TIDMSNR
RNS Number : 3411U
Senior PLC
01 August 2022
Senior plc
Interim Results for the half-year ended 30 June 2022
Strong performance, outlook maintained
change
Half-Year to 30 (constant
FINANCIAL HEADLINES June change currency) (4)
2022 2021
------------------------------------------ ---------- ---------- ---------- ----------- ----
REVENUE GBP402.2m GBP332.8m +21% +16%
------------------------------------------ ---------- ---------- ---------- ----------- ----
OPERATING PROFIT GBP15.4m GBP5.1m +202% +166%
ADJUSTED FOR:
NET RESTRUCTURING (INCOME)/COST GBP(2.8)m GBP0.1m
ADJUSTED OPERATING PROFIT (1) GBP12.6m GBP5.2m +142% +117%
ADJUSTED OPERATING MARGIN (1) 3.1% 1.6% +150 bps +140 bps
------------------------------------------ ---------- ---------- ---------- ----------- ----
PROFIT BEFORE TAX GBP11.1m GBP22.3m -50% -55%
ADJUSTED PROFIT BEFORE TAX (1) GBP8.8m GBP0.9m +878% +577%
------------------------------------------ ---------- ---------- ---------- ----------- ----
BASIC EARNINGS PER SHARE 2.43p 4.72p -49%
ADJUSTED EARNINGS PER SHARE (1) 1.92p 0.10p +1820%
------------------------------------------ ---------- ---------- ----------
INTERIM DIVID PER SHARE 0.30p nil p n/m
------------------------------------------ ---------- ---------- ---------- ----------- ----
FREE CASH FLOW (2) GBP19.3m GBP19.2m +1%
------------------------------------------ ---------- ---------- ---------- ----------- ----
NET DEBT EXCLUDING CAPITALISED GBP72.9m GBP79.9m GBP7m Net debt
LEASES (2) - 30 June 2022 / 31 December decrease /
2021 EBITDA
1.3x
------------------------------------------ ---------- ---------- ---------- ----------- ----
NET DEBT (2) - 30 June 2022 / 31 GBP149.4m GBP153.1m GBP4m
December 2021 decrease
------------------------------------------ ---------- ---------- ---------- ----------- ----
ROCE (3) 2.3% 0.0% +230bps
------------------------------------------ ---------- ---------- ---------- ----------- ----
Highlights
-- Strong trading performance compared to prior year; in line with
expectations
-- 2022 outlook maintained; second half performance expected to
be similar to first half
-- Demand continues to strengthen across our core markets
-- Increased order intake with a book-to-bill of 1.34
-- Strong free cash inflow of GBP19.3m
-- Healthy balance sheet, significantly de-levered
-- Supply chain constraints and increasing inflationary pressures
being managed diligently
-- Spencer Aerospace acquisition on track to complete in Q3 2022
-- Dividend reinstated
Commenting on the results, David Squires, Group Chief Executive
Officer of Senior plc, said:
"These strong results, compared to the same period in 2021, are
in line with our expectations. Profitability has improved and our
healthy balance sheet has been enhanced through strong free cash
flow performance. Our core markets are showing good growth as
activity levels pick up following two years of pandemic related
uncertainty. Global supply chain constraints and increasing
inflationary pressures, caused by external events, remain evident
and we continue to manage the impact of those diligently to ensure
we satisfy our customers and other stakeholders.
The Board anticipates further good progress in 2022, in line
with previous expectations, with performance in the second half of
the year expected to be similar to the first half. Along with the
strong cash performance and healthy balance sheet, this gives the
Board confidence to announce the reinstatement of a dividend for
2022.
Over the medium-term we remain committed to delivering a strong
recovery across both Divisions, driving the Group ROCE to a minimum
of 13.5% in line with our previously stated ambition.
Looking ahead, our differentiated offering in fluid conveyance
and thermal management products coupled with our global footprint
and positioning in attractive and diverse end markets, gives the
Board confidence that Senior is well positioned to build on our
strong capabilities and to capture growth opportunities. Our
continued investment in low carbon technology and advanced
manufacturing combined with our commitment to the highest
sustainability standards provide additional foundations for
continued success."
Further information
+44 (0) 1923
Bindi Foyle, Group Finance Director, Senior plc 714 725
Gulshen Patel, Director of Investor Relations & Corporate +44 (0) 1923
Communications, Senior plc 714 722
+44 (0) 7796
Richard Webster-Smith , Finsbury 708 551
Notes
This Release, together with other information on Senior plc, can
be found at: www.seniorplc.com
(1) Adjusted operating profit and adjusted profit before tax are stated
before GBP2.8m net restructuring income (H1 2021 - GBP0.1m net
restructuring cost, see Note 4 for further detail). Adjusted profit
before tax is also stated before costs associated with corporate
undertakings of GBP0.5m (H1 2021 - GBP21.5m income, see Note 4
for further detail). Adjusted operating margin is the ratio of
adjusted operating profit to revenue. Adjusted earnings per share
is also stated before exceptional non-cash tax credit of GBPnil
(H1 2021 - GBP0.6m).
(2) See Note 12b and 12c for derivation of free cash flow and of net
debt, respectively.
(3) Return on capital employed ("ROCE") is derived from annual adjusted
operating profit (as defined in Note 4) divided by the average
of the capital employed at the start and end of that twelve-month
period, capital employed being total equity plus net debt (as
derived in Note 12c).
(4) H1 2021 results translated using H1 2022 average exchange rates
- constant currency.
The following measures are used for the purpose of assessing covenant
compliance for the Group's borrowing facilities:
-- EBITDA is adjusted profit before tax (defined in Note 4) before
interest (defined below), depreciation, amortisation and profit
or loss on sale of property, plant and equipment. It also excludes
EBITDA from businesses which have been disposed and it is based
on frozen GAAP (pre-IFRS 16). EBITDA for the 12 month period ending
June 2022 was GBP51.0m.
-- Net debt is defined in Note 12c. It is based on frozen GAAP (pre-IFRS
16) and as required by the covenant definition, it is restated
using 12-month average exchange rates.
-- Interest is finance costs and investment income before net finance
income of retirement benefits. It also excludes interest from
businesses which have been disposed and it is based on frozen
GAAP (pre-IFRS 16).
The Group's principal exchange rate for the US Dollar applied in the
translation of Income Statement and cash flow items at average H1
2022 rates was $1.29 (H1 2021 - $1.39) and applied in the translation
of balance sheet items at 30 June 2022 was $1.22 (30 June 2021 - $1.38;
31 December 2021 - $1.35). Currently assuming exchange rate for the
US Dollar to Pound Sterling of $1.28: GBP1 average for 2022.
There will be a presentation on Monday 1 August 2022 at 11.00am
BST accessible via a live webcast on Senior's website at
www.seniorplc.com/investors . The webcast will be made available on
the website for subsequent viewing.
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 and manufactures high
technology components and systems for the principal original
equipment producers in the worldwide aerospace & defence, land
vehicle and power & energy markets.
Cautionary Statement
This Interim Management Report ("IMR") has been prepared solely
to provide additional information to enable shareholders to assess
the Group'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 are made by the Directors in good faith based on the
information available to them at the time of their approval of this
IMR and they should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
INTERIM MANAGEMENT REPORT 2022
Trading performance has been strong in the first half of 2022,
when compared to prior year, in line with expectations. With a
continued focus on operational performance, Senior generated robust
free cash flow and further de-levered its healthy balance
sheet.
For the first half of 2022, Group revenue increased by 16% on a
constant currency basis to GBP402.2m with growth in both divisions.
The year-on-year increase reflected the ramp up in civil aircraft
production rates, growth in land vehicle, power & energy,
semi-conductor equipment and space markets, as well as pricing
benefits of GBP8.1m. Furthermore, favourable exchange rates added
GBP15.2m to total sales.
We measure Group performance on an adjusted basis, which
excludes items that do not directly reflect the underlying trading
performance in the period (see Note 4). References below therefore
focus on these adjusted measures.
The Group generated an adjusted operating profit of GBP12.6m (H1
2021 - GBP5.2m). The Group's adjusted operating margin increased by
150 basis points, to 3.1% for the half-year. The improved
profitability reflected underlying volume related operating
leverage across our operating businesses. Inflationary pressures
were successfully mitigated by diligently managing costs and by
increasing prices and surcharges where possible. Overall, price
increases of GBP8.1m largely offset material and other inflationary
cost increases of GBP9.4m in the first half of the year.
Adjusted profit before tax increased to GBP8.8m (H1 2021 -
GBP0.9m). The adjusted tax charge was GBP0.8m (H1 2021 - GBP0.5m).
Adjusted earnings per share increased to 1.92 pence (H1 2021 - 0.10
pence).
Reported profit before tax was GBP11.1m, compared to GBP22.3m in
H1 2021, having benefited from the profit on the sale of our Senior
Aerospace Connecticut business during that period (H1 2021 -
GBP24.2m). Basic earnings per share was 2.43 pence (H1 2021 - 4.72
pence).
The Group delivered a robust cash performance in the first half
of 2022 generating free cash inflow of GBP19.3m (H1 2021 -
GBP19.2m) helped by o ur effective management of working capital
and capital expenditure. Gross investment in capital expenditure
was GBP11.5m (H1 2021 - GBP7.9m) with GBP1.2m cash outflows (H1
2021 - GBP5.8m inflows) from working capital. The Group generated
net cash inflow of GBP17.5m (H1 2021 - GBP60.9m) in the six months
to June 2022, due to free cash inflow of GBP19.3m (H1 2021 -
GBP19.2m), partly offset by GBP1.8m cash outflows (H1 2021 -
GBP41.7m inflows) related to corporate undertakings and
restructuring activity.
The Group's financial position remains strong, with a healthy
balance sheet and period end net debt to EBITDA of 1.3x. The
headroom on our committed borrowing facilities at 30 June 2022 was
GBP228.0m. Net debt at the end of June 2022 was GBP149.4m
(including capitalised leases of GBP76.5m), a reduction of GBP3.7m
from December 2021, after taking into account adverse currency
movements of GBP11.0m and a GBP2.8m increase for lease
movements.
Reflecting confidence in the Group's performance, financial
position and future prospects, the Board is reinstating dividend
payments and has approved an interim dividend of 0.30 pence per
share (H1 2021 nil pence). It will be paid on 11 November 2022 to
shareholders on the register at the close of business on 14 October
2022. We will continue to follow a progressive dividend policy
reflecting earnings per share, free cash flow generation, market
conditions and dividend cover over the medium term.
Market Overview
In the first half of 2022, our core markets across the Group
continued to improve.
Civil Aerospace (40% of Group)
Demand for air travel is proving resilient, particularly for
domestic and other short-haul routes. International traffic is
accelerating, particularly in North America and Europe with Asia
also improving albeit constrained by the impact of China's zero
COVID policy. IATA expects domestic passenger numbers to reach 2019
levels next year and international passenger numbers to return to
2019 levels by 2025.
In the medium and longer term, strong structural growth in air
travel is driven by growing air traffic demand in Asia and
supported by the replacement of older aircraft with latest
generation, more fuel efficient models.
As a consequence, production volumes for civil aerospace have
been ramping up during the first half of 2022, driven by increasing
single aisle rates. Widebody rates are largely as expected,
although B787 production is yet to recommence as Boeing finalises
the resolution of the issues previously reported.
Defence (15% of Group)
Senior's sales to the Defence sector are primarily focused on
the US defence market. The approved budget for US defence in fiscal
year 2022 is $778bn and a bipartisan request for fiscal year 2023
spending of $857bn has been made. However, the 2022 Appropriations
Bill was not passed until March 2022 which meant that up to that
point, spending was restricted to the prior year's levels under a
Continuing Resolution ("CR") which led to a delay in some ordering
activity.
Other Aerospace (11% of Group)
Sales from our Aerospace operating businesses into industrial
markets outside of the civil aerospace and defence markets are
classified under "Other Aerospace" and include sales into the
space, semi-conductor equipment and medical markets. These end
markets have continued to grow in the first half of 2022, with 8%
growth in semi-conductor anticipated in 2022. According to the
Space Foundation, the global space economy is projected to grow 55%
from 2020 to 2030, while according to Statista, the medical
equipment industry is expected to have a CAGR of around 6% to
2030.
Land Vehicle (19% of Group)
Heavy duty truck and off highway markets grew in the first half
of 2022, while passenger vehicle continued to be affected by supply
chain constraints.
According to Americas Commercial Transportation ("ACT")
Research, the heavy duty truck market grew by 12% in the first half
of 2022 compared to H1 2021, and is forecast to grow by 15% for the
full year 2022. 2023 is expected to be flat as slowing
macroeconomic indicators are expected to be offset by modest
pre-buy activity ahead of the tightening of emission standards
coming in by 2024. For European truck and bus production, IHS
Markit Inc. ("IHS") estimates a decline of 14% in the first half of
2022 compared to H1 2021 and currently forecasts an overall decline
for the full year 2022 of 6% compared to prior year as supply chain
constraints ease.
Passenger vehicle production in the first half of 2022 continued
to be impacted by semi-conductor shortages and was further impacted
by the reduced supply of wire harnesses due to the Ukraine crisis.
According to IHS, European (including the UK) passenger vehicle
production declined by 6% in H1 2022 compared to H1 2021 and is
forecast to grow by 13% for the full year 2022 as semiconductor
availability improves.
According to the International Energy Agency ("IEA") , global
electric car sales have continued their strong growth in 2022 after
breaking records in 2021. In the first quarter of 2022, two million
electric cars were sold worldwide, up by 75% from the same period a
year earlier.
Power & Energy (15% of Group)
Power & energy markets continued to grow in the first half
of 2022 as the recovery in the upstream oil & gas sector
continued and levels of maintenance and overhaul improved for
downstream oil & gas.
The IEA has reiterated its world oil demand forecast for 2022
and announced that in 2023, demand is expected to surpass
pre-pandemic levels. According to the IEA, global refining capacity
is set to expand slightly in 2022 and 2023, although shortages in
individual products may well persist due to uneven rates of demand
growth and limits in the refining system. This tight supply,
coupled with a limited appetite for new refining capacity due to
the US federal government's policies on energy, has led businesses
to focus on upgrading and expanding existing facilities, thereby
increasing maintenance and overhaul work.
In power generation, the IEA forecasts average annual
electricity demand growth of 2.7%, with renewables growth set to
serve more than 90% of net demand growth during 2022-2024.
Nuclear-based generation is expected to grow by 1% annually. For
2022, the IEA forecast renewable capacity to increase over 8%
compared with last year.
Delivery of Group Strategy
Senior has a focused and compelling strategy to maximise value
for shareholders and is confident of delivering its target return
on capital employed of a minimum of 13.5% (post IFRS 16) over the
medium-term. Senior will achieve this through the following:
-- a strategic focus on Intellectual Property (IP) rich fluid conveyance
and thermal management;
-- organically growing our Aerostructures business to fully utilise
our world class global footprint;
-- maintaining strong focus on efficiencies through our Senior Operating
System as end markets continue to recover;
-- executing on our portfolio optimisation strategy to maximise value
creation; and
-- driving intrinsic strong cash generation.
We most recently set out our strategy in detail at our capital
markets day in October 2021:
https://www.seniorplc.com//media/Files/S/Senior-PLC/reports-and-presentations/presentations/capital-markets-presentation-121021.pdf
and in Senior's Annual Report and Accounts 2021 on pages 30 to 39
(available at www.seniorplc.com ). Please refer to these for
greater detail.
In the first half of 2022, in addition to making good progress
with our innovative product development activities, in June 2022 we
announced the strategic acquisition of substantially all of the
assets of Spencer Aerospace Manufacturing, LLC ("Spencer
Aerospace"), a leading manufacturer of highly engineered,
high-pressure hydraulic fluid fittings for use in commercial and
military aerospace applications. The acquisition of Spencer
Aerospace is on track to complete in Q3 2022, subject to customary
closing conditions.
While Senior already has some fluid fitting expertise, our
customers have been strongly encouraging us to increase our
presence in this area and our combined expertise and market reach
will allow us to respond decisively and rapidly grow associated
revenues. The acquisition of Spencer Aerospace will further enhance
Senior's industry-leading fluid conveyance capabilities and is an
important step in our strategy to optimise our portfolio and
maximise value for shareholders.
The high-pressure hydraulic fluid fittings products engineered
and manufactured by Spencer Aerospace are in high demand from
aerospace and defence customers around the world and are
complementary to Senior's existing advanced fluid conveyance
product and system capabilities. The addition of Spencer Aerospace
improves growth prospects by enabling Senior to provide higher
level assemblies and sub-systems, supports penetration into
adjacent market applications (e.g., hydrogen fittings for power and
infrastructure applications) and expands Senior's fittings &
couplings markets in North America, Europe & ROW for both OEMs
& distributors. The strong customer relationships that Senior
has with OEMs, Tier 1 integrators, and aftermarket customers around
the world, will open new opportunities.
Sustainability
Senior is a values-driven organisation: we believe with
conviction that how you do business is every bit as important as
what you do. We always put safety and ethics first and we strongly
encourage and promote diversity and inclusivity across our
international operations. Therefore, sustainability is an integral
part of our strategy, firmly embedded within the behaviours of our
people and the culture of our organisation. We invest in our
employees to help them succeed and they are empowered within a
well-defined governance framework. For many years we have had a
strong focus on Environmental, Social and Governance ("ESG")
matters. Our track record means that we are well positioned to meet
and exceed all of our stakeholder ESG expectations: our
industry-leading ESG disclosures and ratings are evidence of
Senior's longstanding approach to sustainability.
Our products operate in various hard-to-decarbonise sectors -
aerospace, transport and power & energy - as a result, we apply
our expertise and technology across many different applications,
working in close partnership with our customers, to develop
solutions that support both their commercial and sustainability
objectives. Our engineering expertise is key in helping to tackle
the climate change and clean air challenge, as the world
transitions to a lower carbon economy.
Key highlights for ESG in 2022:
Environment
-- We are on track to deliver our Scope 1, 2 and 3 SBTi verified
"Near Term Net-Zero" Targets
-- We have submitted our Long Term Net Zero climate targets to SBTi
for verification and approval
-- Current CDP leadership rating of A- for our climate disclosure
-- Achieved the highest CDP Supplier Engagement Rating of A
-- In 2022, we are proactively developing and extending our supplier
environmental engagement
Social
-- In September 2022, we are undertaking our next global employee
survey
-- We remain on track to achieve our 2025 Lost Time Injury Rate reduction
target
-- In 2022, we have introduced additional safety initiatives involving
ergonomics and hand protection to support our 2025 Lost Time Injury
Rate reduction goal
-- Currently, 55% of the Board Directors are female and two of the
Directors are from minority ethnic backgrounds
Governance
-- The 2022 Code of Conduct annual training programme has been launched
and is due to be completed in Q3
-- All employees continue to receive training and regular reminders
about the risks related to information/cyber security
-- In line with TCFD recommendations, Senior's resilience at different
climate-related scenarios has been assessed and the Transition
Plan is being updated
Outlook
Trading performance has been strong in the first half of 2022,
compared to the same period in 2021, in line with expectations. Our
core markets are showing good growth as activity levels pick up
following two years of pandemic related uncertainty. Global supply
chain constraints and increasing inflationary pressures, caused by
external events, remain evident and we continue to manage the
impact of those diligently to ensure we satisfy our customers and
other stakeholders.
The Board anticipates further good progress in 2022, in line
with previous expectations, with performance in the second half of
the year expected to be similar to the first half. Along with the
strong cash performance and healthy balance sheet, this gives the
Board confidence to announce the reinstatement of a dividend for
2022.
Over the medium-term we remain committed to delivering a strong
recovery across both Divisions, driving the Group ROCE to a minimum
of 13.5% in line with our previously stated ambition.
Looking ahead, our differentiated offering in fluid conveyance
and thermal management products coupled with our global footprint
and positioning in attractive and diverse end markets, gives the
Board confidence that Senior is well positioned to build on our
strong capabilities and to capture growth opportunities. Our
continued investment in low carbon technology and advanced
manufacturing combined with our commitment to the highest
sustainability standards provide additional foundations for
continued success.
DAVID SQUIRES
Group Chief Executive Officer
DIVISIONAL REVIEW
Aerospace Division
The Aerospace Division represents 66% (H1 2021 - 66%(1) ) of
Group revenue and consists of 14 operations. These are located in
North America (six), the United Kingdom (four), continental Europe
(two), Thailand and Malaysia. This Divisional review is on a
constant currency basis, whereby H1 2021 results have been
translated using H1 2022 average exchange rates and on an adjusted
basis to exclude net restructuring income/costs. The Division's
operating results on a constant currency basis are summarised
below:
H1 2022 H1 2021 (2) Change
GBPm GBPm
Revenue GBP264.5m GBP233.7m +13.2%
Adjusted operating profit GBP9.8m GBP5.5m +78.2%
Adjusted operating margin 3.7% 2.4% +130bps
(1) This number is excluding Senior Aerospace Connecticut
H1 2021 results translated using H1 2022 average exchange rates
(2) - constant currency.
Divisional revenue increased by GBP30.8m (13.2%) to GBP264.5m
(H1 2021 - GBP233.7m) whilst adjusted operating profit increased by
GBP4.3m (78.2%) to GBP9.8m (H1 2021 - GBP5.5m).
Revenue Reconciliation GBPm
H1 2021 revenue 233.7
Civil aerospace 40.4
Defence (8.3)
Other markets 7.4
Disposal of business (8.7)
H1 2022 revenue 264.5
======
Revenue in the Aerospace Division increased by 13.2%
year-on-year on a constant currency basis, reflecting the overall
recovery in demand. Excluding the prior year GBP8.7m revenue from
Senior Aerospace Connecticut, which was divested in April 2021,
revenue on an organic, constant currency basis increased by 17.6%.
The year-on-year increase reflected the ramp up in civil aircraft
production rates and growth from semi-conductor equipment and space
markets, which more than offset the decline in defence which was
affected by the Continuing Resolution which was in place in the
U.S. for much of the period.
The civil aerospace sector had the strongest growth during the
period with Senior's sales increasing by 33.4% compared to prior
year. This was reflective of aircraft production rates being higher
in H1 2022 compared to H1 2021, particularly for single aisle
aircraft. 21% of civil aerospace sales were from widebody aircraft
in the first half of 2022, with the other 79% sales being from
single aisle, regional and business jets.
Excluding the divestment of Senior Aerospace Connecticut, total
revenue from the defence sector decreased by GBP8.3m (12.2%) as
orders were delayed due to the late approval of the Appropriations
Bill which resulted in the Continuing Resolution coming into force
and F-35 sales were impacted by customer inventory levels.
Revenue derived from other markets such as space, power &
energy, medical and semi-conductor equipment, where the Group
manufactures products using very similar technology to that used
for certain aerospace products, increased by GBP7.4m as a result of
the increasing demand in the semi-conductor equipment market and
growth in the space satellite sector.
During the period, adjusted operating profit increased by 78.2%
to GBP9.8m (H1 2021 - GBP5.5m) and the adjusted operating margin
increased by 130 basis points to 3.7% (H1 2021 - 2.4%). This
improvement in profitability reflected the underlying volume
related operating leverage across our operating businesses and
price increases to help offset the impact of material and other
inflationary cost increases.
Production volumes for civil aerospace during the first half of
2022 have been ramping up, driven by increasing single aisle/narrow
body rates.
-- Airbus announced at their Half-Year 2022 results, it is adapting
the ramp-up trajectory for its A320 Family month production rate
and now targets a monthly rate of 65 in early 2024, a significant
increase from current levels, albeit six months later than previously
planned. The Airbus teams are engaged with suppliers and partners
to ramp up towards an A320 Family monthly production rate of 75
in 2025, backed by strong customer demand. On the A321XLR, Airbus
announced the first flight took place in June, representing an
important milestone towards the aircraft's entry-into-service
that is expected to take place in early 2024. On the A220, Airbus
reaffirmed at their Half-Year call that they are on track for
a monthly production rate of 14 by the middle of the decade.
-- Boeing announced at their Q2 earnings call that the 737 production
rate increased to 31 airplanes per month during the quarter and
their principal aim is to stabilise production at that rate before
increasing further. Boeing have a 737 order backlog of around
3,400 aircraft and at the end of the second quarter 2022, there
were 290 737 MAX aircraft in inventory.
-- COMAC recently announced completion of the flight test programme,
the final step before certification.
Widebody rates are largely as expected, except for the 787. IATA
has signalled that this segment will return to 2019 levels by
2025.
-- Airbus announced at its Half-Year 2022 results, on widebody, it
is exploring, together with its supply chain, the feasibility
of further rate increases to meet growing market demand as international
air travel recovers. As previously announced, Airbus continues
to target an A330 monthly production rate of almost three aircrafts
at the end of 2022 and an A350 monthly production rate of around
6 aircraft in early 2023.
-- On the 787 platform, Boeing continues to work with the FAA to
finalise actions to resume deliveries and is readying airplanes
for delivery. The programme is producing at a very low rate and
will continue to do so until deliveries resume, with an expected
gradual return to production of five per month over time. Boeing
confirmed at their Q2 earnings call that they had 120 787 aircraft
in inventory at the end of the second quarter of 2022.
-- Boeing reaffirmed on their Q2 earnings call that they still anticipate
delivery of the first 777X plane in 2025.
Global business jet activity was resilient in the first half of
2022, continuing the pre-pandemic bounce. According to WingX
Advance, demand for the last 12 months have consecutively been
record-breaking. In the first half of 2022, activity was up 27%
year-on-year and 21% above pre-pandemic 2019 levels. North American
activity is continuing but it is the rebound in Europe which is
much stronger.
Due to the US defence Appropriations Bill not being signed into
effect until March 2022, defence spending has been delayed in 2022.
We now expect defence revenue to be slightly lower in 2022 compared
to prior year.
-- Lockheed Martin delivered 61 F-35 aircraft in H1 2022, which was
up from 54 in H1 2021. At their half year results presentation,
they announced that deliveries are expected to remain in the range
of 147-153 aircraft per year in 2023 and 2024, before achieving
the 156 aircraft delivery target in 2025. They continue to anticipate
annual deliveries of 156 aircraft beyond 2025 for the foreseeable
future.
Flexonics Division
The Flexonics Division represents 34% (H1 2021 - 34%) of Group
revenue and consists of 12 operations which are located in North
America (four), continental Europe (two), the United Kingdom (two),
South Africa, India, and China (two) including the Group's 49%
equity stake in a land vehicle product joint venture. This
Divisional review, presented before the share of the joint venture
results, is on a constant currency basis, whereby H1 2021 results
have been translated using H1 2022 average exchange rates. There
are no reconciling items between adjusted operating profit and
operating profit in H1 2022. The Division's operating results on a
constant currency basis are summarised below:
H1 2022 H1 2021 (1) Change
GBPm GBPm
Revenue GBP137.9m GBP114.6m +20.3%
Adjusted operating profit GBP11.3m GBP7.8m +44.9%
Adjusted operating margin 8.2% 6.8% +140bps
H1 2021 results translated using H1 2022 average exchange rates
(1) - constant currency.
Divisional revenue increased by GBP23.3m (20.3%) to GBP137.9m
(H1 2021 - GBP114.6m) and adjusted operating profit increased by
GBP3.5m (44.9%) to GBP11.3m (H1 2021 - GBP7.8m).
Revenue Reconciliation GBPm
H1 2021 revenue 114.6
Land vehicles 13.8
Power & energy 9.5
H1 2022 revenue 137.9
======
Flexonics core markets all grew in the first half of the year,
with sales in H1 2022 increasing by 20.3% compared to the prior
period.
Group sales to land vehicle markets increased by 22.3%. Senior's
sales to the North American truck and off-highway market increased
by GBP7.9m (22.7%), as off-highway sales were strong and market
production of heavy-duty diesel trucks increased by 12%. Sales to
other truck and off-highway regions, including Europe and India,
increased by GBP5.0m (38.8%) reflecting the ramp up of new
programmes and market growth in India, which offset underlying
lower supply constrained market production in Europe. Group sales
to passenger vehicle markets increased by GBP0.9m (6.3%) in the
year, reflecting launch of new programmes in North America and
Europe, offset partly by underlying lower market production as a
result of supply chain constraints.
In the Group's power & energy markets, sales increased by
GBP9.5m (18.0%) in the year. Sales to power generation and nuclear
markets increased by GBP5.1m (30.4%) particularly as maintenance
activity increased. Sales to oil and gas markets increased by
GBP4.0m (26.7%), as a result of increasing demand, in particular,
from upstream activity. In downstream oil & gas, levels of
maintenance and overhaul improved in the period. Sales to other
power & energy markets increased by GBP0.4m.
Adjusted operating profit increased by GBP3.5m compared to prior
period and the divisional adjusted operating margin increased by
140 basis points to 8.2% (H1 2021 - 6.8%). This improvement in
profitability reflected the underlying volume related operating
leverage across our operating business and price increases to help
offset the impact of material and other inflationary cost increases
.
Land Vehicle markets, despite facing ongoing supply chain
constraints, are still expected to continue to grow overall in
2022.
-- ACT Research is forecasting a 15% increase in North American heavy-duty
truck production in 2022.
-- The North American medium-duty diesel truck production is forecast
to decrease by 2% in 2022.
-- IHS Markit Inc. forecasts that European truck and bus production
will decline by 6% in 2022 and that passenger vehicle production
will grow by 13% in 2022.
-- Indian passenger vehicle production is forecast to grow by 17%
in 2022.
Power & energy markets grew in the first half of 2022 as the
recovery in upstream oil & gas sector continued and levels of
maintenance and overhaul increased for downstream oil &
gas.
-- The IEA has reiterated their world oil demand forecast for 2022
and announced that in 2023, demand is expected to surpass pre-pandemic
levels.
-- According to the IEA, global refining capacity is set to expand
slightly in 2022 and 2023, although shortages in individual products
may well persist due to uneven rates of demand growth and limits
in the refining system. This tight supply, coupled with a limited
appetite for new refining capacity due to the US federal government's
policies on energy, has led businesses towards upgrading and the
expansion of existing facilities, thereby increasing maintenance
and overhaul work.
-- In power generation, the IEA forecasts average annual electricity
demand growth of 2.7% with renewables growth set to serve more
than 90% of net demand growth during 2022-2024. Nuclear-based
generation is expected to grow by 1% annually during the period.
For 2022, the IEA forecast renewable capacity to increase over
8% compared with last year.
Good progress continues to be made with our fluid conveyance and
thermal management product and technology developments in support
of the transition to clean energy, with many active customer
engagements: one example of this is shown below.
Case study: Thermal management solution for fully electric
heavy-duty truck application
Senior Flexonics Olomouc in the Czech Republic secured a new
contract for a fully electric heavy-duty truck application for one
of our large European truck customers in 2021. This is the first
heavy duty commercial BEV (battery electric vehicle) for this
customer. This contract will run for five years and production will
start in late 2022. We have designed a complex stainless steel
thermal management solution to cool two electric motors for the
on-road commercial vehicle.
OTHER FINANCIAL INFORMATION
Group revenue
Group revenue was GBP402.2m (H1 2021 - GBP332.8m). Excluding the
favourable exchange rate impact of GBP15.2m, Group revenue
increased by GBP54.2m (15.6%), of which GBP8.1m related to pricing.
Revenue grew in both Aerospace and Flexonics.
