3rd Jun 2008 07:00
3 June 2008
UMECO plc
Preliminary results for the year to 31 March 2008
Financial performance strongly ahead
Important strategic progress
Well placed for further substantial growth
Umeco plc, an international provider of supply chain and advanced composite materials primarily to the aerospace & defence industries, announces its preliminary results for the year to 31 March 2008.
Key highlights
Important strategic progress, with focus now on high growth businesses of Composites and Supply Chain; Repair & Overhaul and Chemicals distribution businesses successfully divested
Excellent organic growth from continuing operations, driven by rising levels of demand in core markets
Further expansion of Composites through acquisitions of Lincoln and Primco; contribution ahead of expectations
Significant extension of scope and timeframe of Pattonair's supply chain contract with Rolls-Royce plc, being delivered from dedicated new facility in Derby
Financial highlights - Continuing operations
Revenue increased by 18.8 per cent to £335.2 million (2007: £282.1 million)
Adjusted operating profit increased by 26.0 per cent to £27.1 million (2007: £21.5 million)
Adjusted profit before tax increased by 19.7 per cent to £21.9 million (2007: £18.3 million)
Adjusted earnings per share increased by 14.0 per cent to 36.7 pence (2007: 32.2 pence)
Proposed final dividend of 11.0 pence per share, up 10.0 per cent (2007: 10.0 pence), resulting in a total dividend of 17.0 pence per share, up 9.7 per cent (2007: 15.5 pence)
Strong balance sheet, with investment in acquisitions (£34.5 million) offset by proceeds from divestment programme (£49.0 million). Closing net debt of £57.6 million (2007: £51.8 million); gearing 35.5 per cent (2007: 35.2 per cent)
Current Trading and Prospects
Demand for composite materials in the core markets of aerospace, high end automotive and wind energy remains robust
Buoyant demand for supply chain services with civil aerospace order intake continuing to grow; Boeing and Airbus order books at record levels
Key partnership agreement recently announced with Airbus and others for major aerospace research programme for Next Generation Composite Wing
Clive Snowdon, Chief Executive of Umeco plc, said:
"The last year has seen significant strategic change. Following a successful divestment programme, we are now focused exclusively on the faster growing activities of Composites and Supply Chain.
"Our Composites business has shown strong organic growth and has been considerably strengthened by two acquisitions that are highly complementary to our existing aerospace activities. Our partnership with Airbus on the Next Generation Composite Wing research programme emphasises the technical strength of ACG and its exciting potential for growth in the civil aerospace sector.
"Our Supply Chain business has also shown excellent organic growth, both from existing and newly awarded contracts. During the year, Pattonair secured a significant extension of its major contract with Rolls-Royce plc, a relationship that has been further strengthened by the completion of our new dedicated facility in Derby.
"Demand for both our Composites and Supply Chain products and services continues to be buoyant across all our core markets of aerospace, high end automotive and wind energy.
"Recent strategic activity and investment has created a lean, well focused and financially robust Group capable of high rates of organic growth. With strong forward order books, this leaves us exceptionally well positioned for another successful year."
There will be a meeting for analysts at 09.30 this morning at UBS, 1 Finsbury Avenue, EC2M 2PP. Should you wish to attend please contact Vicky Watkins on 020 7645 3970.
For further information, please contact:-
|
Umeco plc |
Tel: +44 (0) 1926 331 800 |
|
Clive Snowdon, Chief Executive Doug Robertson, Finance Director www.umeco.com |
|
|
Hogarth Partnership |
Tel: +44 (0) 20 7357 9477 |
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John Olsen Barnaby Fry Vicky Watkins |
Further Information on Umeco plc
Umeco is a leading innovator in distribution and supply chain management to the aerospace and defence industries, harnessing new methods for enhancing its customers' performance and profitability.
Umeco also has significant manufacturing interests in advanced composite materials for a growing range of applications in its core aerospace and defence markets and in other high performance technology industries such as motor sport, automotive and wind energy.
Listed on the London Stock Exchange, Umeco had revenue from continuing operations of £335.2 million in the year to 31 March 2008.
Umeco is managed through two business streams:-
Umeco Composites - a provider of a complete range of advanced composite materials principally to the aerospace, motor sport, automotive and wind energy markets.
Customers include Boeing, Airbus, BAE Systems, manufacturers of wind turbines, a number of manufacturers of high performance super cars and Formula 1 teams including Team McLaren Mercedes.
Umeco Supply Chain - a leading international provider of value-added distribution and supply chain outsourcing services to customers in the aerospace & defence market. With its specialisation in the supply of small and medium value components and sophisticated IT systems, its growing global customer base can enjoy significant operational, cost and working capital benefits.
Customers include Rolls-Royce plc, BAE Systems, Safran Group, Parker Aerospace, Goodrich, Thales Aerospace, Turbomeca, Lockheed Martin and the US Department of Defense.
Note on adjusted profit and earnings per share measures:
Umeco uses adjusted figures as key performance indicators. Adjusted figures are stated before profits arising on the divestment of operations, amortisation and impairment charges relating to intangible assets, significant items, the revaluation of financial instruments based on their market values and associated tax effects. The differences between the adjusted and unadjusted measures of operating profit, profit before tax and profit attributable to equity holders of the parent are reconciled in note 4 to this announcement. The narrative in this announcement is based on the adjusted measures of operating profit, profit before tax and earnings per share. These provide a more consistent measure of operating performance. The table below sets out a comparison of adjusted and unadjusted values, and also summarises key performance indicators:
|
2008 £ million |
2007 £ million |
|
|
Revenue |
335.2 |
282.1 |
|
Revenue - including discontinued operations |
380.7 |
333.9 |
|
Operating profit |
24.1 |
19.2 |
|
Adjusted operating profit |
27.1 |
21.5 |
|
Adjusted operating profit - including discontinued operations |
30.7 |
25.7 |
|
Total profit before tax |
17.1 |
16.3 |
|
Adjusted profit before tax |
21.9 |
18.3 |
|
Adjusted profit before tax - including discontinued operations |
25.5 |
22.5 |
|
Pence |
Pence |
|
|
Earnings per share |
47.5 |
27.0 |
|
Adjusted earnings per share |
36.7 |
32.2 |
Chairman's Statement
Overview
I am very pleased to report that Umeco continues to develop and prosper. Our results for 2008 are considerably ahead of the prior year and the strategic developments we have effected during the year leave us well positioned for further substantial growth. Demand for the Group's products and services in our main market, civil aerospace, remains robust, despite the recent announcements by Boeing and Airbus of further delays in the production of the B787 and the A380.
Strategic developments
Following a strategic review in the early part of the financial year the Board decided to focus Umeco on its larger and faster growing business activities of Composites and Supply Chain. This led to the divestment in November 2007 of the smallest business activity, Repair & Overhaul; and in March 2008 of our aerospace chemicals distribution businesses ('Chemicals'). The cash consideration received from this divestment programme was £49.0 million giving rise to a profit of £9.9 million.
Two important acquisitions were completed during the year, both in Composites. In August 2007, we finalised the acquisition of J. D. Lincoln, Inc. ('Lincoln') for an initial cash consideration of US$59.5 million. Lincoln, based at two sites in California, formulates and manufactures a range of pre-impregnated materials ('pre-pregs') primarily used by aerospace tier 2 suppliers for the manufacture of composite interior structures of commercial aircraft. It has a wide range of qualifications, including those recently added for the Boeing B787 and the Airbus A380. In November 2007, we announced the acquisition of George Cole Technologies Limited which traded as Primco for a cash consideration of £3.0 million. Primco, now trading under the Advanced Composites Group ('ACG') brand, which is based in Manchester, is also a materials business that develops and manufactures a range of pre-pregs used in aerospace, defence, industrial, medical and sporting applications. Primco holds a number of product qualifications including several related to Airbus interior materials. Both acquisitions are highly complementary to Umeco's existing aerospace composites activities which are focused on the airframe and have performed ahead of our initial expectations.
