Senior Engng Group - Final Results
March 09 1999 - 2:30AM
UK Regulatory
RNS No 7484h
SENIOR ENGINEERING GROUP PLC
9th March 1999
Preliminary Results for the year ended 31 December 1998
HIGHLIGHTS
- Operating profit before goodwill amortisation and exceptional items up
24.0% to #52.1m (#42.0m).
- Underlying earnings per share up 15.4% to a record 11.75p (10.18p).
- Net cash inflow from operating activities up 10.1% to #75.2m (#68.3m).
- Record cash spend on acquisitions and capital expenditure of #105m
(#54m).
- Annualised interest cover remains above 12 times.
- Final dividend increased by 10.6% to 2.92p (2.64p) making a total of
4.69p (4.24p) for the year.
Speaking today, Dr Alan Watkins, Chairman of Senior said:
"Senior has delivered a strong set of financial results for shareholders and
is well placed to deliver another robust performance in 1999."
For further information, please contact:
Senior Engineering Group plc on 9 March 1999 0171 251 3801
thereafter 01923 775547
Dr A K Watkins, Chairman
A R Parrish, Group Chief Executive
T B Garthwaite, Group Finance Director
Finsbury Limited 0171 251 3801
James Murgatroyd
Internet users will be able to view this announcement, together with other
information about the Senior Engineering Group, on the web site www.segplc.com
Notes to Editors:
Senior Engineering Group plc ("Senior") is a specialist international
engineering group with a market capitalisation of approximately #400 million.
It is organised into two principal divisions - Flexonics and Engineered
Products & Services. The Flexonics Division, which provides 86% of the
Group's operating profits, is a world leading design and manufacturing
business specialising in thin-walled metallic flexible tubing and bellows,
servicing the Aerospace (including Space), Automotive and Specialised
Industrial markets. Engineered Products & Services is comprised of Precision
Tube, Air Systems and Heat Treatment.
PRELIMINARY RESULTS
For the year ended 31 December 1998
The Board set three key objectives for the Group in 1998, the first full year
with the strengthened management team. First, to deliver a good set of
financial results for shareholders; second, to develop the core Flexonics
businesses by capital investment and acquisition; and third, to improve the
performance and value of our Engineered Products & Services businesses. I am
happy to report a strong performance in all three areas.
Financial Highlights
Group turnover for continuing businesses rose 7.6% to #509.6m (1997 -
#473.7m), producing operating profit before goodwill amortisation and
exceptional items of #52.1m, an increase of 24.0% (1997 - #42.0m). Return on
sales improved again to 10.2% (1997 - 8.9%). This represents a significant
milestone for the Group, achieving the Board's medium term objective of
generating double digit operating margins.
The Group achieved record pre-tax profits of #49.5m (1997 - #43.1m), an
increase of 14.8%. Earnings per share were 11.61p (1997 - 10.48p) and on an
underlying basis increased 15.4% to a record 11.75p (1997- 10.18p).
These results were achieved against a marked change in global economic
conditions midway through the year, which resulted in retreating demand in
certain parts of the business, adding increased pressure to the trading
environment.
In light of the Group's overall strong performance, the Board is recommending
a final dividend of 2.92p, making a total for the year of 4.69p (1997 -
4.24p), an increase of 10.6%. The dividend is covered 2.5 times by underlying
earnings per share.
- Flexonics
In the Flexonics division, turnover increased by 9.9% to #361.7m (1997 -
#329.2m). Operating profits before goodwill amortisation rose 14.9% to
#44.7m (1997 - #38.9m), representing a further improvement in return on sales
to 12.4% (1997 - 11.8%).
In the Aerospace businesses, turnover was up an impressive 29.9% to #107.2m
(1997- #82.5m), largely due to the very significant growth in demand,
particularly from commercial space programmes and the increasing European
customer base. The introduction by Senior of state-of-the-art working
practices, supported by substantial capital investment and superior service
levels, will give us the opportunity to leverage share from smaller
competitors in a market which is clearly undergoing a period of rapid
rationalisation.
The Automotive businesses, despite intense competition in the industry,
recorded sales of #150.2m (1997 - #150.6m), reflecting increased
volumes at lower average prices, but at substantially improved operational
efficiency. This performance also reflects Flexonics' increasingly successful
response to the developing exhaust connector market, with the launch of lower
cost, next generation, patented products. Prospects for Automotive are
underpinned not only by further increased volumes of exhaust connectors
already being anticipated in the USA from the existing passenger car market,
but also by the expectation of supplying the larger, fast growing light truck
and sports/utility market. New product development, underpinned by tightening
environmental legislation, continues to provide significant additional
opportunities, most recently from Exhaust Gas Recirculating Tubes and Air
Tubes, the latter now specified across all V6 and V8 engines for General
Motors passenger cars in the USA.
