TIDMSNR
RNS Number : 2082I
Senior PLC
23 July 2012
Senior plc
Interim Results for the half-year ended 30 June 2012
Senior delivered strong results for the first half of 2012 with
revenue, adjusted profit before tax(1) and dividend all increasing
by 20%
FINANCIAL HIGHLIGHTS Half-year to
30 June
2012 2011
------------------------------- ------------------ ----------- ----------- ----------------
REVENUE GBP377.2m GBP315.6m +20%
--------------------------------------------------- ----------- ----------- ----------------
OPERATING PROFIT - REPORTED GBP48.4m GBP40.6m +19%
- ADJUSTED (1) GBP50.7m GBP43.0m +18%
ADJUSTED OPERATING MARGIN (1) 13.5% 13.6% -0.1 ppts
--------------------------------------------------- ----------- ----------- ----------------
PROFIT BEFORE TAX - REPORTED GBP43.2m GBP35.6m +21%
- ADJUSTED (1) GBP45.5m GBP38.0m +20%
-------------------------------------------------- ----------- ----------- ----------------
EARNINGS PER SHARE - BASIC REPORTED 8.17p 6.65p +23%
- ADJUSTED (1) 8.57p 7.00p +22%
-------------------------------------------------- ----------- ----------- ----------------
PROPOSED INTERIM DIVIDEND PER
SHARE 1.38p 1.15p +20%
--------------------------------------------------- ----------- ----------- ----------------
FREE CASH FLOW (2) GBP27.7m GBP23.2m +19%
--------------------------------------------------- ----------- ----------- ----------------
NET DEBT - June GBP74.8m GBP62.9m GBP12m increase
NET DEBT - December 2011 GBP93.0m GBP18m decrease
--------------------------------------------------- ----------- ----------- ----------------
(1) Adjusted figures are stated before a GBP2.0m charge for amortisation
of intangible assets acquired on acquisitions (2011 - GBP2.3m)
and acquisition costs of GBP0.3m (2011 - GBP0.1m). 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 $1.58 (H1 2011 - $1.61) and
EUR1.22 (H1 2011 - EUR1.14), respectively. The US dollar and Euro
rates applied to the Balance Sheet at 30 June 2012 were $1.57 (June
2011 - $1.60) and EUR1.24 (June 2011 - EUR1.11), respectively.
Commenting on the results, Mark Rollins, Group Chief Executive
of Senior plc, said:
"Senior continues to make strong progress, delivering a 20%
increase in revenue, adjusted profit before tax and dividend in the
first half of the year. Looking ahead, whilst the Group cannot
expect to be immune from ongoing macroeconomic uncertainties,
Senior's significant presence in the visible and growing large
commercial aerospace market combined with opportunities for market
share gains mean the longer-term outlook remains encouraging."
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 12 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 revenue up by 20% to GBP377.2m
-- Healthy underlying revenue growth in both the Aerospace and Flexonics
Divisions
-- Performance of Weston (acquired in November 2011 for GBP54m)
ahead of expectations
-- Adjusted profit before tax(1) increased by 20% to GBP45.5m, and
adjusted EPS increased by 22%
-- Continued strong free cash flow reduced net debt by GBP18.2m
in the period
-- Interim dividend increased by 20%, broadly in line with earnings
-- Overall Group outlook remains encouraging
The Group delivered strong results for the first half of 2012.
Adjusted profit before tax(1) increased by 20% to GBP45.5m, on
revenue up 20% to GBP377.2m. Operating margins remained healthy at
13.5% (H1 2011 - 13.6%) reflecting continued underlying progress
and the impact of the Weston acquisition. Adjusted earnings per
share increased by 22% to 8.57p (H1 2011 - 7.00p) with a lower
underlying tax rate offsetting the increased number of shares in
issue. The Group's strongly cash-generative nature meant that net
debt fell by GBP18.2m, to GBP74.8m, during the six-month period
despite investment in working capital and capital expenditure
increasing to deliver the Group's growth.
Overall trading conditions remained positive for the Aerospace
Division during the first half of 2012. Boeing and Airbus delivered
a combined 566 aircraft, 18% ahead of the first half of 2011 (480
aircraft). Their combined order intake in the first six months of
2012 of 670 aircraft, net of cancellations, was ahead of deliveries
such that their combined order book increased to 8,312 aircraft at
the end of June (June 2011 - 7,326 aircraft). Excluding the
acquisition of Weston, which occurred at the end of November 2011,
Senior's sales to the large commercial aircraft market grew by over
20% during the period, principally due to increases in build rates.
Sales also increased to the defence, regional and business jet
sectors, despite flat end markets, due to Senior generally being on
the faster-growing platforms in each sector. Pleasingly, Weston's
financial performance was ahead of expectations for the six-month
period and its integration within the Group is progressing well,
with its European and Asian footprint proving of interest to a
number of the Group's existing customers. In total, on a constant
currency basis, the Aerospace Division's revenue increased by
GBP52.9m (28%) to GBP242.5m and adjusted operating profit increased
by 22% to GBP36.5m (H1 2011 - GBP30.0m). Operating margins were
15.1% (H1 2011 - 15.8%), with the change, as anticipated, due to
the inclusion of the Weston operation.
In land vehicles, the Flexonics Division benefited from
significantly increased revenue from the North American heavy truck
market, which more than offset weaker passenger vehicle sales at
the Group's main European customers such as Renault and PSA.
Overall, the Flexonics Division's industrial sales were slightly
better, with activity ahead in the power and energy markets but
lower in petrochemical. On a constant currency basis, revenue in
the Flexonics Division increased by 9% to GBP134.9m for the first
six months of 2012 (H1 2011 - GBP123.5m), whilst adjusted operating
profit improved by 12% to GBP18.3m (H1 2011 - GBP16.3m). Operating
margins improved to 13.6% (H1 2011 - 13.2%), largely due to
improved manufacturing efficiencies for heavy-duty truck engine
components.
As planned, Martin Clark retired from the Board at the
conclusion of the Group's 2012 Annual General Meeting held on 27
April, after 11 years on the Board, the last five as its Chairman.
Charles Berry, who joined the Board on 1 March this year, took over
as Chairman upon Martin's retirement. Charles brings a broad
experience of listed companies and industrial markets, most
recently as Chairman of Drax Group plc, and he has made an
immediate contribution with a particular focus on leading the Group
through the next phase of its development.
