TIDMSNR
RNS Number : 0549R
Senior PLC
27 February 2023
Senior plc
Results for the year ended 31 December 2022
Strong results as recovery continues
change
Year ended 31 (constant
FINANCIAL HIGHLIGHTS December change currency) (4)
2022 2021
------------------------------------------ ---------- ---------- ---------- -----------
REVENUE GBP848.4m GBP658.7m +29% +20%
------------------------------------------ ---------- ---------- ---------- -----------
OPERATING PROFIT GBP32.5m GBP10.5m +210% +164%
ADJUSTED FOR:
NET RESTRUCTURING INCOME GBP(4.2)m GBP(4.4)m
AMORTISATION OF INTANGIBLE ASSETS GBP0.2m GBPnil
FROM ACQUISITIONS
ADJUSTED OPERATING PROFIT (1) GBP28.5m GBP6.1m +367% +285%
ADJUSTED OPERATING MARGIN (1) 3.4% 0.9% +250 bps +240 bps
------------------------------------------ ---------- ---------- ---------- -----------
PROFIT BEFORE TAX GBP22.4m GBP23.7m -5% -18%
ADJUSTED PROFIT/(LOSS) BEFORE TAX
(1) GBP20.1m GBP(1.9)m +1,158% +1,775%
------------------------------------------ ---------- ---------- ---------- -----------
BASIC EARNINGS PER SHARE 4.86p 5.82p -16%
ADJUSTED EARNINGS PER SHARE (1) 4.36p 0.17p +2,465%
------------------------------------------ ---------- ---------- ---------- -----------
TOTAL DIVID (PAID AND PROPOSED) 1.30p Nil p
PER SHARE
------------------------------------------ ---------- ---------- ---------- -----------
FREE CASH FLOW (2) GBP27.7m GBP14.0m +98%
------------------------------------------ ---------- ---------- ---------- -----------
NET DEBT EXCLUDING CAPITALISED GBP100.5m GBP79.9m GBP20.6m
LEASES (2) increase
------------------------------------------ ---------- ---------- ---------- -----------
NET DEBT / EBITDA(5) 1.47x 1.87x
------------------------------------------ ---------- ---------- ---------- -----------
NET DEBT (2) GBP178.9m GBP153.1m GBP25.8m
increase
------------------------------------------ ---------- ---------- ---------- -----------
ROCE (3) 4.7% 1.0% +370 bps
------------------------------------------ ---------- ---------- ---------- -----------
Highlights
-- Strong trading performance compared to prior year with significantly
improved profitability
-- Healthy book-to-bill of 1.24
-- Excellent free cash flow of GBP27.7m, double prior year
-- Acquired Spencer Aerospace with initial cash outlay of $30m
-- Healthy balance sheet, with net debt / EBITDA(5) of 1.47x (prior
year 1.87x)
-- Achieved class "A" rating for our climate disclosure from CDP
-- Another year of strong recovery and growth anticipated for 2023
-- Final dividend of 1.00p proposed, reflecting improved performance
Commenting on the results, David Squires, Group Chief Executive
Officer of Senior plc, said:
"We have delivered a strong set of results for 2022, overcoming
what was a difficult macroeconomic environment. We significantly
improved profitability, generated excellent free cashflow,
strengthened our balance sheet and continued to make very good
progress on our sustainability goals, maintaining our sector
leading position.
As we start 2023, our order book is healthy, reflecting
favourable market dynamics, with commercial aerospace recovery in
full swing with other important markets remaining buoyant. Demand
is currently holding up well, though we remain mindful of the
potential impact of the ongoing supply chain pressures in
aerospace, as well as the broader macro-economic situation and
geopolitical uncertainty.
With aircraft build rates increasing through the year, and the
continuing aerospace supply chain challenges, we anticipate trading
in our Aerospace Division to be more weighted to the second half of
the year. Overall, the Board anticipates strong growth for the
Group in 2023 in line with its expectations.
We remain on track to drive the Group ROCE to a minimum of 13.5%
in line with our previously stated ambition.
Our strategy and positioning in attractive and structurally
resilient core markets, combined with our sector leading
sustainability credentials and highly relevant technical
capabilities, is delivering a strong recovery across our Aerospace
and Flexonics Divisions and enhanced value for our
stakeholders."
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 , FGS Global 708 551
Notes
This Release represents the Company's dissemination announcement
in accordance with the requirements of Rule 6.3.5 of the Disclosure
and Transparency Rules of the United Kingdom's Financial Services
Authority. The full Annual Report & Accounts 2022, together
with other information on Senior plc, can be found at:
www.seniorplc.com
The information contained in this Release is an extract from the
Annual Report & Accounts 2022, however, some references to
Notes and page numbers have been amended to reflect Notes and page
numbers appropriate to this Release.
The Directors' Responsibility Statement has been prepared in
connection with the full Financial Statements and Directors' Report
as included in the Annual Report & Accounts 2022. Therefore,
certain Notes and parts of the Directors' Report reported on are
not included within this Release.
(1) Adjusted operating profit and adjusted profit/loss before tax
are stated before GBP4.2m net restructuring income (2021 - GBP4.4m,
see Note for further detail) and GBP0.2m amortisation of intangible
assets from acquisitions (2021 - GBPnil). Adjusted profit/loss
before tax is also stated before costs associated with corporate
undertakings of GBP1.7m (2021 - GBP21.2m income, see Note 4 for
further detail). Adjusted operating margin is the ratio of adjusted
operating profit to revenue. In 2021, Adjusted earnings per share
is also stated before exceptional non-cash tax credit of 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) 2021 results translated using 2022 average exchange rates - constant
currency.
(5) The following measures are used for the purpose of assessing covenant
compliance for the Group's borrowing facilities:-- EBITDA is adjusted profit/loss 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 includes 12 months EBITDA for businesses acquired and it
is based on frozen GAAP (pre-IFRS 16). EBITDA for 2022 was
GBP66.8m (2021 - GBP42.1m).
-- 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 adjusted 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 2022
rates was $1.24 (2021 - $1.38) and applied in the translation of balance
sheet items at 31 December 2022 was $1.21 (31 December 2021 - $1.35).
Annual Report
The full Annual Report & Accounts 2022 is now available
online at www.seniorplc.com . Printed copies will be distributed on
or soon after 10 March 2023.
Webcast
There will be a presentation on Monday 27 February 2023 at
11.00am GMT 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 a FTSE 250 international manufacturing Group with
operations in 12 countries. It is listed on the main market of the
London Stock Exchange (symbol SNR). Senior's Purpose is "we help
engineer the transition to a sustainable world for the benefit of
all our stakeholders." 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 Release contains certain forward-looking statements. Such
statements are made by the Directors in good faith based on the
information available to them at the time of the Release and they
should be treated with caution due to the inherent uncertainties,
including both economic and business risk factors, underlying any
such forward-looking information.
GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview of 2022 results
Senior has continued to make good strategic, operational, and
financial progress, with strong delivery across the Group reflected
in significantly improved profitability, excellent free cash flow
generation and further strengthening of our balance sheet.
With commercial aerospace markets recovering and other important
end markets remaining buoyant, we saw order intake increase and a
book to bill ratio of 1.24 for the Group, which underpins our
confidence in continued growth in 2023 and beyond. Both divisions
recorded good order intake demonstrating the broad, diversified,
and high-quality nature of our business.
Senior's Purpose is "we help engineer the transition to a
sustainable world for the benefit of all our stakeholders." Our
strategic focus and industry-leading expertise in fluid conveyance
and thermal management technology was enhanced by the acquisition
of Spencer Aerospace in November 2022. Additionally, we made good
progress on our technology roadmap with many new products in
development and significant technology and engineering milestones
achieved: for example, the development of the bleed air system for
the supersonic X-59 flight demonstrator utilising our advanced
additive manufacturing capability.(1)
In our Post-close Trading Update on 24 January 2023, we reported
a strong end to the year with outperformance in the Flexonics
Division and the Aerospace Division performing in line with
expectations. During 2022, Group revenue increased 20% on a
constant currency basis to GBP848.4m, with growth in both
divisions. The year-on-year increase reflected the ongoing recovery
in our core markets as well as recent programme wins entering
series production. The Group benefited from the increase in civil
aircraft production rates, growth in land vehicle, power &
energy, semi-conductor equipment and space markets, as well as
price increases of GBP28.6m to offset inflationary costs.
Additionally, favourable exchange rates added GBP46.3m (9%) to
total sales.
In Aerospace, revenue increased 18% year-on-year on a constant
currency basis. Excluding Senior Aerospace Connecticut, which was
divested in April 2021, revenue for the full year on a constant
currency basis increased by 20%. The year-on-year increase
reflected the ramp up in civil aircraft production rates, growth
from semi-conductor equipment markets and higher volumes for space
programmes. This more than offset the decline in defence, which was
affected by the delay in spending as a consequence of the
Continuing Resolution being in place in the USA during the first
half of the year.
In Flexonics, revenue grew 26% compared to prior year, on a
constant currency basis. The performance in 2022 was driven by
strong customer demand in the land vehicle and power & energy
markets. In land vehicles, Senior outgrew end market demand due to
recent contract wins entering series production. In power &
energy markets, activity increased in upstream oil and gas and
levels of maintenance and overhaul activity improved.
We measure Group performance on an adjusted basis, which
excludes items that do not directly reflect the underlying in-year
trading performance (see Note 4). References below therefore focus
on these adjusted measures.
The Group generated an adjusted operating profit of GBP28.5m
(2021 - GBP6.1m), an increase of 367% over the prior year. This
resulted in the Group's adjusted operating margin increasing by 250
basis points, to 3.4% in 2022 (2021 - 0.9%). Overall, in 2022,
price increases of GBP28.6m offset material and other inflationary
cost increases of GBP26.0m. The improved profitability principally
reflected the volume related operating leverage across our
businesses. Supply chain constraints and inflationary pressures
persisted throughout 2022: our operating businesses worked
diligently and proactively to navigate these challenges, mitigate
their impact on the business and ensure service levels for
customers were maintained to the best extent possible. As we enter
2023, supply chain constraints have eased somewhat in our Flexonics
Division but continue to require relentless management in a number
of our Aerospace businesses. We see that continuing to be the
situation for some time, given the welcome increase in civil
aircraft production rates required by the industry to satisfy the
strong demand from airlines and aircraft lessors. We continue to
work closely with our suppliers and customers to minimise any
potential disruption. Very recently, the situation has been
compounded by a fire at one of our key suppliers in Thailand. We
are working closely with the supplier and our customers to assess
and mitigate the specific impact of the fire.
Adjusted profit before tax increased to GBP20.1m (2021 -
GBP(1.9)m loss). The adjusted tax charge was GBP2.0m (2021 -
GBP2.6m credit). Adjusted earnings per share increased to 4.36
pence (2021 - 0.17 pence).
