2nd Mar 2005 07:01
Meggitt PLC02 March 2005 For Immediate Release 2 March 2005 Contacts: Meggitt PLC 020 7466 5000 on 2 March 2005 Terry Twigger, Group Chief Executive 01202 847847 at all other times Stephen Young, Group Finance Director or Buchanan Communications 020 7466 5000 Charles Ryland/Jeremy Garcia "Another year of excellent progress" MEGGITT PLC Audited Results for Year ended 31 December 2004 2004 2003Group turnover £479.2m £402.4m +19%Profit before tax, goodwill amortisation and £89.5m £77.8m +15%exceptional items (1),(2)Profit before tax (2) £56.6m £44.3m +28%EPS (2), (3) 9.1p 6.7p +36%Final dividend (3) 4.80p 4.44p +8%Cash flow from operating activities before £111.0m £85.6m +30%exceptional costs (2) • Turnover up 19%. Up 29% at constant currency rates. • Profit before tax, goodwill amortisation and exceptional items up 15%. Up 29% at constant currency rates. • Continued strong cash flow from operating activities, 110% of operating profit converted into cash. • Dunlop acquisition performing in line with expectations. • Three further acquisitions completed in December. • Final dividend up 8% to 4.80p (2003: 4.44p): full year dividend 7.00p (2003: 6.53p). Terry Twigger, Chief Executive commented: "Meggitt made excellent progress in 2004 delivering record turnover and profitsunderpinned by four successful acquisitions in the year. The highlight of theyear was the £426.8m acquisition of Dunlop Aerospace, the integration of whichis now underway and progressing well. Additionally, our new manufacturingfacility in China was successfully opened ahead of schedule. The order book atconstant exchange rates at December 2004 is up 9% on December 2003 afteradjusting for the acquisitions and we look forward to maintaining our momentumin 2005." (1) Excludes operating exceptional costs (2004: £7.9m; 2003: nil), non-operating exceptional items (2004: nil; 2003: £13.3m) and goodwill amortisation (2004: £25.0m; 2003: £20.2m) (2) Adjusted for change in policy for R&D accounting; see note 6 page 17 (3) Adjusted for bonus element of the rights issue RESULTS Meggitt has achieved record turnover and profits in 2004, supported by strongorganic growth at constant exchange rates and a good performance from recentacquisitions. Group turnover was £479.2m (2003: £402.4m), an increase of 19%. This increasewas after the conversion of overseas sales into sterling at less favourableexchange rates than 2003 which adversely impacted reported sales by £38.9m.Acquisitions completed in the year contributed £49.1m and the full year impactof 2003 acquisitions added £35.4m. Excluding both these and the adversecurrency impact, turnover increased by 7%. Operating profit before operating exceptional costs and goodwill amortisationincreased by 17% to £100.6m (2003: £86.0m). This was after a £12.1m adverseimpact from currency and a £10.9m benefit from acquisitions completed in theyear. The full year effect of 2003 acquisitions in 2004 added £6.4m tooperating profit. In 2004, the Group adopted Dunlop Aerospace's policy ofcapitalising certain research and development expenditure, in line with theinternational accounting standards to be adopted for 2005. Meggitt hadpreviously expensed such costs. This change had the effect of increasingreported profit in 2004 by £3.4m and by £2.3m in a restated 2003. Excludingcurrency, acquisitions and the change in R&D treatment, operating profit beforeoperating exceptional costs and goodwill amortisation increased by 9%. Interest expense increased by £2.9m to £11.1m (2003: £8.2m) driven by the DunlopAerospace acquisition completed in August. This resulted in profit beforetaxation, all exceptional items and goodwill amortisation of £89.5m (2003:£77.8m) an impressive increase of £11.7m (15%) and a record. Operating exceptional costs of £7.9m (2003: nil) were as anticipated and relateto the setting up of a new manufacturing facility in China, and the relatedclosure of an existing manufacturing facility in the US Virgin Islands (£3.7m),together with the initial costs of integrating the Dunlop Aerospace business.The Dunlop costs cover expected integration costs and the consolidation ofMeggitt's polymers business into Dunlop Aerospace's facilities in the Midlands(£4.2m). With goodwill amortisation increased to £25.0m (2003: £20.2m) and with no non-operating exceptional costs (2003: £13.3m) statutory profit before taxationincreased by 28% to £56.6m (2003: £44.3m). The effective tax rate for the Group reduced to 27% (2003: 28%) and basicearnings per share increased by 36% to 9.1 pence (2003: 6.7 pence). However, asa result of the China start-up and Dunlop Aerospace integration costs, thebenefits from both of which will accrue in 