Specialised Industrial, the original core business of Flexonics, generated
sales up 8.5% to #104.3m (1997 - #96.1m), an improvement achieved despite the
faltering semi-conductor market, thus demonstrating its underlying strength.
New products, such as the recuperator for land-based micro turbines and
Diamondback flexible gas hose, continue to provide attractive growth
opportunities.
- Engineered Products & Services
Turnover in Engineered Products & Services, comprising Precision Tube, Air
Systems and Heat Treatment, increased by 3.1% to #151.0m (1997 - #146.5m).
Operating profit before goodwill amortisation was lifted by 139% to #7.4m
(1997 - #3.1m). This commendable, if mixed, recovery was achieved in an
increasingly difficult trading environment and demonstrates our commitment to
enhancing the value of these assets.
- Cash Flow
Across the Group in 1998, there was an exceptional level of capital
expenditure (gross #37.5m) to introduce best working practice, increase
capacity and support our growing order book. In addition, we continued to
expand through acquisition, spending #67.5m on 13 businesses. The Group has
continued to demonstrate extremely strong cash generation, which has seen net
cash inflow from operating activities rise 10.1% to #75.2m (1997 - #68.3m).
The balance sheet has therefore remained robust. Gearing was at a very
acceptable 51% at the year end with annualised net interest payable, post the
acquisition of Jet Products Corporation, covered more than 12 times.
Corporate Development
During 1998, the Group made acquisitions in all its business areas to broaden
its product range and widen its geographical coverage. The largest of these
was Jet Products Corporation, a USA manufacturer of precision engineered
aerospace components, ultimately acquired for #33.2m in November. Following
this acquisition, Aerospace is now the largest market sector within
Flexonics. Within Automotive, the Group has increased its geographical reach,
with exhaust connector manufacture now having been established in Brazil
through acquisition and in India through capital investment. The acquisition
of QSi in the USA secured the Group's Air Tube technology. In Specialised
Industrial, the acquisition of Bredan, the Danish speciality expansion joints
producer, stimulated a reorganisation of the Group's European bellows
manufacturing operations.
The Engineered Products & Services businesses have responded well to the cost
reduction and site rationalisation programmes undertaken in 1997. This on
going action, combined in 1998 with selected capital investments and several
acquisitions, has yielded substantially improved results.
Employees
On behalf of the Board, I would like to thank all of our employees for their
contribution throughout 1998. The strength of our performance reflects the
skills and dedication of each employee. To achieve record results in the face
of such difficult trading conditions is testimony to the energy and diligence
of all employees throughout the Group.
Outlook
The Group is well placed to deliver another robust performance in 1999.
It will undoubtedly be a challenging year and it would be unwise to ignore
the lingering threat of a slowdown in global markets. The business is,
however, in excellent shape and effectively structured to meet its customers'
increasingly demanding requirements. The growing geographical diversity of
our markets, the wide range of technically sophisticated industries that we
serve, the strength of our order books and the high quality of our businesses
give us real confidence that we will continue to prosper.
Dr Alan Watkins
9 March 1999
GROUP PROFIT AND LOSS ACCOUNT
For the year ended 31 December 1998
1998 1997
#m #m
------ ------
Turnover
Continuing Operations 489.1 473.7
Acquisitions 20.5
------
509.6
Discontinued Operations - 5.6
------ ------
509.6 479.3
------ ------
Operating profit before
amortisation of goodwill
Continuing Operations 51.0 42.0
Acquisitions 1.1
------
52.1
Amortisation of goodwill (1.1) -
------ ------
Operating Profit 51.0 42.0
Profit on sale of fixed assets in 0.9 1.2
continuing operations ------ ------
Profit on ordinary activities before 51.9 43.2
interest and taxation
Interest receivable 2.9 3.2
Interest payable (5.3) (3.3)
------ ------
Profit on ordinary activities before taxation 49.5 43.1
Tax on profit on ordinary activities (14.2) (11.2)
------ ------
Profit for the financial year 35.3 31.9
Dividends (14.3) (12.9)
------ ------
Profit for the year 21.0 19.0
------ ------
Earnings per share
Basic 11.61p 10.48p
Fully diluted 11.54p 10.44p
Underlying 11.75p 10.18p
------ ------
Dividends per share 4.69p 4.24p
------ ------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 31 December 1998
1998 1997
#m #m
------ ------
Profit for the financial year 35.3 31.9
Currency translation differences on (2.0) (2.1)
overseas assets and goodwill ------ ------
Total recognised gains and losses 33.3 29.8
relating to the year ------ ------
There is no material difference between profits as reported and those profits
restated on an historical cost basis.
