TIDMMGGT
RNS Number : 8493U
Meggitt PLC
04 August 2022
4 August 2 0 22
M egg i t t P L C
2022 Interim r e su l t s
STRONG ORDER BOOK PERFORMANCE AS RECOVERY IN CIVIL AEROSPACE
CONTINUES
Meggitt PLC ("Meggitt" or the "Group"), a leading international
engineering company specialising in high performance components and
sub-systems for the aerospace, defence and selected energy markets,
today announces unaudited interim results for the six months ended
30 June 2022.
Tony Wood , Chi e f Exec u t i v e , c omm e n t e d :
"We delivered a robust trading performance in the first half,
with Group organic revenue up 11%, reflecting strong growth in our
civil aftermarket and civil original equipment business, as well as
a good performance in energy. We ended the half with a Group book
to bill ratio of 1.23x.
We are encouraged by the strong recovery in passenger demand for
our civil business as airlines bring more aircraft into service and
the improving prospects for defence as we come out of a period of
significant destocking in the aftermarket.
The Group has continued to invest in technologies and
capabilities to support the decarbonisation of aviation and the
delivery of clean energy. In the first half we concluded the
acquisition of the remaining 67% of HiETA Technologies which
specialises in additive manufacturing and the remaining 30% of our
joint venture in Mexico which specialises in aerospace composites.
Combined with our recent investments in facilities and the ongoing
development of our engineering and manufacturing capabilities, the
Group remains well positioned for the future.
However, we are mindful of the challenges that our industry
continues to face with availability across the supply chain and
continued cost inflation on materials and labour. We remain focused
on mitigating these effects and the Group is well placed to do
so.
The acquisition of Meggitt by Parker-Hannifin remains on track
for completion in Q3 and I would like to thank all of my global
colleagues for their hard work, resilience and dedication in
delivering for our customers and wider stakeholders through the
first half of the year."
Group performance
C han g e
------ ---------
H 1 20
22 H 1 20 21 R epo r t Or gani
GBP'm GBP'm e d % c (1) %
------ --------- --------- --------
Or de r s 996.9 671.4 48 38
R eve n u e 821.0 680.0 21 11
------ --------- --------- --------
U nde r l y i
n g(2)
EB I T D A 3 140.1 116.2 21 9
O pe r a t in g
p r o f i t 78.6 61.7 27 13
P r o f i t be f
o r e t a x 63.6 48.4 31 15
Ea r ni n g s pe
r s ha r e ( p ) 6.4 4.9 31
------ --------- --------- --------
S t a t u t o
r y
O pe r a t in g
profit 10.0 49.0 (80)
(Loss)/profit be
f o r e t a x (6.5) 33.6 (119)
E arnings pe r s
ha r e ( p) 0.2 3.6 (94)
------ --------- --------- --------
F r e e c a s
h out f lo w (44.2) (34.5) (28)
Net cash inflow/(outflow) 6.4 (14.9) 143
Net debt 885.5 822.6 8
Dividend (p) - -
------ --------- --------- --------
(1.) Organic numbers exclude the impact of acquisitions,
disposals and foreign exchange.
(2.) Underlying profit and EPS are used by the Board to measure
the trading performance of the Group as set out in notes 5 and
10.
3 Underlying EBITDA represents underlying operating profit
adjusted to add back depreciation, amortisation and impairment
losses.
Summary and Highlights
-- Group organic revenue up 11% in the period against the
corresponding period last year (down 21% vs. H1 2019) with
sequential improvement of 15% in the second quarter versus Q1
22.
-- Group book to bill at 1.23x, with book to bill ratio in civil
original equipment at 1.40x, civil aftermarket at 1.59x, Defence at
0.82x and Energy at 1.28x.
-- Civil aerospace organic revenue up 30% in the first half
(down 30% vs. H1 2019) with civil aerospace aftermarket organic
orders and revenue up 112% and 36% respectively compared with H1
21.
-- Defence revenue 8% lower on an organic basis compared with the first half of 2021.
-- Underlying operating profit for the first half higher at
GBP78.6m (H1 2021: GBP61.7m), an organic increase of 13%.
-- Statutory operating profit of GBP10.0m (H1 2021: GBP49.0m)
which includes the impairment of assets relating to the MC21 due to
cessation of work following Russia's invasion of Ukraine.
-- Free cash outflow of GBP44.2m (H1 2021: outflow of GBP34.5m),
reflecting our normal seasonal working capital patterns, but also
including inventory build to support growth and mitigate current
supply chain challenges.
-- Net debt of GBP885.5m (H1 2021: GBP822.6m) with ratios of net
debt:EBITDA of 1.8x and interest cover of 11.8x at 30 June 2022.
Liquidity remains strong with committed facilities of GBP1,207.5m
and headroom of GBP523.5m.
-- In the period, we completed the disposal of our Danish
business for a cash consideration of GBP62.3m, subject to customary
adjustments for working capital and net debt.
-- Recommended all cash offer of 800 pence per share from
Parker-Hannifin approved by shareholders on 21 September 2021 with
the transaction still expected to complete in the third quarter of
2022.
-- In line with the terms of the previously announced proposed
transaction with Parker-Hannifin, the Group is not paying an
interim dividend for 2022.
-- Since the Group is in an offer period under the UK Takeover
Code, we are not providing financial guidance for 2022, nor are we
able to comment on expected performance relative to any analyst
forecasts that may be available.
Enquiries
Tony Wood , C h i e f E x e c u t iv e
Louisa Burdett, Chief Financial Officer
Vikas Gujadhur, Acting Head Investor Relations
Meg g i t t P L C
T el : 02476 826 900
N i c k H a s ell , Mana g in g D i r e c t o r
Dwight Burden, Managing Director
Alex Le May, Managing Director
F T I C on s ul t in g
T el : +4 4 2 0 3 7 2 7 1 3 4 0
Availability
The interim management report will be available on the Group's
website www.meggitt.com from 4 August 2022. Paper copies of the
report will be available to the public from Meggitt's registered
office at Pilot Way, Ansty Business Park, Coventry, CV7 9JU.
C a u t ion ar y S t a t e m e n t
This results announcement contains forward looking statements
with respect to the financial condition, results of operations and
businesses of Meggitt and its strategy, plans and objectives. These
statements are made in good faith based on the information
available at the time this announcement was approved. It is
believed that the expectations reflected in these statements are
reasonable but they may be affected by a number of risks and
uncertainties that are inherent in any forward-looking statement
and which could cause actual results to differ materially from
those currently anticipated. Meggitt does not intend to update
these forward-looking statements. Nothing in this document should
be regarded as a profit forecast. This report is intended solely to
provide information to shareholders and neither Meggitt nor its
directors accept liability to any other person, save as would arise
under English law.
INTERIM MANAGEMENT REPORT
Group Orders and Revenue
Unless otherwise stated, all growth comparisons are presented on
an organic basis.
First quarter trading
On 21 April 2022, we reported Group revenue for the first
quarter was up 5% against the comparative period with civil OE and
AM up 11% and 37% respectively.
Second quarter trading
Group orders were up 22% against the comparative period with
Group revenue up 16%. In Civil Aerospace, revenue grew by 33% with
civil OE up 30 % and AM up 34% reflecting an improvement in air
traffic activity levels in the period against the same quarter last
year. Defence revenue was flat with OE up 2% and AM down 3%, with
revenue from Energy 9% higher.
First half trading
Group book to bill for the period was 1.23x with civil aerospace
at 1.51x, Defence at 0.82x and Energy at 1.28x. Group revenue was
up 11%. In Civil Aerospace, revenue was 30% higher, with sales from
civil OE and civil AM up 21% and 36% respectively. Defence revenue
ended the period 8% lower with revenue from Energy up 18%.
% imp a c
GBP' m t
------ ---------
H1 2021 r ev e nu e 680.0
M&A 2.0 -
C u rr en c y m ove m en t s 64.8 10
Or gani c g r o w t h 74.2 11
------ ---------
H1 2022 r ev e nu e 821.0 21
------ ---------
The adjustments for M&A include the sale of the Group's
Danish business on 30 June 2022, acquisitions of the remaining 67%
of HiETA Technologies on 14 January 2022 and the remaining 30% of
our joint venture in Mexico on 20 May 2022.
Currency movements in the period reflect the weakening of the
pound sterling against our trading currencies, principally the US
dollar.
Profit and earnings per share
Underlying profit is used by the Board to monitor and measure
the underlying trading performance of the Group and excludes
certain items including: amounts arising on the acquisition,
disposal and closure of businesses; amortisation of intangible
assets acquired in business combinations; movements in financial
instruments; and exceptional operating items.
Group underlying operating margins increased by 5 0 basis
points, to 9.6 % (H1 2021: 9.1%) reflecting higher revenue partly
offset by cost inflation and supply chain disruptions. Underlying
operating profit was higher in the period at GBP78.6m (H1 2021:
GBP61.7m), up 13%.
Underlying profit before tax increased by 15 % to GBP63.6m (H1
2021: GBP 48.4 m) with underlying earnings per share up 31% on a
reported basis at 6.4 pence (H1 2021: 4.9 pence).
Cash flow and net debt
Consistent with normal seasonal patterns, the Group generated a
free cash outflow in the first half of GBP44.2m, higher than the
comparative period (H1 2021: GBP34.5m outflow) reflecting increased
working capital.
In the first half, investment in working capital generated an
outflow of GBP85.9m (H1 2021: GBP51.0m outflow), which mainly
reflects higher inventory to maintain continuity of supply and to
support growth. Investment in capital expenditure was GBP29.5m (H1
2021: GBP31.7m).