Reported profit before tax was GBP22.4m. The 2021 reported
profit before tax was GBP23.7m, having benefited from the profit on
the sale of our Senior Aerospace Connecticut business during that
period. Basic earnings per share was 4.86 pence (2021 - 5.82
pence).
(1) This is discussed further in the Technology section of the 2022
Annual Report and Accounts on page 48.
The Group delivered an excellent cash performance in 2022
generating free cash inflow of GBP27.7m (2021 - GBP14.0m), an
increase of 98% over the prior year, driven by the significant
increase in profits. Gross investment in capital expenditure was
GBP30.5m (2021 - GBP21.3m), which was 0.8 times depreciation
excluding the impact of IFRS 16 (2021 - 0.6 times). Cash outflows
from working capital were GBP12.1m (2021 - GBP2.6m) reflecting
increased activity levels and the need to hold some tactical buffer
stocks. However, our effective management of working capital helped
to deliver a small decrease as a percentage of sales to 15.5% (2021
- 15.6%). The Group had net cash outflow of GBP2.6m (2021 -
GBP57.7m inflow) in 2022, due to free cash inflow of GBP27.7m (2021
- GBP14.0m), offset by GBP30.3m cash outflows related to corporate
undertakings and restructuring activity, interim dividend payments
and purchase of own shares (2021 - GBP43.7m inflows).
Net debt at the end of December 2022 was GBP178.9m (including
capitalised leases of GBP78.4m), an increase of GBP25.8m from
December 2021, after taking into account GBP25.3m consideration for
the acquisition of Spencer Aerospace, adverse currency movements of
GBP14.2m and a GBP9.0m increase for lease movements. The Group's
financial position remains robust, with a healthy balance sheet and
period end net debt to EBITDA of 1.47x (December 2021 - 1.87x).
Return on capital employed ("ROCE") increased by 370 basis
points to 4.7% (2021 - 1.0%). The increase in ROCE reflected the
significant increase in profitability, while managing the increase
in capital employed which was mainly due to the acquisition of
Spencer Aerospace. This improvement in ROCE is an important step to
delivering our Group ROCE target of 13.5% over the medium term.
In line with the Board's decision from earlier in the year to
reinstate dividends, and reflecting confidence in the Group's
performance, financial position and future prospects, the Board is
proposing a final dividend of 1.00 pence per share (2021 - nil
pence) and this will be paid on 26 May 2023 to shareholders on the
register at close of business on 28 April 2023 . This would bring
total dividends, paid and proposed for 2022 to 1.30 pence per
share. 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
Our core markets across the Group proved resilient in 2022 and
are buoyant as we commence 2023 despite ongoing macro-economic
challenges and geopolitical uncertainty.
Civil Aerospace (40% of Group)
The rebound in flight departure levels in 2022 was testament to
the resilience of global air travel demand, with the subsequent
recovery across commercial aerospace now in full swing. The strong
growth in passenger numbers seen in most domestic markets and other
short-haul routes was sustained throughout 2022 and is expected to
continue. International, long-haul traffic has been accelerating,
particularly between North America and Europe and the recent easing
of travel restrictions in China has immediately provided added
momentum. IATA continues to expect domestic passenger numbers to
reach 2019 levels by 2024 and international passenger numbers to
return to 2019 levels by 2025.
Production volumes for civil aerospace accelerated in 2022,
driven by increased single aisle build rates. Both Boeing and
Airbus announced production rate increases for wide-bodies starting
from the end of 2022 and further increases on single-aisle rates in
2023 and beyond.
In the medium and longer term, structural growth in air travel
of c. 4% per annum is expected to be driven by growing air traffic
demand in Asia and supported by the replacement of older aircraft
with latest generation, more fuel-efficient models. IATA
anticipates that Asia Pacific will be the fastest growing region
over the next two decades, buoyed by favourable income growth and
demographic factors.
With our diversified product portfolio in the aerospace sector,
including attractive positions across the newest generation of
single aisle aircraft platforms, Senior is well positioned to
benefit from the ongoing market recovery, and increased aircraft
build rates.
Defence (14% 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 was $778bn. However, the 2022 Appropriations Bill was not
passed until March 2022 which meant that up to that point, spending
was restricted to 2021's levels under a Continuing Resolution which
led to a delay in some ordering activity. For Fiscal Year 2023, the
National Defense Authorisation Act has approved $858bn of spend,
10% higher than the budget in 2022.
Senior is well placed with good content on the F-35 Joint Strike
Fighter, mature programmes such as the C-130 transport aircraft,
and newer programmes such as the T-7A Red Hawk trainer.
Other Aerospace (11% of Group)
Sales from our Aerospace operating businesses into end 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. Using our world class
bellows technology, we manufacture highly engineered proprietary
products to provide unique solutions for semi-conductor
manufacturing equipment.
The semi-conductor equipment market reached a new sales record
in 2022, growing by an estimated 4%, reflecting the increase in
global demand for microchips. While wafer fab, foundry and logic
equipment sales increased, memory and storage demand weakened as
post-pandemic related consumer and work-from-home trends normalise
and inflation rises. According to the World Semiconductor Trade
Statistics ("WSTS"), the global semi-conductor market is forecast
to contract by 4% in 2023 as a result of challenging macroeconomic
conditions leading to weaker end market demand.
The galactic low earth orbit satellites market revenue is
expected to accelerate at a compound annual growth rate of 15%
between 2022 and 2030. Rising demand for high-speed and low-cost
broadband, growing advancements in satellite network and potential
uses for laser-based space optical communications are key factors
driving revenue growth of the market.
Land Vehicle (19% of Group)
The land vehicle market experienced good momentum in 2022. All
segments grew in 2022, as markets in North America and Europe were
buoyant, aided by signs of supply chain constraints easing compared
to prior year.
According to Americas Commercial Transportation ("ACT")
research, the heavy-duty truck market grew by 19% in 2022 compared
to 2021. The market is expected to decline by 3% in 2023 as pent-up
demand for more fuel efficient engines and modest pre-buy activity
ahead of tighter emission standards coming to be introduced in 2024
are expected to be offset by slowing macroeconomic indicators in
the US. According to IHS Markit Inc. ("IHS"), European truck and
bus market production declined by 1% and is forecast to decline by
a further 1% in 2023.
Light vehicle production in 2022 continued to be impacted by
semi-conductor shortages, although this is showing signs of
improvement. Production rates were further impacted by
interruptions in the supply of wire harnesses due to the Ukraine
crisis. According to IHS, European light vehicle production grew by
5% in 2022 compared to 2021, despite being forecasted to decline.
It is forecast to grow by 6% in 2023 as semiconductor availability
improves.
According to the International Energy Agency ("IEA") , global
electric car sales have continued their strong growth in 2022. The
Bloomberg NEF Electric Vehicle Outlook 2022 report predicts that by
2025, plug-in vehicles will represent 23% of new passenger vehicle
sales globally and electric vehicles will represent 6% of the
fleet. With the i ncreasing adoption of electrification for both
land vehicle and stationary power applications continuing, this
market is fast growing and represents a major opportunity for
Senior in the medium and long term, particularly for our
proprietary battery cooling technology.
Power & Energy (16% of Group)
Power & energy markets grew in 2022, and in particular,
activity in upstream oil and gas increased and the levels of
maintenance and overhaul improved.
The Ukraine crisis brought pressure to energy supply in key
markets, adding political impetus to build energy security and to
accelerate the energy transition to renewables.
Electricity demand is forecast to continue growing steadily and
the IEA predicts an even stronger push for renewables in the power
sector and faster electrification of industrial processes and
heating. In 2022, 30% of global electricity generation came from
renewable sources and the IEA predicts this rising to about 50% by
2030 and 80% by 2050.
According to the IEA, in 2022, world oil demand grew 2% and is
expected to surpass pre-pandemic levels in 2023 and subsequently
grow 1% per year until 2030. Global refining capacity expanded
slightly in 2022 with similar growth anticipated in 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 US 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.
Amid soaring fuel prices and growing energy security concerns,
momentum is building for nuclear power in many countries. According
to the IEA, nuclear power generation has the potential to play a
significant role in helping countries to securely transition to
energy systems dominated by renewables. In their global pathway to
reach Net Zero Emissions by 2050, the IEA predicts that nuclear
power generation will double between 2020 and 2050, with
construction of new plants needed in all countries that are open to
the technology. Whilst extending lifetimes of nuclear plants will
be an indispensable part of a cost-effective path to Net Zero by
2050, it is feasible that half of the emission reductions by 2050
may come from small modular reactors (SMRs) due to their lower
cost, smaller size, and reduced project risks.
We are ensuring we are appropriately resourced to take advantage
of the market-led opportunities across our Flexonics and Aerospace
Divisions.
Delivery of Group Strategy
Senior has a compelling strategy to maximise value for
shareholders.
Our renewed Purpose is "we help engineer the transition to a
sustainable world for the benefit of all our stakeholders". We do
this by:
-- Using our technology expertise in fluid conveyance and thermal
management to provide safe and innovative products for demanding
applications in some of the most hostile environments.
-- Enabling our customers, who operate in the hardest-to-decarbonise
sectors, to transition to low carbon and clean energy solutions.
-- Staying at the forefront of climate disclosure and action by ensuring
our own operations achieve our Net Zero commitments.
Complementing this, our vision is to be a trusted and
collaborative high value-added engineering and manufacturing
company producing sustainable growth in operating profit, cash flow
and shareholder value.
To achieve our strategy, we will:
-- strengthen our strategic focus on IP-rich fluid conveyance and
thermal management products;
-- organically grow the Aerostructures business by fully utilising
our world class global footprint;
-- maintain a strong focus on lean manufacturing and operational
efficiency through our Senior Operating System;
-- execute on our portfolio optimisation strategy to maximise value
creation;
-- maintain our sector leading sustainability performance; and
-- drive intrinsic strong cash generation and deliver a minimum of
13.5% ROCE over the medium term.
Our strategic focus and expertise in fluid conveyance and
thermal management technology and capabilities is supported by
extensive design and manufacturing process intellectual property
and know-how. We develop and supply proprietary products,
sub-systems and systems for our customers' demanding applications
across a range of diverse and attractive end markets. Our products
are key enablers of pivotal technologies which are delivering
emissions reduction and environmental efficiency and are highly
relevant as the world transitions towards a low carbon economy .
Senior has developed novel solutions for low and zero carbon
applications and we are involved in a range of research and
development projects that support the drive for electrification and
hydrogen propulsion systems on land and in the air. This is
discussed further in the "Technology and product design and
development" section below.
As well as our businesses being actively focused on new product
offerings for the transition to a low-carbon world, we continue to
be actively involved in making conventional technology cleaner to
bridge the gap between both worlds. In addition, Senior's
end-markets are evolving to reflect the global effort to achieve
net zero carbon emissions. Senior's technology and product roadmap
is aligned to these trends with a product development strategy that
is compatible with our focus on sustainability.
This well-defined strategy, along with our well-capitalised
businesses, provides a solid foundation to support our future
growth aspirations.