GROUP BALANCE SHEET
At 31 December 1998
1998 1997
#m #m
------ ------
Fixed assets
Intangible assets - goodwill 53.1 -
Tangible assets 125.3 90.0
Investments 0.6 0.8
------ ------
179.0 90.8
------ ------
Current assets
Stocks 75.6 61.4
Debtors 121.1 112.7
Investments - bank deposits 8.6 11.1
Cash 23.2 21.1
------ ------
228.5 206.3
Creditors :
Amounts falling due within one year (135.7) (115.0)
------ ------
Net current assets 92.8 91.3
------ ------
Total assets less current liabilities 271.8 182.1
Creditors : Amounts falling due after (115.8) (47.3)
more than one year
Provisions for liabilities and charges (3.5) (3.3)
------ ------
Net assets 152.5 131.5
------ ------
Capital and reserves
Called-up share capital 30.7 30.5
Share premium 3.1 0.8
Other reserves 19.2 19.2
Profit and loss account 99.3 80.3
------ ------
Shareholders' funds 152.3 130.8
Minority interests - equity 0.2 0.7
------ ------
Total capital employed 152.5 131.5
------ ------
GROUP CASH FLOW STATEMENT
For the year ended 31 December 1998
1998 1997
#m #m
------ ------
Net cash inflow from operating 75.2 68.3
activities
Returns on investments and servicing
of finance
Interest received 2.4 2.1
Interest paid (4.6) (3.3)
------ ------
Net cash outflow from returns on
investments and servicing of finance (2.2) (1.2)
Taxation paid
U.K. corporation tax (2.9) (4.1)
Overseas tax (11.5) (6.9)
------ ------
(14.4) (11.0)
Capital expenditure and financial
investments
Purchase of tangible fixed assets (37.5) (23.4)
Sale of property, plant and equipment 2.4 1.7
Own shares purchased by the Employee
Benefit Trust (1.0) -
Maturity of investments - bank deposits 3.1 2.5
------ ------
Net cash outflow from capital expenditure
and financial investments (33.0) (19.2)
Acquisitions and disposals
Purchase of subsidiary undertakings (63.7) (31.1)
Net (debt assumed)/cash acquired
with subsidiary undertakings (3.8) 0.1
Sale of business - 10.0
------ ------
Net cash outflow from acquisitions
and disposals (67.5) (21.0)
Dividends paid on ordinary shares (13.4) (12.1)
Management of liquid resources
Maturity of short-term deposits 7.1 3.2
Investment in short-term deposits - (7.1)
------ ------
Net cash inflow/(outflow) from
management of liquid
resources 7.1 (3.9)
Financing
Share issues 0.1 0.5
New loans initiated by Group 82.7 9.1
Repayment of existing loans (24.1) (7.0)
------ ------
58.6 2.1
------ ------
Increase in cash in the period 10.5 2.5
------ ------
Notes :
1. Segment Information
Group turnover, operating profit and net assets are analysed as follows:
a) By class of business Turnover Operating profit Net assets
1998 1997 1998 1997 1998 1997
#m #m #m #m #m #m
------------- ------------ ------------
Flexonics 361.7 329.2 44.7 38.9 123.6 105.1
Engineered Products
& Services 151.0 146.5 7.4 3.1 51.5 45.9
------------- ------------ ------------
Total 512.7 475.7 52.1 42.0 175.1 151.0
Inter-segment sales (3.1) (2.0) - - - -
------------- ------------ ------------
Total continuing
operations 509.6 473.7 52.1 42.0 175.1 151.0
Discontinued operations - 5.6 - - 3.6 2.7
------------- ------------ ------------
509.6 479.3 52.1 42.0 178.7 153.7
Amortisation of goodwill - - (1.1) - - -
------------- ------------ ------------
509.6 479.3 51.0 42.0 178.7 153.7
------------- ------------ ------------
Turnover and operating profit before amortisation of goodwill arising from
acquisitions of #14.4 million and #0.9 million, respectively, has been
included within Flexonics. Turnover and operating profit before amortisation
of goodwill arising from acquisitions of #6.5 million and #0.2 million,
respectively, has been included within Engineered Products & Services.
Amortisation of goodwill arising on acquisitions materially relates to
businesses acquired within Flexonics.
Discontinued operations reflect the turnover and operating results of the
Thermal Engineering Division sold in January 1997.
