TIDMSNR
RNS Number : 4364L
Senior PLC
01 August 2011
Senior plc
Interim Results for the half-year ended 30 June 2011
A strong performance, with adjusted profit before tax up 17% at
GBP38.0m
FINANCIAL Half-year to 30
HIGHLIGHTS June
2011 2010
------------------------------------- ---------- ---------- --------------
REVENUE GBP315.6m GBP287.7m +10%
-------------------------------------- ---------- ---------- --------------
OPERATING PROFIT - REPORTED GBP40.6m GBP35.4m +15%
- ADJUSTED (1) GBP43.0m GBP37.7m +14%
ADJUSTED OPERATING MARGIN
(1) 13.6% 13.1% -
-------------------------------------- ---------- ---------- --------------
PROFIT BEFORE TAX - REPORTED GBP35.6m GBP30.2m +18%
- ADJUSTED (1) GBP38.0m GBP32.5m +17%
------------------------------------- ---------- ---------- --------------
EARNINGS PER
SHARE - BASIC REPORTED 6.65p 5.59p +19%
- ADJUSTED (1) 7.00p 5.94p +18%
------------------------------------- ---------- ---------- --------------
PROPOSED INTERIM DIVIDEND PER SHARE 1.15p 1.00p +15%
-------------------------------------- ---------- ---------- --------------
FREE CASH FLOW (2) GBP23.2m GBP27.6m -16%
-------------------------------------- ---------- ---------- --------------
NET DEBT GBP62.9m GBP87.4m GBP24m better
-------------------------------------- ---------- ---------- --------------
(1) Adjusted figures are stated before a GBP2.3m charge for
amortisation of intangible assets acquired on acquisitions (2010 -
GBP2.3m) and acquisition costs of GBP0.1m (2010 - GBPnil). Adjusted
earnings per share takes account of the tax impact of these
items.
(2) See Note 11(b) for derivation of free cash flow.
The Group's principal exchange rates, for the US dollar and the
Euro, applied in the translation of first-half revenue, profit and
cash flow items at average rates were $1.61 (H1 2010 - $1.54) and
EUR1.14 (H1 2010 - EUR1.15), respectively. The US dollar and Euro
rates applied to the Balance Sheet at 30 June 2011 were $1.60 (June
2010 - $1.52) and EUR1.11 (June 2010 - EUR1.21), respectively.
Commenting on the results, Martin Clark, Chairman of Senior plc,
said:
"Senior has performed strongly in the first half of 2011, with
adjusted profit before tax increasing by 17% to GBP38.0m. Improved
product mix and operational execution resulted in record operating
margins of 13.6% and superior cash generation continues to provide
Senior with the flexibility to invest in organic growth and
acquisitions. While macroeconomic concerns remain, the outlook is
encouraging which gives the Board confidence to recommend an
increase in the interim dividend of 15% to 1.15p."
For further information please contact:
Mark Rollins, Group Chief Executive, Senior
plc 01923 714738
Simon Nicholls, Group Finance Director,
Senior plc 01923 714722
Philip Walters, RLM Finsbury Group 020 7251 3801
This Release, together with other information on Senior plc, may
be found at: www.seniorplc.com
Note to Editors:
Senior is an international manufacturing Group with operations
in 11 countries. It is listed on the main market of the London
Stock Exchange (symbol SNR). Senior designs, manufactures and
markets high technology components and systems for the principal
original equipment producers in the worldwide aerospace, defence,
land vehicle and energy markets.
Cautionary Statement
This Release contains certain forward-looking statements. Such
statements are made by the Directors in good faith based on the
information available to them at the time of the Release and they
should be treated with caution due to the inherent uncertainties
underlying any such forward-looking information.
Overview
Group Highlights
-- Strong performance from large commercial aircraft, military aerospace,
and medium- and heavy-truck programmes
-- Improved product mix and operational execution, and effective
cost control, resulted in record margins
-- Strong, sustainable free cash flow and effective working capital
management
-- Damar Machine Company acquired in March 2011; integration on
track
-- Airbus and Boeing increasing build rates across all programmes;
delivery of Boeing's 787, on which Senior has significant shipset
value, set to commence in Q3 2011
-- Confidence in future prospects underpins a 15% increase in the
interim dividend
The Group delivered strong results for the first half of 2011.
Adjusted profit before tax(1) increased by 17% to GBP38.0m,
revenues were up 10% to GBP315.6m, with the record operating margin
of 13.6% (H1 2010 - 13.1%) reflecting higher volumes, an improved
product mix and, above all, the Group's ongoing focus on
operational excellence. The Group's strong cash generation meant
that net debt fell slightly to GBP62.9m during the six-month
period, even with the acquisition of Damar Machine Company
("Damar") in March for GBP15.3m. At constant currency, total Group
revenue increased by 12% and adjusted operating profit increased by
17%.
Aerospace Divisional revenue increased by GBP23.8m (15%), on a
constant currency basis, to GBP187.9m. The increase was principally
due to increased production of the Boeing 787, Lockheed Martin's
C-130J military transporter and Joint Strike Fighter aircraft, as
well as the acquisition of Damar and improved market shares. On a
constant currency basis, adjusted operating profit for the
Aerospace Division increased by 21% to GBP29.6m (H1 2010 -
GBP24.4m), representing an operating margin of 15.8% (H1 2010 -
14.9%). The Aerospace Division's principal markets were generally
healthy during the first half of 2011, with Boeing and Airbus
reporting improved business conditions, delivering a combined 480
aircraft (H1 2010 - 472 aircraft) and receiving orders, net of
cancellations, for 811 aircraft (H1 2010 - 268 aircraft). Their
combined order book stood at 7,326 aircraft at the end of June
2011, representing approximately seven years of production at
current build rates. In July, American Airlines ordered 460
aircraft, the largest ever order by an airline. Senior's military
markets also remained strong due to the specific performance of the
Group's main programmes, whilst the regional and business jet
markets continued at relatively low levels throughout the
period.
In land vehicles, the Flexonics Division benefited from
increased revenue from the North American and European heavy-truck
markets, which more than offset generally weaker passenger vehicle
sales at the Group's main European customers such as Renault, Ford
and PSA. The Division's industrial markets were generally healthy,
with German markets improving and the global large expansion joint
market reporting similar conditions to the prior year, when volumes
of emergency repair work were strong but new project activity was
relatively weak. On a constant currency basis, Divisional revenue
increased by 9% over H1 2010 to GBP127.8m for the first six months
of 2011, whilst adjusted operating profit improved by 11% to
GBP17.0m (H1 2010 - GBP15.3m), representing an operating margin of
13.3% (H1 2010 - 13.0%).
As previously reported, Michael Steel retired from the Board at
the Group's 2011 Annual General Meeting in April, and two new
non-executive Directors, Mark E Vernon (Group Chief Executive
Officer of Spirax-Sarco Engineering plc) and Andy Hamment (Group
Marketing Director of Ultra Electronics Holdings plc) joined the
Board on 29 April. Mark and Andy bring extensive PLC board
experience of managing successful international specialist
engineering companies operating in similar environments to Senior,
which will be of significant future value to the Group.
Senior continues to gain market share in a number of its
markets, through excellent operational performance and financial
strength, with both new and existing customers offering healthy
growth opportunities. Looking ahead, the large commercial aerospace
industry is anticipated to be strong for a number of years with
Boeing and Airbus increasing build rates and the Boeing 787 due to
start delivery to customers in the third quarter of this year.
Elsewhere across the Group, the outlook appears generally positive
with the regional and business jet manufacturers forecasting build
rates to gradually improve from the current low levels, Senior's
main military platforms expected to remain relatively solid and the
North American truck market showing some signs of recovery. Whilst
the macroeconomic outlook remains uncertain, the Group's industrial
businesses are well positioned to benefit from growth in their end
markets when this occurs. Overall, the outlook for Senior remains
encouraging for the remainder of the year and over the longer
term.