In June 2022, we announced the strategic acquisition of
substantially all of the assets of Spencer Aerospace Manufacturing,
LLC ("Spencer Aerospace"), which completed in November. The
acquisition marks a further step in our well-defined strategy and
is part of our wider objective of optimising our portfolio and
maximising value for shareholders. The acquisition enhances
Senior's industry-leading fluid conveyance capabilities, expanding
our capability to produce higher level assemblies and sub-systems
and with the potential to penetrate new markets such as hydrogen
fittings for power and infrastructure applications. While Senior
has existing hydraulic fluid fittings expertise, our customers have
been strongly encouraging us to increase our presence and,
following the acquisition, our combined expertise and market reach
will allow us to respond decisively and accelerate growth as we
leverage Senior's strong relationships with OEMs, Tier 1
integrators, and aftermarket customers around the world to open new
opportunities for Spencer Aerospace.
The strategy for Aerostructures as its core markets continue to
recover is to focus and drive:
-- filling our existing capacity;
-- pursuing some further diversification into Space and Defence;
and
-- growing market share profitably in Civil Aerospace.
We saw good progress in our Aerostructures businesses in 2022
and remain confident of further performance improvement as
production volumes continue to ramp.
Considered and effective capital deployment
We understand the importance of considered and effective capital
deployment towards maximising shareholder value creation. The Group
has a financial objective to maintain an overall ROCE in excess of
the Group's cost of capital and to target a minimum pre-tax return
on capital employed of 13.5% on a post IFRS 16 basis. Our strategy
of expanding Senior's high-quality fluid conveyance and thermal
management businesses remains a priority. All significant
investments are supported by a business case and are assessed using
a rigorous investment appraisal process.
To maximise the Group's operating efficiency and overall
effectiveness we actively review our overall portfolio of operating
businesses and evaluate them in terms of their strategic fit within
the Group. In December 2019, Senior confirmed that it was reviewing
strategic options for its Aerostructures business, which included a
potential divestment. Although we received strong interest for the
business, the Group determined that, with the onset of the
pandemic, it was in the best interests of Senior and its
stakeholders for the Aerostructures business to remain within the
Group at that time. We are considering the best time to relaunch
the process to ensure we optimise value for shareholders, taking
into account financing markets and end market conditions.
Technology and product design and development on the road to Net
Zero
Senior's fluid conveyance and thermal management businesses have
design IP (intellectual property) and our structures businesses
have manufacturing IP and know-how. Both are underpinned by our
investment in advanced manufacturing technology and supported by
our extensive design and engineering expertise, and collaboration
through our Technology Council.
In support of our core technology themes, Senior has identified
two key enabling technologies that underpin innovation throughout
our product development and manufacturing lifecycle: Additive
Manufacturing and Digitisation. Our Technology Council ensures that
these technologies are collaboratively developed for the benefit of
all business in the Group.
Electrification and hydrogen power are poised to remain the key
technology themes in many of our end markets in the decades to
come. Our fluid conveyance and thermal management technology,
highly relevant to these themes, will continue to help us support
our customers with high-valued solutions in the medium- and
long-term to bridge the transition to sustainable technologies for
the future in a low carbon economy.
Aerospace
-- Our traditional fluid conveyance products are entirely compatible
with sustainable aviation fuels, the increasing adoption of which
appears to be the fastest route to lowering aviation emissions.
-- Our Additive Manufacturing capabilities are enabling advances
in complex product design for improved performance and weight
reduction for the benefit of our customers across a number of
product applications.
-- Our world-class capability in thermal management and fluid conveyance
provides opportunities to support the further development of electric/hybrid
air vehicle applications.
-- We are building upon our long experience of providing hydrogen
fluid handling and distribution products for industrial markets
to support development of both on-aircraft and off-aircraft hydrogen
technologies as this alternative propulsion ecosystem evolves.
Land Vehicles
-- Our current exhaust gas recirculation and waste heat recovery
products continue to support evolving Land Vehicle propulsion
systems as they become more efficient and lower their environmental
impact.
-- We are focusing on new product offerings for the transition to
a low carbon economy and engage with our customers' new product
development programmes by providing design and engineering support
for cooling and fluid handling solutions for batteries and power
electronics on the growing number of electric/ hybrid vehicles.
-- We are supporting the development of fuel cell cooling and associated
fluid conveyance for commercial vehicle applications by capitalising
on our experience of producing hydrogen fuel cell products in
the energy sector.
Power & Energy
-- We continue to develop our well-established wide range of fluid
conveyance products, bellows and expansion joints for harsh environments
in carbon-free energy generation including solar farms, wind power
plants, hydroelectric, geothermal, fuel cell and nuclear power
applications.
-- Our extensive experience of providing fluid conveyance products
for demanding environments, and specifically hydrogen fuel cell
cooling and conveyance, opens up opportunities in hydrogen production
and infrastructure applications.
Sustainability
A commitment to sustainability is rooted in our core values and
underpins our Purpose. Sustainability is an integral part of our
strategy, embedded within the behaviours of our people and the
culture of Senior. We believe with conviction that how you do
business is every bit as important as what you do. Across the Group
we always put safety and ethics first, and we strongly encourage
and promote diversity and inclusivity across our international
operations.
We continuously aim to deliver our products in a manner that is
both environmentally sustainable and supports economic growth and
long-term value creation for shareholders through sustainable
methods. In implementing our strategy, we are committed to using
natural resources responsibly, investing for the long-term
wellbeing of the planet and ensuring that all people involved in
our business process' are treated fairly. Our Environmental, Social
and Governance ("ESG") programmes continue to evolve; this year we
have been awarded a class leading "A" rating by CDP for our work on
climate disclosure and action, having already previously achieved
the highest leadership rating for our Supplier Engagement
programme. We were also highly commended by the UK Investor
Relations Society in their annual best practice awards for how we
communicate our sustainability programmes and commitments to our
stakeholders.
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. We achieve this by applying our expertise
and technology across many different applications in
hard-to-decarbonise sectors ranging from aviation through to land
vehicle and power & energy markets. We work in close
partnership with our customers' developing solutions which support
both their commercial and sustainability objectives as we all
strive to achieve our individual Net Zero goals.
In 2022, we have again made good progress with our key
sustainability metrics and activities:
Environment
-- Awarded the top 'A' score by CDP in its global annual ranking
for transparency on climate change; Senior is one of only 283
companies which achieved an A out of nearly 15,000 scored, putting
us in the top 2% of disclosing companies. We were the only Aerospace
and Defence company to achieve an A rating in 2022. In February
2022, we were informed by CDP that Senior was awarded the highest
leadership status in its annual supplier engagement ratings, putting
us in the top 8% of companies on this metric.
-- We remain on track to achieve our Scope 1, 2 and 3 Science Based
Target Initiative ("SBTi") verified Near Term Targets.
-- We have submitted our Long-Term Net Zero Targets to SBTi for validation.
The targets, to be achieved by 2040, are aligned to keep global
warming to 1.5 degrees centigrade, the most ambitious goal of
the Paris Agreement.
-- 41% of our electricity was sourced from renewable energy, an increase
from 36% in 2021.
-- Recycled 94.8% of waste produced.
Social
-- Recognising the impact of high rates of inflation, Senior has
taken steps to help the broader workforce including salary settlements
that reflected regional cost of living pressures, a more flexible
approach to working hours and promoting employee assistance and
wellbeing initiatives.
-- Building on the success of our first Global Employee Opinion Survey
in 2021 and the actions taken as a result of the feedback, we
undertook our second Global Employee Opinion Survey in September
2022.
-- We remain on track to achieve our 2025 Lost Time Injury Rate reduction
target.
-- In 2022, we 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 ethnic minority backgrounds.
Governance
-- In 2022, employees received refresher training on Senior's Code
of Conduct.
-- Employees continue to receive training and regular reminders about
the risks related to information/cyber security.
-- In 2022, we developed our Climate Change training to improve awareness
of climate related matters across the Group.
Outlook
As we start 2023, our order book is healthy, reflecting
favourable market dynamics, with commercial aerospace recovery in
full swing and other important markets remaining buoyant. Demand is
currently holding up well, though we remain mindful of the
potential impact of the ongoing supply chain pressures in
aerospace, as well as the broader macro-economic situation and
geopolitical uncertainty.
With aircraft build rates increasing through the year, and the
continuing supply chain challenges in aerospace, including the
recent fire at one of our key suppliers, we anticipate trading in
our Aerospace Division to be more weighted to the second half of
the year. Overall, the Board anticipates strong growth for the
Group in 2023 in line with its expectations.
We remain on track to drive the Group ROCE to a minimum of 13.5%
in line with our previously stated ambition.
Our strategy and positioning in attractive and structurally
resilient core markets, combined with our sector leading
sustainability credentials and highly relevant technical
capabilities, is delivering a strong recovery across our Aerospace
and Flexonics Divisions and enhanced value for our
stakeholders.
DAVID SQUIRES
Group Chief Executive Officer
DIVISIONAL REVIEW
Aerospace Division
The Aerospace Division represents 65% (2021 - 66%) of Group
revenue and consists of 14 operating businesses. 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 2021 results have been translated
using 2022 average exchange rates and on an adjusted basis to
exclude the charge relating to amortisation of intangible assets
from acquisitions and net restructuring income. The Division's
operating results on a constant currency basis are summarised
below:
2022 2021 (1) Change
GBPm GBPm
Revenue 553.6 471.0 +18%
Adjusted operating profit 20.3 8.4 +142%
Adjusted operating margin 3.7% 1.8% +190bps
(1) 2021 results translated using 2022 average exchange rates - constant
currency.
Divisional revenue increased by GBP82.6m (17.5%) to GBP553.6m
(2021 - GBP471.0m) whilst adjusted operating profit increased by
GBP11.9m (141.7%) to GBP20.3m (2021 - GBP8.4m).
Revenue Reconciliation GBPm
2021 revenue 471.0
Civil aerospace 81.4
Defence (6.6)
Other 16.8
Disposal of business (9.0)
======
2022 revenue 553.6
======
Revenue in the Aerospace Division increased by 17.5%
year-on-year on a constant currency basis, reflecting the overall
recovery in demand. Excluding the prior year GBP9.0m revenue from
Senior Aerospace Connecticut, which was divested in April 2021,
revenue on a constant currency basis increased by 19.8%. The
year-on-year increase reflected the ramp up in civil aircraft
production rates, growth from semi-conductor equipment markets and
ramp up in space programmes reflecting end market growth. This more
than offset the decline in defence, which was affected by the delay
in spending as a consequence of the Continuing Resolution being in
place in the USA during the first half of the year.
The civil aerospace sector had the strongest growth during the
period with Senior's sales increasing by 31.6% compared to prior
year. This was reflective of the significant ramp up in aircraft
production rates from the OEMs resulting in rates being higher in
2022 compared to 2021, driven particularly by single aisle aircraft
including regional and large business jets, with widebody
production rate increases announced towards the end of the year. In
2022, 21% of civil aerospace sales were from widebody aircraft,
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 GBP6.6m (5.1%) as
purchase orders were delayed due to the late approval of the
Appropriations Bill which resulted in the Continuing Resolution
coming into force as well as our sales to F-35 programme being
impacted by customer inventory levels of some of the parts we
supply.