Operating profit
Adjusted operating profit increased by GBP7.4m (142.3%) to
GBP12.6m (H1 2021 - GBP5.2m). Excluding the favourable exchange
rate impact of GBP0.6m, adjusted operating profit increased by
GBP6.8m (117.2%) on a constant currency basis. After accounting for
GBP2.8m net restructuring income (H1 2021 - GBP0.1m net
restructuring cost), reported operating profit was GBP15.4m (H1
2021 - GBP5.1m).
The Group's adjusted operating margin increased by 150 basis
points, to 3.1% for the half year. This improved profitability
reflected underlying volume related operating leverage across our
operating businesses. Inflationary pressures were successfully
mitigated by diligently managing costs and by increasing prices and
surcharges where possible. Overall price increases of GBP8.1m
offset material and other inflationary cost increases of
GBP9.4m.
Finance costs and investment income
Finance costs, net of investment income decreased to GBP3.8m (H1
2021 - GBP4.3m) and comprise IFRS 16 interest charge on lease
liabilities of GBP1.2m (H1 2021 - GBP1.3m), net finance income on
retirement benefits of GBP0.6m (H1 2021 - GBP0.2m) and net interest
charge of GBP3.2m (H1 2021 - GBP3.2m). The decrease was mainly due
to higher net finance income on the Senior plc UK pension plan.
Tax charge
The adjusted ETR for the year was 9.1% (H1 2021 - 55.6%), being
a tax charge of GBP0.8m (H1 2021 - GBP0.5m) on adjusted profit
before tax of GBP8.8m (H1 2021 - GBP0.9m). The adjusted ETR
reflects the geographic mix of taxable profits and losses in the
period and benefits from the impact of prior year item credits, as
well as enhanced deductions for R&D expenditure in the US and
capital expenditure in the UK, which being proportionately large
relative to the underlying tax position resulted in a decrease in
ETR for the period.
The reported tax rate was 9.0%, being a tax charge of GBP1.0m on
reported profit before tax of GBP11.1m. This included GBP0.2m net
tax charge against items excluded from adjusted profit before tax,
of which GBP0.1m credit related to the corporate undertakings and
GBP0.3m charge related to net restructuring income. The 2021 half
year reported tax rate was 12.1%, being a tax charge of GBP2.7m on
reported profit before tax of GBP22.3m. This included the tax
charge of items excluded from adjusted profit before tax of GBP2.8m
and GBP0.6m credit related to the revaluation of UK deferred tax
assets at the substantially enacted 25% corporation tax rate
effective from 1 April 2023.
Cash tax paid was GBP1.7m (H1 2021 - GBP2.0m) and is stated net
of refunds received of GBP1.3m (H1 2021 - GBPnil) relating to tax
paid in prior periods, including GBP1.1m in the US arising from
Covid-19 relief measures in previous years which resulted in the
offset of tax losses against taxable profits of prior periods.
Earnings per share
The weighted average number of shares, for the purposes of
calculating undiluted earnings per share, increased to 416.4
million (H1 2021 - 415.5 million). The increase arose principally
due to the exercising of share-based payment awards during the
first half of 2022. The adjusted earnings per share increased to
1.92 pence (H1 2021 - 0.10 pence). Basic earnings per share was
2.43 pence (H1 2021 - 4.72 pence). See Note 7 for details of the
basis of these calculations.
Return on capital employed (ROCE)
ROCE, a key performance indicator for the Group as defined
above, increased by 230 basis points to 2.3% (H1 2021 - 0.0%). The
increase in ROCE was mainly a result of the increase in adjusted
operating profit for the 12 month period to June 2022 compared to
prior year.
Cash flow
The Group generated robust free cash flow of GBP19.3m in H1 2022
(H1 2021 - GBP19.2m) as set out in the table below:
H1 2022 H1 2021
GBPm GBPm
---------------------------------------------------------- --------- ----------
Operating profit 15.4 5.1
Net restructuring (income)/costs (2.8) 0.1
---------------------------------------------------------- --------- ----------
Adjusted operating profit 12.6 5.2
---------------------------------------------------------- --------- ----------
Depreciation (including amortisation of software) 24.5 24.2
---------------------------------------------------------- --------- ----------
Working capital and provisions movement, net of
restructuring items (1.2) 5.8
---------------------------------------------------------- --------- ----------
Pension payments above service cost (1.6) (2.6)
---------------------------------------------------------- --------- ----------
Other items(1) 2.2 0.6
---------------------------------------------------------- --------- ----------
Interest paid, net (4.1) (4.2)
---------------------------------------------------------- --------- ----------
Income tax paid, net (1.7) (2.0)
---------------------------------------------------------- --------- ----------
Capital expenditure (11.5) (7.9)
---------------------------------------------------------- --------- ----------
Sale of property, plant and equipment 0.1 0.1
---------------------------------------------------------- --------- ----------
Free cash flow 19.3 19.2
---------------------------------------------------------- --------- ----------
Corporate undertakings (0.5) 47.0
---------------------------------------------------------- --------- ----------
Net restructuring cash paid (1.3) (3.0)
---------------------------------------------------------- --------- ----------
US Class action lawsuits - (2.3)
---------------------------------------------------------- --------- ----------
Net cash flow 17.5 60.9
---------------------------------------------------------- --------- ----------
Effect of foreign exchange rate changes (11.0) 2.9
---------------------------------------------------------- --------- ----------
IFRS 16 non-cash additions and modifications (2.8) (5.3)
---------------------------------------------------------- --------- ----------
Change in net debt 3.7 58.5
---------------------------------------------------------- --------- ----------
Opening net debt (153.1) (205.9)
---------------------------------------------------------- --------- ----------
Closing net debt (149.4) (147.4)
---------------------------------------------------------- --------- ----------
(1) Other items comprises GBP2.2m share-based payment charges (H1
2021 - GBP1.8m), GBP(0.1)m profit on share of joint venture (H1
2021 - GBP(0.2)m), GBP0.2m working capital and provision currency
movements (H1 2021 - GBP(1.0)m) and GBP(0.1)m profit on sale
of fixed assets (H1 2021 - GBPnil).
Capital expenditure
Gross capital expenditure of GBP11.5m (H1 2021 - GBP7.9m) was
0.6 times depreciation excluding the impact of IFRS 16 (H1 2021 -
0.4 times). The disposal of property, plant and equipment raised
GBP0.1m (H1 2021 - GBP0.1m). For the full year 2022, capital
investment is expected to be slightly below 2022 depreciation
(excluding the impact of IFRS 16).
Working capital
Working capital increased by GBP12.4m in first half of 2022 to
GBP115.4m (31 December 2021 - GBP103.0m), of which GBP7.5m related
to foreign currency movements. As expected, the underlying increase
was reflective of demand recovery underway in our key end markets
along with some supply chain lead times increasing. We will
continue our relentless and effective focus on working capital
management.
Net debt
Net debt which includes IFRS 16 lease liabilities decreased by
GBP3.7m to GBP149.4m at 30 June 2022 (31 December 2021 -
GBP153.1m). As noted in the cash flow table above, the Group
generated net cash inflow of GBP17.5m (defined in Note 12c), partly
offset by GBP11.0m adverse foreign currency movements and GBP2.8m
non-cash changes in lease liabilities due to additions and
modifications.
Net debt excluding IFRS 16 lease liabilities of GBP76.5m (31
December 2021 - GBP73.2m) decreased by GBP7.0m to GBP72.9m at 30
June 2022 (31 December 2021 - GBP79.9m).
Funding and Liquidity
At 30 June 2022, the Group held committed borrowing facilities
of GBP300.9m and the Group had headroom of GBP228.0m under these
committed facilities. During the first half of 2022, the Group
refinanced its US revolving credit facility of $50.0m (GBP41.0m)
and extended the maturity to June 2025. Accordingly, the weighted
average maturity of the Group's committed facilities is now 2.7
years. Net debt (defined in Note 12c) was GBP149.4m, including
GBP76.5m of capitalised leases which do not form part of the
definition of debt under the committed facilities and do not impact
the Group's lending covenants.
The Group has two covenants for committed borrowing facilities,
which are tested at June and December: the Group's net debt to
EBITDA (defined in the Notes to the Financial Headlines) must not
exceed 3.0x and interest cover, the ratio of EBITDA to interest
must be higher than 3.5x. At 30 June 2022, the Group's net debt to
EBITDA was 1.3x and interest cover was 8.8x, both comfortably
within covenants limits. For all testing periods within the Going
Concern Period, there is sufficient headroom to remain within the
covenant limits and the Group's committed borrowing facilities,
even in a severe but plausible downside scenario.
In the first half, the Group implemented a global cash pooling
structure which has enhanced liquidity and cash management, reduced
gross debt levels and will help mitigate rising interest costs
moving forward.
Going concern basis
The Directors have, at the time of approving these Condensed
Consolidated Interim Financial Statements, a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis of accounting in preparing these
Condensed Consolidated Interim Financial Statements, having
undertaken a rigorous assessment of the financial forecasts.
Further details are provided in Note 2.
Risks and uncertainties
During the first half of 2022 the principal risks and
uncertainties faced by the Group have been reviewed. While the
principal risk list has remained relatively unchanged from those
set out in detail on pages 50 to 55 of the Annual Report &
Accounts 2021 (available at www.seniorplc.com ), certain risks such
as Economic and Geopolitical Impact, Supply Chain Challenges and
Inflation have intensified as a result of the conflict in Ukraine.
Additionally, the Customer Demand and Price-down Pressures
principal risk has been split into two separate principal risks to
address these elements individually.
The Group's risk and assurance framework continues to serve as
an effective foundation from which to monitor and address shifting
business conditions in this unsettled economic climate. Additional
information regarding the risk and assurance framework is set out
on pages 48 and 49 of the Annual Report and Accounts 2021
(available at www.seniorplc.com ).
The Group's principal risks and uncertainties as at 30 June 2022
and for the remaining six months of the financial year are
summarised as:
Risks and Uncertainties Descriptions
STRATEGIC RISKS
Economic and geopolitical impact There is an increasing risk that there
will be a global economic downturn which
may impact some or all of the sectors
within which the Group operates.
Changes in critical trade relations factors,
such as tariffs, sanctions and exchange
rates, resulting from geo-political events
have created uncertainty over the future
impacts on international trade, including
export revenues, material availability
and cost and the ability to employ foreign
nationals.
Shifts in political regimes and government
spending programmes can lead to higher
taxation which may impact earnings.
--------------------------------------------------
Pandemic The expansion of global vaccination programmes
and other measures appear to have furthered
the progress towards a return to normality.