Looking ahead, the large commercial aerospace industry (32% of
the Group's revenue in the first half) is anticipated to be strong
for a number of years, with Boeing and Airbus increasing build
rates, the Boeing 787 scheduled to ramp-up to full production by
the end of 2013, and the Airbus A350 due to be delivered to its
first customer in mid-2014. Elsewhere in aerospace, the regional
and business jet manufacturers are forecasting build rates to
improve gradually from the current low levels, with the
introduction of Bombardier's CSeries being beneficial for Senior.
Whilst Senior's main military platforms remain relatively solid
today, future weakness cannot be discounted given the general
ongoing squeeze on Western defence spending. In the Flexonics
Division, North American medium- and heavy-duty truck volumes are
currently at satisfactory levels, following a recent moderation in
growth expectations. New programmes and lower material prices are
mitigating some of the volume weakness in Senior's European
passenger vehicle markets. The Group's industrial markets continue
to be mixed with a number of expansion joint opportunities being
pursued in Asia and the Middle East. Whilst the macroeconomic
outlook remains uncertain, Senior's presence
in the visible and growing large commercial aerospace market
combined with the fact that the Group is well placed, operationally
and financially, to gain market share means that the Board's
expectation for 2012 full-year adjusted profit before tax remains
unchanged and the outlook for Senior remains encouraging over the
longer term.
As a result of the Group's strong first half performance and
future prospects, the interim dividend is being increased by 20% to
1.38 pence per share (2011 interim dividend - 1.15 pence).
Note: (1) Adjusted profit before tax is before amortisation of
intangible assets arising on acquisitions and acquisition
costs.
Interim Management Report 2012
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
2012; risks and uncertainties facing the Group during the second
half of the 2012 financial year; going concern; and the outlook for
the Group.
Operations and business model
Senior is an international, market-leading engineering solutions
provider with operations in 12 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. Many of the
Group's products are used to satisfy the increasing requirement for
emission control and environmentally driven 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. These trends are expected to drive an inherent
increase in underlying demand for, and further development of, many
of the Group's core products for the foreseeable future.
The Group aims to be the supplier of choice 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's principal underlying aerospace market demand drivers
are global passenger air miles, air freight demand, large
commercial and regional and business jet build rates, and military
aerospace programme spending (in particular by the US Government).
Within land vehicle and industrial markets, the principal demand
drivers are passenger vehicle sales in Europe, medium- and
heavy-duty truck sales in North America and capital project
spending in the global petrochemical and power generation
industries. Long-term forecasts for trends in these demand drivers
are mostly positive, which are anticipated to provide the
foundation for future sustainable growth in revenue, profitability
and associated cash flows from the Group's organic product
portfolio.
Senior has a flat organisational structure, with only one layer
of management between the Group Chief Executive 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 to provide more complete customer programme solutions.
Senior embraces fully the concepts and principles of Lean,
striving at all times for continuous improvement and the
elimination of non-value-added activities and processes. Continuing
success in implementation of this methodology across the Group's
operations is the principal reason for the significant growth
achieved in Group adjusted operating margin from 6.8% in 2006 to
13.5% in the first half of 2012.
All Group operations are required to maintain a strong focus on
cash generation, in particular concentrating on tight controls over
discretionary expenditure and continuous improvements in
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. Senior has made excellent progress with this
initiative in recent years, as evidenced by its consistently strong
free cash flow generation. Sustaining and, where possible, building
further on this position is a key Group objective.
Senior 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. The Group also plans to continue to target a
select number of complementary acquisitions to accelerate growth
and enhance its overall asset portfolio, whilst maintaining a
strong financial position.
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 encouraged to be
embraced and managed effectively within each business unit to
optimise performance. Senior takes a cautious approach to risk,
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.
Senior 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 comprises 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 (64% of Group revenue) consists of 18
operations (11 in North America, six in Europe and one in Thailand)
whilst the Flexonics Division (36% 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, Spirit AeroSystems, GKN, Cummins, Ford and
PSA.
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 aircraft
programmes. Boeing and Airbus delivered a combined 566 aircraft in
the period, a year-on-year increase of 18% (2011 - 480 aircraft).
Their combined order book stood at 8,312 aircraft at the end of
June 2012, representing over seven years of production at current
build rates. Combined net order intake in the first half of 2012 of
670 aircraft (729 orders less 59 cancellations) remained robust,
although this was slightly lower than the net order intake of 811
aircraft in the first half of 2011. The market for large commercial
aircraft accounted for 50% of the Aerospace Division's sales, an
increase of 10 percentage points following the acquisition of the
Weston operations in the UK and Thailand in November 2011. As
anticipated, the Group also benefited from continued healthy demand
in military aerospace markets (25% of divisional sales) in
particular for the Lockheed Martin C-130J transport aircraft and
the Sikorsky Black Hawk helicopter programmes. This, and
contributions from new platforms, drove further improvements in the
Group's military sales in the period. Overall, production of
regional and business jet aircraft remained weak but broadly stable
in the period, as expected. Against this backdrop, Senior's sales
in the regional jet market increased by 8% and in the business jet
market increased by 15%, reflecting the Group's success in winning
positions on the
faster-growing platforms in these sectors.
In the Flexonics Division, demand for the Group's land vehicle
components (52% of divisional sales) increased ahead of
expectation, in the main due to increases in underlying market
demand for medium- and heavy-duty trucks in North America of 24%.
These increases were partially offset by a larger than anticipated
decline of 14% in sales of passenger vehicles by the Group's
principal European customers. The Group also made further good
progress in finalising its joint venture agreement to commence
manufacture of heavy-duty diesel engine components in China early
in 2013, marking the next step in satisfying its major land vehicle
customers' increasing requirements for global programme supply as
emission regulations tighten in developing markets. Activity levels
in the Group's industrial markets (48% of divisional sales), in
particular in the global power and energy markets for large
industrial expansion joints and dampers and in HVAC markets in the
UK, were better than anticipated in the first half of the year.
