the Luxfer Czech Republic CGU was deemed impaired. As a result, an impairment of $2.2 million was recognized with regards to the property, plant and equipment.
Post-employment benefits
We account for the pension costs relating to our retirement plans under IAS 19R "Employee Benefits." In applying IAS 19R, we have recognized actuarial gains and losses in full through reserves. In all cases, the pension costs are assessed in accordance with the advice of independent qualified actuaries, but require the exercise of significant judgment in relation to assumptions for future salary and pension increases, long-term price inflation and investment returns. The most sensitive assumption is the long-term discount rate used to discount the net retirement benefit obligation.
Deferred income taxes
Deferred income tax assets are recognized for unabsorbed tax losses and unutilized capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilized. Judgment is required to determine the amount of deferred income tax assets that can be recognized, based upon the likely timing, level of future taxable profits and tax rates in various jurisdictions, together with future tax planning strategies.
Inventories obsolescence and inventories write down
Inventories are stated at the lower of cost and net realizable value and are reviewed on a regular basis. We will make allowance for excess or obsolete inventories and write down to net realizable value. This will be based primarily on committed sales prices and our estimates of expected and future product demand and related pricing.




40


Other significant accounting policies
Other significant accounting policies not involving the same levels of measurement uncertainties as those discussed above are nevertheless important to an understanding of our consolidated financial statements. Policies related to financial instruments, the characterization of operating and finance leases and consolidation policy require difficult judgments on complex matters that are often subject to multiple sources of authoritative guidance. Certain of these matters are among topics currently under re-examination by accounting bodies and regulators. The new IFRS 16 accounting standard on leases is likely to have a material impact on our accounting policies and on our balance sheet as a result of having to bring, currently off-balance sheet, operating leases onto the balance sheet, with a corresponding liability also recorded. With regards to other policies, whilst material change appears unlikely, we cannot predict outcomes with confidence.
Recent Accounting Pronouncements
See "Note 1—Accounting policies" to our consolidated financial statements for a description of other recent accounting pronouncements, including the respective dates of effectiveness and effects on our results of operations.

41


A.
Operating results.
Results of Operations for the Years Ended December 31, 2017, 2016 and 2015
The table below summarizes our consolidated results of operations for the years ended December 31, 2017, 2016 and 2015, both in U.S. dollars and as a percentage of total revenue. For more detailed segment information, see "Note 2—Revenue and segmental analysis" to our consolidated financial statements included elsewhere in this Annual Report.
 
 
 
Year Ended December 31,
 
 
 
 
2017
 
2016
 
2015
 
 
 
 
Amount
 
Percentage
of
Revenue
 
Amount
 
Percentage
of
Revenue
 
Amount
 
Percentage
of
Revenue
 
 
 
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
(in $ million)
 
(%)
 
 
Revenue
 
$
441.3

 
100.0
 %
 
$
414.8

 
100.0
 %
 
$
460.3

 
100.0
 %
 
 
Cost of sales
 
(332.7
)
 
(75.4
)%
 
(321.4
)
 
(77.5
)%
 
(356.3
)
 
(77.4
)%
 
 
Gross profit
 
108.6

 
24.6
 %
 
93.4

 
22.5
 %
 
104.0

 
22.6
 %
 
 
Distribution costs
 
(9.3
)
 
(2.1
)%
 
(7.8
)
 
(1.9
)%
 
(7.9
)
 
(1.7
)%
 
 
Administrative expenses
 
(58.9
)
 
(13.3
)%
 
(50.8
)
 
(12.2
)%
 
(52.6
)
 
(11.4
)%
 
 
Share of results of joint ventures and associates
 
0.1

 
0.1
 %
 
0.5

 
0.1
 %
 
(1.2
)
 
(0.3
)%
 
 
Trading profit(1)
 
$
40.5

 
9.2
 %
 
$
35.3

 
8.5
 %
 
$
42.3

 
9.2
 %
 
 
Profit on sale of redundant site(2)
 
0.4

 
0.1
 %
 
2.1

 
0.5
 %
 

 

 
 
Changes to defined benefit pension plans(2)
 

 

 
0.6

 
0.1
 %
 
18.0

 
3.9
 %
 
 
Restructuring and other expense(2)
 
(21.6
)
 
(4.9
)%
 
(2.2
)
 
(0.5
)%
 
(22.4
)
 
(4.9
)%
 
 
Operating profit
 
$
19.3

 
4.4
 %
 
$
35.8

 
8.6
 %
 
$
37.9

 
8.2
 %
 
 
Other income / (expense):
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Net gain / (loss) on acquisitions and disposals(2)
 
1.3

 
0.3
 %
 
0.2

 
0.1
 %
 
(2.0
)
 
(0.4
)%
 
 
Finance income: