TIDMSNR
RNS Number : 8062H
Senior PLC
01 March 2010
Senior plc
Results for the year ended 31 December 2009
A resilient performance and strong cash flows deliver a GBP72m reduction in net
debt
+------------------------------------+-----------+--+-----------+--+-----------+-+
| FINANCIAL HIGHLIGHTS | Year ended 31 | | | |
| | December | | | |
+------------------------------------+--------------------------+--+-----------+-+
| | 2009 | | 2008 | | | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| REVENUE | GBP540.1m | | GBP562.4m | | -4% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| OPERATING PROFIT | GBP61.0m | | GBP59.8m | | +2% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| ADJUSTED OPERATING PROFIT (1) | GBP59.4m | | GBP64.5m | | -8% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| ADJUSTED OPERATING MARGIN (1) | 11.0% | | 11.5% | | - | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| PROFIT BEFORE TAX | GBP49.6m | | GBP51.3m | | -3% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| ADJUSTED PROFIT BEFORE TAX (1) | GBP48.0m | | GBP56.0m | | -14% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| BASIC EARNINGS PER SHARE | 9.79p | | 9.92p | | -1% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| ADJUSTED EARNINGS PER SHARE (1) | 8.91p | | 10.63p | | -16% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| TOTAL DIVIDENDS (PAID AND | 2.60p | | 2.60p | | Unchanged | |
| PROPOSED) PER SHARE | | | | | | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| FREE CASH FLOW (2) | GBP60.1m | | GBP52.4m | | +15% | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
| NET DEBT (2) | GBP102.3m | | GBP174.5m | | GBP72m | |
| | | | | | better | |
+------------------------------------+-----------+--+-----------+--+-----------+-+
+-----+--------------------------------------------------------------------+
| (1) | Adjusted figures are stated before loss on disposal of fixed |
| | assets of GBP0.1m (2008 - GBPnil), a GBP4.6m charge for |
| | amortisation of intangible assets acquired on acquisitions (2008 - |
| | GBP4.7m) and an exceptional pension gain of GBP6.3m (2008 - |
| | GBPnil). Adjusted earnings per share takes account of the tax |
| | impact of these items. |
+-----+--------------------------------------------------------------------+
| (2) | See Notes 11(b) and 11(c) for derivation of free cash flow and of |
| | net debt respectively. |
+-----+--------------------------------------------------------------------+
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
$1.56 (2008 - $1.85) and EUR1.12 (2008 - EUR1.26), respectively. The US dollar and
Euro rates applied to the balance sheet at 31 December 2009 were $1.61 (2008 -
$1.44) and EUR1.13 (2008 - EUR1.03), respectively.
Commenting on the results, Martin Clark, Chairman of Senior plc, said:
"Senior has delivered a resilient set of results for 2009, with the highlights
being the strong cash generation and the GBP72m reduction in net debt. These
results, which were achieved despite the adverse impact that the global economic
crisis had on many of the Group's markets, demonstrate the operational and
financial strength of the Group. The current year has started ahead of the
Board's expectations and, consequently, prospects for 2010, which were
previously forecast to be more difficult than in 2009, have improved and the
Group's performance for 2010 is now anticipated to be broadly in line with the
2009 outcome."
For further information please contact:
+--------------------------------------------+-------+---------------+
| Mark Rollins, Group Chief Executive, | | 01923 714738 |
| Senior plc | | |
+--------------------------------------------+-------+---------------+
| Simon Nicholls, Group Finance Director, | | 01923 714722 |
| Senior plc | | |
+--------------------------------------------+-------+---------------+
| Clare Hunt, Finsbury Group | | 020 7251 3801 |
+--------------------------------------------+-------+---------------+
This Release represents the Company's dissemination announcement in accordance
with the requirements of Rule 6.3.5 of the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority. The full Annual Report &
Accounts 2009, together with other information on Senior plc, may be found at:
www.seniorplc.com
The information contained in this Release is an extract from the Annual Report &
Accounts 2009, however, some references to Note and page numbers have been
amended to reflect Note and page numbers appropriate to this Release.
The Directors' Responsibility Statement has been prepared in connection with the
full Financial Statements, Operating and Financial Review and Directors' Report
as included in the Annual Report & Accounts 2009. Therefore, certain Notes and
parts of the Directors' Report reported on are not included within this Release.
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.
CHAIRMAN'S STATEMENT
"Senior has delivered a resilient set of results for 2009, with the highlights
being the strong cash generation and the GBP72m reduction in net debt. These
results, which were achieved despite the adverse impact that the global economic
crisis had on many of the Group's markets, demonstrate the operational and
financial strength of the Group. The current year has started ahead of the
Board's expectations and, consequently, prospects for 2010, which were
previously forecast to be more difficult than in 2009, have improved and the
Group's performance for 2010 is now anticipated to be broadly in line with the
2009 outcome."
Financial Results
Group revenue decreased by 4% to GBP540.1m (2008 - GBP562.4m), whilst reported
operating profit increased by 2% to GBP61.0m (2008 - GBP59.8m). On an
underlying basis, excluding the effects of beneficial foreign exchange movements
and the exceptional pension curtailment gain, revenue declined by 16% and
operating profit fell by 22%. The pension gain of GBP6.3m arose from the
introduction of a 2% cap on future annual increases in pensionable salaries for
active members of the Group's UK defined benefit pension plan. The reductions
in underlying revenue and operating profit arose mainly as a result of the
severe declines experienced in the land vehicle and business jet markets during
the year.
Adjusted profit before tax, the measure which the Board believes most accurately
reflects the true underlying performance of the business, decreased by 14% to
GBP48.0m (2008 - GBP56.0m). Adjusted profit before tax measures profit before
the loss on disposal of fixed assets of GBP0.1m (2008 - GBPnil), the charge for
amortisation of intangible assets arising on acquisitions of GBP4.6m (2008 -
GBP4.7m) and the exceptional pension gain of GBP6.3m (2008 - GBPnil). Adjusted
earnings per share decreased by 16% to 8.91 pence (2008 - 10.63 pence).
One of the highlights of 2009 was the level of cash generated by the Group.
Free cash flow increased by 15% to GBP60.1m (2008 - GBP52.4m), even after
discretionary pension payments of GBP13.2m (2008 - GBPnil) were made into the UK
and USA defined benefit pension plans. The very strong cash flow, combined with
beneficial currency movements, resulted in net debt reducing by GBP72.2m to
GBP102.3m during the year (31 December 2008 - GBP174.5m). This level of net
debt represents 1.3 times (31 December 2008 - 2.1 times) earnings before
interest, tax, depreciation and amortisation ("EBITDA"), well within the Group's
principal banking covenant requirement that net debt to EBITDA is less than 3.0
times.
Through its resilient 2009 results, Senior has demonstrated that it can react
quickly, and cost-effectively, to very challenging market conditions.
Furthermore, the Group is well financed, with year-end net debt being GBP105.0m
below the level of its committed borrowing facilities. These strong
fundamentals leave the Group well positioned to invest in the future growth of
the business.
The Group's 2009 financial performance is discussed in greater detail in the
Operating and Financial Review which follows this statement.
Dividend
The Board is recommending an unchanged final dividend of 1.70 pence per share
(2008 - 1.70 pence), bringing the total dividend for the year to 2.60 pence
(2008 - 2.60 pence). At the level recommended, the full-year dividend would be
covered 3.4 times (2008 - 4.1 times) by adjusted underlying earnings per share.
The final dividend, if approved, will be paid on 28 May 2010 to shareholders on
the register at close of business on 30 April 2010.
Markets and Operations
Senior reports as two Divisions - Aerospace, consisting of 14 operations and
representing 59% of 2009 Group revenue, and Flexonics, consisting of 11
operations and representing 41% of Group revenue. All of Senior's operations
are focused on manufacturing components and systems for original equipment
manufacturers. The Group's products are typically single sourced, highly
engineered and involve advanced manufacturing processes.
Aerospace
The market for commercial aircraft (59% of Divisional sales) was mixed during
2009. Boeing and Airbus collectively delivered a record 979 wide-bodied
commercial aircraft in the year, 14% higher than in 2008 (858 aircraft),
although net order intake declined to 413 aircraft (2008 - 1,439). Their
combined order book consequently reduced to 6,863 aircraft at the year-end (2008
- 7,429), still a healthy seven-year order book at current build rates. Of these
orders, 851 are for the Boeing 787 aircraft, where Senior has between US$600k
and US$1,100k of content per aircraft, depending on the engine configuration.
The 787 flew for the first time on 15 December 2009; an important milestone for
Senior. Boeing anticipates that deliveries of the 787 to customers will start
in the final quarter of 2010, with production increasing steadily thereafter to
a rate of 120 aircraft per annum by the end of 2013.
Bombardier and Embraer, the two largest regional jet manufacturers, experienced
contrasting fortunes during 2009, with jet-aircraft deliveries up 7% at
Bombardier but 25% down at Embraer. Net order intake for in-production aircraft
was actually negative for both companies, as cancellations exceeded orders.
Both companies are, therefore, expected to reduce their regional jet build rates
in 2010. Bombardier officially launched its new CSeries aircraft during 2009,
with Senior being awarded the low-pressure and high-pressure ducting systems at
the Paris Air Show in July. Bombardier received orders for 50 CSeries aircraft
in the year, with deliveries expected to commence in 2013.
The business jet sector was the hardest hit sector of the commercial aircraft
market in 2009, with deliveries falling by 34% to 870 aircraft, from the record
1,315 aircraft delivered in 2008. Recently, however, there have been some signs
of stabilisation in the business jet market with prices of second-hand aircraft
no longer declining and manufacturers once again ordering parts from suppliers
as inventory levels become more aligned with demand.
Senior experienced healthy sales growth in the military and defence sector
during 2009; and this market now represents 26% of Aerospace Divisional sales.
The Group's two largest defence programmes, the Lockheed Martin C-130 military
air-transport aircraft and the Sikorsky Black Hawk helicopter, both experienced
increases in build rates in 2009. The Group also increased the content that it
has on each aircraft. Elsewhere, the Airbus A400M military air-transport
aircraft flew for the first time in December 2009 and Lockheed Martin continued
with its F35 Joint Strike Fighter flight-testing and development programme.
The effects of the contraction in the regional and business jet marketplaces
were partially mitigated by the stronger defence market and beneficial currency
movements; this resulted in reported sales for the Aerospace Division increasing
slightly to GBP319.2m (2008 - GBP312.9m) but adjusted operating profit declining
by 12% to GBP38.8m (2008 - GBP44.3m), with the Divisional operating margin at
12.2% (2008 - 14.1%).
Flexonics
Industrial markets, such as petrochemical, power generation, medical and heating
and ventilation, accounted for 50% of the 2009 Divisional sales. Sales to land
vehicle markets accounted for the remainder.
The land vehicle markets started the year extremely poorly, with year-on-year
production volumes down by 35% to 55% in the first half of 2009 in North America
and Western Europe. During the second half of the year, production of passenger
cars improved slightly due to the combination of modestly improved vehicle
sales, driven at least partially by various government incentive schemes, and
the generally low levels of inventory of finished vehicles. As a result,
production of light passenger vehicles ended the year down 32% and 20% in North
America and Europe respectively. By way of contrast, sales and production of
light vehicles were slightly ahead in Brazil and India, two increasingly
important markets for Senior. Sales and production of medium and heavy duty
trucks remained weak (typically down 40%) throughout 2009 in North America and
Europe. However, sales of the Group's most significant land vehicle product in
North America, an exhaust gas recycling cooler, were very strong in the final
quarter, as truck engine manufacturers built more engines ahead of the
implementation of tighter emission regulations from 1 January 2010.
During 2009, many of the Group's industrial markets were adversely impacted by
the global slowdown, with the effect of poorer end markets being compounded by
the Group's customers de-stocking in order to generate cash. Encouragingly,
these issues became less pronounced towards the end of the year. One important
market which did remain strong throughout 2009 was that for large metal and
fabric expansion joints for industrial piping systems. Senior Flexonics Pathway
is one of the world's leading suppliers to this market and its strong financial
performance made a healthy contribution to the Flexonics Division's results for
2009. In addition, Senior has a small, but growing, presence in the burgeoning
alternative energy market, with product development for the combined heat and
power ("CHP") and solar energy markets making encouraging progress during the
year.
Despite the severe declines in the land vehicle markets in North America and
Europe, improved performances in the Rest of the World, beneficial currency
movements, the strong expansion joint market and the quick action taken to
reduce costs resulted in reported adjusted operating profit for the Division
increasing slightly to GBP26.2m (2008 - GBP25.9m). Whilst reported sales
declined by 12% to GBP221.3m (2008 - GBP250.1m), the Divisional operating margin
improved significantly to 11.8% (2008 - 10.4%). This was a satisfactory outcome
to what was a challenging year for the Flexonics Division.
Employees and the Board
2009 was a difficult time for many of the Group's personnel with headcount
reductions and short-time working having an adverse impact on employees at many
operations. Whilst the Group's total headcount fell by 1,180 (20%) in nine
months, to stand at 4,756 at the end of June 2009, employee numbers stabilised
as anticipated, in the second half of the year, with the Group having 4,764
employees at the year-end. Given the significant uncertainty seen during the
past year, I would especially like to thank all of Senior's employees for their
continued hard work on behalf of the Group and for maintaining such a positive
attitude during the challenging trading environment witnessed during 2009.