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 framework of five market sectors that are capable of
producing sustainable real growth in operating profit and cash flow
and consistently exceeding the Group's cost of capital. At Group
level there are four key principles to Senior's strategy to achieve
these objectives, 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, with decisions in both cases being subject
to strict financial and commercial criteria, the operation's
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 principles are supported by five financial
performance measures and two non-financial performance measures as
set out in detail on pages 21 and 22 of the Annual Report &
Accounts 2011. 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
2012 2011
Organic revenue growth (1) +10% +7%
Adjusted earnings per share (2) 8.57p 7.00p
- growth +22% +18%
Return on revenue margin (3) 13.5% 13.6%
Free cash flow (4) GBP27.7m GBP23.2m
Return on capital employed (5) 27.8% 28.5%
Energy intensity (6) 224 236
Lost time injury frequency rate (7) 0.83 0.56
(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.
The Group continued to make good progress in achieving its
financial targets in the first half of 2012 with excellent
increases in organic sales and earnings per share. The Group's
headline return on revenue declined marginally due to a structural
change in its asset portfolio following the acquisitions of Weston
and Damar in 2011, although on a like-for-like basis return on
revenue in organic operations increased by 0.2 percentage points to
13.8%. Cash generation and return on capital employed also exceeded
target levels as set out in detail on pages 21 and 22 of the Annual
Report & Accounts 2011. Satisfactory improvements were also
seen in energy intensity (energy consumption normalised to
revenue). It is however disappointing to report a deterioration in
the lost time injury frequency rate, the Group's principal health
and safety measure, following five years of excellent progress in
this area during which time the rate has been reduced by over
two-thirds.
Results for the six months ended 30 June 2012
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 2012 and H1 2011 results are both
translated at H1 2012 average exchange rates. Reported results were
impacted marginally overall by a slight strengthening of the Pound
Sterling against non-US dollar currencies in the period, although
this was offset partially by a slight weakening of the Pound
Sterling against the US dollar (H1 2012 average rate of GBP1:$1.58
compared to H1 2011 average rate of GBP1:$1.61). 64% of the Group's
revenue in the first half was generated in North America.
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
2012 2011 2012 2011 2012 2011
GBPm GBPm GBPm GBPm % %
Aerospace 242.5 189.6 36.5 30.0 15.1 15.8
Flexonics 134.9 123.5 18.3 16.3 13.6 13.2
Inter-segment sales (0.2) (0.1) - - - -
Central costs - - (4.1) (3.6) - -
---------- ---------- ----------- ----------- ---------- ----------
Total - constant
currency 377.2 313.0 50.7 42.7 13.5 13.6
Exchange - 2.6 - 0.3 - -
---------- ---------- ----------- ----------- ---------- ----------
Total - as reported 377.2 315.6 50.7 43.0 13.5 13.6
---------- ---------- ----------- ----------- ---------- ----------
(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
2012 2011
GBPm GBPm
Operating profit per the Condensed Consolidated
Income Statement 48.4 40.6
Amortisation of intangible assets from acquisitions 2.0 2.3
Acquisition costs 0.3 0.1
---------- ----------
Adjusted operating profit 50.7 43.0
---------- ----------
Revenue
Reported Group revenue for the first half of 2012 increased by
20% to GBP377.2m compared to the first half of 2011. This increase
included GBP33.6m relating to the acquisitions of Weston EU Limited
and Weston (SEA) Limited, acquired on 25 November 2011, and the
first quarter sales of Damar Aerosystems which was acquired on 25
March 2011. Excluding these acquisitions, revenue from organic
operations increased by 9%. On a constant currency basis, total
Group revenue increased by 21% and revenue from organic operations
increased by 10%.
Total revenue in the Aerospace Division, on a constant currency
basis, increased by GBP52.9m (28%) to GBP242.5m. This increase was
driven principally by strong demand arising from increases in build
rates on the Group's large commercial aircraft programmes, in
particular Boeing's 787, 777 and 737 programmes and the Airbus A320
and A380 programmes. The total revenue increase in this market
sector, including acquisitions, was 59%. Revenue from military
aerospace improved by 7% with largely stable performance on the
Group's most significant programmes, the C-130J transport aircraft
and Black Hawk helicopter, and increases in revenue being seen from
other programmes (e.g. Boeing's P-8A naval reconnaissance aircraft
and V-22 tilt-rotor aircraft, and Augusta Westland's AW101
helicopter). Revenue from business and regional jet programmes
increased by 13% as the Group again outperformed the underlying
market, mainly due to recoverable development work on new regional
jet platforms and from increased activity on existing large
business jet programmes.
Revenue in the Flexonics Division, on a constant currency basis,
increased by GBP11.4m (9%) to GBP134.9m. Revenue in land vehicle
markets increased by 13%, mainly due to increased underlying market
demand for medium- and heavy-duty trucks in North America compared
with the first half of 2011. However, these increases were offset
partially by a decrease in passenger vehicle markets, principally
due to a decline in sales made by the Group's principal European
customers (PSA, Ford and Renault) of approximately 14%. Demand
conditions in the Group's principal industrial markets were
favourable overall, with increased activity levels in global power
generation markets and UK HVAC markets more than offsetting a
slight decline in demand from the global petrochemical sector and
weakness in European industrial markets. Total revenue from
industrial markets increased by 6%.
Operating profit
Reported Group operating profit increased by 19% in the first
half of 2012 to GBP48.4m (H1 2011 - GBP40.6m). Adjusted operating
profit, at constant currency, increased by GBP7.7m (18%) to
GBP50.7m including acquisition contributions of GBP3.3m.
At constant currency, adjusted operating profit in the Aerospace
Division increased by GBP6.5m (22%) to GBP36.5m. This increase was
driven principally by the impact of stronger demand on large
commercial aircraft programmes, the positive impact from the
acquisitions of Weston and Damar and further benefits from improved
operational execution. In the Flexonics Division, adjusted
operating profit at constant currency increased by GBP2.0m (12%) to
GBP18.3m, principally due to strong performances in North American
truck programmes, including the benefit of targeted operational
efficiency improvements.
The Group's reported operating margin in the first half of 2012
fell by 0.1 percentage points to 13.5% (2011 - 13.6%) due to
marginal dilution as a result of the operating margins generated by
the two acquisitions. However, underlying margins in organic
operations continued to improve as the benefits of increased
volumes in certain key markets combined with the positive impact of
further operational efficiency improvements. This resulted in an
increase in operating margin from organic operations of 0.2
percentage points to 13.8%. On a constant currency basis, the
operating margin achieved by organic operations in the Aerospace
Division was 15.9% (H1 2011 - 15.8%) and in the Flexonics Division
was 13.6% (H1 2011 - 13.2%).
