26th Nov 2008 07:00
26 November 2008
Hampson Industries PLC
Unaudited results for the six month period ended 30 September 2008
Profit before tax up 149%
Hampson Industries PLC ("Hampson" or "the Group") the international aerospace and specialist engineering group announces strong results for the six month period ended 30 September 2008.
Corporate highlights
Hampson becomes clear global leader in large tooling systems for composite aero structures, which now comprises 45% of Group revenue
Strategic push into tooling positions the Group well to limit exposure to any cyclicality in commercial aircraft build rates
Recently acquired Odyssey Industries Inc ("Odyssey") and Global Tooling Systems Inc. ("GTS") performed well ahead of expectations and are strongly earnings accretive
Strong liquidity position with £84 million undrawn from renewed and extended 5-7 year borrowing facilities. Net interest cover** increased to over five times and gearing reduced by 13 percentage points to 62%
Record tooling orders, fully booked to year end March 2009 with capacity being expanded to meet demand. Significant new contract wins in composite components
Financial highlights
|
Six months to 30 September 2008 |
Six months to 30 September 2007 |
Change % |
|
|
Continuing operations: |
|||
|
Revenue |
£110.5m |
£76.3m |
+45 |
|
Trading profit* |
£20.0m |
£10.0m |
+99 |
|
Operating profit |
£17.4m |
£8.3m |
+110 |
|
Profit before tax* |
£16.1m |
£7.1m |
+127 |
|
Profit before tax - statutory basis |
£12.5m |
£5.0m |
+149 |
|
Earnings per share* |
8.30p |
4.89p |
+70 |
|
Earnings per share - statutory basis |
6.46p |
3.37p |
+92 |
|
Dividend per share - interim |
0.80p |
0.50p |
+60 |
|
Net debt |
£114.0m |
£66.7m |
|
|
Exchange rates (GBP 1 = USD): |
|||
|
Average for period |
1.94 |
2.00 |
|
|
Period end |
1.82 |
2.04 |
* Trading profit, profit before tax and earnings per share are all stated to reflect the continuing operations of the Group before restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition. The Board considers that this measure of profit provides the best view of the underlying trading performance of the Group.
** Net interest cover is defined as trading profit divided by net financing costs excluding; unamortised debt issuance costs and changes in the net fair value of derivative financial instruments - interest instruments.
Commenting on the first half results, Chairman Chris Geoghegan said:
"In these challenging economic times, I am pleased to report another set of robust results that highlight the strength of our business model and the success of our clearly-focussed strategy to push into high-growth, high-margin aerospace composites and tooling. The contribution that our most recent acquisitions, Odyssey and GTS, have made to the Group in the period since we have bought them is particularly pleasing, being earnings accretive and ahead of our expectations.
"The recent investments we have made in composites, and particularly tooling have created a better balance within the Group between the aerospace production build cycle and the development and launch phases of aircraft programmes. Consequently the increased scale of the Group coupled with the spread of revenue sources has significantly reduced our exposure to any single contract downturn or to any cyclicality of the aerospace sector. This leaves the Group well placed to continue to generate long term profitable growth."
Further information:
Kim Ward, Chief Executive +44 (0)1384 472 941
Howard Kimberley, Finance Director +44 (0)1384 472 946
Marylene Guernier, M:Communications +44 (0)20 7153 1269
Chairman's Statement
The first six month period of the current financial year has been another period of considerable progress for the Group.
Robust trading results have combined with a number of significant achievements in the period that have left us a better balanced and stronger business, operating as market leaders in a number of defined niches within our core market sectors.
Revenue has increased by 45% in the period, and Group operating profit has more than doubled. Statutory earnings per share have increased by 92% and this has enabled us to declare an improved interim dividend to Shareholders of 0.80p per share, up 60% on the comparable period.
The acquisitions of Odyssey Industries Inc. "Odyssey" and Global Tooling Systems Inc. "GTS" have been fully integrated and are trading well ahead of our pre-acquisition expectations. We have also seen both of their order books progressively strengthen, in addition to that of our existing aerospace tooling business, Coast Composites, where we have recently expanded capacity in response to the demand we are now seeing for the Airbus A350 and other new commercial and military programmes.