Deficit payments made in respect of retirement benefit schemes
were GBP21.7m (H1 2021: GBP21.7m).
Including cash proceeds from M&A activity of GBP50.3m
(principally from the sale of our Danish business), the net cash
generated by the Group was GBP6.4m in the first half (H1 2021:
GBP14.9m outflow).
At the end of June, net debt was GBP885.5m (H1 2021: GBP822.6m)
including lease liabilities of GBP201.5m, an increase of GBP106.0m
from 31 December 2021 after adverse currency movements of GBP80.1m.
There was ample headroom of GBP523.5m on committed facilities of
GBP1,207.5m.
First half cash flow statement
H1 2022 H1 2021
GBP'm GBP'm
-------- --------
Underlying operating profit 78.6 61.7
Depreciation and amortisation 61.5 54.5
Working capital movements (85.9) (51.0)
Net interest paid (13.6) (14.9)
Tax paid (13.2) (29.4)
Exceptional operating items paid (9.0) (12.2)
Purchase of property, plant and equipment
and intangible assets 4 (29.5) (31.7)
Proceeds from sale of property, plant and
equipment 4 8.0 22.7
Capitalised development costs/programme
participation costs (19.4) (12.5)
Retirement benefit deficit reduction payments (21.7) (21.7)
-------- --------
Free cash flow (44.2) (34.5)
Net proceeds from disposal/acquisition of
businesses 50.3 18.3
Issue of equity share capital 0.3 -
Other - 1.3
-------- --------
Net cash generated 6.4 (14.9)
Lease liabilities entered (29.0) (28.0)
Debt acquired or disposed with businesses (5.2) -
Exchange differences (80.1) (7.1)
Other movements 1.9 0.4
-------- --------
Net debt movements (106.0) (49.6)
-------- --------
Net debt at 1 January (779.5) (773.0)
Net debt at 30 June (885.5) (822.6)
-------- --------
4 Purchase of property, plant and equipment and intangible
assets, and proceeds from sale of property, plant and equipment
have been adjusted by GBP40.7m compared with the equivalent amounts
reported on a statutory basis. This adjustment eliminates the gross
effect of the simultaneous purchase and sale and leaseback of the
Group's facility in Ventura County, USA. The combined transaction,
which resulted in a cash inflow of GBP4.5m, is reflected on a net
basis within proceeds from sale of property, plant and
equipment.
There are two main financial covenants in our financing
agreements. The net borrowings:underlying EBITDA ratio, which must
not exceed 3.5x, was 1.8x at 30 June 2022 (June 2021: 2.4x). In
addition, interest cover, which must be not less than 3.0x, was
11.8x at 30 June 2022 (June 2021: 9.7x).
The Group has ample headroom against both key covenant ratios,
and net borrowings:underlying EBITDA remains within our target
range of 1.5x to 2.5x.
M&A
Consistent with our strategy of developing sustainable and
differentiated technologies for our core end markets in aerospace,
defence and energy, on 30 June 2022, we completed the sale of our
Danish business to CTS Ceramics Denmark A/S for a cash
consideration of GBP62.3m, subject to customary adjustments for
working capital and net debt.
Also, in the first half of 2022, we completed the acquisition of
the remaining 67% of HiETA Technologies, which specialises in
additive manufacturing as well as acquiring the remaining 30% of
our joint venture in Mexico which specialises in aerospace
composites.
Environmental, Social and Governance
During the period, we have continued to invest in our advanced
technologies and operations to decarbonise aviation. We have also
submitted our SBTI (Science Based Targets initiative) targets and
await feedback.
TRADING SUMMARY
Unless otherwise stated, all growth comparisons are presented on
an organic basis.
Revenue (GBP'm) Growth (%)
H1 2022 H1 2021 Reported Organic
-------- -------- --------- --------
Civil OE 158.6 121.0 31 21
Civil AM 257.4 171.9 50 36
-------- -------- --------- --------
Total Civil 416.0 292.9 42 30
Defence 302.4 301.9 - (8)
Energy 75.3 60.1 25 18
Other 27.3 25.1 9 -
-------- -------- --------- --------
TOTAL 821.0 680.0 21 11
-------- -------- --------- --------
Ci v il a e r o space
Meggitt operates in three main segments of the civil aerospace
market: large jets, regional aircraft and business jets. The large
jet fleet includes over 23,000 aircraft, the regional aircraft
fleet over 6,000 and business jets around 19,000. The Group has
products on the vast majority of these platforms and hence a large
installed base. With c.55% of our civil aftermarket revenue (full
year 2019) generated from platforms under 10 years old, we are well
placed to continue to generate good returns over the coming years
as the market recovers.
The split of civil revenue in the first half, which accounted
for 51% of the Group total, was 38% original equipment (OE) and 62%
aftermarket (AM).
Civil OE
In the first six months of 2022 compared with the same period in
2021, civil OE revenue was up 21%, with large jets, the largest
component of our OE revenue, up 20% and regional jets up 31%.
Business jet OE revenue was up 23%. Within the first half, civil OE
was up 13% and 30% in the first and second quarters of 2022
respectively, in comparison to the corresponding quarters in 2021,
and up 16 % sequentially between the first and second quarters of
2022.
Civil AM
Global air traffic has continued to recover during the half,
with global ASKs and RPKs in the first five months of the year 53%
and 85% higher respectively than the same period in 2021.
Sequentially, in the first half, civil AM orders were down 20 %
and revenue up 21 % in the second quarter compared with the first
quarter of this year.
As a result of increasing passenger demand and the corresponding
increase in air traffic activity across the period, civil AM
revenue was up 36% in the first half. Within that, large jets were
up 33%, regional jets up 61% and business jets up 26%. Within the
first half, in the first and second quarters, civil AM revenue was
up 39% and 34% respectively compared with the corresponding periods
in 2021.
A summary of civil aftermarket organic revenue growth rates
comparing 2022 to 2021 and quarterly trends in 2022 is set out in
the table below.
Sequential
Year on year (HY22 vs HY21) HY22
Growth (%) Q1 Q2 H1 Q1 vs Q2
---------- --------- --------- -----------
Large jets 42 26 33 24
Regional jets 67 56 61 9
Business jets 15 36 26 28
---------- --------- --------- -----------
Total Civil AM 39 34 36 21
---------- --------- --------- -----------
Overall, civil aerospace revenue was 30% higher in the first
half on an organic basis.
Defence
Our Defence business accounted for 37% of Group revenues in H1
2022 with 60% of revenue from OE and 40% from the aftermarket. We
have equipment on an installed base of around 22,000 fixed wing and
rotary aircraft and a significant number of ground vehicles and are
well placed having secured strong positions on some of the newest
and hardest working platforms. Direct sales to US customers
accounted for 73% of defence revenue, with 19% to European
customers and 8% to the rest of the world.
Defence revenue was 8% lower where in OE, revenue was down 7%
with the aftermarket 9% lower, reflecting the continued effects of
inventory destocking and weaker ordering from the US Defence
Logistics Agency in the
aftermarket. Our order book remains solid with book to bill of
0.82x, and we are starting to see initial signs of restocking in
the aftermarket as well as original equipment growth,
E ne r g y a nd o t her
Energy and other revenues (12% of Group total) come from a
variety of end markets of which the single most significant is
energy (9% of Group total). Our energy capabilities centre on
providing valves and condition-monitoring equipment for power
generation installations, including ground-based gas and wind
turbines, and printed circuit heat exchangers used primarily in the
oil and gas market. Other markets (3% of Group total) include the
automotive, industrial, test, consumer goods and medical
sectors.
Energy revenue was up 18% with Heatric revenue up 50%, partially
offset by Energy Sensing and Controls where revenue was down 65%.
Revenue from other markets was flat against the comparative
period.
Our energy businesses had a strong book to bill of 1.28x for the
period underpinned by a number of contract wins and a robust
pipeline of new growth opportunities, particularly in the
renewables and green energy space. We have differentiated
aero-derivative technologies which play a critical role in the
extraction of deep water offshore gas reserves and the growth in
demand for liquid natural gas, green and renewable energy positions
this business well for the future.
DIVISIONAL P E RFO R M A N C E
Unless otherwise stated, all growth comparisons are presented on
an organic basis.
The financial performance of the individual divisions for the
six months ended 30 June 2022 is summarised in the table below:
Revenue Underlying Operating Profit/(Loss)
H1 20 H1 20
H1 2022 21 % Growth H1 2022 21 % Growth
Re por Re por O rg
GBP'm GBP'm te d O r ganic GBP'm GBP'm te d a n ic
------- ----- ------ --------- ---------- -------- ------- ---------
Airframe Systems 416.1 339.9 22 13 57.4 41.7 38 23
Engine Systems 124.3 91.4 36 23 (11.6) (14.5) 20 18
Energy & Equipment 134.9 130.9 3 (5) 20.2 20.4 (1) (11)
Services & Support 145.7 117.8 24 13 12.6 14.1 (11) (19)
Total Group 821.0 680.0 21 11 78.6 61.7 27 13
------- ----- ------ --------- ---------- -------- ------- ---------
Airframe Systems provides Braking Systems, Fire Protection &
Safety Systems, Power & Motion, Fuel Systems, Avionics &
Sensors and Polymer Seals for around 35,000 in-service civil and
22,000 defence aircraft. As well as increasing our content on new
generation aircraft, we also have a strong presence on all of the
fastest growing and hardest worked defence platforms. As such, we
have strong relationships with all of the major OEMs, whether
commercial, defence or business jet; fixed wing or rotorcraft; US,
European or rest of the world. The division represents 51% of Group
revenue, generating 49% of its revenue from OE sales and 51% from
the aftermarket.