As a result of the strong first half performance and the Group's
healthy future prospects, the interim dividend is being increased
by 15% to 1.15 pence per share (2010 interim dividend - 1.00
pence).
Note:
(1) Adjusted profit before tax is before amortisation of intangible
assets arising on acquisitions and acquisition costs.
Interim Management Report 2011
To the Members of Senior plc
This Interim Management Report ("IMR") has been prepared solely
to provide additional information to enable shareholders to assess
the Company's strategy and business objectives and the potential
for the strategy and objectives to be fulfilled. It should not be
relied upon by any other party or for any other purpose.
This IMR contains certain forward-looking statements. Such
statements have been made by the Directors in good faith based on
information available to them at the time of their approval of this
Report. These statements should therefore be treated with caution
due to the inherent uncertainties, including both economic and
business risk factors, underlying such forward-looking
information.
This IMR has been prepared for the Group as a whole and
therefore gives greatest emphasis to those matters that are
significant to Senior plc and its subsidiary undertakings when
viewed as a whole. The IMR discusses the following aspects of the
business: operations and business model; long-term strategy and
business objectives; the results for the six months ended 30 June
2011; risks and uncertainties facing the Group during the second
half of the 2011 financial year; going concern; Board diversity and
the outlook for the Group.
Operations and business model
Senior is an international engineering solutions provider 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 Group's underlying key market drivers are the build rates of
large commercial aircraft and regional and business jets, military
aerospace programme spending (in particular by the US Government),
passenger vehicle sales in Europe, Brazil, India and North America,
heavy-truck sales in North America and capital project spending in
the global petrochemical, power generation and renewable energy
industries. Many of the Group's products are used to satisfy the
increasing requirement for emission control and environmental
solutions in its principal end markets, as well as the growing
desire for improvements in operating costs, particularly fuel
efficiency in developing new aircraft platforms, gas turbine and
land vehicle engine applications. Long-term forecasts in these
areas, which are generally positive, are anticipated to provide the
foundation for future sustainable growth in revenue, profitability
and associated cash flows from the Group's product portfolio.
Senior 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. In order to promote quick decision-making and enhance
flexibility, the Group has a flat organisational structure with
only one layer of management between the Group CEO and local
operational management. The Group's culture is based around
empowerment of its autonomous operations within a well defined
control framework (including strong financial controls) and
includes a strong commitment to Lean Manufacturing principles,
whilst also promoting collaboration to support sharing of best
practice between operations and to provide more complete customer
programme solutions.
Sustained superior cash generation is a key financial objective
for all Group operations and available funding capacity is utilised
to invest in organic growth and operational improvement
opportunities, with improvement initiatives aligned to the key
value drivers within the business. The Group also plans to target a
select number of complementary acquisitions to accelerate growth
and enhance the overall asset portfolio.
The Group seeks to be consistent in its approach to all
stakeholders. This means meeting commitments that are made, acting
with integrity and in an ethical manner, complying with legal and
regulatory requirements and being a responsible member of each
community within which it operates.
The Group acknowledges that its objectives cannot be achieved
without assuming some degree of risk, and that profit is in part
the reward for risk taking. Risk, therefore, is embraced and
managed effectively within each business unit to optimise
performance. Senior takes a relatively cautious approach to risk
management, believing that stronger and more effective risk
management procedures will enable the Group to embrace and
effectively manage increasing levels of risk as the Group grows in
line with its strategic objectives.
The Group is split into two Divisions, Aerospace and Flexonics,
and operates in the following five key market sectors:
Sectors Division Description
Fluid conveyance Aerospace Design and manufacture of metallic
systems and non-metallic air and hydraulic
system solutions
Structures Aerospace Provision of precision engineered
structural components and higher value
assemblies for airframes and nacelles
Gas turbine engines Aerospace Manufacture of complex critical
components for demanding aero-engine
operating conditions
Land vehicle emission Flexonics Design, development and manufacture
control of engineered emission control products
for passenger vehicles and heavy-duty
diesel engines for trucks and off-road
vehicles
Industrial process Flexonics Design and delivery of low-maintenance
control control systems and products for
demanding temperature and pressure
environments in the petrochemical, power
and energy, HVAC and renewable energy
industries
The Aerospace Division (60% of Group revenue) consists of 16
operations (11 in North America and five in Europe) whilst the
Flexonics Division (40% of Group revenue) has 11 operations (three
in North America, five in Europe and three in the Rest of the
World). Major customers include Boeing, Airbus, UTC, Rolls-Royce,
Bombardier, Goodrich, Spirit AeroSystems, GKN, Cummins, Ford, PSA
and GM.
Demand levels in the Group's key aerospace markets during the
six-month period were slightly ahead of expectation, driven
principally by increasing build rates in large commercial and
military aircraft programmes. Boeing and Airbus delivered a
combined 480 aircraft in the period (2010 - 472 aircraft). Their
combined order book stood at 7,326 aircraft at the end of June
2011, representing approximately seven years of production at
current build rates. Combined net order intake in the first half of
2011 was 811 aircraft (1,007 orders less 196 cancellations), well
above the 268 aircraft net order intake in the first half of 2010.
The market for large commercial aircraft accounted for 40% of the
Aerospace Division's sales. As anticipated, the Group also
benefited from continued healthy demand in military aerospace
markets (30% of Divisional sales) as increasing build rates on the
C-130J transport aircraft and market share gains on the Sikorsky
Black Hawk helicopter drove further improvements in sales.
Production of regional and business jet aircraft remained broadly
stable in the period, as expected. Bombardier and Embraer, the
principal manufacturers of regional jets, delivered a combined 72
aircraft in the first half of 2011, an increase of 13% compared to
last year.
In the Flexonics Division, demand for the Group's land vehicle
components (53% of Divisional sales) increased ahead of
expectation, in the main due to increases in underlying market
demand for medium- and heavy-trucks in North America of 32% and in
Europe of 38%. These increases were partially offset by a larger
than anticipated decline in sales of passenger vehicles by the
Group's principal European customers of approximately 7%. Activity
levels in the Group's industrial markets (47% of Divisional sales),
in particular in the global market for large industrial expansion
joints, were better than anticipated in the first quarter of the
year, but with second quarter activity falling more in line with
expectations.
Senior continues to gain market share in a number of its markets
through excellent operational performance and financial strength,
with both new and existing customers offering healthy growth
opportunities. As an example, the decision by Airbus to re-engine
its high volume A320 aircraft by 2016 should offer Senior the
opportunity to increase its content on this aircraft. Tightening
emission legislation and growth in renewable energy markets can
also be expected to provide healthy longer-term opportunities for
the Group.
Long-term strategy and business objectives
The Group's primary performance objective is to create long-term
and sustainable growth in shareholder value. It aims to achieve
this objective through the development of a portfolio of
collaborative high value-added engineering manufacturing companies
within its five market sector framework, that are capable of
producing sustainable real growth in operating profit and cash flow
and consistently exceed the Group's cost of capital. At Group level
there are four key principles to Senior's strategy, which are:
-- optimising the value of the Group's existing operations portfolio
by exceeding customer expectation through advanced process engineering
and excellent factory and logistics execution, leading to market
differentiation and continued growth in organic revenue, operating
margins and cash flow delivery;
-- targeted investment in new product development, technologies
and geographic regions, for markets having higher than average
growth potential, to further enhance organic growth opportunities;
-- portfolio enhancement through focused acquisitions and disposal
of non-core assets, both of which 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
and continuously striving for improvements amongst its operating
businesses whilst operating in a safe and socially responsible
manner.