In Supply Chain, a significant extension to the Group's long term contract with Rolls-Royce plc was signed in November 2007. Through a dedicated new facility in Derby, Umeco now provides Rolls-Royce with a much broader range of parts and services, helping them to meet the growing demand for their aerospace engine range and to enhance further their aftermarket customer service. As part of the revised agreement, the contract timeframe was also extended by a further five years and will now run until December 2015.
Results and dividend
Revenue from continuing operations, Composites and Supply Chain, in the year to 31 March 2008 was £335.2 million (2007: £282.1 million) an increase of 18.8 per cent. Of the £53.1 million increase £13.2 million relates to acquisitions; the underlying increase in revenue was therefore 14.1 per cent or 14.6 per cent at constant exchange rates. Revenue including Repair & Overhaul and Chemicals was £380.7 million (2007: £333.9 million).
Operating profit from continuing activities rose by 26.0 per cent to £27.1 million (2007: £21.5 million) with margins showing a further improvement to 8.1 per cent (2007: 7.6 per cent). Of the £5.6 million increase £2.3 million relates to acquisitions. Including Repair & Overhaul and Chemicals, operating profit was £30.7 million (2007: £25.7 million).
Net interest charges, excluding revaluations of financial instruments, were £5.2 million (2007: £3.2 million). This increase reflects the significant capital investments, acquisitions and volume-related rise in working capital arising in the Group over the past twelve months. The full interest effect of the divestment programme, completed in March 2008, will be seen in the current financial year.
Profit before tax from continuing activities was £21.9 million (2007: £18.3 million), an increase of 19.7 per cent. Including Repair & Overhaul and Chemicals, profit before tax was £25.5 million (2007: £22.5 million). Earnings per share were 36.7 pence compared to 32.2 pence, an increase of 14.0 per cent.
The Directors are proposing an increased final dividend of 11.0 pence (2007: 10.0 pence), making a total for the year of 17.0 pence per ordinary share (2007: 15.5 pence) an increase of 9.7 per cent. The final dividend is payable on 1 August 2008 to shareholders on the register on 4 July 2008.
Directors
At the AGM in July 2007 Michael Harper retired as a non-executive Director due to his other business commitments and we thank him for his invaluable support and advice during the period he was on the Board.
Chris Hole, who until December 2006 was Director of Procurement at Rolls-Royce, joined the Board in July 2007 as Michael's replacement.
Doug Robertson was appointed Finance Director following the retirement of John Beaumont in July 2007, after over 13 years' service. Doug held the same role with Seton House Group until April 2007. We wish John a long and happy retirement.
Andrew Moss, Chief Executive of Umeco Composites since 1999, is today appointed to the Board in the new role of Chief Operating Officer. Andrew has been instrumental in the development of Umeco Composites and, following our recent refocusing, is the right person to continue to drive forward our operational performance across both Composites and Supply Chain.
This appointment will allow our Chief Executive, Clive Snowdon, to focus on Umeco's strategic development, ensuring that we take full advantage of the many and substantial opportunities that we see ahead of us.
Management and employees
In a year of some considerable change for the Group I welcome the management and employees of the newly acquired businesses and wish to place on record our appreciation to the staff of Repair & Overhaul and Chemicals for their dedicated service during the period of our ownership and to all our staff for their continued commitment and hard work.
Prospects
As in the prior year, our considerable rate of progress was held back primarily by a number of external factors including the production delays of the A380 and the B787 and, for most of the year, rising interest rates. Despite these factors we again delivered a high level of underlying growth in revenue and profits.
The principal market in which Umeco operates, civil aerospace, looks exceptionally robust with Airbus and Boeing entering 2008 with record order books. Airbus has restarted A380 production though Boeing's development of the B787 is behind schedule with initial deliveries now due in late 2009. Both of these significant programmes are anticipated to generate a high level of incremental revenue for the Group in the medium and long term.
The demand for our broadening range of advanced composite materials in the aerospace and other growth markets continues at a high rate; this is leading to increasing utilisation of our extended capacity. In the coming year, further investments are planned at Lincoln and we will continue to focus on the rapidly expanding wind energy market. The selection of ACG by Airbus to participate in the Next Generation Composite Wing ('NGCW') research programme, announced in May 2008, is a major strategic milestone for the Group.
These factors, coupled with the acquisitions of Lincoln and Primco together with the considerable benefits of the extended Rolls-Royce contract, put Umeco on track for another year of strong growth.
We go into the new financial year as a more focused Group with a strong order book, robust demand from the markets in which we operate and an enhanced infrastructure following the major investments we have made over the last four years. We are looking forward to another successful year.
Brian McGowan
Chairman
Chief Executive's Review
Operations
Total revenue for the year, including discontinued operations, was £380.7 million (2007: £333.9 million) an increase of 14.0 per cent; revenue from continuing operations rose by 18.8 per cent to £335.2 million. Acquisitions completed during the year accounted for additional revenue of £13.2 million. Foreign exchange rate movements, principally the US dollar against sterling, had the effect of reducing reported revenue; at constant exchange rates revenue from continuing operations would have been £2.4 million higher.
Growth has again been achieved across all of our business activities. This reflects strong civil aerospace and wind energy markets, continuing high level of demand for our advanced composite materials and additional volumes on existing and new supply chain contracts.
Total operating profit of £30.7 million (2007: £25.7 million) increased by 19.5 per cent, with profit from continuing operations of £27.1 million rising by 26.0 per cent. Our operating margin from continuing operations rose to 8.1 per cent (2007: 7.6 per cent). This reflects the good margins of the businesses recently acquired and operational gearing.
The Group divested its Repair & Overhaul activity on 1 November 2007. In the period until this date, Repair & Overhaul achieved revenue of £15.7 million (year to 31 March 2007: £24.1 million) and operating profit of £2.4 million (year to 31 March 2007: £3.1 million).
Umeco Composites
|
Continuing operations |
2008 £ million |
2007 £ million |
|
Revenue |
149.2 |
124.5 |
|
Operating profit |
17.7 |
13.5 |
|
Per cent |
Per cent |
|
|
Operating margin |
11.9 |
10.8 |
Umeco Composites provides a broad range of advanced composite materials principally to the aerospace, motor sport & automotive, marine and wind energy markets.
Revenue from continuing operations increased in the year by 19.8 per cent, or by 10.4 per cent on an underlying constant currency basis. Of the £24.7 million increase in revenue, £13.2 million relates to acquisitions made during the year.
Operating profit rose by 31.1 per cent, or by 12.9 per cent on an underlying constant currency basis, resulting in an improvement in margins from 10.8 per cent to 11.9 per cent.
This further significant rise in revenue and profits reflects the growing use of advanced composite materials in a number of markets, in particular the aerospace and wind energy industries, and the acquisitions of Lincoln and Primco during the year. The use of composites in aerospace is a significant trend; composites account for 16 per cent of the A380 and more than 50 per cent of the B787 and A350 XWB's primary airframe structures.
Advanced Composites Group ('ACG') continued to trade very successfully in the UK and South Africa during the year and integrated Primco into its operating structure. Overall performance, whilst significantly ahead of the prior year, was held back by two customer issues in the USA, which were outside our control, that resulted in the deferral of orders received in the prior year. There are now encouraging signs of recovery in the USA from those specific customers and ACG in the UK has secured a number of new long term contracts.
ACG's UK technology centre continues to be praised by customers and has been very influential in attracting a higher level of grant funded activities and in winning new business. ACG's enlarged UK manufacturing facility is now fully operational and further capacity increases in both the UK and the USA are planned for the coming year. Primco, now renamed ACG Manchester, was acquired in November 2007 and delivered results in line with our initial expectations.
In May 2008, it was announced that ACG will be assisting Airbus in the research programme being put in place to develop novel materials and process technologies for potential use on the NGCW, backed by £103 million of funding from the UK Government and industrial partners. ACG and 16 other leading British organisations in both industry and research will work with Airbus to develop new technologies suitable for the NGCW. This three-year programme has been set up to develop future wing design and the manufacturing process to minimise the environmental impact of future aircraft.
Aerovac and Richmond again delivered significant growth in revenue and profits. The global wind energy market, which is growing at an estimated annual rate in excess of 20 per cent, is now a key segment for the business. Consequently, capital investments are planned in the current year to provide additional capacity and new products. Richmond continues to work closely with Boeing and its partners on the B787 programme and in the first half year saw higher activity levels in its vacuum bag kitting activities; this fell back in the second half year due to the production delays on the B787.