Central costs in the first half were GBP4.1m (H1 2011 -
GBP3.6m), with the increase attributable to a combination of
increased staff costs and share-based payment costs.
Finance costs
Total finance costs, net of investment income, increased to
GBP5.2m (H1 2011 - GBP5.0m). Net interest costs on borrowings
increased to GBP3.9m (H1 2011 - GBP3.8m), mainly due to an increase
in average borrowing levels following the acquisition of Weston in
November 2011. Finance costs relating to retirement benefits
increased marginally to GBP1.3m (H1 2011 - GBP1.2m), principally as
a result of a reduction in the expected returns on assets in the
Group's pension plans. This 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 20% to GBP45.5m (H1 2011
- GBP38.0m). Reported profit before tax increased by 21% to
GBP43.2m (H1 2011 - GBP35.6m).
Tax charge
The Group's total tax charge increased to GBP10.2m (H1 2011 -
GBP8.9m), largely as a result of the increased level of operating
profits. If the net tax benefits of GBP0.7m (H1 2011 - GBP1.0m)
arising from amortisation of intangible assets on acquisitions and
acquisition costs are added back, the adjusted tax charge of
GBP10.9m (H1 2011 - GBP9.9m) represents an underlying tax rate of
24.0% (H1 2011 - 26.0%) on adjusted profit before tax. The
reduction in the Group's tax rate arose due to a combination of
changes in the geographic mix of profits following the acquisitions
in 2011 and a reorganisation of certain overseas operations
completed in the fourth quarter last year.
Earnings per share
The average number of shares in issue in H1 2012, for the
purposes of calculating undiluted earnings per share, was 403.9
million (H1 2011 - 401.7 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 22% to
8.57p (H1 2011 - 7.00p), whilst undiluted basic earnings per share
increased by 23% to 8.17p (H1 2011 - 6.65p). Fully diluted basic
earnings per share, calculated using 418.1 million shares,
increased by 23% to 7.89p (H1 2011 - 6.42p).
Dividend
The interim dividend is being increased by 20% to 1.38 pence per
share (2011 interim dividend - 1.15 pence per share), reflecting
the Group's healthy first half performance and encouraging future
prospects. It will be paid on 30 November 2012 to shareholders on
the register at the close of business on 26 October 2012.
Cash flow
The Group's free cash flow, the derivation of which is set out
in Note 11b) of the Interim Financial Statements, remained strong
at GBP27.7m (H1 2011 - GBP23.2m), driven by the increase in
operating profit, and reflecting the Group's sustained focus on,
and success with, cash generation initiatives. H1 2012 cash flow
included a GBP9.9m working capital outflow, mainly due to an
increase in receivables and inventory that arose due to increased
underlying activity in the period. The Group's level of working
capital as a proportion of annualised sales in the six-month period
increased by 0.6 percentage points to 9.4%, reflecting underlying
increases in market activity, and remains well within the target
range.
Cash generated from operating activities was GBP48.9m (H1 2011 -
GBP41.0m). This included the cash outflow from working capital of
GBP9.9m and pension payments in excess of service cost of GBP3.5m.
Capital expenditure increased to GBP12.8m (H1 2011 - GBP9.1m), with
the majority of the increase related to investment in growth
programmes. Capital expenditure of GBP7.8m was incurred in the
Aerospace Division and GBP4.9m in the Flexonics Division. Capital
expenditure is expected to be higher in the second half than the
first half as further 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 3% to GBP284.4m in the six-month period
(31 December 2011 - GBP276.3m) mainly as a result of retained
profits of GBP33.0m, which was partially offset by actuarial losses
in the Group's defined benefit pension plans of GBP14.3m and
dividends paid of GBP10.7m.
Net debt
The Group's net debt decreased by GBP18.2m in the six-month
period. This movement included favourable foreign currency
movements of GBP1.2m, largely due to a weakening in the value of
the US dollar against the Pound Sterling over the period from
GBP1:$1.55 at the start of the year to GBP1:$1.57 at the end of
June 2012. Total net debt at 30 June 2012 was GBP74.8m (31 December
2011 - GBP93.0m). The Group's ratio of net debt to EBITDA, its
principal bank covenant, improved to 0.6x at 30 June 2012 (31
December 2011 - 0.8x). 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 2012
were GBP46.3m in excess of the value of pension assets,
representing an increase in the deficit of GBP11.8m from 31
December 2011. The net liability in respect of the Group's UK
defined benefit pension plan increased by GBP8.5m to GBP33.8m (31
December 2011 - GBP25.3m). Net pension liabilities in North America
and other territories increased by GBP3.3m. The GBP8.5m increase in
the UK net liability over the first six months of 2012 is
principally due to the adverse impact of a reduction in bond yields
that determine the discount rate used in calculating the plan's
total benefit obligations.
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 2011, 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 risks, and the steps that the Group is
taking to manage them, were discussed in some depth on pages 31 to
33 of the Annual Report & Accounts 2011 which is available at
www.seniorplc.com. They can be summarised as follows:
-- Strategy
The Group has a significant breadth of future potential growth
opportunities. It is therefore essential that an appropriately
focused strategy is formulated, communicated and executed to
optimise long-term performance. The Group's focus on, and communication
of, its evolving strategy has increased in recent years.
-- Global cyclical downturn
The potential adverse impact on the Group of significant demand
reductions in key global markets arising from the consequences
of either sovereign debt issues in Europe, government austerity
measures and/or political instability in the Middle East, remains
a risk. The diversity of the Group's end market exposures provides
strong mitigation against inevitable cyclicality but nevertheless
management remains ready to implement appropriate cost reduction
measures in response to any significant reduction in key end
market demand.
-- Programme participation
Long-term growth in demand, including participation in future
development programmes in the Group's major markets, is an essential
foundation for future growth. Considerable focus is therefore
given to securing profitable new programme wins that will underpin
future Group performance.
-- Acquisition programme
Continued significant free cash flow generation, and the expectation
that this will be sustained in the future, has enabled the Group
to undertake a targeted acquisition programme. Failure to execute
this programme effectively could have an adverse impact on the
Group's ability to generate long-term value for shareholders.