The above key elements are supported by five financial
performance measures and two non-financial performance measures as
set out in detail on page 13 of the Annual Report & Accounts
2010. A summary of the movements in these Key Performance
Indicators ("KPIs") is set out in the table below:
Half-year Half-year
ended ended
30 June 30 June
2011 2010
Organic revenue growth (1) +7% +5%
Adjusted earnings per share (2) 7.00p 5.94p
- growth +18% +39%
Return on revenue margin (3) 13.6% 13.1%
Free cash flow (4) GBP23.2m GBP27.6m
Return on capital employed (5) 28.5% 26.1%
Energy intensity (6) 236 239
Lost time injury frequency rate (7) 0.56 1.00
(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 amortisation of intangible assets arising on acquisitions
and acquisition costs) 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) Free cash flow is net cash generated by the Group prior to corporate
activity such as acquisitions, disposals, financing and transactions
with shareholders.
(5) 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.
(6) Energy intensity is a measure of the Group's energy
consumption relative to sales.
(7) 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.
Pleasingly, all of the Group's financial performance targets
were exceeded in the first half of 2011 with increases in organic
sales, earnings per share and return on revenue having been
achieved. Cash generation and return on capital employed also
exceeded target levels as set out in detail on page 13 of the
Annual Report & Accounts 2010.
After significant success over the past few years, the Group has
introduced a new five-year target to further reduce energy
consumption, its single largest contributor to greenhouse gases.
The goal is to reduce energy intensity (energy consumption
normalised to revenue) by 10% before the end of 2015. In the first
half of 2011 the Group's energy intensity metric was 236, a
reduction of 1.3% from the prior year (H1 2010 - 239). In respect
to the Group's principal health and safety measure, the lost time
injury frequency rate, it is particularly pleasing to be able to
report a further, and significant, reduction in the rate to 0.56
(H1 2010 - 1.00), which reflects the long-standing and ongoing
focus on improving safety across the Group.
Results for the six months ended 30 June 2011
The Group's operating results are summarised in the table below.
In order to show like-for-like comparative performance, Divisional
revenue and adjusted operating profit are shown on a constant
currency basis where H1 2011 and H1 2010 results are both
translated at H1 2011 average exchange rates. 66% of the Group's
revenue in the first half was generated in North America, with the
reported results impacted by the translation effect of a weaker US
dollar (H1 2011 average rate of GBP1:$1.61 compared to H1 2010
average rate of GBP1:$1.54):
Revenue Adjusted OP (1) Margin
Half-year Half-year Half-year Half-year Half-year Half-year
ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June
2011 2010 2011 2010 2011 2010
GBPm GBPm GBPm GBPm % %
Aerospace 187.9 164.1 29.6 24.4 15.8 14.9
Flexonics 127.8 117.5 17.0 15.3 13.3 13.0
Inter-segment
sales (0.1) (0.2) - - - -
Central costs - - (3.6) (2.8) - -
---------- ---------- ---------- ----------- ---------- ----------
Total -
constant
currency 315.6 281.4 43.0 36.9 13.6 13.1
Exchange - 6.3 - 0.8 - -
---------- ---------- ---------- ----------- ---------- ----------
Total - as
reported 315.6 287.7 43.0 37.7 13.6 13.1
---------- ---------- ---------- ----------- ---------- ----------
(1) Adjusted operating profit is the profit before amortisation of
intangible assets arising on acquisitions, acquisition costs
and before interest and tax charges. It may be reconciled to
the operating profit shown in the Condensed Consolidated Income
Statement as follows:
Half-year Half-year
ended ended
30 June 30 June
2011 2010
GBPm GBPm
Operating profit per the Condensed Consolidated
Income Statement 40.6 35.4
Amortisation of intangible assets from acquisitions 2.3 2.3
Acquisition costs 0.1 -
---------- ----------
Adjusted operating profit 43.0 37.7
---------- ----------
Acquisitions
On 25 March 2011 the Group acquired 100% of the issued share
capital of Damar Machine Company and two small related legal
entities (collectively "Damar") for a total consideration of
GBP15.3m. Damar is principally a manufacturer and integrator of
precision machined parts and assemblies for the commercial
aerospace industry. It specialises in air beams, wing skins,
stow-bin parts, interior decorative assemblies, panels and bulkhead
components, manufactured from aluminium, titanium and other
specialist metals. The business is highly complementary to Senior's
existing Aerospace Division, with content on each of Boeing's 737,
747, 767, 777 and 787 platforms which in total represented some 88%
of Damar's revenue in 2010. Damar has a well established reputation
in the aerospace industry and its capabilities, combined with
Senior's wider market access, financial strength and operational
excellence focus, are expected to lead to healthy growth prospects
and improved operational performance, benefiting customers,
employees and shareholders alike in the future. Financial details
relating to this acquisition are set out in Note 13 to the
Condensed Consolidated Interim Financial Statements ("Interim
Financial Statements").
Revenue
Reported Group revenue for the first half of 2011 increased by
10% to GBP315.6m compared to the first half of 2010. This increase
included GBP7.1m relating to the acquisitions of Damar, as noted
above, and WahlcoMetroflex Inc. ("Wahlco") which was acquired in
August 2010. Excluding these acquisitions, revenue from organic
operations increased by 7%. On a constant currency basis, total
Group revenue increased by 12%.
Total revenue in the Aerospace Division, on a constant currency
basis, increased by GBP23.8m (15%) to GBP187.9m. This increase in
revenue was driven principally by robust demand from increases in
build rates on the Group's large commercial aircraft programmes, in
particular Boeing's 777 and 787 programmes and on the Airbus A330
and A380. Revenue from military aerospace also improved, in line
with expectation, as build rates of the C-130J transport aircraft
continue to increase and benefits were realised from previously
secured increases in shipset value on the Black Hawk helicopter.
Business and regional jet markets remained stable although
relatively weak in the first half.
Revenue in the Flexonics Division, on a constant currency basis,
increased by GBP10.3m (9%) to GBP127.8m. This increase arose mainly
from increased underlying market demand for medium- and
heavy-trucks in North America and Europe compared with the first
half of 2010. Revenue in passenger vehicle markets in the USA,
Brazil and India also increased, due to underlying market
expansion, although this increase was more than offset by a decline
in sales made by the Group's principal European customers (PSA,
Ford and Renault) of approximately 7%. Demand conditions in the
Group's principal industrial markets were mixed, with activity
levels in some European markets improving whilst the important
global large industrial expansion joint market was broadly
unchanged overall in the first half.
Operating profit
Reported Group operating profit increased by 15% in the first
half of 2011 to GBP40.6m (H1 2010 - GBP35.4m). Adjusted operating
profit, at constant currency, increased by GBP6.1m (17%) to
GBP43.0m including acquisition contributions of GBP0.6m.
At constant currency, adjusted operating profit in the Aerospace
Division increased by GBP5.2m (21%) to GBP29.6m. This increase was
driven principally by the impact of stronger demand in large
commercial aircraft and military aerospace programmes, further
benefits from improved operational execution and a favourable
product mix. In the Flexonics Division, adjusted operating profit
at constant currency increased by GBP1.7m (11%), principally due to
strong performances in North American and European truck
programmes, effective cost control and continued operational
efficiency improvements.
The benefits of increased volumes in certain key markets,
combined with the positive impact of sustained cost control
measures and an improved product mix, were also seen in the Group's
reported operating margin which increased to 13.6% in the first
half of 2011 (H1 2010 - 13.1%). On a constant currency basis, the
operating margin in the Aerospace Division was 15.8% (H1 2010 -
14.9%) and 13.3% in the Flexonics Division (H1 2010 - 13.0%).
Central costs in the first half were GBP3.6m (H1 2010 -
GBP2.8m). The prior year benefited from a GBP0.5m pension credit
with the remaining increase of GBP0.3m principally due to an
increase in staff costs and tax adviser fees.
Finance costs
Total finance costs, net of investment income, decreased to
GBP5.0m (H1 2010 - GBP5.2m). Net interest costs on borrowings
decreased to GBP3.8m (H1 2010 - GBP4.1m), mainly due to the
beneficial impact of foreign exchange translation of interest on US
dollar denominated borrowings, whereas finance costs relating to
retirement benefits increased marginally to GBP1.2m (H1 2010 -
GBP1.1m). This was principally as a result of a reduction in the
expected returns on assets in the Group's pension plans, which in
turn is due to an increase in the proportion of plan assets that
are held as fixed income investments as part of the Group's risk
reduction initiatives to implement liability-driven investment
strategies in its UK and US defined benefit pension plans.