Revenue was up 13% in the half. Civil OE revenue was up 17% with
large jets, regional jets and business jets OE up 14%, 53% and 19%
respectively.
Civil aftermarket revenue was 52% higher with large, regional
and business jets up 67%, 76% and 29% respectively. We are
encouraged by the order intake across civil aerospace in the
division of 1.76x (across OE and aftermarket).
Defence revenue was down 10%, with OE and AM down 11% and 9%
respectively, driven by the lower orders received in 2021.
Underlying operating margin was 150 basis points higher than the
comparative period at 13.8 % (H1 2021: 12.3%).
Engine Systems has a leading position in aero sensing with a
broad range of technologies and sensor applications including
vibration monitoring and engine health management systems. This
division also provides aero-engine heat exchangers, flow control
and advanced engine composites. Strong positions on high volume
platforms mean we are well positioned for growth in Engine Systems.
The division represents 15% of Group revenue, generating 95% of its
revenue from OE and 5% from the aftermarket as a result of its
principal route to the aftermarket being through the Services &
Support division.
Revenue increased by 23% in the first half. Civil OE revenue was
29% higher, mainly driven by large and business jets. Civil AM
revenue was up 82% driven by large and regional jets. In defence,
revenue was up 20% with strong growth in OE where we supply
equipment on major platforms.
Engine Systems generated a reduced underlying operating loss in
the first half of GBP11.6m (H1 2021: loss of GBP14.5m).
Our recovery plan for Engine Composites remains on track, with
the main product transfers to our low cost facility in Saltillo,
Mexico completed. However, whilst manufacturing volumes have
continued to improve, they remain below 2019 levels.
Energy & Equipment consists of our energy product groups and
businesses that provide products directly to defence customers.
Energy Sensors & Controls provides a range of valves,
actuators, sensor and condition monitoring systems for oil and gas
applications. Heatric provides innovative printed circuit heat
exchanger technology for offshore gas and lower carbon
applications. Defence Systems provides a series of complex
engineered products to defence agencies in electronic cooling,
ammunition handling and scoring systems. Energy & Equipment
represents 16% of Group revenue and generates 80% of its revenue
from OE and 20% from the aftermarket.
Revenue was down 5% with a strong performance in energy up 15%,
offset by defence where revenue was down 23%. Heatric grew revenue
50% in the first half underpinned by a strong order book as we
entered the year, with revenue in our Energy Sensors and Controls
business down 5% in the half.
Order intake for the division was up 35% in the half versus the
same period last year with a particularly strong performance in
defence where orders were up 119%.
Underlying operating margins at 15.0% were broadly flat against
the comparative period (H1 2021: 15.6%).
Services & Support provides a full service aftermarket
offering including spares distribution and MRO to our commercial,
business jet and defence customer base, throughout the lifecycle of
our products. The division represents 18% of Group revenue and
generates 100% of its revenue from the aftermarket, with 80%
generated from civil aerospace and 20% from defence.
Overall order intake in the division was up 24% in the first
half. Civil orders were 38% higher in the first half, with very
strong growth in regional jets where orders were up 194%.
Regionally orders were up 14%, 33% and 14%, in the US, Europe and
Asia Pacific respectively.
Revenue for the division was 13% higher in the first half, with
civil aerospace revenue up 21%, within which large jet, regional
jet and business jet revenues were up 23%, 10% and 14% respectively
in the period. Defence revenue was flat reflecting the delay to
normal order patterns in the US from the DLA (Defence Logistics
Agency).
Underlying operating margin was lower at 8.6% (H1 2021: 12.0%)
due to adverse mix in civil and lower volumes in the defence
aftermarket.
IN V ES T ING F O R T HE FUTURE
H1 2022 H1 2021 % Change
GBPm GBP'm GBP'm Organic Reported
-------- -------- -------- ---------
Total research and development (R&D) 42.8 39.4 (2) 9
Less: Charged to cost of sales /
WIP (4.1) (10.7) (65) (62)
Less: Capitalised (19.4) (11.7) 53 66
Add: Amortisation / Impairment 20.0 17.2 7 16
-------- -------- -------- ---------
Charge to underlying net operating
costs 39.3 34.2 4 15
-------- -------- -------- ---------
Capital expenditure 29.5 31.7 (7)
-------- -------- -------- ---------
R&D in the period increased slightly as we continued to
invest in new technologies to support new product development and
future growth. In the first half, total R&D expenditure of
GBP42.8m was slightly down as a percentage of the increased revenue
at 5.2% (H1 2021: GBP39.4m, 5.8%).
The charge to underlying net operating costs, including
amortisation and impairment, increased by 15% (up 4% on an organic
basis) to GBP39.3m (2021: GBP34.2m).
Capital expenditure was lower in the first half at GBP29.5m (H1
2021: GBP31.7m).
OTHER FI N A N C I A L INFORMATION
Tax charge
The statutory tax credit for the period was GBP7.8m (2021:
GBP5.3m charge) based on the reported loss before tax of GBP6.5m
(2021: GBP33.6m profit). Based on underlying profit before tax of
GBP63.6m (2021: GBP48.4m) the Group's underlying tax rate for the
period was 21.3% (2021: 21.4%).
The Group is aware of the European General Court judgment in
June 2022 that supported the European Commission view that state
aid applies to one of the UK's CFC exemptions utilised by the
Group. The Group does not consider there to be a significant risk
of a material adjustment to the financial statements in this regard
as the Group received and paid tax assessments from the UK tax
authorities of GBP16.9m, which the UK tax authority considered was
recoverable from businesses. The Group is considering, with its
external advisors, whether to appeal the European General Court
judgment to the European Court of Justice.
Retirement benefit schemes
The trustees of the Group's UK defined benefit pension plan have
advised the Pensions Regulator that the triennial valuation, as at
5 April 2021, will not be finalised until 30 September 2022. The
delay is to allow the trustees, should the acquisition of the Group
by Parker-Hannifin have completed by that date, to finalise the
valuation based on the approach set out in the legally binding
Memorandum of Understanding agreed with Parker-Hannifin.
In the event the acquisition is not anticipated to have
completed by 30 September 2022, the trustees will finalise the
valuation based on assumptions and a recovery plan agreed with the
Group. Under such circumstances, the Group's disclosures in its
2021 Annual Report of the estimated funding position remain
unchanged. If the valuation is agreed with the Group it will be
finalised by 30 September 2022.
The Group's principal defined benefit pension schemes are in the
UK and US, all of which are closed to future accrual.
Total scheme net deficits reduced to GBP72.1m at 30 June 2022
(31 December 2021: GBP136.4m), with the principal drivers of the
net reduction being:
-- A reduction of GBP333.3m (H1 2021: reduction of GBP88.0m)
relating to re-measurement gains on scheme liabilities, principally
arising from the significant increase in AA corporate bond yields
in both the UK and US;
-- An increase of GBP279.4m (H1 2021: increase of GBP22.3m) due
to re-measurement losses on scheme assets; and
-- Deficit reduction payments of GBP21.7m (H1 2021: GBP21.7m) of
which GBP19.8m was paid in respect of the UK scheme (H1 2021:
GBP18.5m).
In the UK, the Group is currently making deficit payments in
accordance with a recovery plan agreed with the trustees following
the 2018 triennial funding valuation, amended following the four
month deferral of GBP9.6m of deficit contributions originally due
to be made in 2020. This amended recovery plan provides for the
2018 deficit to be addressed by payments which gradually increase
over the period to August 2023. Under the plan, the Group will make
deficit contributions of GBP40.2m in 2022 and GBP29.9m in 2023.