2005 and beyond, IIMR EPS decreasedby 6% from 16.4 pence in 2003 to 15.4 pence in 2004. The Group continued its outstanding record of strong cash generation with cashflow from operating activities before exceptional costs at 110% of operatingprofit before operating exceptionals and goodwill amortisation. Net cash inflowbefore acquisitions was £45.6m (2003: £38.9m). Interest cover was 8.3 times(2003: 10.5 times) as a result of the acquisitions with gearing at the end ofDecember at 71% (December 2003: 52%). The Board is proposing an 8% increase in the final dividend to 4.80 pence (2003:4.44 pence). The full dividend is covered 2.2 times (2003: 2.5 times) by profitbefore exceptional items and goodwill amortisation. CORPORATE ACTIVITY The acquisition of the design and manufacturing division of the Dunlop StandardAerospace Group (Dunlop Aerospace) for £426.8m including expenses was completedon 24 August 2004. The acquisition was funded by a rights issue which raised£180.4m net of expenses and the remainder from borrowings. Dunlop manufactureswheels and brakes, polymers, composites and a variety of engine-relatedcomponents for the aerospace industry. Since the acquisition, Dunlop Aerospacehas performed in line with expectations and the integration into Meggitt isprogressing well. Three other acquisitions were completed in December for a combined considerationof £14.2m in cash. On 17 December 2004, the acquisition of Wilcoxon ResearchInc (Wilcoxon) was completed. Wilcoxon, located in Gaithersburg, Maryland, USA,manufactures a range of products from rugged, low cost industrial accelerometers(vibration sensors) to unique laboratory and test instrumentation. Wilcoxonwill form part of the Meggitt Electronics business unit which produces high-technology micro-machined sensor solutions and high volume electroniccomponents. On 22 December 2004, the acquisition of Eaton Corporation's flight-lock actuatorbusiness was completed. This business manufactures door locking devices andrepair kits for Boeing aircraft and will be integrated into Meggitt's existingAerospace business. The acquisition of Schreiner Canada Limited (Schreiner) was completed on 24December 2004. Schreiner, located in Medicine Hat, Alberta, Canada, assembles,services and operates unmanned air, ground and sea vehicles and targets fortraining military forces and the defence industry. It will form part of MeggittDefence Systems, which is already the world leader in aerial free flying andtowed targets, electronic scoring and electro-mechanical launch and recoverysystems. BOARD OF DIRECTORS In order to comply with corporate governance best practice so as to ensure anappropriate balance between executive and non-executive directors, Mr JohnStobie and Dr Richard Greaves have agreed to stand down from the Meggitt PLCBoard with effect from 1 March 2005. Following the recent significant expansion of the Group and in order tostrengthen Meggitt further for future development, a new Executive ManagementBoard is being formed, charged with day to day management of the Group. Johnand Richard will be senior members of the new Management Board. Additionalmembers will be other business heads and key functional executives. The Group intends to continue its successful strategy of growing its corebusinesses both organically and by acquisition. These changes will help toensure its management processes support this strategy. After 1 March 2005 the Meggitt PLC Board will be as follows: Sir Colin Terry Non-Executive ChairmanTerry Twigger Chief ExecutiveSir Alan Cox Senior Non-Executive DirectorDavid Robins Non-Executive DirectorPeter Hill Non-Executive DirectorStephen Young Group Finance DirectorPhilip Green Group Corporate Affairs Director OPERATIONAL HIGHLIGHTS Aerospace • Turnover increased 23% to £339.4m (2003: £275.5m). At constant exchange rates the increase was 32%. • Operating profit before exceptional costs and goodwill amortisation increased by 19% to £77.3m (2003: £65.1m). At constant exchange rates the increase was 32%. • Dunlop acquisition performing in line with expectations and integration is progressing as planned. Meggitt's position as a world leader in the field of aerospace engine conditionmonitoring has continued to be enhanced. The Engine Monitoring Unit on the Trent 900 engine for use in the new AirbusA380 aircraft has passed certification. This unit is the first of its kind andwill, through use of advanced algorithms, help to optimise maintenance on thatengine. In addition the initial production orders for the electronicsmonitoring part of the engine mounted Vibration Monitoring Unit, for the GP7200Alliance engine, also to be used on the Airbus A380 were received. Building on