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 GBP16.8m as a result
of increased demand in the semi-conductor equipment market and the
ramp up in space satellite programmes reflecting end market
growth.
During the period, adjusted operating profit increased by 141.7%
to GBP20.3m (2021 - GBP8.4m) and the adjusted operating margin
increased by 190 basis points to 3.7% (2021 - 1.8%). The improved
profitability reflected the volume related operating leverage
across our businesses, while price increases helped offset the
impact of material and other inflationary cost increases. Our
operating businesses worked hard to address the persistent supply
chain challenges and mitigate their impact, ensuring service levels
for customers were maintained to the best extent possible. These
supply chain constraints are likely to be evident throughout 2023
and continue to require relentless management in a number of our
operations. These challenges are a function of the welcome increase
in civil aircraft production rates required by the industry to
satisfy the strong demand from airlines and aircraft lessors. We
will continue to work closely with our suppliers and customers to
minimise disruption. Very recently, the situation has been
compounded by a fire at one of our key suppliers in Thailand. We
are working closely with the supplier and our customers to assess
and mitigate the specific impact of the fire.
Both Airbus and Boeing are planning further increases in
aircraft production programmes in 2023 and beyond which gives
confidence that civil aerospace revenue will continue to grow in
2023. With aircraft build rates increasing through the year, and
the continuing supply chain challenges in aerospace, including the
recent fire at one of our key suppliers, we anticipate Aerospace
Division trading to be more weighted to the second half of the
year.
The most fuel-efficient single aisle aircraft are in high demand
which underpins planned rate increases:
-- Airbus announced at their FY 2022 results that on the A320 Family
programme, they are now progressing towards a monthly production
rate of 65 aircraft by the end of 2024 and 75 in 2026. For the
entry-into-service of the A321XLR, Airbus announced that they
expect this to take place in Q2 2024. Airbus ended 2022 with a
backlog of 6,093 A320 Family (2021: 5,839).
-- Boeing announced at their full year results that the 737 programme
is stabilising production rate at 31 per month, which is on steady
course to being achieved, with plans to ramp production to approximately
50 per month in the 2025/2026 timeframe. At their Investor Day
in November 2022, they announced a target of 400-450 737 MAX deliveries
in 2023, rising from the low 30s deliveries per month in the beginning
of the year and reaching near 40 deliveries per month in H2 2023.
As at the end of 2022, Boeing had a 737 firm order backlog of
around 3,653 units (2021: 3,414) and 250 737 MAX aircraft in inventory.
-- During 2022, the first customer delivery of the COMAC C919 was
completed. COMAC announced that they have received orders for
more than 1200 units and expect to reach annual production capacity
of 150 aircraft in five years.
Recovery in long-haul routes, which typically use widebody
aircraft, has been accelerating in 2022. With the easing of travel
restrictions in Asia, especially recently in China, this is
expected to provide added momentum over the coming year. IATA has
signalled that this segment will return to 92% of 2019 levels by
2025 and 104% of 2019 levels by 2026. As a result, both Boeing and
Airbus have announced production rate increases for wide bodies
starting from the end of 2022.
-- On widebody aircraft, Airbus announced at their FY 2022 results
that the A330 monthly production rate increased to around 3 at
the end of 2022 as planned and they are now targeting to reach
a monthly production rate of 4 in 2024. On the A350 platform,
Airbus confirmed the monthly rate is now around 6 aircraft. In
order to meet growing demand for widebody aircraft as international
air travel recovers, and following a feasibility study with the
supply chain, it is now targeting a monthly production rate of
9 A350s at the end of 2025.The company's total widebody backlog
was 619 at the end of 2022 (2021: 766).
-- Boeing resumed 787 programme deliveries in August 2022, after
receiving approval from the FAA for their plan on inspections
and retrofit work. The 787 programme continues at a low production
rate with plans to ramp up to five per month in late 2023 and
to 10 per month in the 2025/2026 timeframe. At their Investor
Day in November 2022, they announced a target of 70-80 787 deliveries
for 2023. Boeing confirmed at the full year earnings call that
they had 100 787 aircraft in inventory at the end of 2022, which
they stated will be delivered by the end of 2024.
-- Boeing reaffirmed on their full year earnings call that the 777X
programme timeline is holding for delivery of the first plane
in 2025.
Global business jet activity in 2022 was resilient, continuing
the pandemic bounce. According to WingX Advance, 2022 was a record
year as sales were up 10% year-on-year and 14% above pre-pandemic
2019 levels. In 2023, demand is forecast to normalise to 2019
levels in Europe, with North America sustaining higher than
pre-pandemic activity. Airbus continues to ramp-up A220 production,
having increased to 6 per month during 2022. They announced at
their FY 2022 results that they are still on track for rate 14
which they envisaged by the middle of the decade.
We expect defence revenue to be stable in 2023 compared to prior
year.
-- Lockheed Martin delivered 141 F-35 aircraft in 2022, below its
stated target of 147-153, as they experienced supplier performance
challenges and a delivery pause & suspension of the Government
Furnished Equipment (GFE) engine. At their full year results,
they announced an intention of producing 147-153 aircraft in 2023
and 2024, although deliveries in 2023 will be determined pending
the resumption of engine deliveries and other factors. They continue
to anticipate annual deliveries of 156 aircraft in 2025 and for
the foreseeable future. In Q4 2022, they finalised the F-35 Low-Rate
Initial Production (LRIP) Lots 15-17 production contract with
the U.S. Government for up to 398 aircraft.
In November 2022, Senior completed its acquisition of Spencer
Aerospace, expanding Senior's presence in hydraulic fluid fittings
and allowing Senior to meet customer demand in an area that closely
complements existing fluid conveyance products. Initial integration
activities are proceeding well.
Senior Aerospace has a diversified product portfolio of
innovative offerings with many growth opportunities as our
customers value Senior's financial resilience, stability, design
and manufacturing expertise and global footprint. We continue to
secure new contracts and contract extensions on civil platforms and
other aerospace
markets that will drive our growth. In 2022, new contracts of note that were signed include:
-- Senior Aerospace Ketema was awarded multi-year contracts worth
in excess of $30m to supply cryogenic valves for space launch
vehicles.
-- Senior Aerospace AMT was awarded repeat production contracts worth
c.$10m to supply floor beam assemblies and frames for large commercial
aircraft.
-- Senior Aerospace Jet Products increased market share for v-blade
production for large commercial aircraft.
-- Senior Metal Bellows won a development and certification contract
for implantable medication delivery pumps. This included a proof-of-design
bellow for an intra-aortic balloon pump assembly.
Good progress continues to be made with our fluid conveyance and
thermal management product and technology developments: one example
of this is shown below.
Case study: Proof of concept development for Aerospace Heat
Exchangers
Senior's extensive experience in the design and manufacture of
fluid conveyance applications provides significant insight into the
system requirements for various aerospace applications. Our fluid
conveyance products frequently connect to heat exchangers within
airframe and engine applications and, in response to customer
requests for a single-source system provider, we are investing in
the design and manufacture of a proof of concept high-temperature
heat exchanger for aerospace applications, building on our
extensive experience gained in producing high performance heat
exchangers for land vehicles and battery thermal management.
We have been able to demonstrate significant performance and
weight advantages by leveraging our Additive Manufacturing (AM)
expertise to outperform 'conventional', commonly available, heat
exchanger designs. Developing this new product capability will open
significant new markets for Senior and complements our existing
expertise and knowledge in fluid conveyance system and component
design, demonstrating how we can leverage AM techniques and apply
our land vehicles expertise to new aerospace applications.
Flexonics Division
The Flexonics Division represents 35% (2021 - 34%) of Group
revenue comprising 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 is on a constant currency basis(2) , whereby 2021 results
have been translated using 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:
2022 2021 (1) Change
GBPm GBPm
Revenue 295.6 234.6 +26%
Adjusted operating profit 25.4 13.9 +83%
Adjusted operating margin 8.6% 5.9% +270bps
(1) 2021 results translated using 2022 average exchange rates - constant
currency.
Divisional revenue increased by GBP61.0m (26.0%) to GBP295.6m
(2021 - GBP234.6m) and adjusted operating profit increased by
GBP11.5m (82.7%) to GBP25.4m (2021 - GBP13.9m).
Revenue Reconciliation GBPm
2021 revenue 234.6
Land vehicles 37.1
Power & energy 23.9
2022 revenue 295.6
======
In Flexonics, strong customer demand in the land vehicle and
power & energy markets in 2022 drove an increase in sales of
26.0% compared to prior year.
Group sales to land vehicle markets increased by 29.2% as Senior
outgrew end market demand due to higher market share. Senior's
sales to the North American truck and off-highway market increased
by GBP18.7m (25.8%), with strong demand for on-highway vehicles as
production of heavy-duty trucks increased by 19%. Sales to other
truck and off-highway regions, including Europe and India,
increased by GBP12.0m (45.6%), helped by recent contract wins
entering series production, and end market production growth as
supply chain constraints eased through the year. Group sales to
passenger vehicle markets increased by GBP6.4m (22.8%) in the year,
benefiting from recent contract wins entering series production in
North America and Europe.
In the Group's power & energy markets, sales increased by
GBP23.9m (22.2%) in the year. Sales to power generation and nuclear
markets increased by GBP9.3m (26.7%) as efforts to extend
powerplant life and maintenance grew. Sales to oil and gas markets
increased by GBP8.8m (27.1%), as a result of higher production
volumes for upstream. Sales to other power & energy markets
increased by GBP5.8m.
Adjusted operating profit increased by GBP11.5m compared to
prior period and the divisional adjusted operating margin increased
by 270 basis points to 8.6% (2021 - 5.9%). This significant
improvement in profitability reflected the volume related operating
leverage across our operating businesses and agreed price increases
to offset the impact of inflationary cost increases.
In 2023, Senior's overall sales to land vehicle markets are
expected to outperform end markets due to the launch and ramp up of
new programmes. In terms of the end markets:
-- ACT Research is forecasting a 3% decline in North American heavy-duty
truck production in 2023. Pent-up demand for more fuel-efficient
engines and modest pre-buy activity ahead of tighter emission
standards coming to be introduced in 2024 are expected to be offset
by slowing macroeconomic indicators in the US.
-- The North American medium-duty diesel truck production is forecast
to be stable in 2023 as backlogs remain elevated, indicating solid
pent-up demand.
-- IHS Markit Inc. forecasts that European truck and bus production
will fall by 1% in 2023 in line with the slowing macroeconomic
indicators, while light vehicle production is forecast to grow
by 6% in 2023 with semiconductor availability improving.
-- Indian light vehicle production is forecasted to grow by 8% in
2023.
The divisional review is presented before the share of the joint
(2) venture results.
