TIDMSNR
RNS Number : 7216W
Senior PLC
03 August 2009
Monday 3 August 2009
Senior plc
Interim Results for the half-year ended 30 June 2009
Senior delivers a GBP47m reduction in net debt
+------------------------+------------------------+------------------------------+------------+------------+
| FINANCIAL HIGHLIGHTS | Half-year | |
| | to 30 | |
| | June | |
+-------------------------------------------------+-------------------------------------------+------------+
| | 2009 | 2008 | |
+-------------------------------------------------+------------------------------+------------+------------+
| REVENUE | GBP275.9m | GBP279.9m | -1% |
+-------------------------------------------------+------------------------------+------------+------------+
| OPERATING PROFIT | GBP26.5m | GBP31.3m | -15% |
+-------------------------------------------------+------------------------------+------------+------------+
| ADJUSTED OPERATING PROFIT (1) | GBP28.9m | GBP33.4m | -13% |
+-------------------------------------------------+------------------------------+------------+------------+
| ADJUSTED OPERATING MARGIN (1) | 10.5% | 11.9% | - |
+-------------------------------------------------+------------------------------+------------+------------+
| PROFIT BEFORE TAX | GBP21.1m | GBP27.2m | -22% |
+-------------------------------------------------+------------------------------+------------+------------+
| ADJUSTED PROFIT BEFORE TAX (1) | GBP23.5m | GBP29.3m | -20% |
+-------------------------------------------------+------------------------------+------------+------------+
| BASIC EARNINGS PER SHARE | 3.92p | 5.17p | -24% |
+-------------------------------------------------+------------------------------+------------+------------+
| ADJUSTED EARNINGS PER SHARE (1) | 4.27p | 5.50p | -22% |
+-------------------------------------------------+------------------------------+------------+------------+
| PROPOSED INTERIM DIVIDEND PER SHARE | 0.90p | 0.90p | No change |
+-------------------------------------------------+------------------------------+------------+------------+
| FREE CASH FLOW (2) | GBP28.9m | GBP24.6m | +17% |
+-------------------------------------------------+------------------------------+------------+------------+
| NET BORROWINGS | 30 June | GBP127.4m | GBP121.7m | - |
| | 31 December | - | GBP174.5m | -GBP47m |
+------------------------+------------------------+------------------------------+------------+------------+
+------+------------------------------------------------------------------------------+
| (1) | Adjusted figures are stated before a GBP2.4m charge for amortisation of |
| | intangible assets acquired on acquisitions (2008 - GBP2.1m). Adjusted |
| | earnings per share takes account of the tax impact of these items. |
+------+------------------------------------------------------------------------------+
| (2) | See Note 10(b) for derivation of free cash flow. |
+------+------------------------------------------------------------------------------+
| The Group's principal exchange rates, for the US dollar and the Euro, applied in |
| the translation of revenue, profit and cash flow items at average rates were $1.50 |
| (2008 - $1.98) and EUR1.11 (2008 - EUR1.30), respectively. The US dollar and Euro rates |
| applied to the Balance Sheet at 30 June 2009 were $1.65 (2008 - $1.99) and EUR1.17 |
| (2008 - EUR1.26), respectively. |
+------+------------------------------------------------------------------------------+
Commenting on the results, Martin Clark, Chairman of Senior plc, said:
"Senior's markets remained highly challenging during the first half of 2009, and
so I am pleased to report that the Group continued to be highly cash generative
and the Group's net debt improved by GBP47.1m in the six month period. The
early and decisive action taken by management, to reduce the cost base in
response to market conditions, also meant that the Group's adjusted operating
margin remained in double digits at 10.5% (H1 2008 - 11.9%) despite underlying
revenue declining by 20% compared to the first half of 2008. The Group's
financial strength and its continuing focus on operational excellence are
providing opportunities to win business from weaker competitors. This, combined
with significant future organic growth from new aircraft programmes, such as the
Boeing 787 and the Joint Strike Fighter, means the long-term prospects for the
Group remain encouraging."
For further information please contact:
+--------------------------------------------------+---------+----------------+
| Mark Rollins, Group Chief Executive, Senior plc | | 01923 714738 |
+--------------------------------------------------+---------+----------------+
| Simon Nicholls, Group Finance Director, Senior | | 01923 714722 |
| plc | | |
+--------------------------------------------------+---------+----------------+
| Clare Strange, Finsbury Group | | 020 7251 3801 |
+--------------------------------------------------+---------+----------------+
This Release, together with other information on Senior plc, may be found at:
www.seniorplc.com
Note to Editors:
Senior is an international manufacturing Group with operations in 11 countries.
It is listed on the main market of the London Stock Exchange (symbol SNR).
Senior designs, manufactures and markets high technology components and systems
for the principal original equipment producers in the worldwide aerospace,
defence, land vehicle and energy markets.
Cautionary Statement
This Release contains certain forward-looking statements. Such statements are
made by the Directors in good faith based on the information available to them
at the time of the Release and they should be treated with caution due to the
inherent uncertainties underlying any such forward-looking information.
Interim Report 2009
Chairman's statement
Senior's markets remained highly challenging during the first half of 2009, and
so I am pleased to report that the Group continued to be highly cash generative
and the Group's net debt improved by GBP47.1m in the six month period. The
early and decisive action taken by management, to reduce the cost base in
response to market conditions, also meant that the Group's adjusted operating
margin remained in double digits at 10.5% (H1 2008 - 11.9%) despite underlying
revenue declining by 20% compared to the first half of 2008. The Group's
financial strength and its continuing focus on operational excellence are
providing opportunities to win business from weaker competitors. This, combined
with significant future organic growth from new aircraft programmes, such as the
Boeing 787 and the Joint Strike Fighter, means the long-term prospects for the
Group remain encouraging.
Financial results
Reported Group revenue fell by 1% to GBP275.9m (H1 2008 - GBP279.9m) and the
Group's adjusted operating profit declined by 13% to GBP28.9m (H1 2008 -
GBP33.4m). The results benefited from favourable exchange rate movements and at
constant currency, where H1 2009 and H1 2008 results are both translated at H1
2009 average exchange rates, Group revenue declined by 20% and adjusted
operating profit declined by 32%. The revenue decline was largely due to very
weak land vehicle and business jet markets, the residual impact of the Boeing
strike which took place in the final quarter of 2008 and de-stocking by
customers as they took measures to preserve cash.
Adjusted profit before tax, the measure which the Board believes most accurately
reflects the true underlying performance of the business, fell by 20% to
GBP23.5m (H1 2008 - GBP29.3m). Adjusted profit before tax measures profit
before the charge for amortisation of intangible assets arising on acquisitions
of GBP2.4m (H1 2008 - GBP2.1m). Adjusted earnings per share decreased by 22% to
4.27p (H1 2008 - 5.50p) with the underlying tax charge increasing slightly to
27.7% (H1 2008 - 26.3%).
The Group again demonstrated its strongly cash generative nature, with free cash
flow increasing by 17% to GBP28.9m (H1 2008 - GBP24.6m) as working capital,
capital expenditure and discretionary costs were carefully controlled. The
strong cash flow, combined with beneficial currency movements, resulted in net
debt reducing by an encouraging GBP47.1m to GBP127.4m (31 December 2008 -
GBP174.5m) over the six month period.
With the global economic crisis having had a significant adverse effect on a
number of the Group's end markets, the first half's resilient profit performance
and excellent cash generation reflect the early and decisive action taken by the
Group's operational management to mitigate the effects of the economic downturn.
The financial results are discussed in greater detail in the Interim Management
Report which follows this statement.
Operations
Reported revenue in the Aerospace Division increased by 11% to GBP169.2m (H1
2008 - GBP152.2m) although, on a constant currency basis, revenue decreased by
12%. Weak business and regional jet markets, de-stocking by customers and
Boeing utilising inventory delivered during its employee strike in the fourth
quarter of 2008, were the main reasons for the decline. Senior's sales volumes
are expected to match Boeing's production rates by the end of the third quarter
of 2009 as the inventory overhang is cleared. Despite the decline in revenue,
the adjusted operating margin for the Aerospace Division remained relatively
robust at 13.0% (H1 2008 - 14.6%).
Boeing and Airbus delivered 500 aircraft in the period, up 3% on the 486
aircraft delivered in H1 2008. Their combined order book stood at 6,998
aircraft at the end of June 2009, a healthy seven year order book at current
production rates, although their net order intake in the first half of 2009 was
only 69 aircraft (175 orders less 106 cancellations). Boeing recently announced
the need to make modifications to its 787 aircraft thus delaying its first
flight. Senior has significant content on the 787 and consequently it is an
important future programme for the Group. First half aircraft deliveries were
weak in the regional jet market (down 17% compared with H1 2008) and in the
business jet market (down 36% in the first quarter compared with the first
quarter of 2008, with the awaited data for the second quarter expected to be
weaker still). However, Senior's defence markets were strong, with growing
sales on unmanned aerial vehicles and the Lockheed C-130 transport aircraft
being particularly beneficial.