Profit before tax
Adjusted profit before tax increased by 17% to GBP38.0m (H1 2010
- GBP32.5m). Reported profit before tax increased by 18% to
GBP35.6m (H1 2010 - GBP30.2m).
Tax charge
The Group's total tax charge increased to GBP8.9m (H1 2010 -
GBP7.9m), largely as a result of the increased level of operating
profits. If the net tax benefits of GBP1.0m (H1 2010 - GBP0.9m)
arising from amortisation of intangible assets on acquisitions and
acquisition costs are added back, the adjusted tax charge of
GBP9.9m (H1 2010 - GBP8.8m) represents an underlying tax rate of
26.0% (H1 2010 - 27.1%) on adjusted profit before tax.
Earnings per share
The average number of shares in issue in H1 2011, for the
purposes of calculating undiluted earnings per share, was 401.7
million (H1 2010 - 399.0 million). The increase arose principally
from the vesting of shares awarded under the Group's long-term
incentive plan. Adjusted earnings per share increased by 18% to
7.00p (H1 2010 - 5.94p), whilst undiluted basic earnings per share
increased by 19% to 6.65p (H1 2010 - 5.59p). Fully diluted basic
earnings per share, calculated using 416.0 million shares,
increased by 19% to 6.42p (H1 2010 - 5.41p).
Dividend
The interim dividend is being increased by 15% to 1.15 pence per
share (2010 interim dividend - 1.00 pence per share), reflecting
the Group's strong performance and healthy future prospects. It
will be paid on 30 November 2011 to shareholders on the register at
the close of business on 28 October 2011.
Cash flow
The Group's free cash flow, the derivation of which is set out
in Note 11(b) of the Interim Financial Statements, remained strong
at GBP23.2m (H1 2010 - GBP27.6m), driven by the increase in
operating profit, and reflecting the Group's continuing focus on,
and success with, cash generation initiatives. H1 2011 cash flow
included an GBP8.9m working capital outflow, principally due to an
increase in receivables that arose due to increased sales in the
period. The Group maintained similar levels of working capital as a
proportion of annualised sales in the first half of 2011, and
working capital remains within the Group's target range.
The main drivers of cash generation during the period were the
increase in the Group's operating profits, continued tight controls
over discretionary expenditure (including capital expenditure) and
an ongoing focus on working capital efficiency ensuring that only
necessary resources are tied up in this area.
Cash generated from operating activities was GBP41.0m (H1 2010 -
GBP43.5m). This included the cash outflow from working capital of
GBP8.9m and pension payments in excess of service cost of GBP3.5m.
Capital expenditure increased to GBP9.1m (H1 2010 - GBP5.6m) with
the majority of the increase related to investment in growth
programmes. Capital expenditure of GBP5.5m was incurred in the
Aerospace Division and GBP3.4m in the Flexonics Division. Capital
expenditure is expected to be slightly higher in the second half
than the first half as investments are made to increase capacity
ahead of the forthcoming aerospace build rate increases and to
enhance product quality to continue to meet customer
requirements.
Net Assets
Net assets increased by 11% to GBP251.4m in the six-month period
(31 December 2010 - GBP225.9m) mainly as a result of retained
profits of GBP26.7m and actuarial gains in the Group's defined
benefit pension plans of GBP6.6m, partially offset by dividends
paid of GBP8.5m.
Net debt
The Group's net debt decreased by GBP0.8m in the six-month
period, after the acquisition of Damar for GBP15.3m. This movement
included favourable foreign currency movements of GBP1.4m, largely
due to a weakening in the value of the US dollar against Sterling
over the period from GBP1:$1.57 at the start of the year to
GBP1:$1.60 at the end of June 2011. Total net debt at 30 June 2011
was GBP62.9m (31 December 2010 - GBP63.7m). The Group's ratio of
net debt to EBITDA, its principal bank covenant, improved to 0.6x
at 30 June 2011 (31 December 2010 - 0.7x). Under the Group's
committed borrowing facilities, this ratio is required to be less
than 3.0x.
Retirement benefit obligations
Aggregate post-retirement benefit liabilities at 30 June 2011
were GBP29.3m in excess of the value of pension assets,
representing a decrease in the deficit of GBP8.9m from 31 December
2010. The net liability in respect of the Group's UK defined
benefit pension scheme decreased by GBP9.0m to GBP20.8m (31
December 2010 - GBP29.8m). Net pension liabilities in North America
and other territories increased marginally by GBP0.1m. The GBP9.0m
decrease in the UK net liability over the first six months of 2011
principally reflects the positive effect of total cash
contributions to the plan combined with improved absolute
investment returns on these assets.
Change in accounting policies
The accounting policies adopted in these Interim Financial
Statements are consistent with those followed in the preparation of
the Annual Report & Accounts 2010, except for the adoption of
Standards and Interpretations that are effective for the current
financial year. These are highlighted in Note 2 of the Interim
Financial Statements, and do not have a material impact on the
presentation of the Group's results.
Related party transactions
The Group's only related party transactions are between the
Company and its subsidiaries and these have been eliminated on
consolidation.
Risks and uncertainties
There are a number of potential risks and uncertainties which
may have a material impact on the Group's performance over the
remaining six months of this financial year, and which could cause
actual results to differ materially from the expected and
historical results. These were discussed in some depth in the
Annual Report & Accounts 2010, where the subjects of Group
strategy, global cyclical downturn, future programme participation,
acquisitions, employee retention, new aircraft platform delays, raw
material costs, low-cost country competition, pension deficits, and
the Group's financing structure and liquidity were covered. The
Board considers that these, together with an increase in price
pressures from customers in certain key markets, remain the most
likely areas of potential risk and uncertainty, with the position
largely unchanged from that set out in the Annual Report &
Accounts 2010.
The Group actively manages its strategic, commercial and
day-to-day operational risks through its Executive Committee.
Whilst there has been no significant change to the Group's risk
profile in the first half of 2011, fluctuations in foreign exchange
rates and underlying market demand conditions remain the most
significant risks to the Group's ability to achieve its performance
objectives in 2011.
Demand patterns were slightly ahead of expectations in the first
half of 2011, with large commercial aircraft build rates increasing
and military aerospace markets remaining robust. Regional and
business jet markets remained stable overall as anticipated. Land
vehicle markets generally held up satisfactorily in the period,
with the Group experiencing healthy increases in demand in North
American and European truck markets although this was offset
partially by a weakening in European passenger vehicle markets.
European industrial markets were strong in the first half whereas,
following a strong start to the year, the Group's North American
industrial markets eased down in the second quarter. The Group
continues to monitor forward market indicators closely and
maintains tight controls over discretionary expenditure levels and
working capital.
The Group faces potential foreign exchange volatility, given
that 74% of the Group's profits in H1 2011 were earned in North
America and that 99% of its gross borrowings at 30 June 2011 were
denominated in US dollars. The Group's Treasury Committee operates
Board-approved financial policies, including hedging policies,
designed to ensure the Group maintains an adequate level of funding
headroom and effectively mitigates foreign exchange and other
financial risks. These policies are described more fully in the
Annual Report & Accounts 2010.
Going concern basis
As noted in the Annual Report & Accounts 2010, the Group
meets its day-to-day working capital and other funding requirements
through a combination of long-term funding, in the form of
revolving credit and private placement facilities, and short-term
overdraft borrowings. The Group's GBP80m revolving credit facility,
which is currently undrawn, is the next major borrowing facility to
be renewed. Discussions with a number of banks are at an advanced
stage, and the Group is confident that an appropriate replacement
facility will be put in place well before the July 2012 expiry date
of the existing facility. Further, and as discussed above, during
the first half of 2011 the Group remained strongly cash generative
with free cash flow of GBP23.2m achieved. At 30 June 2011 the Group
had significant funding headroom of GBP148m under its committed
borrowing facilities.