As previously announced, there was one change to the Board during 2009 with Mike
Sheppard, Chief Executive for the Flexonics Division, stepping down at the end
of July in order to focus all of his time on the Flexonics operations. On
behalf of the Board, I would like to thank Mike for his contribution, past and
continuing, to the Group.
Outlook
Senior is financially and operationally strong and well positioned to take
advantage of the significant opportunities being seen across the Group. The
growing emphasis on better understanding customer needs, and providing solutions
for them, is generating increased quotation activity and new business. Market
share is also being won as a result of the difficulties some of the Group's
competitors are experiencing in the current economic environment.
In Aerospace, the most recent announcements from Boeing and Airbus indicate that
their 2010 production volumes will be at, or slightly below, 2009 levels.
Boeing and Airbus each have order books representing nearly seven years of
production at current build rates. The regional jet manufacturers' order books
are generally weaker and build rates are anticipated to fall further in 2010.
Business jet production levels, which typically react more quickly to changes in
economic conditions, have recently shown some signs of stabilisation. Looking
forward, it is expected that the Boeing 787, on which Senior has more content
than on any previous commercial aircraft, will start to be delivered to
customers in late 2010. Two other potentially important new programmes for the
Group, the Airbus 350 and Bombardier CSeries aircraft, are scheduled for
delivery to customers beginning in 2013. Build rates of the Group's three main
military programmes, the Joint Strike Fighter, the C-130 air-transporter and the
Black Hawk helicopter, are each expected to increase further during 2010, with
the Joint Strike Fighter seeing a steadily increasing build rate over subsequent
years.
In the land vehicle markets, which represent around half of the Flexonics
Division's revenue, industry commentators are forecasting production of
passenger vehicles to be slightly higher in most of the Group's geographical
markets in 2010 than in 2009, except in Western Europe, particularly Germany,
where more challenging markets are expected as government-funded incentive
schemes come to an end. Sales of medium and heavy duty trucks have been at low
levels for some time now, with the average age of commercial fleets increasing.
Whilst there are currently few signs of improvement in this marketplace, volumes
can be expected to increase when fleet owners become more confident about future
economic conditions. On the industrial side of the Flexonics Division, the
market for large expansion joints has been very strong for the past two years
and there must be the possibility that the capital-project element of the market
may weaken at some point during 2010. On the other hand, growing activity is
being seen in the development of products for the CHP and solar energy markets.
The Group's other industrial markets are broadly stable.
Although Senior's end markets may remain challenging for some time to come, the
number and extent of opportunities being seen by the Group mean the medium- and
long-term prospects for Senior remain highly encouraging. The current year has
started ahead of the Board's expectations and consequently, prospects for 2010,
which were previously forecast to be more difficult than in 2009, have improved
and the Group's performance for 2010 is now anticipated to be broadly in line
with the 2009 outcome.
Martin Clark
Chairman
OPERATING AND FINANCIAL REVIEW
To the members of Senior plc
This Operating and Financial Review ("OFR") has been prepared solely to provide
additional information to enable shareholders to assess the Company's objectives
and strategies and the potential for these to be fulfilled. The OFR should not
be relied upon by any other party for any other purpose.
The OFR contains certain forward-looking statements. Such statements have been
made by the Directors in good faith based on the information available to them
at the time of their approval of this Report, and they should be treated with
caution due to the inherent uncertainties underlying any such forward-looking
information.
In preparing this OFR, the Directors have sought to comply with the guidance set
out in the Accounting Standards Board's "Reporting Statement: Operating and
Financial Review" and its recently published "Rising to the Challenge", a review
of narrative reporting by UK Listed Companies.
This OFR 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 OFR is organised under the following
headings:
+----+--------------------------------------------------------------------+
| ? | Operations and Business Model |
+----+--------------------------------------------------------------------+
| ? | Long-term Strategy, Business Objectives and Key Performance |
| | Indicators |
+----+--------------------------------------------------------------------+
| ? | Financial Review |
+----+--------------------------------------------------------------------+
| ? | Divisional Review |
+----+--------------------------------------------------------------------+
| ? | Outlook |
+----+--------------------------------------------------------------------+
| ? | Risks and Uncertainties |
+----+--------------------------------------------------------------------+
| ? | Resources |
+----+--------------------------------------------------------------------+
| ? | Corporate Social Responsibility |
+----+--------------------------------------------------------------------+
Operations and Business Model
Senior is an international manufacturing Group with operations in 11 countries.
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.
The principal underlying market demand drivers for the Group are global
passenger air miles, air freight demand, large commercial and regional and
business jet build rates, military aerospace programme spending (in particular
by the US Government), passenger vehicle sales in North America, Europe and
Brazil, heavy duty diesel truck sales in North America and capital project
spending in the global petrochemical and power generation industries. Many of
the Group's products are used to satisfy the growing need for emission control
and environmental solutions in its principal end markets.
The Group aims to be a market-leading engineering solutions provider for its
customers, delivering quality products on time, utilising its design and
manufacturing engineering capabilities to optimise customer value and working
responsively to fulfil customer needs.
The Group has a flat organisational structure, with only two layers of
management between the Group CEO and local operational management, in order to
enhance flexibility and promote quick decision making. The Group's culture is
based around empowerment of its autonomous operations within a well-defined
control framework (including strong financial controls), whilst also promoting
collaboration to support sharing of best practice and provide more complete
customer programme solutions where appropriate.
The Group fully embraces the concepts and principles of the Lean Manufacturing
methodology, striving at all times for continuous improvement and the
elimination of non-value-added activities and processes.
All Group operations are required to maintain a strong focus on cash generation,
in particular concentrating on tight controls over discretionary expenditure and
improved efficiencies in working capital management. This requires a clear
understanding that the working capital cycle begins when a customer places an
order and only ends when cash is collected at the end of the process. The Group
has made excellent progress with this initiative in recent years, which has been
a principal driver of its consistently strong free cash flow generation.
The Group initially aims to utilise its available funding capacity to invest in
organic growth and operational improvement opportunities, aligning its
improvement initiatives with the key value drivers within the business. Once
net debt has been reduced to an appropriate level, the Group also plans to
target a small number of acquisitions to accelerate growth and enhance the
overall asset portfolio.
The Group aims to be consistent in its approach to all stakeholders. This means
meeting every commitment that is made, at all times acting with integrity and in
an ethical manner, complying with all legal and regulatory requirements and
being a responsible member of each community within which it operates.
The Group is split into two Divisions, Aerospace and Flexonics.
Aerospace
The Aerospace Division consists of 14 operations. These are located in the USA
(nine), the United Kingdom (two), and continental Europe (three). In 2009, this
Division accounted for 59% of total Group revenue. Its main products were
engine structures and mounting systems (27% of Divisional sales), metallic
ducting systems (23%), airframe and other structural parts (19%), composite
ducting systems (7%), helicopter machined parts (7%) and fluid control systems
(5%). The remaining 12% of Divisional sales were to non-aerospace, but related,
technology markets. The Division's largest customers include Boeing,
representing 13% of 2009 Divisional sales, United Technologies (10% of
Divisional sales), Spirit AeroSystems, Goodrich, Bombardier, Airbus,
Rolls-Royce, GKN and GE.
Flexonics
The Flexonics Division has 11 operations. These are located in North America
(three), the United Kingdom (two), continental Europe (three), South Africa,
India and Brazil. In 2009, the Flexonics Division accounted for 41% of total
Group revenue. This Division's sales comprised flexible mechanisms for vehicle
exhaust systems (19% of Divisional sales), cooling and emission control
components (17%), diesel fuel distribution pipework (14%), and sales of
industrial components, principally expansion joints, control bellows and hoses
(50%). The industrial components were supplied to power and boiler markets (17%
of Divisional sales), oil and gas and chemical processing industries (12%), HVAC
and solar markets (11% ) and other industrial markets (10%). The Division's
largest individual end users are land vehicle customers, including Cummins
(representing 12% of Divisional sales), PSA and Ford (each representing 8%) and
General Motors (5%). The percentage of Divisional sales coming from the
automotive market fell again in 2009 to 32% (2008 - 37%) with sales to the heavy
duty diesel engine market (e.g. Cummins and Caterpillar) growing to 18% (2008 -
16%).
Long-term Strategy, Business Objectives and Key Performance Indicators
There are four key elements to Senior's strategy for accelerating growth and
creating long-term, sustainable shareholder value, which are:
+----+--------------------------------------------------------------------+
| ? | targeted investment in new product development and new |
| | geographies, for markets having higher than average growth |
| | potential; |
+----+--------------------------------------------------------------------+
| ? | exceeding customer expectation through advanced process |
| | engineering and excellent factory and logistics execution; |
+----+--------------------------------------------------------------------+
| ? | portfolio enhancement, through focused acquisitions and disposal |
| | of non-core assets; both are subject to strict financial and |
| | commercial criteria, their long-term outlook and the Group's |
| | anticipated funding position; and |
+----+--------------------------------------------------------------------+
| ? | creating an entrepreneurial culture within a strong control |
| | framework, continuously striving for improvements amongst its |
| | operating businesses whilst operating in a safe and socially |
| | responsible manner. |
+----+--------------------------------------------------------------------+
The Group implements and monitors its performance against this strategy by
having the following financial objectives:
+----+--------------------------------------------------------------------+
| ? | to have organic sales growth in excess of the rate of inflation; |
+----+--------------------------------------------------------------------+
| ? | to increase adjusted earnings per share on an annual basis by more |
| | than the rate of inflation; |
+----+--------------------------------------------------------------------+
| ? | to increase the Group's return on revenue margin each year; |
+----+--------------------------------------------------------------------+
| ? | to generate sufficient cash to enable the Group to fund future |
| | growth and to follow a progressive dividend policy; and |
+----+--------------------------------------------------------------------+
| ? | to maintain an overall return on capital employed in excess of the |
| | Group's cost of capital and to target a pre-tax return in excess |
| | of 15%. |
+----+--------------------------------------------------------------------+
These financial objectives are supported by two non-financial objectives which
are:
+----+--------------------------------------------------------------------+
| ? | to reduce the Group's carbon dioxide emissions to revenue ratio by |
| | 15% from 113.7 tonnes per GBPm revenue in 2006 to below 96.6 |
| | tonnes by 2010; and |
+----+--------------------------------------------------------------------+
| ? | to reduce the number of OSHA (or equivalent) recordable injury and |
| | illness cases involving days away from work by 5% per annum. |
+----+--------------------------------------------------------------------+
In spite of very challenging market conditions in 2009, two of the Group's
financial objectives were met: i) the Group generated a record level of free
cash flow of GBP60.1m to support future growth and its dividend policy, and; ii)
achieved a return on capital employed of 18.6%. Three of the Group's financial
performance objectives were not met in 2009, as above inflation increases in
organic sales and adjusted earnings per share were not achieved, due to the
underlying market demand reductions experienced in the period. Consequently,
the Group's return on revenue margin did not increase. However, over the
five-year period to 2009 the Group has achieved above inflation increases in
sales and adjusted earnings per share as well as increasing its return on
revenue margin to 11.0%, from 5.2% in 2004.
The Group exceeded its improvement target for recordable injury and illness
cases, recording a lost time injury frequency rate of 1.61 days per 100
employees (2008 - 1.94 days). In addition, further improvements were made in
the level of carbon dioxide emissions, with an emission level of 99m tonnes per
GBP1m of sales (a 13% reduction since 2006) achieved in the year. The Group
remains on track to meet its four-year target to reduce emissions by 15%.
A summary of the year-on-year movements in these Key Performance Indicators
("KPIs") is set out in the table below:
+------------------------------------------------+----------+-+---------+
| | 2009 | | 2008 |
+------------------------------------------------+----------+-+---------+
| Organic revenue growth (1) | -16% | | +5% |
+------------------------------------------------+----------+-+---------+
| Adjusted earnings per share (2) | 8.91p | | 10.63p |
+------------------------------------------------+----------+-+---------+
| - growth | -16% | | +38% |
+------------------------------------------------+----------+-+---------+
| Return on revenue margin (3) | 11.0% | | 11.5% |
+------------------------------------------------+----------+-+---------+
| Return on capital employed (4) | 18.6% | | 21.7% |
+------------------------------------------------+----------+-+---------+
| CO2 emissions/GBPm revenue (5) | 99 | | 104 |
| | tonnes | | tonnes |
+------------------------------------------------+----------+-+---------+
| Lost time injury frequency rate (6) | 1.61 | | 1.94 |
+------------------------------------------------+----------+-+---------+
+-----+--------------------------------------------------------------------+
| (1) | Organic revenue growth is the rate of growth in Group revenue, at |
| | constant exchange rates, excluding the effect of acquisitions and |
| | disposals. |
+-----+--------------------------------------------------------------------+
| (2) | Adjusted earnings per share is the profit after taxation (adjusted |
| | for the profit or loss on disposal of fixed assets, amortisation |
| | of intangible assets arising on acquisitions and exceptional |
| | pension gains) divided by the average number of shares in issue in |
| | the period. |
+-----+--------------------------------------------------------------------+
| (3) | Return on revenue margin is the Group's adjusted operating profit |
| | divided by its revenue. |
+-----+--------------------------------------------------------------------+
| (4) | Return on capital employed is the Group's adjusted operating |
| | profit divided by the average of the capital employed at the start |
| | and end of the period. Capital employed is total assets less |
| | total liabilities, except for those of an interest bearing nature. |
+-----+--------------------------------------------------------------------+
| (5) | CO2 emissions/GBPm revenue is an estimate of the Group's carbon |
| | dioxide emissions in tonnes divided by the Group's revenue in GBP |
| | millions. |
+-----+--------------------------------------------------------------------+
| (6) | Lost time injury frequency rate is the number of OSHA (or |
| | equivalent) recordable injury and illness cases involving days |
| | away from work per 100 employees. |
+-----+--------------------------------------------------------------------+
Financial Review
Summary
A summary of the Group's operating results is set out in the table below.