Despite the optimism that the worst of
the COVID-19 pandemic is behind us, the
Group remains vigilant to the potential
impacts of future waves of the pandemic
and will continue to prioritise the health
and safety of our employees. Focus continues
on responding to demand increases in a
controlled way to ensure that the cost
saving measures introduced in 2020 are
not undermined.
--------------------------------------------------
Climate change There is a risk that climate change and/or
the measures taken to address it may have
an adverse impact on the Group. Climate
change may result in extreme weather events
that may impact on our ability, or that
of a supplier, to meet our customers'
requirements.
Our customers' products may evolve to
require new technology, such as electrification.
This also presents an opportunity for
the Group to be involved in replacement
technologies.
Increasing legislation aimed at accelerating
decarbonisation may increase our operating
costs. It may also change consumer behaviours
impacting on our end markets. For example,
consumers may fly less often.
--------------------------------------------------
Implementation of strategy An inability to implement the Group's
strategy and/or effectively manage the
Group's portfolio could have a significant
impact on the Group's ability to generate
long-term value for shareholders.
Ambiguity surrounding the Group's strategy
and strategic priorities may result in
investors failing to recognise the value
of the Group's investment case.
--------------------------------------------------
Innovation and technological change The Group must innovate in order to continue
to win new business and achieve profitable
growth. There is a risk that the Group
does not continue to innovate and implement
technological change resulting in its
technology becoming uncompetitive or obsolete.
New technologies may have an impact on
the Group's markets, e.g., electric vehicles
and hydrogen aircraft.
--------------------------------------------------
OPERATIONAL RISKS
Supply chain challenges Suppliers may be unable or unwilling to
respond to increases or decreases in demand,
impacting our ability to supply our customers
and/or our ability to optimise inventory.
Critical materials or components may become
temporarily or permanently unavailable,
leading to an inability to meet production
commitments.
Supply chain disruption can lead to higher
volatility in delivery schedules as customers
adjust demand to protect their production
capabilities. This may challenge the Group's
ability to meet customer schedule, quality
and cost requirements, resulting in potential
delays, penalties and cost overruns.
During 2022, the Group has successfully
implemented a number of mitigating actions
to counteract supply chain disruptions,
including increasing safety stock of critical
materials and components, expanding our
supplier base to provide alternate material
sources and enhancing communication with
customers and suppliers regarding changes
in demand, lead times and other production
factors.
--------------------------------------------------
Cyber/information security The risk that the Group is subjected to
external threats from hackers or viruses
potentially causing critical or sensitive
data to be lost, corrupted, made inaccessible,
or accessed by unauthorised users, resulting
in financial and/or reputational loss.
--------------------------------------------------
Customer demand Supply chain constraints, ongoing impacts
from COVID-19, staffing shortages and
other labour disruptions may leave customers
unable to meet current sales commitments
and/or respond to increases in market
demands. As a result, there is a risk
that customers do not honour firm order
schedules, delay programme ramp-up, postpone
new programmes or in extreme circumstances,
go out of business.
--------------------------------------------------
Programme management The ability to introduce new products
in line with customer requirements and
to respond appropriately to increases
or decreases in demand thereafter is key
to achieving the Group's strategic objectives.
There is a risk that the Group is unable
to respond quickly enough to changes in
demand, which may result in excess inventory
and/or an inability to meet schedule and
cost requirements leading to delays, cost
overruns or asset write-downs.
Changes across a variety of production
requirements, such as fluctuations in
material supplies, volatility in customer
ordering and employee retention and training,
may challenge the Group's ability to maintain
programme quality specifications, leading
to the potential for higher costs of quality
or greater risk of product defects.
--------------------------------------------------
Price-down pressures Customer pricing pressure is an ongoing
challenge within our industries, driven
by the expectations of airlines, land
vehicle operators and governments seeking
to purchase more competitively priced
products in the future. This may put some
pressure on the Group's future operating
margins.
--------------------------------------------------
PEOPLE AND CULTURE RISKS
Talent and skills There is a risk that the Group, particularly
in the US and UK, is unable to attract
sufficient skills and talent and/or is
unable to retain the skills and talent
it has in order to meet demand and/or
respond to strategic priorities. Margins
may be impacted by higher wage rates necessary
to retain current employees and/or attract
new employees.
A notable portion of the Group's workforce
may reach retirement age at the same time,
creating a gap in skills and labour availability.
--------------------------------------------------
FINANCIAL RISKS
Inflation Inflationary pressures stemming from a
confluence of labour constraints, supply
chain disruptions and shifting customer
demand could result in a reduction of
earnings from existing programmes if the
Group is unable to secure mitigating price
adjustments from customers.
Higher production costs resulting from
material, energy and labour cost inflation
can reduce our ability to remain cost
competitive and win new business.
Inflationary pressures may result in higher
interest rates which could impact the
Group's earnings.
During 2022, the Group has deployed a
variety of strategies to mitigate the
impacts of rising inflation, including
negotiating selling price adjustments
with customers (where there is no pass
through mechanism), utilising alternate
supply sources and implementing efficiency
improvement projects to contain labour
and energy cost escalations.
--------------------------------------------------
Financing and liquidity The Group could have insufficient financial
resources to fund its growth strategy
or meet its financial obligations as they
fall due or insufficient liquidity to
meet financing covenants.
Foreign exchange impacts could have a
material impact on the Group's financial
performance, both on the balance sheet
(translation risk) and income statement
(transaction risk).
The Group is in a strong financial position
at the end of June 2022.
--------------------------------------------------
COMPLIANCE RISKS
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. In 2022, we are providing
relevant training to all employees across
the Group.
--------------------------------------------------
In response to the risks and uncertainties, the Board has
established a range of mitigating actions that are set out in
detail on pages 50 to 55 of the Annual Report & Accounts 2021
(available at www.seniorplc.com ). These are reviewed and updated
regularly.
Responsibility statement of the Directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
1. the condensed set of financial statements has been prepared in
accordance with IAS 34 "Interim Financial Reporting" as adopted
for use by the UK;
2. the Interim Management Report herein includes a fair review of
the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on
the condensed set of financial statements; and a description
of the principal risks and uncertainties for the remaining six
months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the
first six months of the current financial year and that have
materially affected the financial position or performance of
the entity during that period; and any changes in the related
party transactions described in the last annual report that could
do so.
By Order of the Board
David Squires Bindi Foyle
David Squires Bindi Foyle
Group Chief Executive Officer Group Finance Director
29 July 2022 29 July 2022
INDEPENT REVIEW REPORT TO SENIOR PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the Condensed
Consolidated Income Statement, the Condensed Consolidated Balance
Sheet Statement, the Condensed Consolidated Statement of Changes in
Equity, the Condensed Consolidated Cash Flow Statement, and the
related explanatory notes.
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 2022 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Group will continue in operation.
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 DTR of the UK FCA.
As disclosed in Note 2, the Annual Financial Statements of the
Group are prepared in accordance with UK-adopted international
accounting standards.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
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. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this 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
reached.
Mike Barradell
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London, E14 5GL
29 July 2022
Condensed Consolidated Income Statement
For the half-year ended 30 June 2022
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2022 2021 2021
GBPm GBPm GBPm
Revenue 3 402.2 332.8 658.7
---------- ---------- --------
Trading profit 3 15.3 4.9 10.3
Share of joint venture profit 9 0.1 0.2 0.2
Operating profit (1) 3 15.4 5.1 10.5
Investment income 0.7 0.2 0.5
Finance costs (4.5) (4.5) (8.5)
Corporate undertakings 4 (0.5) 21.5 21.2
---------- ---------- --------
Profit before tax (2) 11.1 22.3 23.7
Tax (charge)/credit 5 (1.0) (2.7) 0.5
---------- ---------- --------
Profit for the period 10.1 19.6 24.2
---------- ---------- --------
Attributable to:
Equity holders of the parent 10.1 19.6 24.2
---------- ---------- --------
Earnings per share
Basic (3) 7 2.43p 4.72p 5.82p
---------- ---------- --------
Diluted (4) 7 2.37p 4.65p 5.73p
---------- ---------- --------
(1) Adjusted operating profit 4 12.6 5.2 6.1
(2) Adjusted profit/(loss) before
tax 4 8.8 0.9 (1.9)
(3) Adjusted earnings per share 7 1.92p 0.10p 0.17p
(4) Adjusted and diluted earnings
per share 7 1.88p 0.09p 0.17p
------------------------------------ --- ------- ------- -------
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2022
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2022 2021 2021
GBPm GBPm GBPm
Profit for the period 10.1 19.6 24.2
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss:
Losses on foreign exchange contracts-
cash flow hedges during the period (6.5) (0.6) (2.1)
Reclassification adjustments for
losses/(gains) included in profit 1.3 (0.7) (1.3)
---------- ---------- --------
Losses on foreign exchange contracts-
cash flow hedges (5.2) (1.3) (3.4)
Foreign exchange gain recycled
to the Income Statement on disposal
and restructuring (business closures) - (2.9) (2.9)
Exchange differences on translation
of overseas operations 22.2 (6.9) (3.8)
Tax relating to items that may
be reclassified 1.2 0.3 0.8
---------- ---------- --------
18.2 (10.8) (9.3)
Items that will not be reclassified
subsequently to profit or loss:
Actuarial (losses)/gains on defined
benefit pension schemes (15.1) 8.3 19.7
Tax relating to items that will
not be reclassified 3.8 (3.6) (6.4)
---------- ---------- --------
(11.3) 4.7 13.3
Other comprehensive income/(expense)
for the period, net of tax 6.9 (6.1) 4.0
---------- ---------- --------