Lincoln, which was acquired in August 2007, delivered a revenue and profit contribution that exceeded our expectations at the time of acquisition. Order intake from its core aerospace and defence customers has been robust and significant additional manufacturing capacity was added in the second half year with further investments planned for the current year. Lincoln's management team has been strengthened since acquisition and we are actively supporting them in achieving their ambitious growth plans in respect of the B787, A380 and the MRAP (mine resistant ambush protected) vehicle programmes.
GRPMS had a good year in both the UK and Scandinavia with revenue and profits both rising. It expanded its European operations in August 2007 through the purchase of Ashland's Estonian operations for a modest sum.
Med-Lab also had a good year with revenue and profits both rising, reflecting a higher level of activity in the aerospace overhaul market.
Aeropia and RD Taylor, our Chemicals businesses, traded in line with our expectations to the date of their divestment on 31 March 2008.
Umeco Supply Chain
|
Continuing operations |
2008 £ million |
2007 £ million |
|
Revenue |
186.0 |
157.6 |
|
Operating profit |
9.4 |
8.0 |
|
Per cent |
Per cent |
|
|
Operating margin |
5.1 |
5.1 |
Umeco Supply Chain is a leading international provider of distribution and supply chain outsourcing services primarily to OEM customers in the aerospace & defence markets. With its specialisation in the supply of small and medium value components and its sophisticated IT systems, it creates and delivers significant operational, cost and working capital benefits for its growing international customer base. The business trades as Pattonair on a global basis.
Revenue increased in the year by 18.0 per cent, all of which was organic.
Operating profit increased in the period by 17.5 per cent, or by 15.2 per cent on a constant currency basis. This excellent growth in revenue and profits reflects the strength of the civil aerospace market and the implementation of new contracts secured in the prior year.
Pattonair Derby enjoyed a high level of growth from its long term contracts with Rolls-Royce and Goodrich Actuation Systems. We were delighted to sign, in November 2007, a significant extension to our contract with Rolls-Royce which broadens the range of products and services that we will supply to them. As part of this revised agreement the contract timeframe was extended to December 2015. The trading impact of the extended contract was, as expected, relatively modest during our fourth quarter though it did generate a very material rise in order intake. In December 2007 the business relocated to a new £8.0 million freehold facility in Derby. This much larger, purpose built facility enables Pattonair to support the higher level of activity and generate operational improvements.
Pattonair Woking had an excellent year with revenue and profits considerably ahead of the prior year. A number of new contracts were secured during the year and bidding activity on new projects remains at a high level.
Pattonair Milan also had a good year with revenue and profits ahead of the prior year. A new general manager was appointed in the autumn with the objectives of securing a higher level of revenue generation and improving operational efficiency.
In France, Pattonair's business has been extremely busy implementing the Thales and Turbomeca contracts won in the prior year and moved into new, larger leased premises last summer. Activity levels on both of these contracts have been lower than initially anticipated but this is expected to correct in the current financial year.
In Canada, as previously announced, Pattonair ended its relationship with Bombardier Aerospace with minimal impact on performance. A much slimmed down organisation has now relocated to smaller premises in Montreal to support other existing customers and to seek additional business.
At Pattonair USA trading levels have now started to recover following a number of senior management changes in the early part of the year. With a robust operating platform now in place the business is well positioned to increase its market share in both the civil and defence markets and is bidding on a number of exciting new programmes. As a result of the Turbomeca contract signed in Europe the business secured additional revenue from the customer's Texan operation that includes a warehouse management project.
In Singapore, Pattonair moved into its new warehouse and office facility in September 2007. This will provide direct support to the division's Far Eastern customers and is also engaged in contract negotiations with a number of prospective customers. Rolls-Royce has announced a new engine build facility to come on stream in Singapore during 2009 and we are well positioned to support this important development. The Chinese business is now fully operational and is trading profitably; additional sales staff have been recruited for both Far Eastern operations.
Summary
2008 was a very busy year for the Group: we made two important acquisitions; successfully divested two non-core businesses at premium prices; and secured a major extension to our long term contract with Rolls-Royce. In addition we continued to invest in and grow our core businesses.
Going forward, Umeco will focus on its larger, and rapidly growing advanced composite materials and supply chain activities. Both of these business streams are delivering high rates of organic growth and we do not foresee any slowing of activity levels in the coming year. Our overall growth prospects will be enhanced by a full year contribution from recent acquisitions, and the expected significant increase in activity with Rolls-Royce. We continue to gain market share on a global basis as a result of our infrastructure investments in recent years and will add capacity as required in order to meet the growing long term demand for our products and services.
During the year our order intake continued to grow at a rate considerably ahead of deliveries. At the end of March 2008, Umeco's order book stood at £216.9 million (2007: £161.6 million). This is based on scheduled customer requirements over the coming year.
Civil aerospace order intake over the past year has been at a record level and at the end of March 2008 Airbus and Boeing had a combined backlog of 7,293 aircraft; at current build rates this represents over seven years of production. As a result of the rapid increase in oil prices some smaller airlines have ceased trading but the well financed carriers, particularly in the Middle and Far East, continue to place orders for a significant number of new aircraft. It is also anticipated that a number of Western airlines will place orders for new aircraft to replace their older, and more expensive to operate, aircraft. In addition the recently announced merger proposals of major Western carriers should provide them with a more robust financial platform that will better enable them to fund their fleet replacement programmes.
The impact of ever-rising oil prices and the global demand for more environmentally sustainable products is driving demand for our advanced composite materials and services. This is evidenced by the recently announced NGCW programme on which ACG has secured a key position. We continue to benefit from the rapidly rising demand from the wind energy market and will be making a number of capacity investments in the coming year as we foresee a very major long term opportunity in this segment.
We continue to seek bolt-on acquisitions for our two core business streams and we believe we have an appropriately strong balance sheet and access to debt facilities to leave us well positioned in this regard.
In summary we are planning for another very active and successful year despite a worsening macro economic climate and volatility in the financial markets. We have a proven, dedicated management team who are committed to overcoming the external obstacles that arise from time to time and to delivering a further sustained enhancement to our short and longer term performance and prospects.
Clive Snowdon
Chief Executive
Finance Director's Review
Operating results
|
Continuing operations |
2008 £ million |
2007 £ million |
|
Revenue |
||
|
- total |
335.2 |
282.1 |
|
- acquisitions |
13.2 |
- |
|
Operating profit |
||
|
- total |
27.1 |
21.5 |
|
- acquisitions |
2.3 |
- |
|
Operating margins |
per cent |
per cent |
|
- total |
8.1 |
7.6 |
|
- acquisitions |
17.4 |
- |
Revenue from continuing operations was 18.8 per cent higher than last year, with acquisitions accounting for 4.7 percentage points of the increase. Operating profit was £27.1 million, £5.6 million higher than the previous year, of which acquisitions contributed £2.3 million. The increase in the existing businesses is primarily due to the buoyant civil aerospace industry and organic growth achieved in Supply Chain, coupled with an increase in demand for advanced composite materials from the aerospace and other industries, including the growing wind energy market.
Operating margins rose to 8.1 per cent from 7.6 per cent helped by the impact of the acquisitions.
Exchange rates
|
Average rates |
2008 |
2007 |
|
US dollar |
2.007 |
1.893 |
|
Euro |
1.419 |
1.476 |
Almost 40 per cent of Group revenue is generated by overseas subsidiaries and an increasing amount of UK business is transacted in foreign currencies, principally the US dollar and the Euro. At constant exchange rates, the increase in revenue from continuing operations for the year would have been 19.7 per cent, £2.4 million higher than the reported figure.
Net financial expense
Net financial expense, excluding revaluations of financial instruments, rose from £3.2 million in 2007 to £5.2 million. Average interest rates payable in the year were 6.4 per cent and average net debt was £83.3 million, compared with 6.1 per cent and £53.6 million last year. Interest was covered 5.2 times by adjusted operating profit from continuing operations (2007: 6.7 times).