Further detail on the performance of each Division is included in the section
entitled "Divisional Review".
+--------------------+-------+-------+-+-------+-------+--+------+------+
| | Revenue | | Adjusted | (1)| Margin |
| | | | Operating | | |
| | | | Profit | | |
+--------------------+---------------+-+---------------+--+-------------+
| | 2009 | 2008 | | 2009 | 2008 | | 2009 | 2008 |
+--------------------+-------+-------+-+-------+-------+--+------+------+
| | GBPm | GBPm | | GBPm | GBPm | | % | % |
+--------------------+-------+-------+-+-------+-------+--+------+------+
| Aerospace | 319.2 | 312.9 | | 38.8 | 44.3 | | 12.2 | 14.1 |
+--------------------+-------+-------+-+-------+-------+--+------+------+
| Flexonics | 221.3 | 250.1 | | 26.2 | 25.9 | | 11.8 | 10.4 |
+--------------------+-------+-------+-+-------+-------+--+------+------+
| Inter-segment | (0.4) | (0.6) | | - | - | | - | - |
| sales | | | | | | | | |
+--------------------+-------+-------+-+-------+-------+--+------+------+
| Central costs | - | - | | (5.6) | (5.7) | | - | - |
+--------------------+-------+-------+-+-------+-------+--+------+------+
| Group total | 540.1 | 562.4 | | 59.4 | 64.5 | | 11.0 | 11.5 |
+--------------------+-------+-------+-+-------+-------+--+------+------+
+-----+--------------------------------------------------------------------+
| (1) | Adjusted operating profit is the profit before interest and tax |
| | and before the loss on disposal of fixed assets, amortisation of |
| | intangible assets arising on acquisitions and an exceptional |
| | pension gain. |
+-----+--------------------------------------------------------------------+
Adjusted operating profit may be reconciled to the operating profit that is
shown in the Consolidated Income Statement as follows:
+-------------------------------------------------+----------+-+---------+
| | 2009 | | 2008 |
+-------------------------------------------------+----------+-+---------+
| | GBPm | | GBPm |
+-------------------------------------------------+----------+-+---------+
| Operating profit per Financial Statements | 61.0 | | 59.8 |
+-------------------------------------------------+----------+-+---------+
| Loss on sale of fixed assets | 0.1 | | - |
+-------------------------------------------------+----------+-+---------+
| Exceptional pension gain | (6.3) | | - |
+-------------------------------------------------+----------+-+---------+
| Amortisation of intangible assets from | 4.6 | | 4.7 |
| acquisitions | | | |
+-------------------------------------------------+----------+-+---------+
| Adjusted operating profit | 59.4 | | 64.5 |
+-------------------------------------------------+----------+-+---------+
Including the positive impact of foreign exchange movements, Group revenue
decreased by 4% in 2009 (16% excluding the impact of foreign exchange), as the
Group experienced a significant contraction in volumes in a number of its end
markets during the year. Military aerospace and the industrial petrochemical
and power generation markets showed resilience but the consequences of the
global credit crisis had a significant negative impact on demand in many other
markets. Volume reductions of between 40% and 50% were experienced in land
vehicle and regional and business jet markets in the first half of the year and,
whilst build rates of large commercial aircraft remained stable, many of the
Group's major aerospace customers implemented de-stocking measures that had a
negative effect on demand. Demand in other industrial markets, including HVAC,
semi-conductor and medical markets also declined significantly in the period.
Demand patterns generally stabilised in the second half of the year and some
growth was experienced, in particular in land vehicle markets, in the fourth
quarter.
The Group acted quickly, in the first quarter, to implement a series of cost
reduction plans aimed at mitigating the operational impact of the decreases in
market demand, including a necessary reduction in headcount of 700 people.
This, together with the headcount reductions already implemented in the fourth
quarter of 2008, brought the total headcount reduction to 1,180 people (20%) in
the nine month period from 1 October 2008 to 30 June 2009. Despite the cost
reduction and rationalisation measures implemented, adjusted operating profit
decreased by 8% (22% excluding the impact of foreign exchange) in 2009.
Operating margins achieved were a healthy 11.0% (2008 - 11.5%).
The Group's free cash flow and net debt for 2009 and the prior year were:
+-------------------------------------------------+---------+-+---------+
| | 2009 | | 2008 |
+-------------------------------------------------+---------+-+---------+
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Free cash flow | 60.1 | | 52.4 |
+-------------------------------------------------+---------+-+---------+
| Net debt | 102.3 | | 174.5 |
+-------------------------------------------------+---------+-+---------+
Free cash flow is the total net cash flow generated by the Group prior to
corporate activity such as acquisitions, disposals, financing and transactions
with shareholders; it is calculated as follows:
+-------------------------------------------------+----------+-+----------+
| | 2009 | | 2008 |
+-------------------------------------------------+----------+-+----------+
| | GBPm | | GBPm |
+-------------------------------------------------+----------+-+----------+
| Net cash from operating activities | 69.8 | | 74.6 |
+-------------------------------------------------+----------+-+----------+
| Interest received | 2.6 | | 1.7 |
+-------------------------------------------------+----------+-+----------+
| Proceeds on disposal of tangible fixed assets | 0.3 | | 0.6 |
+-------------------------------------------------+----------+-+----------+
| Purchases of tangible fixed assets | (12.3) | | (23.8) |
+-------------------------------------------------+----------+-+----------+
| Purchases of intangible assets | (0.3) | | (0.7) |
+-------------------------------------------------+----------+-+----------+
| Free cash flow | 60.1 | | 52.4 |
+-------------------------------------------------+----------+-+----------+
The Group generated significant free cash flow of GBP60.1m in 2009 (2008 -
GBP52.4m), an excellent increase of 15% over the prior year. The principal
drivers of this strong performance were the quick and decisive actions taken to
implement cost reduction measures early in the year in response to deteriorating
market conditions, sustained tight controls over discretionary expenditure
(including capital expenditure) and continued good progress with the Group's
Lean Manufacturing initiatives that resulted in exceptionally strong working
capital inflows from reduced inventory.
As a result of its strong free cash flow performance, the Group was able to
contribute GBP19.6m in excess of service costs into its defined benefit pension
plans in the UK and the US, GBP13.2m of which was voluntary, and still achieve a
significant reduction in net debt of GBP72.2m during the year (including foreign
exchange gains of GBP21.9m). Net debt at the year-end was GBP102.3m (2008 -
GBP174.5m).
Revenue
Group revenue decreased by GBP22.3m (4%) to GBP540.1m (2008 - GBP562.4m). There
were no acquisitions in the period. If the effect of a year-on-year beneficial
exchange impact of GBP82.5m is excluded, then underlying revenue fell by 16% on
a constant currency basis. In 2009, 66% of Group sales originated from North
America, 10% from the United Kingdom, 17% from the Rest of Europe and 7% from
the Rest of the World.
Operating profit
Group operating profit increased by 2% to GBP61.0m (2008 - GBP59.8m), including
the positive impact of a GBP6.3m exceptional pension curtailment gain which
arose following the implementation of a cap on future pensionable salary
increases in the Group's UK defined benefit pension plan. Excluding this
exceptional gain Group operating profit declined by 9%, principally due to the
underlying market demand reductions experienced in the year.
Adjusted operating profit decreased by GBP5.1m (8%) to GBP59.4m (2008 -
GBP64.5m). Adjusted operating profit is that before finance costs, loss on
disposal of fixed assets of GBP0.1m (2008 - GBPnil), amortisation of intangible
assets arising on acquisitions of GBP4.6m (2008 - GBP4.7m) and the exceptional
pension gain of GBP6.3m (2008 - GBPnil). The Group benefited from favourable
foreign currency movements of GBP11.2m, and, if these are excluded, then
underlying adjusted operating profit decreased by 22% on a constant currency
basis.
Finance costs
Finance costs, net of investment income of GBP1.2m (2008 - GBP2.7m), increased
to GBP11.4m (2008 - GBP8.5m). Net interest costs on borrowings increased to
GBP7.2m (2008 - GBP6.8m) mainly due to foreign exchange movements in the year.
Pension related charges also increased, to GBP4.2m in 2009 (2008 - GBP1.7m),
principally as a result of higher interest costs relating to the unwinding of
discounted liabilities and the reduced level of assets in the Group's pension
plans at the start of the year.
Profit before tax
Adjusted profit before tax decreased by 14% to GBP48.0m (2008 - GBP56.0m).
Reported profit before tax decreased to GBP49.6m (2008 - GBP51.3m).
Tax charge
The total tax charge decreased to GBP10.6m (2008 - GBP12.1m), due to the
decrease in the Group's taxable profits. Net tax benefits, arising on the loss
on sale of fixed assets and amortisation of intangible assets from acquisitions
totalled GBP1.9m (2008 - GBP1.9m). If these are added back, then the resultant
tax charge of GBP12.5m (2008 - GBP14.0m) represented an underlying rate of 26.0%
(2008 - 25.0%) on the adjusted profit before tax of GBP48.0m (2008 - GBP56.0m).
The increase in the underlying tax rate was mainly due to the increased
proportion of the Group's profits being generated in both the USA and South
Africa (where the Group's effective tax rate is approximately 35%).
Earnings per share
The weighted average number of shares, for the purposes of calculating undiluted
earnings per share, increased to 398.3 million (2008 - 395.0 million). Adjusted
earnings per share decreased by 16% to 8.91 pence (2008 - 10.63 pence). Basic
earnings per share decreased by 1% to 9.79 pence (2008 - 9.92 pence).
Dividends
A final dividend of 1.70 pence per share is proposed for 2009, unchanged from
last year, which would cost GBP6.8m (2008 final dividend - GBP6.8m). This would
bring the full-year dividend to 2.60 pence per share, the same level as the
prior year. The cash outflow incurred during 2009 in respect of the final
dividend for 2008 and the interim dividend for 2009, was GBP10.4m (2008 -
GBP10.3m).
Research and development
The Group's expenditure on research and development increased to GBP9.7m during
2009 (2008 - GBP8.6m). Expenditure was mainly incurred on designing and
engineering products in accordance with individual customer specifications and
developing specific manufacturing processes for their production.
Capital expenditure
Capital expenditure decreased by 49% in 2009 to GBP12.6m (2008 - GBP24.5m),
principally in response to the significant demand reductions experienced by the
Group's operations. The Group's operations remain well capitalised. Disposal
of assets no longer required raised GBP0.3m (2008 - GBP0.6m). A higher level of
capital expenditure is anticipated for 2010, although this will be dependent on
the Group securing the expected new programme wins in both Divisions.
Capital structure
The Group's Consolidated Balance Sheet at 31 December 2009 may be summarised as
follows:
+------------------------------------+---------+-+-------------+-+----------+
| | Assets | | Liabilities | | Net |
| | | | | | Assets |
+------------------------------------+---------+-+-------------+-+----------+
| | GBPm | | GBPm | | GBPm |
+------------------------------------+---------+-+-------------+-+----------+
| Property, plant and equipment | 118.0 | | - | | 118.0 |
+------------------------------------+---------+-+-------------+-+----------+
| Goodwill and intangible assets | 180.3 | | - | | 180.3 |
+------------------------------------+---------+-+-------------+-+----------+
| Current assets and liabilities | 144.6 | | (100.2) | | 44.4 |
+------------------------------------+---------+-+-------------+-+----------+
| Other non-current assets and | 0.8 | | (8.3) | | (7.5) |
| liabilities | | | | | |
+------------------------------------+---------+-+-------------+-+----------+
| Post-retirement obligations | - | | (48.1) | | (48.1) |
+------------------------------------+---------+-+-------------+-+----------+
| Total before net debt | 443.7 | | (156.6) | | 287.1 |
+------------------------------------+---------+-+-------------+-+----------+
| Net debt | 20.4 | | (122.7) | | (102.3) |
+------------------------------------+---------+-+-------------+-+----------+
| Total at 31 December 2009 | 464.1 | | (279.3) | | 184.8 |
+------------------------------------+---------+-+-------------+-+----------+
| Total at 31 December 2008 | 549.4 | | (373.2) | | 176.2 |
+------------------------------------+---------+-+-------------+-+----------+
Net assets increased by 5% in the year to GBP184.8m (2008 - GBP176.2m), in the
main as a result of retained profits of GBP39.0m offset by adverse total foreign
exchange movements of GBP5.8m. Net assets per share increased by 5% to 46.2p
(2008 - 44.2p). There were 399.7 million ordinary shares in issue at the end of
2009 (2008 - 398.3 million). Post-retirement obligations decreased to GBP48.1m
(2008 - GBP51.2m), with the decrease in deficit arising principally due to an
increase in returns on invested assets, increased voluntary cash contributions
in excess of service cost of GBP19.6m and a curtailment gain arising as a result
of a cap on future pensionable salary increases in the UK, which were largely
offset by the adverse impact of a lower rate of 5.70% being used to discount the
UK pension plan liabilities (2008 - 6.40%) and an increase in the inflation
assumption from 2.8% to 3.5%.