Our financial flexibility has also been strengthened with the securing in April this year of new, enlarged, five year committed borrowing facilities followed by a successful debut in the US private debt placement market in May 2008.
Whilst we recognise that the current economic environment, and particularly volatility in global financial markets, will lead to softening in demand for commercial aerospace, we expect the relative strength of the current commercial aircraft order book to have a positive influence for the balance of this and the following financial year. We have an experienced management team and we remain vigilant and prepared to act quickly and decisively, should the need arise, to take any necessary actions to ensure our business remains competitive under any changed demand scenario.
The recent investments we have made in composites, and particularly tooling, have created a better balance within the Group between the aerospace production build cycle and the development and launch phases of aircraft programmes. Consequently the increased scale of the Group coupled with the spread of revenue sources has significantly reduced our exposure to any single contract downturn or to any cyclicality of the aerospace sector. This leaves the Group well placed to continue to generate long term profitable growth and create value for Shareholders
Chris Geoghegan
Chairman
26 November 2008
In addition to the "statutory" measures of profit, reference is made throughout to the impact on the Group's profit and earnings of excluding the following items; restructuring and rationalisation charges, impairment charges, amortisation of intangible assets arising on acquisition and changes in the net fair value of financial instruments. The Directors believe that exclusion of these items allows trends in the underlying performance of the Group's business to be more easily identified and understood. Reference is made throughout to the term "trading profit" which is defined as operating profit excluding all of the fore-going items.
Business Review
Group Performance
Revenue for the six month period was £110.5 million, an increase of £34.2 million (45%) compared with the first half of the previous year. This increase was assisted by three months' contribution from Odyssey and GTS, which accounted for £30.3 million of the improvement.
Trading profit, at £20.0 million, increased by almost 100% compared with the same period in the prior year and benefitted from a strong contribution from Odyssey and GTS, which exceeded the Board's expectations in the period.
Net financing costs (including changes in the net fair value of derivative financial instruments) amounted to £4.9 million in the six month period, compared with £3.2 million in the first half of the previous year. £0.6 million of this increase was in respect of the expensing of debt arrangement costs associated with the Group's previous borrowing facilities on their refinancing in April 2008.
Profit before tax for the six month period increased by £9.0 million (127%) and £7.5 million (149%) on a management and statutory basis, respectively.
Earnings per share on both a management and statutory basis also improved strongly compared to the equivalent period in the prior year, in spite of the additional shares issued as part of the US$253.3 million initial consideration to fund the acquisitions of Odyssey and GTS, which were completed in June 2008.
At 8.3p, earnings per share, on a management basis, were 3.4p (70%) higher than for the equivalent period in the prior year. On a statutory basis, earnings per share increased by 3.1p (92%), to 6.5p.
Funding and Liquidity
All of the Group's existing bank borrowing facilities were refinanced in April 2008 prior to the acquisitions of Odyssey and GTS. The new facilities comprise five year bank borrowing facilities of £160 million maturing in April 2013, and US$50 million of notes privately placed in the US debt market, maturing in May 2015. In addition, the Group maintains leasing facilities which are used to finance certain items of capital expenditure, totalling a further £26.5 million. At 30 September 2008, £83.6 million of the Group's committed borrowing facilities remained undrawn, with a weighted average tenor of almost five years.
In spite of increased working capital to support the growth in the tooling businesses, the six month period to 30 September saw improved underlying cash generation from operating activities some £3.7 million higher than in the equivalent period of the previous year.
After funding the cash element of the consideration for the Odyssey and GTS acquisitions of £109.7 million, net indebtedness at 30 September stood at £114.0 million, £53.4 million higher than at the prior year end. Interest cover (trading profit divided by net financing costs excluding unamortised debt issuance costs and changes in the net fair value of derivative financial instruments - interest instruments) for the six month period increased to over five times (year ended 31 March 2008: 4.2 times), and balance sheet "gearing" (net indebtedness expressed as a percentage of shareholders' equity) reduced by 13 percentage points to 62% from the position as at 31 March 2008. The ratio of net indebtedness to EBITDA (trading profit before depreciation and amortisation) on a trailing twelve month basis (adjusted to reflect an assumed twelve months' ownership of Odyssey and GTS) was 2.2 times, unchanged from the year ended 31 March 2008.
