Senior Engng Group - Interim Results
September 03 1998 - 3:32AM
UK Regulatory
RNS No 4140r
SENIOR ENGINEERING GROUP plc
3rd September 1998
SENIOR ENGINEERING GROUP plc ("SENIOR")
SENIOR, a specialist international engineering group, today
announces its Interim Results for the half-year ended 30 June
1998:
HIGHLIGHTS
Half-Year Half-Year Year
June 1998 June 1997 Change 1997
#m #m #m
----------- --------- -------- -------
CONTINUING OPERATIONS:
TURNOVER 254.9 233.9 +9.0% 473.7
----------- --------- ------- -------
OPERATING
PROFIT 24.9 19.7 +26.4% 42.0
----------- --------- ------- ------
EARNINGS PER SHARE 5.75p 5.04p +14.1% 10.48p
----------- --------- ------- ------
UNDERLYING EARNINGS
PER SHARE 5.77p 4.67p +23.6% 10.18p
----------- --------- ------- ------
DIVIDENDS PER SHARE 1.77p 1.60p +10.6% 4.24p
----------- --------- ------- ------
* Flexonics reports organic growth in operating profit of 18.9%.
* North America provides 68.3% of Group's operating profit.
* Board approves record levels of capital expenditure, primarily
for Aerospace.
* Seven acquisitions completed in first six months.
* Interim dividend is increased by 10.6%.
* Balance Sheet remains strong with gearing of 37.2%.
Commenting on the results, Dr Alan Watkins, Chairman of Senior
said:
"With a strong set of interim results we are well set to
deliver further progress in the second half. The United
States, our major market, remains in buoyant condition and
with a much strengthened management team, we can look forward
to acquiring and integrating further businesses".
For further information, please contact:
SENIOR ENGINEERING GROUP plc
Dr AK Watkins, Chairman on 3.9.98: 0171 253 2252
AR Parrish, Group Chief Executive thereafter: 01923 775547
TB Garthwaite, Group Finance Director
Ludgate Communications
Tim Davis 0171 253 2252
Internet users will be able to view this announcement,
together with other information about the Senior Engineering
Group, on the web site http://www.segplc.com
Senior Engineering Group plc
Interim Statement 1998
OVERVIEW
The results for the six months ended 30 June 1998 show further
significant progress in the achievement of the three key
objectives established in 1997, firstly to deliver improved
results for shareholders, secondly to develop a sound base on
which to grow the business over the longer term and, thirdly,
to ensure we have the right management in place to capitalise
on the many opportunities that exist for each of the Group's
companies.
Turnover from continuing operations increased by 9.0% to
#254.9m (1997: #233.9m), providing operating profits of #24.9m
(1997: #19.7m), an increase of 26.4%. The trend of improving
return on sales evident at the last year end continued, rising
to 9.8% (1997: 8.4%). At the pre-tax level, profits increased
by 15.7% to #24.3m (1997: #21.0m).
Despite an increased tax charge, earnings per share grew by
14.1% to 5.75p (1997: 5.04p) with underlying earnings per
share (which eliminates the one-off profit on sale of fixed
assets reported last year) up 23.6% to 5.77p (1997: 4.67p).
Your Board has declared an interim dividend of 1.77p, an
increase of 10.6% compared to last year's 1.60p. The dividend
will be paid on 27 November 1998 to shareholders on the
register at 30 October 1998. As with last year, the interim
dividend is to be paid as a Foreign Income Dividend ("FID").
Given the recent changes in legislation this will be the last
FID, restricting savings to the Group in Advance Corporation
Tax to #1.3m this year.
We have continued our policy of investing heavily in the
businesses to maximise their efficiency and to ensure they are
properly equipped to capitalise on opportunities within their
market places. During the period, net capital expenditure
totalled #12.0m (1997: #8.5m) and working capital increased by
#18.4m (1997: #4.3m), the majority of both investments being
within the Flexonics businesses in order to meet the
significant opportunities now being realised within the
aerospace sector. The pace of this investment is expected to
accelerate over the balance of this year and into next, as the
Group pursues its investment plans, particularly at Ketema for
which we recently announced the largest single investment
programme in the Group's history, at US$21m.
During this half year, a further #20m was invested in seven
acquisitions, in Scandinavia, Spain, Brazil and the USA, as
part of our continuing strategy of widening our product range
and geographic coverage. The significant increase in overall
investment has lifted the Group's net debt from #19.3m at the
end of last year to #52.7m, representing gearing of 37.2%
(1997: 14.8%). The Group's balance sheet remains strong, with
the additional expectation of a positive net cash inflow,
before investing and financing activities, in the balance of
the year.
OPERATIONAL REVIEW
Flexonics
Thin walled, corrugated and tubular metallic products, focused
on the Automotive, Aerospace and Specialised Industrial
sectors. Turnover #180.8m (1997: #162.0m); operating profit
#21.2m (1997: #17.7m).
Flexonics' 11.6% growth in sales was accompanied by another
encouraging improvement in overall margins to 11.7% (1997:
10.9%). Excluding the impact of acquisitions, and measured at
constant exchange rates, this performance represents organic
growth in operating profit of 18.9%.
Flexonics' Automotive businesses continued to capitalise on
their position as a leading supplier to the world's motor
manufacturers. Despite the recent 7 week strike at General
Motors in the USA, sales were broadly maintained at #76.4m
(1997: #77.3m), representing 42.2% of Flexonics' overall sales
(1997: 47.7%). The results reflect the maturing market for the
traditional exhaust connector together with the growing
acceptance of Flexonics' newer range of engine applications -
Exhaust Gas Recirculating Tubes and, most recently, Air Tubes.
Flexonics' Automotive business is expected to continue to grow
in the developed markets as environmental legislation tightens
still further. However, more significant growth - both
organic and via acquisition - is expected in new and emerging
markets. In pursuit of the latter, the recently concluded
acquisition of three businesses in Brazil - Deltaterm, Tecne
and Teflex - for a total consideration of approximately #13m
has brought to the Group important new customers and an
expanded geographic base. In June of this year we announced
the #0.7m acquisition of the remaining 45% of Inalsa-Flexonics
in India, ahead of the #0.8m investment in its new automotive
product line. The same month we confirmed the #5.8m
acquisition of QSi Technologies in Pittsburgh, USA, which has
brought further innovative medical and automotive technology
into the Group.
Our Aerospace companies continue to experience dramatic
growth. Sales rose to #50.4m (1997: #36.8m), representing
27.9% of Flexonics' total sales (1997: 22.7%). This has been
achieved through meeting the increasing demands from existing
customers and winning business from new customers for both
traditional aerospace and, increasingly, space-related
business. Ketema, which is this Division's largest
contributor to sales, is now benefiting from its US $100m
order intake reported for last year. In addition, significant
progress has also been made during the period in enhancing our
presence in the equally buoyant European market. The results
include orders from new European based customers together with
a contribution from Bosman BV, Rotterdam, designer and
manufacturer of a range of highly engineered hot engine
components, which was acquired in February 1998 for
approximately #2.4m.
Sales to the broadly based and highly innovative Specialised
Industrial sector increased to #54.0m (1997: #47.9m),
representing 29.9% of total sales (1997: 29.6%) reflecting the
acquisition for #4.4m in February 1998 of Bredan Kompensator
Fabrik A/S, Denmark. This overall performance is particularly
creditable given the 50% decrease in sales to the semi-
conductor market, where clearly the Group has not escaped the
effects of the Asian led, but now global, setback. Elsewhere,
significant progress has been made in developing further
applications for a combination of existing and new customers.
Encouraging growth is evident in both USA and Europe, with
further progress anticipated in products targeted at the land
based turbine, liquid natural gas and refrigeration markets.
Engineered Products & Services (EP&S)
Precision welded tube, air systems (heating, ventilation and
air conditioning equipment) and heat treatment (surface
treatment of metals). Turnover #75.7m (1997: #73.1m);
operating profit #3.7m (1997: #2.0m).
This Division has been the subject of extensive reorganisation
and restructuring during the past year as well as being the
recipient of a significant capital investment programme
designed to improve efficiency and to raise standards of
quality and service.
Precision Tube maintained its sales at #36.7m (1997: #36.5m)
in a difficult market characterised by weakening prices.
However margins improved, largely as a result of better
efficiencies arising from the ongoing capital investment
programme. The period marked the satisfactory commissioning
of both a new #2.8m tube mill and a new #1.5m furnace, with a
further new mill due to come on stream in the second quarter
of next year. Progress was made in developing penetration of
the encouragingly resilient automotive market. The Division's
strategic move towards more value-added precision engineering
has been assisted by the #1.1m acquisition in March of Accles
& Pollock.
Air Systems' sales were marginally reduced at #28.4m (1997:
#29.4m). These businesses have responded positively to the
reorganisation undertaken in the second half of 1997, leading
to a modest profit. The streamlined German companies are now
better positioned to benefit from the slowly recovering
construction market, a factor reflected by their order books
which show encouraging recent increases. Within the UK, a
significant ducting contract from a leading semi-conductor
manufacturer has been deferred to 1999, limiting the progress
achievable during the current year.
Despite a more challenging UK market, Senior Heat Treatment
produced a good performance, with sales up 47.2% at #10.6m
(1997: #7.2m) reflecting full contributions from Nitrotec and
Astra Heat Treatment, both acquired last year. As with
Flexonics, the majority of the Group's heat treatment business
is within the automotive sector, where it is the UK and
Spanish market leader. Our efforts to capitalise on the fast-
growing Spanish opportunities have been greatly assisted by
the acquisitions in February of the remaining 50% of the share
capital of Traitement Thermique Iberique, owner of majority
interests in three Spanish heat treatment businesses, for
approximately #1.5m and, in May, of Tratamientos Sarasketa,
Bilbao for #2.5m.
EMPLOYEES
Two additional senior management appointments were made during
the period. Peter David joined in January from Williams
Holdings plc as Director - Operations Development with
particular responsibility for the post-acquisition integration
process. In April, Michael Oxborrow joined as Director -
Senior Asia. He joined from Van der Horst Ltd and has worked
in the region for 29 years. Based in Singapore, he is
responsible for the Group's existing business in Australia,
Singapore, New Zealand and India, together with managing the
Group's increasing presence elsewhere in the Asian market,
where Senior remains under-represented.
I would like to thank all employees for their continuing
efforts and enthusiasm, often in the face of challenging
markets, and for their contribution to the growing success of
the Group.
YEAR 2000
A detailed programme has been developed to ensure we are Year
2000 compliant. This programme will have been completed by
mid 1999.
OUTLOOK
Despite the knock-on effects of Asian economic problems and a
general downturn in UK engineering, we are nonetheless well
set to deliver further progress in the second half over 1997.
Most importantly, the United States, increasingly our major
market, remains in buoyant condition, especially, but not
solely, in aerospace and will remain the focus of our
acquisition strategy. Asia, at present values, also provides
potentially attractive buying opportunities in this
substantial market, where we remain optimistic over longer
term prospects.
With a much strengthened management team, we can confidently
manage and improve what we already have and look forward to
acquiring and integrating further businesses.