Cash flow
The Group's free cash flow, whose derivation is set out in the table below,
increased by 15% to GBP60.1m (2008 - GBP52.4m). The main drivers of this
improvement were a significant inflow from working capital of GBP29.9m (2008 -
GBP12.2m) and a reduction in capital expenditure to GBP12.6m (2008 - GBP24.5m).
These were offset by additional discretionary pension payments of GBP13.2m (2008
- GBPnil) and an increase in tax payments of GBP2.4m to GBP11.2m in the year.
In addition, included within operating profit in 2009 is a non-cash exceptional
pension gain of GBP6.3m (2008 - GBPnil) relating to the implementation of a cap
on future pensionable salary increases in the UK pension plan from 2010.
+-------------------------------------------------+---------+-+---------+
| | 2009 | | 2008 |
+-------------------------------------------------+---------+-+---------+
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Operating profit | 61.0 | | 59.8 |
+-------------------------------------------------+---------+-+---------+
| Depreciation and amortisation | 25.4 | | 23.4 |
+-------------------------------------------------+---------+-+---------+
| Working capital movement | 29.9 | | 12.2 |
+-------------------------------------------------+---------+-+---------+
| Pension payments above service cost | (6.4) | | (5.2) |
+-------------------------------------------------+---------+-+---------+
| Additional discretionary pension payments | (13.2) | | - |
+-------------------------------------------------+---------+-+---------+
| Exceptional pension gain | (6.3) | | - |
+-------------------------------------------------+---------+-+---------+
| Other items | (0.7) | | 1.7 |
+-------------------------------------------------+---------+-+---------+
| Cash generated from operations | 89.7 | | 91.9 |
+-------------------------------------------------+---------+-+---------+
| Interest paid (net) | (6.1) | | (6.8) |
+-------------------------------------------------+---------+-+---------+
| Tax paid | (11.2) | | (8.8) |
+-------------------------------------------------+---------+-+---------+
| Capital expenditure | (12.6) | | (24.5) |
+-------------------------------------------------+---------+-+---------+
| Sale of fixed assets | 0.3 | | 0.6 |
+-------------------------------------------------+---------+-+---------+
| Free cash flow | 60.1 | | 52.4 |
+-------------------------------------------------+---------+-+---------+
| Dividends | (10.4) | | (10.3) |
+-------------------------------------------------+---------+-+---------+
| Acquisitions and deferred consideration | 0.5 | | (43.6) |
| received | | | |
+-------------------------------------------------+---------+-+---------+
| Share issues | 0.1 | | 1.3 |
+-------------------------------------------------+---------+-+---------+
| Foreign exchange variations | 21.9 | | (79.5) |
+-------------------------------------------------+---------+-+---------+
| Opening net debt | (174.5) | | (94.8) |
+-------------------------------------------------+---------+-+---------+
| Closing net debt | (102.3) | | (174.5) |
+-------------------------------------------------+---------+-+---------+
Net debt
Net debt decreased by GBP72.2m in the year to GBP102.3m (2008 - GBP174.5m). The
principal reasons for the decrease were: tight controls over discretionary
expenditure imposed across the Group early in the year, which helped to preserve
cash profits; a reduction in the level of capital expenditure in the year to 61%
of depreciation (2008 - 131% of depreciation); exceptionally strong cash inflows
from working capital during the year of GBP29.9m; and favourable foreign
exchange rate movements of GBP21.9m, most notably due to an appreciation in the
value of the Pound Sterling against the US dollar from GBP1:US$1.44 at 31
December 2008 to GBP1:US$1.61 at 31 December 2009. At the year-end, net debt
comprised gross borrowings of GBP122.7m, with 94% of the Group's gross
borrowings in US dollars (31 December 2008 - 85%), and cash and cash equivalents
of GBP20.4m.
The Group's committed borrowing facilities contain a requirement that the ratio
of EBITDA (adjusted profit before interest, tax, depreciation and amortisation)
to net interest costs must exceed 3.5x, and that the ratio of net debt to EBITDA
must not exceed 3.0x. At 31 December 2009 the Group was operating well within
these covenants as the ratio of EBITDA to net interest costs was 10.6x (31
December 2008 - 12.0x) and the ratio of net debt to EBITDA was 1.3x (31 December
2008 - 2.1x).
Liquidity
As at 31 December 2009, the Group's gross borrowings were GBP121.4m (2008 -
GBP150.8m). The maturity of these borrowings, together with the maturity of the
Group's committed facilities, can be analysed as follows:
+--------------------------------------+------------+--+------------+
| | Gross | (1)| Committed |
| | Borrowings | | Facilities |
+--------------------------------------+------------+--+------------+
| | GBPm | | GBPm |
+--------------------------------------+------------+--+------------+
| Within one year | 1.1 | | - |
+--------------------------------------+------------+--+------------+
| In the second year | 0.9 | | 12.4 |
+--------------------------------------+------------+--+------------+
| In years three to five | 26.2 | | 101.7 |
+--------------------------------------+------------+--+------------+
| After five years | 93.2 | | 93.2 |
+--------------------------------------+------------+--+------------+
| | 121.4 | | 207.3 |
+--------------------------------------+------------+--+------------+
+-----+--------------------------------------------------------------------+
| (1) | Gross borrowings include the use of bank overdrafts, other loans |
| | and committed facilities, but exclude finance leases and |
| | unrealised losses on forward foreign exchange contracts. |
| | Unrealised forward foreign exchange contract losses of GBPnil |
| | (2008 - GBP33.9m) are included in the calculation of net debt. |
+-----+--------------------------------------------------------------------+
At the year-end the Group had committed facilities of GBP207.3m, with a weighted
average maturity of 5.4 years. The Group is in a strong funding position with
the next material refinancing not due until July 2012.
Going concern basis
The Group's business activities, performance and position are set out in the
Operations Review above and the Divisional Review below. The financial position
of the Group, its cash flows, liquidity position and borrowing facilities are
described within this Operating and Financial Review. In addition, a review of
the principal risks and uncertainties that are likely to affect the Group's
future development is set out below, together with a summary of the Group's
policies and processes in respect of capital and financial risk management
including foreign exchange, credit and liquidity risks.
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 borrowing. At 31
December 2009, 97% of the Group's gross debt was financed via revolving credit
and private placement facilities, with an average maturity of 5.4 years. The
Group is well funded and now has no major borrowing facility renewal before
2012.
However, current economic conditions create uncertainty particularly over the
level of demand for the Group's products and the exchange rate between the Pound
Sterling and the US dollar. This is important to the Group's financial
performance given that around 80% of the Group's profits in 2009 were earned in
the US and 94% of its gross borrowings at 31 December 2009 were denominated in
US dollars. For these reasons, a sensitivity analysis has been performed on the
Group's forecasts and projections, to take account of reasonably possible
changes in trading performance together with foreign exchange fluctuations under
the hedging policies that are in place. This analysis shows that the Group will
be able to operate well within the level of its current committed borrowing
facilities and banking covenants under all reasonably foreseeable scenarios. As
a consequence, the Directors have a reasonable expectation that the Company and
the Group have adequate resources to continue in operational existence for the
foreseeable future. The Board has continued to adopt the going concern basis in
preparing the Group's Annual Report & Accounts 2009.
Changes in accounting policies
The accounting policies adopted in the Financial Statements are consistent with
those followed in the preparation of the Group's 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 Financial
Statements, and do not have a material impact on the presentation of the Group's
results.
Related party transactions
The Group's related party transactions are between the Company and its
subsidiaries, and have been eliminated on consolidation.
Divisional Review
The Group consists of two Divisions, Aerospace and Flexonics, whose performances
are discussed below. It should be noted that the results for 2008 have been
translated using 2009 average exchange rates in order to make appropriate
comparisons at constant currency.
Aerospace Division
+------------------------------------+----------+--+----------+--+----------+
| | 2009 | | 2008 | | Change |
+------------------------------------+----------+--+----------+--+----------+
| | GBPm | | GBPm | | |
+------------------------------------+----------+--+----------+--+----------+
| Revenue | 319.2 | | 361.5 | | -12% |
| | | | (1) | | |
+------------------------------------+----------+--+----------+--+----------+
| Adjusted operating profit | 38.8 | | 51.4 (1) | | -25% |
+------------------------------------+----------+--+----------+--+----------+
| Operating margin | 12.2% | | 14.2% | | - |
+------------------------------------+----------+--+----------+--+----------+
+-----+--------------------------------------------------------------------+
| (1) | 2008 results translated using 2009 average exchange rates. |
+-----+--------------------------------------------------------------------+
The revenue of the Aerospace Division fell by GBP42.3m (12%) to GBP319.2m (2008
- GBP361.5m at constant currency). The Division's sales in the large commercial
aircraft market (41% of Divisional sales) were broadly stable during 2009.
Although aircraft deliveries increased by 14% to 979 (2008 - 858), as there was
no repeat of the 2008 machinists strike at Boeing, demand for the Group's
products in this market was impacted by de-stocking initiatives implemented by
most customers in response to deteriorating macroeconomic conditions. The 2009
Boeing and Airbus combined net order intake was 413 aircraft, which was 42% of
the level of deliveries, a significant decline from recent years' order intakes,
and a reflection of the impact of the global financial crisis. However, the
combined order book still stood at 6,863 aircraft at the year-end (representing
approximately seven years of deliveries at current build rates). This order
book includes 851 orders for the Boeing 787 aircraft where Senior has between
US$600k and US$1,100k of content per aircraft depending on engine configuration.
This continues to represent a solid foundation for the Group's future.
Military markets remained robust overall, with increased volumes of helicopter
parts delivered to Sikorsky and to the growing C130 transport aircraft
programme. Stable demand was experienced in other US Government programmes.
However, regional and business jet markets declined significantly in 2009.
Combined deliveries of 185 aircraft by the principal regional jet manufacturers,
Embraer (125 aircraft) and Bombardier (60 aircraft), were 17% lower than the
combined total of 222 achieved in 2008. The business jet market was also very
weak for the whole year, with 870 deliveries being some 34% lower than in 2008
(1,315 deliveries), although demand levels within this market stabilised in the
second half of the year.
As a result of the volume declines experienced in the regional and business jet
markets, the Aerospace Division's adjusted operating profit (before profit/loss
on disposal of fixed assets and amortisation of intangible assets arising on
acquisitions) decreased by GBP12.6m (25%) to GBP38.8m (2008 - GBP51.4m at
constant currency). The Division's operating margin decreased by 2.0 percentage
points to 12.2% (2008 - 14.2%).
Capital expenditure for the Aerospace Division decreased to GBP9.0m in 2009
(2008 - GBP17.1m), in response to the general market contraction. However, this
also reflects the fact that the Aerospace Division is well capitalised, since
the Group's rate of capital expenditure in this Division in recent years has
been well above the rate of depreciation, as production capacity has been
increased to meet the demands of both existing and future major programmes, such
as the C130 military transport plane, the Boeing 787 and the Joint Strike
Fighter. Total capital expenditure in this Division represented 0.8x
depreciation (2008 - 1.9x).
Flexonics Division
+------------------------------------+----------+--+----------+--+----------+
| | 2009 | | 2008 | | Change |
+------------------------------------+----------+--+----------+--+----------+
| | GBPm | | GBPm | | |
+------------------------------------+----------+--+----------+--+----------+
| Revenue | 221.3 | | 284.1 | | -22% |
| | | | (1) | | |
+------------------------------------+----------+--+----------+--+----------+
| Adjusted operating profit | 26.2 | | 30.2 (1) | | -13% |
+------------------------------------+----------+--+----------+--+----------+
| Operating margin | 11.8% | | 10.6% | | - |
+------------------------------------+----------+--+----------+--+----------+
+-----+--------------------------------------------------------------------+
| (1) | 2008 results translated using 2009 average exchange rates. |
+-----+--------------------------------------------------------------------+
Revenue for the Flexonics Division decreased by GBP62.8m (22%) to GBP221.3m
(2008 - GBP284.1m at constant currency). The Division benefited from sustained
strength in demand for large industrial expansion joints (oil refining, power
generation and chemical processing) with the Group's Pathway operation based in
Texas performing well, although other industrial market demand was weak.
Industrial markets accounted for 50% of this Division's sales in 2009.
Demand in land vehicle markets, representing the remaining 50% of the Flexonics
Division's sales, fell dramatically in the first half of the year, before
recovering some ground in the second half. The recovery in passenger vehicle
markets was largely driven by various government-backed incentive schemes.
After an extremely weak first half, the Group enjoyed an increase in demand for
its heavy duty diesel products in North America in the second half of the year,
as a result of an engine pre-build in advance of new tighter emission
regulations that came into force on 1 January 2010. Overall, sales of medium
and heavy duty trucks in North America were 244,000 in 2009, a decline of 37%
compared to the 386,000 sold in 2008. Light vehicle sales in North America fell
by 3.2 million vehicles (20%) to 12.6 million and in Europe were down by 0.9
million vehicles (5%) to 15.9 million.