this success, Meggitt has been selected to supply engine mountedEngine Vibration Monitoring units on the General Electric GEnx engine. Contracts have been signed for the Chinese regional jet (ARJ-21) EngineVibration Monitoring Unit and the Engine Interface Control Unit. This positionsMeggitt firmly in the emerging Chinese civil aircraft market and complementslast year's award to supply the engine monitoring system on the Russian regionaljet. Initial orders have been received for the retrofit of our new advanced enginevibration monitoring system for the Boeing 737 aircraft where there is asubstantial retrofit market in excess of 1,000 aircraft. The main additionalbenefit of this system is to give advanced warning of bearing degradation whichcan lead to engine shut downs. In addition, contracts with Airbus have been received for the development andproduction of an Advanced Engine Interface and Vibration Monitoring Unit forfitment on CFM-56 powered A340 Aircraft. This unit also enhances the currentlyinstalled product by providing further CFMI developed advanced engine algorithmsfor early detection of No.4 bearing degradation. The unit will be standard fiton new aircraft and be available for retrofit onto the existing fleet of over250 CFM-56 powered A340 aircraft. Orders have also been received from the United States Army to provide oil debrismonitoring system products for the AH-64A and AH-64D Apache helicopters. Thesefluid monitoring products will improve the mission effectiveness andavailability of the Apache by reducing the number of unnecessary precautionarylandings and aborted missions in addition to lowering system maintenance costs. Progress in the Avionics business continued with a number of new programmeorders secured. These included an order for the provision of secondary flightdisplay systems to Pilatus for the update of Royal Australian Air Force PC-9trainers and also orders for a wide range of equipment for the long awaitedcontract for the supply of BAE SYSTEMS Hawk trainers to India. Also, Avionicswas selected to supply the threat warning indicators for F-16 aircraft destinedfor Poland, which is the first order for this product range. In addition, theAvionics business should receive orders in excess of £35m in the first half ofthe year relating to the second tranche of Eurofighter aircraft. Planning activities for a new facility for the Vibro-Meter business inManchester, New Hampshire USA, are progressing. A sixteen acre green fieldproperty located in close proximity to the existing facility has been purchasedin order to build a 60,000 sq ft facility due to come on line in 2006. A major contract was received for the supply of the environmental cooling systemfor the Boeing C130 Avionics Modernisation Programme (AMP). As a consequence ofcontinued investment in engineering resources, 16 new valve programme orders inthe aerospace market and 6 programmes in the industrial power generation marketwere won in 2004. It is anticipated that these new programmes will be worth inexcess of £100m over their life. Airdynamics also secured orders for fanproducts for the V-22 Osprey and Joint Strike Fighter which are expected to beworth in the order of £24m over the next ten years. Building on its success on the A380 aircraft, Safety Systems was selected toprovide engine and landing gear fire protection for the new Airbus militaryA400M cargo aircraft. This will have its first flight in 2008 with deliveriesscheduled for 2009 and is estimated to be valued at £30m over the life of theprogramme. The flight lock actuator business acquired from Eaton Corporation inDecember 2004 has already been integrated successfully into the Safety Systemsfacility in California, USA. Deliveries of this product range commenced inJanuary 2005. Further contracts were received from Eclipse Aviation to provide the engineinlet anti-ice and engine bleed ducting system for the new Eclipse 500 verylight jet. Low rate initial production is expected to commence in the secondhalf of 2006. This order, together with the already announced autopilot order,means that even at half of Eclipse's projected volumes these contracts arepotentially worth in excess of £110m over the next ten years. The polymers business in the USA received the prestigious "Platinum SourcePreferred Supplier Award" from Northrop Grumman. The award criteria includedoutstanding performance on delivery, quality and cost. The Dunlop Aerospace companies acquired in August 2004 contributed £49.0m toturnover and £10.9m of operating profit (before £4.2m of operating exceptionalcosts). The Dunlop businesses include Polymers & Composites and Fluid Dynamicsproducts. These businesses which are based both