CONDENSED CONSOLIDATED UNAUDITED INCOME STATEMENT
For the six months ended 30 June 2022
Six months
ended Six months
30 June ended
2022 30 June 2021
Note GBP'm GBP'm
----------- --------------
Revenue 4 821.0 680.0
Cost of sales (569.7) (484.6)
----------- --------------
Gross profit 251.3 195.4
Operating costs (271.1) (183.2)
Operating income 29.8 36.8
----------- --------------
Net operating costs (241.3) (146.4)
Operating profit(1) 10.0 49.0
Finance income 0.7 0.4
Finance costs (17.2) (15.8)
----------- --------------
Net finance costs 8 (16.5) (15.4)
(Loss)/profit before tax (2) (6.5) 33.6
Tax credit/(charge) 9 7.8 (5.3)
Profit for the period attributable to
equity owners of the Company 1.3 28.3
----------- --------------
Earnings per share:
Basic (3) 10 0.2p 3.6p
Diluted (4) 10 0.2p 3.6p
----------- --------------
Non-GAAP measures
4 &
(1) Underlying operating profit 5 78.6 61.7
(2) Underlying profit before tax 5 63.6 48.4
(3) Underlying basic earnings per share 10 6.4p 4.9p
(4) Underlying diluted earnings per
share 10 6.4p 4.9p
----------------------------------------- ----- ----------- --------------
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF COMPREHENSIVE
INCOME
For the six months ended 30 June 2022
Six months Six months
ended ended
30 June 30 June
2022 2021
Note GBP'm GBP'm
----------- -----------
Profit for the period attributable to equity
owners of the Company 1.3 28.3
Items that may be reclassified to the income
statement in subsequent periods:
Currency translation movements:
Arising in the period 171.5 (49.9)
Transferred to the income statement (1.4) -
Movements in fair value of financial liabilities
arising from changes in credit risk (0.8) (0.8)
Tax effect 0.2 0.2
----------- -----------
169.5 (50.5)
Items that will not be reclassified to the
income statement in subsequent periods:
Remeasurement of retirement benefit obligations 20 53.9 65.7
Tax effect (12.7) (11.3)
----------- -----------
41.2 54.4
Other comprehensive income for the period 210.7 3.9
Total comprehensive income for the period
attributable to equity owners
of the Company 212.0 32.2
----------- -----------
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEET
At 30 June 2022
30 June 31 December
2022 2021
Note GBP'm GBP'm
---------- ------------
Non-current assets
Goodwill 13 1,672.3 1,531.8
Development costs 13 522.5 524.7
Programme participation costs 13 20.9 19.0
Other intangible assets 13 287.6 306.6
Property, plant and equipment 14 526.6 478.6
Investments 15 - 18.7
Other receivables 19.9 18.8
Contract assets 62.5 55.8
Derivative financial instruments 18 0.1 10.0
Retirement benefit assets 20 8.1 -
3,120.5 2,964.0
Current assets
Inventories 539.1 455.4
Trade and other receivables 334.0 294.5
Contract assets 60.6 53.7
Derivative financial instruments 18 19.8 4.8
Current tax recoverable 9.8 8.1
Cash and cash equivalents 105.2 190.8
1,068.5 1,007.3
Total assets 4 4,189.0 3,971.3
Current liabilities
Trade and other payables (326.1) (317.9)
Contract liabilities (64.7) (62.7)
Derivative financial instruments 18 (14.3) (3.2)
Current tax liabilities (35.2) (34.2)
Lease liabilities (16.0) (15.6)
17 &
Bank and other borrowings 18 (17.2) (105.3)
Provisions 19 (75.8) (55.8)
(549.3) (594.7)
Net current assets 519.2 412.6
Non-current liabilities
Other payables (3.1) (3.7)
Contract liabilities (85.8) (72.6)
Derivative financial instruments 18 (4.0) (1.3)
Deferred tax liabilities (63.7) (70.9)
Lease liabilities (185.5) (153.4)
17 &
Bank and other borrowings 18 (772.0) (696.0)
Provisions 19 (87.2) (80.3)
Retirement benefit obligations 20 (80.2) (136.4)
(1,281.5) (1,214.6)
Total liabilities (1,830.8) (1,809.3)
Net assets 2,358.2 2,162.0
---------- ------------
Equity
Share capital 21 39.1 39.1
Share premium 1,228.0 1,227.8
Other reserves 15.7 15.7
Hedging and translation reserves 513.4 343.9
Retained earnings 562.0 535.5
---------- ------------
Total equity attributable to owners
of the Company 2,358.2 2,162.0
---------- ------------
CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2022
Equity attributable to owners of the
Company
Hedging
Share Share Other and translation Retained Total
capital premium reserves reserves earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
--------- --------- ---------- ----------------- ---------- ---------
At 1 January 2021 39.0 1,226.6 15.7 348.9 402.4 2,032.6
Profit for the period - - - - 28.3 28.3
Other comprehensive (expense)/income
for the period - - - (50.5) 54.4 3.9
--------- --------- ---------- ----------------- ---------- ---------
Total comprehensive (expense)/income
for the period - - - (50.5) 82.7 32.2
Employee share schemes:
Value of services provided - - - - 3.3 3.3
Issue of equity share capital - 0.5 - - (0.5) -
--------- --------- ---------- ----------------- ---------- ---------
At 30 June 2021 39.0 1,227.1 15.7 298.4 487.9 2,068.1
--------- --------- ---------- ----------------- ---------- ---------
At 1 January 2022 as previously
reported 39.1 1,227.8 15.7 343.9 535.5 2,162.0
Impact of adopting amendments
to IAS 37 (note 2) - - - - (20.4) (20.4)
--------- --------- ---------- ----------------- ---------- ---------
At 1 January 2022 as restated 39.1 1,227.8 15.7 343.9 515.1 2,141.6
Profit for the period - - - - 1.3 1.3
Other comprehensive income
for the period - - - 169.5 41.2 210.7
--------- --------- ---------- ----------------- ---------- ---------
Total comprehensive income
for the period - - - 169.5 42.5 212.0
Employee share schemes:
Value of services provided - - - - 4.6 4.6
Issue of equity share capital - 0.2 - - (0.2) -
--------- --------- ---------- ----------------- ---------- ---------
At 30 June 2022 39.1 1,228.0 15.7 513.4 562.0 2,358.2
--------- --------- ---------- ----------------- ---------- ---------
CONDENSED CONSOLIDATED UNAUDITED CASH FLOW STATEMENT
For the six months ended 30 June 2022
Six months Six months
ended ended
30 June 30 June
2022 2021
Note GBP'm GBP'm
----------- -----------
Non-GAAP measures
Cash inflow from operations before business
acquisition and disposal expenses and exceptional
operating items 32.5 44.3
Cash outflow from business acquisition
and disposal expenses (1.9) (1.0)
Cash outflow from exceptional operating
items 7 (9.0) (12.2)
---------------------------------------------------- ----- ----------- -----------
Cash inflow from operations 24 21.6 31.1
Interest received 0.5 0.1
Interest paid (14.1) (15.0)
Tax paid (13.2) (29.4)
Cash outflow from operating activities (5.2) (13.2)
----------- -----------
Businesses acquired 26 (5.6) (0.9)
Businesses disposed 27 57.8 20.2
Capitalised development costs 13 (19.4) (11.7)
Capitalised programme participation costs - (0.8)
Purchase of intangible assets (6.7) (6.2)
Purchase of property, plant and equipment (64.4) (29.6)
Government grants received in respect of
purchase of property, plant and equipment 0.9 4.1
Proceeds from disposal of property, plant
and equipment 48.7 22.7
Cash inflow/(outflow) from investing activities 11.3 (2.2)
----------- -----------
Issue of equity share capital 0.3 0.5
Proceeds from bank and other borrowings 3.0 2.8
Repayments of bank and other borrowings (96.6) (15.8)
Debt issue costs paid (0.1) (0.3)
Repayments of lease liabilities 16 (7.7) (7.6)
----------- -----------
Cash outflow from financing activities (101.1) (20.4)
----------- -----------
Net decrease in cash and cash equivalents (95.0) (35.8)
Cash and cash equivalents at start of the
period 190.8 178.6
Exchange gains/(losses) on cash and cash
equivalents 9.4 (3.5)
----------- -----------
Cash and cash equivalents at end of the
period 105.2 139.3
----------- -----------
NOTES TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL
STATEMENTS
For the six months ended 30 June 2022
1. General information and basis of preparation
Meggitt PLC is a public limited company listed on the London
Stock Exchange, domiciled and incorporated in the United Kingdom
with the registered number 432989. Meggitt PLC is the parent
company of a Group whose principal activities during the period
were the design and manufacture of high performance components and
sub-systems for aerospace, defence and other specialist markets,
including energy, medical, industrial and test.
The condensed consolidated financial statements presented in
this document have not been audited or reviewed and do not
constitute Group statutory accounts as defined in section 434 of
the Companies Act 2006. Group statutory accounts for the year ended
31 December 2021 were approved by the Board of Directors on 2 March
2022 and delivered to the Registrar of Companies. The auditors'
report on those accounts was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
The condensed consolidated financial statements for the six
months ended 30 June 2022 have been prepared in accordance with UK
Adopted International Accounting Standard 34, 'Interim Financial
Reporting'. They should be read in conjunction with the Group's
financial statements for the year ended 31 December 2021.
Going concern
The directors have formed a judgement, at the time of approving
the condensed consolidated financial statements, that there is a
reasonable expectation that the Group has adequate resources to
continue in operational existence for a period of at least 12
months from the date of approval of this interim management report.
For this reason, the directors continue to adopt the going concern
basis in preparing these condensed consolidated financial
statements.
In making a judgement as to whether the going concern principle
should be adopted, the directors have considered the period
starting with the date these condensed consolidated financial
statements were approved by the Board and ending on 3 August 2023.
In reaching this judgement, the directors considered:
Existing financing
The Group has committed credit facilities with its relationship
banks and private placement investors of GBP1,207.5m at 30 June
2022. With the exception of one tranche of USD300m private
placement debt, which is due for repayment in July 2023, no other
significant facilities mature during the going concern assessment
period.
Current liquidity
At 30 June 2022, the Group had significant headroom against its
committed credit facilities, as set out below, and no new financing
is required to meet the repayment of the USD300m private placement
debt in July 2023:
Total
GBP'm
--------
Committed credit facilities 1,207.5
Bank and other borrowings (note 17) 789.2
Less: cash (105.2)
--------
Net borrowings excluding lease liabilities 684.0
Headroom 523.5
--------
Covenants
The Group's committed credit facilities contain two financial
ratio covenants - net debt/EBITDA and interest cover. The covenant
calculations are drafted to protect the Group from potential
volatility caused by accounting standard changes, sudden movements
in exchange rates and exceptional items. This is achieved by
measuring EBITDA on a frozen GAAP basis, excluding exceptional
operating items and retranslating net debt and EBITDA at similar
average exchange rates. Covenant ratios are required to be measured
on a trailing 12 month basis twice a year (at 30 June and 31
December), with net debt/EBITDA not to exceed 3.5x and interest
cover to be not less than 3.0x.
At 30 June 2022, net debt/EBITDA was 1.8x, well within the
Group's target range of 1.5x to 2.5x and similar to that in the
three financial years prior to the COVID-19 outbreak (2019: 1.5x,
2018: 1.8x and 2017: 1.9x). Interest cover at 30 June 2022 was
11.8x. No covenant waivers have ever been sought by the Group,
including during the period since the COVID-19 outbreak.