In response to the significant volume declines experienced in land vehicle
markets late in 2008, profit preservation plans were implemented at all affected
operations during the fourth quarter of 2008; this continued in the first half
of 2009. In total, the Division's workforce was reduced by 680 people (24%) in
this period. Despite these measures, the Flexonics Division's adjusted
operating profit for 2009 decreased by 13% to GBP26.2m (2008 - GBP30.2m at
constant currency). However, the Division's operating margin for 2009 increased
by a very satisfactory 1.2 percentage points to 11.8% (2008 - 10.6 %), due to an
improved product mix in industrial operations, and the positive leverage effect
on operating profit from the increase in volumes experienced in land vehicle
markets late in the fourth quarter on the much reduced cost base.
Capital expenditure for the Division decreased to GBP3.5m or 0.4x depreciation
in 2009 (2008 - GBP7.4m or 0.8x depreciation), reflecting the weak market
conditions and the fact that capital expenditure levels in recent years, in
particular in the land based vehicle operations, have been well above
depreciation.
Outlook
A detailed outlook statement is included in the Chairman's Statement above.
Demand conditions in the Aerospace Division are strongest in the military and
defence sector. Large commercial aircraft build rates are currently stable, but
regional jet demand continues to decline. Demand for business jets now appears
to have stabilised at a relatively low level, by historical standards, with
little prospect of any significant recovery in the immediate future. Within
Flexonics, order books in the Group's major industrial markets (petrochemical
and power generation) remain relatively robust. In addition, positive momentum
from the increased level of sales in passenger vehicle markets late in 2009 has
been sustained to date, although it appears likely that there may be some
slowdown in demand in 2010 in Europe when government incentive schemes end. The
outlook for heavy duty diesel demand in North America is weak in the short term,
although there is the prospect of a recovery once fleet owners become more
confident of future economic conditions.
Against this backdrop the Group remains cash generative, continues to operate
well within its bank covenants and does not have a major banking facility
renewal until 2012. Going forward, the Group is well funded with healthy
long-term prospects.
Risks and Uncertainties
There are a number of potential risks and uncertainties which could have a
material impact on the Group's future performance and could cause actual results
to differ materially from those expected or from historical results. The
principal risks and uncertainties are set out below. Overall, the Group's risk
profile has moderated during 2009 principally due to: a stabilisation of key
market demand; increased confidence in the outlook compared to a year ago; and a
significant increase in the Group's level of funding headroom which has been
driven by very strong free cash flow generation during the year.
Global financial crisis
The potential adverse impact on the Group of the global financial crisis remains
significant, but has receded during the year. The Group suffered a significant
reduction in demand in almost all of its key markets in the first half of 2009,
and had to implement profit preservation plans that resulted in a reduction in
the total workforce of 20% in the nine month period ended 30 June 2009. Market
demand conditions generally stabilised during the second half of the year and
the Group even enjoyed some volume uplift in land vehicle markets. Customer
financing issues have also lessened, as credit markets have become more liquid
and the North American car industry has been restructured.
The Group's financing position, which has been reported earlier in this
Operating and Financial Review, improved significantly in the year due to very
strong free cash flow generation. Therefore, Senior is well placed to be able
to withstand any further potential negative consequences that may arise from any
residual global credit market issues.
Markets and customers
Long-term growth in demand, including participation in future development
programmes in the Group's major markets, is an essential foundation for future
growth. The Group is well positioned in this respect in its key aerospace and
industrial markets, and in the emission-related sectors of land based vehicle
and industrial markets, where increasingly stringent legislation will ensure
that long-term demand for the Group's products remains healthy. To ensure that
the Group retains its position and is well placed to take advantage of new
market growth opportunities, the senior management team has recently been
strengthened through the recruitment of a Head of Business Development, a newly
created role.
The Group maintains close relationships with its key customers in both
Divisions. Innovative customer solutions and quality products delivered on
time, fully in line with specifications, are critical components of customer
value that ensure continued participation in existing and future development
programmes, and these underpin the Group's long-term growth aspirations.
Provision of superior customer value is a top priority within the Group.
The Group derived 59% of its sales in 2009 from the aerospace market with the
most significant element attributable to the large commercial aircraft sector
which accounted for 24% of Group sales. Whilst the commercial aerospace market
is expected to be strong in the long term (driven by sustained growth in global
passenger air miles), and build rates for wide-bodied commercial aircraft are
anticipated to remain broadly stable in 2010, should this not be the case, the
Group's financial performance would be adversely affected, as was the case in
2001 following the events of "9/11".
The Group has a well-balanced portfolio of aerospace customers, nearly all of
whom are financially strong with the largest, Boeing, representing only 8% of
2009 Group sales. The immediate and total loss of such a customer is considered
to be highly improbable, given that many parts are typically supplied by a
number of Senior's operations to a range of customer locations, with many
products on long-term agreements.
The Group's industrial markets are diverse and fragmented, with the largest
single customer representing only 2% of 2009 Group sales. The failure of any
single industrial customer is, therefore, unlikely to have a material effect on
the Group.
The long-term potential economic viability of North American and European
automotive manufacturers improved in 2009, but nevertheless remains uncertain,
despite industry restructuring and significant recent government support. It is
therefore possible that one of the larger US automotive manufacturers may again
seek protection from its creditors (known as going into Chapter 11 in the US),
which in turn could result in some of its suppliers seeking similar creditor
protection. In this event the Group may not recover all of the amounts owed to
it. However as seen in the last year, production of vehicles, and hence sales
of the Group's relevant products would likely continue, albeit at a lower level,
so rendering the impact to be of a one-off, rather than ongoing, nature. The
largest automotive manufacturer accounted for around 3% of 2009 Group sales,
both to the manufacturer directly and/or to its supplier base.
Competitors
The Group operates in competitive market sectors. The aerospace supply base is
today principally located in North America and Europe, and this is where the
Group's aerospace operations are situated, so enabling commercial, operational
and engineering support to be readily given to its customers. Whilst the
industry is consolidating, the supplier base remains fragmented, and the Group
participates in a diverse range of aerospace programmes with a broad range of
end customers. Hence, the actions of a single competitor are unlikely to have a
material impact on the results of the Group.
An additional threat relates to the increasing pressure, principally on the part
of customers, to move the manufacture of certain aerospace components to
operations in low-cost countries. In response, some years ago the Group set up
an operation in Mexico and is actively engaged in new programme bids to expand
this facility. Other low-cost country alternatives will also be considered at
the appropriate time.
In the Flexonics Division, development of the Group's products is increasingly
being driven by more stringent environmental and land vehicle emission
legislation. The industrial markets in which the Group operates (50% of 2009
Divisional sales) are diverse both geographically and in nature, with
engineering skills, technical qualifications and service levels being the key to
competing successfully in these markets. Again, the markets are competitive but
no single competitor represents a material threat to the Group. In the land
vehicle markets, the Group's heavy duty diesel engine products are similar in
nature to those produced in the Aerospace Division, in that engineering support
and process engineering are very important to the customers' choice of supplier;
the Group therefore maintains appropriate resources close to customers'
locations in these cases. However, there are other land vehicle based products
where competition is fiercer and price more the defining factor.
Where this is the case, the Group is increasingly manufacturing products in its
lower cost operations in the Czech Republic, South Africa, Brazil and India,
rather than in its North American and European operations, whilst retaining
commercial and engineering expertise close to the customers' locations.
Defined benefit pension plans
The Group operates a number of defined benefit pension plans, with the largest
being a UK plan, as well as a number of geographically based defined
contribution and government-sponsored arrangements. The primary liability for
funding the UK defined benefit pension plan rests with the participating
employer, Senior plc.
The Group's combined pension deficits at 31 December 2009 were GBP48.1m (31
December 2008 - GBP51.2m). The Group has experienced an increase in the
combined deficits in recent years, principally due to underperformance in
expected asset returns and adverse movements in discount rates applied to the
plans' future liabilities, much of which is beyond the control of the Trustees
of the plans.
The Group continues to work with the Trustees of the defined benefit pension
plans to implement measures to reduce the level of volatility and risk in the
plans, with the ultimate aim of eliminating the Group's pension deficit. The
significant actions taken to date include the closure of all non-union plans to
new members, increases in contribution rates, a cap on future increases in
pensionable salary of 2% implemented in the UK in 2009, and implementation of
liability-driven investment strategies in all defined benefit pension plans.
A 10-year funding plan was approved by the UK Pensions Regulator, based on the
actuarial valuation of the UK pension plan undertaken in April 2007. Under this
funding plan the Group is committed to contributing an additional GBP5m per
annum above service cost for 10 years. However, given the Group's very strong
cash generation in 2009, additional discretionary payments of GBP10m were made
into this pension plan. The Group also made additional voluntary contributions
to the smaller US plans of approximately GBP3.2m in 2009 to help improve their
funding positions.
Recruitment and retention of key employees
Capable, empowered and highly engaged individuals are a key asset of the
business. There is a risk that the Group's performance will deteriorate if it
is unable to attract and retain high quality key employees. The Group has had
considerable recent success in attracting highly experienced senior executives
from within the industry, in part attributable to the culture of the Group as
described in the Operations and Business Model section of this Operating and
Financial Review. The Group's commitment to training and development has also
increased through the introduction of a management development programme.
Senior management turnover ratios remain low, a further indication of success in
this very important area.
Capital risk management
The Group manages its capital structure to safeguard its ability to continue as
a going concern whilst maximising the return to stakeholders through the
optimisation of the balance between debt and equity. In considering the
appropriate level of net debt the Group pays close attention to its level as
compared to the cash generation potential of the Group, measured by adjusted
profit before interest, tax, depreciation and amortisation ("EBITDA"). The
Group also monitors capital on the basis of a gearing ratio. This ratio is
calculated as net debt divided by total capital. Net debt is calculated as the
total of bank and other loans, obligations under finance leases, forward
exchange contract losses less cash and cash equivalents and forward exchange
contract gains. Total capital is the equity shown in the Consolidated Balance
Sheet.
All of the Group's external borrowing facilities have a requirement for the
ratio of net debt to EBITDA to be less than 3.0x. Internally the Group aims for
this ratio to not exceed 2.5x. At 31 December 2009 net debt was 1.3x the
Group's level of EBITDA (31 December 2008 - 2.1x). In addition, all borrowing
facilities contain the requirement for EBITDA interest cover (the number of
times net interest is covered by the Group's EBITDA) to be in excess of 3.5x.
At 31 December 2009 EBITDA was 10.6x the level of net interest (31 December 2008
- 12.0x). Therefore, the Group currently has considerable funding headroom.
The Group's strategy in respect of gearing is to target a long-term gearing
ratio within the range of 60% to 80%. Ratios outside this range may still be
considered to be acceptable, in certain circumstances. The gearing ratio for
the Group at the end of 2009 was 55% (2008 - 99%). The decrease in 2009 is
attributable to a combination of the strong free cash flow generation during the
year and foreign exchange gains arising mainly from an appreciation in the value
of the Pound Sterling against the US dollar.
Financial risk management
The Group's activities expose it to a variety of financial risks including
interest rate risk, credit risk, liquidity risk and foreign exchange risk. The
Group's overall treasury risk management programme focuses on the
unpredictability of financial markets, and seeks to minimise potential adverse
effects on the Group's financial performance.
The Group uses derivative financial instruments to hedge certain risk exposures.
The use of financial derivatives is governed by the Group's policies approved
by the Board, which provide written principles on foreign exchange risk,
interest rate risk, credit risk, the use of financial derivatives and
non-derivative financial instruments, and the investment of excess liquidity.
Compliance with policies and exposure limits is reviewed by the Group's Treasury
Committee on a regular basis. The Group does not enter into or trade financial
instruments, including derivative financial instruments, for speculative
purposes.
Interest rate risk management
The Group has a policy of maintaining approximately 60% of its borrowing costs
at fixed interest rates. The Group generally borrows long-term in fixed rates
but at times may borrow at floating rates and swap into fixed depending on
credit market conditions. Occasionally a portion of fixed debt interest is
swapped into floating rates. The combination of maintaining an acceptable
balance of fixed and floating rate debt, and the Group's policy of borrowing in
foreign currency in proportion to its generation of foreign currency earnings,
provides an effective hedge against the impact of interest rate and foreign
currency volatility on total interest costs.
Credit risk management
The Group's credit risk is primarily attributable to its trade receivables. The
credit quality of customers is assessed taking into account their financial
position, past experience and other factors. In determining the recoverability
of trade receivables, the Group considers any change in the credit quality of
the trade receivable from the date credit was initially granted up to the
reporting date. The Group has no significant concentration of credit risk, with
exposure spread over a large number of counterparties and customers. The Group
is guarantor under the leases of two buildings in the UK, which arose on the
disposal of former Group owned subsidiaries in 2001 and 2004.
Liquidity risk management
Liquidity risk reflects the risk that the Group will have insufficient resources
to meet its financial liabilities as they fall due. The Group manages liquidity
risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities, by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities. Cash flow
forecasts are produced monthly, together with appropriate capacity planning and
scenario analysis, to ensure that bank covenant and liquidity targets will be
met. The Board also regularly assesses the balance of capital and debt funding
of the Group, as part of a process to satisfy the Group's long-term strategic
funding requirements.