Very weak land vehicle markets, partially offset by generally satisfactory
industrial markets, resulted in total revenue for the Flexonics Division
declining, on a constant currency basis, by 31% in the first half of 2009
compared to H1 2008. Reported revenue of GBP107.0m (H1 2008 - GBP128.1m) was
down 16%. The Division's adjusted operating margin of 9.0% (H1 2008 - 11.1%)
was a resilient outcome given the 35% to 55% reduction in land vehicle
production volumes typically experienced in North America and Europe.This result
highlights the specialist nature and diversity of Senior's Flexonics markets as
well as the positive impact of the cost control measures undertaken. Senior is
one of the world's leading manufacturers of metal and fabric expansion joints
for the oil and gas, power generation and chemical processing markets and this
product group continued to operate close to the record 2008 performance levels
throughout the first half of 2009. The Group also has a small, but established,
presence in the rapidly growing alternative energy market and pleasing progress
was made during the period in extending the Group's product, customer and
geographical reach in this sector.
The Group's headcount was 4,756 at the end of June, a 20% reduction from the
5,936 at the end of September 2008. The necessary, but difficult, decisions
which were taken to match the Group's cost base with its lower revenue were
implemented at a cost of GBP3.0m, of which GBP1.9m was incurred in 2008, and are
expected to result in savings of approximately GBP22m in 2009 compared to 2008.
A further GBP3m year-on-year saving is expected to arise in 2010 from the
actions already taken. Pleasingly, a small number of operations have recently
begun recruiting, following an improvement in production volumes at a number of
customers. No significant changes in overall headcount are expected for the
remainder of the year.
Dividend
The interim dividend is being maintained at 0.90 pence per share (H1 2008 -
0.90 pence), and will be paid on 30 November 2009 to shareholders on the
register at the close of business on 30 October 2009. The estimated cost of
GBP3.6m represents 12% of the GBP28.9m free cash flow generated in the first
half of the year.
Employees and the Board
The first half of the year has been a difficult time for many of the Group's
personnel with redundancies, short-time working and minimal overtime
opportunities having an adverse impact on employees at most operations. Against
such a background, I would like to thank all of Senior's employees for their
hard work on behalf of the Group and for the positive attitudes that I have
witnessed when visiting operations.
Mike Sheppard, Chief Executive Officer of the Flexonics Division, has decided to
step down from the Board in order to focus all of his time on the Flexonics
operations. He left the Board on 31 July 2009, and I would like to thank him, on
behalf of the Board, for his contribution to the running of Senior over the past
seven years. There are an encouraging number of opportunities for the Flexonics
Division and the Board looks forward to their delivery over the coming years
under Mike's continued leadership.
Outlook
The latest public announcements from Boeing and Airbus, along with the
production schedules they provide to suppliers, indicate their production
volumes continuing close to current levels during 2010 and 2011. A number of
industry commentators are, however, predicting declines in the production of
large commercial aircraft and Senior is working hard to win new work to help
mitigate the extent of a decline, should it occur. Despite some aircraft
cancellations, Boeing and Airbus still have order books representing seven
years' production at current build rates. The weakness in business and regional
jet markets is expected to continue for the foreseeable future and the Group has
adjusted its cost base accordingly. Defence markets are anticipated to remain
healthy for Senior in the near term, principally due to content and build rate
increases on the Lockheed C-130 transport aircraft and Sikorsky's military
helicopter programmes. In the longer term, the significant content the Group
has on the Joint Strike Fighter is expected to provide substantial growth. The
US Government's announcement in April this year of the acceleration in funding
for this programme was positive news for Senior.
Land vehicle markets, which were extremely weak in the first half of 2009, have
recently shown some signs of improvement, with production schedules from a
number of European and North American customers indicating stronger second half
volumes. Their view is undoubtedly helped by governmental "scrappage
incentives" and the tightening of heavy truck emission legislation in North
America in January 2010. Elsewhere, production volumes in India and Brazil were
better in the second quarter than in the first, with an expectation that the
higher volumes will continue for the remainder of 2009. With a healthy order
book, prospects for the industrial expansion joint business appear excellent for
the remainder of 2009. However, in respect of the capital-project element of
this business, prospects are expected to be more challenging during 2010. A
growing proportion of the Group's industrial products relate to emission control
and renewable energy and nuclear markets, all of which offer encouraging
opportunities for the future.
Senior is strongly cash generative, financed for the long term and is well
regarded by its customers. Whilst the Group's end markets are expected to
remain challenging for the foreseeable future, Senior is gaining market share,
through excellent operational performance and its comparative financial
strength, and can look forward to significant future organic growth from new
aircraft programmes such as 787 and Joint Strike Fighter. Consequently, the
long-term prospects for the Group remain encouraging.
Martin ClarkChairman
Interim Management Report 2009
To the members of Senior plc
This Interim Management Report ("IMR") has been prepared solely to provide
additional information to enable shareholders to assess the Company's strategy
and business objectives and the potential for the strategy and objectives to be
fulfilled. It should not be relied upon by any other party or for any other
purpose.
This IMR contains certain forward-looking statements. Such statements have
been made by the Directors in good faith based on information available to them
at the time of their approval of this report. These statements should therefore
be treated with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying such forward-looking information.
This IMR has been prepared for the Group as a whole and therefore gives greatest
emphasis to those matters that are significant to Senior plc and its subsidiary
undertakings when viewed as a whole. The IMR discusses the following aspects of
the business: operations; long-term strategy and business objectives; the
results for the six months ended 30 June 2009; risks and uncertainties facing
the Group during the second half of the 2009 financial year; and the future
outlook for the Group.
Operations
Senior is an international manufacturing group with operations in 11 countries.
Senior designs, manufactures and markets high technology components and systems,
much of the development of which is being increasingly driven by tightening
emission legislation, for the principal original equipment producers in the
worldwide aerospace, defence, land vehicle and energy markets. Major customers
include Boeing, Airbus, UTC, GE, Rolls-Royce, Bombardier, Goodrich, Spirit
AeroSystems, Cummins, Ford and PSA. The Group is split into two Divisions,
Aerospace and Flexonics. The Aerospace Division (61% of Group sales) consists of
14 operations (nine in North America and five in Europe) whilst the Flexonics
Division (39% of Group sales) has 11 operations (three in North America, five in
Europe and three in the Rest of the World).
Demand patterns in aerospace markets during the six month period were mixed. The
strongest level of demand was experienced in defence markets, which accounted
for 26% of the Aerospace Division's sales. The large commercial aerospace market
(representing 40% of Divisional sales) remained stable, with Boeing and Airbus
delivering a combined 500 aircraft, an increase of 3% over the same period last
year and in line with expectations. Demand levels in the regional and business
jet markets (20% of Divisional sales) declined significantly with the principal
manufacturers of regional jets, Embraer and Bombardier, delivering a combined 94
aircraft in the first half of 2009, a reduction of 17% compared to the same
period in 2008. The largest decline was experienced in the business jet market,
where aircraft deliveries fell by 36% in the first quarter, with the awaited
second quarter statistics expected to show a further decline.
In the Flexonics Division, activity levels in the oil and gas, chemical
processing, HVAC and power generation industries (55% of Divisional sales)
remained relatively robust. However, demand in land vehicle markets (45% of
Divisional sales) for both heavy duty diesel and passenger vehicle components,
remained very weak with year-on-year production volumes declining by 44%. Low
consumer confidence, combined with the uncertainty surrounding the financial
position of the major US automotive manufacturers, resulted in North American
land vehicle demand remaining very depressed for the whole of the first half of
the year. Late in the period, a recovery was seen in the Group's European and
Rest of the World land vehicle markets.
Long-term strategy and business objectives
The Group's long-term strategy is to develop a portfolio of collaborative, high
value-added engineering companies capable of producing sustainable real growth
in operating profit, cash flow and shareholder value, focusing on the original
equipment markets, primarily aerospace, defence, energy and emission control.
There are five key elements that underpin this strategy:
+------+------------------------------------------------------------------------------+
| - | targeted investment in new product development for markets having higher |
| | than average long-term growth potential; |
+------+------------------------------------------------------------------------------+
| - | exceeding customer expectations; |
+------+------------------------------------------------------------------------------+
| - | portfolio enhancement through focused acquisitions and disposal of non-core |
| | assets; |
+------+------------------------------------------------------------------------------+
| - | continual improvement in performance of the organic operations; and |
+------+------------------------------------------------------------------------------+
| - | creation of an entrepreneurial culture with strong internal controls within |
| | the Group. |
+------+------------------------------------------------------------------------------+
The above key elements are supported by five financial performance measures and
two non-financial performance measures, as set out in detail on page 11 of the
Annual Report & Accounts 2008. Two of the Group's financial performance targets
have been met in the first half of 2009, as return on capital employed of 18.3%
was achieved (above the target of 15%), and free cash flow increased by GBP4.3m
to GBP28.9m for the six month period which fully supports the cost of the
proposed interim dividend of GBP3.6m (0.90 pence per share). The Group did not
meet three of its financial performance targets, as above inflation increases in
organic sales growth and the adjusted earnings per share targets were not
achieved due to the underlying market demand reductions experienced in the
period. Consequently, the return on revenue margin did not increase.