The Group has a well-established process designed to optimise
results from the acquisition and integration process.
-- Employee retention
Capable, empowered and highly engaged individuals are a key asset
of the business. An ability to attract, develop and retain high-quality
individuals in key management positions is therefore essential
to the long-term success of the Group. Increasing attention is
being paid to recruitment processes and the training and development
of personnel at all levels.
-- New aircraft platform delays
Significant shipset content has been secured on a number of new
aircraft platforms currently under development or in initial
phases of production. These include the Boeing 787 Dreamliner,
Bombardier's CSeries regional jet and the Airbus A350. Delays
in the launch or ramp up in production of these platforms could
have a material adverse impact on the Group's rate of organic
growth. The Group maintains close relationships with its key
customers which enables it effectively to monitor new programme
development and prospective launch timings.
-- Raw material costs
Raw materials, principally stainless steel, aluminium and various
exotic metal alloys are the Group's largest input cost, representing
over 40% of total costs in 2011. A significant increase in the
cost of raw material inputs could have a damaging impact on the
Group's profitability. The Group mitigates this risk via a combination
of fixed price purchase contracts, customer surcharge agreements
and customer directed purchases at fixed costs.
-- Importance of emerging markets
Customers' desire to move manufacture of components to low-cost
countries could render the Group's operations uncompetitive and
have an adverse impact on profitability. In addition, certain
customers require global programme support as they respond to
increasing domestic demand in a number of these emerging markets.
The Group is increasingly manufacturing products internationally
to meet these requirements, including developing additional capabilities
in low-cost countries such as Mexico, Czech Republic, Thailand,
Brazil, India and most recently in China.
-- Pension deficit
An increase in the Group's pension deficit might have a material
adverse impact on cash flow and the ability of the Group to invest
for growth. The Group has for some time been developing and implementing
liability-driven investment strategies in all defined benefit
pension plans.
-- Financing and liquidity
The Group's activities expose it to a variety of financial risks
including foreign exchange risk and liquidity risk. The Group's
overall treasury risk management programme focuses on the unpredictability
of financial markets, seeking to minimise any potential adverse
effects on the Group's financial performance, and to ensure that
the Group has sufficient financial resources to fund its growth
strategy and to meet its financial obligations as they fall due.
-- Corporate governance breach
Corporate governance legislation, (such as the UK Bribery Act
and the US Foreign Corrupt Practices Act), regulations and guidance
(such as the UK Corporate Governance Code and global health and
safety regulations) are increasingly complex and onerous. A serious
breach of these rules and regulations could have a significant
impact on the Group's reputation, lead to a loss of confidence
on the part of investors, customers or other stakeholders and
ultimately have a material adverse impact on the Group's enterprise
value. The Group has well-established governance policies and
procedures in all key areas.
The Board considers that the above remain the most likely areas
of potential risk and uncertainty, with the position remaining
largely unchanged from that set out in the Annual Report &
Accounts 2011.
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 2012, 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 2012.
Going concern basis
As noted in the Annual Report & Accounts 2011, the Group is
well funded with significant long-term committed borrowing
facilities in place. It 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 (the first of which is not due to mature until October
2014), and short-term overdraft borrowings. The Group's GBP60m
revolving credit facility, which is currently undrawn, is not due
for renewal until 2016. Furthermore, and as discussed above, during
the first half of 2012 the Group remained strongly cash generative
with free cash flow of GBP27.7m achieved. The Group's ratio of net
debt to EBITDA, its principal bank covenant, improved to 0.6x at 30
June 2012 (31 December 2011 - 0.8x). Under the Group's committed
borrowing facilities, this ratio is required to be less than 3.0x.
At 30 June 2012, the Group had significant funding headroom of
GBP106m 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. Consequently the
Board has continued to adopt the going concern basis in preparing
the Group's Condensed Consolidated Interim Financial
Statements.
Outlook
The large commercial aircraft market, which now accounts for 50%
of the Aerospace Division's revenue, is anticipated to be strong
for a number of years. Boeing and Airbus are in the process of
increasing build rates for all of their major platforms, including
the Boeing 787 which entered service at the end of 2011 and on
which Senior has significant content. Further growth is expected
when Airbus delivers the new A350 aircraft to its first customer
during 2014. The regional and business jet markets are broadly
stable, although relatively weak, with manufacturers anticipating a
gradual increase in build rates when the global economic climate
improves. In the meantime, a number of new programmes are scheduled
to go into production in the next couple of years, such as
Bombardier's CSeries aircraft. Whilst Senior's main military
platforms, the Black Hawk helicopter and the C--130J transport
aircraft, are solid today, future weakness cannot be discounted
given the general ongoing squeeze on Western governments' defence
spending. However, Senior has healthy content on the newly
developing F35 Joint Strike Fighter, P-8A maritime surveillance
aircraft and A400M military transporter programmes, whose build
rates are anticipated to grow over the coming years so providing
some resilience for the future.
In the Flexonics Division, North American truck volumes are
currently at satisfactory levels, following a recent moderation in
growth expectations, and new programmes and lower material prices
are mitigating some of the volume weakness in Senior's European
passenger vehicle markets. The Group's industrial markets continue
to be mixed with a number of expansion joint opportunities being
pursued in Asia and the Middle East.
Looking further ahead, the Flexonics Division's ongoing
development of cooling and emission control products, particularly
for the heavy-duty truck and off-highway vehicle markets, can be
anticipated to contribute to future growth. Tightening emission
legislation and growth in renewable energy markets can also be
expected to provide healthy longer-term opportunities for the
Group.
Senior continues to actively pursue market share gain
opportunities in a number of areas as potential customers seek to
rationalise their supply bases towards financially strong and
operationally excellent suppliers with a global footprint.
Accordingly, Senior's forthcoming joint venture presence in China,
for the manufacture of emission legislation-driven parts for the
medium- and heavy-duty truck engine market, as well as the recent
acquisition of Weston's aerospace facility in Thailand, are
expected to be beneficial. The decisions taken by Airbus and Boeing
to re-engine their A320 and B737 aircraft, to improve fuel
efficiency by over 10%, are presenting a number of opportunities
for Senior to increase its content on these high-volume aircraft.