The Group's forecasts, taking into account reasonably possible
changes in trading performance together with foreign exchange
fluctuations under the hedging policies that are in place, show
that the Group will be able to operate comfortably within the level
of its current committed borrowing facilities and banking
covenants. As a consequence, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, a period of not
less than 12 months from this reporting date. The Board has
continued to adopt the going concern basis in preparing the Group's
Condensed Consolidated Interim Financial Statements.
Board diversity
In undertaking the recent recruitment of two non-executive
Directors, the Board was fully cognisant of the desire for Board
diversity and actively considered a wide range of candidates before
selecting Mark E Vernon and Andy Hamment as being the two strongest
and most appropriate candidates for the role. The Board remains
committed to diversity, having an aspirational goal of 15% for
female Board representation by the end of 2013 and a larger
percentage thereafter.
Outlook
The outlook for the large commercial aircraft market, where
Senior has its largest end market exposure, is anticipated to be
strong for a number of years with Boeing and Airbus having
announced build rate increases for all of their major platforms.
Further, Boeing is confident that customer deliveries of its 787
aircraft, on which Senior has significant revenue content, will
commence in the third quarter of 2011 with a gradual, but
meaningful, ramp-up in production anticipated thereafter. The Group
can also be expected to benefit when Airbus and Bombardier bring
their respective A350 and CSeries aircraft into service in a few
years' time. The regional and business jet markets are stable,
although relatively weak, but manufacturers are anticipating a slow
but gradual increase in build rates and the Group has content on a
number of new programmes scheduled to go into production over the
coming years which should support longer-term growth. Whilst
western governments are reducing military and defence expenditure,
Senior's two main military platforms, the Black Hawk helicopter and
the C-130J transport aircraft, are important strategic programmes,
so providing resilience for the Group in this sector. Senior also
has healthy content on the key F35 Joint Strike Fighter programme,
whose build rate is anticipated to grow strongly over the next
decade.
In Flexonics, the recent increases in heavy truck demand in
North America and Europe are anticipated to be sustained in the
second half of the year as are the healthier demand levels for
passenger vehicles outside Europe. However, within Europe, the
Group's main passenger vehicle customers such as Renault, Ford and
PSA are anticipating that the current challenging conditions will
continue for some time to come. Looking further ahead, the
Flexonics Division's ongoing development of cooling and emission
control products, particularly for the heavy truck and off-highway
vehicle markets, is expected to provide opportunities for future
growth. The Group's industrial markets are anticipated to remain
solid in the near-term and to grow thereafter as tighter emission
laws in North America trigger investment in the clean-up of coal
fired power stations, renewable energy becomes more widespread and
an eventual improvement in the global economy leads to investment
in new industrial plants.
In addition to the organic growth opportunities, the Group's
improved profit performance and associated strong cash generation
place the business in a good position to grow by acquisition if
suitable opportunities arise. Overall, while macroeconomic concerns
remain, Senior anticipates performing in line with the Board's
expectations for the remainder of the year, and the longer-term
outlook for Senior continues to be encouraging.
DIRECTORS' RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge that:
1. the condensed set of Interim Financial Statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting" as adopted
by the European Union;
2. the Interim Management Report herein includes a fair review of
the important events during the first six months and description
of the principal risks and uncertainties for the remaining six
months of the year, as required by Rule 4.2.7R of the Disclosure
and Transparency Rules of the United Kingdom's Financial Services
Authority; and
3. the Interim Management Report includes as applicable, a fair review
of disclosure of related party transactions and changes therein,
as required by Rule 4.2.8R of the Disclosure and Transparency
Rules of the United Kingdom's Financial Services Authority.
By order of the Board
Mark Rollins Group Chief Executive
Simon Nicholls Group Finance Director
29 July 2011
Condensed Consolidated Income Statement
For the half-year ended 30 June 2011
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2011 2010 2010
GBPm GBPm GBPm
Continuing operations
Revenue 3 315.6 287.7 566.9
---------- ---------- --------
Trading profit 40.6 35.4 62.0
Profit on sale of fixed assets - - 0.2
---------- ---------- --------
Operating profit (1) 3 40.6 35.4 62.2
Investment income 0.2 0.2 0.5
Finance costs (5.2) (5.4) (10.6)
---------- ---------- --------
Profit before tax (2) 35.6 30.2 52.1
Tax 5 (8.9) (7.9) (11.7)
---------- ---------- --------
Profit for the period 26.7 22.3 40.4
---------- ---------- --------
Attributable to:
Equity holders of the parent 26.7 22.3 40.4
---------- ---------- --------
Earnings per share
Basic (3) 7 6.65p 5.59p 10.11p
---------- ---------- --------
Diluted 7 6.42p 5.41p 9.77p
---------- ---------- --------
(1) Adjusted operating profit 4 43.0 37.7 75.4
(2) Adjusted profit before tax 4 38.0 32.5 65.3
(3) Adjusted earnings per share 7 7.00p 5.94p 12.01p
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2011
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
GBPm GBPm GBPm
Profit for the period 26.7 22.3 40.4
Other comprehensive income:
Gains/ (losses) on cash flow hedges
during the period 0.4 (0.8) 0.8
Reclassification adjustments for
gains included in profit or loss (0.4) (0.6) (1.2)
---------- ---------- --------
Losses on cash flow hedges - (1.4) (0.4)
Gains on revaluation of financial
instruments 0.1 - -
Exchange differences on translation
of foreign operations (1.5) 7.0 4.0
Actuarial gains/ (losses) on defined
benefit pension schemes 6.6 (6.2) 0.4
---------- ---------- --------
Other comprehensive income 5.2 (0.6) 4.0
Tax relating to components of other
comprehensive income - 0.3 2.7
---------- ---------- --------
Other comprehensive income for the
period, net of tax 5.2 (0.3) 6.7
---------- ---------- --------
Total comprehensive income for the
period 31.9 22.0 47.1
---------- ---------- --------
Attributable to:
Equity holders of the parent 31.9 22.0 47.1
---------- ---------- --------
Condensed Consolidated Balance Sheet
30 June 30 June
As at 30 June 2011 Notes 2011 2010 31 Dec 2010
GBPm GBPm GBPm
Non-current assets
Goodwill 8 178.1 176.9 169.7
Other intangible assets 5.0 9.0 6.9
Property, plant and equipment 9 115.6 116.2 114.0
Deferred tax assets 0.5 0.2 1.0
Trade and other receivables 0.6 0.6 0.6
------- ------- -----------
Total non-current assets 299.8 302.9 292.2
------- ------- -----------
Current assets
Inventories 78.1 70.8 75.1
Construction contracts 1.7 1.9 1.4
Trade and other receivables 97.7 86.0 79.3
Cash and cash equivalents 11a) 54.4 40.0 56.0
------- ------- -----------
Total current assets 231.9 198.7 211.8
------- ------- -----------
Total assets 531.7 501.6 504.0
------- ------- -----------
Current liabilities
Trade and other payables 122.1 109.7 110.5
Tax liabilities 7.2 4.3 7.4
Obligations under finance leases 0.2 0.2 0.3
Bank overdrafts and loans 0.2 0.4 0.3
------- ------- -----------
Total current liabilities 129.7 114.6 118.5
------- ------- -----------
Non-current liabilities
Bank and other loans 11c) 116.2 125.8 118.3
Retirement benefit obligations 12 29.3 50.1 38.2