Intangible amortisation & goodwill impairment
The amortisation charge in the income statement relating to continuing operations was £2.3 million (2007: £1.0 million). This relates to the amortisation of intangible assets arising on acquisitions, principally the benefit of product approvals, order books and customer relationships on hand at the dates of acquisition. No impairment charges have been made in the year.
Significant items
Restructuring costs of £0.7 million were incurred during the year, principally in relation to the closure of Supply Chain's operation in Montreal which supported the contract with Bombardier Aerospace that was terminated in the year.
Profit before tax
The strong performance in the year lifted adjusted profit before tax from continuing operations to £21.9 million (2007: £18.3 million), an increase of 19.7 per cent over the previous year. Total profit before tax from continuing operations was £17.1 million (2007: £16.3 million).
Tax
The effective tax charge on adjusted profit from continuing operations was 31.3 per cent (2007: 32.8 per cent). The lower rate reflects greater certainty of the Group's tax liability at its US businesses, which partially offset the impact of profits arising overseas being taxed at rates above the UK statutory rate of 30.0 per cent.
Discontinued operations
Discontinued operations, comprising Repair & Overhaul and Chemicals, achieved a profit before tax of £2.6 million up to their respective dates of divestment. Their profit after tax was £1.8 million. The net profit arising on the divestments was £9.9 million, which is stated after recognising a provision of £4.0 million established in respect of potential environmental work at Repair & Overhaul's site in Toulouse, France and other costs to be incurred under the terms of the divestment.
Earnings per share
Adjusted earnings per share were 36.7 pence, 14.0 per cent higher than last year (2007: 32.2 pence). Earnings per share were 47.5 pence (2007: 27.0 pence).
Dividends
An interim dividend of 6.0 pence was paid in December 2007 and a final dividend of 11.0 pence is proposed, making a total of 17.0 pence, a 9.7 per cent increase over the previous year's 15.5 pence. The value of the interim dividend was £2.9 million and the value of the proposed final dividend is £5.3 million.
Operating cash flow
|
Continuing operations |
2008 £ million |
2007 £ million |
|
Operating profit |
27.1 |
21.5 |
|
Significant items |
(0.7) |
(0.7) |
|
Depreciation |
3.8 |
2.9 |
|
Share based payments |
0.4 |
0.2 |
|
Increase in inventories |
(32.1) |
(16.4) |
|
Increase in debtors |
(16.2) |
(9.7) |
|
Decrease in creditors and retirement benefit obligations |
32.1 |
8.9 |
|
Operating cash flow |
14.4 |
6.7 |
|
Per cent |
Per cent |
|
|
Operating cash flow conversion |
53.1 |
31.2 |
|
Working capital ratio |
24.8 |
24.1 |
Operating profit conversion to cash of 53.1 per cent rose from 31.2 per cent last year following an increase of £16.2 million in working capital and retirement benefit obligations. This principally comprised increases of £32.1 million in inventories and £16.2 million in debtors, partially offset by a net rise of £32.1 million in creditors and retirement benefit obligations. The additional investment in inventories was largely driven by increasing demand and higher inventory to support the expansion of our major Supply Chain contracts, a large proportion of which is funded by customers. The ratio of working capital to revenue increased from 24.1 per cent to 24.8 per cent.
Capital expenditure
Gross capital expenditure relating to continuing operations of £12.6 million (2007: £8.6 million) was £8.8 million higher than depreciation. Expenditure in the year included £5.9 million relating to the freehold building and associated fitting-out at Pattonair Derby for its new facility to support the contract with Rolls-Royce.
Free cash flow
Following the major increase in working capital and the capital expenditure programme in the year, operating cash flow less interest, tax and capital expenditure at continuing operations consumed £8.3 million (2007: £9.4 million). Tax paid was £0.5 million below the charge in the financial statements due to timing differences.
Acquisitions & divestments
Expenditure on acquisitions in the year relating to continuing operations, as set out in the Chairman's Statement, led to a cash outflow of £34.5 million (2007: £1.3 million) net of cash balances acquired. The divestments completed during the year yielded an inflow of £45.8 million net of expenses and cash balances disposed.
Net indebtedness and gearing
|
2008 £ million |
2007 £ million |
|
|
Net debt |
57.6 |
51.8 |
|
Per cent |
Per cent |
|
|
Gearing |
35.5 |
35.2 |
Group banking facilities comprise a US$250.0 million revolving credit facility and a £10.0 million overdraft. Gearing increased slightly from 35.2 per cent last year to 35.5 per cent; debt remains well within the facility levels and interest cover remains materially above the banking covenant limit. Changes in exchange rates resulted in an increase in the sterling value of net debt of £1.6 million.
Equity and shares issued
Equity attributable to shareholders increased from £146.9 million to £162.4 million. The increase includes the profit for the year of £22.7 million, less dividends paid of £7.7 million. In addition, 525,708 shares were issued to employees under the Group's share option schemes, raising £1.5 million.
Pensions
The Group operates a number of defined contribution pension schemes, and two defined benefit plans both of which are closed to new members. The latest actuarial valuations of these two plans, conducted in 2005, show a deficit of £5.5 million compared with a deficit of £1.5 million in the previous valuations in 2002. The increase was due to changes in inflation and mortality assumptions and to a lower rate of return used in the valuation of scheme assets. The Board has agreed with the pension plans' trustees that the deficit will be funded over five years and, accordingly, special payments totalling £1.4 million were made to the plans during the year.
Under IFRS, the deficits under the plans are recognised in the balance sheet. The IAS 19 valuation of the plans at 31 March 2008 showed an increase in the shortfall in assets to liabilities to £2.7 million from £2.0 million in the previous year. This increase is principally the result of lower than expected investment returns during the year.
Currency exchange risk
The Group seeks to hedge currency exchange risks by matching purchases and revenues that are denominated in foreign currencies. Where this is not possible, forward currency contracts may be taken out to protect exposures. Group policy prohibits speculation in currency management.
The retranslation of the Group's net investment in overseas businesses led to the net surplus of £0.3 million being credited to the translation reserve.
Interest rate risk
Following the divestment of Antavia, the French business within Repair & Overhaul, the Euro-denominated funding put in place to hedge this investment has been settled. This has resulted in the Group's principal borrowings being split between sterling and US dollar based debt. Whilst the Group does not hedge the currency value of interest charges, it has partly protected the interest rate risk by the use of interest rate swaps. These financial instruments have fixed the base rate on 53.1 per cent of the Group's year end debt at below 5.0 per cent and will provide cover on a proportion of the Group's anticipated debt during the current financial year.
Changes in the market value of these financial instruments, together with the change in value of forward foreign exchange contracts, led to a financial expense of £1.8 million being recognised (2007: £0.3 million financial income).