Positive momentum is expected in power & energy markets
given higher activity levels in the upstream oil & gas and
nuclear sectors:
-- The IEA expects world oil demand in 2023 to surpass pre-pandemic
levels.
-- According to the IEA, global refining capacity is anticipated
to expand slightly in 2023. 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 global electricity demand
growth in 2023 to be similar as 2022, albeit with some uncertainty
around how macroeconomic growth rates will impact demand.
-- In the nuclear sector, 2023 will see nations focus on energy security
through ensuring the smooth operating of existing powerplant and
look to further develop SMRs.
Our innovative technology is a key point of differentiation for
the Group, and we continue to focus our development efforts, with
our products applicable across a diverse range of attractive
industrial markets. In 2022, we made good progress with new product
development:
-- Senior Flexonics Crumlin supplied prototype Battery Cooling Plates
to several European car companies.
-- Senior supplied Prototype Heat Sinks to several tier one electric
vehicle inverter suppliers.
-- Senior Flexonics Crumlin secured a production order for Battery
Cooling Plates for a premium sports car manufacturer.
-- Senior Flexonics Kassel was named as a partner for the development
of a marine hydrogen powered fuel cell fluid management system.
-- Senior Flexonics Bartlett was nominated to supply assemblies for
a Solid Oxide Fuel Cell being developed to replace diesel powered
generators.
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.
Case study: Senior Flexonics development of Solid Oxide Fuel
Cells
Senior's engineering teams continue to be innovative and develop
new products and processes across a variety of key decarbonisation
technologies. One important innovation relates to solid oxide fuel
cells for stationary power generation. Senior Flexonics is working
with a leading OEM to develop a scalable, cutting-edge assembly and
brazing process to enable their system to reach market leading
performance and value. Low volume production will commence in the
next two years and the medium and long-term growth potential
represents a significant opportunity for Senior Flexonics.
OTHER FINANCIAL INFORMATION
Group revenue
Group revenue was GBP848.4m (2021 - GBP658.7m). Excluding the
favourable exchange rate impact of GBP46.3m, Group revenue
increased by GBP143.4m (20.3%), of which GBP28.6m related to
pricing. Revenue grew in both Aerospace and Flexonics
year-on-year.
Operating profit
Adjusted operating profit increased by GBP22.4m (367.2%) to
GBP28.5m (2021 - GBP6.1m). Excluding the favourable exchange rate
impact of GBP1.3m, adjusted operating profit increased by GBP21.1m
(285.1%) on a constant currency basis. After accounting for GBP0.2m
amortisation of intangible assets from acquisitions (2021 - GBPnil)
and GBP4.2m net restructuring income (2021 - GBP4.4m), reported
operating profit was GBP32.5m (2021 - GBP10.5m).
The Group's adjusted operating margin increased by 250 basis
points, to 3.4% for the full year. This improved profitability
principally reflected volume related operating leverage across our
businesses. Inflationary pressures were successfully mitigated by
diligently managing costs and by increasing prices and surcharges
where possible. Overall price increases of GBP28.6m offset material
and other inflationary cost increases of GBP26.0m.
Finance costs and investment income
Finance costs, net of investment income and before interest
unwind of deferred and contingent consideration increased to
GBP8.4m (2021 - GBP8.0m) and comprise IFRS 16 interest charge on
lease liabilities of GBP2.5m (2021 - GBP2.6m), net finance income
on retirement benefits of GBP1.2m (2021 - GBP0.4m) and net interest
charge of GBP7.1m (2021 - GBP5.8m). This increase was mainly due to
higher underlying interest rates on variable rate debt and foreign
exchange movements on fixed rate USD Private Placement Notes
denominated in US Dollars.
Gross finance costs, including interest unwind of deferred and
contingent consideration were GBP10.6m (2021 - GBP8.5m) and
investment income was GBP1.9m (2021 - GBP0.5m).
Tax charge
The adjusted tax rate for the year was 10.0% (2021 - 136.8%
credit), being a tax charge of GBP2.0m (2021 - GBP2.6m credit) on
adjusted profit before tax of GBP20.1m (2021 - GBP1.9m loss). The
adjusted tax rate benefitted from enhanced deductions for R&D
expenditure in the US, the super-deduction for capital expenditure
in the UK, as well as prior year items.
The reported tax rate was 9.8% charge, being a tax charge of
GBP2.2m on reported profit before tax of GBP22.4m. This included
GBP0.2m net tax charge against items excluded from adjusted profit
before tax, of which GBP0.7m charge related to net restructuring
income and a GBP0.5m credit related to corporate undertakings in
the year. The 2021 reported tax rate was 2.1% credit, being a tax
credit of GBP0.5m on reported profit before tax of GBP23.7m. This
included GBP2.1m net tax charge against items excluded from
adjusted loss before tax, of which GBP2.9m related to the corporate
undertakings in the year and GBP0.6m credit 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 GBP3.5m (2021 - GBP5.3m) and is stated net of
refunds received of GBP1.1m (2021 - GBP0.9m) of tax paid in prior
periods, including refunds arising from the offset of tax losses
against taxable profits of prior periods. Tax payments in 2021 were
GBP2.3m higher than they would otherwise have been as a result of
coronavirus relief measures in some countries which allowed the
deferral of tax bills normally due in 2020 into 2021.
Earnings per share
The weighted average number of shares, for the purposes of
calculating undiluted earnings per share, decreased to 415.3
million (2021 - 415.7 million). The decrease arose principally due
to the purchase of shares held by the employee benefit trust during
2022. The adjusted earnings per share was 4.36 pence (2021 - 0.17
pence). Basic earnings per share was 4.86 pence (2021 - 5.82
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 370 basis points to 4.7% (2021 - 1.0%). The
increase in ROCE was mainly a result of the significant increase in
adjusted operating profit compared to prior year.
Cash flow
The Group generated excellent free cash flow of GBP27.7m in 2022
(2021 - GBP14.0m) as set out in the table below:
2022 2021
GBPm GBPm
------------------------------------------------------- -------- --------
Operating profit 32.5 10.5
Amortisation of intangible assets from acquisitions 0.2 -
Net restructuring income (4.2) (4.4)
------------------------------------------------------- -------- --------
Adjusted operating profit 28.5 6.1
------------------------------------------------------- -------- --------
Depreciation (including amortisation of software) 49.6 47.8
Working capital and provisions movement, net of
restructuring items (12.1) (2.6)
Pension payments above service cost (1.4) (5.1)
Other items(1) 5.6 2.2
Interest paid, net (9.0) (8.0)
Income tax paid, net (3.5) (5.3)
Capital expenditure (30.5) (21.3)
Sale of property, plant and equipment 0.5 0.2
------------------------------------------------------- -------- --------
Free cash flow 27.7 14.0
------------------------------------------------------- -------- --------
Corporate undertakings (26.7) 46.9
Net restructuring proceeds/(cash paid) 2.1 (0.9)
US Class action lawsuits - (2.3)
Dividends paid (1.2) -
Purchase of shares held by employee benefit trust (4.5) -
------------------------------------------------------- -------- --------
Net cash flow (2.6) 57.7
Effect of foreign exchange rate changes (14.2) 0.7
IFRS 16 non-cash additions and modifications including
acquisition (9.0) (5.6)
------------------------------------------------------- -------- --------
Change in net debt (25.8) 52.8
Opening net debt (153.1) (205.9)
------------------------------------------------------- -------- --------
Closing net debt (178.9) (153.1)
------------------------------------------------------- -------- --------
(1) Other items comprises GBP4.3m share-based payment charges (2021
- GBP3.5m), GBP(0.4m) profit on share of joint venture (2021 -
GBP(0.2m)), GBP1.8m working capital and provision currency movements
(2021 - GBP(1.1m)) and GBP(0.1m) profit on sale of fixed assets
(2021 - GBPnil).
Capital expenditure
Gross capital expenditure of GBP30.5m (2021 - GBP21.3m) was 0.8
times depreciation excluding the impact of IFRS 16 (2021 - 0.6
times). The disposal of property, plant and equipment raised
GBP0.5m (2021 - GBP0.2m). 2023 capital investment is expected to be
in line with depreciation (excluding the impact of IFRS 16). We are
prioritising new investment on sustainability related items;
important replacement equipment for current production; and growth
projects where contracts have been secured.
Working capital
Working capital increased by GBP28.3m in 2022 to GBP131.3m (2021
- GBP103.0m), of which GBP9.3m related to foreign currency
movements. As expected, the underlying increase was reflective of
increased activity in our key end markets along with some supply
chain lead times increasing. In 2022, our effective management of
working capital reduced it as a percentage of sales by 10 basis
points to 15.5% (2021 - 15.6%). Although we may continue to see an
increase in working capital over the coming year, we will continue
our relentless and effective focus on working capital
management.
Retirement benefit schemes
The retirement benefit surplus in respect of the Group's UK
defined benefit pension plan ("the UK Plan") decreased by GBP20.4m
to GBP51.8m (31 December 2021 - GBP72.2m) due to GBP23.2m net
actuarial losses, partly offset by GBP1.4m cash contributions by
the Group, in excess of running costs, and GBP1.4m net interest
income. Retirement benefit deficits in respect of the US and other
territories increased by GBP1.1m to GBP12.1m (31 December 2021 -
GBP11.0m).
The latest triennial actuarial valuation of the UK Plan as at 5
April 2022 showed a surplus of GBP24.5m (5 April 2019 - deficit of
GBP10.2m). As a result, and effective from April 2022, the Group's
deficit reduction cash contributions, including administration
costs, to the UK Plan ceased on 30 June 2022.
The estimated cash contributions expected to be paid during 2023
in the US funded plans is GBP2.3m (GBP0.4m was paid in 2022).
Net debt
Net debt which includes IFRS 16 lease liabilities increased by
GBP25.8m to GBP178.9m at 31 December 2022 (31 December 2021 -
GBP153.1m). As noted in the cash flow above, the Group generated
net cash outflow of GBP2.6m (as defined in Note 32(c) of the
Financial Statements), after GBP14.2m adverse foreign currency
movements and GBP9.0m non-cash changes in lease liabilities due to
additions and modifications of which GBP4.7m relates to acquisition
leases.
Net debt excluding IFRS 16 lease liabilities of GBP78.4m (31
December 2021 - GBP73.2m) increased by GBP20.6m to GBP100.5m at 31
December 2022 (31 December 2021 - GBP79.9m), due to free cash
inflow of GBP27.7m being more than offset by GBP26.7m cash outflow
in respect of corporate undertakings, GBP9.1m capital repayment of
leases, GBP3.6m net cash outflows for dividends and purchase of
shares net of restructuring income and GBP8.9m adverse foreign
currency movements.
Funding and Liquidity
As at 31 December 2022, the Group's gross borrowings excluding
leases and transaction costs directly attributable to borrowings
were GBP145.3m (31 December 2021 - GBP132.0m), with 64% of the
Group's gross borrowings denominated in US Dollars (31 December
2021 - 62%). Cash and bank balances were GBP43.2m (31 December 2021
- GBP51.1m).