Deferred tax liabilities 3.9 7.2 1.9
Obligations under finance leases 0.7 1.0 0.8
Others 0.5 0.5 0.4
------- ------- -----------
Total non-current liabilities 150.6 184.6 159.6
------- ------- -----------
Total liabilities 280.3 299.2 278.1
------- ------- -----------
Net assets 251.4 202.4 225.9
------- ------- -----------
Equity
Issued share capital 10 40.2 40.0 40.1
Share premium account 12.3 12.2 12.3
Equity reserve 2.0 1.9 2.2
Distributable reserve - 19.4 -
Hedging and translation reserve 4.8 7.5 6.2
Retained earnings 192.1 122.8 165.1
Own shares - (1.4) -
------- ------- -----------
Equity attributable to equity holders
of the parent 251.4 202.4 225.9
------- ------- -----------
Total equity 251.4 202.4 225.9
------- ------- -----------
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2011
All equity is attributable to equity holders
of the parent
Issued Share Hedging and
share premium Equity Distribut-able translation Retained Own Total
capital account reserve reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2010 39.9 12.1 1.9 19.4 1.6 111.3 (1.4) 184.8
Profit for the
period - - - - - 40.4 - 40.4
Losses on cash
flow hedges - - - - (0.4) - - (0.4)
Gains on
revaluation of
financial
instruments - - - - - - - -
Exchange
differences
on
translation
of foreign
operations - - - - 4.0 - - 4.0
Actuarial
gains on
defined
benefit
pension
schemes - - - - - 0.4 - 0.4
Tax relating
to components
of other
comprehensive
income - - - - 1.0 1.7 - 2.7
------- ------- ------- -------------- ----------- -------- ------ -------
Total
comprehensive
income for
the period - - - - 4.6 42.5 - 47.1
Issue of share
capital 0.2 0.2 (0.1) - - - - 0.3
Share-based
payment
charge - - 1.0 - - - - 1.0
Sale of shares
held by
employee
benefit
trust - - - - - - 1.4 1.4
Tax relating
to
share-based
payments - - - - - 2.1 - 2.1
Transfer to
retained
earnings - - (0.6) (19.4) - 20.0 - -
Dividends paid - - - - - (10.8) - (10.8)
------- ------- ------- -------------- ----------- -------- ------ -------
Balance at 31
December
2010 40.1 12.3 2.2 - 6.2 165.1 - 225.9
Profit for the
period - - - - - 26.7 - 26.7
Losses on cash
flow hedges - - - - - - - -
Gains on
revaluation
of financial
instruments - - - - 0.1 - - 0.1
Exchange
differences
on
translation
of foreign
operations - - - - (1.5) - - (1.5)
Actuarial
gains on
defined
benefit
pension
schemes - - - - - 6.6 - 6.6
Tax relating
to components
of other
comprehensive
income - - - - - - - -
------- ------- ------- -------------- ----------- -------- ------ -------
Total
comprehensive
income for
the period - - - - (1.4) 33.3 - 31.9
Issue of share
capital 0.1 - (0.1) - - - - -
Share-based
payment
charge - - 0.8 - - - - 0.8
Tax relating
to
share-based
payments - - - - - 1.3 - 1.3
Transfer to
retained
earnings - - (0.9) - - 0.9 - -
Dividends paid - - - - - (8.5) - (8.5)
------- ------- ------- -------------- ----------- -------- ------ -------
Balance at 30
June 2011 40.2 12.3 2.0 - 4.8 192.1 - 251.4
------- ------- ------- -------------- ----------- -------- ------ -------
All equity is attributable to equity holders
of the parent
Issued Share Hedging and
share premium Equity Distribut-able translation Retained Own Total
capital account reserve reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2010 39.9 12.1 1.9 19.4 1.6 111.3 (1.4) 184.8
Profit for the
period - - - - - 22.3 - 22.3
Losses on cash
flow hedges - - - - (1.4) - - (1.4)
Gains on
revaluation of
financial
instruments - - - - - - - -
Exchange
differences
on
translation
of foreign
operations - - - - 7.0 - - 7.0
Actuarial
losses on
defined
benefit
pension
schemes - - - - - (6.2) - (6.2)
Tax relating
to components
of other
comprehensive
income - - - - 0.3 - - 0.3
------- ------- ------- -------------- ----------- -------- ------ -------
Total
comprehensive
income for
the period - - - - 5.9 16.1 - 22.0
Issue of share
capital 0.1 0.1 (0.1) - - - - 0.1
Share-based
payment
charge - - 0.7 - - - - 0.7
Tax relating
to
share-based
payments - - - - - 1.6 - 1.6
Transfer to
retained
earnings - - (0.6) - - 0.6 - -
Dividends paid - - - - - (6.8) - (6.8)
------- ------- ------- -------------- ----------- -------- ------ -------
Balance at 30
June 2010 40.0 12.2 1.9 19.4 7.5 122.8 (1.4) 202.4
------- ------- ------- -------------- ----------- -------- ------ -------
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2011
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2011 2010 2010
GBPm GBPm GBPm
Net cash from operating activities 11a) 31.7 32.9 70.2
---------- ---------- --------
Investing activities
Interest received 0.2 0.2 0.7
Proceeds on disposal of property,
plant and equipment 0.4 0.1 2.1
Purchases of property, plant and
equipment (8.8) (5.5) (13.5)
Purchases of intangible assets (0.3) (0.1) (0.7)
Acquisition of Damar 13 (15.3) - -
Acquisition of Wahlco - - (8.3)
---------- ---------- --------
Net cash used in investing
activities (23.8) (5.3) (19.7)
---------- ---------- --------
Financing activities
Dividends paid (8.5) (6.8) (10.8)
Repayment of borrowings - (4.5) (4.6)
Repayments of obligations under
finance leases (0.2) (0.1) (0.2)
Share issues - 0.1 0.3
Sale of shares held by employee
benefit trust - - 1.4
New loans raised - 3.5 -
Net cash inflow on forward
contracts 0.1 - -
---------- ---------- --------
Net cash used in financing
activities (8.6) (7.8) (13.9)
---------- ---------- --------
Net (decrease)/increase in cash
and cash equivalents (0.7) 19.8 36.6
Cash and cash equivalents at
beginning of period 55.9 19.3 19.3
Effect of foreign exchange rate
changes (0.8) 0.7 -
---------- ---------- --------
Cash and cash equivalents at end
of period 11a) 54.4 39.8 55.9
---------- ---------- --------
Notes to the Condensed Consolidated Interim Financial
Statements
1. General information
The information for the year ended 31 December 2010 does not
constitute the Group's statutory accounts for 2010 as defined in
Section 434 of the Companies Act 2006. Statutory accounts for 2010
have been delivered to the Registrar of Companies. The Auditors'
report on those accounts was unqualified, did not draw attention to
any matters by way of emphasis and did not contain statements under
Sections 498(2) or (3) of the Companies Act 2006.
These Interim Financial Statements, which were approved by the
Board of Directors on 29 July 2011, have been reviewed by the
Auditors, and their review opinion is set out at the end of this
Report.
2. Accounting policies
The Group's Annual Financial Statements are prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union.
These Interim Financial Statements have been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Services Authority and with IAS 34 "Interim Financial
Reporting" as adopted by the European Union. They have also been
prepared on the going concern basis as set out in the IMR. The
Directors have, at the time of approving these Interim Financial
Statements, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of
accounting in preparing these Interim Financial Statements.
The accounting policies, presentation and methods of computation
adopted are consistent with those followed in the preparation of
the Group's Annual Financial Statements for the year ended 31
December 2010, except for as described below.
In the current financial year, the Group has adopted IAS 24
"Related Party Disclosures", IFRIC 14 (Amendment) "Prepayments of a
Minimum Funding Requirement" and Improvements to IFRSs 2010 - as
published in May 2010.
IAS 24 simplifies the disclosure requirements for entities that
are controlled, jointly controlled or significantly influenced by
government related entities and clarifies the definition of a
related party. This revision does not impact the Group's related
party disclosures.
IFRIC 14 (Amendment) allows an entity to recognise an early
payment of contributions to cover minimum funding requirements on
its pension plan as a prepayment. This amendment does not represent
a material impact on the Group's Financial Statements.