in the UK and the US arecomplementary to Meggitt's existing product lines. Work is underway tointegrate these businesses into Meggitt and in the first half of 2005, Meggitt'sexisting UK polymers business will move to Dunlop facilities. During 2004, theFluid Dynamics businesses were successful in securing a number of new orderswhich included supplying two heat exchangers to Pratt & Whitney Canada for thePW610 turbofan engine that powers the Eclipse very light jet and a heatexchanger for another PW600 engine family model - the PW615 on the CessnaMustang. An anti-ice valve is be provided to Pratt & Whitney Canada for thePW305/306 engines. Other heat exchanger contracts received were for the GEnxengine that will go on the Boeing 787 Dreamliner and the SM146 engine designedfor the Russian regional jet. A substantial part of Dunlop Aerospace is the Braking Systems business which isprimarily based in the UK with subsidiary facilities in Belgium, Singapore andthe US supporting the aftermarket. Since acquisition the management of theBraking Systems facilities has been combined which will lead to a number ofsignificant improvements in terms of costs and efficiencies. The Braking Systems business is a major workshare partner with Honeywell on thewheels and braking systems for the A380 aircraft. The main wheel and braketechnical service order (TSO) testing for the conventional wheel and brake wascompleted during 2004. This clears the way for flight testing on the aircraftto commence in 2005. In addition, parallel development work on the use of metalmatrix composite (MMC) material which offers substantial weight benefits for thewheels is ongoing. Braking Systems also supplies the wheels, braking system andlanding gear computer for the Eurofighter and the announcement of orders for thesecond tranche of Eurofighter aircraft underpins the importance of thisprogramme with £30m of orders expected in the first half of the year. The benefits from the actions taken to integrate Dunlop Aerospace into Meggittwill deliver annualised savings of £7m in 2005 and £10m in 2006. The cost ofachieving these savings is approximately £9m (£4m in 2004 and £5m in 2005).This is in line with our expectations at the time of the acquisition. Defence Systems • Turnover increased 33% to £68.9m (2003: £52.0m). At constant exchange rates the increase is 46% driven by acquisitions. • Operating profit before goodwill amortisation increased by 27% to £12.2m (2003: £9.6m). At constant exchange rates the increase is 40%. Meggitt Defence Systems made excellent progress during 2004. It maintained itsmarket leading position in weapon training systems, secured new programme ordersfor ammunition handling and thermal cooling systems and won developmentprogrammes for the next generation of towed countermeasures. In weapon training systems, Meggitt secured two new orders for the 'Banshee',from Finland and the French Navy. The Banshee is now in service with 42countries worldwide. The UK MoD also extended the Banshee services contract fora further two years until 2007. The acquisition of Schreiner further underpinsMeggitt's position in the worldwide targets market. In ammunition handling, multiple development and production system contractswere secured in 2004. These included the large calibre autoloader for FutureCombat Systems, 120mm mortar for US Army, next generation 30mm ammunition systemfor the C130 gunship, and the ammunition handling system for the Stryker lightarmoured vehicle. In Thermal Cooling Systems orders were received forenvironmental control system pods for the rapid airborne mine detection andclearance system. These development contracts for ammunition handling andthermal cooling systems will lead to significant production contracts over thenext five years in excess of £30m. Countermeasures production activity declined as expected in 2004 but substantialprogress was made in the development of the next generation of systems. Thisincluded a development contract from the USAF for a compact Reel Out/Reel In(RORI) magazine for fibre optic towed decoys. The RORI magazine will allowrecovery of the expensive towed decoy significantly reducing the cost ofownership of these highly effective countermeasure systems. Defence Systems in the UK is being relocated to a new modern facility in theAshford, Kent area. This will improve the efficiency of the business and alsopromote Ashford as the centre of excellence for all Meggitt Defence Systemsproducts for the European marketplace. Electronics • Turnover from continuing operations was £70.9m (2003: £71.2m). At constant exchange rates, turnover was up 10%. • Operating profit before exceptional costs and goodwill amortisation