The maturity of these borrowings, together with the maturity of
the Group's committed facilities, can be analysed as follows:
Gross Committed
borrowings facilities
GBPm (1) GBPm
Within one year 0.5 -
In the second year - -
In years three to five 120.0 255.1
After five years 24.8 24.8
------------------------ ------------ --- ------------
145.3 279.9
------------------------ ------------ --- ------------
(1) Gross borrowings include other loans and committed facilities,
but exclude leases of GBP78.4m and transaction costs directly
attributable to borrowings of GBP(1.6)m.
At the year-end, the Group had committed facilities of GBP279.9m
comprising private placement debt of GBP126.2m and revolving credit
facilities of GBP153.7m. The Group is in a strong funding position,
with headroom at 31 December 2022 of GBP179.4m in cash and undrawn
facilities.
During the first half of 2022, the Group refinanced its US
revolving credit facility of $50.0m (GBP41.3m at year end exchange
rate) and extended the maturity to June 2025. In October 2022, the
US private placement debt of $20m (GBP16.5m at year end exchange
rate) was repaid. In November 2022 the Group refinanced its UK
revolving credit facility and extended the maturity to November
2026 with a commitment of GBP115m and in support of the strong ESG
commitments made by Senior and its lenders, we have jointly agreed
appropriate sustainability linked key performance indicators.
The weighted average maturity of the Group's committed
facilities at 31 December 2022 was 3.5 years.
The Group has GBP0.5m (2021 - GBPnil) of uncommitted borrowings
which are repayable on demand.
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 on page 2
must not exceed 3.0x and interest cover, the ratio of EBITDA to
interest must be higher than 3.5x. At 31 December 2022, the Group's
net debt to EBITDA was 1.47x and interest cover was 9.4x, both
comfortably within covenant limits.
During the year 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 and viability
In accordance with provisions 30 and 31 of the 2018 UK Corporate
Governance Code, the Directors have concluded that there is a
reasonable expectation as to the Group's longer-term viability and
have continued to adopt the going concern basis in preparing the
Financial Statements. The full viability statement can be found on
page 82 of the Annual Report & Accounts 2022.
In assessing going concern, taking into account the level of
cash and available committed facilities the Directors concluded
that the Group has sufficient funds, and is forecast to be in
compliance with debt covenants at all measurement dates, to allow
it to operate for the foreseeable future (a period of at least 12
months from the date of approval of the Financial Statements), even
in a severe but plausible downside scenario.
In forming their conclusion, the Board has undertaken a rigorous
assessment of the financial forecasts, key uncertainties,
sensitivities, and has reviewed a severe but plausible downside
scenario, which reflects the probability weighted and cumulative
estimated effects of the Group's principal risks and uncertainties
as disclosed on pages 60 to 71 of the Annual Report & Accounts
2022.
Risks and uncertainties
The principal risks and uncertainties faced by the Group are set
out in detail on pages 60 to 71 of the Annual Report & Accounts
2022.
Responsibility statement of the Directors in respect of the
Annual Report & Accounts 2022
We confirm that to the best of our knowledge:
1. the Financial Statements, as included in the Annual Report &
Accounts 2022, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company
and the undertakings included in the consolidation taken as a
whole; and
2. the Strategic Report, set out in the Annual Report & Accounts
2022, includes a fair review of the development and performance
of the business and the position of the issuer and the undertakings
included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that they
face.
We consider the Annual Report & Accounts 2022, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group's
position and performance, business model and strategy.
By Order of the Board
David Squires Bindi Foyle
Group Chief Executive Officer Group Finance Director
24 February 2023 24 February 2023
Consolidated Income Statement
For the year ended 31 December 2022
Year ended Year ended
2022 2021
Notes GBPm GBPm
Revenue 3 848.4 658.7
=========== ===========
Trading profit 32.1 10.3
Share of joint venture profit 9 0.4 0.2
----------- -----------
Operating profit (1) 3 32.5 10.5
Investment income 1.9 0.5
Finance costs (10.6) (8.5)
Corporate undertakings 4 (1.4) 21.2
----------- -----------
Profit before tax (2) 22.4 23.7
Tax (charge)/credit 5 (2.2) 0.5
----------- -----------
Profit for the period 20.2 24.2
=========== ===========
Attributable to:
Equity holders of the parent 20.2 24.2
=========== ===========
Earnings per share
Basic (3) 7 4.86p 5.82p
=========== ===========
Diluted (4) 7 4.73p 5.73p
=========== ===========
(1) Adjusted operating profit 4 28.5 6.1
(2) Adjusted profit/(loss) before
tax 4 20.1 (1.9)
(3) Adjusted earnings per share 7 4.36p 0.17p
(4) Adjusted and diluted earnings
per share 7 4.24p 0.17p
------------------------------------ ------ ------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
Year ended Year ended
2022 2021
GBPm GBPm
Profit for the period 20.2 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 (4.5) (2.1)
Reclassification adjustments for losses/(gains)
included in profit 2.2 (1.3)
----------- -----------
Losses on foreign exchange contracts - cash
flow hedges (2.3) (3.4)
Foreign exchange gain recycled to the Income
Statement on disposal and restructuring (business
closures) - (2.9)
Exchange differences on translation of overseas
operations 24.5 (3.8)
Tax relating to items that may be reclassified 0.7 0.8
----------- -----------
22.9 (9.3)
Items that will not be reclassified subsequently
to profit or loss:
Actuarial (losses)/gains on defined benefit
pension schemes (23.1) 19.7
Tax relating to items that will not be reclassified 5.7 (6.4)
----------- -----------
(17.4) 13.3
Other comprehensive income for the period, net
of tax 5.5 4.0
----------- -----------
Total comprehensive income for the period 25.7 28.2
=========== ===========
Attributable to:
Equity holders of the parent 25.7 28.2
=========== ===========
Consolidated Balance Sheet
As at 31 December 2022
Year ended Year ended
2022 2021
Notes GBPm GBPm
Non-current assets
Goodwill 8 199.7 150.2
Other intangible assets 36.2 4.2
Investment in joint venture 9 4.4 3.9
Property, plant and equipment 10 307.2 294.6
Deferred tax assets 10.9 5.7
Retirement benefits 13 51.8 72.2
Trade and other receivables 0.4 0.1
----------- -----------
Total non-current assets 610.6 530.9
----------- -----------
Current assets
Inventories 194.3 145.2
Current tax receivables 2.1 2.6
Trade and other receivables 126.7 98.0
Cash and bank balances 12c) 43.2 51.1
Total current assets 366.3 296.9
----------- -----------
Total assets 976.9 827.8
=========== ===========
Current liabilities
Trade and other payables 191.2 143.0
Current tax liabilities 17.7 14.6
Lease liabilities 12.7 0.4
Bank overdrafts and loans 12c) 0.5 14.8
Provisions 16.7 13.8
Deferred consideration 23.4 -
Total current liabilities 262.2 186.6
----------- -----------
Non-current liabilities
Bank and other loans 12c) 143.2 116.2
Retirement benefits 13 12.1 11.0
Deferred tax liabilities 4.7 10.5
Lease liabilities 65.7 72.8
Provisions 2.9 2.2
Contingent consideration 28.9 -
Others 7.8 3.4
----------- -----------
Total non-current liabilities 265.3 216.1
----------- -----------
Total liabilities 527.5 402.7
=========== ===========
Net assets 449.4 425.1
=========== ===========
Equity
Issued share capital 11 41.9 41.9
Share premium account 14.8 14.8
Equity reserve 6.4 5.8
Hedging and translation reserve 51.5 28.6
Retained earnings 346.5 343.2
Own shares (11.7) (9.2)
----------- -----------
Equity attributable to equity holders
of the parent 449.4 425.1
----------- -----------
Total equity 449.4 425.1
=========== ===========
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022 All equity is attributable
to equity holders of the parent
Issued Share Trans-
share premium Equity Hedging lation 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 year 2021 - - - - - 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 income/(expense)
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 - -
Dividends paid - - - - - - - -
-------- -------- -------- -------- -------- --------- ------- -------
Balance at 31 December
2021 41.9 14.8 5.8 (37.2) 65.8 343.2 (9.2) 425.1
======== ======== ======== ======== ======== ========= ======= =======
Profit for the year 2022 - - - - - 20.2 - 20.2
Losses on foreign exchange
contracts - cash flow
hedges - - - (2.3) - - - (2.3)
Exchange differences on
translation of overseas
operations - - - - 24.5 - - 24.5
Actuarial losses on defined
benefit pension schemes - - - - - (23.1) - (23.1)
Tax relating to components
of other
comprehensive income - - - 0.7 - 5.7 - 6.4
Total comprehensive income/(expense)
for the period - - - (1.6) 24.5 2.8 - 25.7
-------- -------- -------- -------- -------- --------- ------- -------
Share-based payment charge - - 4.3 - - - - 4.3
Purchase of shares held
by employee benefit trust - - - - - - (4.5) (4.5)
Use of shares held by
employee benefit trust - - - - - (2.0) 2.0 -
Transfer to retained earnings - - (3.7) - - 3.7 - -
Dividends paid - - - - - (1.2) - (1.2)
-------- -------- -------- -------- -------- --------- ------- -------
Balance at 31 December
2022 41.9 14.8 6.4 (38.8) 90.3 346.5 (11.7) 449.4
======== ======== ======== ======== ======== ========= ======= =======
Consolidated Cash Flow Statement
For the year ended 31 December 2022
Year ended Year ended
2022 2021
Notes GBPm GBPm
Net cash from operating activities 12a) 57.7 27.0
----------- -----------
Investing activities
Interest received 0.7 0.1
Proceeds on disposal of property,
plant and equipment 0.5 0.2
Purchases of property, plant and
equipment (28.7) (20.2)
Purchases of intangible assets (1.8) (1.1)
Acquisition of Spencer 14 (25.3) -
Proceeds on disposal activities
net of cash balances 14 - 51.7
Net cash (used)/generated in investing
activities (54.6) 30.7
----------- -----------
Financing activities
Dividends paid (1.2) -
New loans 90.8 20.0
Repayment of borrowings (90.4) (41.1)
Purchase of shares held by employee (4.5) -
benefit trust
Repayment of lease liabilities (9.1) (8.4)
Net cash used in financing activities (14.4) (29.5)
----------- -----------
Net (decrease)/increase in cash
and cash equivalents (11.3) 28.2
Cash and cash equivalents at beginning
of period 51.1 23.2
Effect of foreign exchange rate
changes 2.9 (0.3)
----------- -----------
Cash and cash equivalents at end
of period 12c) 42.7 51.1
=========== ===========
Notes to the above Financial Statements
For the year ended 31 December 2022
1. General information
These results for the year ended 31 December 2022 are an excerpt
from the Annual Report & Accounts 2022 and do not constitute
the Group's statutory accounts for 2022 or 2021. Statutory accounts
for 2021 have been delivered to the Registrar of Companies, and
those for 2022 will be delivered following the Company's Annual
General Meeting. The Auditor has reported on both those accounts;
their reports were 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 or equivalent
preceding legislation.