Good progress was made in the first half of 2009 against the Group's
non-financial improvement targets. Total CO2 emissions decreased by 3% to 101
tonnes per GBPm of revenue (December 2008 - 104 tonnes per GBPm of revenue), in
line with targeted reductions. The lost time injury frequency rate improved to
an annualised 1.50 days per 100 employees (December 2008 - 1.94 days), which is
comfortably ahead of the Group's reduction target.
Results for the six months ended 30 June 2009
With 67% of the Group's revenue being generated in North America, the reported
results for the first half of 2009 benefited from the translation effect of the
stronger US dollar (H1 2009 average rate of GBP1:$1.50 compared to H1 2008
average rate of GBP1:$1.98). If this effect is excluded, on a constant currency
basis, where H1 2009 and H1 2008 results are both translated at H1 2009 average
exchange rates, the Group's operating results can be summarised as follows:
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| | Revenue | Adjusted | Margin |
| | | OP (1) | |
+---------------+----------------------------+-----------------------------+---------------------------+
| | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| | GBPm | GBPm | GBPm | GBPm | % | % |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| Aerospace | 169.2 | 192.0 | 22.0 | 28.4 | 13.0 | 14.8 |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| Flexonics | 107.0 | 154.2 | 9.6 | 17.6 | 9.0 | 11.4 |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| Inter-segment | (0.3) | (0.5) | - | - | - | - |
| sales | | | | | | |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| Central | - | - | (2.7) | (3.2) | - | - |
| costs | | | | | | |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| Total - | 275.9 | 345.7 | 28.9 | 42.8 | 10.5 | 12.4 |
| constant | | | | | | |
| currency | | | | | | |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| Exchange | - | (65.8) | - | (9.4) | - | - |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
| Total - | 275.9 | 279.9 | 28.9 | 33.4 | 10.5 | 11.9 |
| as | | | | | | |
| reported | | | | | | |
+---------------+-------------------+--------+--------------------+--------+------------------+--------+
+------+------------------------------------------------------------------------------+
| (1) | Adjusted operating profit is the profit before amortisation of intangible |
| | assets arising on acquisitions, and before interest and tax charges. It may |
| | be reconciled to the operating profit shown in the Condensed Consolidated |
| | Income Statement as follows: |
+------+------------------------------------------------------------------------------+
+------------------------------------------------------------+------------+------------+
| | 2009 | 2008 |
| | GBPm | GBPm |
+------------------------------------------------------------+------------+------------+
| Operating profit per Financial Statements | 26.5 | 31.3 |
+------------------------------------------------------------+------------+------------+
| Amortisation of intangible assets from acquisitions | 2.4 | 2.1 |
+------------------------------------------------------------+------------+------------+
| Adjusted operating profit | 28.9 | 33.4 |
+------------------------------------------------------------+------------+------------+
Revenue
Reported Group revenue decreased by 1% to GBP275.9m compared to the first half
of 2008. On a constant currency basis, Group revenue decreased by 20%. There
were no acquisitions in the period.
Revenue in the Aerospace Division fell, on a constant currency basis, by
GBP22.8m (12%) to GBP169.2m. Revenue increases in military programmes, in
particular in the Lockheed C-130 transport aircraft programme, partially offset
declines experienced in business and regional jet programmes. In the large
commercial aircraft sector, build rates remained stable in the period. However,
revenue in this market was adversely impacted by a combination of the
utilisation of excess inventory held by Boeing following the strike that
occurred in the fourth quarter of 2008, and some reduced volumes due to a number
of major customers implementing targeted de-stocking initiatives.
The Flexonics Division experienced a decline in revenue, on a constant currency
basis, of GBP47.2m (31%) to GBP107.0m. Demand in this Division's industrial oil
and gas, chemical processing, HVAC and power generation markets remained
relatively robust. However, a significant reduction in land vehicle revenues was
experienced with year-on-year volumes falling by 44% in these markets.
Operating profit
Reported Group operating profit decreased by 15% in the first half of 2009 to
GBP26.5m (H1 2008 - GBP31.3m). Adjusted operating profit decreased by GBP4.5m
(13%) to GBP28.9m, including a foreign exchange benefit of GBP9.4m. On a
constant currency basis, the Group's adjusted operating profit decreased by 32%,
principally due to the margin impact of lower volumes in land vehicle and
business jet markets. The Group's headcount had reduced to 4,756 at the end of
the period as a result of a cost rationalisation programme that was started in
the fourth quarter of 2008, aimed at mitigating the adverse impact on
profitability of these reduced volumes. At the end of June, the total number of
employees had fallen by approximately 20% compared to the end of September 2008.
The cost of implementing this programme was GBP3.0m, the majority of which was
incurred in 2008, and it is estimated that cost savings of GBP22m will be
realised in 2009 from this initiative. A further GBP3.0m year-on-year saving is
expected to arise in 2010 from the actions already taken.
Reported adjusted operating profit in the Aerospace Division decreased
marginally by GBP0.2m to GBP22.0m, as the negative margin impact of volume
reductions was offset by cost saving initiatives, and a foreign exchange benefit
of GBP6.2m. In the Flexonics Division, despite a strong performance from the
industrial operations in North America, reported adjusted operating profits
declined by GBP4.6m (32%) to GBP9.6m; this was principally due to
the significant sales volume decline experienced in all land vehicle markets.
The result also included a favourable exchange impact of GBP3.4m.
The benefits of decisive actions taken since the last quarter of 2008 in respect
of the Group's cost base were seen in the Group's reported operating margin
which, despite the significant revenue decline, remained at 10.5% in the first
half (H1 2008 - 11.9%). On a constant currency basis, the operating margin in
the Aerospace Division was 13.0% (H1 2008 - 14.8%) and in the Flexonics Division
was 9.0% (H1 2008 - 11.4%).
Finance costs
Finance costs, net of investment income, increased to GBP5.4m (H1 2008 -
GBP4.1m). Interest costs on borrowings remained unchanged at GBP3.2m, but those
relating to retirement benefits increased to GBP2.2m (H1 2008 - GBP0.9m) as a
result of higher assumed interest costs relating to the unwinding of discounted
liabilities and reduced assumed asset returns.
Profit before tax
Adjusted profit before tax decreased by 20% to GBP23.5m (H1 2008 - GBP29.3m).
Reported profit before tax declined by 22% to GBP21.1m (H1 2008 - GBP27.2m).
Tax charge
The Group's total tax charge decreased to GBP5.5m (H1 2008 - GBP6.9m). If the
net tax benefits of GBP1.0m (H1 2008 - GBP0.8m) arising from amortisation of
intangible assets on acquisitions are added back, the adjusted tax charge of
GBP6.5m (H1 2008 - GBP7.7m) represents an underlying tax rate of 27.7% (H1 2008
- 26.3%) on adjusted profit before tax. The increase in the underlying tax rate
is principally due to the higher proportion of Group taxable profits being
generated in the USA, where the Group's tax rate is approximately 37%, and
increased taxable losses in the UK.
Earnings per share
The average number of shares in issue in H1 2009, for the purposes of
calculating undiluted earnings per share, was 398.1 million (H1 2008 - 392.9
million). The increase arose principally from the vesting of shares awarded
under the Group's long-term incentive plan and from the exercise of share
options. Adjusted earnings per share decreased by 22% to 4.27p (H1 2008 -
5.50p), whilst undiluted basic earnings per share decreased by 24% to 3.92p (H1
2008 - 5.17p). Fully diluted basic earnings per share, calculated using 403.3
million shares, decreased by 24% to 3.87p (H1 2008 - 5.06p).
Dividend
An interim dividend of 0.90 pence per share, unchanged from the prior year's
interim dividend is proposed. The total cost of the proposed interim dividend is
GBP3.6m (2008 interim - GBP3.6m).
Cash flow
The Group's free cash flow, the derivation of which is set out in Note 10(b) of
the Condensed Consolidated Interim Financial Statements, increased by GBP4.3m
(17%) to GBP28.9m (H1 2008 - GBP24.6m). This excellent performance, delivered in
spite of challenging market conditions, reflects the Group's continuing focus
on, and success with, cash generation initiatives.
The most important drivers of the improvement in free cash flow were the early
implementation of cost reduction measures to mitigate the impact of declining
market demand, a tightening of controls over discretionary expenditure
(including capital expenditure) and a continuing focus on working capital
efficiency to ensure that only necessary resources are tied up in this area.
Cash generated from operating activities was GBP41.8m (H1 2008 - GBP44.3m). This
included a cash inflow from working capital of GBP9.5m, which more than offset
the decline in operating profit. Capital expenditure decreased to GBP5.7m (H1
2008 - GBP12.9m), as the Group's operations are now well capitalised following
significant recent investment supporting new programmes in both Divisions,
including the Boeing 787 programme. Capital expenditure decreased by GBP5.2m in
the Aerospace Division and by GBP2.0m in the Flexonics Division. The Group also
made a voluntary payment of GBP5.0m to its UK defined benefit pension scheme, to
help reduce the scheme's funding deficit.
Net debt
The Group's net debt decreased significantly in the six month period, driven by
strong cash conversion and favourable movements in foreign exchange rates, in
particular the value of the US dollar against Sterling. Total net debt at 30
June 2009 was GBP127.4m (31 December 2008 - GBP174.5m), a reduction of GBP47.1m,
with GBP22.2m attributable to cash inflows from operations and GBP24.9m derived
from favourable foreign currency movements. The Group's ratio of net debt to
EBITDA, its principal bank covenant, improved to 1.6x at 30 June 2009 (31
December 2008 - 2.1x). Under the Group's committed borrowing facilities, this
ratio is required to be less than 3.0x.