Dividend
The Board has declared an interim dividend of 0.80p per share to be paid on or around 13 February 2009 to those shareholders on the register on 23 January 2009. This represents a 60% increase on last year's interim dividend and is covered nearly seven times by earnings of the half year.
Currency
The results for the six month period to 30 September 2008 were translated at an average rate of exchange of GBP1 = USD 1.94 (year ended 31 March 2008: GBP1 = USD 2.01, six months ended 30 September 2007: GBP1 = USD 2.00). On a constant currency basis, revenue and trading profit would have been £2.2 million and £0.6 million lower, respectively.
Operational Review
Aerospace Components & Structures
Hampson's Aerospace Components & Structures businesses supply highly-engineered, performance-critical metallic components, sub-assemblies and fully assembled structures to many of the world's leading airframe manufacturers and gas turbine engine producers and their tier one suppliers.
As expected, aerospace markets in general have remained robust in the period. Against this background, overall activity levels were higher in the Aerospace Components & Structures division, leading to an 8% increase in revenue to £46.4 million compared to the first six months of the previous year.
Despite generating growth in revenue, divisional trading profit, at £5.8 million was marginally lower than in the first six months of last year. This was due primarily to the impact of the Eclipse 500 programme, which operated at well below break even volumes in the period. Following the filing under Chapter 11 of the US Bankruptcy Code on 25 November 2008, the outcome of this programme is now subject to considerable uncertainty. All appropriate actions have already been taken to minimise the impact on the Group's ongoing trading results. In the event that the programme is terminated, the Group would take an exceptional one-time, non-cash impairment charge to reduce the carrying values of intangible assets, receivables, and inventory of up to £21 million, depending on likely recoveries. Such a charge would have no impact on the Group's banking covenants or overall solvency. Termination of the Eclipse 500 programme would have a positive impact on the results for the Group going forward, both in terms of earnings and cash-flow.
Aerospace Composites & Transparencies
Hampson's Aerospace Composites & Transparencies businesses provide a broad range of high performance transparencies and carbon composite components for airframe, satellite and gas turbine applications. Hampson is also the world leader in the design and fabrication of close tolerance tooling systems for large, carbon composite aero structures.
The Aerospace Composites & Transparencies division benefitted from particularly strong results from Odyssey and GTS in the three month period since acquisition, with their order books having continued growing to record levels. This has been achieved in spite of delays in receiving orders from Boeing and its sub-contractors for the rate and derivative tooling for the B787 as a result of the continuing development delays in that aircraft programme. We expect these orders to be significant.
A key element of our growth strategy in recent years has been to reposition Hampson in profitable niches with less cyclical and more secular growth characteristics. As a consequence of this strategy, our Aerospace Composites & Transparencies business is now the largest of Hampson's divisions, generating well over 50% of the Group's revenue on a pro forma full year basis.
Total divisional revenue for the six month period stood at £53.1 million, some £30.0 million (129%) higher than in the first half of the prior year. Trading profit of £14.4 million was £9.7 million (208%) higher than the first half of the prior year.
The growth in the period was entirely due to the impact of Odyssey and GTS. On a constant currency, like-for-like basis, revenue and trading profit were both marginally lower compared to the same period last year due to continuing timing delays on the Lightning II (JSF) programme in respect of which the Group supplies high temperature composite engine components and later than planned receipt of initial A350 tooling orders. Compared to the prior period, results were also held back by lower requirements for composite engine nacelles by Eclipse Aviation.
The half year period saw a number of new contract wins at all of the Group's composites businesses, including a US$39 million sole source supply contract for F-16 canopies to the USAF for the next five years, a US$17 million contract to supply a package of assembly tooling for the Boeing 747-8 programme and contracts to supply initial development tools to Airbus for the A350 programme worth US$27 million.
In light of the growth in orders received, new capacity has already been brought on line in tooling with more committed, and Composites Horizons Inc., the Group's high temperature composites business, is about to undertake a US$3 million facility expansion programme in response to a doubling of its order book and the expectation of further contract wins.