Doug Robertson
Finance Director
Consolidated income statement
___________________________________________________________________________
For the year to 31 March 2008
|
2008 |
2007 |
|||
|
Restated |
||||
|
Note |
£ million |
£ million |
||
|
Continuing operations |
||||
|
Revenue |
2 |
335.2 |
282.1 |
|
|
Cost of sales |
(243.0) |
(206.5) |
||
|
Gross profit |
92.2 |
75.6 |
||
|
Administrative expenses |
(68.1) |
(56.4) |
||
|
Operating profit |
2 |
24.1 |
19.2 |
|
|
Financial income |
3 |
1.2 |
1.5 |
|
|
Financial expense |
3 |
(8.2) |
(4.4) |
|
|
Profit before tax |
17.1 |
16.3 |
||
|
Income tax - UK |
(4.0) |
(3.8) |
||
|
Income tax - overseas |
(2.0) |
(1.5) |
||
|
Profit from continuing operations |
11.1 |
11.0 |
||
|
Discontinued operations |
||||
|
Profit from discontinued operations (net of tax) |
11 |
11.7 |
1.9 |
|
|
Profit for the year |
22.8 |
12.9 |
||
|
Attributable to: |
||||
|
Equity holders of the parent |
22.7 |
12.8 |
||
|
Minority interest |
0.1 |
0.1 |
||
|
22.8 |
12.9 |
|||
|
Earnings per share |
Pence |
Pence |
||
|
Total |
||||
|
Basic earnings per share |
7 |
47.5 |
27.0 |
|
|
Diluted earnings per share |
7 |
47.4 |
26.8 |
|
|
Continuing operations |
||||
|
Basic earnings per share |
7 |
23.0 |
23.0 |
|
|
Diluted earnings per share |
7 |
22.9 |
22.8 |
|
|
Discontinued operations |
||||
|
Basic earnings per share |
7 |
24.5 |
4.0 |
|
|
Diluted earnings per share |
7 |
24.5 |
4.0 |
Consolidated balance sheet
_________________________________________________________________________
As at 31 March 2008
|
2008 |
2007 |
||
|
£ million |
£ million |
||
|
Assets |
|||
|
Non-current assets |
|||
|
Property, plant & equipment |
37.8 |
32.5 |
|
|
Intangible assets |
117.2 |
100.0 |
|
|
Deferred tax assets |
3.5 |
2.8 |
|
|
158.5 |
135.3 |
||
|
Current assets |
|||
|
Inventories |
118.3 |
88.8 |
|
|
Trade & other receivables |
92.4 |
81.7 |
|
|
Financial assets |
- |
0.5 |
|
|
Income tax receivable |
2.6 |
1.2 |
|
|
Cash |
33.4 |
7.9 |
|
|
246.7 |
180.1 |
||
|
Total assets |
405.2 |
315.4 |
|
|
Liabilities |
|||
|
Current liabilities |
|||
|
Trade & other payables |
(127.6) |
(94.7) |
|
|
Financial liabilities |
(1.4) |
- |
|
|
Income tax payable |
(6.7) |
(4.2) |
|
|
Loans & borrowings |
(1.4) |
(1.0) |
|
|
(137.1) |
(99.9) |
||
|
Non-current liabilities |
|||
|
Other payables |
(0.3) |
(3.7) |
|
|
Deferred tax liabilities |
(9.1) |
(3.9) |
|
|
Retirement benefit obligation |
(2.7) |
(2.0) |
|
|
Loans & borrowings |
(89.6) |
(58.7) |
|
|
Provisions |
(4.0) |
- |
|
|
(105.7) |
(68.3) |
||
|
Total liabilities |
(242.8) |
(168.2) |
|
|
Net assets |
162.4 |
147.2 |
|
|
Equity |
|||
|
Share capital |
12.0 |
11.9 |
|
|
Share premium |
115.3 |
113.9 |
|
|
Translation reserve |
(0.7) |
(1.0) |
|
|
Retained earnings |
35.8 |
22.1 |
|
|
Equity attributable to equity holders of the parent |
162.4 |
146.9 |
|
|
Minority interest |
- |
0.3 |
|
|
Total equity |
162.4 |
147.2 |
Consolidated cash flow statement
_________________________________________________________________________
For the year to 31 March 2008
|
2008 |
2007 |
|||
|
Restated |
||||
|
£ million |
£ million |
|||
|
Cash flows from operating activities - continuing operations |
||||
|
Profit for the year - continuing operations |
11.1 |
11.0 |
||
|
Depreciation |
3.8 |
2.9 |
||
|
Amortisation and impairment charges |
2.3 |
1.6 |
||
|
Financial income |
(1.2) |
(1.5) |
||
|
Financial expense |
8.2 |
4.4 |
||
|
Share based payments expense |
0.4 |
0.2 |
||
|
Income tax expense |
6.0 |
5.3 |
||
|
30.6 |
23.9 |
|||
|
Increase in inventories |
(32.1) |
(16.4) |
||
|
Increase in trade & other receivables |
(16.2) |
(9.7) |
||
|
Increase in trade & other payables |
33.4 |
10.2 |
||
|
Decrease in retirement benefit obligation |
(1.3) |
(1.3) |
||
|
Cash generated from operations |
14.4 |
6.7 |
||
|
Net financial expense paid |
(5.3) |
(2.6) |
||
|
Tax paid |
(5.5) |
(5.6) |
||
|
Net cash flow from operating activities - continuing operations |
3.6 |
(1.5) |
||
|
Cash flows from investing activities - continuing operations |
||||
|
Acquisition of property, plant & equipment |
(12.4) |
(8.1) |
||
|
Proceeds from sale of property, plant & equipment |
0.5 |
0.2 |
||
|
Acquisition of subsidiaries, net of cash acquired |
(34.5) |
(1.3) |
||
|
Disposal of subsidiaries, net of cash disposed |
45.8 |
- |
||
|
Net cash flow from investing activities - continuing operations |
(0.6) |
(9.2) |
||
|
Cash flows from financing activities - continuing operations |
||||
|
Proceeds from issue of share capital |
1.5 |
0.4 |
||
|
Drawdown of bank loans |
67.2 |
31.4 |
||
|
Repayment of bank loans |
(36.5) |
(5.0) |
||
|
Repayment of lease finance liabilities |
(0.4) |
(0.5) |
||
|
Dividends paid to equity holders of the parent |
(7.7) |
(7.1) |
||
|
Dividends paid to minority interest |
- |
(0.1) |
||
|
Net cash flow from financing activities - continuing operations |
24.1 |
19.1 |
Consolidated cash flow statement (continued)
_________________________________________________________________________
For the year to 31 March 2008
|
2008 |
2007 |
|||
|
Restated |
||||
|
Note |
£ million |
£ million |
||
|
Discontinued operations |
||||
|
Net cash from operating activities |
2.9 |
2.1 |
||
|
Net cash from investing activities |
(3.6) |
(12.8) |
||
|
Net cash from financing activities |
(0.1) |
- |
||
|
Net cash flow from discontinued operations |
(0.8) |
(10.7) |
||
|
Net increase/(decrease) in cash |
9 |
26.3 |
(2.3) |
|
|
Cash at start of year |
7.4 |
9.5 |
||
|
Effect of exchange rate fluctuations |
(1.3) |
0.2 |
||
|
Net cash at end of year |
32.4 |
7.4 |
Consolidated statement of recognised income and expense
_________________________________________________________________________
For the year to 31 March 2008
|
2008 |
2007 |
|||
|
£ million |
£ million |
|||
|
Foreign exchange translation differences |
0.3 |
(1.5) |
||
|
Actuarial (loss)/gain in pension schemes |
(2.0) |
0.5 |
||
|
Tax in respect of the above |
0.3 |
(0.1) |
||
|
Income and expense recognised directly in equity |
(1.4) |
(1.1) |
||
|
Profit for the year |
22.8 |
12.9 |
||
|
Total recognised income and expense for the year |
21.4 |
11.8 |
||
|
Total recognised income and expense for the year |
||||
|
Attributable to: |
||||
|
Equity holders of the parent |
21.3 |
11.7 |
||
|
Minority interest |
0.1 |
0.1 |
||
|
Total recognised income and expense for the year |
21.4 |
11.8 |
Notes to the preliminary announcement of results ____________________________________________________________________________
For the year to 31 March 2008
1 Basis of preparation
Umeco plc (the 'Company') is domiciled in the UK. The consolidated financial statements of the Company as at and for the year to 31 March 2008 comprise the Company and its subsidiaries (together referred to as the 'Group') and have been prepared in accordance with IFRS adopted for use in the EU ('Adopted IFRS').
The financial information set out in this announcement, which was approved by the Board on 3 June 2008, does not constitute the Company's statutory accounts for the years to 31 March 2008 and 31 March 2007 but is derived from the 2008 statutory accounts. The statutory accounts for the year to 31 March 2007 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The statutory accounts for the year to 31 March 2008 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts, their report was unqualified, did not include references to any matter which the auditors drew attention to by way of emphasis without qualifying their report and did not contain statements under sections 237 (2) or (3) of the Companies Act 1985.
In the process of applying the Group's accounting policies, management has made a number of judgements. The process of preparing these consolidated financial statements inevitably requires the Group to make estimates and assumptions concerning the future and the resulting accounting estimates may not equal the related actual results. The estimates and judgements that have the most significant effect on the amounts included within these consolidated financial statements were the same as those that applied to the audited consolidated financial statements for the year to 31 March 2007, with the addition of judgements made in respect of provisions for disposal costs.