Base case scenario
The Group has developed a base case scenario, using its
forecasts for 2022 and for H1 2023. It assumes the recovery in
civil aerospace markets continue and the outlook for defence
markets is stable. As the Group is under an offer period under the
UK Takeover Code, it is not providing financial guidance for 2022
and accordingly the base case scenario assumptions have not been
disclosed. However, under this scenario, the Group had significant
headroom under its existing committed facilities to meet its
obligations as they fall due and does not breach either of its
financial covenant ratios.
Reverse stress test scenario
The Group has performed a reverse stress test scenario to
determine the conditions under which it would be close to breaching
its net debt/EBITDA financial covenant ratio during the going
concern assessment period. The Group considers the likelihood of
such a set of circumstances occurring to be remote and
significantly outside any severe but plausible scenarios the Group
has modelled.
Principal risks
The Group has also considered whether its principal risks have
been appropriately reflected in its going concern assessment. The
Group has considered the likelihood of the risks taking place
during the going concern assessment period and, were they to occur,
the extent to which the impacts would be experienced during this
period and the timing of mitigation actions available to the Group.
The Board has regularly reviewed these risks throughout the period
and up to the date of these financial statements and maintains a
risk appetite statement with associated risk tolerances to ensure
that identified risks are managed within acceptable limits. The
Group has concluded that the going concern assessment has been
appropriately adjusted to reflect these risks.
Proposed acquisition of the Group by Parker-Hannifin Corporation
('Parker')
On 21 September 2021, the shareholders of the Group approved an
all-cash offer of 800 pence per share for the Group by Parker. In
the event the acquisition by Parker is completed within the going
concern assessment period, the directors considered the intention
and ability of Parker to be able to:
-- Finance the equity purchase of the Group;
-- Repay those liabilities of the Group which would immediately
become due on a change of control; and
-- Continue to operate the Group as a going concern for the
reminder of the assessment period, post completion.
The directors believe that Parker will be able to meet these
obligations, having taken into account publically available
information.
Conclusion
Based on the above, the directors have concluded there are no
material uncertainties around the Group's ability to continue as a
going concern and it is appropriate to adopt the going concern
principle in these condensed consolidated financial statements.
2. Accounting policies
The condensed consolidated financial statements have been
prepared using the same accounting policies adopted in the Group's
financial statements for the year ended 31 December 2021, except as
described below.
The tax charge for the period has been calculated using the
expected effective tax rates for each tax jurisdiction for the year
ended 31 December 2022. These rates have been applied to the
pre-tax profits made in each jurisdiction for the six months ended
30 June 2022.
Adoption of new and revised accounting standards
Amendments to IAS 37 "Onerous contracts - costs of fulfilling a
contract"
Under IAS 37, a contract is onerous when the unavoidable costs
of meeting the contractual obligations exceed the economic benefits
arising from the contract. Prior to the amendments to IAS 37, there
was diversity in practice as to whether the costs of meeting
contractual obligations should comprise only incremental costs
(e.g. direct materials and direct labour) or also include an
allocation of other direct costs (e.g. factory overheads), which
would be incurred regardless of whether the contract was being
performed or not.
Under the Group's previous accounting policy, it only included
incremental direct costs in measuring the costs to fulfil a
contract under IAS 37. The IAS 37 amendments clarify however, that
the costs of fulfilling a contract should include an allocation of
other direct costs. The amendments are effective for accounting
periods beginning on, or after, 1 January 2022 to open contracts at
that date, with any additional amounts required to be recognised as
an adjustment to retained earnings at that date.
The Group has implemented these amendments within its accounting
policies for both onerous contracts and warranty provisions with
effect from 1 January 2022. This has resulted in the recognition of
new onerous contract provisions of GBP15.2m (in respect of
contracts which are not onerous on an incremental cost basis), an
increase in the measurement of existing onerous contract provisions
of GBP6.7m and an increase in the measurement of existing product
warranty claims of GBP4.4m. The aggregate increase in provisions as
a result of the amendments was GBP26.3m. After recognising a
GBP5.9m reduction in deferred tax liabilities, arising as a result
of these provision increases, the total adjustment to retained
earnings at 1 January 2022 was GBP20.4m.
No other accounting standards, amendments or revisions to
existing standards, or interpretations have become effective which
had a significant impact on the Group's condensed consolidated
financial statements.
Recent accounting developments
A number of new standards and amendments and revisions to
existing standards have been published and are mandatory for the
Group's future accounting periods. These have not been early
adopted and are not expected to have a significant impact on the
Group's consolidated financial statements when they are
adopted.
3. Critical accounting estimates and judgements
In applying the Group's accounting policies, the Group is
required to make certain estimates and judgements concerning the
future. These estimates and judgements are regularly reviewed and
revised as necessary. An update on the critical accounting
estimates and judgements disclosed in the Group's 2021 Annual
Report is set out below:
-- Critical accounting estimates
The Group's estimates relating to environmental provisions and
associated recoveries from insurers and other third parties; and
retirement benefit obligations remain critical estimates for the
current period.
The Group previously disclosed a critical estimate relating to
its capitalised development costs on the Irkut MC-21 aircraft
following the entry of Russian troops into Ukraine and Western
countries imposing a number of sanctions on Russia in response.
Since the date of the 2021 Annual Report, the conflict in Ukraine
has escalated and further sanctions have been imposed on Russia.
The Group has ceased development activity on the MC-21 aircraft
and, given the significant uncertainty over the future of the
aircraft and the participation by Western countries in its
development, the Group has concluded that the full carrying value
of its investment of GBP46.2m in the programme is impaired and has
recognised this charge as an exceptional operating item (see note
7).
There are no new critical estimates applicable to the current
period.
-- Critical accounting judgement
The Group's judgement relating to when development costs meet
the criteria to be recognised as intangible assets remains a
critical judgement for the current period. There are no new
critical judgements applicable to the current period.
4. Segmental analysis
The Group manages its businesses under four customer-aligned
divisions: Airframe Systems, Engine Systems, Energy & Equipment
and Services & Support.
The key performance measure reviewed by the Chief Operating
Decision Maker ('CODM') is underlying operating profit. The CODM
has been identified as the Board.
Six months ended 30 June 2022
Airframe Engine Energy Services
Systems Systems & Equipment & Support Total
GBP'm GBP'm GBP'm GBP'm GBP'm
--------- --------- ------------- ----------- ----------
Gross segment revenue 478.2 155.3 143.1 150.2 926.8
Inter-segment revenue (62.1) (31.0) (8.2) (4.5) (105.8)
--------- --------- ------------- ----------- ----------
Revenue from external
customers 416.1 124.3 134.9 145.7 821.0
--------- --------- ------------- ----------- ----------
At a point in time 395.2 121.8 65.4 143.5 725.9
Over time: Power by the
hour/ cost per brake
landing 13.7 2.1 - 2.2 18.0
Over time: Other 7.2 0.4 69.5 - 77.1
--------- --------- ------------- ----------- --------
Revenue by basis of
recognition 416.1 124.3 134.9 145.7 821.0
--------- --------- ------------- ----------- --------
Underlying operating
profit/(loss)* 57.4 (11.6) 20.2 12.6 78.6
--------- --------- ------------- ----------- ----------
Six months ended 30 June 2021 (restated)**
Airframe Engine Energy Services
Systems Systems & Equipment & Support Total
GBP'm GBP'm GBP'm GBP'm GBP'm
--------- --------- ------------- ----------- --------
Gross segment revenue 406.2 128.3 134.9 120.4 789.8
Inter-segment revenue (66.3) (36.9) (4.0) (2.6) (109.8)
--------- --------- ------------- ----------- --------
Revenue from external
customers 339.9 91.4 130.9 117.8 680.0
--------- --------- ------------- ----------- --------
At a point in time 324.4 90.1 55.3 116.6 586.4
Over time: Power by the
hour/ cost per brake
landing 8.8 1.2 - 1.2 11.2
Over time: Other 6.7 0.1 75.6 - 82.4
--------- --------- ------------- ----------- --------
Revenue by basis of recognition 339.9 91.4 130.9 117.8 680.0
--------- --------- ------------- ----------- --------
Underlying operating
profit/(loss)* 41.7 (14.5) 20.4 14.1 61.7
--------- --------- ------------- ----------- --------
*Central costs are allocated using a variety of bases designed
to reflect the beneficial relationship between costs and segments.
Bases include headcount, payroll costs, gross assets and revenue. A
detailed reconciliation of underlying operating profit to operating
profit is shown in note 5.
**Prior period figures have been restated to reduce both gross
segment revenue and inter-segment revenue by GBP35.9m.
Segmental assets
30 June 31 December
2022 2021
GBP'm GBP'm
-------- ------------
Airframe Systems 1,175.6 1,071.0
Engine Systems 421.2 384.0
Energy & Equipment 231.8 218.7
Services & Support 130.0 119.7
Total segmental trading assets 1,958.6 1,793.4
Centrally managed trading assets* 180.4 163.0
Goodwill (note 13) 1,672.3 1,531.8
Other intangible assets excluding software
assets 234.7 250.7
Investments (note 15) - 18.7
Derivative financial instruments - non-current
(note 18) 0.1 10.0
Derivative financial instruments - current
(note 18) 19.8 4.8
Retirement benefit assets (note 20) 8.1 -
Current tax recoverable 9.8 8.1
Cash and cash equivalents 105.2 190.8
Total assets 4,189.0 3,971.3
-------- ------------
*Centrally managed trading assets principally include amounts
recoverable from insurers and other third parties in respect of
environmental issues relating to former sites, other receivables
and property, plant and equipment of central companies, including
the Group's Ansty Park facility.
5. Reconciliations between profit and underlying profit
Underlying profit is used by the Board to monitor and measure
the underlying trading performance of the Group. Items excluded
from underlying profit measures are treated consistently with the
way performance is measured under the Group's short-term and
long-term incentive plans and with covenant requirements defined in
the Group's committed credit facilities.