2. Significant accounting policies
Whilst the financial information included in this Annual Results
Release has been prepared in accordance with UK-adopted
international accounting standards, this announcement does not
itself contain sufficient information to comply with UK-adopted
international accounting standards. Full Financial Statements that
comply with UK-adopted international accounting standards are
included in the Annual Report & Accounts 2022 which is
available online at www.seniorplc.com. Printed copies will be
distributed on or soon after 10 March 2023.
At the date of authorisation of the Group's Financial
Statements, there are no relevant and material new standards,
amendments to standards or interpretations which are effective for
the year ended 31 December 2022.
3. Segment information
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.
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
Year Year Year Year Year Year Year Year
ended ended ended ended ended ended ended ended
2022 2022 2022 2022 2021 2021 2021 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External
revenue 553.0 295.4 - 848.4 438.9 219.8 - 658.7
Inter-segment
revenue 0.6 0.2 (0.8) - 0.4 0.1 (0.5) -
--------- --------- ------------ ------- --------- --------- ------------ ------
Total revenue 553.6 295.6 (0.8) 848.4 439.3 219.9 (0.5) 658.7
========= ========= ============ ======= ========= ========= ============ ======
Adjusted
trading
profit 20.3 25.4 (17.6) 28.1 7.9 12.9 (14.9) 5.9
Share of
joint venture
profit - 0.4 - 0.4 - 0.2 - 0.2
--------- --------- ------------ ------- --------- --------- ------------ ------
Adjusted
operating
profit (Note
4) 20.3 25.8 (17.6) 28.5 7.9 13.1 (14.9) 6.1
Amortisation
of intangible
assets from
acquisitions (0.2) - - (0.2) - - - -
Net restructuring
income (Note
4) 4.2 - - 4.2 2.2 2.2 - 4.4
Operating
profit 24.3 25.8 (17.6) 32.5 10.1 15.3 (14.9) 10.5
========= ========= ============ ======= ========= ========= ============ ======
Investment
income 1.9 0.5
Finance
costs (10.6) (8.5)
Corporate
undertakings (1.4) 21.2
------- ------
Profit before
tax 22.4 23.7
Tax (charge)/credit
(Note 5) (2.2) 0.5
------- ------
Profit after
tax 20.2 24.2
======= ======
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:
Assets Year ended Year ended
2022 2021
GBPm GBPm
Aerospace 647.8 506.6
Flexonics 217.3 184.9
Segment assets for reportable segments 865.1 691.5
Unallocated
Central 3.6 4.6
Cash 43.2 51.1
Deferred and current tax 13.0 8.3
Retirement benefits 51.8 72.2
Others 0.2 0.1
----------- -----------
Total assets per Consolidated Balance Sheet 976.9 827.8
=========== ===========
Liabilities Year ended Year ended
2022 2021
GBPm GBPm
Aerospace 189.5 148.1
Flexonics 79.7 63.9
Segment liabilities for reportable segments 269.2 212.0
Unallocated
Central 19.2 15.4
Loans and Overdrafts 143.7 131.0
Deferred and current tax 22.4 25.1
Retirement benefits 12.1 11.0
Deferred and Contingent consideration 52.3 -
Others 8.6 8.2
----------- -----------
Total liabilities per Consolidated Balance Sheet 527.5 402.7
=========== ===========
Total revenue is disaggregated by market sectors as follows:
Year Year
ended ended
2022 2021
GBPm GBPm
Civil Aerospace 339.4 244.5
Defence 122.1 125.0
Other 92.1 69.8
------- -------
Aerospace 553.6 439.3
Land Vehicles 164.1 118.8
Power & Energy 131.5 101.1
------- -------
Flexonics 295.6 219.9
Eliminations (0.8) (0.5)
------- -------
Total revenue 848.4 658.7
------- -------
Other Aerospace comprises space and non-military helicopters and
other markets, principally including semiconductor, medical, and
industrial applications.
4. Adjusted operating profit and adjusted profit/(loss) before
tax
The presentation of adjusted operating profit and adjusted
profit before tax measures, derived in accordance with the table
below, have been included to identify the performance of the Group
prior to the impact of amortisation of intangible assets from
acquisitions, net restructuring income and the costs and income
associated with corporate undertakings. The Board has adopted a
policy to separately disclose those items, where significant in
size, that it considers are outside the results for the particular
year under review and against which the Board measures and assesses
the performance of the business.
The adjustments are made on a consistent basis and also reflect
how the business is managed on a day-to-day basis.
The amortisation charge relates to acquisition of Spencer
Aerospace. It is charged on a straight-line basis and reflects a
non-cash item for the reported year. 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. The aerospace manufacturing grant, within net
restructuring income, represents incentives specific to only part
of the Group for a limited time period. Corporate undertakings
relate to business acquisition activities, 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.
Year ended Year ended
2022 2021
GBPm GBPm
Operating profit 32.5 10.5
Amortisation of intangible assets from acquisitions 0.2 -
Net restructuring income (4.2) (4.4)
Adjusted operating profit 28.5 6.1
=========== ===========
Profit before tax 22.4 23.7
Adjustments to profit/loss before tax as above (4.0) (4.4)
----------------------------------------------------- ----------- -----------
Corporate undertakings 1.4 (21.2)
Corporate undertakings - Interest 0.3 -
----------------------------------------------------- ----------- -----------
Total Corporate undertakings 1.7 (21.2)
Adjusted profit/(loss) before tax 20.1 (1.9)
=========== ===========
Net restructuring income
In 2020 the Group had 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. In 2022 there were still some
residual activities associated with that. The decisive actions
which we took on restructuring and cost management 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 GBP4.2m (2021 -
GBP4.4m). Of this, GBP4.0m income (2021 - GBP4.2m) related to an
aerospace manufacturing grant and GBP1.2m net charge related to
consultancy and other costs (2021 - GBP0.4m net charge). For
certain specific programmes, and in conjunction with the focus on
restructuring, management has also identified inventory impairment
reversals of GBP2.7m (2021 - GBP1.4m) where customer demand has
increased, and further impairment provisions on property, plant and
equipment in 2022 with a charge of GBP1.3m (2021 - GBP0.8m) to
cover the risk where there are no alternative uses.
Net cash inflow related to restructuring activities was GBP2.1m
(2021 - GBP0.9m net cash outflow). At 31 December 2022, a
restructuring provision of GBP0.2m (31 December 2021: GBP1.3m) was
recognised and is expected to be utilised in 2023.
Corporate undertakings
Costs associated with corporate undertakings were GBP1.7m in
2022, of which GBP1.2m of acquisition costs and GBP0.3m interest
unwind of deferred and contingent consideration relates to the
acquisition of Spencer Aerospace in November 2022 and GBP0.2m costs
relate to other corporate activities. In 2021, net income of
GBP21.2m was recognised, of which GBP24.2m gain relates to the
disposal of Senior Aerospace Connecticut in April 2021, partly
offset by GBP3.0m bid defence and costs relating to other corporate
activities. See Note 14 for further details.
5. Tax charge
Year ended Year ended
2022 2021
GBPm GBPm
Current tax:
Current year 8.2 7.0
Adjustments in respect of prior periods (1.9) (6.0)
----------- -----------
6.3 1.0
----------- -----------
Deferred tax:
Current year (3.5) (1.7)
Adjustments in respect of prior periods (0.6) 0.2
----------- -----------
(4.1) (1.5)
----------- -----------
Total tax charge/(credit) 2.2 (0.5)
=========== ===========
The adjusted tax rate for the year was 10.0% (2021 - 136.8%
credit), being a tax charge of GBP2.0m (2021 -GBP2.6m credit) on
adjusted profit before tax of GBP20.1m (2021 - GBP1.9m loss).
The adjusted tax rate benefits from enhanced deductions for
R&D expenditure in the US, the super-deduction for capital
expenditure in the UK, as well as prior year items.
The reported tax rate was 9.8%, being a tax charge of GBP2.2m on
reported profit before tax of GBP22.4m. This included GBP0.2m net
tax charge on items excluded from adjusted profit before tax. The
2021 reported tax rate was 2.1% credit, being a tax credit of
GBP0.5m on reported profit before tax of GBP23.7m.
Cash tax paid was GBP3.5m (2021 - GBP5.3m) and is stated net of
refunds received of GBP1.1m (2021 - GBP0.9m) of tax paid in prior
periods, including refunds arising from the offset of tax losses
against taxable profits of prior periods. Tax payments in 2021 were
GBP2.3m higher than they would otherwise have been as a result of
coronavirus relief measures in some countries which allowed the
deferral of tax bills ordinarily due in 2020 into 2021.
6. Dividends
No dividends were recorded in the prior period.
Year ended Year ended
2022 2021
GBPm GBPm
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December
2021 of GBPnil per share (2020 -GBPnil) - -
Interim dividend for the year ended 31 December
2022 of 0.30p per share (2021 -GBPnil) 1.2 -
1.2 -
----------- -----------
Proposed final dividend for the year ended 31
December 2022 of 1.00p per share (2021 - GBPnil) 4.1 -
7. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Number of shares Year ended Year ended
2022 2021
million million
Weighted average number of ordinary shares for
the purposes of basic earnings per share 415.3 415.7
Effect of dilutive potential ordinary shares:
Share options 11.6 6.8
----------- -----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 426.9 422.5
=========== ===========
Year ended 2022 Year ended 2021
Earnings and earnings per share Earnings EPS Earnings EPS
GBPm pence GBPm pence
Profit for the period 20.2 4.86 24.2 5.82
Adjust:
Amortisation of intangible
assets from acquisitions net
of tax of GBPnil (2021 - GBPnil) 0.2 0.05 - -
Net restructuring income net
of tax of GBP0.7m (2021 - GBP0.2m
tax credit) (3.5) (0.84) (4.6) (1.11)
Corporate undertakings net
of tax of GBP0.5m (2021 - GBP2.9m) 1.2 0.29 (18.3) (4.40)
Non-cash tax credit - - (0.6) (0.14)
Adjusted earnings after tax 18.1 4.36 0.7 0.17
========= ======= ========= =======
Earnings per share
* basic 4.86p 5.82p
* diluted 4.73p 5.73p
* adjusted 4.36p 0.17p
* adjusted and diluted 4.24p 0.17p
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 amortisation of
intangible assets from acquisitions, net restructuring income, the
costs and income associated with corporate undertakings and
non-cash tax credit. The Board has adopted a 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. See Note 4 for further details.
8. Goodwill
Goodwill increased by GBP49.5m during the year to GBP199.7m
(2021 - GBP150.2m) due to the acquisition of Spencer Aerospace of
GBP42.0m (see Note 14) and exchange translation differences of
GBP7.5m.