Dr A K Watkins
Chairman
SENIOR ENGINEERING GROUP plc
GROUP RESULTS
for the half-year ended 30 June 1998 (Unaudited)
Half-Year Half-Year Year
June 1998 June 1997 1997
Notes #m #m #m
---------- ---------- -------
TURNOVER
Continuing operations 248.9 233.9 473.7
Acquisitions 6.0
----------
254.9
Discontinued operations - 5.6 5.6
---------- ---------- -------
254.9 239.5 479.3
---------- ---------- -------
OPERATING PROFIT
Continuing operations 24.4 19.7 42.0
Acquisitions 0.5
----------
24.9
Profit on sale of fixed
assets in continuing
operations - 1.6 1.2
---------- ---------- -------
PROFIT ON ORDINARY
ACTIVITIES BEFORE
INTEREST AND TAXATION 24.9 21.3 43.2
Interest payable, net (0.6) (0.3) (0.1)
---------- ---------- -------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 24.3 21.0 43.1
Tax on profit on ordinary
activities 1 (6.8) (5.7) (11.2)
---------- --------- -------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 17.5 15.3 31.9
DIVIDENDS (5.3) (4.9) (12.9)
--------- --------- -------
PROFIT FOR THE PERIOD 12.2 10.4 19.0
--------- --------- -------
EARNINGS PER SHARE 2 5.75p 5.04p 10.48p
--------- --------- -------
UNDERLYING EARNINGS
PER SHARE 2 5.77p 4.67p 10.18p
--------- --------- -------
DIVIDENDS PER SHARE 1.77p 1.60p 4.24p
--------- --------- -------
SENIOR ENGINEERING GROUP plc
SUMMARISED GROUP BALANCE SHEET
as at 30 June 1998 (Unaudited)
30 June 30 June 31 Dec.
1998 1997 1997
Notes #m #m #m
FIXED ASSETS -------- -------- -------
Goodwill 3 11.1 - -
Tangible assets 102.5 83.3 90.0
Investments - 0.8 0.8
-------- -------- -------
113.6 84.1 90.8
-------- -------- -------
NET CURRENT ASSETS
Stocks 69.7 61.6 61.4
Debtors 123.5 110.6 105.8
Creditors including
deferred tax (111.5) (101.0) (107.2)
-------- -------- -------
81.7 71.2 60.0
-------- -------- -------
NET BORROWINGS (52.7) (24.4) (19.3)
-------- -------- -------
NET ASSETS 142.6 130.9 131.5
-------- -------- -------
CAPITAL AND RESERVES
Share capital 30.5 30.5 30.5
Share premium 0.9 87.6 0.8
Other reserves 34.9 2.2 34.9
Profit and loss account 75.5 10.6 64.6
-------- -------- -------
SHAREHOLDERS' FUNDS 141.8 130.9 130.8
Minority interests 0.8 - 0.7
-------- -------- -------
TOTAL CAPITAL EMPLOYED 142.6 130.9 131.5
-------- -------- -------
SENIOR ENGINEERING GROUP plc
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
for the half-year ended 30 June 1998 (Unaudited)
Half-Year Half-Year Year
June 1998 June 1997 1997
#m #m #m
---------- ---------- -------
At beginning of period 130.8 129.1 129.1
Profit for the period 17.5 15.3 31.9
Dividends (5.3) (4.9) (12.9)
Arising on share issues 0.1 0.3 0.5
Goodwill - (8.3) (15.7)
Currency variations (1.3) (0.6) (2.1)
---------- ---------- -------
At end of period 141.8 130.9 130.8
---------- ---------- -------
SENIOR ENGINEERING GROUP plc
SUMMARISED GROUP CASH FLOW STATEMENT
for the half-year ended 30 June 1998 (Unaudited)
Half-Year Half-Year Year
June 1998 June 1997 1997
#m #m #m
---------- ---------- ------
GROUP OPERATING PROFIT 24.9 19.7 42.0
Depreciation 8.0 8.0 15.9
(Increase)/decrease in working
capital (18.4) (4.3) 10.4
---------- ---------- ------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 14.5 23.4 68.3
Interest paid, net (0.4) (0.7) (1.2)
Dividends paid (8.0) (7.2) (12.1)
Tax paid (7.7) (2.5) (11.0)
---------- ---------- ------
NET CASH (OUTFLOW)/INFLOW BEFORE
INVESTING AND FINANCING ACTIVITIES (1.6) 13.0 44.0
Purchase of tangible fixed assets (12.3) (10.0) (23.4)