from continuing operations reduced by £0.3m to £11.1m (2003: £11.4m). At constant exchange rates, operating profit was 16% higher. • New China facility officially opened on 20 October 2004, ahead of schedule. Exceptional operating costs of £3.7m in line with expectations. In the Electronics businesses, the continued commitment to new productintroduction has ensured that a number of new programme orders have beensecured. These include sensors for the NASA space shuttle, sensors for Lockheedfor the Joint Strike Fighter aircraft flight testing and cables and retrofitkits for GE industrial power products. Progress also continues in the highvolume lower price market with a number of successes in the automotive marketincluding orders from Behr Hella, Preh, TRW and Eaton. The acquisition of Wilcoxon will provide a complementary range of products, andenhance further Meggitt Electronics' existing core competencies in sensor designand applications, opening up synergistic opportunities in research anddevelopment and market development. In addition, the use of Meggitt's existingdistribution network should further increase Wilcoxon's exposure to the marketplace. In the second half of 2004, Meggitt Electronics completed the development of itsmanufacturing facility in Xiamen, China. It was opened formally in October andin December, the facility passed its ISO9001-2000 and ISO-14001 certificationaudits after just 7 months in operation. With the project progressing well, theclosure of the TTI facility in US Virgin Islands is planned to be finalised bythe end of the first half. INTERNATIONAL FINANCIAL REPORTING STANDARDS The Group will, in line with other UK companies, adopt International FinancialReporting Standards (IFRS) in 2005. The principal standards which will impactthe Group's results are: IAS12 Income Taxes IAS19 Employee Benefits IAS32 & 39 Financial Instruments IFRS2 Share Based Payment IFRS3 Business Combinations Our 2004 results will be restated to IFRS prior to publication of our 2005Interim results in order to demonstrate the impact on the Group's financialstatements. OUTLOOK The markets we operate in continue to improve although the effects of the weakdollar are expected to continue to influence our reported performance in 2005.Both Boeing and Airbus are projecting significant increases in large civil jetdeliveries in 2005 and 2006 compared with the low point of the cycle of 2003/2004 and deliveries of new aircraft in the business and general aviationsegments continue to recover although the picture for regional aircraft ismuted. The market for civil spares and repairs continues to grow in line with theincreasing utilisation of aircraft. Military equipment sales are predicted toremain firm in 2005. The effect of any slow down in future defence expenditureon new platforms will be mitigated by Meggitt's strong position on existingplatforms and the subsequent demand for spares and repairs. The acquisitionsmade in the second half of 2004 are performing well and the benefits from theopening of our facility in China will start to impact positively in 2005. The order book at the end of December 2004 is up 9% over December 2003, atconstant exchange rates when including the 2004 acquisitions in both years. The Group is therefore on track to deliver another strong year of sustainedgrowth in 2005 and as a consequence the Directors are recommending an increasein the final dividend of 8%. Audited Consolidated Profit and Loss Accountfor the year ended 31 December 2004 2004 2004 2004 2003 Restated Continuing Acquisitions Total Total £'000 £'000 £'000 £'000 Turnover 430,084 49,099 479,183 402,441Cost of sales (233,634) (27,597) (261,231) (219,879) Gross profit 196,450 21,502 217,952 182,562Net operating expenses - before goodwill amortisation and exceptional (106,686) (10,646) (117,332) (96,541)operating costsExceptional operating costs (3,673) (4,206) (7,879) -Amortisation of goodwill (19,262) (5,719) (24,981) (20,185)Net Operating Expenses (129,621) (20,571) (150,192) (116,726)Operating profit before goodwill amortisation 89,764 10,856 100,620 86,021 and exceptional operating costsExceptional operating costs (3,673) (4,206) (7,879) -Amortisation of goodwill (19,262) (5,719) (24,981) (20,185)Operating profit 66,829 931 67,760 65,836Net loss on disposal of discontinued operations - - - (13,334)Profit on ordinary activities before interest 66,829 931 67,760 52,502Interest payable (net) (6,498) (4,653) (11,151) (8,174) Profit/(loss) on ordinary activities before taxation 60,331 (3,722) 56,609 44,328Tax on profit on ordinary activities (22,031) (21,897) Profit for the financial year 34,578 22,431Dividends (30,059) (22,113) Retained profit