The ongoing global recession presents a potential risk to the Group's funding
status. Those steps already taken in relation to changes in market conditions,
and in respect of the long-term financing of the Group, have been discussed
earlier in this Operating and Financial Review. In summary, the Group has had
considerable success in 2009 in paying down its level of debt through effective
cost controls, implementation of necessary workforce reductions and tight
control over working capital and discretionary expenditure. As a result, the
Group is currently in a well-funded position, with significant headroom under
its committed borrowing facilities and no major renewal of borrowing facilities
due until 2012.
Group management is prepared to take further action to rationalise operations as
necessary to mitigate the impact of any further downturn in market demand,
should this occur. The Group has an experienced management team that was also
substantially in place during the market downturn that occurred after "9/11", a
period during which the Group generated significant positive free cash flow. It
is considered unlikely that the Group will face any significant funding issues
in the foreseeable future.
Foreign exchange risk management
The Group enters into forward foreign exchange contracts to hedge the exchange
risk arising on the operations' trading activities in foreign currencies. Where
commented on below, the sensitivity analysis of the Group's exposure to foreign
currency risk at the reporting date has been determined based on the change
taking place at the beginning of the financial year and left unchanged
throughout the reporting period, with all other variables held constant (such as
interest rates).
Translation risk
The Group derived 89% of its revenue from businesses outside the United Kingdom,
of which 52% related to operations in the USA. Fluctuations in the value of the
US dollar and other currencies in relation to the Pound Sterling have had, and
may continue to have, a significant impact on the results of the Group's
operations when reported in Pound Sterling. The Group decided not to hedge this
translation risk. In addition, the majority of assets are denominated in
foreign currency, particularly in US dollars. In order to provide a hedge
against volatility in the value of these assets compared to the Group's
earnings, and hence provide a natural hedge against the Group's principal
borrowing covenant (the ratio of net debt to EBITDA), the Group aims to borrow
in foreign currencies in similar proportions to its generation of foreign
currency EBITDA, where practical and economic.
After taking account of these policies, a 10% appreciation (or depreciation) of
the US dollar against the Pound Sterling would have increased (or decreased)
2009 Group operating profit by GBP4.4m and would have increased (or decreased)
net equity by GBP13.7m.
Transaction risk
The Group has a number of transaction-related foreign currency exposures,
particularly between the Euro and the South African Rand, and between the US
dollar and the Pound Sterling. The Group seeks to hedge around 80% of
transaction-related exposures for 15 months forward and applies hedge accounting
where the forwards can be designated in a qualifying cash flow hedge
relationship. Based on the net of the annual sales and purchase-related
exposures, all transaction-related foreign currency exposures after hedging in
existence at 31 December 2009 are immaterial.
Resources
Employees
The key resource of the Group is its employees, who have extensive knowledge of
the Group's key markets, customers, product technology and manufacturing
processes. The average number of employees employed in the Group during 2009
was 4,873 (2008 - 5,822). Of these 4,075 were in production-related roles, 56
in distribution, 307 in sales and 435 in administration. Senior is an
international group operating in 11 countries. At the end of 2009 the Group
employed a total of 4,764 people, with 49% located in North America, 15% in the
United Kingdom, 21% in the rest of Europe and 15% in the Rest of the World.
Engineering capability and manufacturing technology
A key strength of the Group is its engineering capability and manufacturing
technology. The Group possesses significant product design and manufacturing
engineering capabilities, which are essential to support the development of
precision components for customers and improve production processes to help
maximise production efficiency and product quality. This in turn maintains and
enhances the Group's reputation for delivering quality added-value products to
its customers on time and at a competitive price. During 2009 the Group spent
GBP12.6m (2008 - GBP24.5m) on capital expenditure to strengthen the Group's
manufacturing capability, as well as its production capacity. This expenditure
was 0.6x the depreciation level (2008 - 1.3x).
Financial
The Group funds its activities through a mixture of equity and debt financing.
It obtains its equity financing from a wide range of non-related institutional
investors who trade the Company's shares on the London Stock Exchange. The
largest holder has an interest in around 12.3% of the shares of the Company. As
at 31 December 2009, the Company's share price was 75.0p, giving it a market
capitalisation of around GBP300m.
In respect of debt financing, at the end of 2009, the Group had committed
borrowing facilities totalling GBP207.3m, of which GBP122.7m was being utilised.
The Group held GBP20.4m in cash and hence net debt was GBP102.3m. The
committed facilities at this time consisted of US$35m (GBP21.7m) of loan notes
due in 2014, US$25m (GBP15.5m) of loan notes due in 2015, US$30m (GBP18.6m) of
loan notes due in 2017, US$75m (GBP46.7m) of loan notes due in 2018, US$20m
(GBP12.4m) of loan notes due in 2020, an GBP80.0m multi-currency revolving
credit facility maturing in 2012 and a US$20m (GBP12.4m) bilateral facility
maturing in 2011.
Corporate Social Responsibility
The policy of the Board is to seek to enhance shareholder value in an ethical
and socially responsible manner, taking into account the wishes of all
stakeholders, and with a particular focus on health and safety and preserving
the environment. Two of the Group's six KPIs, namely reductions in carbon
dioxide emissions and lost time injuries, are targeted at this area. Details of
the Group's corporate and social responsibility principles and performance
indices are set out in a separate "Corporate Social Responsibility Report" in
the Annual Report & Accounts 2009.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
+----+--------------------------------------------------------------------+
| 1. | the Financial Statements, prepared in accordance with IFRS as |
| | adopted by the European Union, give a true and fair view of the |
| | assets, liabilities, financial position and profit or loss of the |
| | Company and the undertakings included in the consolidation taken |
| | as a whole; and |
+----+--------------------------------------------------------------------+
| 2. | the Operating and Financial Review, which is incorporated into the |
| | Directors' Report, includes a fair review of the development and |
| | performance of the business and the position of the Company and |
| | the undertakings included in the consolidation taken as a whole, |
| | together with a description of the principal risks and |
| | uncertainties they face. |
+----+--------------------------------------------------------------------+
By Order of the Board
+--------------------+---------+-----------------------------------------+
| Mark Rollins | | Simon Nicholls |
+--------------------+---------+-----------------------------------------+
| Group Chief | | Group Finance Director |
| Executive | | |
+--------------------+---------+-----------------------------------------+
| 26 February 2010 | | 26 February 2010 |
+--------------------+---------+-----------------------------------------+
Consolidated Income Statement
For the year ended 31 December 2009
+------------------------------------+-+-------+-+---------+-+---------+
| | |Notes | | Year | | Year |
| | | | | ended | | ended |
| | | | | 2009 | | 2008 |
| | | | | GBPm | | GBPm |
+------------------------------------+-+-------+-+---------+-+---------+
| Continuing operations | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Revenue | | 3 | | 540.1 | | 562.4 |
+------------------------------------+-+-------+-+---------+-+---------+
| Trading profit | | | | 61.1 | | 59.8 |
+------------------------------------+-+-------+-+---------+-+---------+
| Loss on sale of fixed assets | | | | (0.1) | | - |
+------------------------------------+-+-------+-+---------+-+---------+
| Operating profit (1) | | 3 | | 61.0 | | 59.8 |
+------------------------------------+-+-------+-+---------+-+---------+
| Investment income | | | | 1.2 | | 2.7 |
+------------------------------------+-+-------+-+---------+-+---------+
| Finance costs | | | | (12.6) | | (11.2) |
+------------------------------------+-+-------+-+---------+-+---------+
| Profit before tax (2) | | | | 49.6 | | 51.3 |
+------------------------------------+-+-------+-+---------+-+---------+
| Tax | | 5 | | (10.6) | | (12.1) |
+------------------------------------+-+-------+-+---------+-+---------+
| Profit for the period | | | | 39.0 | | 39.2 |
+------------------------------------+-+-------+-+---------+-+---------+
| Attributable to: | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Equity holders of the parent | | | | 39.0 | | 39.2 |
+------------------------------------+-+-------+-+---------+-+---------+
| Earnings per share | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Basic | | 7 | | 9.79p | | 9.92p |
+------------------------------------+-+-------+-+---------+-+---------+
| Diluted | | 7 | | 9.58p | | 9.78p |
+------------------------------------+-+-------+-+---------+-+---------+
+------------------------------------+-+------+-+---------+-+---------+
| (1) Adjusted operating profit | | 4 | | 59.4 | | 64.5 |
+------------------------------------+-+------+-+---------+-+---------+
| (2) Adjusted profit before tax | | 4 | | 48.0 | | 56.0 |
+------------------------------------+-+------+-+---------+-+---------+
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2009
+-------------------------------------------------+---------+-+---------+
| | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Profit for the period | 39.0 | | 39.2 |
+-------------------------------------------------+---------+-+---------+
| Other comprehensive income: | | | |
+-------------------------------------------------+---------+-+---------+
| Gains/(losses) on cash flow hedges during the | 5.1 | | (9.0) |
| period | | | |
+-------------------------------------------------+---------+-+---------+
| Reclassification adjustments for losses | 1.7 | | 3.2 |
| included in profit or loss | | | |
+-------------------------------------------------+---------+-+---------+
| Gains/(losses) on cash flow hedges | 6.8 | | (5.8) |
+-------------------------------------------------+---------+-+---------+
| Gains/(losses) on revaluation of financial | 8.0 | | (44.4) |
| instruments | | | |
+-------------------------------------------------+---------+-+---------+
| Exchange differences on translation of foreign | (20.6) | | 59.9 |
| operations | | | |
+-------------------------------------------------+---------+-+---------+
| Actuarial losses on defined benefit pension | (20.0) | | (15.0) |
| schemes | | | |
+-------------------------------------------------+---------+-+---------+
| Other comprehensive income | (25.8) | | (5.3) |
+-------------------------------------------------+---------+-+---------+
| Tax relating to components of other | 4.4 | | 0.5 |
| comprehensive income | | | |
+-------------------------------------------------+---------+-+---------+
| Other comprehensive income for the period, net | (21.4) | | (4.8) |
| of tax | | | |
+-------------------------------------------------+---------+-+---------+
| Total comprehensive income for the period | 17.6 | | 34.4 |
+-------------------------------------------------+---------+-+---------+
| Attributable to: | | | |
+-------------------------------------------------+---------+-+---------+
| Equity holders of the parent | 17.6 | | 34.4 |
+-------------------------------------------------+---------+-+---------+
Consolidated Balance Sheet
As at 31 December 2009
+-------------------------+-------+-+---------+-+---------+-+---------+
| | Notes | | Year | | Year | | Year |
| | | | ended | | ended | | ended |
| | | | 2009 | | 2008 | | 2007 |
| | | | GBPm | | GBPm | | GBPm |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Non-current assets | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Goodwill | 8 | | 169.3 | | 184.0 | | 114.3 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Other intangible assets | | | 11.0 | | 17.6 | | 11.9 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Property, plant and | 9 | | 118.0 | | 138.4 | | 93.6 |
| equipment | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Deferred tax assets | | | 0.2 | | 0.4 | | 0.1 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Trade and other | | | 0.6 | | 3.3 | | 3.5 |
| receivables | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Total non-current | | | 299.1 | | 343.7 | | 223.4 |
| assets | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Current assets | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Inventories | | | 65.0 | | 99.6 | | 79.4 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Construction contracts | | | 0.5 | | 1.5 | | 2.9 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Trade and other | | | 79.1 | | 92.7 | | 78.7 |
| receivables | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Cash and cash | 11c) | | 20.4 | | 11.9 | | 8.7 |
| equivalents | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Total current assets | | | 165.0 | | 205.7 | | 169.7 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Total assets | | | 464.1 | | 549.4 | | 393.1 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Current liabilities | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Trade and other | | | 95.6 | | 151.8 | | 92.5 |
| payables | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Current tax liabilities | | | 4.6 | | 8.0 | | 9.0 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Obligations under | | | 0.2 | | 0.2 | | 0.2 |
| finance leases | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Bank overdrafts and | | | 1.1 | | 1.2 | | 41.5 |
| loans | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Total current | | | 101.5 | | 161.2 | | 143.2 |
| liabilities | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Non-current liabilities | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Bank and other loans | 11c) | | 120.3 | | 149.6 | | 58.3 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Retirement benefit | 12 | | 48.1 | | 51.2 | | 36.3 |
| obligations | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Deferred tax | | | 7.8 | | 8.8 | | 3.3 |
| liabilities | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Obligations under | | | 1.1 | | 1.5 | | 1.3 |
| finance leases | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Others | | | 0.5 | | 0.9 | | 0.8 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Total non-current | | | 177.8 | | 212.0 | | 100.0 |
| liabilities | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Total liabilities | | | 279.3 | | 373.2 | | 243.2 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Net assets | | | 184.8 | | 176.2 | | 149.9 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Equity | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Issued share capital | 10 | | 39.9 | | 39.8 | | 39.1 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Share premium account | | | 12.1 | | 12.0 | | 11.3 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Equity reserve | | | 1.9 | | 1.7 | | 1.6 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Distributable reserve | | | 19.4 | | 19.4 | | 19.4 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Hedging and translation | | | 1.6 | | 6.3 | | (4.4) |