Following the divestments of the Repair & Overhaul and Chemicals business activities the results of these undertakings have been classified as discontinued operations, and the comparatives for the year to 31 March 2007 amended accordingly. Segmental results for the year to 31 March 2007 have been revised to allocate central costs only to those business units that now form part of continuing operations.
2 Segmental reporting
|
Revenue |
Adjusted operating profit (see note 4) |
Total operating profit |
|||||||||
|
2008 |
2007 |
2008 |
2007 |
2008 |
2007 |
||||||
|
£ million |
£ million |
£ million |
£ million |
£ million |
£ million |
||||||
|
Before acquisitions* |
|||||||||||
|
Composites |
165.8 |
152.2 |
16.6 |
14.6 |
16.5 |
14.7 |
|||||
|
Supply Chain |
186.0 |
157.6 |
9.4 |
8.0 |
8.8 |
5.6 |
|||||
|
Repair & Overhaul |
15.7 |
24.1 |
2.4 |
3.1 |
1.4 |
1.7 |
|||||
|
Total |
367.5 |
333.9 |
28.4 |
25.7 |
26.7 |
22.0 |
|||||
|
Less discontinued operations - note 11 |
(45.5) |
(51.8) |
(3.6) |
(4.2) |
(2.6) |
(2.8) |
|||||
|
Continuing |
|||||||||||
|
operations |
322.0 |
282.1 |
24.8 |
21.5 |
24.1 |
19.2 |
|||||
|
Acquisitions* |
|||||||||||
|
Composites |
13.2 |
- |
2.3 |
- |
- |
- |
|||||
|
Supply Chain |
- |
- |
- |
- |
- |
- |
|||||
|
Repair & Overhaul |
- |
- |
- |
- |
- |
- |
|||||
|
Continuing |
|||||||||||
|
operations |
13.2 |
- |
2.3 |
- |
- |
- |
|||||
|
Total |
|||||||||||
|
Composites |
179.0 |
152.2 |
18.9 |
14.6 |
16.5 |
14.7 |
|||||
|
Supply Chain |
186.0 |
157.6 |
9.4 |
8.0 |
8.8 |
5.6 |
|||||
|
Repair & Overhaul |
15.7 |
24.1 |
2.4 |
3.1 |
1.4 |
1.7 |
|||||
|
Total |
380.7 |
333.9 |
30.7 |
25.7 |
26.7 |
22.0 |
|||||
|
Less discontinued operations - note 11 |
(45.5) |
(51.8) |
(3.6) |
(4.2) |
(2.6) |
(2.8) |
|||||
|
Continuing |
|||||||||||
|
operations |
335.2 |
282.1 |
27.1 |
21.5 |
24.1 |
19.2 |
|||||
|
* Acquisitions are defined as those that occurred during the year to 31 March 2008 and relate entirely to continuing operations. |
|||||||||||
|
Total operating profit (as above) |
24.1 |
19.2 |
|||||||||
|
Financial income |
1.2 |
1.5 |
|||||||||
|
Financial expense |
(8.2) |
(4.4) |
|||||||||
|
Profit before tax |
17.1 |
16.3 |
|||||||||
|
Income tax - UK |
(4.0) |
(3.8) |
|||||||||
|
Income tax - overseas |
(2.0) |
(1.5) |
|||||||||
|
Profit from continuing operations |
11.1 |
11.0 |
|||||||||
|
Discontinued operations |
|||||||||||
|
Profit from discontinued operations (net of tax) - note 11 |
11.7 |
1.9 |
|||||||||
|
Profit for the year |
22.8 |
12.9 |
|||||||||
2 Segmental reporting (continued)
|
2008 |
2007 |
||||
|
£ million |
£ million |
||||
|
Revenue by destination |
|||||
|
UK |
187.9 |
168.7 |
|||
|
Rest of Europe |
102.5 |
86.6 |
|||
|
North America |
66.6 |
57.8 |
|||
|
Rest of world |
23.7 |
20.8 |
|||
|
Total |
380.7 |
333.9 |
|||
|
Less discontinued operations |
(45.5) |
(51.8) |
|||
|
Continuing operations |
335.2 |
282.1 |
|
2008 |
2007 |
||||
|
£ million |
£ million |
||||
|
Segment assets |
|||||
|
Composites |
179.9 |
135.5 |
|||
|
Supply Chain |
179.8 |
141.6 |
|||
|
Repair & Overhaul |
- |
33.1 |
|||
|
Unallocated assets |
45.5 |
5.2 |
|||
|
Total assets |
405.2 |
315.4 |
|||
|
Segment liabilities |
|||||
|
Composites |
(45.3) |
(37.1) |
|||
|
Supply Chain |
(90.3) |
(66.9) |
|||
|
Repair & Overhaul |
- |
(11.1) |
|||
|
Unallocated liabilities |
(107.2) |
(53.1) |
|||
|
Total liabilities |
(242.8) |
(168.2) |
|||
|
Net assets |
162.4 |
147.2 |
2 Segmental reporting (continued)
|
2008 |
2007 |
||||
|
£ million |
£ million |
||||
|
Capital expenditure |
|||||
|
Composites |
3.6 |
5.0 |
|||
|
Supply Chain |
9.3 |
3.8 |
|||
|
Repair & Overhaul |
0.2 |
2.0 |
|||
|
Unallocated |
0.1 |
0.2 |
|||
|
Total |
13.2 |
11.0 |
|||
|
Less discontinued operations |
(0.6) |
(2.4) |
|||
|
Continuing operations |
12.6 |
8.6 |
|||
|
Depreciation |
|||||
|
Composites |
2.4 |
1.8 |
|||
|
Supply Chain |
1.6 |
1.1 |
|||
|
Repair & Overhaul |
0.3 |
0.4 |
|||
|
Unallocated |
0.1 |
0.2 |
|||
|
Total |
4.4 |
3.5 |
|||
|
Less discontinued operations |
(0.6) |
(0.6) |
|||
|
Continuing operations |
3.8 |
2.9 |
|||
|
Amortisation of intangible assets and impairment of goodwill |
|||||
|
Composites |
2.3 |
- |
|||
|
Supply Chain |
- |
1.8 |
|||
|
Repair & Overhaul |
1.0 |
1.4 |
|||
|
Total |
3.3 |
3.2 |
|||
|
Less discontinued operations |
(1.0) |
(1.4) |
|||
|
Continuing operations |
2.3 |
1.8 |
For the year to 31 March 2007, the value shown for Supply Chain includes £0.8 million in respect of goodwill impairment. In the year to 31 March 2007, £0.2 million of negative goodwill was credited to the income statement in respect of Composites.
3 Financial income and expense
|
2008 |
2007 |
||||
|
£ million |
£ million |
||||
|
Financial income |
|||||
|
Revaluation of financial instruments |
- |
0.3 |
|||
|
Interest income |
0.1 |
0.3 |
|||
|
Expected return on pension scheme assets |
1.1 |
0.9 |
|||
|
1.2 |
1.5 |
||||
|
Financial expense |
|||||
|
Revaluation of financial instruments |
1.8 |
- |
|||
|
Interest on bank loans and overdrafts |
5.4 |
3.5 |
|||
|
Interest payable in respect of lease finance |
0.1 |
0.1 |
|||
|
Interest cost on pension scheme liabilities |
0.9 |
0.8 |
|||
|
8.2 |
4.4 |
4 Reconciliation of adjusted profit measures
Umeco uses adjusted figures as key performance indicators. Adjusted figures are stated before profits arising on the divestment of discontinued operations, amortisation and impairment charges relating to intangible assets, significant items, the revaluation of financial instruments based on their market values and associated tax effects. The differences between the total and adjusted profit measures are reconciled below. The narrative in this preliminary announcement is based on the adjusted measures of operating profit, profit before tax and earnings per share. These provide a more consistent measure of operating performance.