Retirement benefit obligations
Aggregate post-retirement benefit liabilities at 30 June 2009 were GBP65.6m in
excess of the value of pension assets, representing an increase in the deficit
of GBP14.4m from 31 December 2008. The net liability in respect of the Group's
UK defined benefit pension scheme increased by GBP18.0m to GBP55.3m (31 December
2008 - GBP37.3m) after taking into account an additional voluntary contribution
of GBP5.0m made by the Group in June. Net pension liabilities in North America
and other territories declined by GBP3.6m. The movement in the UK net liability
reflects an increase in the present value of benefit obligations arising from an
increase in market estimates of future price inflation, since pension benefits
in the scheme are inflation linked, and from a decrease in market yields of high
quality corporate bonds which are used to determine the rate for discounting
future scheme liabilities.
Going concern basis
As noted in the Annual Report & Accounts 2008, the Group meets its day-to-day
working capital and other funding requirements through a combination of
long-term funding, in the form of revolving credit and private placement
facilities, and short-term overdraft borrowings. The Group has no major
borrowing facility renewal before 2012.
During the first half of 2009, the Group remained strongly cash generative in
spite of challenging market conditions. Net cash inflows of GBP22.2m together
with GBP24.9m of favourable foreign currency movements decreased net debt by
GBP47.1m to GBP127.4m (31 December 2008 - GBP174.5m), resulting in an increase
of 58% in the Group's level of funding headroom to GBP78.7m.
Current economic conditions continue to create uncertainty, particularly over
the level of demand for the Group's products. In addition, the Group faces
potential foreign exchange volatility, given that 78% of the Group's profits in
H1 2009 were earned in the USA and that 85% of its gross borrowings at 30 June
2009 were denominated in US dollars. The Group actively manages its strategic,
commercial and day-to-day operational risks through its Executive Committee.The
Group's Treasury Committee operates Board-approved financial policies, including
hedging policies, that are designed to ensure the Group maintains an adequate
level of funding headroom and effectively mitigates foreign exchange and other
financial risks. These policies are described more fully in the Annual Report &
Accounts 2008.
The Group's forecasts, taking into account reasonably possible changes in
trading performance together with foreign exchange fluctuations under the
hedging policies that are in place, indicate that the Group will be able to
operate comfortably within the level of its current committed borrowing
facilities and banking covenants. After making relevant enquiries, the Directors
have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly, the Board has
continued to adopt the going concern basis in preparing the Group's Condensed
Consolidated Interim Financial Statements.
Change in accounting policies
The accounting policies adopted in these Interim Financial Statements are
consistent with those followed in the preparation of the Annual Report &
Accounts 2008, except for the adoption of Standards and Interpretations that are
effective for the current financial year; these are highlighted in Note 2 of the
Condensed Consolidated Interim Financial Statements, and do not have a material
impact on the presentation of the Group's results.
Risks and uncertainties
There are a number of potential risks and uncertainties which may have a
material impact on the Group's performance over the remaining six months of this
financial year, and which could cause actual results to differ materially from
the expected and historical results. These were discussed in some depth in the
Annual Report & Accounts 2008, where the subjects of the global credit crisis,
markets and customers, competitors, defined benefit pension schemes, foreign
exchange, capital structure, interest rates, and credit and liquidity risk were
covered. The Board considers that these remain the most likely areas of
potential risk and uncertainty, with the position largely unchanged from that
set out in the Annual Report & Accounts 2008.
Whilst there has been no significant change to the Group's risk profile in the
first half of 2009, underlying market demand conditions still remain the most
significant risk to the Group's ability to achieve its performance objectives in
2009. Demand patterns have been largely in line with expectation in the first
half of 2009, with land vehicles and regional and business jets showing the
greatest levels of decline as a result of the global recession. Additional
weakness, above expectation, has been seen in North American land vehicle
markets, although this has largely been offset by greater than expected demand
in other land vehicle markets. Demand in military aerospace markets has been
strong, but has remained generally stable in the large commercial aerospace
market and the Group's industrial markets.
In response to this challenging market risk profile, the Group has implemented
various cost reduction and profit preservation plans, principally at those
operations that are exposed to the land vehicle and business and regional jet
markets. Total headcount has fallen by almost 20% since this programme was
initiated in the fourth quarter of 2008. The Group has also reduced
discretionary expenditure and has maintained positive progress with its working
capital efficiency initiatives. As a result, the Group has again improved its
delivery of free cash flow in the period. Management remains ready to take
further action as necessary.
The Group's total unfunded liability relating to its defined benefit pension
schemes was GBP65.6m as at 30 June 2009, representing an increase of GBP14.4m in
the first half of the year. The Group has already taken action to help reduce
the combined pension deficit, including: an increase in cash contributions in
excess of service costs (GBP7.7m was contributed to the schemes in the first
half of 2009, of which GBP5.0m was discretionary); closure of the UK defined
benefit scheme to new entrants; and increases to employee contribution rates.
Further actions are being considered to reduce the volatility and risk
associated with the defined benefit pension scheme deficit and to reduce the
absolute level of the pension deficit as efficiently as possible, in the context
of the Group's overall funding requirements.
Pleasingly, significant positive progress has been made in the first half of the
year in respect of the Group's capital structure, and its credit and liquidity
risk, mainly through the generation of increased levels of free cash flow and
favourable foreign exchange rate movements. This resulted in a significant
reduction in net debt in the period and an increase of 58% in the Group's level
of funding headroom to GBP78.7m.
Future outlook
A detailed outlook statement is included in the Chairman's statement above.
In summary, the Group's end markets are expected to remain challenging for the
foreseeable future. However, Senior is gaining market share through excellent
operational performance and its comparative financial strength, and can look
forward to significant future organic growth from new aircraft programmes such
as the Boeing 787 and Joint Strike Fighter. The Group remains strongly cash
generative and is financed for the longer term, with no major financing renewal
due until 2012. Consequently, the long-term prospects for the Group remain
encouraging.
DIRECTORS' RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge that:
+-------+--------------------------------------------------------------------------------+
| 1. | the condensed set of Interim Financial Statements has been prepared in |
| | accordance with IAS 34 "Interim Financial Reporting" as adopted by the |
| | European Union; |
+-------+--------------------------------------------------------------------------------+
| 2. | the Interim Management Report herein includes a fair review of the important |
| | events during the first six months and description of the principal risks and |
| | uncertainties for the remaining six months of the year, as required by Rule |
| | 4.2.7R of the Disclosure and Transparency Rules of the United Kingdom's |
| | Financial Services Authority; and |
+-------+--------------------------------------------------------------------------------+
| 3. | the Interim Management Report includes as applicable, a fair review of |
| | disclosure of related party transactions and changes therein, as required by |
| | Rule 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's |
| | Financial Services Authority. |
+-------+--------------------------------------------------------------------------------+
By order of the Board
Mark Rollins Group Chief Executive
Simon Nicholls Group Finance Director
31 July 2009
INDEPENDENT REVIEW REPORT TO SENIOR PLC
We have been engaged by Senior plc ("the Company") to review the condensed set
of Financial Statements in the half-yearly financial report for the six months
ended 30 June 2009 which comprises the Condensed Consolidated Income Statement,
the Condensed Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in
Equity, the Condensed Consolidated Cash Flow Statement and related Notes 1 to
11. We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of Financial
Statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to them in an independent review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company, for our
review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in Note 2, the annual Financial Statements of the Group are
prepared in accordance with IFRS as adopted by the European Union. The condensed
set of Financial Statements included in this half-yearly financial report has
been prepared in accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of Financial Statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of Financial Statements in the half-yearly financial
report for the six months ended 30 June 2009 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Registered Auditors
Reading
31 July 2009
Condensed Consolidated Income Statement
For the half-year ended 30 June 2009
+------------------------------------------+-------+------------+------------+------------+
| |Notes | Half-year | Half-year | Year |
| | | ended | ended | ended |
| | | 30 June | 30 June | 31 Dec |
| | | 2009 | 2008 | 2008 |
+------------------------------------------+-------+------------+------------+------------+
| | | GBPm | GBPm | GBPm |
+------------------------------------------+-------+------------+------------+------------+
| Continuing operations | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Revenue | 3 | 275.9 | 279.9 | 562.4 |
+------------------------------------------+-------+------------+------------+------------+
| Trading profit | | 26.5 | 31.3 | 59.8 |
+------------------------------------------+-------+------------+------------+------------+
| Loss on sale of fixed assets | | - | - | - |
+------------------------------------------+-------+------------+------------+------------+
| Operating profit (1) | 3 | 26.5 | 31.3 | 59.8 |