| reserve | | | | | | | |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Retained earnings | | | 111.3 | | 98.4 | | 84.3 |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Own shares | | | (1.4) | | (1.4) | | (1.4) |
+-------------------------+-------+-+---------+-+---------+-+---------+
| Equity attributable to equity | | 184.8 | | 176.2 | | 149.9 |
| holders of the parent | | | | | | |
+---------------------------------+-+---------+-+---------+-+---------+
| Total equity | | | 184.8 | | 176.2 | | 149.9 |
+-------------------------+-------+-+---------+-+---------+-+---------+
Statement of Changes in Equity
For the year ended 31 December 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 | 39.1 | 11.3 | 1.6 | 19.4 | (4.4) | 84.3 | (1.4) | 149.9 |
| 2008 | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Profit for the year | - | - | - | - | - | 39.2 | - | 39.2 |
| 2008 | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Losses on cash flow | - | - | - | - | (5.8) | - | - | (5.8) |
| hedges | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Losses on | - | - | - | - | (44.4) | - | - | (44.4) |
| revaluation of | | | | | | | | |
| financial | | | | | | | | |
| instruments | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Exchange differences | - | - | - | - | 59.9 | - | - | 59.9 |
| on 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 | 0.7 | 0.7 | (0.1) | - | - | - | - | 1.3 |
| capital | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| 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 | 39.8 | 12.0 | 1.7 | 19.4 | 6.3 | 98.4 | (1.4) | 176.2 |
| December 2008 | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Profit for the year | - | - | - | - | - | 39.0 | - | 39.0 |
| 2009 | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Gains on cash flow | - | - | - | - | 6.8 | - | - | 6.8 |
| hedges | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Gains on revaluation | - | - | - | - | 8.0 | - | - | 8.0 |
| of financial | | | | | | | | |
| instruments | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Exchange differences | - | - | - | - | (20.6) | - | - | (20.6) |
| on translation of | | | | | | | | |
| foreign operations | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Actuarial losses on | - | - | - | - | - | (20.0) | - | (20.0) |
| defined benefit | | | | | | | | |
| pension schemes | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Tax relating to | - | - | - | - | 1.1 | 3.3 | - | 4.4 |
| components of other | | | | | | | | |
| comprehensive income | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Total comprehensive | - | - | - | - | (4.7) | 22.3 | - | 17.6 |
| income for the | | | | | | | | |
| period | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Issue of share | 0.1 | 0.1 | (0.1) | - | - | - | - | 0.1 |
| capital | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Share-based payment | - | - | 0.8 | - | - | - | - | 0.8 |
| charge | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Tax relating to | - | - | - | - | - | 0.5 | - | 0.5 |
| share-based payments | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Transfer to retained | - | - | (0.5) | - | - | 0.5 | - | - |
| earnings | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Dividends paid | - | - | - | - | - | (10.4) | - | (10.4) |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
| Balance at 31 | 39.9 | 12.1 | 1.9 | 19.4 | 1.6 | 111.3 | (1.4) | 184.8 |
| December 2009 | | | | | | | | |
+----------------------+---------+---------+---------+----------------+-------------+----------+--------+--------+
Cash Flow Statement
For the year ended 31 December 2009
+------------------------------------+-+-------+-+---------+-+---------+
| | | Notes | | Year | | Year |
| | | | | ended | | ended |
| | | | | 2009 | | 2008 |
| | | | | GBPm | | GBPm |
+------------------------------------+-+-------+-+---------+-+---------+
| Net cash from operating activities | | 11a) | | 69.8 | | 74.6 |
+------------------------------------+-+-------+-+---------+-+---------+
| Investing activities | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Interest received | | | | 2.6 | | 1.7 |
+------------------------------------+-+-------+-+---------+-+---------+
| Deferred consideration received | | | | 0.5 | | 0.1 |
+------------------------------------+-+-------+-+---------+-+---------+
| Proceeds on disposal of property, | | | | 0.3 | | 0.6 |
| plant and equipment | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Purchases of property, plant and | | | | (12.3) | | (23.8) |
| equipment | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Purchases of intangible assets | | | | (0.3) | | (0.7) |
+------------------------------------+-+-------+-+---------+-+---------+
| Acquisition of Capo Industries | | | | - | | (44.1) |
+------------------------------------+-+-------+-+---------+-+---------+
| Acquisition of Sterling Machine | | | | - | | 0.4 |
+------------------------------------+-+-------+-+---------+-+---------+
| Net cash used in investing | | | | (9.2) | | (65.8) |
| activities | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Financing activities | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Dividends paid | | | | (10.4) | | (10.3) |
+------------------------------------+-+-------+-+---------+-+---------+
| Repayment of borrowings | | | | (20.0) | | (85.9) |
+------------------------------------+-+-------+-+---------+-+---------+
| Repayments of obligations under | | | | (0.2) | | (0.2) |
| finance leases | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Share issues | | | | 0.1 | | 1.3 |
+------------------------------------+-+-------+-+---------+-+---------+
| New loans raised | | | | 4.5 | | 103.4 |
+------------------------------------+-+-------+-+---------+-+---------+
| Net cash outflow on forward | | | | (25.2) | | (13.0) |
| contracts | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Net cash used in financing | | | | (51.2) | | (4.7) |
| activities | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Net increase in cash and cash | | | | 9.4 | | 4.1 |
| equivalents | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Cash and cash equivalents at | | | 10.7 | | 4.9 |
| beginning of period | | | | | |
+--------------------------------------+-------+-+---------+-+---------+
| Effect of foreign exchange rate | | | | (0.8) | | 1.7 |
| changes | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
| Cash and cash equivalents at end | | 11c) | | 19.3 | | 10.7 |
| of period | | | | | | |
+------------------------------------+-+-------+-+---------+-+---------+
Notes to the above Financial Statements
For the year ended 31 December 2009
1. General information
These results for the year ended 31 December 2009 are an excerpt from the
forthcoming Annual Report & Accounts 2009 and do not constitute the Group's
statutory accounts for 2009 or 2008. Statutory accounts for 2008 have been
delivered to the Registrar of Companies, and those for 2009 will be delivered
following the Company's Annual General Meeting. The Auditors have reported on
both those accounts; their reports were 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 or equivalent preceding legislation.
2. Significant accounting policies
Whilst the financial information included in this Annual Results Release has
been prepared in accordance with International Financial Reporting Standards
("IFRS") adopted by the European Union, this announcement does not itself
contain sufficient information to comply with IFRS. Full Financial Statements
that comply with IFRS are included in the Annual Report & Accounts 2009 which is
available at www.seniorplc.com, copies of which will be distributed on or soon
after 12 March 2010.
The accounting policies adopted are consistent with those followed in the
preparation of the Group's Annual Report & Accounts 2009 which are unchanged
from those adopted in the Group's Annual Report & Accounts 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", IAS 23
(Revised) "Borrowing Costs", IFRS 7 (Amendment) "Improving Disclosure about
Financial Instruments" and IFRIC 18 "Transfers of Assets from Customers".
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's Executive Committee 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, Statements of Changes in Equity have 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.
IFRS 7 (Amendment) requires enhanced disclosures about fair value measurements
and liquidity risk. The Group has elected not to provide comparative
information for these enhanced disclosures in the current year in accordance
with the transitional reliefs offered in these amendments.
IFRIC 18 "Transfers of Assets from Customers" addresses the accounting by
recipients for transfers of property, plant and equipment from customers. It
concludes that when property, plant and equipment meets the definition of an
asset from the perspective of the recipient, the recipient should recognise the
asset at its fair value on the date of transfer, with the credit recognised in
accordance with IAS 18 "Revenue". This interpretation 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"; IAS 39
(Amendment)/IFRS 7 (Amendment) "Reclassification of Financial Assets";
Improvements to IFRS - as published in May 2008; and IFRIC 16 "Hedges of a Net
Investment in a Foreign Operation". "Embedded Derivatives" (Amendments to IFRIC
9 and IAS 39), IFRIC 13 "Customer Loyalty Programmes" and IFRIC 15 "Agreements
for the Construction of Real Estate" are currently not relevant to the Group's
operations.
3. Segmental information
The Group reports its segment information as two operating Divisions according
to the market segments they serve, Aerospace and Flexonics. For management
purposes, the Aerospace Division is managed as two sub-divisions, Aerostructures
and Fluid Systems, in order to enhance management oversight; however, these are
aggregated as one reporting segment in accordance with IFRS 8. The Flexonics
Division is managed as a single division.
Segment information for revenue, operating profit and a reconciliation to entity
net profit is presented below.
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| | Aerospace | Flexonics | Elimination | Total | Aerospace | Flexonics | Elimination | Total |
| | | | / Central | | | | / Central | |
| | | | costs | | | | costs | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| | Year | Year | Year | Year | Year | Year | Year | Year |
| | ended | ended | ended | ended | ended | ended | ended | ended |
| | 2009 | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | 2008 |
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| External | 319.0 | 221.1 | - | 540.1 | 312.4 | 250.0 | - | 562.4 |
| revenue | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Inter-segment | 0.2 | 0.2 | (0.4) | - | 0.5 | 0.1 | (0.6) | - |
| revenue | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Total | 319.2 | 221.3 | (0.4) | 540.1 | 312.9 | 250.1 | (0.6) | 562.4 |
| revenue | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Adjusted | 38.8 | 26.2 | (5.6) | 59.4 | 44.3 | 25.9 | (5.7) | 64.5 |
| operating | | | | | | | | |
| profit (see | | | | | | | | |
| note 4) | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Loss on | (0.1) | - | - | (0.1) | - | - | - | - |
| sale of | | | | | | | | |
| fixed | | | | | | | | |
| assets | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Exceptional | - | - | 6.3 | 6.3 | - | - | - | - |
| pension | | | | | | | | |
| gain | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Amortisation | (4.6) | - | - | (4.6) | (4.7) | - | - | (4.7) |
| of | | | | | | | | |
| intangible | | | | | | | | |
| assets from | | | | | | | | |
| acquisitions | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Operating | 34.1 | 26.2 | 0.7 | 61.0 | 39.6 | 25.9 | (5.7) | 59.8 |
| profit | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Investment | | | | 1.2 | | | | 2.7 |
| income | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Finance | | | | (12.6) | | | | (11.2) |
| costs | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Profit | | | | 49.6 | | | | 51.3 |
| before tax | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Tax | | | | (10.6) | | | | (12.1) |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
| Profit | | | | 39.0 | | | | 39.2 |
| after tax | | | | | | | | |
+---------------+-----------+-----------+-------------+--------+-----------+-----------+-------------+--------+
Segment information for assets and liabilities is presented below.
+-------------------------------------------------+---------+-+---------+
| Assets | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Aerospace | 162.3 | | 202.6 |
+-------------------------------------------------+---------+-+---------+
| Flexonics | 97.7 | | 126.9 |
+-------------------------------------------------+---------+-+---------+
| Corporate | 0.9 | | 1.6 |
+-------------------------------------------------+---------+-+---------+
| Segment assets for reportable segments | 260.9 | | 331.1 |
+-------------------------------------------------+---------+-+---------+
| Unallocated | | | |
+-------------------------------------------------+---------+-+---------+
| Goodwill | 169.3 | | 184.0 |
+-------------------------------------------------+---------+-+---------+
| Intangible customer relationships | 9.5 | | 15.7 |
+-------------------------------------------------+---------+-+---------+
| Cash | 20.4 | | 11.9 |
+-------------------------------------------------+---------+-+---------+
| Deferred and current tax | 2.6 | | 1.0 |
+-------------------------------------------------+---------+-+---------+
| Others | 1.4 | | 5.7 |
+-------------------------------------------------+---------+-+---------+
| Total assets per balance sheet | 464.1 | | 549.4 |
+-------------------------------------------------+---------+-+---------+
+-------------------------------------------------+---------+-+---------+
| Liabilities | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Aerospace | 42.1 | | 54.5 |
+-------------------------------------------------+---------+-+---------+
| Flexonics | 40.1 | | 50.5 |
+-------------------------------------------------+---------+-+---------+
| Corporate | 11.2 | | 7.9 |
+-------------------------------------------------+---------+-+---------+
| Segment liabilities for reportable segments | 93.4 | | 112.9 |
+-------------------------------------------------+---------+-+---------+
| Unallocated | | | |
+-------------------------------------------------+---------+-+---------+
| Debt | 121.4 | | 150.8 |
+-------------------------------------------------+---------+-+---------+
| Finance leases | 1.3 | | 1.7 |
+-------------------------------------------------+---------+-+---------+
| Deferred and current tax | 12.4 | | 16.8 |
+-------------------------------------------------+---------+-+---------+
| Retirement benefit obligations | 48.1 | | 51.2 |
+-------------------------------------------------+---------+-+---------+
| Forward exchange contracts | - | | 33.9 |
+-------------------------------------------------+---------+-+---------+
| Others | 2.7 | | 5.9 |
+-------------------------------------------------+---------+-+---------+
| Total liabilities per balance sheet | 279.3 | | 373.2 |
+-------------------------------------------------+---------+-+---------+
4. Adjusted operating profit and adjusted profit before tax
The provision of adjusted operating profit and adjusted profit before tax,
derived in accordance with the table below, has been included 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, an exceptional pension gain and amortisation of intangible assets
acquired on acquisitions. The exceptional pension gain relates to the
curtailment gain arising from the introduction of a cap on future pensionable
earnings growth of 2% per annum from 6 April 2010 in the UK defined benefit
plan.