Automotive Turbocharger
The Automotive Turbocharger division manufactures small, highly engineered precision components and rotating assemblies for turbocharger and similar close tolerance applications.
With higher fuel prices and environmental considerations continuing to drive the use of smaller, forced-induction engines in the passenger car and light vehicle sectors, the division continued to see growing demand for its products in the period.
Revenue, as a result, climbed 6% higher than in the equivalent period of 2007/8. Compared to a first half loss of £1.0 million in 2007/08, the first six months of the current year generated a trading profit of £0.4 million, after absorbing reduced net start-up losses of the Indian plant, of just over £0.1 million. Following the successful implementation of SAP, we expect to realise further operational efficiencies at both plants as well as benefit from the results of targeted cost reduction initiatives which are anticipated to deliver improved divisional results in the second half.
Our recently established Indian facility made positive progress in the period. The new facility, which offers a world-class manufacturing environment for precision engineered products, continues to generate interest from existing and new automotive customers and from our aerospace customers who continue to develop global strategies that involve the migration of some sourcing activity to lower cost facilities.
Outlook
With our recent investment to become global leaders in large tooling manufacture, we have deliberately positioned the Group to limit our exposure to the normal cyclicality of commercial aircraft build rates. Tooling now comprises over 50% of our total aerospace revenue and our tooling businesses have full order books. We expect to continue to see further order growth as orders are released for both rate and derivative tools on the B787 and Lightning II (JSF) programmes, as well as further development tooling orders on the A350.
In light of the current global economic environment, there are inevitably increasing risks of some softening of commercial aerospace demand from current levels. Although, in light of this, we consider it likely that Boeing, Airbus and their prime contractors will review their production rates, the unprecedented size of their current combined order book should provide some degree of resilience to activity levels within the commercial aerospace supply chain.
We expect military aerospace demand to remain broadly stable throughout the short and medium terms.
Global automotive markets will see falling production, although the proportion of passenger cars and light vehicles fitted with turbochargers is likely to increase. Taking these two factors together, we currently expect that the impact of reduced volumes on existing programmes will be partially commuted by growth in new programmes. We also expect operating efficiencies and cost reductions to generate improved results for this division in the second half.
Over 60 per cent of the Group's revenue is denominated in US Dollars. The recent strengthening of that currency against Sterling, if sustained, will result in a further benefit to the Group's results going forward.
In summary, our strategy to reduce the inherent cyclical exposure of the commercial aerospace market and to build strong global leadership positions in distinct market niches has left us very well placed to weather the challenges presented by the current economic environment. We therefore expect to continue to make further positive progress during the second half of the current financial year and beyond.
Principal risks and uncertainties
In common with all trading businesses, the Group is exposed to a variety of risks in the conduct of its normal business operations. Set out on pages 21 to 24 of the Group's annual report for the year ended 31 March 2008 is a summary of some of the most important risks and uncertainties which, in the opinion of the Directors, could impact its performance. These are equally applicable to the current financial year. Although it is not possible to completely record or quantify every risk that the group faces, on a short term, forward-looking basis over the remainder of this financial year, the main area of potential risk and uncertainty relates to the continued solvency of Eclipse Aviation Corporation. Should this customer cease operations as a going concern, the Group would incur one-off, non-cash impairment charges to write down the value of certain fixed and current assets of up to £21 million. Other principal risks and uncertainties include those related to the global economic environment, cyclical markets, market competition, customer concentration, programme dependencies & relationships, commercial dispute resolution and litigation and interest rate and foreign exchange risk. The Group seeks to put in place strategies and actions to mitigate the potential effect of these risks wherever practical.