The Improvements to IFRSs 2010 incorporated necessary, but
non-urgent, amendments to seven International Financial Reporting
Standards. The amendments most relevant to the Group are:
IFRS 7 Financial Instruments - Disclosures. The required
enhanced disclosures will be presented in the Group's Annual
Financial Statements for the year ending 31 December 2011.
IAS 34 Interim Financial Reporting emphasises the principle that
the disclosure about significant events and transactions in interim
periods should update the relevant information presented in the
most recent annual report. These Interim Financial Statements as at
30 June 2011 reflect the amended disclosure requirements, where
applicable.
The remaining five amendments in the Improvements to IFRSs 2010
do not currently impact 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: IAS 32 (Amendment) "Classification of
Rights Issues". IFRS 1 (Amendments) "Limited Exemption from
Comparative IFRS 7 Disclosures for First-time Adopters" and IFRIC
19 "Extinguishing Financial Liabilities with Equity Instruments"
are currently not relevant to the Group's operations.
3. Segmental analysis
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.
There has been no change in the basis of segmentation or in the
basis of measurement of segment profit or loss in the period.
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in the Group's Annual
Financial Statements for the year ended 31 December 2010 and sales
between segments are carried out at arm's length. Adjusted
operating profit, as described in Note 4, is the key measure
reported to the Group's Executive Committee for the purpose of
resource allocation and assessment of segment performance.
Investment income, finance costs and tax are not allocated to
segments, as this type of activity is driven by the central tax and
treasury function.
Segment assets include directly attributable computer software
assets, property, plant and equipment, and working capital assets.
Goodwill, intangible customer relationships, cash, deferred and
current tax and other financial assets (except for working capital)
are not allocated to segments for the purposes of reporting
financial performance to the Group's Executive Committee.
Business Segments
Segment information for revenue, operating profit and a
reconciliation to entity net profit is presented below.
Eliminations Eliminations
/ central / central
Aerospace Flexonics costs Total Aerospace Flexonics costs Total
Half-year Half-year Half-year Half-year Half-year Half-year Half-year Half-year
ended ended ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2011 2011 2011 2011 2010 2010 2010 2010
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External
revenue 187.9 127.7 - 315.6 169.8 117.9 - 287.7
Inter-segment
revenue - 0.1 (0.1) - 0.1 0.1 (0.2) -
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Total revenue 187.9 127.8 (0.1) 315.6 169.9 118.0 (0.2) 287.7
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted
operating
profit (see
Note 4) 29.6 17.0 (3.6) 43.0 25.3 15.2 (2.8) 37.7
Amortisation
of intangible
assets from
acquisitions (2.3) - - (2.3) (2.3) - - (2.3)
Acquisition
costs (0.1) - - (0.1) - - - -
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Operating
profit 27.2 17.0 (3.6) 40.6 23.0 15.2 (2.8) 35.4
---------- ---------- ------------ ---------- ---------- ------------
Investment
income 0.2 0.2
Finance costs (5.2) (5.4)
---------- ----------
Profit before
tax 35.6 30.2
Tax (8.9) (7.9)
---------- ----------
Profit after
tax 26.7 22.3
---------- ----------
Segment information for assets and a reconciliation to total
assets is presented below.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
GBPm GBPm GBPm
Aerospace 185.3 173.4 167.0
Flexonics 107.8 99.9 101.9
Corporate 1.2 0.9 1.2
---------- ---------- --------
Segment assets for reportable segments 294.3 274.2 270.1
Unallocated
Goodwill 178.1 176.9 169.7
Intangible customer relationships 3.4 7.7 5.3
Cash 54.4 40.0 56.0
Deferred and current tax 0.8 2.1 1.1
Others 0.7 0.7 1.8
---------- ---------- --------
Total assets per balance sheet 531.7 501.6 504.0
---------- ---------- --------
4. Adjusted operating profit and adjusted profit before tax
Adjusted operating profit and adjusted profit before tax,
derived in accordance with the table below, have been provided to
identify the performance of operations, from the time of
acquisition or until the time of disposal, prior to the impact of
gains or losses arising from the sale of fixed assets, impairment
of goodwill, amortisation of intangible assets acquired on
acquisitions and acquisition costs.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
GBPm GBPm GBPm
Operating profit 40.6 35.4 62.2
---------- ---------- --------
Profit on sale of fixed assets - - (0.2)
Amortisation of intangible assets from
acquisitions 2.3 2.3 4.6
Impairment of goodwill - - 8.7
Acquisition costs 0.1 - 0.1
---------- ---------- --------
Adjustments to operating profit 2.4 2.3 13.2
---------- ---------- --------
Adjusted operating profit 43.0 37.7 75.4
---------- ---------- --------
Profit before tax 35.6 30.2 52.1
Adjustments to profit as above before
tax 2.4 2.3 13.2
---------- ---------- --------
Adjusted profit before tax 38.0 32.5 65.3
---------- ---------- --------
5. Tax charge
Half-year Half-year
ended ended
30 June 30 June
2011 2010
Current tax: GBPm GBPm
UK corporation tax - -
Foreign tax 5.1 7.3
---------- ----------
5.1 7.3
Deferred tax:
Current year 3.8 0.6
---------- ----------
8.9 7.9
---------- ----------
Corporation tax for the interim period is charged at 26.0% (2010
- 27.1%), representing the best estimate of the weighted average
annual corporation tax rate expected for the full financial
year.
6. Dividends
Half-year Half-year
ended ended
30 June 30 June
2011 2010
GBPm GBPm
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December
2010 of 2.12p (2009 - 1.70p) per share 8.5 6.8
---------- ----------
Proposed interim dividend for the year ended 31
December 2011 of 1.15p (2010 - 1.00p) per share 4.6 4.0
---------- ----------
The proposed interim dividend was approved by the Board of
Directors on 29 July 2011 and has not been included as a liability
in these Interim Financial Statements.
7. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Half-year Half-year
ended ended
30 June 30 June
2011 2010
Number of shares million million
Weighted average number of ordinary shares for
the purposes of basic earnings per share 401.7 399.0
Effect of dilutive potential ordinary shares:
Share options 14.3 13.5
---------- ----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 416.0 412.5
---------- ----------
Half-year Half-year Half-year Half-year
ended ended ended ended
30 June 30 June 30 June 30 June
2011 2011 2010 2010
Earnings EPS Earnings EPS
Earnings and earnings per
share GBPm pence GBPm pence
Profit for the period 26.7 6.65 22.3 5.59
Adjust:
Amortisation of intangible
assets from acquisitions net
of tax of GBP0.9m (2010 -
GBP0.9m) 1.4 0.35 1.4 0.35
Acquisition costs net of tax
of GBP0.1m (2010 - GBP nil) - - - -
---------- ---------- ---------- ----------
Adjusted earnings after tax 28.1 7.00 23.7 5.94
---------- ---------- ---------- ----------
Earnings per share
- basic 6.65p 5.59p
- diluted 6.42p 5.41p
- adjusted 7.00p 5.94p
- adjusted and diluted 6.75p 5.75p
The effect of dilutive shares on the earnings for the purposes
of diluted earnings per share is GBPnil (2010 - GBPnil).
The denominators used for all basic, diluted and adjusted
earnings per share are as detailed in the "Number of shares" table
above.
Adjusted earnings per share, derived in accordance with the
table above, has been provided to identify the performance of
operations, from the time of acquisition or until the time of
disposal, prior to the impact of the following items:
- amortisation of intangible assets acquired on acquisitions;
and
- acquisition costs.
8. Goodwill
The increase in goodwill from GBP169.7m at 31 December 2010 to
GBP178.1m at 30 June 2011, reflects the goodwill arising on the
acquisition of Damar (see Note 13) of GBP10.6m, partially offset by
foreign exchange differences of GBP2.2m.
9. Property, plant and equipment
During the period, the Group spent GBP8.8m (2010 - GBP5.5m) on
the acquisition of property, plant and equipment. The Group also
disposed of machinery with a carrying value of GBP0.4m (2010 -
GBP0.1m) for proceeds of GBP0.4m (2010 - GBP0.1m).
