Final Results -11-
February 27 2012 - 2:01AM
UK Regulatory
in the Middle East, remains to demonstrate its ability to manage cyclicality,
significant. as it withstood significant declines in most
of its key markets during the global recession
of 2008 and 2009 and continued to remain
healthily profitable and highly cash generative.
The Group's financing position, which has
been reported on earlier in this Operating
and Financial Review, improved again in 2011,
and included the renewal of its main bank
syndicated revolving credit facility. As
a result the Group has no major refinancing
requirement until October 2014. Senior therefore
remains well placed to be able to withstand
any potential negative consequences that
may arise from a further global cyclical
downturn.
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Programme participation
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Long-term growth in demand, The Group has developed a portfolio of businesses
including participation that are exposed to markets which exhibit
in future development fundamental long-term growth characteristics.
programmes in the Group's It aims to develop constructive and co-operative
major markets, is an essential relationships with key customers in each
foundation for future market, providing innovative customer solutions
growth. Failure to secure and quality products delivered on time and
profitable new programme in line with specifications. These are critical
wins could have a severe components of customer value that ensure
impact on Group performance. continued participation in existing and future
development programmes. The Group ensures
that its operations are sufficiently well
capitalised to be able to bid competitively
on new programme opportunities, and maintains
close control over operating costs to ensure
that operations remain competitive on existing
programmes. The Group also utilises an internal
contract approval process, comprising both
financial and non-financial analyses, to
ensure that bids are submitted and won at
acceptable margin levels.
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Acquisitions
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Failure to execute an Continued significant free cash flow generation,
effective acquisition and the expectation that this will be sustained
programme would have a in the future, has enabled the Group to recommence
significant impact on a targeted acquisition programme with two
the Group's ability to further acquisitions completed in the period.
generate long-term value The Group's acquisition framework has been
for shareholders. updated in 2011 to enhance the targeting
process. In addition, a well-established
and proven valuation, due diligence and integration
process is employed by the senior management
team. Post-acquisition reviews are performed
on all acquisitions, comprising a full retrospective
review of each deal process, including integration
effectiveness, and sharing of lessons learned
with the Board and across the senior management
team.
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Employee retention
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An inability to attract, Capable, empowered and highly engaged individuals
develop and retain high-quality are a key asset of the business. The Group
individuals in key management has had recent success in attracting highly
positions could severely experienced senior executives from within
affect the long-term success the industry, in part attributable to the
of the Group. culture of the Group as described in the
Operations and Business Model section of
this Operating and Financial Review. The
Group sponsors the development and training
of key managers through an in-house management
development programme, and this will be supplemented
in 2012 with additional targeted training
for the individual members of the Group's
Executive Committee. Senior management turnover
ratios remain low, a further indication of
success in this important area.
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New aircraft platform
delays
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Significant shipset content The Group monitors programme development
has been secured on a and launch timing of new aircraft platforms
number of new aircraft very closely, utilising internal customer
platforms currently under relationships and market intelligence. It
development or in initial also takes a cautious approach to both capital
phases of production. investment in new programmes, to minimise
These include the Boeing the time between installation and utilisation
787 Dreamliner, Bombardier's of new capital equipment, and to inclusion
CSeries regional jet and of projected build rates and associated revenue
the Airbus A350. Delays in its financial projections. In addition,
in the launch or ramp the growing breadth of Senior's exposure
up in production of these to a comprehensive and diverse range of aerospace
platforms could have a industry platforms with increasing shipset
material adverse impact content, together with its broad exposure
on the Group's rate of in land vehicle and industrial markets, means
organic growth. that the Group's future organic growth profile
is not overly dependent on any individual
new aircraft platform.
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Raw material costs
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A significant increase Raw materials, principally stainless steel,
in the cost of raw material aluminium and various exotic metal alloys
inputs could have a damaging are the Group's largest input cost, representing
impact on the Group's over 40% of total costs in 2011. The Group
profitability. has a good track record in managing this
cost exposure through a combination of fixed
price purchase contracts, customer surcharge
agreements and customer directed purchases
at fixed costs that together ensure there
is no material impact on Group operating
margins from volatility in the price of these
materials.
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Importance of emerging
markets
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Customers' desire to move The threat of low-cost country manufacture
manufacture of components has existed for some time in certain product
to low cost countries lines, typically where price competition
could render the Group's was fierce or where product manufacture involved
operations uncompetitive significant labour content. The Group's strategy
and have an adverse impact of developing a portfolio of high value-added
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