Condensed Consolidated Income Statement
|
Unaudited |
||||
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
||
|
Notes |
£'000 |
£'000 |
£'000 |
|
|
Continuing operations |
||||
|
Revenue |
3 |
110,512 |
76,346 |
157,946 |
|
Operating profit |
4 |
17,360 |
8,258 |
18,172 |
|
Analysed as: |
||||
|
Trading profit |
20,005 |
10,039 |
22,366 |
|
|
Restructuring and rationalisation charges |
5 |
(547) |
(1,384) |
(2,309) |
|
Impairment charges |
5 |
- |
- |
(392) |
|
Changes in net fair value of derivative financial instruments - non interest instruments |
5 |
1 |
- |
(775) |
|
Amortisation of intangible assets on acquisition |
5 |
(2,099) |
(397) |
(718) |
|
Net financing costs |
(4,853) |
(3,241) |
(8,989) |
|
|
Analysed as: |
||||
|
Financial income |
677 |
624 |
1,960 |
|
|
Financial expense |
(4,624) |
(3,576) |
(7,279) |
|
|
Restructuring and rationalisation charges - Unamortised debt issuance costs |
5 |
(586) |
- |
- |
|
Changes in net fair value of derivative financial instruments - interest instruments |
5 |
(320) |
(289) |
(3,670) |
|
Profit before taxation |
12,507 |
5,017 |
9,183 |
|
|
Taxation |
7 |
(3,752) |
(1,806) |
(2,349) |
|
Profit after taxation |
8,755 |
3,211 |
6,834 |
|
|
Discontinued operations |
||||
|
Post tax results from discontinued operations |
8 |
(30) |
(1,048) |
(1,542) |
|
Profit for the financial period |
8,725 |
2,163 |
5,292 |
|
|
Attributable to: |
||||
|
- Equity shareholders of the parent company |
8,725 |
2,163 |
5,292 |
|
|
- Minority interests |
- |
- |
- |
|
|
8,725 |
2,163 |
5,292 |
||
|
Dividends per 25p ordinary share |
||||
|
Interim dividend per share |
9 |
0.80p |
0.50p |
0.50p |
|
Final dividend per share |
9 |
0.00p |
0.00p |
1.50p |
|
Earnings per 25p ordinary share |
||||
|
Continuing Operations: |
||||
|
Earnings per share before restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition |
10 |
8.30p |
4.89p |
12.96p |
|
Basic |
10 |
6.46p |
3.37p |
7.18p |
|
Diluted |
10 |
6.44p |
3.36p |
7.14p |
|
Total Operations: |
||||
|
Basic |
10 |
6.44p |
2.27p |
5.56p |
|
Diluted |
10 |
6.42p |
2.26p |
5.53p |
Condensed Consolidated Balance Sheet
|
Unaudited |
|||
|
As at |
30 September 2008 |
30 September 2007 |
31 March 2008 |
|
£'000 |
£'000 |
£'000 |
|
|
Assets |
|||
|
Non-current assets |
|||
|
Goodwill |
217,580 |
59,431 |
61,448 |
|
Intangible assets |
32,501 |
21,543 |
21,901 |
|
Property, plant and equipment |
44,863 |
39,919 |
40,790 |
|
Deferred tax assets |
- |
4,070 |
- |
|
294,944 |
124,963 |
124,139 |
|
|
Current assets |
|||
|
Inventories |
46,069 |
26,334 |
26,762 |
|
Trade and other receivables - due within one year |
50,840 |
34,264 |
36,089 |
|
Financial assets - derivatives |
11 |
- |
- |
|
Current tax assets |
252 |
214 |
2,249 |
|
Cash and cash equivalents |
11,832 |
13,877 |
21,774 |
|
109,004 |
74,689 |
86,874 |
|
|
Total assets |
403,948 |
199,652 |
211,013 |
|
Liabilities |
|||
|
Current liabilities |
|||
|
Trade and other payables |
(57,578) |
(31,886) |
(34,950) |
|
Financial liabilities - derivatives |
(5,712) |
(1,226) |
(5,382) |
|
Provisions |
(25,642) |
(2,343) |
(3,048) |
|
(88,932) |
(35,455) |
(43,380) |
|
|
Non-current liabilities |
|||
|
Financial liabilities - borrowings |
(124,967) |
(79,031) |
(81,055) |
|
Deferred tax liabilities |
(5,308) |
(8,812) |
(5,086) |
|
Provisions |
(81) |
- |
(162) |
|
Retirement benefit liabilities |
(360) |
(137) |
(351) |
|
(130,716) |
(87,980) |