for the financial year 4,519 318 Earnings per share - basic 9.1p 6.7pEarnings per share - diluted 9.1p 6.7pEarnings per share - IIMR 15.4p 16.4pProfit on ordinary activities before taxation, 83,266 6,203 89,469 77,847exceptional operating costs, loss on disposal ofdiscontinued operations and goodwill amortisation Audited Consolidated Balance Sheetas at 31 December 2004 2004 2003 Restated £'000 £'000Fixed assets Goodwill 610,045 318,877Development expenditure 18,503 5,262Licences, patents and trademarks 285 637Tangible assets 113,055 53,312Investments 1,075 1,075 742,963 379,163Current assets Stocks 106,351 73,539Debtors - amounts falling due within one year 121,835 97,956Debtors - amounts falling due after more than one year 54,436 24,343Cash at bank and in hand 43,951 22,670 326,573 218,508Creditors - amounts falling due within one year (161,116) (117,151)Net current assets 165,457 101,357 Total assets less current liabilities 908,420 480,520Creditors - amounts falling due after more than one (377,669) (159,195)yearProvisions for liabilities and charges (65,756) (50,201) Net assets 464,995 271,124 Capital and reserves Called up share capital 21,481 14,761Share premium account 342,636 155,475Other reserves 14,064 14,064Revaluation reserve 54 55Profit and loss account 86,760 86,769 Shareholders' funds - equity 464,995 271,124 Audited Consolidated Cash Flow Statementfor the year ended 31 December 2004 2004 2004 2003 2003 Restated Restated £'000 £'000 £'000 £'000 Cash inflow from operating activities before 111,012 85,582exceptional operating costsCash outflow from exceptional operating costs (3,088) -Cash flow from operating activities 107,924 85,582 Returns on investments and servicing of financeInterest received 1,094 866Debt issue costs (1,122) (731)Interest paid (11,223) (8,406) (11,251) (8,271)Taxation (18,578) (12,728) Capital expenditure and financial investmentPurchase of tangible fixed assets (14,159) (10,307)Purchase of intangible fixed assets (5,032) (3,923)Sale of tangible fixed assets 192 401Sale of investments 25 262 (18,974) (13,567)Cash inflow before corporate items 59,121 51,016 Acquisitions and disposalsPurchase of businesses (440,447) (60,454)Net cash acquired with businesses 6,914 11Disposal of businesses - 3,181 (433,533) (57,262)Equity dividends paid (13,529) (12,162)Cash outflow before financing (387,941) (18,408) FinancingIssue of ordinary share capital 188,542 1,876Expenses of issue of ordinary share capital (5,625) -Debt due within one year: increase in short term borrowings 12,193 26,574 repayment of short term borrowings (15,427) (36,567) Debt due beyond one year: increase in long term borrowings 241,176 163,030 repayment of long term borrowings (13,479) (140,861) 407,380 14,052Increase/(decrease) in cash in year 19,439 (4,356) Audited Consolidated Statement of Total Recognised Gains and Losses 2004 2003 Restated £'000 £'000 Profit for the financial year 34,578 22,431Currency translation differences on foreign currency net (4,554) (13,051)investmentsTotal recognised gains and losses relating to the year 30,024 9,380Prior year adjustment 3,727Total gains and losses recognised since last annual report 33,751 Audited Segmental Analysisfor the year ended 31 December 2004 Turnover Operating Profit Operating Assets 2004 2003 2004 2003 2004 2003 Restated Restated Restated £'000 £'000 £'000 £'000 £'000 £'000 Segment Aerospace 339,350 275,506 77,342 65,090 200,290 96,788Defence Systems 68,949 52,030 12,195 9,586 13,957 16,734Electronics 70,884 71,235 11,083 11,383 17,072 13,908Unallocated - - - - (5,875) (6,528)Goodwill amortisation - - (24,981) (20,185) - -Exceptional Costs(i) - - (7,879) - - - Continuing 479,183 398,771 67,760 65,874 225,444 120,902 Discontinued - 3,670 - (38) - - 479,183 402,441 67,760 65,836 225,444 120,902 Country of origin UK 138,231 109,056 10,971 9,096 136,194 33,174Rest of Europe 61,252 54,823 9,088 6,729 29,592 28,868North America 276,243 238,562 47,951 50,014 58,885 58,852Other 3,457 - (250) (3) 773 8 479,183 402,441 67,760 65,836 225,444 120,902 Geographical market UK 76,727 60,230Rest of Europe 101,032 92,605North America 254,076 209,761Other 47,348 39,845 479,183 402,441 Reconciliation of operating assets to net assets 2004 2003 Restated £'000 £'000 Operating assets 225,444 120,902Investments 1,075 1,075Goodwill 610,045 318,877Proposed dividend (20,623) (15,057)Net debt (328,205) (140,526)Accrued interest (982) 222Tax balances (21,759) (14,369) 464,995 271,124 (i) Allocated £4,206,000 to Aerospace and £3,673,000 to Electronics Audited Consolidated Cashflow Statement Notesfor the year ended 31 December 2004 Reconciliation of operating profit to operating cash flow 2004 2003 