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -----------
Operating profit 10.0 49.0
Amounts arising on the acquisition, disposal
and closure of businesses (note 5a) (25.5) (7.5)
Amortisation of intangible assets acquired
in business combinations (note 13) 39.2 40.1
Financial instruments loss/(gain) (note
6) 3.1 (24.6)
Exceptional operating items (note 7) 51.8 4.7
Adjustments to operating profit* 68.6 12.7
Underlying operating profit 78.6 61.7
----------- -----------
(Loss)/profit before tax (6.5) 33.6
Adjustments to operating profit per above 68.6 12.7
Net interest expense on retirement benefit
obligations (note 8) 1.5 2.1
----------- -----------
Adjustments to (loss)/profit before tax 70.1 14.8
Underlying profit before tax 63.6 48.4
----------- -----------
Profit for the period 1.3 28.3
Adjustments to (loss)/profit before tax
per above 70.1 14.8
Tax effect of adjustments to (loss)/profit
before tax (21.3) (5.1)
Adjustments to profit for the period 48.8 9.7
Underlying profit for the period 50.1 38.0
----------- -----------
* Of the adjustments to operating profit, GBP6.8m (2021:
GBP2.0m) relating to exceptional operating items has been charged
to cost of sales, with the balance of GBP61.8m (2021: GBP10.7m)
included within net operating costs.
a. The Group separately presents amounts arising on the
acquisition, disposal and closure of businesses. These include
gains or losses made on the disposal or closure of businesses,
adjustments to the fair value of contingent consideration payable
in respect of acquired businesses or receivable in respect of
disposed businesses and costs directly attributable to the
acquisition and disposal of businesses. Additionally in 2022, it
includes amounts incurred in respect of the proposed acquisition of
the Group by Parker-Hannifin Corporation ('Parker') and fair value
losses arising on the acquisition by the Group of the remaining
equity in its joint ventures (note 15).
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -------------
Gain on disposal of businesses before disposal
expenses (41.6) (9.5)
Costs related to disposal of businesses
in the current period (note 27) 1.5 0.4
----------- -------------
Gain on disposal of businesses in the current
period (note 27) (40.1) (9.1)
Costs related to the proposed acquisition
of the Group by Parker 4.9 -
Fair value adjustment to equity investments
(note 15) 9.9 -
Costs relating to the acquisition of businesses
in the current period 0.3 -
Amounts recognised in respect of disposals
in prior periods (0.5) 1.6
----------- -------------
Amounts arising on the acquisition, disposal
and closure of businesses (25.5) (7.5)
----------- -----------
6. Financial instruments
To ensure appropriate and timely commercial decisions are made
as to when and how to mitigate the Group's foreign currency and
interest rate exposures, gains and losses arising from the marking
to market of financial instruments that are not hedge accounted are
excluded from underlying profit measures. The Group does not hedge
account for foreign currency forward contracts, cross currency
derivatives or treasury lock derivatives. When interest rate
derivatives qualify to be hedge accounted, any difference
recognised in the income statement as hedge ineffectiveness between
movements in fair value of the derivatives and fair value of fixed
rate borrowings is excluded from underlying profit measures.
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -----------
Movement in fair value of:
Foreign currency forward contracts 20.5 1.8
Interest rate derivatives 1.5 1.7
Fixed rate borrowings due to interest rate
risk (1.5) (1.6)
Cross currency derivatives (13.8) (24.9)
Treasury lock derivative (0.3) (0.3)
Impact of retranslating net foreign currency
assets and liabilities at spot rate (3.3) (1.3)
Financial instruments - loss/(gain) 3.1 (24.6)
----------- -----------
7. Exceptional operating items
Items which are significant by virtue of their size or nature,
are considered non-recurring, and which are excluded from the
underlying profit measures used by the Board to monitor and measure
the underlying performance of the Group (see note 5), are
classified as exceptional operating items. They include, for
instance, costs directly attributable to the integration of
acquired businesses; significant site consolidations and other
restructuring costs; incremental income and expenditure directly
attributable to the COVID-19 pandemic; and in 2022, given its
significance, impairment losses relating to the MC-21 aircraft
programme (see note 3).
Income statement Cash outflow
------------------------ ----------------------
Six
Six months Six months months Six months
ended ended ended ended
30 June 30 June 30 June 30 June
2022 2021 2022 2021
Note GBP'm GBP'm GBP'm GBP'm
----------- ----------- --------- -----------
MC-21 impairment a 46.2 - - -
Site consolidations b 6.0 3.1 8.2 9.7
COVID-19 incremental non-recurring
costs 0.5 1.6 0.8 2.4
Other items (0.9) - - 0.1
----------- ----------- --------- -----------
Exceptional operating items 51.8 4.7 9.0 12.2
----------- ----------- --------- -----------
a. Of the amounts classified as exceptional operating items,
GBP2.1m has been recognised within cost of sales, with the balance
of GBP44.1m recognised within other operating costs. The tax credit
in respect of these items was GBP10.4m (see note 3).
b. Amounts principally relate to costs incurred in respect of
the Group's previously announced plans to reduce its footprint by
the end of 2021. This was substantially complete at the end of
2021, however costs in respect of projects commenced prior to the
end of 2021 are continuing to be incurred as these projects are
completed. Cumulative costs since the announcement are GBP117.9m.
In 2022, costs are principally in respect of the move to the new
facility at Ansty Park in the West Midlands, UK which has enabled
the Group to consolidate a range of manufacturing, engineering and
support operations into a single centre of excellence. Of the
amounts classified as exceptional operating costs, GBP4.4m has been
recognised within cost of sales, with the balance of GBP1.6m
recognised within other operating costs. The tax credit in respect
of these items was GBP1.3m.
8. Net finance costs
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -----------
Interest on bank deposits 0.6 0.3
Unwinding of interest on other receivables 0.1 0.1
Finance income 0.7 0.4
Interest on bank borrowings 0.4 -
Interest on senior notes 11.4 10.6
Interest on lease liabilities 3.3 2.9
Unwinding of discount on provisions (note
19) 0.8 0.3
Net interest expense on retirement benefit
obligations (notes 5 & 20) 1.5 2.1
Amortisation of debt issue costs 0.5 0.6
Less: amounts capitalised in the cost of
qualifying assets (note 13) (0.7) (0.7)
----------- -----------
Finance costs 17.2 15.8
Net finance costs 16.5 15.4
----------- -----------
9. Tax
The statutory tax credit for the period was GBP7.8m (2021:
GBP5.3m charge) based on the reported loss before tax of GBP6.5m
(2021: GBP33.6m profit). Based on underlying profit before tax of
GBP63.6m (2021: GBP48.4m) the Group's underlying tax rate for the
period was 21.3% (2021: 21.4%).
In June 2022, the European General Court issued a judgment
supporting the European Commission view that state aid applies to
one of the UK's CFC exemptions utilised by the Group. No
adjustments have been required in the period arising from this
judgement as, in 2021, the Group received and paid tax assessments
from the UK tax authorities of GBP16.9m, which the UK tax authority
considered was recoverable in respect of state aid.
10. Earnings per share
Earnings per share ('EPS') is calculated by dividing the profit
attributable to equity owners of the Company of GBP1.3m (2021:
GBP28.3m) by the weighted average number of shares in issue during
the period of 781.8m (2021: 779.7m). The weighted average number of
shares excludes treasury shares and any shares bought by the Group
and held during the period by an independently managed Employee
Share Ownership Plan Trust. The weighted average number of own
shares excluded is 1.3m (2021: 2.7m).
Underlying EPS is based on underlying profit for the period
(note 5) and the same number of shares used in the calculation of
basic EPS. It is reconciled to basic EPS below:
Six months Six months
ended ended
30 June 30 June
2022 2021
Pence Pence
----------- -----------
Basic EPS 0.2 3.6
Adjust for effects of:
Amounts arising on the acquisition, disposal
and closure of businesses (3.3) (1.0)
Amortisation of intangible assets acquired
in business combinations 3.9 4.2
Financial instruments - loss/(gain) 0.4 (2.6)
Exceptional operating items 5.1 0.5
Net interest expense on retirement benefit
obligations 0.1 0.2
----------- -----------
Underlying basic EPS 6.4 4.9
----------- -----------
Diluted EPS for the period is 0.2p (2021: 3.6p). The calculation
of diluted EPS adjusts the weighted average number of shares to
reflect the assumption that all potentially dilutive ordinary
shares convert. For the Group, this means assuming all share awards
currently expected to vest, based on performance to date, are
exercised. The weighted average number of shares used in the
calculation of diluted EPS is 785.3m (2021: 782.8m). Underlying
diluted EPS for the period is 6.4p (2021: 4.9p). The calculation of
underlying diluted EPS is based on underlying profit (note 5) and
the same weighted average number of shares used in the calculation
of diluted EPS.
11. Dividends
The directors did not recommend the payment of a dividend in
respect of 2021. In line with the terms of the previously announced
proposed transaction with Parker-Hannifin Corporation, the Board is
not recommending an interim dividend for 2022.
12. Related party transactions
The remuneration of key management personnel of the Group, which
is defined as members of the Board and the Group Executive
Committee, is set out below.