In addition, the Group's improved profit performance and associated
strong cash generation continue to place Senior in a good position
to grow by acquisition, as well as organically, if suitable
opportunities arise.
Whilst the macroeconomic outlook remains uncertain, Senior's
presence in the visible and growing large commercial aerospace
market combined with the fact that the Group is well placed, both
operationally and financially, to gain market share means that the
Board's expectation for 2012 full-year adjusted profit before tax
remains unchanged and the overall outlook for Senior remains
encouraging over the longer term.
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
20 July 2012
Condensed Consolidated Income Statement
For the half-year ended 30 June 2012
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2012 2011 2011
GBPm GBPm GBPm
Continuing operations
Revenue 3 377.2 315.6 640.7
---------- ---------- --------
Trading profit 48.4 40.6 83.3
Loss on sale of fixed assets - - (0.3)
---------- ---------- --------
Operating profit (1) 3 48.4 40.6 83.0
Investment income 0.1 0.2 0.3
Finance costs (5.3) (5.2) (10.6)
---------- ---------- --------
Profit before tax (2) 43.2 35.6 72.7
Tax 5 (10.2) (8.9) (17.7)
---------- ---------- --------
Profit for the period 33.0 26.7 55.0
---------- ---------- --------
Attributable to:
Equity holders of the parent 33.0 26.7 55.0
---------- ---------- --------
Earnings per share
Basic (3) 7 8.17p 6.65p 13.68p
---------- ---------- --------
Diluted 7 7.89p 6.42p 13.21p
---------- ---------- --------
(1) Adjusted operating profit 4 50.7 43.0 88.3
(2) Adjusted profit before tax 4 45.5 38.0 78.0
(3) Adjusted earnings per share 7 8.57p 7.00p 14.55p
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2012
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2012 2011 2011
GBPm GBPm GBPm
Profit for the period 33.0 26.7 55.0
Other comprehensive income:
Gains / (losses) on cash flow hedges
during the period 0.4 0.4 (2.3)
Reclassification adjustments for
losses / (gains) included in profit
or loss 0.5 (0.4) 0.2
---------- ---------- --------
Gains / (losses) on cash flow hedges 0.9 - (2.1)
Gains on revaluation of financial
instruments - 0.1 0.1
Exchange differences on translation
of foreign operations (3.8) (1.5) (1.4)
Actuarial (losses) / gains on defined
benefit pension schemes (14.3) 6.6 (1.8)
---------- ---------- --------
Other comprehensive income (17.2) 5.2 (5.2)
Tax relating to components of other
comprehensive income 2.4 - 8.8
---------- ---------- --------
Other comprehensive income for
the period, net of tax (14.8) 5.2 3.6
---------- ---------- --------
Total comprehensive income for
the period 18.2 31.9 58.6
---------- ---------- --------
Attributable to:
Equity holders of the parent 18.2 31.9 58.6
---------- ---------- --------
Condensed Consolidated Balance Sheet
As at 30 June 2012 30 June 30 June
Notes 2012 2011 31 Dec 2011
GBPm GBPm GBPm
Non-current assets
Goodwill 8 208.0 178.1 209.9
Other intangible assets 15.0 5.0 16.9
Property, plant and equipment 9 126.7 115.6 126.4
Deferred tax assets 9.0 0.5 9.0
Trade and other receivables 0.7 0.6 0.7
------- ------- -----------
Total non-current assets 359.4 299.8 362.9
------- ------- -----------
Current assets
Inventories 90.8 78.1 90.3
Construction contracts 1.8 1.7 1.0
Trade and other receivables 111.1 97.7 105.8
Cash and cash equivalents 11a) 44.8 54.4 29.3
------- ------- -----------
Total current assets 248.5 231.9 226.4
------- ------- -----------
Total assets 607.9 531.7 589.3
------- ------- -----------
Current liabilities
Trade and other payables 131.7 122.1 135.1
Tax liabilities 11.2 7.2 9.2
Obligations under finance leases 0.5 0.2 0.6
Bank overdrafts and loans 0.2 0.2 1.0
Provisions 6.2 - 5.5
------- ------- -----------
Total current liabilities 149.8 129.7 151.4
------- ------- -----------
Non-current liabilities
Bank and other loans 11c) 118.1 116.2 119.7
Retirement benefit obligations 12 46.3 29.3 34.5
Deferred tax liabilities 8.1 3.9 6.0
Obligations under finance leases 0.8 0.7 1.0
Others 0.4 0.5 0.4
------- ------- -----------
Total non-current liabilities 173.7 150.6 161.6
------- ------- -----------
Total liabilities 323.5 280.3 313.0
------- ------- -----------
Net assets 284.4 251.4 276.3
------- ------- -----------
Equity
Issued share capital 10 40.5 40.2 40.2
Share premium account 12.3 12.3 12.3
Equity reserve 3.5 2.0 2.7
Hedging and translation reserve 1.6 4.8 4.5
Retained earnings 226.5 192.1 216.6
Equity attributable to equity holders
of the parent 284.4 251.4 276.3
------- ------- -----------
Total equity 284.4 251.4 276.3
------- ------- -----------
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2012
All equity is attributable to equity holders
of the parent
Hedging
Issued Share and
share premium Equity translation Retained Total
capital account reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2011 40.1 12.3 2.2 6.2 165.1 225.9
Profit for the period - - - - 55.0 55.0
Losses on cash flow
hedges - - - (2.1) - (2.1)
Gains on revaluation
of financial instruments - - - 0.1 - 0.1
Exchange differences
on translation of foreign
operations - - - (1.4) - (1.4)
Actuarial losses on
defined benefit pension
schemes - - - - (1.8) (1.8)
Tax relating to components
of other comprehensive
income - - - 1.7 7.1 8.8
-------- -------- -------- ------------ --------- -------
Total comprehensive
income for the period - - - (1.7) 60.3 58.6
Issue of share capital 0.1 - (0.1) - - -
Share-based payment
charge - - 1.5 - - 1.5
Tax relating to share-based
payments - - - - 3.4 3.4
Transfer to retained
earnings - - (0.9) - 0.9 -
Dividends paid - - - - (13.1) (13.1)
-------- -------- -------- ------------ --------- -------
Balance at 31 December
2011 40.2 12.3 2.7 4.5 216.6 276.3
Profit for the period - - - - 33.0 33.0
Gains on cash flow
hedges - - - 0.9 - 0.9
Gains on revaluation
of financial instruments - - - - - -
Exchange differences
on translation of foreign
operations - - - (3.8) - (3.8)
Actuarial losses on
defined benefit pension
schemes - - - - (14.3) (14.3)
Tax relating to components
of other comprehensive
income - - - - 2.4 2.4