|
2008 |
2007 |
||||
|
£ million |
£ million |
||||
|
Operating profit - continuing operations |
|||||
|
Total operating profit |
24.1 |
19.2 |
|||
|
Exclude: |
|||||
|
- significant items |
0.7 |
0.7 |
|||
|
- impairment of goodwill |
- |
0.8 |
|||
|
- negative goodwill recognised |
- |
(0.2) |
|||
|
- amortisation of intangible assets |
2.3 |
1.0 |
|||
|
Adjusted operating profit |
|||||
|
- continuing operations |
27.1 |
21.5 |
|||
|
Profit before tax - continuing operations |
|||||
|
Total profit before tax |
17.1 |
16.3 |
|||
|
Exclude: |
|||||
|
- significant items |
0.7 |
0.7 |
|||
|
- impairment of goodwill |
- |
0.8 |
|||
|
- negative goodwill recognised |
- |
(0.2) |
|||
|
- amortisation of intangible assets |
2.3 |
1.0 |
|||
|
- revaluation of financial instruments |
1.8 |
(0.3) |
|||
|
Adjusted profit before tax |
|||||
|
- continuing operations |
21.9 |
18.3 |
|||
4 Reconciliation of adjusted profit measures (continued)
|
2008 |
2007 |
||||
|
£ million |
£ million |
||||
|
Profit attributable to equity holders of the parent |
|||||
|
Total profit attributable to equity holders of the parent |
22.7 |
12.8 |
|||
|
Exclude: |
|||||
|
- significant items |
0.7 |
0.7 |
|||
|
- impairment of goodwill |
- |
0.8 |
|||
|
- negative goodwill recognised |
- |
(0.2) |
|||
|
- amortisation of intangible assets |
3.3 |
2.4 |
|||
|
- revaluation of financial instruments |
1.8 |
(0.3) |
|||
|
- profit on disposal of discontinued operations |
(9.9) |
- |
|||
|
- associated tax effects |
(0.9) |
(1.0) |
|||
|
Adjusted profit attributable to |
|||||
|
equity holders of the parent |
17.7 |
15.2 |
|||
|
Pence |
Pence |
||||
|
Adjusted earnings per share |
36.7 |
32.2 |
|||
Significant items in the year to 31 March 2008 comprised re-organisation costs, principally in relation to the closure of Umeco Supply Chain's principal Canadian facility upon the termination of the contract with Bombardier Aerospace. Significant items in the year to 31 March 2007 comprised re-organisation costs, principally in relation to the closure of Umeco Supply Chain's electronics component distribution activity.
5 Tax expense
The effective tax rate on profit before tax from continuing operations is 35.1 per cent (2007: 32.5 per cent). The effective rate of tax on adjusted profit before tax from continuing operations is 31.3 per cent (2007: 32.8 per cent). These effective tax rates differ from the UK standard rate of corporation tax of 30.0 per cent (2007: 30.0 per cent) principally due to greater certainty of the Group's tax liability at its US businesses and the effects of tax rates in overseas jurisdictions.
6 Dividends
The Directors have proposed a final dividend of 11.0 pence per share, payable on 1 August 2008 to shareholders on the register on 4 July 2008. The amount of this final dividend is £5.3 million.
The following dividends were paid and proposed by the Company:
|
2008 |
2008 |
2007 |
2007 |
||
|
Pence per share |
£ million |
Pence per share |
£ million |
||
|
Dividends paid |
|||||
|
Previous year final |
10.0 |
4.8 |
9.5 |
4.5 |
|
|
Current year interim |
6.0 |
2.9 |
5.5 |
2.6 |
|
|
16.0 |
7.7 |
15.0 |
7.1 |
||
|
Dividends proposed |
|||||
|
Interim |
6.0 |
2.9 |
5.5 |
2.6 |
|
|
Final |
11.0 |
5.3 |
10.0 |
4.7 |
|
|
17.0 |
8.2 |
15.5 |
7.3 |
7 Earnings per share
The weighted average number of shares in issue during the year was 47.9 million (2007: 47.5 million). The weighted average number of shares on a fully diluted basis was 48.0 million (2007: 47.8 million) after an adjustment for dilutive share options of 0.1 million (2007: 0.3 million).
Basic earnings per share have been calculated on profit attributable to equity holders of the parent of £22.7 million (2007: £12.8 million). The Directors consider that adjusted earnings per share provide a more consistent measure of operating performance. Adjusted earnings per share are calculated based on adjusted profit attributable to equity holders of the parent, calculated as set out in note 4.
8 Capital and reserves
|
Share |
Share |
Translation |
Retained |
||
|
capital |
premium |
reserve |
earnings |
Total |
|
|
£ million |
£ million |
£ million |
£ million |
£ million |
|
|
At 1 April 2007 |
11.9 |
113.9 |
(1.0) |
22.1 |
146.9 |
|
Total recognised income and expense |
- |
- |
0.3 |
21.0 |
21.3 |
|
Share capital issued |
0.1 |
1.4 |
- |
- |
1.5 |
|
Cost of share based payments |
- |
- |
- |
0.2 |
0.2 |
|
Shares awarded under share schemes |
- |
- |
- |
0.2 |
0.2 |
|
Dividends paid |
- |
- |
- |
(7.7) |
(7.7) |
|
At 31 March 2008 |
12.0 |
115.3 |
(0.7) |
35.8 |
162.4 |
|
At 1 April 2006 |
11.8 |
113.6 |
0.5 |
16.0 |
141.9 |
|
Total recognised income and expense |
- |
- |
(1.5) |
13.2 |
11.7 |
|
Share capital issued |
0.1 |
0.3 |
- |
- |
0.4 |
|
Cost of share based payments |
- |
- |
- |
0.2 |
0.2 |
|
Shares awarded under share schemes |
- |
- |
- |
(0.2) |
(0.2) |
|
Dividends paid |
- |
- |
- |
(7.1) |
(7.1) |
|
At 31 March 2007 |
11.9 |
113.9 |
(1.0) |
22.1 |
146.9 |
9 Reconciliation of net cash to movement in net debt
|
2008 |
2007 |
|||
|
£ million |
£ million |
|||
|
Net increase/(decrease) in cash |
26.3 |
(2.3) |
||
|
Borrowings taken on with acquisition |
- |
(0.1) |
||
|
Drawdown of bank loans |
(67.2) |
(31.4) |
||
|
Drawdown of lease finance |
(0.2) |
(0.5) |
||
|
Repayment of bank loans |
36.5 |
5.0 |
||
|
Repayment of lease finance liabilities |
0.4 |
0.5 |
||
|
(4.2) |
(28.8) |
|||
|
Effect of exchange rate fluctuations |
(1.6) |
3.7 |
||
|
Movement in net debt |
(5.8) |
(25.1) |
||
|
Net debt at start of year |
(51.8) |
(26.7) |
||
|
Net debt at end of year |
(57.6) |
(51.8) |
Net debt comprises cash balances, bank overdrafts, bank loans and lease finance obligations.
10 Acquisitions
On 31 August 2007, the Group acquired the entire issued share capital of J. D. Lincoln, Inc. ('Lincoln') for an initial cash consideration of US$59.5 million. Additional cash consideration of up to US$15.0 million is payable based on the EBITDA of Lincoln in the twelve months after completion. Lincoln formulates and manufactures a range of pre-preg materials primarily used by aerospace tier 2 suppliers for the manufacture of composite interior structures of commercial aircraft. In the period from acquisition to 31 March 2008, Lincoln achieved an operating profit of £0.2 million, after a charge of £2.0 million in respect of the amortisation of acquired intangible assets. Had the acquisition completed on 1 April 2007, it is estimated that Lincoln would have contributed a further £7.6 million to revenue and £0.1 million to profit before tax, after making certain non-recurring payments to the vendors. Other than the recognition of intangible assets of £20.6 million and a related deferred tax liability, the only fair value adjustments made were the recognition of additional trade & other payables of £0.2m.
On 21 November 2007, Advanced Composites Group Limited acquired the entire issued share capital of George Cole Technologies Limited which traded as Primco ('Primco') for a cash consideration of £3.0 million. Primco's operations are based in Manchester, and the business develops and manufactures a range of phenolic resin based pre-pregs used in aerospace, defence, industrial, medical and sporting applications.