+------------------------------------------+-------+------------+------------+------------+
| Investment income | | 1.1 | 0.9 | 2.7 |
+------------------------------------------+-------+------------+------------+------------+
| Finance costs | | (6.5) | (5.0) | (11.2) |
+------------------------------------------+-------+------------+------------+------------+
| Profit before tax (2) | | 21.1 | 27.2 | 51.3 |
+------------------------------------------+-------+------------+------------+------------+
| Tax | 5 | (5.5) | (6.9) | (12.1) |
+------------------------------------------+-------+------------+------------+------------+
| Profit for the period | | 15.6 | 20.3 | 39.2 |
+------------------------------------------+-------+------------+------------+------------+
| Attributable to: | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Equity holders of the parent | | 15.6 | 20.3 | 39.2 |
+------------------------------------------+-------+------------+------------+------------+
| Earnings per share | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Basic | 7 | 3.92p | 5.17p | 9.92p |
+------------------------------------------+-------+------------+------------+------------+
| Diluted | 7 | 3.87p | 5.06p | 9.78p |
+------------------------------------------+-------+------------+------------+------------+
+------------------------------------------+-------+------------+------------+------------+
| (1) Adjusted operating profit | 4 | 28.9 | 33.4 | 64.5 |
+------------------------------------------+-------+------------+------------+------------+
| (2) Adjusted profit before tax | 4 | 23.5 | 29.3 | 56.0 |
+------------------------------------------+-------+------------+------------+------------+
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2009
+------------------------------------------+------+------------+------------+------------+
| | | Half-year | Half-year | Year |
| | | ended | ended | ended |
| | | 30 June | 30 June | 31 Dec |
| | | 2009 | 2008 | 2008 |
+------------------------------------------+------+------------+------------+------------+
| | | GBPm | GBPm | GBPm |
+------------------------------------------+------+------------+------------+------------+
| Profit for the period | | 15.6 | 20.3 | 39.2 |
+------------------------------------------+------+------------+------------+------------+
| Other comprehensive income: | | | | |
+------------------------------------------+------+------------+------------+------------+
| Gains/(losses) on cash flow hedges | | 5.2 | (0.9) | (9.0) |
| during the period | | | | |
+------------------------------------------+------+------------+------------+------------+
| Reclassification adjustments for losses | | 1.0 | 0.9 | 3.2 |
| included in profit or loss | | | | |
+------------------------------------------+------+------------+------------+------------+
| Gains/(losses) on cash flow hedges | | 6.2 | - | (5.8) |
+------------------------------------------+------+------------+------------+------------+
| Gains/(losses) on revaluation of | | 8.9 | (3.0) | (44.4) |
| financial instruments | | | | |
+------------------------------------------+------+------------+------------+------------+
| Exchange differences on translation of | | (27.2) | 1.8 | 59.9 |
| foreign operations | | | | |
+------------------------------------------+------+------------+------------+------------+
| Actuarial losses on defined benefit | | (21.6) | (9.1) | (15.0) |
| pension schemes | | | | |
+------------------------------------------+------+------------+------------+------------+
| Other comprehensive income | | (33.7) | (10.3) | (5.3) |
+------------------------------------------+------+------------+------------+------------+
| Tax relating to components of other | | 2.8 | 0.4 | 0.5 |
| comprehensive income | | | | |
+------------------------------------------+------+------------+------------+------------+
| Other comprehensive income for the | | (30.9) | (9.9) | (4.8) |
| period, net of tax | | | | |
+------------------------------------------+------+------------+------------+------------+
| Total comprehensive income for the | | (15.3) | 10.4 | 34.4 |
| period | | | | |
+------------------------------------------+------+------------+------------+------------+
| Attributable to: | | | | |
+------------------------------------------+------+------------+------------+------------+
| Equity holders of the parent | | (15.3) | 10.4 | 34.4 |
+------------------------------------------+------+------------+------------+------------+
Condensed Consolidated Balance Sheet
As at 30 June 2009
+------------------------------------------+-------+------------+------------+------------+
| |Notes | 30 June | 30 June | 31 Dec |
| | | 2009 | 2008 | 2008 |
+------------------------------------------+-------+------------+------------+------------+
| | | GBPm | GBPm | GBPm |
+------------------------------------------+-------+------------+------------+------------+
| Non-current assets | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Goodwill | | 165.7 | 143.9 | 184.0 |
+------------------------------------------+-------+------------+------------+------------+
| Other intangible assets | | 13.3 | 14.9 | 17.6 |
+------------------------------------------+-------+------------+------------+------------+
| Property, plant and equipment | 8 | 117.6 | 105.5 | 138.4 |
+------------------------------------------+-------+------------+------------+------------+
| Deferred tax assets | | 0.3 | 0.3 | 0.4 |
+------------------------------------------+-------+------------+------------+------------+
| Trade and other receivables | | 3.2 | 3.2 | 3.3 |
+------------------------------------------+-------+------------+------------+------------+
| Total non-current assets | | 300.1 | 267.8 | 343.7 |
+------------------------------------------+-------+------------+------------+------------+
| Current assets | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Inventories | | 72.0 | 77.5 | 99.6 |
+------------------------------------------+-------+------------+------------+------------+
| Construction contracts | | 0.3 | 1.6 | 1.5 |
+------------------------------------------+-------+------------+------------+------------+
| Trade and other receivables | | 82.1 | 91.6 | 92.7 |
+------------------------------------------+-------+------------+------------+------------+
| Cash and cash equivalents | 10a) | 10.7 | 19.7 | 11.9 |
+------------------------------------------+-------+------------+------------+------------+
| Total current assets | | 165.1 | 190.4 | 205.7 |
+------------------------------------------+-------+------------+------------+------------+
| Total assets | | 465.2 | 458.2 | 549.4 |
+------------------------------------------+-------+------------+------------+------------+
| Current liabilities | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Trade and other payables | | 97.7 | 105.0 | 151.8 |
+------------------------------------------+-------+------------+------------+------------+
| Tax liabilities | | 7.6 | 7.8 | 8.0 |
+------------------------------------------+-------+------------+------------+------------+
| Obligations under finance leases | | 0.2 | 0.2 | 0.2 |
+------------------------------------------+-------+------------+------------+------------+
| Bank overdrafts and loans | | 0.2 | 39.0 | 1.2 |
+------------------------------------------+-------+------------+------------+------------+
| Total current liabilities | | 105.7 | 152.0 | 161.2 |
+------------------------------------------+-------+------------+------------+------------+
| Non-current liabilities | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Bank and other loans | 10c) | 130.4 | 97.7 | 149.6 |
+------------------------------------------+-------+------------+------------+------------+
| Retirement benefit obligations | 11 | 65.6 | 44.3 | 51.2 |
+------------------------------------------+-------+------------+------------+------------+
| Deferred tax liabilities | | 7.0 | 7.1 | 8.8 |
+------------------------------------------+-------+------------+------------+------------+
| Obligations under finance leases | | 1.2 | 1.3 | 1.5 |
+------------------------------------------+-------+------------+------------+------------+
| Others | | 0.6 | 0.6 | 0.9 |
+------------------------------------------+-------+------------+------------+------------+
| Total non-current liabilities | | 204.8 | 151.0 | 212.0 |
+------------------------------------------+-------+------------+------------+------------+
| Total liabilities | | 310.5 | 303.0 | 373.2 |
+------------------------------------------+-------+------------+------------+------------+
| Net assets | | 154.7 | 155.2 | 176.2 |
+------------------------------------------+-------+------------+------------+------------+
| Equity | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Issued share capital | 9 | 39.9 | 39.8 | 39.8 |
+------------------------------------------+-------+------------+------------+------------+
| Share premium account | | 12.1 | 12.0 | 12.0 |
+------------------------------------------+-------+------------+------------+------------+
| Equity reserve | | 1.6 | 1.3 | 1.7 |
+------------------------------------------+-------+------------+------------+------------+
| Distributable reserve | | 19.4 | 19.4 | 19.4 |
+------------------------------------------+-------+------------+------------+------------+
| Hedging and translation reserve | | (5.1) | (5.0) | 6.3 |
+------------------------------------------+-------+------------+------------+------------+
| Retained earnings | | 88.2 | 89.1 | 98.4 |
+------------------------------------------+-------+------------+------------+------------+
| Own shares | | (1.4) | (1.4) | (1.4) |
+------------------------------------------+-------+------------+------------+------------+
| Equity attributable to equity holders of | | 154.7 | 155.2 | 176.2 |
| the parent | | | | |
+------------------------------------------+-------+------------+------------+------------+
| Total equity | | 154.7 | 155.2 | 176.2 |
+------------------------------------------+-------+------------+------------+------------+
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2009
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| | All equity is attributable to equity holders of the parent |
+---------------------------+-----------------------------------------------------------------------------------------+
| | Issued | Share | Equity | Distribut-able | Hedging | Retained | Own | Total |
| | share | premium | reserve | reserve | and | earnings | shares | equity |
| | capital | account | | | translation | | | |
| | | | | | reserve | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Balance at 1 January 2008 | 39.1 | 11.3 | 1.6 | 19.4 | (4.4) | 84.3 | (1.4) | 149.9 |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Profit for the period | - | - | - | - | - | 39.2 | - | 39.2 |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Losses on cash flow | - | - | - | - | (5.8) | - | - | (5.8) |
| hedges | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Losses on revaluation of | - | - | - | - | (44.4) | - | - | (44.4) |
| financial instruments | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Exchange differences on | - | - | - | - | 59.9 | - | - | 59.9 |