-------- -------- -------- ------------ --------- -------
Total comprehensive
income for the period - - - (2.9) 21.1 18.2
Issue of share capital 0.3 - (0.3) - - -
Share-based payment
charge - - 1.2 - - 1.2
Tax relating to share-based
payments - - - - (0.6) (0.6)
Transfer to retained
earnings - - (0.1) - 0.1 -
Dividends paid - - - - (10.7) (10.7)
-------- -------- -------- ------------ --------- -------
Balance at 30 June
2012 40.5 12.3 3.5 1.6 226.5 284.4
-------- -------- -------- ------------ --------- -------
All equity is attributable to equity holders
of the parent
Hedging
Issued Share and
share premium Equity translation Retained Total
capital account reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2011 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
-------- -------- -------- ------------ --------- -------
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2012
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2012 2011 2011
GBPm GBPm GBPm
Net cash from operating activities 11a) 40.3 31.7 77.1
---------- ---------- --------
Investing activities
Interest received 0.2 0.2 0.3
Proceeds on disposal of property,
plant and equipment - 0.4 0.3
Purchases of property, plant and
equipment (12.4) (8.8) (21.1)
Purchases of intangible assets (0.4) (0.3) (1.0)
Acquisition of Damar - (15.3) (15.6)
Acquisition of Weston - - (53.0)
---------- ---------- --------
Net cash used in investing activities (12.6) (23.8) (90.1)
---------- ---------- --------
Financing activities
Dividends paid (10.7) (8.5) (13.1)
Repayment of borrowings - - (0.2)
Repayments of obligations under
finance leases (0.3) (0.2) (0.4)
Share issues - - -
Net cash inflow on forward contracts - 0.1 0.2
---------- ---------- --------
Net cash used in financing activities (11.0) (8.6) (13.5)
---------- ---------- --------
Net increase / (decrease) in cash
and cash equivalents 16.7 (0.7) (26.5)
Cash and cash equivalents at beginning
of period 28.5 55.9 55.9
Effect of foreign exchange rate
changes (0.4) (0.8) (0.9)
---------- ---------- --------
Cash and cash equivalents at end
of period 11a) 44.8 54.4 28.5
---------- ---------- --------
Notes to the Condensed Consolidated Interim Financial
Statements
1. General information
The information for the year ended 31 December 2011 does not
constitute the Group's statutory accounts for 2011 as defined in
Section 434 of the Companies Act 2006. Statutory accounts for 2011
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 20 July 2012, 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 2011, except for as described below.
In the current financial year, the Group has adopted IFRS 7
(Amendment) "Disclosures - Transfers of Financial Assets". IFRS 7
(Amendment) requires enhanced disclosures for transactions
involving transfers of financial assets. This amendment does not
currently affect the Group's disclosures on Financial
Instruments.
The following amendments to Standards, although effective from
the current financial year have not yet been endorsed by the
European Union and therefore have not been adopted by the Group:
IFRS 1 (Amendments) "Removal of Fixed Dates for First-Time
Adopters" and "Severe Hyperinflation" and IAS 12 (Amendment)
"Deferred Tax: Recovery of Underlying Assets". These amendments,
when endorsed by the EU will not impact the Group's Financial
Statements.
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 2011 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
2012 2012 2012 2012 2011 2011 2011 2011
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External revenue 242.4 134.8 - 377.2 187.9 127.7 - 315.6
Inter-segment
revenue 0.1 0.1 (0.2) - - 0.1 (0.1) -
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Total revenue 242.5 134.9 (0.2) 377.2 187.9 127.8 (0.1) 315.6
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted
operating
profit (see
Note 4) 36.5 18.3 (4.1) 50.7 29.6 17.0 (3.6) 43.0
Amortisation
of intangible
assets from
acquisitions (2.0) - - (2.0) (2.3) - - (2.3)
Acquisition
costs - (0.3) - (0.3) (0.1) - - (0.1)
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Operating profit 34.5 18.0 (4.1) 48.4 27.2 17.0 (3.6) 40.6
---------- ---------- ------------ ---------- ---------- ------------
Investment income 0.1 0.2
Finance costs (5.3) (5.2)
---------- ----------
Profit before
tax 43.2 35.6
Tax (10.2) (8.9)
---------- ----------
Profit after
tax 33.0 26.7
---------- ----------
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
2012 2011 2011
GBPm GBPm GBPm
Aerospace 227.5 185.3 221.1
Flexonics 102.6 107.8 103.0
Corporate 1.6 1.2 1.3
---------- ---------- --------
Segment assets for reportable segments 331.7 294.3 325.4
Unallocated
Goodwill 208.0 178.1 209.9
Intangible customer relationships 12.9 3.4 14.9
Cash 44.8 54.4 29.3
Deferred and current tax 9.5 0.8 9.2
Others 1.0 0.7 0.6
---------- ---------- --------
Total assets per balance sheet 607.9 531.7 589.3
---------- ---------- --------
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, amortisation
of intangible assets acquired on acquisitions and acquisition
costs.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2012 2011 2011
GBPm GBPm GBPm
Operating profit 48.4 40.6 83.0
---------- ---------- --------
Loss on sale of fixed assets - - 0.3
Amortisation of intangible assets from
acquisitions 2.0 2.3 4.4
Acquisition costs 0.3 0.1 0.6
---------- ---------- --------
Adjustments to operating profit 2.3 2.4 5.3
---------- ---------- --------
Adjusted operating profit 50.7 43.0 88.3
---------- ---------- --------
Profit before tax 43.2 35.6 72.7
Adjustments to profit as above before
tax 2.3 2.4 5.3
---------- ---------- --------
Adjusted profit before tax 45.5 38.0 78.0
---------- ---------- --------
5. Tax charge
Half-year Half-year
ended ended
30 June 30 June
2012 2011
Current tax: GBPm GBPm
UK corporation tax - -
Foreign tax 7.2 5.1
---------- ----------
7.2 5.1
Deferred tax:
Current year 3.0 3.8
---------- ----------
10.2 8.9
---------- ----------
Corporation tax for the interim period is charged at 23.7% (2011
- 25.0%) on profit before tax. On adjusted profit before tax, an
underlying tax rate of 24.0% (2011 - 26.0%) is charged,