b) By geographical market
Turnover by Turnover by Operating profit Net assets
destination origin by origin
1998 1997 1998 1997 1998 1997 1998 1997
#m #m #m #m #m #m #m #m
------------ ------------ ----------- -----------
United Kingdom 151.1 151.7 180.2 184.5 13.0 11.3 55.8 58.3
Rest of Europe 122.6 110.2 95.6 84.8 3.9 1.6 39.0 28.9
North America 217.2 191.3 225.6 200.3 35.4 29.1 75.4 58.7
Rest of World 27.5 27.7 12.0 8.5 (0.2) - 4.9 5.1
------------ ------------ ----------- -----------
Total 518.4 480.9 513.4 478.1 52.1 42.0 175.1 151.0
Inter-segment
sales (8.8) (7.2) (3.8) (4.4) - - - -
------------ ------------ ----------- -----------
Total continuing
operations 509.6 473.7 509.6 473.7 52.1 42.0 175.1 151.0
Discontinued
operations - 5.6 - 5.6 - - 3.6 2.7
------------ ------------ ----------- -----------
509.6 479.3 509.6 479.3 52.1 42.0 178.7 153.7
Amortisation of
goodwill - - - - (1.1) - - -
------------ ------------ ----------- -----------
509.6 479.3 509.6 479.3 51.0 42.0 178.7 153.7
------------ ------------ ----------- -----------
c) Net assets reconciliation
1998 1997
#m #m
----------------
Net assets, as above 178.7 153.7
Unallocated liabilities, net (0.7) (2.9)
Intangible assets - goodwill 53.1 -
Net borrowings (78.6) (19.3)
----------------
Net assets, per balance sheet 152.5 131.5
----------------
2. Dividends
The proposed final dividend is at the rate of 2.92p per share (1997 - 2.64p)
making 4.69p for the year (1997 - 4.24p) and, if approved, will be payable on
3 June 1999 to shareholders on the register at the close of business on 30
April 1999.
3. Earnings per Share
The calculation of basic earnings per share and underlying earnings per share
are shown below and have been based on the weighted average number of shares
in issue and ranking for dividend during 1998. Fully diluted earnings per
share allow for future exercise of all outstanding share options.
The provision of an underlying earnings per share has been included to
identify the performance of the continuing operations before amortisation of
goodwill and profit on sale of fixed assets.
Total Group Continuing operations
before exceptional items
1998 1997 1998 1997
#m #m #m #m
----- ----- ----- -----
Operating profit before 52.1 42.0 52.1 42.0
amortisation of goodwill
Amortisation of goodwill (1.1) - - -
Profit on sale of fixed assets 0.9 1.2 - -
Interest payable, net (2.4) (0.1) (2.4) (0.1)
----- ----- ----- -----
Profit before taxation 49.5 43.1 49.7 41.9
Taxation (14.2) (11.2) (13.9) (10.9)
----- ----- ----- -----
Profit after taxation 35.3 31.9 35.8 31.0
----- ----- ----- -----
Weighted average number
of shares - basic 304.3m 304.5m 304.3m 304.5m
----- ----- ----- -----
- fully diluted 306.1m 305.7m
----- -----
Earnings per share
- basic 11.61p 10.48p
----- -----
- fully diluted 11.54p 10.44p
----- -----
- underlying 11.75p 10.18p
----- -----
4. Group Cash Flow Statement
a) Reconciliation of operating profit to net cash inflow from operating
activities
1998 1997
#m #m
----- -----
Group operating profit 51.0 42.0
Depreciation of tangible fixed assets 15.8 15.9
Amortisation of goodwill 1.1 -
Increase in stocks (4.7) (1.1)
Increase in debtors (1.9) (6.2)
Increase in creditors 13.6 18.0
Working capital currency variations 0.3 (0.3)
----- -----
Net cash inflow from operating activities 75.2 68.3
----- -----
b) Reconciliation of net cash flow to movement in net debt
1998 1997
#m #m
----- -----
Increase in cash in the period 10.5 2.5
Increase in loans (58.6) (2.1)
(Decrease)/increase in liquid resources (7.1) 3.9
Decrease in current asset
investments due after one year (3.1) (2.5)
----- -----
Change in net debt resulting from cash flows (58.3) 1.8
Currency variations on net borrowings (1.0) (0.6)
----- -----
Movement in net debt in the period (59.3) 1.2
Net debt at 1 January (19.3) (20.5)
----- -----
Net debt at 31 December (78.6) (19.3)
----- -----
5. Reconciliation of Movements in Shareholders' Funds
Other reserves
---------------------------
Share Share Revaluation Special Total Profit Total
capital premium & loss
account account
#m #m #m #m #m #m #m
------------------------------------------------------------
At 1 January 1998 30.5 0.8 2.2 17.0 19.2 80.3 130.8
Profit for the
financial year- - - - - - 35.3 35.3
Dividends - - - - - (14.3) (14.3)
Share issues 0.2 2.3 - - - - 2.5
Currency variations - - - - - (2.0) (2.0)
------------------------------------------------------------
At 31 December
1998 30.7 3.1 2.2 17.0 19.2 99.3 152.3
------------------------------------------------------------
6. Status of Financial Information
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 1998 or 1997 but is derived
from those accounts. Statutory accounts for 1997 have been delivered to the
Registrar of Companies, and those for 1998 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those
accounts; their reports were unqualified and did not contain statements under
Sections 235, 237(2) or (3) of the Companies Act 1985.
END
FR AWUOKKNKORUR
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