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -----------
Salaries and other short-term employee benefits 3.5 2.9
Share-based payment expense 0.6 0.5
----------- -----------
Total 4.1 3.4
----------- -----------
13. Intangible assets
Programme Other
Development participation intangible
Goodwill Costs costs assets Total
GBP'm GBP'm GBP'm GBP'm GBP'm
--------- ------------ --------------- ------------ --------
At 1 January 2022 1,531.8 524.7 19.0 306.6 2,382.1
Exchange rate adjustments 136.3 45.2 2.1 25.0 208.6
Businesses acquired
(note 26) 15.0 - - - 15.0
Business disposed
(note 27) (10.8) - - (0.4) (11.2)
Additions - 19.4 0.7 6.5 26.6
Interest capitalised
(note 8) - 0.7 - - 0.7
Transfers from contract
assets - 0.6 - - 0.6
Amortisation* - (20.2) (0.9) (50.1) (71.2)
Impairment losses** - (47.9) - - (47.9)
--------- ------------ --------------- ------------ --------
At 30 June 2022 1,672.3 522.5 20.9 287.6 2,503.3
--------- ------------ --------------- ------------ --------
*Included within amortisation of other intangible assets is
GBP39.2m (2021: GBP40.1m) relating to intangible assets acquired in
business combinations and which is excluded from the Group's
underlying profit figures (note 5).
** Included within impairment losses of development costs is
GBP48.1m (2021: GBP1.1m) in respect of amounts charged to
exceptional operating items and which has been excluded from
underlying operating profit (note 5 ).
Goodwill impairment
Under the Group's annual impairment testing cycle, goodwill is
tested for impairment at 30 June each year. During the period, the
Group did not identify any trigger events indicating the carrying
value of goodwill attributable to any of the Group's CGUs was
impaired and accordingly no additional impairment testing was
performed.
The cumulative impairment charge recognised at 30 June 2022 is
GBP355.3m (December 2021: GBP324.7m), with the movement in the
period wholly attributable to the impact of retranslating foreign
currency denominated balances.
14. Property, plant and equipment
Plant,
Land and equipment Right-of-use
buildings and vehicles assets(*) Total
GBP'm GBP'm GBP'm GBP'm
----------- -------------- ------------- -------
At 1 January 2022 147.7 214.1 116.8 478.6
Exchange rate adjustments 9.2 16.7 8.0 33.9
Businesses acquired (note
26) - 1.9 2.1 4.0
Business disposed (note
27) (0.7) (2.2) (0.1) (3.0)
Additions 44.1 19.1 26.0 89.2
Disposals (43.1) (1.5) (1.3) (45.9)
Depreciation** (5.8) (16.4) (8.0) (30.2)
----------- -------------- ------------- -------
At 30 June 2022 151.4 231.7 143.5 526.6
----------- -------------- ------------- -------
*The net book amount comprises property of GBP141.0m (December
2021: GBP115.0m) and other assets of GBP2.5m (December 2021:
GBP1.8m).
**Depreciation includes GBP0.5m (2021: GBP0.8m) in respect of
amounts charged to exceptional operating items and which has been
excluded from underlying operating profit (note 5).
15. Investments
The Group's investments in its joint ventures, Meggitt UTC
Aerospace Systems, LLC and HiETA Technologies Limited were
accounted for using the equity method. During the period, the Group
acquired the remaining equity in these companies from its joint
venture partners and the investments are fully consolidated into
the Group's results from the date of acquisition (see note 26).
Total
GBP'm
-------
At 1 January 2022 18.7
Exchange rate adjustments 0.9
Share of loss after tax (0.3)
Fair value adjustments* (9.9)
Disposal on acquisition of remaining equity in the
joint ventures (see note 26) (9.4)
-------
At 30 June 2022 -
-------
*At the date the remaining equity in the joint ventures was
acquired, the value-in-use of the investments was higher than their
carrying value and accordingly no impairment was required. However,
on acquisition of the remaining equity IAS 28, requires the
investments to be initially remeasured to fair value, which
resulted in a reduction in their carrying value of GBP9.9m. As the
fair value losses arose only as a result of the acquisition of the
remaining equity, they have been excluded form underlying operating
profit (note 5a).
16. Lease liabilities
The Group leases various factories, warehouses, offices, plant
and equipment. The following amounts are included in the Group's
condensed consolidated financial statements in respect of its
leases:
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -----------
Depreciation charge for right-of-use assets
(note 14) 8.0 7.6
Additions to right-of-use assets (note 14)* 26.0 22.2
Net book amount of right-of-use assets (note
14) 143.5 118.3
Interest on lease liabilities (note 8) 3.3 2.9
Expense related to short-term leases and
low-value assets 0.5 0.2
Net cash outflow in respect of lease liabilities** 11.0 10.5
----------- -----------
*In 2022, this includes GBP22.2m relating to the sale and
leaseback of the Group's Airframe Systems facility in Ventura
County, USA which has a lease term of 15 years.
**Comprises capital payments of GBP7.7m (2021: GBP7.6m) and
interest payments of GBP3.3m (2021: GBP2.9m).
17. Bank and other borrowings
30 June 31 December
2022 2021
GBP'm GBP'm
-------- ------------
Bank loans 8.0 2.8
Other loans 9.2 102.5
-------- ------------
Current portion 17.2 105.3
-------- ------------
Bank loans 28.2 28.2
Other loans 743.8 667.8
-------- ------------
Non-current portion 772.0 696.0
-------- ------------
During the period, the Group repaid USD125m of loan notes issued
to private placement investors in 2010 on their maturity in
June.
18. Financial instruments - fair value measurement
For trade and other receivables, cash and cash equivalents,
trade and other payables and floating rate bank and other
borrowings, fair values approximate to book values primarily due to
the short maturity periods of these financial instruments. For
trade and other receivables, allowances are made within their book
value for credit risk. Lease liabilities are outside of the scope
of IFRS 7 "Financial Instruments: Disclosures" with regards to fair
value disclosures.
Derivative financial instruments measured at fair value, are
classified as level 2 in the fair value measurement hierarchy, as
they have been determined using significant inputs based on
observable market data. The current and non-current elements of
fixed rate bank and other borrowings measured at fair value, are
classified as level 3 in the fair value measurement hierarchy, as
they have been determined using significant inputs which are a
mixture of those based on observable market data (interest rate
risk) and those not based on observable market data (credit risk).
There were no transfers of assets or liabilities between levels of
the fair value hierarchy in the period. Where financial instruments
are measured at fair value, the methods of determining their fair
value are unchanged from those disclosed in the Group's
consolidated financial statements for the year ended 31 December
2021.
A comparison of book values and fair values for certain
financial instruments is provided below:
Book value Fair value
---------------------- ----------------------
30 June 31 December 30 June 31 December
2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm
-------- ------------ -------- ------------
Derivative financial instruments
- non-current 0.1 10.0 0.1 10.0
Derivative financial instruments
- current 19.8 4.8 19.8 4.8
-------- ------------ -------- ------------
Financial assets 19.9 14.8 19.9 14.8
-------- ------------ -------- ------------
Derivative financial instruments
- current (14.3) (3.2) (14.3) (3.2)
Bank and other borrowings
- current (17.2) (105.3) (17.2) (105.3)
Derivative financial instruments
- non-current (4.0) (1.3) (4.0) (1.3)
Bank and other borrowings
- non-current (772.0) (696.0) (724.0) (692.6)
-------- ------------ -------- ------------
Financial liabilities (807.5) (805.8) (759.5) (802.4)
-------- ------------ -------- ------------
19. Provisions
Total
GBP'm
-------
At 1 January 2022 as previously reported 136.1
Impact of adopting amendments to IAS 37 (note 2) 26.3
-------
At 1 January 2022 as restated 162.4
Exchange rate adjustments 15.4
Businesses acquired (note 26) 0.2
Additional provisions 6.8
Unused amounts reversed (3.5)
Charge to net finance costs (note 8) 0.8
Amounts utilised (19.1)
-------
At 30 June 2022 163.0
-------
30 June 31 December
2022 2021
GBP'm GBP'm
-------- ------------
Disclosed as:
Current 75.8 55.8
Non-current 87.2 80.3
-------- ------------
Total 163.0 136.1
-------- ------------
Analysed as:
Environmental* 94.7 93.6
Onerous contracts 36.0 15.1
Warranty costs 23.9 19.2
Other 8.4 8.2
------ ------
Total 163.0 136.1
------ ------
*Included within other receivables is GBP16.7m (December 2021:
GBP15.0m) in respect of amounts recoverable from insurers and other
third parties in respect of environmental issues relating to
historic sites.
20. Retirement benefit obligations
Total
GBP'm
-------
At 1 January 2022 136.4
Exchange rate adjustments 8.3
Service cost 1.9
Net interest expense (note 8) 1.5
Contributions - Group (23.6)
Administrative expenses borne directly by schemes 1.5
Remeasurement of retirement benefit obligations (53.9)
-------
At 30 June 2022 72.1
-------
Disclosed as:
Retirement benefit assets (8.1)
Retirement benefit obligations 80.2
-------
At 30 June 2022 72.1
-------
30 June 31 December
Amounts recognised in the balance sheet 2022 2021
Present value of liabilities 1,049.2 1,355.1
Fair value of assets (1,006.3) (1,228.0)
Effect of asset ceiling* 29.2 9.3
---------- ------------
Total 72.1 136.4
---------- ------------
Analysed as:
Pension schemes 36.0 97.9
Healthcare schemes 36.1 38.5
---------- ------------
Total 72.1 136.4
---------- ------------
*The asset ceiling relates to surpluses in schemes which have
not been recognised as future economic benefits are not available
to the Group in the form either of a reduction in contributions or
a refund.
Key financial assumptions used to calculate scheme
liabilities
30 June 31 December
2022 2021
GBP'm GBP'm
-------- ------------
UK scheme:
Discount rate 3.85% 1.80%
Inflation rate (RPI) 3.20% 3.40%
21.6 to 21.6 to
Current life expectancy: Male aged 65 years 23.4 23.4
-------- ------------
US schemes:
Discount rate 4.45% 2.80%
19.8 to 19.8 to
Current life expectancy: Male aged 65 years 20.7 20.7
-------- ------------
Group cash contributions paid during the period included deficit
reduction payments of GBP21.7m (2021: GBP21.7m).