Restated £'000 £'000 Operating profit 67,760 65,836Depreciation and 40,253 32,562amortisationChange in stocks (11,866) 3,237Change in debtors 1,266 (10,192)Change in creditors 10,454 (5,846)Loss/(profit) on disposal of 57 (15)fixed assets Cash inflow from operating 107,924 85,582activities Analysis of net debt Other At Cash Acquisition Exchange non-cash At 01/01/04 flow of businesses differences movements 31/12/04 £'000 £'000 £'000 £'000 £'000 £'000 Cash 22,670 19,828 - 1,453 - 43,951Overdrafts - (389) - - - (389)Net cash 22,670 19,439 - 1,453 - 43,562 Debt due within one year (7,791) 3,234 (1,517) 549 - (5,525) Debt due after one year (155,405) (227,697) - 14,913 1,947 (366,242) Net debt (140,526) (205,024) (1,517) 16,915 1,947 (328,205) Reconciliation of net cash flow to movement in netdebt 2004 2003 £'000 £'000 Increase/(decrease) in cash in the 19,439 (4,356)yearIncrease in debt financing (224,463) (12,176) Change in net debt resulting from cash flows (205,024) (16,532)On acquisition of businesses (1,517) 11Other non-cash movements 1,947 -Exchange differences 16,915 15,673Movement in net debt in the year (187,679) (848)Net debt at 1 January (140,526) (139,678)Net debt at 31 December (328,205) (140,526) NOTES ON THE PRELIMINARY ANNOUNCEMENT 1. DIVIDENDS The Board is recommending a final dividend of 4.80p. Taken with the interim dividend of 2.20p paid in 2004 this gives a total of 7.00p, representing an increase in the overall dividend of 7.2%. Subject to approval at the Annual General Meeting to be held on 12 May 2005, the proposed final dividend will be paid on 1 July 2005 to persons registered as holders of the Ordinary Shares at close of business on 1 April 2005. In continuation of recent practice, ordinary shareholders will be offered the opportunity to elect for shares in lieu of cash for the final dividend. 2004 2003* Pence Pence Interim (paid December 2004) 2.20 2.09 Final (proposed) 4.80 4.44 ----- ----- 7.00 6.53 ===== ===== * Comparative information has been adjusted for the bonus element of the rights issue approved by shareholders on 21 July 2004. 2. TAXATION The taxation charge for the year of £22,031,000 (2003: £21,897,000) includes £20,416,000 of overseas tax (2003: £20,514,000). 3. EARNINGS PER SHARE The calculation of earnings per Ordinary Share is based on profits of £34,578,000 (2003: £22,431,000) and on the weighted average number of Ordinary Shares in issue during the twelve months to 31 December 2004 of 379,011,000 (2003: 335,061,000*). An alternative earnings per share has been shown which uses adjusted earnings as recommended by the Institute of Investment Management & Research (IIMR). The adjusted earnings exclude goodwill amortisation, FRS3 exceptional items and any related tax. A reconciliation of basic to IIMR EPS is given below 2004 2003* Pence Pence Basic earnings per share 9.1 6.7 Add back goodwill amortisation (net of tax) 6.3 5.7 Add back exceptional loss on disposal of discontinued operations - 4.0 ----- ----- Earnings per share IIMR basis 15.4 16.4 ===== ===== * Comparative information has been adjusted for the bonus element of the rights issue approved by shareholders on 21 July 2004. 4. ACCOUNTING POLICIES The audited consolidated figures have been prepared on the basis of the accounting policies set out in the 2004 financial statements. 5. FINANCIAL INFORMATION The financial information is prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 31 December 2004, all of which have been applied consistently throughout this and the preceding year other than as referred to below. The accounts are abridged preliminary Group accounts for the year ended 31 December 2004, together with comparatives. These are not statutory accounts and have been extracted from the full statutory accounts for 2004, which will be delivered to the Registrar of Companies in due course and on which the independent auditors' report is unqualified. The results for 2003 are an abridged statement of the Group accounts for that year, which have been delivered to the Registrar of Companies and on which the independent auditors' report was unqualified. 6. CHANGES IN ACCOUNTING POLICIES The Group has adopted a new accounting policy for development costs under which amounts that satisfy certain criteria are now capitalised and then amortised over their useful life. The Group has also adopted UITF17 (revised 2003) "Employee Share Schemes", and UITF38 "Accounting for ESOP trusts". The adoption of each of these policies represents a change in accounting policy and the comparative figures have been restated accordingly. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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