Total comprehensive income for
the period 17.0 13.5 28.2
---------- ---------- --------
Attributable to:
Equity holders of the parent 17.0 13.5 28.2
---------- ---------- --------
Condensed Consolidated Balance Sheet
As at 30 June 2022 30 June 30 June
Notes 2022 2021 31 Dec 2021
GBPm GBPm GBPm
Non-current assets
Goodwill 8 157.1 148.8 150.2
Other intangible assets 4.3 4.1 4.2
Investment in joint venture 9 4.2 3.8 3.9
Property, plant and equipment 10 304.1 303.0 294.6
Deferred tax assets 8.7 4.5 5.7
Retirement benefits 11 58.5 57.2 72.2
Trade and other receivables 0.1 0.1 0.1
-------- -------- ------------
Total non-current assets 537.0 521.5 530.9
-------- -------- ------------
Current assets
Inventories 163.3 138.5 145.2
Current tax receivables 2.8 3.1 2.6
Trade and other receivables 133.7 97.3 98.0
Cash and bank balances 12c) 82.6 60.0 51.1
Assets classified as held for sale - 2.3 -
Total current assets 382.4 301.2 296.9
-------- -------- ------------
Total assets 919.4 822.7 827.8
-------- -------- ------------
Current liabilities
Trade and other payables 190.4 142.2 143.0
Current tax liabilities 15.9 19.0 14.6
Lease liabilities 12c) 11.3 0.5 0.4
Bank overdrafts and loans 12c) 31.3 1.3 14.8
Provisions 14 12.9 19.2 13.8
Total current liabilities 261.8 182.2 186.6
-------- -------- ------------
Non-current liabilities
Bank and other loans 12c) 124.2 129.7 116.2
Retirement benefits 11 10.8 10.1 11.0
Deferred tax liabilities 7.0 10.1 10.5
Lease liabilities 12c) 65.2 75.9 72.8
Provisions 14 2.9 2.4 2.2
Others 3.2 3.6 3.4
-------- -------- ------------
Total non-current liabilities 213.3 231.8 216.1
-------- -------- ------------
Total liabilities 475.1 414.0 402.7
-------- -------- ------------
Net assets 444.3 408.7 425.1
-------- -------- ------------
Equity
Issued share capital 15 41.9 41.9 41.9
Share premium account 14.8 14.8 14.8
Equity reserve 5.5 4.1 5.8
Hedging and translation reserve 46.8 27.1 28.6
Retained earnings 342.6 330.0 343.2
Own Shares (7.3) (9.2) (9.2)
-------- -------- ------------
Equity attributable to equity
holders of the parent 444.3 408.7 425.1
-------- -------- ------------
Total equity 444.3 408.7 425.1
-------- -------- ------------
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2022
All equity is attributable to equity
holders of the parent
Issued Share
share premium Equity Hedging Translation Retained Own Total
capital account reserve reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2021 41.9 14.8 5.1 (37.2) 75.1 305.1 (11.5) 393.3
-------- -------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - - 24.2 - 24.2
Losses on foreign exchange
contracts- cash flow hedges - - - (3.4) - - - (3.4)
Foreign exchange loss/(gain)
recycled to the Income Statement
on disposal - - - 2.6 (5.5) - - (2.9)
Exchange differences on
translation of overseas
operations - - - - (3.8) - - (3.8)
Actuarial gains on defined
benefit pension schemes - - - - - 19.7 - 19.7
Tax relating to components of
other comprehensive income - - - 0.8 - (6.4) - (5.6)
-------- -------- -------- -------- ------------ --------- -------- -------
Total comprehensive
(expense)/income for the period - - - - (9.3) 37.5 - 28.2
Share-based payment charge - - 3.5 - - - - 3.5
Tax relating to share-based
payments - - - - - 0.1 - 0.1
Use of shares held by employee
benefit trust - - - - - (2.3) 2.3 -
Transfer to retained earnings - - (2.8) - - 2.8 - -
Balance at 31 December 2021 41.9 14.8 5.8 (37.2) 65.8 343.2 (9.2) 425.1
-------- -------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - - 10.1 - 10.1
Losses on foreign exchange
contracts- cash flow hedges - - - (5.2) - - - (5.2)
Exchange differences on
translation of overseas
operations - - - - 22.2 - - 22.2
Actuarial losses on defined
benefit pension schemes - - - - - (15.1) - (15.1)
Tax relating to components of
other comprehensive income - - - 1.2 - 3.8 - 5.0
-------- -------- -------- -------- ------------ --------- -------- -------
Total comprehensive
(expense)/income for the period - - - (4.0) 22.2 (1.2) - 17.0
Share-based payment charge - - 2.2 - - - - 2.2
Use of shares held by employee
benefit trust - - - - - (1.9) 1.9 -
Transfer to retained earnings - - (2.5) - - 2.5 - -
Balance at 30 June 2022 41.9 14.8 5.5 (41.2) 88.0 342.6 (7.3) 444.3
-------- -------- -------- -------- ------------ --------- -------- -------
All equity is attributable to equity holders
of the parent
Issued Share
share premium Equity Hedging Translation Retained Own Total
capital account reserve reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2021 41.9 14.8 5.1 (37.2) 75.1 305.1 (11.5) 393.3
-------- -------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - - 19.6 - 19.6
Losses on foreign exchange
contracts- cash flow hedges - - - (1.3) - - - (1.3)
Exchange differences on
translation of overseas
operations - - - - (6.9) - - (6.9)
Foreign exchange loss/(gain)
recycled to the Income Statement
on disposal - - - 2.6 (5.5) - - (2.9)
Actuarial gains on defined
benefit pension schemes - - - - - 8.3 - 8.3
Tax relating to components of
other comprehensive income - - - 0.3 - (3.6) - (3.3)
Total comprehensive
income/(expense) for the period - - - 1.6 (12.4) 24.3 - 13.5
Share-based payment charge - - 1.8 - - - - 1.8
Tax relating to share-based
payments - - - - - 0.1 - 0.1
Use of shares held by employee
benefit trust - - - - - (2.3) 2.3 -
Transfer to retained earnings - - (2.8) - - 2.8 - -
Balance at 30 June 2021 41.9 14.8 4.1 (35.6) 62.7 330.0 (9.2) 408.7
-------- -------- -------- -------- ------------ --------- -------- -------
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2022
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2022 2021 2021
GBPm GBPm GBPm
Net cash from operating activities 12a) 28.8 17.2 27.0
---------- ---------- --------
Investing activities
Interest received 0.1 - 0.1
Proceeds on disposal of property,
plant and equipment 0.1 0.1 0.2
Purchases of property, plant and
equipment (10.9) (7.5) (20.2)
Purchases of intangible assets (0.6) (0.4) (1.1)
Proceeds on disposal of businesses
net of cash balances 13 - 51.5 51.7
Net cash (used)/generated in investing
activities (11.3) 43.7 30.7
---------- ---------- --------
Financing activities
New loans 13.9 19.7 20.0
Repayment of borrowings (13.6) (40.9) (41.1)
Repayment of lease liabilities (4.4) (4.0) (8.4)
Net cash used in financing activities (4.1) (25.2) (29.5)
---------- ---------- --------
Net increase in cash and cash
equivalents 13.4 35.7 28.2
Cash and cash equivalents at beginning
of period 51.1 23.2 23.2
Effect of foreign exchange rate
changes 3.2 (0.2) (0.3)
---------- ---------- --------
Cash and cash equivalents at end
of period 12c) 67.7 58.7 51.1
---------- ---------- --------
Notes to the Condensed Consolidated Interim Financial
Statements
1. General information
These Condensed Consolidated Interim Financial Statements of
Senior plc ("the Group"), which were approved by the Board of
Directors on 29 July 2022, have been reviewed by KPMG LLP, the
Group's auditor, whose report is set out after the Directors'
Responsibility Statement.
The comparative figures for the year ended 31 December 2021 do
not constitute the Group's statutory accounts for 2021 as defined
in Section 434(3) of the Companies Act 2006. Statutory accounts for
2021 have been delivered to the Registrar of Companies. The
auditor's 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.
2. Accounting policies
Basis of preparation
These Condensed Consolidated Interim Financial Statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34 "Interim
Financial Reporting" as adopted for use by the UK.
The Annual Financial Statements of the Group for the year ended
31 December 2022 will be prepared in accordance with UK-adopted
international accounting standards. As required by the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority,
these Condensed Consolidated Interim Financial Statements have been
prepared applying the accounting policies and presentation that
were applied in the preparation of the published Annual Financial
Statements of the Group as at and for the year ended 31 December
2021, which were prepared in accordance with UK-adopted
international accounting standards.
These Condensed Consolidated Interim Financial Statements do not
include all the information required for full Annual Financial
Statements and should be read in conjunction with the Annual
Financial Statements of the Group as at and for the year ended 31
December 2021.
Going Concern
The Directors have, at the time of approving these Condensed
Consolidated Interim Financial Statements, a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future, being a period of at least 12
months from this reporting date (the "Going Concern Period").
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these Condensed Consolidated Interim
Financial Statements, having undertaken a rigorous assessment of
the financial forecasts.
The Board has considered projections, including severe but
plausible downsides covering a period of at least 12 months from
the date of this report based on the experiences over recent years,
including the strong trading performance in the first half of 2022
coupled with our core markets showing good growth as activity
levels pick up, as outlined in the Interim Management Report
review. These projections are borne out of extensive scenario
testing, based on a variety of end market assumptions, while taking
account of appropriate mitigating actions within the direct control
of the Group.
The Group has two covenants for committed borrowing facilities,
which are tested at June and December: the Group's net debt to
EBITDA (defined in the Notes to the Financial Headlines) must not
exceed 3.0x and interest cover, the ratio of EBITDA to interest
must be higher than 3.5x. At 30 June 2022, the Group's net debt to
EBITDA was 1.3x and interest cover was 8.8x, both comfortably
within covenants limits. The Group's liquidity headroom at 30 June
2022 was GBP228m. For all testing periods within the Going Concern
Period, there is sufficient headroom to remain within the covenant
limits and the Group's committed borrowing facilities, even in a
severe but plausible downside scenario.
Based on the above assessment, the Board has concluded that the
Group will continue to have adequate financial resources to realise
its assets and discharge its liabilities as they fall due over the
Going Concern Period. Accordingly, the Directors have formed the
judgement that it is appropriate to prepare these Condensed
Consolidated Interim Financial Statements on the going concern
basis.
New policies and standards
The accounting policies, presentation and methods of computation
adopted in the preparation of these Condensed Consolidated Interim
Financial Statements are consistent with those followed in the
preparation of the Group's Annual Financial Statements for the year
ended 31 December 2021, which were prepared in accordance in
accordance with UK-adopted international accounting standards.
At the date of authorisation of these Condensed Consolidated
Interim Financial Statements , several new standards and amendments
to existing standards have been issued, some of which are
effective. None of these standards and amendments have a material
impact on the Group.
The preparation of the Condensed Consolidated Interim Financial
Statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The Group's latest Annual
Financial Statements for the year ended 31 December 2021, which are
available via Senior's website www.seniorplc.com , set out the key
sources of estimation uncertainty and the critical judgements that
were made in preparing those 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, which is consistent with the oversight employed by
the Executive Committee. The chief operating decision maker, as
defined by IFRS 8, is the Executive Committee. The Group is managed
on the same basis, as two operating divisions.