21. Issued share capital
30 June 31 December
2022 2021
No. m No. m
-------- ------------
Allotted and fully paid 782.9 782.0
-------- ------------
The increase in the number of shares during the period relates
to shares issued on the exercise of Sharesave awards.
22. Contingent liabilities
The Company has given guarantees in respect of credit facilities
for certain of its subsidiaries, some property and other leases,
and the performance by some current and former subsidiaries of
certain contracts. Also, there are similar guarantees given by
certain other Group companies. The directors believe that the
probability of an outflow of economic benefits arising from the
guarantees is remote.
The Company and various of its subsidiaries are, from time to
time, parties to legal proceedings, regulatory investigations and
claims which arise in the ordinary course of business. The
directors do not anticipate that the outcome of these proceedings,
investigations and claims, either individually or in aggregate,
will have a material adverse effect upon the Group's financial
position.
23. Capital commitments
30 June 31 December
2022 2021
GBP'm GBP'm
-------- ------------
Contracted for but not incurred:
Intangible assets 0.9 0.8
Property, plant and equipment 10.9 6.8
-------- ------------
Total 11.8 7.6
-------- ------------
24. Cash inflow from operations
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -----------
Profit for the period 1.3 28.3
Adjustments for:
Net finance costs (note 8) 16.5 15.4
Tax (credit)/charge (note 9) (7.8) 5.3
Depreciation (note 14) 30.2 27.8
Amortisation and impairment losses (note
13) 119.1 68.7
Gain on disposal of property, plant and equipment (2.4) (2.4)
Gain on disposal of businesses before disposal
expenses (note 5a) (41.6) (9.5)
Fair value adjustment to equity investments
(note 5a) 9.9 -
Loss/(gain) on financial instruments (note
6) 3.1 (24.6)
Impact of retranslating net foreign currency
cash at spot rate - 0.8
Share of loss after tax of joint ventures
(note 15) 0.3 0.8
Change in carrying value of held for sale
assets and liabilities up to date of disposal - 0.1
Retirement benefit obligation deficit payments
(note 20) (21.7) (21.7)
Share-based payment expense 4.3 2.7
Changes in working capital (89.6) (60.6)
----------- -----------
Cash inflow from operations 21.6 31.1
----------- -----------
The Board uses free cash flow to monitor and measure the
underlying trading cash performance of the Group. It is reconciled
to cash from operating activities below:
Six months Six months
ended ended
30 June 30 June
2022 2021
GBP'm GBP'm
----------- -----------
Cash outflow from operating activities (5.2) (13.2)
Add back cash outflow from business acquisition
and disposal expenses 1.9 1.0
Add back impact of retranslating net foreign
currency cash at spot rate - (0.8)
Capitalised development costs (note 13) (19.4) (11.7)
Capitalised programme participation costs - (0.8)
Purchase of intangible assets (6.7) (6.2)
Purchase of property, plant and equipment
(net of grants received)* (63.5) (25.5)
Proceeds from disposal of property, plant
and equipment** 48.7 22.7
Free cash outflow (44.2) (34.5)
----------- -----------
*In 2022, includes GBP40.7m relating to the purchase of the
Group's Airframes Systems facility in Ventura County, USA and
GBP10.3m relating to the expansion of the Group's carbon facility
in Kentucky, USA.
**In 2022, includes GBP45.2m relating to the subsequent sale and
leaseback of the Group's Airframes Systems facility in Ventura
County, USA.
25. Movements in net debt
Gross
debt Net debt
Cash and
cash equivalents
GBP'm GBP'm GBP'm
-------- ------------------ ------------
At 1 January 2022 970.3 (190.8) 779.5
Cash outflow from operating activities - 5.2 5.2
Cash inflow from investing activities - (11.3) (11.3)
Cash (inflow)/outflow from financing
activities (101.4) 101.1 (0.3)
Lease liabilities entered 29.0 - 29.0
Businesses acquired (note 26) 5.3 - 5.3
Businesses disposed (note 27) (0.1) - (0.1)
Exchange rate adjustments 89.5 (9.4) 80.1
Other movements (1.9) - (1.9)
-------- ------------------ ------------
At 30 June 2022 990.7 (105.2) 885.5
-------- ------------------ ------------
30 June 31 December
2022 2021
GBP'm GBP'm
Analysed as:
Bank and other borrowings - current 17.2 105.3
Bank and other borrowings - non-current 772.0 696.0
Lease liabilities - current 16.0 15.6
Lease liabilities - non-current 185.5 153.4
Cash and cash equivalents (105.2) (190.8)
------------------ ------------
Total 885.5 779.5
------------------ ------------
26. Businesses acquired
On 4(th) January 2022, the Group acquired the assets and
business of a small company based in the USA and which is reported
within the Airframe Systems division. On 14(th) January 2022, the
Group acquired the remaining 67% equity in the joint venture HiETA
Technologies Limited based in the UK and which is reported within
the Engine Systems division. On 20 May 2022, the Group acquired the
remaining 30% equity in the joint venture Meggitt UTC Aerospace
Systems LLC (UTC Aero) based in Mexico and which is reported within
the Engine Systems division. The aggregate cash consideration for
these acquisitions was GBP6.6m.
The net assets of the businesses at the dates of acquisition
were as follows:
Total
GBP'm
-------------
Property, plant and equipment (note 14) 4.0
Inventories 4.7
Trade and other receivables - current 4.6
Cash and cash equivalents 1.0
Trade and other payables - current (7.8)
Lease liabilities - current (note 25) (0.5)
Bank and other borrowings - current (note 25) (2.8)
Lease liabilities - non-current (note 25) (2.0)
Provisions - non-current (note 19) (0.2)
Net assets of acquired businesses 1.0
Add: Goodwill arising on consolidation (note 13) 15.0
Less: Equity investments disposed (note 15) (9.4)
-------------
Net assets acquired by Group 6.6
-------------
Consideration payable 6.6
Less: Cash and cash equivalents acquired (1.0)
-------------
Businesses acquired before acquisition costs 5.6
Add: Acquisition expenses paid 0.3
-------------
Net cash outflow for businesses acquired 5.9
-------------
27. Business disposed
On 30 June 2022, the Group disposed of the trade and assets of
Meggitt A/S, a piezoelectric ceramics manufacturer based in
Denmark, for a cash consideration of GBP62.3m, which is subject to
an adjustment for net debt and working capital in the business at
the date of disposal. The business disposed, which was previously
reported within the Energy & Equipment division, was not a
major line of business or geographical area of operation of the
Group. The net assets of the business at the date of disposal were
as follows:
Meggitt
A/S
GBP'm
---------------
Goodwill (note 13) 10.8
Other intangible assets (note 13) 0.4
Property, plant and equipment (note 14) 3.0
Inventories 3.1
Trade and other receivables - current 2.6
Cash and cash equivalents 4.5
Trade and other payables - current (1.7)
Lease liabilities - current (note 25) (0.1)
Deferred tax liabilities - non-current (0.5)
---------------
Net assets disposed 22.1
---------------
Consideration received 62.3
Less: Net assets disposed (22.1)
Less: Business disposal expenses payable (note 5a) (1.5)
Add: Currency translation gain transferred from equity 1.4
Gain on disposal (note 5a) 40.1
---------------
Consideration received 62.3
Less: Cash and cash equivalents disposed (4.5)
---------------
Business disposed before disposal expenses 57.8
Less: Business disposal expenses paid* (1.6)
Net cash inflow in respect of businesses disposed 56.2
---------------
*Business disposal expenses paid in the period were GBP0.4m in
respect of Meggitt A/S and GBP1.2m in respect of the proposed
acquisition of the Group by Parker-Hannifin Corporation.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group disclosed in its 2021 Annual Report the principal
risks and uncertainties which the Group is exposed to. These risks
have not changed significantly over the period and are expected to
continue to be relevant for the remaining six months of the year.
The risks relate to those arising from:
-- Strategic - fundamental changes in the Group's business
model; reduced demand for the Group's products; and failure to
adapt to the impacts of climate change.
-- Operational - quality escape/equipment fault; business
interruption; failure to meet new product development and programme
milestones and certification requirements; failure to meet
customers' cost, quality and delivery standards; IT/systems failure
(including cyber breach); supply chain failure; failure to
successfully and simultaneously deliver significant change
programmes; and failure to attract and retain people.
-- Corporate - legal or regulatory breach; insufficient funding
of pension scheme deficits; and inability to maintain sufficient
liquidity.
Further details can be found in the 'Risk management' section of
the 2021 Annual Report on pages 48 to 57, together with details of
strategies adopted to mitigate these exposures.
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors confirm that to the best of their knowledge:
-- This condensed set of consolidated interim financial
statements has been prepared in accordance with UK adopted IAS 34
'Interim Financial Reporting'; and
-- The interim management report (including the interim
financial statements, management report and responsibility
statements) includes a fair review of the information required by
DTR 4.2.7R and DTR 4.2.8R, namely:
o An indication of important events that have occurred during
the six months ended 30 June 2022 and their impact on the condensed
set of financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
o Material related party transactions in the six months ended 30
June 2022 and any material changes to the related party
transactions described in the last annual report.
The details of the Directors of Meggitt PLC at 2 March 2022 are
listed on pages 100 to 103 of the 2021 Annual Report.
By order of the Board:
A Wood L Burdett
Chief Executive Officer Chief Financial
Officer
3 August 2022 3 August 2022
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