9. Investment in joint venture
The Group has a 49% interest in Senior Flexonics Technologies
(Wuhan) Limited, a jointly controlled entity incorporated in China
which was set up in 2012. The Group's investment of GBP4.4m
represents the Group's share of the joint venture's net assets as
at 31 December 2022 (2021 - GBP3.9m).
10. Property, plant and equipment
During the period, the Group spent GBP28.7m (2021 - GBP20.2m) on
the acquisition of property, plant and equipment. The Group also
disposed of property, plant and equipment with a carrying value of
GBP0.4m (2021 - GBP0.2m) for proceeds of GBP0.5m (2021 - GBP0.2m).
At 31 December 2022, right-of-use assets were GBP70.8m (2021 -
GBP67.4m).
11. Share capital
Share capital as at 31 December 2022 amounted to GBP41.9m. No
shares were issued during 2021 and 2022.
12. Notes to the Consolidated Cash Flow statement
a) Reconciliation of operating profit to net cash from operating
activities
Year ended Year ended
2022 2021
GBPm GBPm
Operating profit 32.5 10.5
Adjustments for:
Depreciation of property, plant and equipment 48.1 46.3
Amortisation of intangible assets 1.7 1.5
Profit on sale of fixed assets (0.1) -
Share-based payment charges 4.3 3.5
Pension payments in excess of service cost (1.4) (5.1)
Corporate undertaking costs (1.4) (4.8)
Share of joint venture (0.4) (0.2)
Increase in inventories (34.2) (7.2)
Increase in receivables (18.8) (16.1)
Increase in payables and provisions 37.5 11.6
Restructuring impairment of property, plant
and equipment and software 1.3 3.8
US class action lawsuits - (2.3)
Working capital and provisions currency movements 1.8 (1.1)
----------- -----------
Cash generated by operations 70.9 40.4
Income taxes paid (3.5) (5.3)
Interest paid (9.7) (8.1)
----------- -----------
Net cash from operating activities 57.7 27.0
=========== ===========
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 acquisitions, restructuring, disposal activities,
financing and transactions with shareholders. It is used as a
performance measure by the Board and Executive Committee and is
derived as follows:
Year ended Year ended
2022 2021
GBPm GBPm
Net cash from operating activities 57.7 27.0
Corporate undertaking costs 1.4 4.8
Net restructuring cash (received)/paid (2.1) 0.9
US class action lawsuits - 2.3
Interest received 0.7 0.1
Proceeds on disposal of property, plant and
equipment 0.5 0.2
Purchases of property, plant and equipment (28.7) (20.2)
Purchases of intangible assets (1.8) (1.1)
----------- -----------
Free cash flow 27.7 14.0
=========== ===========
c) Analysis of net debt
At 1 At 31
January Net Exchange Other December
2022 cashflow Non cash movement movements(1) 2022
GBPm GBPm GBPm GBPm GBPm GBPm
Cash and bank balances 51.1 (10.8) - 2.9 - 43.2
Overdrafts - (0.5) - - - (0.5)
-------- --------- -------- --------- ------------- ---------
Cash and cash equivalents 51.1 (11.3) - 2.9 - 42.7
Debt due within
one year (14.8) 17.2 - (2.4) - -
Debt due after one
year (116.2) (17.6) - (9.4) - (143.2)
Lease Liabilities(1) (73.2) 9.1 - (5.3) (9.0) (78.4)
-------- --------- -------- --------- ------------- ---------
Liabilities arising
from financing activities (204.2) 8.7 - (17.1) (9.0) (221.6)
-------- --------- -------- --------- ------------- ---------
Total (153.1) (2.6) - (14.2) (9.0) (178.9)
-------- --------- -------- --------- ------------- ---------
(1) Other movements include lease additions and modifications of GBP4.3m
and GBP4.7m related to lease acquired on acquisition. Following
a review of the lease liability disclosures in 2022 the presentation
of current and non-current liabilities within the Consolidated
Balance Sheet for 31 December 2022 now reflects the timing of
the underlying lease payments. Comparative information has not
been restated as the adjustment is not deemed material.
Year ended Year ended
2022 2021
GBPm GBPm
Cash and cash equivalents comprise:
Cash and bank balances 43.2 51.1
Overdrafts (0.5) -
----------- -----------
Total 42.7 51.1
=========== ===========
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Consolidated Balance Sheet) comprise
cash at bank and other short-term highly liquid investments with a
maturity of three months or less.
d) Analysis of working capital and provisions
Working capital comprises the following:
Year ended Year ended
2022 2021
GBPm GBPm
Inventories 194.3 145.2
Trade and other receivables 126.7 98.0
Trade and other payables (191.2) (143.0)
----------- -----------
Working capital, including derivatives 129.8 100.2
Items excluded:
Foreign exchange contracts 1.5 2.8
----------- -----------
Total 131.3 103.0
----------- -----------
Working capital and provisions movement, net of restructuring
items, a non-statutory cash flow item, is derived as follows:
Year ended Year ended
2022 2021
GBPm GBPm
Increase in inventories (34.2) (7.2)
Increase in receivables (18.8) (16.1)
Increase in payables and provisions 37.5 11.6
----------- -----------
Working capital and provisions movement, excluding
currency effects (15.5) (11.7)
Items excluded:
Decrease in restructuring related inventory
impairment 2.7 1.5
Decrease in net restructuring provision and
other receivables 0.7 7.6
----------- -----------
Total (12.1) (2.6)
=========== ===========
13. Retirement benefit schemes
At 31 December 2022, aggregate retirement benefit liabilities of
GBP12.1m (2021 - GBP11.0m) comprise the Group's US defined benefit
pension funded schemes with a total deficit of GBP6.7m (2021 -
GBP5.3m) and other unfunded schemes, with a deficit of GBP5.4m
(2021 - GBP5.7m). The retirement benefit surplus of GBP51.8m (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.
14. Acquisition and Disposal activities
Acquisition of Spencer Aerospace Manufacturing, LLC.
On 25 November 2022, the Group acquired 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,
located in Valencia, California, USA. This acquisition enhances
Senior's industry leading fluid conveyance capabilities and is an
important step in our strategy to optimise our portfolio and
maximise value for shareholders. Integration plans are well
defined, and we are now focused on delivering the growth
opportunities we have identified.
The initial consideration was $30m (GBP24.8m) paid in cash at
completion, with a net working capital adjustment of $0.2m
(GBP0.2m), of which $0.6m (GBP0.5m) was paid in cash initially and
$0.4m (GBP0.3m) cash adjustment was received in January 2023. A
further $30m (GBP24.8m) is to be paid 12 months after completion.
Additionally, there is contingent consideration of $40m (GBP33.1m)
potentially payable, in milestone amounts, dependent on the
financial performance of Spencer Aerospace during the period
between completion and 31 December 2026. The most likely range of
this contingent element is estimated between $30m and $40m. The
amortised cost of deferred consideration is GBP23.2m and the fair
value of contingent consideration is GBP28.7m at the acquisition
date. The fair value of contingent consideration assumes expanding
the relationship with Spencer's established customers and
leveraging Senior's strong relationships with OEMs, Tier 1
integrators, and aftermarket customers around the world to exploit
opportunities for Spencer Aerospace. The acquisition was funded
using the Group's existing borrowing facilities.
Set out below is a summary of the fair value of identified
assets acquired and liabilities assumed:
GBPm
------------------------------------------------------- ------
Identifiable intangible assets 31.0
Property, plant and equipment 5.8
Inventories 2.2
Financial assets, excluding cash and cash equivalents 1.7
Cash and cash equivalents -
Lease liabilities (4.7)
Financial liabilities (1.1)
Net assets acquired 34.9
Goodwill 42.0
------------------------------------------------------- ------
Total consideration 76.9
------------------------------------------------------- ------
Consideration satisfied by:
Cash paid 25.3
Working capital adjustment receivable (0.3)
Deferred and Contingent consideration payable 51.9
------
Total consideration 76.9
------------------------------------------------------- ------
Net cash outflow arising on acquisition:
Cash consideration 25.3
Less: cash and cash equivalents acquired -
------------------------------------------------------- ------
Net cash outflow arising on acquisition 25.3
------------------------------------------------------- ------
The goodwill of GBP42.0m represents the premium paid in
anticipation of future profitability from assets that are not
capable of being separately identified and separately recognised
such as the assembled workforce as well as the expectation that the
Group will be able to leverage its wider market access and strong
financial position to generate sustainable financial growth beyond
what Spencer would have potentially achieved as a stand-alone
company. The strong customer relationships that the Group has with
OEMs, Tier 1 integrators, and aftermarket customers around the
world, will open new opportunities for Spencer Aerospace. The
combined capabilities will provide greater access to developing
market opportunities such as hydrogen infrastructure and fluid
handling. There are strong synergies with Senior's existing fluid
conveyance businesses, and the combination of expertise will
accelerate growth in aerospace and adjacent markets. Goodwill is
expected to be fully tax deductible in accordance with US tax
rules.
The intangible assets acquired as part of the acquisition relate
mainly to qualified parts lists and customer relationships, the
fair value of which is dependent on estimates of attributable
future revenues, profitability and cash flows, and are being
amortised over 18 and 16 years. The fair value has also been
assigned to the order backlog which are being amortised over 1
year.
The financial assets acquired include trade receivables with a
fair value of GBP1.6m and a gross contractual value of GBP1.6m, all
of which is currently expected to be collectible.
Acquisition-related costs of GBP1.2m are included within
corporate undertakings in the Group's Consolidated Income Statement
for the 12 months ended 31 December 2022 (See Note 4).
From the date of acquisition to 31 December 2022, Spencer
contributed GBP0.7m of external revenue and GBP(0.1)m to the
Group's operating profit before amortisation of intangible assets
from the acquisition of GBP0.2m. If the acquisition had been
completed on 1 January 2022, Group revenue for the 12 months ended
31 December 2022 would have been GBP855.9m and Group operating
profit would have been GBP31.2m.
Disposal activities
On 22nd April 2021, the Group sold its stand alone,
build-to-print helicopter structures operating business, Senior
Aerospace Connecticut, based in the USA. The decision to sell was
based on its primary focus on build-to-print parts for the rotary
sector, with proceeds from the sale strengthening the Group's
balance sheet and providing greater flexibility for the Group to
operate within its capital deployment framework. For the year ended
31 December 2021, Senior Aerospace Connecticut external revenue was
GBP8.1m and operating profit was GBP0.8m.
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.
In 2021 the Group received GBP0.2m deferred consideration
relating to the disposal of its Aerospace business Senior Aerospace
Absolute Manufacturing.
15. Provisions
Provisions include warranty costs of GBP10.8m (2021 - GBP6.9m),
restructuring of GBP0.2m (2021 - GBP1.3m), and other provisions
including contractual matters, claims and legal costs that arise in
the ordinary course of business of GBP8.6m (2021 - GBP7.8m).
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 31 December 2022 (see Note 15). 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. Related party transactions
The Group has related party relationships with a number of
pension schemes and with Directors and Senior Managers of the
Group.
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END
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