Sale of property, plant and equipment 0.3 1.5 1.7
Acquisition of businesses (20.0) (19.1) (31.0)
Disposal of business - 10.8 10.0
Proceeds from share issues, net 0.1 0.2 0.5
Currency variations on net
borrowings 0.1 (0.3) (0.6)
----------- --------- ------
(INCREASE)/DECREASE IN NET DEBT (33.4) (3.9) 1.2
NET DEBT AT BEGINNING OF PERIOD (19.3) (20.5) (20.5)
----------- --------- ------
NET DEBT AT END OF PERIOD (52.7) (24.4) (19.3)
----------- --------- ------
SENIOR ENGINEERING GROUP plc
SEGMENT INFORMATION
for the half-year ended 30 June 1998 (Unaudited)
a) BY CLASS OF BUSINESS
Turnover Operating Profit
Half-Year Half-Year Year Half-Year Half-Year Year
June 1998 June 1997 1997 June 1998 June 1997 1997
#m #m #m #m #m #m
--------- --------- ------ --------- --------- ----
Flexonics 180.8 162.0 329.2 21.2 17.7 38.9
Engineered
Products &
Services 75.7 73.1 146.5 3.7 2.0 3.1
--------- --------- ------ --------- --------- -----
Total 256.5 235.1 475.7 24.9 19.7 42.0
Inter-segment
sales (1.6) (1.2) (2.0) - - -
--------- --------- ------ --------- --------- -----
Total
continuing
operations 254.9 233.9 473.7 24.9 19.7 42.0
Discontinued
operations - 5.6 5.6 - - -
--------- --------- ------ --------- --------- -----
254.9 239.5 479.3 24.9 19.7 42.0
--------- --------- ------ --------- --------- -----
b) BY GEOGRAPHICAL MARKET
Turnover by Origin Operating Profit
by Origin
Half-Year Half-Year Year Half-Year Half-Year Year
June 1998 June 1997 1997 June 1998 June 1997 1997
#m #m #m #m #m #m
---------- --------- ----- --------- --------- ----
United Kingdom 94.4 92.7 184.5 5.3 4.6 11.3
Rest of Europe 46.3 43.3 84.8 2.6 1.0 1.6
North America 111.4 95.9 200.3 17.0 14.0 29.1
Rest of World 4.8 4.1 8.5 0.1
---------- --------- ----- --------- --------- ----
Total 256.9 236.0 478.1 24.9 19.7 42.0
Inter-segment
sales (2.0) (2.1) (4.4) - - -
---------- --------- ------ --------- --------- ----
Total continuing
operations 254.9 233.9 473.7 24.9 19.7 42.0
Discontinued
operations - 5.6 5.6 - - -
---------- --------- ------ --------- --------- ----
254.9 239.5 479.3 24.9 19.7 42.0
---------- --------- ------ --------- --------- ----
SENIOR ENGINEERING GROUP plc
NOTES TO THE ACCOUNTS
for the half-year ended 30 June 1998 (Unaudited)
1. Tax on profit on ordinary activities for the half-year
to 30 June 1998 has been charged at 28%, being the
estimated rate applicable for the year ended 31 December
1998 (1997 actual - 26%).
2. Earnings per share have been calculated on the weighted
average number of shares in issue during the period of
304.8m (1997 half-year - 304.4m; 1997 year - 304.5m).
Underlying earnings per share has been included to
identify the performance of the continuing operations
before amortisation of goodwill and profit on sale of
fixed assets.
3. The interim accounts have been prepared using the
accounting policies set out in the Group's 1997
Annual Accounts with the exception of goodwill arising
on acquisitions since 31 December 1997, which is
being capitalised and amortised (#0.1m for 1998 half-
year) over 20 years on a straight-line basis in
accordance with Financial Reporting Standard 10. Goodwill
previously eliminated against reserves has not been
reinstated on the balance sheet.
4. The results for the year ended 31 December 1997 are an
abridged version of the Group's full accounts for that
year which received an unqualified auditors' report and
which have been filed with the Registrar of Companies.
END
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