Business Segments
Segment information for revenue and operating profit and a
reconciliation to the Group profit after tax 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
2022 2022 2022 2022 2021 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External revenue 264.4 137.8 - 402.2 222.8 110.0 - 332.8
Inter-segment
revenue 0.1 0.1 (0.2) - 0.3 - (0.3) -
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Total revenue 264.5 137.9 (0.2) 402.2 223.1 110.0 (0.3) 332.8
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted trading
profit 9.8 11.3 (8.6) 12.5 5.1 7.4 (7.5) 5.0
Share of joint
venture profit - 0.1 - 0.1 - 0.2 - 0.2
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted
operating
profit 9.8 11.4 (8.6) 12.6 5.1 7.6 (7.5) 5.2
Net restructuring
income/(costs) 2.8 - - 2.8 (0.6) 0.5 - (0.1)
Operating profit 12.6 11.4 (8.6) 15.4 4.5 8.1 (7.5) 5.1
---------- ---------- ------------ ---------- ---------- ------------
Investment income 0.7 0.2
Finance costs (4.5) (4.5)
Corporate
undertakings (0.5) 21.5
---------- ----------
Profit before
tax 11.1 22.3
Tax charge (1.0) (2.7)
---------- ----------
Profit after
tax 10.1 19.6
---------- ----------
Trading profit and adjusted trading profit is operating profit
and adjusted operating profit respectively before share of joint
venture profit. See Note 4 for the derivation of adjusted operating
profit.
Segment information for assets and liabilities is presented
below.
30 June 30 June 31 Dec
2022 2021 2021
Assets GBPm GBPm GBPm
Aerospace 551.5 515.2 506.6
Flexonics 210.4 177.9 184.9
Segment assets for reportable segments 761.9 693.1 691.5
Unallocated
Central 4.8 4.5 4.6
Cash 82.6 60.0 51.1
Deferred and current tax 11.5 7.6 8.3
Retirement benefits 58.5 57.2 72.2
Others 0.1 0.3 0.1
-------- -------- -------
Total assets per Consolidated Balance
Sheet 919.4 822.7 827.8
-------- -------- -------
30 June 30 June 31 Dec
2022 2021 2021
Liabilities GBPm GBPm GBPm
Aerospace 179.1 151.7 148.1
Flexonics 82.4 66.0 63.9
Segment liabilities for reportable segments 261.5 217.7 212.0
Unallocated
Central 16.1 17.6 15.4
Loans and overdrafts 155.5 131.0 131.0
Deferred and current tax 22.9 29.1 25.1
Retirement benefits 10.8 10.1 11.0
Others 8.3 8.5 8.2
-------- -------- -------
Total liabilities per Consolidated Balance
Sheet 475.1 414.0 402.7
-------- -------- -------
Total revenue is disaggregated by market sectors as follows:
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2022 2021 2021
GBPm GBPm GBPm
Civil Aerospace 161.3 117.2 244.5
Defence 59.7 71.2 125.0
Other 43.5 34.7 69.8
---------- ---------- --------
Aerospace 264.5 223.1 439.3
Land Vehicles 75.7 59.4 118.8
Power & Energy 62.2 50.6 101.1
Flexonics 137.9 110.0 219.9
Eliminations (0.2) (0.3) (0.5)
Total revenue 402.2 332.8 658.7
---------- ---------- --------
Other Aerospace comprises space and other markets, principally
including semiconductor equipment, medical and industrial
applications.
4. Adjusted operating profit and adjusted profit before tax
The presentation of adjusted operating profit and adjusted
profit before tax measures, derived in accordance with the table
below, has been included to identify the performance of the Group
prior to the impact of net restructuring income/cost and the income
and costs associated with corporate undertakings. The adjustments
are made on a consistent basis and also reflect how the business is
managed on a day-to-day basis.
The Group implemented a restructuring programme in 2019, which
continued through 2020 and 2021 in response to the impact of the
COVID-19 pandemic on some of the Group's end markets. Some residual
restructuring activity has continued in 2022. Corporate
undertakings relate to business acquisition costs, gain on disposal
of a business, bid defence and other costs relating to corporate
activities. None of these charges are reflective of in-year
performance. Therefore, they are excluded by the Board and
Executive Committee when measuring the operating performance of the
businesses.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2022 2021 2021
GBPm GBPm GBPm
Operating profit 15.4 5.1 10.5
Net restructuring (income)/costs (2.8) 0.1 (4.4)
Adjusted operating profit 12.6 5.2 6.1
---------- ---------- --------
Profit before tax
rofit before tax 11.1 22.3 23.7
Adjustments to profit/loss before tax
as above (2.8) 0.1 (4.4)
Corporate undertakings 0.5 (21.5) (21.2)
Adjusted profit/(loss) before tax 8.8 0.9 (1.9)
---------- ---------- --------
Net restructuring income/costs
The Group focused on taking actions to conserve cash to manage
through the pandemic, including curtailing capital expenditure,
tightly managing working capital and implementing further cost
cutting actions. The decisive actions taken on restructuring and
cost management over the last couple of years has delivered the
expected benefits. In addition, the Group has continued to review
inventory and asset exposures on programmes that have been reduced,
cancelled or where the Group will no longer participate. As part of
the restructuring focus, we have assessed critically any inventory
or asset exposures on these programmes and written down the
carrying values on excess holdings and assets where there is no
alternate use. Where demand has picked up on previously reduced or
cancelled programmes, inventory impairments have been reversed to
the extent that there are confirmed orders in place.
The restructuring resulted in net income of GBP2.8m (H1 2021:
GBP0.1m net charge). Of this, GBP3.4m income (H1 2021: GBPnil)
related to an aerospace manufacturing grant and GBP0.8m cost
related to consultancy and other activities (H1 2021: GBP1.4m
including headcount). For certain specific programmes, and in
conjunction with the focus on restructuring, management has also
identified inventory impairment reversals of GBP1.5m (H1 2021:
GBP0.9m) where customer demand has increased, and further
impairment provisions on property, plant and equipment in 2022 with
a charge of GBP1.3m (H1 2021: GBPnil) to cover the risk where there
are no alternative uses. H1 2021 also included a net credit of
GBP0.4m related to disposal and property, plant and equipment.
Net cash outflow related to restructuring activities was GBP1.3m
(H1 2021: GBP3.0m). At 30 June 2022, a restructuring provision of
GBP0.9m (30 June 2021: GBP6.1m; 31 December 2021: GBP1.3m) was
recognised and is expected to be utilised in the second half of
2022.
Corporate undertakings
In the half-year ended 30 June 2022, the Group recorded GBP0.3m
costs related to the acquisition of Spencer Aerospace and GBP0.2m
costs relating to other corporate activities in the Condensed
Consolidated Income Statement (Half year ended 30 June 2021:
GBP24.2m gain on disposal of Senior Aerospace Connecticut and
GBP2.7m bid defence and costs relating to other corporate
activities). See note 13 for further details.
5. Tax charge
Half-year Half-year
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Current tax:
Current year charge 2.1 1.1
Irrecoverable withholding tax 0.2 0.2
Prior year items (0.2) -
---------- ----------
2.1 1.3
Deferred tax:
Current year charge (0.9) 1.4
Prior year items (0.2) -
---------- ----------
(1.1) 1.4
Total tax charge 1.0 2.7
---------- ----------
Tax for the half-year ended 30 June 2022 is calculated at 9.0%
(H1 2021: 12.1%) on the profit before tax, representing the
half-year allocation of the estimated weighted average annual tax
rate expected for the full financial year in accordance with IAS
34. The estimated tax rate is weighted to reflect the tax impact of
significant events taking place during the interim period.
In the half-year ended 30 June 2021 a deferred tax credit of
GBP0.6m was recognised in the Income Statement and GBP2.0m deferred
tax charge was recognised in the Statement of Comprehensive Income
following the substantial enactment on 24(th) May 2021 of a change
in UK tax rate from 19% to 25% effective from 1 April 2023.
The group is paying close attention to proposals under Pillar 2
of the OECD's Base Erosion Profit Shifting (BEPS) project and the
impact this may have on the group's future tax position. The Group
does not consider that changes to international tax legislation to
effect these proposals is likely to have a significant impact on
its tax position.
6. Dividends
No dividends were recorded in the current or prior period.
An Interim dividend for the year ending 31 December 2022 of 0.3
pence per share, estimated cost GBP1.3m, was approved by the Board
of Directors on 29 July 2022 and has not been included as a
liability in these Condensed Consolidated Interim Financial
Statements, in accordance with the requirements of IFRS.
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
2022 2021
Number of shares million million
Weighted average number of ordinary shares for
the purposes of basic earnings per share 416.4 415.5
Effect of dilutive potential ordinary shares:
Share options 10.1 6.2
---------- ----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 426.5 421.7
---------- ----------
Half-year Half-year Half-year Half-year
ended ended ended ended
30 June 30 June 30 June 30 June
2022 2022 2021 2021
Earnings EPS Earnings EPS
Earnings and earnings per share
("EPS") GBPm Pence GBPm Pence
Profit for the period 10.1 2.43 19.6 4.72
Adjust:
Net restructuring (income)/cost
net of tax of GBP0.3m (H1 2021:
GBP0.2m credit) (2.5) (0.61) (0.1) (0.03)
Corporate undertakings net
of tax of GBP0.1m (H1 2021:
GBP3.0m) 0.4 0.10 (18.5) (4.45)
Non-cash deferred tax credit - - (0.6) (0.14)
Adjusted earnings after tax 8.0 1.92 0.4 0.10
---------- ---------- ---------- ----------
Earnings per share
- basic 2.43p 4.72p
- diluted 2.37p 4.65p
- adjusted 1.92p 0.10p
- adjusted and diluted 1.88p 0.09p
The denominators used for all basic, diluted and adjusted
earnings per share are as detailed in the table above.
The presentation of adjusted earnings per share, derived in
accordance with the table above, has been included to identify the
performance of the Group prior to the impact of net restructuring
income/cost, corporate undertakings and a non-cash deferred tax
credit (See Note 4 and Note 5 for further details).
The impact of these items have been excluded from adjusted
earnings after tax and adjusted earnings per share in line with the
Board adopted policy to separately disclose those items, where
significant in size, that it considers are outside the earnings for
the particular year under review and against which the Board
measures and assesses the performance of the business.
8. Goodwill
The change in goodwill from GBP150.2m at 31 December 2021 to
GBP157.1m at 30 June 2022 reflects an increase of GBP6.9m due to
foreign exchange differences.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. No such indicators have been identified at 30 June
2022.
9. Investment in joint venture
The Group has a 49% interest in Senior Flexonics Technologies
(Wuhan) Limited, a jointly controlled entity incorporated in China.
The Group's investment of GBP4.2m (30 June 2021: GBP3.8m; 31
December 2021: GBP3.9m) represents the Group's share of the joint
venture's net assets as at 30 June 2022.
