Final Results -8-
February 27 2012 - 2:01AM
UK Regulatory
The total tax charge increased to GBP17.7m (2010 - GBP11.7m),
due to the increase in the Group's taxable profits. Net tax
benefits of GBP1.8m (2010 - GBP5.6m) arose from the loss on sale of
fixed assets, acquisition costs, amortisation of intangible assets
from acquisitions and, in 2010, goodwill impairment. If these are
added back, then the resultant tax charge of GBP19.5m (2010 -
GBP17.3m) represented an underlying rate of 25.0% (2010 - 26.5%) on
the adjusted profit before tax of GBP78.0m (2010 - GBP65.3m). The
decrease in the underlying tax rate arose mainly due to a decrease
in the tax rate in the USA and an increase in deferred tax assets
recognised in the UK arising from the capitalisation of certain
historical UK losses that are now anticipated to be available for
use following the acquisition of Weston.
Earnings per share
The weighted average number of shares, for the purposes of
calculating undiluted earnings per share, increased to 402.0
million (2010 - 399.6 million). Adjusted earnings per share
increased by 21% to 14.55 pence (2010 - 12.01 pence). Basic
earnings per share increased by 35% to 13.68 pence (2010 - 10.11
pence). See Note 7 for details of the basis of these
calculations.
Dividends
A final dividend of 2.65 pence per share is proposed for 2011,
an increase of 25% from last year, which would cost GBP10.7m (2010
final dividend - GBP8.5m). This would bring the full-year dividend
to 3.80 pence per share, 22% above the prior year. The cash outflow
incurred during 2011 in respect of the final dividend for 2010 and
the interim dividend for 2011 was GBP13.1m (2010 - GBP10.8m).
Research and development
The Group's expenditure on research and development increased to
GBP11.8m during 2011 (2010 - GBP10.6m). Expenditure was incurred
mainly on designing and engineering products in accordance with
individual customer specifications and developing specific
manufacturing processes for their production.
Capital expenditure
Gross capital expenditure increased by 56% in 2011 to GBP22.1m
(2010 - GBP14.2m), principally representing investment in future
growth programmes and also ongoing necessary replacement and
compliance expenditure. The Group's operations remain well
capitalised. The disposal of assets no longer required raised
GBP0.3m (2010 - GBP2.1m). A higher level of capital expenditure is
anticipated for 2012, although the extent will be dependent
primarily on the level of build rate increases in the large
commercial aircraft segment and the Group securing the expected new
programme wins in both Divisions.
Capital structure
The Group's Consolidated Balance Sheet at 31 December 2011 may
be summarised as follows:
Assets Liabilities Net Assets
GBPm GBPm GBPm
Property, plant and equipment 126.4 - 126.4
Goodwill and intangible assets 226.8 - 226.8
Current assets and liabilities 197.1 (149.8) 47.3
Other non-current assets and liabilities 9.7 (6.4) 3.3
Retirement benefit obligations - (34.5) (34.5)
------- ------------ -----------
Total before net debt 560.0 (190.7) 369.3
Net debt 29.3 (122.3) (93.0)
------- ------------ -----------
Total at 31 December 2011 589.3 (313.0) 276.3
======= ============ ===========
Total at 31 December 2010 504.0 (278.1) 225.9
======= ============ ===========
Net assets increased by 22% in the year to GBP276.3m (2010 -
GBP225.9m), in the main as a result of retained profits of
GBP55.0m. Net assets per share increased by 22% to 68.7p (2010 -
56.3p). There were 402.2 million ordinary shares in issue at the
end of 2011 (2010 - 400.9 million).
Retirement benefit obligations, as calculated in accordance with
IAS 19, decreased by GBP3.7m to GBP34.5m (2010 - GBP38.2m)
principally due to the positive impact of an increase in the value
of fixed income assets in the plans and GBP7.8m of cash
contributions in excess of service costs, but offset partially by
an increase in plan liabilities resulting from a decrease in the
discount rate used to discount plan liabilities.
Cash flow
The Group generated significant free cash flow (whose derivation
is set out in the table below) of GBP55.6m in 2011, marginally
below the GBP58.8m achieved in 2010. The main driver of the year's
performance was cash generated from operations of GBP96.3m, which
is stated after taking into account additional pension
contributions in excess of service costs of GBP7.8m and a working
capital outflow of GBP4.6m.
The positive cash flow from operations was offset by increased
net capital expenditure of GBP21.8m (2010 - GBP12.1m) and tax and
interest payments of GBP18.9m (2010 - GBP16.2m).
2011 2010
GBPm GBPm
Operating profit 83.0 62.2
Depreciation and amortisation 23.0 24.6
Working capital movement (4.6) 2.5
Pension payments above service cost (7.8) (5.8)
Additional discretionary pension payments - (6.0)
Goodwill impairment - 8.7
Other items 2.7 0.9
------- --------
Cash generated from operations 96.3 87.1
------- --------
Interest paid (net) (8.2) (7.6)
Tax paid (10.7) (8.6)
Capital expenditure (22.1) (14.2)
Sale of fixed assets 0.3 2.1
------- --------
Free cash flow 55.6 58.8
------- --------
Dividends (13.1) (10.8)
Acquisitions (68.6) (8.3)
Share issues - 0.3
Sale of shares held by employee benefit trust - 1.4
Finance lease assumed on acquisition and entered
into (0.9) -
Foreign exchange variations (2.3) (2.8)
Opening net debt (63.7) (102.3)
------- --------
Closing net debt (93.0) (63.7)
======= ========
Net debt
Net debt increased by GBP29.3m in the year to GBP93.0m (2010 -
GBP63.7m). The principal reasons for the increase were expenditure
on acquisitions of GBP68.6m (2010 - GBP8.3m) and gross capital
expenditure of GBP22.1m (2010 - GBP14.2m). These increases were
partially offset by the increase in cash generated by operations,
which was driven by the underlying positive impact of increased
profitability, continued tight controls over operational
expenditure and sustained low levels of working capital. At the
year-end, net debt comprised gross borrowings (including finance
leases of GBP1.6m) of GBP122.3m, with 98% of the Group's gross
borrowings in US dollars (31 December 2010 - 99%), and cash and
cash equivalents of GBP29.3m.
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 2011, the Group was operating well within
these covenants as the ratio of EBITDA to net interest costs was
13.7x (31 December 2010 - 11.8x) and the ratio of net debt to
EBITDA was 0.8x (31 December 2010 - 0.7x).
Liquidity
As at 31 December 2011, the Group's gross borrowings excluding
finance leases were GBP120.7m (2010 - GBP118.6m). The maturity of
these borrowings, together with the maturity of the Group's
committed facilities, can be analysed as follows:
Gross Committed
Borrowings (1) Facilities
GBPm GBPm
Within one year 1.0 -
In the second year 0.2 -
In years three to five 38.8 106.3
After five years 80.7 80.7
------------ ------------
120.7 187.0
============ ============
(1) Gross borrowings include the use of bank overdrafts, other loans
and committed facilities, but exclude finance leases of GBP1.6m.
The Group successfully refinanced its revolving credit facility
in October 2011 and, at the year-end, had committed facilities of
GBP187.0m with a weighted average maturity of 5.2 years. The Group
is in a strong funding position, with headroom of GBP94.0m under
these facilities and no borrowings due for repayment until a
private placement loan of GBP22.6m matures in October 2014.
Going concern basis
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