+-------------------------------------------------+---------+-+---------+
| | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Operating profit | 61.0 | | 59.8 |
+-------------------------------------------------+---------+-+---------+
| Loss on sale of fixed assets | 0.1 | | - |
+-------------------------------------------------+---------+-+---------+
| Exceptional pension gain | (6.3) | | - |
+-------------------------------------------------+---------+-+---------+
| Amortisation of intangible assets from | 4.6 | | 4.7 |
| acquisitions | | | |
+-------------------------------------------------+---------+-+---------+
| Adjustments to operating profit | (1.6) | | 4.7 |
+-------------------------------------------------+---------+-+---------+
| Adjusted operating profit | 59.4 | | 64.5 |
+-------------------------------------------------+---------+-+---------+
| | | | |
+-------------------------------------------------+---------+-+---------+
| Profit before tax | 49.6 | | 51.3 |
+-------------------------------------------------+---------+-+---------+
| Adjustments to profit as above before tax | (1.6) | | 4.7 |
+-------------------------------------------------+---------+-+---------+
| Adjusted profit before tax | 48.0 | | 56.0 |
+-------------------------------------------------+---------+-+---------+
+-------------------------------------------------+---------+-+---------+
| | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Current tax: | | | |
+-------------------------------------------------+---------+-+---------+
| UK Corporation Tax | - | | - |
+-------------------------------------------------+---------+-+---------+
| Foreign tax | 4.5 | | 9.8 |
+-------------------------------------------------+---------+-+---------+
| Adjustments in respect of prior periods | 1.9 | | (0.2) |
+-------------------------------------------------+---------+-+---------+
| | 6.4 | | 9.6 |
+-------------------------------------------------+---------+-+---------+
| Deferred tax: | | | |
+-------------------------------------------------+---------+-+---------+
| Current year | 6.5 | | 3.6 |
+-------------------------------------------------+---------+-+---------+
| Adjustments in respect of prior periods | (2.3) | | (1.1) |
+-------------------------------------------------+---------+-+---------+
| | 4.2 | | 2.5 |
+-------------------------------------------------+---------+-+---------+
| | 10.6 | | 12.1 |
+-------------------------------------------------+---------+-+---------+
UK Corporation Tax is calculated at an effective rate of 28% (2008 - 28.5%) of
the estimated assessable profit for the year. Taxation for other jurisdictions
is calculated at the rates prevailing in the respective jurisdictions.
+-------------------------------------------------+---------+-+---------+
| | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Amounts recognised as distributions to equity | | | |
| holders in the period: | | | |
+-------------------------------------------------+---------+-+---------+
| Final dividend for the year ended 31 December | 6.8 | | 6.7 |
| 2008 of 1.70p (2007 - 1.70p) per share | | | |
+-------------------------------------------------+---------+-+---------+
| Interim dividend for the year ended 31 December | 3.6 | | 3.6 |
| 2009 of 0.90p (2008 - 0.90p) per share | | | |
+-------------------------------------------------+---------+-+---------+
| | 10.4 | | 10.3 |
+-------------------------------------------------+---------+-+---------+
| Proposed final dividend for the year ended 31 | 6.8 | | 6.8 |
| December 2009 | | | |
| of 1.70p (2008 - 1.70p) per share | | | |
+-------------------------------------------------+---------+-+---------+
The calculation of the basic and diluted earnings per share is based on the
following data:
+-------------------------------------------------+---------+-+---------+
| Number of shares | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | million | | million |
+-------------------------------------------------+---------+-+---------+
| Weighted average number of ordinary shares for | 398.3 | | 395.0 |
| the purposes of basic earnings per share | | | |
+-------------------------------------------------+---------+-+---------+
| Effect of dilutive potential ordinary shares: | | | |
+-------------------------------------------------+---------+-+---------+
| Share options | 9.0 | | 6.0 |
+-------------------------------------------------+---------+-+---------+
| Weighted average number of ordinary shares for | 407.3 | | 401.0 |
| the purposes of diluted earnings per share | | | |
+-------------------------------------------------+---------+-+---------+
+------------------------------+----------+---------+----------+---------+
| Earnings and earnings per | Year | Year | Year | Year |
| share | ended | ended | ended | ended |
| | 2009 | 2009 | 2008 | 2008 |
| | Earnings | EPS | Earnings | EPS |
| | GBPm | pence | GBPm | pence |
+------------------------------+----------+---------+----------+---------+
| Profit for the period | 39.0 | 9.79 | 39.2 | 9.92 |
+------------------------------+----------+---------+----------+---------+
| Adjust: | | | | |
+------------------------------+----------+---------+----------+---------+
| Loss on sale of fixed assets | - | - | - | - |
| net of tax of GBP0.1m (2008 | | | | |
| - GBPnil) | | | | |
+------------------------------+----------+---------+----------+---------+
| Exceptional pension gain | (6.3) | (1.58) | - | - |
+------------------------------+----------+---------+----------+---------+
| Amortisation of intangible | 2.8 | 0.70 | 2.8 | 0.71 |
| assets from acquisitions net | | | | |
| of tax of GBP1.8m (2008 - | | | | |
| GBP1.9m) | | | | |
+------------------------------+----------+---------+----------+---------+
| Adjusted earnings after tax | 35.5 | 8.91 | 42.0 | 10.63 |
+------------------------------+----------+---------+----------+---------+
| Earnings per share | | | | |
+------------------------------+----------+---------+----------+---------+
| - basic | | 9.79p | | 9.92p |
+------------------------------+----------+---------+----------+---------+
| - diluted | | 9.58p | | 9.78p |
+------------------------------+----------+---------+----------+---------+
| - adjusted | | 8.91p | | 10.63p |
+------------------------------+----------+---------+----------+---------+
| - adjusted and diluted | | 8.72p | | 10.47p |
+------------------------------+----------+---------+----------+---------+
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.
The provision of an adjusted earnings per share, derived in accordance with the
table above, has been included 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 |
+----+--------------------------------------------------------------------+
| ? | exceptional pension gain |
+----+--------------------------------------------------------------------+
| ? | amortisation of intangible assets acquired on acquisitions. |
+----+--------------------------------------------------------------------+
8. Goodwill
Goodwill decreased by GBP14.7m during the year to GBP169.3m (2008 - GBP184.0m).
The decrease represents GBP14.7m of exchange translation differences. No
impairment charges were recognised in 2009 (2008 - GBPnil).
9. Property, Plant and Equipment
During the period, the Group spent GBP12.3m (2008 - GBP23.8m) on the acquisition
of property, plant and equipment. The Group also disposed of machinery with a
carrying value of GBP0.4m (2008 - GBP0.6m) for proceeds of GBP0.3m (2008 -
GBP0.6m).
10. Share Capital
Share capital as at 31 December 2009 amounted to GBP39.9m. During 2009, the
Group issued 239,894 shares at an average price of 21.97p per share under share
option plans raising GBP0.1m. 1,099,451 shares were also issued during 2009
under the 2005 Long Term Incentive Plan.
11. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash from operating activities
+-------------------------------------------------+---------+-+---------+
| | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Operating profit from continuing operations | 61.0 | | 59.8 |
+-------------------------------------------------+---------+-+---------+
| Adjustments for: | | | |
+-------------------------------------------------+---------+-+---------+
| Depreciation of property, plant and equipment | 20.1 | | 18.1 |
+-------------------------------------------------+---------+-+---------+
| Amortisation of intangible assets | 5.3 | | 5.3 |
+-------------------------------------------------+---------+-+---------+
| Share options | 0.9 | | 0.9 |
+-------------------------------------------------+---------+-+---------+
| Loss on disposal of property, plant and | 0.1 | | - |
| equipment | | | |
+-------------------------------------------------+---------+-+---------+
| Exceptional pension gain | (6.3) | | - |
+-------------------------------------------------+---------+-+---------+
| Pension payments in excess of service cost | (19.6) | | (5.2) |
+-------------------------------------------------+---------+-+---------+
| Operating cash flows before movements in | 61.5 | | 78.9 |
| working capital | | | |
+-------------------------------------------------+---------+-+---------+
| Decrease in inventories | 26.8 | | 7.6 |
+-------------------------------------------------+---------+-+---------+
| Decrease in receivables | 11.5 | | 10.0 |
+-------------------------------------------------+---------+-+---------+
| Decrease in payables | (8.4) | | (5.4) |
+-------------------------------------------------+---------+-+---------+
| Working capital currency movements | (1.7) | | 0.8 |
+-------------------------------------------------+---------+-+---------+
| Cash generated by operations | 89.7 | | 91.9 |
+-------------------------------------------------+---------+-+---------+
| Income taxes paid | (11.2) | | (8.8) |
+-------------------------------------------------+---------+-+---------+
| Interest paid | (8.7) | | (8.5) |
+-------------------------------------------------+---------+-+---------+
| Net cash from operating activities | 69.8 | | 74.6 |
+-------------------------------------------------+---------+-+---------+
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:
+--------------------------------------------+---------+-+---------+
| | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+--------------------------------------------+---------+-+---------+
| Net cash from operating activities | 69.8 | | 74.6 |
+--------------------------------------------+---------+-+---------+
| Interest received | 2.6 | | 1.7 |
+--------------------------------------------+---------+-+---------+
| Proceeds on disposal of property, plant | 0.3 | | 0.6 |
| and equipment | | | |
+--------------------------------------------+---------+-+---------+
| Purchases of property, plant and equipment | (12.3) | | (23.8) |
| - cash | | | |
+--------------------------------------------+---------+-+---------+
| Purchase of intangible assets | (0.3) | | (0.7) |
+--------------------------------------------+---------+-+---------+
| Free cash flow | 60.1 | | 52.4 |
+--------------------------------------------+---------+-+---------+
c) Analysis of net debt
+--------------------------------+----------+----------+----------+----------+
| | At | Cash | Exchange | At |
| | 1 Jan | flow | Movement | 31 Dec |
| | 2009 | | | 2009 |
+--------------------------------+----------+----------+----------+----------+
| | GBPm | GBPm | GBPm | GBPm |
+--------------------------------+----------+----------+----------+----------+
| Cash | 11.9 | 9.3 | (0.8) | 20.4 |
+--------------------------------+----------+----------+----------+----------+
| Overdrafts | (1.2) | 0.1 | - | (1.1) |
+--------------------------------+----------+----------+----------+----------+
| Cash and cash equivalents | 10.7 | 9.4 | (0.8) | 19.3 |
+--------------------------------+----------+----------+----------+----------+
| Debt due within one year | - | - | - | - |
+--------------------------------+----------+----------+----------+----------+
| Debt due after one year | (149.6) | 15.5 | 13.8 | (120.3) |
+--------------------------------+----------+----------+----------+----------+
| Finance leases | (1.7) | 0.2 | 0.2 | (1.3) |
+--------------------------------+----------+----------+----------+----------+
| Forward exchange contract | (33.9) | 25.2 | 8.7 | - |
| losses | | | | |
+--------------------------------+----------+----------+----------+----------+
| Total | (174.5) | 50.3 | 21.9 | (102.3) |
+--------------------------------+----------+----------+----------+----------+
The forward exchange contract losses shown above are reported as GBPnil (2008 -
GBP33.9m) in current liabilities within trade and other payables.
+-------------------------------------------------+---------+-+---------+
| | Year | | Year |
| | ended | | ended |
| | 2009 | | 2008 |
| | GBPm | | GBPm |
+-------------------------------------------------+---------+-+---------+
| Cash and cash equivalents comprise: | | | |
+-------------------------------------------------+---------+-+---------+
| Cash | 20.4 | | 11.9 |
+-------------------------------------------------+---------+-+---------+
| Bank overdrafts | (1.1) | | (1.2) |
+-------------------------------------------------+---------+-+---------+
| Total | 19.3 | | 10.7 |
+-------------------------------------------------+---------+-+---------+
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. The Directors
consider that the carrying amount of cash and cash equivalents approximates
their fair value.
12. Retirement benefit schemes
Defined Benefit Schemes
Aggregate post-retirement benefit liabilities are GBP48.1m (2008 - GBP51.2m).
The primary components of this liability are the Group's UK pension plan and US
pension plans, with deficits of GBP39.6m (2008 - GBP37.3m) and GBP3.8m (2008 -
GBP9.3m) respectively. These values have been assessed by an independent
actuary using current market values and discount rates. The decrease in the
liability from GBP51.2m at 31 December 2008 to GBP48.1m at 31 December 2009 is
primarily due to contributions in excess of service cost of GBP19.6m, higher
returns on plan assets than assumed and an exceptional pension gain arising from
the introduction of a cap on future pensionable earnings growth of 2% per annum
from 6 April 2010 in the UK plan, offset partially by a decrease in the UK plan
discount rate assumption to 5.7% (2008 - 6.4%) and an increase in the UK plan
inflation rate assumption to 3.5% (2008 - 2.8%). The changes in discount and
inflation rate assumptions since 31 December 2008 are in line with movements in
market yields of high quality corporate bonds and movements in market estimates
of future price inflation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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