On 31 August 2007, GRPMS Limited acquired the Estonian distribution business of Ashland Composite Polymers, part of Ashland Inc., and the inventory and fixed assets related to this business. There was no goodwill arising.
The fair value of net assets acquired were as follows:
|
Lincoln |
Primco |
GRPMS Estonia |
Total |
|
|
£ million |
£ million |
£ million |
£ million |
|
|
Property, plant & equipment |
0.8 |
1.0 |
0.1 |
1.9 |
|
Intangible assets |
20.6 |
0.4 |
- |
21.0 |
|
Inventory |
1.4 |
0.5 |
0.1 |
2.0 |
|
Trade & other receivables |
2.3 |
1.2 |
- |
3.5 |
|
Cash |
- |
0.2 |
- |
0.2 |
|
Trade & other payables |
(1.4) |
(1.2) |
- |
(2.6) |
|
Loans & borrowings |
(0.2) |
- |
- |
(0.2) |
|
Income tax payable |
(0.6) |
(0.1) |
- |
(0.7) |
|
Deferred tax liabilities |
(5.8) |
(0.1) |
- |
(5.9) |
|
Net identifiable assets and liabilities |
17.1 |
1.9 |
0.2 |
19.2 |
|
Goodwill |
16.8 |
1.4 |
- |
18.2 |
|
Consideration |
33.9 |
3.3 |
0.2 |
37.4 |
|
Satisfied by: |
||||
|
Cash consideration paid |
29.6 |
3.0 |
0.2 |
32.8 |
|
Expenses paid |
1.1 |
0.3 |
- |
1.4 |
|
Consideration and expenses accrued |
3.2 |
- |
- |
3.2 |
|
33.9 |
3.3 |
0.2 |
37.4 |
10 Acquisitions (continued)
The goodwill recognised on the acquisitions of Lincoln and Primco is attributable to the skills and technical capabilities of the employees of these companies, and synergies expected to be generated from establishing links between these companies and the Group's existing composites activities.
Amounts recognised for intangible assets and goodwill are provisional and subject to change for the period of one year from the date of acquisition. Intangible assets have been recognised in respect of customer relationships, product qualifications & approvals, and order books on hand at acquisition.
In addition to payments in respect of acquisitions made in the year, £3.7 million was paid in respect of deferred consideration due under the terms of the acquisition of Avionics Mobile Services Limited and the purchase of the minority interest shareholding in Tailored Logistics Corporation, Inc.
Details of acquisitions made in the year to 31 March 2007 are as follows:
In October 2006, the Group acquired the entire issued share capital of Antavia, a Toulouse-based provider of repair & overhaul services to the aerospace industry, for a cash consideration of €12.3 million. In the period from acquisition to 31 March 2007, Antavia contributed £0.6 million to the Group's adjusted profit before tax from discontinued operations. After a charge for amortisation of intangible assets of £1.2 million, Antavia's contribution to total profit before tax was a loss of £0.6 million. Had the acquisition completed on 1 April 2006, it is estimated that Antavia would have made a further equal contribution to adjusted profit before tax and total profit before tax.
In June 2006, the Group acquired the entire issued share capital of Aerodyne for £0.1 million in cash. Aerodyne is based in Cape Town, South Africa, and manufactures advanced composites component parts for the upper end automotive market. In November 2006, the Group acquired the entire issued share capital of US Airmotive, a distributor of a wide range of aerospace chemicals, for £0.5 million.
10 Acquisitions (continued)
The table below sets out the fair values of assets acquired as a result of these acquisitions. The only adjustments made to book values in order to arrive at the fair value recognised in the Group's financial statements relate to the recognition of intangible assets. An asset of £3.9 million was recognised in relation to Antavia's customer relationships and orders.
|
Antavia |
Aerodyne |
US Airmotive |
Total |
|
|
£ million |
£ million |
£ million |
£ million |
|
|
Property, plant & equipment |
0.2 |
0.7 |
- |
0.9 |
|
Intangible assets |
3.9 |
- |
- |
3.9 |
|
Inventories |
0.8 |
0.3 |
- |
1.1 |
|
Trade & other receivables |
1.9 |
0.2 |
0.3 |
2.4 |
|
Bank loans |
(0.1) |
- |
- |
(0.1) |
|
Trade & other payables |
(1.8) |
(0.9) |
- |
(2.7) |
|
Deferred tax liabilities |
(1.3) |
- |
- |
(1.3) |
|
Net identifiable assets and liabilities |
3.6 |
0.3 |
0.3 |
4.2 |
|
Goodwill |
5.0 |
(0.2) |
0.3 |
5.1 |
|
Consideration |
8.6 |
0.1 |
0.6 |
9.3 |
|
Satisfied by: |
||||
|
Cash consideration paid |
8.3 |
0.1 |
0.5 |
8.9 |
|
Expenses paid |
0.3 |
- |
0.1 |
0.4 |
|
8.6 |
0.1 |
0.6 |
9.3 |
11 Divestments
On 1 November 2007, the Group completed the divestment of its Repair & Overhaul business segment to AMETEK, Inc. for a cash consideration of £36.0 million. The divestment was effected by way of the sale of the entire issued share capital of AEM Limited and Antavia SAS to Ametek Holdings B.V., a wholly owned subsidiary of AMETEK, Inc.
On 31 March 2008, Umeco divested its chemicals distribution businesses ('Chemicals'). This was effected by the sale of the entire issued share capital of Aeropia Limited, Aeropia, Inc., and RD Taylor & Company Limited to Haas TCM of the UK Limited, a wholly owned subsidiary of Haas TCM Group, Inc. for a cash consideration of £13.0 million.
The Repair & Overhaul and Chemicals operations were not discontinued or classified as held for sale as at 31 March 2007 and the comparative income statement and statement of cash flows have been restated to show these activities as a discontinued operation. Results of these activities have been disclosed separately from continuing operations.
11 Divestments (continued)
In the year to 31 March 2008, the profit from discontinued operations was as follows:
|
Repair & Overhaul |
Chemicals |
Total |
||
|
£ million |
£ million |
£ million |
||
|
Revenue |
15.7 |
29.8 |
45.5 |
|
|
Expenses |
(14.3) |
(28.6) |
(42.9) |
|
|
Results from operating activities |
1.4 |
1.2 |
2.6 |
|
|
Income tax expense |
(0.4) |
(0.4) |
(0.8) |
|
|
Profit for the period |
1.0 |
0.8 |
1.8 |
|
|
Profit arising on disposal |
2.6 |
7.3 |
9.9 |
|
|
Profit from discontinued operations |
3.6 |
8.1 |
11.7 |
In the year to 31 March 2007, the profit from discontinued operations was as follows:
|
Repair & Overhaul |
Chemicals |
Total |
||
|
£ million |
£ million |
£ million |
||
|
Revenue |
24.1 |
27.7 |
51.8 |
|
|
Expenses |
(22.4) |
(26.6) |
(49.0) |
|
|
Results from operating activities |
1.7 |
1.1 |
2.8 |
|
|
Income tax expense |
(0.5) |
(0.4) |
(0.9) |
|
|
Profit from discontinued operations |
1.2 |
0.7 |
1.9 |
The divestments had the following effect on the financial position of the Group:
|
£ million |
||||
|
Property, plant & equipment |
5.1 |
|||
|
Intangible assets |
18.8 |
|||
|
Inventories |
6.5 |
|||
|
Trade & other receivables |
11.6 |
|||
|
Income tax receivable |
0.2 |
|||
|
Cash |
3.3 |
|||
|
Trade & other payables |
(9.9) |
|||
|
Loans & borrowings |
(2.9) |
|||
|
Income tax payable |
(0.6) |
|||
|
Deferred tax liabilities |
(0.6) |
|||
|
Net assets disposed of |
31.5 |
|||
|
Consideration received (£49.0 million, net of disposal costs of £7.6 million which includes a disposal provision of £4.0 million) |
41.4 |
|||
|
Profit arising on disposal |
9.9 |
|||
12 Details of Annual General Meeting
The Annual General Meeting of the Company will be held at The Falstaff Hotel, 16-20 Warwick New Road, Leamington Spa, CV32 5JQ on Thursday 24 July 2008 at 1.00pm.
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