10. Property, plant and equipment
During the period, the Group invested GBP10.9m (H1 2021:
GBP7.5m) on the acquisition of property, plant and equipment
(excluding right-of-use assets). The Group also disposed of
machinery with a carrying value of GBPnil (H1 2021: GBP0.1m) for
proceeds of GBP0.1m (H1 2021: GBP0.1m).
At 30 June 2022, right-of-use assets were GBP69.6m (30 June
2021: GBP71.8m; 31 December 2021: GBP67.4m). Right-of-use asset
depreciation was GBP5.1m for the six months ending 30 June 2022 (H1
2021: GBP4.7m).
11. Retirement benefit schemes
Aggregate retirement benefit liabilities of GBP10.8m (30 June
2021: GBP10.1m; 31 December 2021: GBP11.0m) comprise the Group's US
defined benefit pension funded schemes with a total deficit of
GBP5.0m (30 June 2021: GBP4.3m; 31 December 2021: GBP5.3m) and
other unfunded schemes, with a deficit of GBP5.8m (30 June 2021:
GBP5.8m; 31 December 2021 : GBP5.7m).
The retirement benefit surplus of GBP58.5m (30 June 2021:
GBP57.2m; 31 December 2021: GBP72.2m) comprises the Group's UK
defined benefit pension funded scheme. The liability and asset
values of the funded schemes have been assessed by independent
actuaries using current market values and discount rates.
12. 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
2022 2021
GBPm GBPm
Operating profit 15.4 5.1
Adjustments for:
Depreciation of property, plant and equipment 23.7 23.4
Amortisation of intangible assets 0.8 0.8
Share of joint venture (0.1) (0.2)
Share-based payment charges 2.2 1.8
Profit on sale of fixed assets (0.1) -
Pension payments in excess of service cost (1.6) (2.6)
Corporate undertaking costs (0.5) (4.5)
Increase in inventories (7.3) (1.5)
Increase in receivables (27.9) (15.3)
Increase in payables and provisions 28.6 19.2
US class action lawsuits - (2.3)
Restructuring impairment of property, plant and
equipment 1.3 0.5
Working capital and provisions currency movements 0.2 (1.0)
Cash generated by operations 34.7 23.4
Income taxes paid (1.7) (2.0)
Interest paid (4.2) (4.2)
---------- ----------
Net cash from operating activities 28.8 17.2
---------- ----------
b) Free cash flow
Free cash flow, a non-statutory item, enhances the reporting of
the cash-generating ability of the Group prior to corporate
activity such as corporate undertakings, net restructuring cash
flows, payments related to previously reported US class action
lawsuits, financing and transactions with shareholders. It is
derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Net cash from operating activities 28.8 17.2
Corporate undertaking costs 0.5 4.5
Net restructuring cash paid 1.3 3.0
US class action lawsuits - 2.3
Interest received 0.1 -
Proceeds on disposal of property, plant and equipment 0.1 0.1
Purchases of property, plant and equipment (10.9) (7.5)
Purchase of intangible assets (0.6) (0.4)
------------ ----------
Free cash flow 19.3 19.2
------------ ----------
At At
c) Analysis of net 1 January Exchange Other Lease 30 June
debt 2022 Cash flow movement Movements 2022
GBPm GBPm GBPm GBPm GBPm
Cash and bank balances 51.1 28.0 3.5 - 82.6
Overdrafts (1) - (14.6) (0.3) - (14.9)
----------- --------- ------------ ------------ ----------
Cash and cash equivalents 51.1 13.4 3.2 - 67.7
Debt due within one
year (14.8) - (1.6) - (16.4)
Debt due after one
year (116.2) (0.3) (7.7) - (124.2)
Lease liabilities (2) (73.2) 4.4 (4.9) (2.8) (76.5)
Liabilities arising
from financing activities (204.2) 4.1 (14.2) (2.8) (217.1)
----------- --------- ------------ ------------ ----------
Total (153.1) 17.5 (11.0) (2.8) (149.4)
----------- --------- ------------ ------------ ----------
(1) The Group's notional cash pool enables access to cash in its subsidiaries
to pay down the Group's borrowings. The Group has the legal right
to offset balances within the cash pool which it intends to use.
If cash and cash equivalents were presented net of the notional
cash pool at 30 June 2022, the cash and bank balances would be
GBP67.7m and overdrafts would be GBPnil.
(2) The change in lease liabilities in the six months ended 30 June
2022 includes lease rental payments of GBP5.6m (GBP1.2m of these
payments relates to lease interest), GBP4.9m exchange movement
and GBP2.8m other movements related to lease additions and modifications.
Following a review of the lease liability disclosures in 2022,
the presentation of current and non-current liabilities within
the Consolidated Balance Sheet for 30 June 2022 now reflects the
timing of the underlying lease payments. Comparative information
has not been restated as the adjustment is not deemed material.
c) Analysis of net debt (continued)
Half-year Half-year
ended ended
30 June 30 June
2022 2021
Cash and Cash equivalents comprise: GBPm GBPm
Cash and bank balances 82.6 60.0
Overdrafts (14.9) (1.3)
---------- ----------
Total 67.7 58.7
---------- ----------
d) Analysis of working capital and provisions
Working capital comprises the following:
Half-year Half-year
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Inventories 163.3 138.5
Trade and other receivables 133.7 97.3
Trade and other payables (190.4) (142.2)
---------- ----------
Working capital, including derivatives 106.6 93.6
Items excluded:
Foreign exchange contracts 8.8 0.3
Deferred consideration relating to disposals-current - (0.3)
Total 115.4 93.6
---------- ----------
Working capital and provisions movement, net of restructuring
items, a non-statutory cash flow item, is derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Increase in inventories (7.3) (1.5)
Increase in receivables (27.9) (15.3)
Increase in payables and provisions 28.6 19.2
---------- ----------
Working capital and provisions movement, excluding
currency effects (6.6) 2.4
Items excluded:
Decrease in restructuring related inventory impairment 1.5 0.9
Decrease in net restructuring provision and other
receivables 3.9 2.5
Total (1.2) 5.8
---------- ----------
13. Acquisition and Disposal activities
On 9 June 2022, the Group signed a definitive agreement to
acquire substantially all of the assets of Spencer Aerospace
Manufacturing, LLC, a leading manufacturer of highly engineered,
high-pressure hydraulic fluid fittings for use in commercial and
military aerospace applications. The acquisition is expected to
complete in Q3 2022, subject to customary closing conditions.
On 22nd April 2021, the Group sold its stand alone,
build-to-print helicopter structures operating company, Senior
Aerospace Connecticut, based in the USA. A gain of GBP24.2m arose
on disposal after taking fair value of net assets disposed
(GBP28.4m including GBP15.1m of goodwill, GBP7.5m property, plant
and equipment and GBP5.8m of working capital), offset by net cash
consideration of GBP49.7m after GBP1.8m disposal costs, and the
previously recorded foreign exchange gain that has been recycled to
the Income Statement of GBP2.9m.
14. Provisions
Current and non-current provisions include warranty costs of
GBP8.9m (30 June 2021: GBP7.1m; 31 December 2021: GBP6.9m),
restructuring of GBP0.9m (30 June 2021: GBP6.1m; 31 December 2021:
GBP1.3m) and other provisions including contractual matters, claims
and legal costs that arise in the ordinary course of business of
GBP6.0m (30 June 2021: GBP8.4m; 31 December 2021: GBP7.8m).
15. Share capital
Share capital as at 30 June 2022 amounted to GBP41.9m (30 June
2021: GBP41.9m, 31 December 2021: GBP41.9m). No shares were issued
during the period.
16. Contingent liabilities
The Group is subject to various claims which arise from time to
time in the course of its business including, for example, in
relation to commercial matters, product quality or liability, and
tax audits. Where the Board has assessed there to be a more likely
than not outflow of economic benefits, provision has been made for
the best estimate as at 30 June 2022 (see Note 14). For all other
matters, the Board has concluded that it is not more likely than
not that there will be an economic outflow of benefits. While the
outcome of some of these matters cannot be predicted with any
certainty, the Directors do not expect any of these arrangements,
legal actions or claims, after allowing for provisions already made
where appropriate, to result in significant loss to the Group.
17. Financial Instruments
Categories of financial instruments
Half-year Half-year
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Carrying value of financial assets:
Cash and bank balances 82.6 60.0
Trade receivables 115.3 84.6
Other receivables 0.7 0.5
---------- ----------
Financial assets at amortised cost 198.6 145.1
---------- ----------
Foreign exchange contracts- cash flow hedges 1.4 1.8
Total financial assets 200.0 146.9
---------- ----------
Carrying value of financial liabilities:
Bank overdrafts and loans 155.5 131.0
Lease liabilities 76.5 76.4
Trade payables 101.4 65.2
Other payables 58.5 55.7
---------- ----------
Financial liabilities at amortised cost 391.9 328.3
---------- ----------
Foreign exchange contracts- cash flow hedges 10.2 2.1
Total financial liabilities 402.1 330.4
---------- ----------
Half-year Half-year
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Undiscounted contractual maturity of financial
liabilities at amortised cost:
Amounts payable:
On demand or within one year 206.3 136.4
In the second to fifth years inclusive 148.0 130.2
After five years 83.1 111.0
---------- ----------
437.4 377.6
Less: future finance charges (45.5) (49.3)
---------- ----------
Financial liabilities at amortised cost 391.9 328.3
---------- ----------
The carrying amount is a reasonable approximation of fair value
for the financial assets and liabilities noted above except for
bank overdrafts and loans, where the Directors estimate the fair
value to be GBP148.6m (30 June 2021: GBP132.3m). The fair value has
been determined by applying a make-whole calculation using
prevailing treasury bill yields plus the applicable credit spread
for the Group.
Fair values
The following table presents an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value. All financial instruments are measured at level 2, i.e.
those fair values derived from inputs other than quoted prices that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices). There has not
been any transfer of assets or liabilities between levels. There
are no non-recurring fair value measurements.
Half-year Half-year
ended ended
30 June 30 June
2022 2021
GBPm GBPm
Assets:
Foreign exchange contracts - cash flow hedges 1.4 1.8
Total assets 1.4 1.8
---------- ----------
Liabilities:
Foreign exchange contracts - cash flow hedges 10.2 2.1
Total liabilities 10.2 2.1
---------- ----------
18. Related party transaction
The Group has related party relationships with a number of
pension schemes (see Note 11) and with Directors and Senior
Managers of the Group.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR RLMRTMTJTBIT
(END) Dow Jones Newswires
August 01, 2022 02:00 ET (06:00 GMT)
Senior (LSE:SNR)
Historical Stock Chart
From Jul 2024 to Jul 2024
Senior (LSE:SNR)
Historical Stock Chart
From Jul 2023 to Jul 2024