| translation of foreign | | | | | | | | |
| operations | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Actuarial losses on | - | - | - | - | - | (15.0) | - | (15.0) |
| defined benefit pension | | | | | | | | |
| schemes | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Tax relating to | - | - | - | - | 1.0 | (0.5) | - | 0.5 |
| components of other | | | | | | | | |
| comprehensive income | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Total comprehensive | - | - | - | - | 10.7 | 23.7 | - | 34.4 |
| income for the period | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Issue of share capital | 0.7 | 0.7 | (0.1) | - | - | - | - | 1.3 |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Share-based payment | - | - | 0.9 | - | - | - | - | 0.9 |
| charge | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Transfer to retained | - | - | (0.7) | - | - | 0.7 | - | - |
| earnings | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Dividends paid | - | - | - | - | - | (10.3) | - | (10.3) |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Balance at 31 December | 39.8 | 12.0 | 1.7 | 19.4 | 6.3 | 98.4 | (1.4) | 176.2 |
| 2008 | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Profit for the period | - | - | - | - | - | 15.6 | - | 15.6 |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Gains on cash flow hedges | - | - | - | - | 6.2 | - | - | 6.2 |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Gains on revaluation of | - | - | - | - | 8.9 | - | - | 8.9 |
| financial instruments | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Exchange differences on | - | - | - | - | (27.2) | - | - | (27.2) |
| translation of foreign | | | | | | | | |
| operations | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Actuarial losses on | - | - | - | - | - | (21.6) | - | (21.6) |
| defined benefit pension | | | | | | | | |
| schemes | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Tax relating to | - | - | - | - | 0.7 | 2.1 | - | 2.8 |
| components of other | | | | | | | | |
| comprehensive income | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Total comprehensive | - | - | - | - | (11.4) | (3.9) | - | (15.3) |
| income for the period | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Issue of share capital | 0.1 | 0.1 | (0.1) | - | - | - | - | 0.1 |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Share-based payment | - | - | 0.5 | - | - | - | - | 0.5 |
| charge | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Transfer to retained | - | - | (0.5) | - | - | 0.5 | - | - |
| earnings | | | | | | | | |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Dividends paid | - | - | - | - | - | (6.8) | - | (6.8) |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Balance at 30 June 2009 | 39.9 | 12.1 | 1.6 | 19.4 | (5.1) | 88.2 | (1.4) | 154.7 |
+---------------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Balance at 1 January 2008 | 39.1 | 11.3 | 1.6 | 19.4 | (4.4) | 84.3 | (1.4) | 149.9 |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Profit for the period | - | - | - | - | - | 20.3 | - | 20.3 |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| (Losses)/gains on cash | - | - | - | - | - | - | - | - |
| flow hedges | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Losses on revaluation of | - | - | - | - | (3.0) | - | - | (3.0) |
| financial instruments | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Exchange differences on | - | - | - | - | 1.8 | - | - | 1.8 |
| translation of foreign | | | | | | | | |
| operations | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Actuarial losses on | - | - | - | - | - | (9.1) | - | (9.1) |
| defined benefit pension | | | | | | | | |
| schemes | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Tax relating to | - | - | - | - | 0.6 | (0.2) | - | 0.4 |
| components of other | | | | | | | | |
| comprehensive income | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Total comprehensive | - | - | - | - | (0.6) | 11.0 | - | 10.4 |
| income for the period | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Issue of share capital | 0.7 | 0.7 | (0.3) | - | - | - | - | 1.1 |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Share-based payment | - | - | 0.5 | - | - | - | - | 0.5 |
| charge | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Transfer to retained | - | - | (0.5) | - | - | 0.5 | - | - |
| earnings | | | | | | | | |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Dividends paid | - | - | - | - | - | (6.7) | - | (6.7) |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
| Balance at 30 June 2008 | 39.8 | 12.0 | 1.3 | 19.4 | (5.0) | 89.1 | (1.4) | 155.2 |
+---------------------------+-------+-------+-------+-------+--------+-------+-------+--------+
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2009
+-----------------------------------------+-------+------------+------------+------------+
| | Notes | Half-year | Half-year | Year |
| | | ended | ended | ended |
| | | 30 June | 30 June | 31 Dec |
| | | 2009 | 2008 | 2008 |
+-----------------------------------------+-------+------------+------------+------------+
| | | GBPm | GBPm | GBPm |
+-----------------------------------------+-------+------------+------------+------------+
| Net cash from operating activities | 10a) | 32.8 | 36.5 | 74.6 |
+-----------------------------------------+-------+------------+------------+------------+
| Investing activities | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Interest received | | 1.7 | 0.5 | 1.7 |
+-----------------------------------------+-------+------------+------------+------------+
| Disposal of subsidiary | | - | - | 0.1 |
+-----------------------------------------+-------+------------+------------+------------+
| Proceeds on disposal of property, plant | | 0.1 | 0.5 | 0.6 |
| and equipment | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Purchases of property, plant and | | (5.3) | (12.6) | (23.8) |
| equipment | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Purchases of intangible assets | | (0.4) | (0.3) | (0.7) |
+-----------------------------------------+-------+------------+------------+------------+
| Acquisition of Capo Industries | | - | (44.1) | (44.1) |
+-----------------------------------------+-------+------------+------------+------------+
| Acquisition of Sterling Machine | | - | 0.4 | 0.4 |
+-----------------------------------------+-------+------------+------------+------------+
| Net cash used in investing activities | | (3.9) | (55.6) | (65.8) |
+-----------------------------------------+-------+------------+------------+------------+
| Financing activities | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Dividends paid | | (6.8) | (6.7) | (10.3) |
+-----------------------------------------+-------+------------+------------+------------+
| Repayment of borrowings | | (2.6) | (1.7) | (85.9) |
+-----------------------------------------+-------+------------+------------+------------+
| Repayments of obligations under finance | | (0.1) | (0.1) | (0.2) |
| leases | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Share issues | | 0.1 | 1.1 | 1.3 |
+-----------------------------------------+-------+------------+------------+------------+
| New loans raised | | - | 41.2 | 103.4 |
+-----------------------------------------+-------+------------+------------+------------+
| Net cash outflow on forward contracts | | (18.3) | (1.3) | (13.0) |
+-----------------------------------------+-------+------------+------------+------------+
| Net cash (used in)/from financing | | (27.7) | 32.5 | (4.7) |
| activities | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Net increase in cash and cash | | 1.2 | 13.4 | 4.1 |
| equivalents | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Cash and cash equivalents at beginning | | 10.7 | 4.9 | 4.9 |
| of period | | | | |
+-----------------------------------------+-------+------------+------------+------------+
| Effect of foreign exchange rate changes | | (1.4) | 0.1 | 1.7 |
+-----------------------------------------+-------+------------+------------+------------+
| Cash and cash equivalents at end of | 10a) | 10.5 | 18.4 | 10.7 |
| period | | | | |
+-----------------------------------------+-------+------------+------------+------------+
Notes to the Condensed Consolidated Interim Financial Statements
For the half-year ended 30 June 2009
1. General Information
The information for the year ended 31 December 2008 does not constitute the
Group's statutory accounts for 2008 as defined in Section 435 of the Companies
Act 2006. Statutory accounts for 2008 have been 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 statements under
Sections 498(2) or (3) of the Companies Act 2006.
These Interim Financial Statements, which were approved by the Board of
Directors on 31 July 2009, have been reviewed by the Auditors, and their review
opinion is set out above.
2. Accounting policies
The Group's Annual Financial Statements are prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by the European
Union.
These Interim Financial Statements have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and with
IAS 34 "Interim Financial Reporting" as adopted by the European Union. They have
also been prepared on the going concern basis as set out in the IMR.
The accounting policies, presentation and methods of computation adopted are
consistent with those followed in the preparation of the Group's Annual
Financial Statements for the year ended 31 December 2008, except for as
described below.
In the current financial year, the Group has adopted IFRS 8 "Operating
Segments", IAS 1 (Revised) "Presentation of Financial Statements", IFRS 2
(Amendment) "Share-based Payment Vesting Conditions and Cancellations" and IAS
23 (Revised) "Borrowing Costs".
IFRS 8 replaces IAS 14 "Segment Reporting" and requires segment information to
be presented on the same basis as that used for internal reporting purposes,
identifying the components of the Group that are regularly reviewed by the Group
Chief Executive to allocate resources to the segments and to assess their
performance. Adoption of IFRS 8 has not led to a change in the Group's
reportable segments.
IAS 1 (Revised) requires the presentation of a statement of changes in equity as
a primary statement, separate from the income statement and statement of
comprehensive income. As a result, a Condensed Consolidated Statement of Changes
in Equity has been included in the primary statements, showing changes in each
component of equity for each period presented.
IFRS 2 (Amendment) clarifies that for share-based payments, vesting conditions
are service and performance conditions only and that all cancellations of
awards, whether by the entity or by other parties, should receive the same
accounting treatment. These do not represent a material impact on the Group's
Financial Statements.
IAS 23 (Revised) removes the option of immediately expensing borrowing costs
directly attributable to the acquisition, construction or production of a
qualifying asset and instead requires these costs to be capitalised as part of
the cost of that asset. Whilst this is an accounting policy change for the
Group, it does not represent a material impact on the Group's Financial
Statements.