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
2012 2011
GBPm GBPm
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December
2011 of 2.65p (2010 - 2.12p) per share 10.7 8.5
---------- ----------
Proposed interim dividend for the year ended 31
December 2012 of 1.38p (2011 - 1.15p) per share 5.7 4.6
---------- ----------
The proposed interim dividend was approved by the Board of
Directors on 20 July 2012 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
2012 2011
Number of shares million million
Weighted average number of ordinary shares for
the purposes of basic earnings per share 403.9 401.7
Effect of dilutive potential ordinary shares:
Share options 14.2 14.3
---------- ----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 418.1 416.0
---------- ----------
Half-year Half-year Half-year Half-year
ended ended ended ended
30 June 30 June 30 June 30 June
2012 2012 2011 2011
Earnings EPS Earnings EPS
Earnings and earnings per share GBPm pence GBPm pence
Profit for the period 33.0 8.17 26.7 6.65
Adjust:
Amortisation of intangible
assets from acquisitions net
of tax of GBP0.7m (2011 - GBP0.9m) 1.3 0.33 1.4 0.35
Acquisition costs net of tax
of GBPnil (2011 - GBP nil) 0.3 0.07 - -
---------- ---------- ---------- ----------
Adjusted earnings after tax 34.6 8.57 28.1 7.00
---------- ---------- ---------- ----------
Earnings per share
- basic 8.17p 6.65p
- diluted 7.89p 6.42p
- adjusted 8.57p 7.00p
- adjusted and diluted 8.28p 6.75p
The earnings figures used to calculate both the basic earnings
per share and the diluted earnings per share are the same.
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:
- profit or loss on sale of fixed assets
- amortisation of intangible assets acquired on acquisitions; and
- acquisition costs.
8. Goodwill
The change in goodwill from GBP209.9m at 31 December 2011 to
GBP208.0m at 30 June 2012 reflects foreign exchange differences of
GBP2.0m and GBP0.1m increase in goodwill recognised on acquisition
of Weston EU Limited following finalisation of the fair value of
net assets acquired.
9. Property, plant and equipment
During the period, the Group spent GBP12.4m (2011 - GBP8.8m) on
the acquisition of property, plant and equipment. The Group also
disposed of machinery with a carrying value of GBPnil (2011 -
GBP0.4m) for proceeds of GBPnil (2011 - GBP0.4m).
10. Share capital
Share capital as at 30 June 2012 amounted to GBP40.5m. During
the period, the Group issued 154,339 shares at an average price of
25.6p per share under share option plans, raising GBP0.04m. A
further 2,679,044 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
2012 2011
GBPm GBPm
Operating profit from continuing operations 48.4 40.6
Adjustments for:
Depreciation of property, plant and equipment 10.0 8.9
Amortisation of intangible assets from acquisitions 2.0 2.3
Amortisation of other intangible assets 0.3 0.3
Share-based payment charges 1.5 1.5
Pension payments in excess of service cost (3.5) (3.5)
---------- ----------
Operating cash flows before movements in working
capital 58.7 50.1
Increase in inventories (2.0) (1.5)
Increase in receivables (7.4) (17.6)
(Decrease) / increase in payables (0.5) 10.2
Working capital currency movements 0.1 (0.2)
---------- ----------
Cash generated by operations 48.9 41.0
Income taxes paid (4.5) (5.3)
Interest paid (4.1) (4.0)
---------- ----------
Net cash from operating activities 40.3 31.7
---------- ----------
Cash and cash equivalents comprise:
Cash 44.8 54.4
Bank overdrafts - -
---------- ----------
Total 44.8 54.4
---------- ----------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Balance Sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less.
b) Free cash flow
Free cash flow, a non-statutory item, highlights the total net
cash generated by the Group prior to corporate activity such as
acquisitions, disposals, financing and transactions with
shareholders. It is derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2012 2011
GBPm GBPm
Net cash from operating activities 40.3 31.7
Interest received 0.2 0.2
Proceeds on disposal of property, plant and equipment - 0.4
Purchases of property, plant and equipment - cash (12.4) (8.8)
Purchase of intangible assets (0.4) (0.3)
---------- ----------
Free cash flow 27.7 23.2
---------- ----------
c) Analysis of net debt
At At
1 January Exchange 30 June
2012 Cash flow movement 2012
GBPm GBPm GBPm GBPm
Cash 29.3 15.9 (0.4) 44.8
Overdrafts (0.8) 0.8 - -
---------- --------- --------- --------
Cash and cash equivalents 28.5 16.7 (0.4) 44.8
Debt due within one year (0.2) - - (0.2)
Debt due after one year (119.7) - 1.6 (118.1)
Finance leases (1.6) 0.3 - (1.3)
Total (93.0) 17.0 1.2 (74.8)
---------- --------- --------- --------
12. Retirement benefit schemes
Defined Benefit Schemes
Aggregate post-retirement benefit obligations are GBP46.3m (30
June 2011 - GBP29.3m; 31 December 2011 - GBP34.5m). This liability
is made up of net deficits in the Group's UK and US defined benefit
pension schemes, with deficits of GBP33.8m (30 June 2011 -
GBP20.8m; 31 December 2011 - GBP25.3m) and GBP7.7m (30 June 2011 -
GBP3.2m; 31 December 2011 - GBP4.2m) respectively, and a liability
on unfunded schemes of GBP4.8m (30 June 2011 - GBP5.3m; 31 December
2011 - GBP5.0m). These values have been assessed by independent
actuaries using current market values and discount rates. The
increase in the liability from GBP34.5m at 31 December 2011 to
GBP46.3m at 30 June 2012 reflects an increase in the present value
of benefit obligations, due to a decrease in the UK plan discount
rate assumption to 4.4% (31 December 2011 - 4.8%), offset partially
by the positive effect of total cash contributions in excess of
service cost of GBP3.5m. The change in the discount rate assumption
since 31 December 2011 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.
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 2012 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 12. 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 2012 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
20 July 2012
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUWGMUPPGMU
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