10. Share capital
Share capital as at 30 June 2011 amounted to GBP40.2m. During
the period, the Group issued 74,200 shares at an average price of
25.0p per share under share option plans, raising GBP0.02m. A
further 1,256,703 shares were issued during the period under the
Group's long-term incentive plan.
11. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash from operating
activities
Half-year Half-year
ended ended
30 June 30 June
2011 2010
GBPm GBPm
Operating profit from continuing operations 40.6 35.4
Adjustments for:
Depreciation of property, plant and equipment 8.9 9.6
Amortisation of intangible assets from acquisitions 2.3 2.3
Amortisation of other intangible assets 0.3 0.3
Share-based payment charges 1.5 0.8
Pension payments in excess of service cost (3.5) (5.2)
---------- ----------
Operating cash flows before movements in working
capital 50.1 43.2
Increase in inventories (1.5) (3.7)
Increase in receivables (17.6) (7.3)
Increase in payables 10.2 10.9
Working capital currency movements (0.2) 0.4
---------- ----------
Cash generated by operations 41.0 43.5
Income taxes paid (5.3) (6.5)
Interest paid (4.0) (4.1)
---------- ----------
Net cash from operating activities 31.7 32.9
---------- ----------
Cash and cash equivalents comprise:
Cash 54.4 40.0
Bank overdrafts - (0.2)
---------- ----------
Total 54.4 39.8
---------- ----------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Balance Sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less.
b) Free cash flow
Free cash flow, a non-statutory item, highlights the total net
cash generated by the Group prior to corporate activity such as
acquisitions, disposals, financing and transactions with
shareholders. It is derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2011 2010
GBPm GBPm
Net cash from operating activities 31.7 32.9
Interest received 0.2 0.2
Proceeds on disposal of property, plant and equipment 0.4 0.1
Purchases of property, plant and equipment - cash (8.8) (5.5)
Purchase of intangible assets (0.3) (0.1)
---------- ----------
Free cash flow 23.2 27.6
---------- ----------
c) Analysis of net debt
At At
1 January Exchange 30 June
2011 Cash flow movement 2011
GBPm GBPm GBPm GBPm
Cash 56.0 (0.8) (0.8) 54.4
Overdrafts (0.1) 0.1 - -
---------- --------- --------- --------
Cash and cash equivalents 55.9 (0.7) (0.8) 54.4
Debt due within one year (0.2) - - (0.2)
Debt due after one year (118.3) - 2.1 (116.2)
Finance leases (1.1) 0.2 - (0.9)
Forward exchange contract losses - (0.1) 0.1 -
---------- --------- --------- --------
Total (63.7) (0.6) 1.4 (62.9)
---------- --------- --------- --------
12. Retirement benefit schemes
Defined Benefit Schemes
Aggregate post-retirement benefit obligations are GBP29.3m (30
June 2010 - GBP50.1m; 31 December 2010 - GBP38.2m). This liability
is made up of net deficits in the Group's UK and US defined benefit
pension schemes, with deficits of GBP20.8m (30 June 2010 -
GBP41.8m; 31 December 2010 - GBP29.8m) and GBP3.2m (30 June 2010 -
GBP3.8m; 31 December 2010 - GBP3.3m) respectively, and a liability
on unfunded schemes of GBP5.3m (30 June 2010 - GBP4.5m; 31 December
2010 - GBP5.1m). These values have been assessed by independent
actuaries using current market values and discount rates. The
decrease in the liability from GBP38.2m at 31 December 2010 to
GBP29.3m at 30 June 2011 reflects the positive effect of total cash
contributions in excess of service cost of GBP3.5m, together with
higher than assumed investment returns and a decrease in the
present value of benefit obligations, due to an increase in the UK
plan discount rate assumption to 5.6% (31 December 2010 - 5.4%).
This change in the discount rate assumption since 31 December 2010
is in line with movements in market yields of high-quality
corporate bonds which are used to determine the rate for
discounting future scheme liabilities.
13. Acquisitions
Damar Machine Company
On 25 March 2011, the Group acquired 100% of the issued share
capital of Damar Machine Company and two small related legal
entities (collectively "Damar"). Damar, located in Monroe,
Washington, USA, is principally a manufacturer and integrator of
precision machined parts and assemblies for the commercial aircraft
industry. The business, like the Group's existing Aerospace
Division, has content on each of Boeing's 737, 747,767, 777 and 787
platforms, with Boeing commercial aircraft representing some 88% of
Damar's 2010 revenue. Over the past year, Boeing has announced
build-rate increases for all of these aircraft types. Consequently,
the future prospects for Damar, and the Group's Aerospace Division,
appear highly encouraging. Damar's capabilities, combined with
Senior's wider market access, financial strength and operational
excellence focus, are expected to lead to stronger growth prospects
and improved operational efficiencies, benefitting customers,
employees and shareholders. The cash consideration, including
acquired overdraft of GBP0.1m, was GBP15.3m and the acquisition was
funded from the Group's existing debt facilities.
Set out below is a provisional summary of the net assets
acquired:
Recognised amounts of identifiable assets acquired
and liabilities assumed: GBPm
------------------------------------------------------- ------
Identifiable intangible assets 0.5
Property, plant and equipment 2.2
Inventories 2.0
Financial assets, excluding cash and cash equivalents 1.1
Bank overdraft (0.1)
Financial liabilities (1.1)
------------------------------------------------------- ------
Net assets acquired 4.6
Goodwill 10.6
------------------------------------------------------- ------
Total consideration 15.2
------------------------------------------------------- ------
Consideration satisfied by:
Cash paid at closing 15.3
Net asset adjustment (0.1)
------------------------------------------------------- ------
Total consideration transferred 15.2
------------------------------------------------------- ------
Net cash outflow arising on acquisition:
Cash consideration paid to date 15.2
Plus: overdraft acquired 0.1
------------------------------------------------------- ------
Net cash outflow arising on acquisition 15.3
------------------------------------------------------- ------
The goodwill of GBP10.6m results largely from the expectation
that the Group will be able to leverage the excellent business
relationship the Group has with Boeing, as well as the Group's
relationships with other commercial aerospace suppliers, to
generate substantial, sustainable financial growth beyond what
Damar would have potentially achieved as a stand-alone company.
None of the goodwill is expected to be deductible for tax purposes.
The intangible assets acquired as part of the acquisition relate to
customer contracts, the fair value of which is dependent on
estimates of attributable future revenues, pro tability and cash
ows, and are being amortised over 2.8 years. The financial assets
acquired include trade receivables with a fair value of GBP1.0m and
a gross contractual value of GBP1.0m, all of which is expected to
be collectible. Acquisition-related costs of GBP0.1m are included
in administrative expenses within trading profit in the Group's
Condensed Consolidated Income Statement for the half-year ended 30
June 2011. The fair value of the acquired identifiable tangible and
intangible assets and liabilities is provisional pending completion
of the fair value exercise.
Damar contributed GBP4.3m of external revenue and GBP0.2m to the
Group's operating profit from the date of acquisition to 30 June
2011. If the acquisition had been completed on 1 January 2011,
Group revenue for the six months ending 30 June 2011 would have
been GBP319.7m and Group operating profit would have been
GBP40.9m.
INDEPENDENT REVIEW REPORT TO SENIOR PLC
We have been engaged by Senior plc ("the Company") to review the
condensed set of Financial Statements in the half-yearly financial
report for the six months ended 30 June 2011 which comprises the
Condensed Consolidated Income Statement, the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated
Balance Sheet, the Condensed Consolidated Statement of Changes in
Equity, the Condensed Consolidated Cash Flow Statement and related
Notes 1 to 13. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of Financial Statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in Note 2, the annual Financial Statements of the
Group are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of Financial Statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of Financial Statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of Financial Statements
in the half-yearly financial report for the six months ended 30
June 2011 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
29 July 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
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