The following Standards and Interpretations are also effective from the current
financial year, but currently do not impact the Group's Financial Statements:
IFRS 1 (Amendment)/ IAS 27 (Amendment) "Cost of an Investment in Subsidiary,
Jointly Controlled Entity or Associate"; IAS 32 (Amendment) / IAS 1 (Amendment)
"Puttable Financial Instruments and Obligations Arising on Liquidation";
Improvements to IFRS - as published in May 2008; and IFRIC 16 "Hedges of a Net
Investment in a Foreign Operation". IFRIC 13 "Customer Loyalty Programmes",
IFRIC 15 "Agreements for the Construction of Real Estate" and IFRIC 17
"Distributions of Non-cash Assets to Owners" are currently not relevant to the
Group's operations.
3. Segmental analysis
For management purposes, the Group is organised into two operating Divisions
according to the market segments they serve, Aerospace and Flexonics. These
Divisions are the basis on which the Group reports its segment information. This
is consistent with the way the Group is managed and with the format of the
Group's internal financial reporting.
Business segments
Segment information for revenue, operating profit and a reconciliation to entity
net profit is presented below.
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| | Aerospace | Flexonics | Eliminations | Total | Aerospace | Flexonics | Eliminations | Total |
| | | | / Central | | | | / Central | |
| | | | costs | | | | costs | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| | Half-year | Half-year | Half-year | Half-year | Half-year | Half-year | Half-year | Half-year |
| | ended | ended | ended | ended | ended | ended | ended | ended |
| | 30 June | 30 June | 30 June | 30 June | 30 June | 30 June | 30 June | 30 June |
| | 2009 | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | 2008 |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| External | 169.0 | 106.9 | - | 275.9 | 151.9 | 128.0 | - | 279.9 |
| revenue | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Inter-segment | 0.2 | 0.1 | (0.3) | - | 0.3 | 0.1 | (0.4) | - |
| revenue | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Total revenue | 169.2 | 107.0 | (0.3) | 275.9 | 152.2 | 128.1 | (0.4) | 279.9 |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Adjusted | 22.0 | 9.6 | (2.7) | 28.9 | 22.2 | 14.2 | (3.0) | 33.4 |
| operating | | | | | | | | |
| profit (see | | | | | | | | |
| Note 4) | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Loss on sale of | - | - | - | - | - | - | - | - |
| fixed assets | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Amortisation of | (2.4) | - | - | (2.4) | (2.1) | - | - | (2.1) |
| intangible | | | | | | | | |
| assets from | | | | | | | | |
| acquisitions | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Operating | 19.6 | 9.6 | (2.7) | 26.5 | 20.1 | 14.2 | (3.0) | 31.3 |
| profit | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Investment | | | | 1.1 | | | | 0.9 |
| income | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Finance costs | | | | (6.5) | | | | (5.0) |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Profit before | | | | 21.1 | | | | 27.2 |
| tax | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Tax | | | | (5.5) | | | | (6.9) |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
| Profit after | | | | 15.6 | | | | 20.3 |
| tax | | | | | | | | |
+-----------------+-----------+-----------+--------------+-----------+-----------+-----------+--------------+-----------+
Segment information for assets and a reconciliation to total assets is presented
below.
+------------------------------------------------+------------+------------+------------+
| | Half-year | Half-year | Year |
| | ended | ended | ended |
| | 30 June | 30 June | 31 Dec |
| | 2009 | 2008 | 2008 |
+------------------------------------------------+------------+------------+------------+
| | GBPm | GBPm | GBPm |
+------------------------------------------------+------------+------------+------------+
| Aerospace | 322.0 | 294.2 | 374.4 |
+------------------------------------------------+------------+------------+------------+
| Flexonics | 125.7 | 137.8 | 156.1 |
+------------------------------------------------+------------+------------+------------+
| Sub total continuing operations | 447.7 | 432.0 | 530.5 |
+------------------------------------------------+------------+------------+------------+
| Unallocated corporate amounts | 17.5 | 26.2 | 18.9 |
+------------------------------------------------+------------+------------+------------+
| Total | 465.2 | 458.2 | 549.4 |
+------------------------------------------------+------------+------------+------------+
4. Adjusted operating profit and adjusted profit before tax
Â
Â
Adjusted operating profit and adjusted profit before tax, derived in accordance
with the table below, have been provided to identify the performance of
operations, from the time of acquisition or until the time of disposal, prior to
the impact of gains or losses arising from the sale of fixed assets and
amortisation of intangible assets acquired on acquisitions.
+------------------------------------------------+------------+------------+------------+
| | Half-year | Half-year | Year |
| | ended | ended | ended |
| | 30 June | 30 June | 31 Dec |
| | 2009 | 2008 | 2008 |
+------------------------------------------------+------------+------------+------------+
| | GBPm | GBPm | GBPm |
+------------------------------------------------+------------+------------+------------+
| Operating profit | 26.5 | 31.3 | 59.8 |
+------------------------------------------------+------------+------------+------------+
| Loss on sale of fixed assets | - | - | - |
+------------------------------------------------+------------+------------+------------+
| Amortisation of intangible assets from | 2.4 | 2.1 | 4.7 |
| acquisitions | | | |
+------------------------------------------------+------------+------------+------------+
| Adjustments to operating profit | 2.4 | 2.1 | 4.7 |
+------------------------------------------------+------------+------------+------------+
| Adjusted operating profit | 28.9 | 33.4 | 64.5 |
+------------------------------------------------+------------+------------+------------+
| Profit before tax | 21.1 | 27.2 | 51.3 |
+------------------------------------------------+------------+------------+------------+
| Adjustments to profit as above before tax | 2.4 | 2.1 | 4.7 |
+------------------------------------------------+------------+------------+------------+
| Adjusted profit before tax | 23.5 | 29.3 | 56.0 |
+------------------------------------------------+------------+------------+------------+
5. Tax charge
+------------------------------------------------------------+------------+------------+
| | Half-year | Half-year |
| | ended | ended |
| | 30 June | 30 June |
| | 2009 | 2008 |
+------------------------------------------------------------+------------+------------+
| | GBPm | GBPm |
+------------------------------------------------------------+------------+------------+
| Current tax: | | |
+------------------------------------------------------------+------------+------------+
| UK corporation tax | - | - |
+------------------------------------------------------------+------------+------------+
| Foreign tax | 4.3 | 4.5 |
+------------------------------------------------------------+------------+------------+
| | 4.3 | 4.5 |
+------------------------------------------------------------+------------+------------+
| Deferred tax: | | |
+------------------------------------------------------------+------------+------------+
| Current year | 1.2 | 2.4 |
+------------------------------------------------------------+------------+------------+
| | 5.5 | 6.9 |
+------------------------------------------------------------+------------+------------+
Corporation tax for the interim period is charged at 27.7% (2008 - 26.3%),
representing the best estimate of the weighted average annual corporation tax
rate expected for the full financial year.
6. Dividends
+------------------------------------------------------------+------------+------------+
| | Half-year | Half-year |
| | ended | ended |
| | 30 June | 30 June |
| | 2009 | 2008 |
+------------------------------------------------------------+------------+------------+
| | GBPm | GBPm |
+------------------------------------------------------------+------------+------------+
| Amounts recognised as distributions to equity holders in | | |
| the period: | | |
+------------------------------------------------------------+------------+------------+
| Final dividend for the year ended 31 December 2008 of | 6.8 | 6.7 |
| 1.70p (2007 - 1.70p) per share | | |
+------------------------------------------------------------+------------+------------+
| Proposed interim dividend for the year ended 31 December | 3.6 | 3.6 |
| 2009 of 0.90p (2008 - 0.90p) per share | | |
+------------------------------------------------------------+------------+------------+
The proposed interim dividend was approved by the Board of Directors on 31 July
2009 and has not been included as a liability in these Interim Financial
Statements.
7. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
+------------------------------------------------------------+------------+------------+
| | Half-year | Half-year |
| | ended | ended |
| | 30 June | 30 June |
| | 2009 | 2008 |
+------------------------------------------------------------+------------+------------+
| Number of shares | million | million |
+------------------------------------------------------------+------------+------------+
| Weighted average number of ordinary shares for the | 398.1 | 392.9 |
| purposes of basic earnings per share | | |
+------------------------------------------------------------+------------+------------+
| Effect of dilutive potential ordinary shares: | | |
+------------------------------------------------------------+------------+------------+
| Share options | 5.2 | 8.6 |
+------------------------------------------------------------+------------+------------+
| Weighted average number of ordinary shares for the | 403.3 | 401.5 |
| purposes of diluted earnings per share | | |
+------------------------------------------------------------+------------+------------+
+------------------------------------+------------+------------+------------+------------+
| | Half-year | Half-year | Half-year | Half-year |
| | ended | ended | ended | ended |
| | 30 June | 30 June | 30 June | 30 June |
| | 2009 | 2009 | 2008 | 2008 |
+------------------------------------+------------+------------+------------+------------+
| Earnings and earnings per share | Earnings | EPS | Earnings | EPS |
| | GBPm | pence | GBPm | pence |
+------------------------------------+------------+------------+------------+------------+
| Profit for the period | 15.6 | 3.92 | 20.3 | 5.17 |
+------------------------------------+------------+------------+------------+------------+
| Adjust: | | | | |
+------------------------------------+------------+------------+------------+------------+
| Loss on sale of fixed assets net | - | - | - | - |
| of tax of GBPnil (2008 - GBPnil) | | | | |
+------------------------------------+------------+------------+------------+------------+
| Amortisation of intangible assets | 1.4 | 0.35 | 1.3 | 0.33 |
| from acquisitions net of tax of | | | | |
| GBP1.0m (2008 - GBP0.8m) | | | | |
+------------------------------------+------------+------------+------------+------------+
| Adjusted earnings after tax | 17.0 | 4.27 | 21.6 | 5.50 |
+------------------------------------+------------+------------+------------+------------+
| Earnings per share | | | | |
+------------------------------------+------------+------------+------------+------------+
| - basic | | 3.92p | | 5.17p |
+------------------------------------+------------+------------+------------+------------+
| - diluted | | 3.87p | | 5.06p |
+------------------------------------+------------+------------+------------+------------+
| - adjusted | | 4.27p | | 5.50p |
+------------------------------------+------------+------------+------------+------------+
| - adjusted and diluted | | 4.22p | | 5.38p |
+------------------------------------+------------+------------+------------+------------+
The effect of dilutive shares on the earnings for the purposes of diluted
earnings per share is GBPnil (2008 - GBPnil).
The denominators used for all basic, diluted and adjusted earnings per share are
as detailed in the "Number of shares" table above.
Adjusted earnings per share, derived in accordance with the table above, has
been provided to identify the performance of operations, from the time of
acquisition or until the time of disposal, prior to the impact of the following
items:
+----------+---------------+
| - | gains or |
| | losses |
| | arising |
| | from the |
| | sale of |
| | fixed |
| | assets |
+----------+---------------+
| - | amortisation |
| | of |
| | intangible |
| | assets |
| | acquired on |
| | acquisitions. |
+----------+---------------+
8. Property, Plant and Equipment
During the period, the Group spent GBP5.3m (2008 - GBP12.6m) on the acquisition
of property, plant and equipment. The Group also disposed of machinery with a
carrying value of GBP0.1m (2008 - GBP0.5m) for proceeds of GBP0.1m (2008 -
GBP0.5m).
9. Share capital
Share capital as at 30 June 2009 amounted to GBP39.9m. During the period, the
Group issued 239,894 shares at an average price of 21.97p per share under share
option plans, raising GBP0.1m. A further 1,099,451 shares were issued during
the period under the Group's long-term incentive plan.
10. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash from operating activities
+------------------------------------------------------------+------------+------------+
| | Half-year | Half-year |
| | ended | ended |
| | 30 June | 30 June |
| | 2009 | 2008 |
+------------------------------------------------------------+------------+------------+
| | GBPm | GBPm |
+------------------------------------------------------------+------------+------------+
| Operating profit from continuing operations | 26.5 | 31.3 |
+------------------------------------------------------------+------------+------------+
| Adjustments for: | | |
+------------------------------------------------------------+------------+------------+
| Depreciation of property, plant and equipment | 10.5 | 8.4 |
+------------------------------------------------------------+------------+------------+
| Amortisation of intangible assets from acquisitions | 2.4 | 2.1 |
+------------------------------------------------------------+------------+------------+
| Amortisation of other intangible assets | 0.3 | 0.3 |
+------------------------------------------------------------+------------+------------+
| Share options | 0.5 | 0.7 |
+------------------------------------------------------------+------------+------------+
| Loss on disposal of property, plant and equipment | - | - |
+------------------------------------------------------------+------------+------------+
| Pension payments in excess of service cost | (7.7) | (2.3) |
+------------------------------------------------------------+------------+------------+
| Operating cash flows before movements in working capital | 32.5 | 40.5 |
+------------------------------------------------------------+------------+------------+
| Decrease in inventories | 17.9 | 5.9 |
+------------------------------------------------------------+------------+------------+
| Decrease/(increase) in receivables | 2.7 | (9.4) |
+------------------------------------------------------------+------------+------------+
| (Decrease)/increase in payables | (11.1) | 6.9 |
+------------------------------------------------------------+------------+------------+
| Working capital currency movements | (0.2) | 0.4 |
+------------------------------------------------------------+------------+------------+
| Cash generated by operations | 41.8 | 44.3 |
+------------------------------------------------------------+------------+------------+
| Income taxes paid | (4.4) | (4.1) |
+------------------------------------------------------------+------------+------------+
| Interest paid | (4.6) | (3.7) |
+------------------------------------------------------------+------------+------------+
| Net cash from operating activities | 32.8 | 36.5 |
+------------------------------------------------------------+------------+------------+
| Cash and cash equivalents comprise: | | |
+------------------------------------------------------------+------------+------------+
| Cash | 10.7 | 19.7 |
+------------------------------------------------------------+------------+------------+
| Bank overdrafts | (0.2) | (1.3) |
+------------------------------------------------------------+------------+------------+
| Total | 10.5 | 18.4 |
+------------------------------------------------------------+------------+------------+
Cash and cash equivalents (which are presented as a single class of assets on
the face of the Balance Sheet) comprise cash at bank and other short-term highly
liquid investments with a maturity of three months or less.
b) Free cash flow
Free cash flow, a non-statutory item, highlights the total net cash generated by
the Group prior to corporate activity such as acquisitions, disposals, financing
and transactions with shareholders. It is derived as follows:
+------------------------------------------------------------+------------+------------+
| | Half-year | Half-year |
| | ended | ended |
| | 30 June | 30 June |
| | 2009 | 2008 |
+------------------------------------------------------------+------------+------------+
| | GBPm | GBPm |
+------------------------------------------------------------+------------+------------+
| Net cash from operating activities | 32.8 | 36.5 |
+------------------------------------------------------------+------------+------------+
| Interest received | 1.7 | 0.5 |
+------------------------------------------------------------+------------+------------+
| Proceeds on disposal of property, plant and equipment | 0.1 | 0.5 |
+------------------------------------------------------------+------------+------------+
| Purchases of property, plant and equipment - cash | (5.3) | (12.6) |
+------------------------------------------------------------+------------+------------+
| Purchase of intangible assets | (0.4) | (0.3) |
+------------------------------------------------------------+------------+------------+
| Free cash flow | 28.9 | 24.6 |
+------------------------------------------------------------+------------+------------+
c) Analysis of net debt
+------------------------------------+------------+------------+------------+------------+
| | At | Cash flow | Exchange | At |
| | 1 January | | movement | 30 June |
| | 2009 | | | 2009 |
+------------------------------------+------------+------------+------------+------------+
| | GBPm | GBPm | GBPm | GBPm |
+------------------------------------+------------+------------+------------+------------+
| Cash | 11.9 | 0.3 | (1.5) | 10.7 |
+------------------------------------+------------+------------+------------+------------+
| Overdrafts | (1.2) | 0.9 | 0.1 | (0.2) |
+------------------------------------+------------+------------+------------+------------+
| Cash and cash equivalents | 10.7 | 1.2 | (1.4) | 10.5 |
+------------------------------------+------------+------------+------------+------------+
| Debt due within one year | - | - | - | - |
+------------------------------------+------------+------------+------------+------------+
| Debt due after one year | (149.6) | 2.6 | 16.6 | (130.4) |
+------------------------------------+------------+------------+------------+------------+
| Finance leases | (1.7) | 0.1 | 0.2 | (1.4) |
+------------------------------------+------------+------------+------------+------------+
| Forward exchange contract losses | (33.9) | 18.3 | 9.5 | (6.1) |
+------------------------------------+------------+------------+------------+------------+
| Total | (174.5) | 22.2 | 24.9 | (127.4) |
+------------------------------------+------------+------------+------------+------------+
The forward exchange contract losses shown above are reported as GBP6.1m (1
January 2009 - GBP33.9m) in current liabilities within trade and other payables.
11. Retirement benefit schemes
Defined Benefit Schemes
Aggregate post-retirement benefit obligations are GBP65.6m (30 June 2008 -
GBP44.3m; 31 December 2008 - GBP51.2m). This liability is principally made up
of net deficits in the Group's UK and US defined benefit pension schemes, with
deficits of GBP55.3m (30 June 2008 - GBP37.1m; 31 December 2008 - GBP37.3m) and
GBP6.1m (30 June 2008 - GBP3.1m; 31 December 2008 - GBP9.3m) respectively. These
values have been assessed by independent actuaries using current market values
and discount rates. The increase in the liability from GBP51.2m at 31 December
2008 to GBP65.6m at 30 June 2009 is primarily due to lower returns on UK plan
assets than assumed, an increase in the UK plan inflation rate assumption to
3.5% (31 December 2008 - 2.8%) and a decrease in the UK plan discount rate
assumption to 6.2% (31 December 2008 - 6.4%). The changes in inflation and
discount rate assumptions since 31 December 2008 are in line with movements in
market estimates of future price inflation and movements in market yields of
high quality corporate bonds respectively.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR WUUPWMUPBGMG
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