(86,654) |
|
|
Total liabilities |
(219,648) |
(123,435) |
(130,034) |
|
Net assets |
184,300 |
76,217 |
80,979 |
|
Equity |
|||
|
Called up share capital |
39,659 |
23,806 |
23,806 |
|
Reserves |
144,641 |
52,333 |
57,094 |
|
Equity attributable to shareholders of the parent |
184,300 |
76,139 |
80,900 |
|
Minority interest |
- |
78 |
79 |
|
Total equity |
184,300 |
76,217 |
80,979 |
Condensed Consolidated Cash Flow Statement
|
Unaudited |
|||
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Cash flows from operating activities |
|||
|
Cash generated from operations |
9,622 |
3,679 |
20,633 |
|
Interest received |
677 |
624 |
1,603 |
|
Interest paid |
(4,538) |
(3,395) |
(6,582) |
|
Tax paid |
(1,723) |
(565) |
(2,749) |
|
Net cash from operating activities |
4,038 |
343 |
12,905 |
|
Cash flows from investing activities |
|||
|
Acquisitions (net of cash acquired) |
(115,135) |
- |
(985) |
|
Disposals (net of cash disposed) |
120 |
2,751 |
2,776 |
|
Purchase of property, plant and equipment |
(2,585) |
(1,710) |
(4,020) |
|
Purchase of intangible assets |
(831) |
(436) |
(1,170) |
|
Proceeds on sale of property, plant and equipment |
43 |
683 |
722 |
|
Development costs |
(189) |
(83) |
(594) |
|
Net cash used in investing activities |
(118,577) |
1,205 |
(3,271) |
|
Cash flows from financing activities |
|||
|
Net proceeds from issue of ordinary share capital |
62,581 |
- |
- |
|
New borrowings |
123,383 |
3,000 |
5,000 |
|
Dividends paid |
- |
- |
(1,333) |
|
Finance lease principal payments |
(653) |
(741) |
(1,522) |
|
Finance lease interest payments |
(86) |
(60) |
(175) |
|
Repayments of loans |
(80,034) |
(20) |
(58) |
|
Net cash flow used in financing activities |
105,191 |
2,179 |
1,912 |
|
Currency variations on cash and cash equivalents |
(594) |
(91) |
(13) |
|
(Decrease)/increase in cash and cash equivalents |
(9,942) |
3,636 |
11,533 |
|
Cash and cash equivalents at the beginning of the period |
21,774 |
10,241 |
10,241 |
|
Cash and cash equivalents at the end of the period |
11,832 |
13,877 |
21,774 |
Reconciliation of movement in cash and cash equivalents to movement in net debt
|
Unaudited |
|||
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Movement in cash and cash equivalents |
(9,942) |
3,636 |
11,533 |
|
Net proceeds of borrowings |
(43,349) |
(2,980) |
(4,942) |
|
Currency variations on borrowings |
(1,719) |
- |
- |
|
Finance lease payments |
653 |
741 |
1,522 |
|
New finance leases |
- |
(1,133) |
(1,654) |
|
Other movements in net debt |
909 |
(121) |
(241) |
|
Movement in period |
(53,448) |
143 |
6,218 |
|
Net debt at beginning of period |
(60,576) |
(66,794) |
(66,794) |
|
Net debt at end of period |
(114,024) |
(66,651) |
(60,576) |
Other movements in net debt reflect movements in the unamortised issuance costs in relation to borrowings within the Group.
Condensed Cash Flow from Operating Activities
|
Unaudited |
|||
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Continuing operations |
|||
|
Profit before tax |
12,507 |
5,017 |
9,183 |
|
Add back: financial (income)/expense |
4,853 |
3,241 |
8,989 |
|
Operating profit |
17,360 |
8,258 |
18,172 |
|
Deprecation of property, plant and equipment |
2,594 |
2,190 |
4,338 |
|
Amortisation of intangible assets |
2,611 |
941 |
2,026 |
|
Amortisation of government grants |
- |
- |
(115) |
|
Impairment charges |
- |
- |
392 |
|
Results of discontinued operations |
(30) |
(37) |
(394) |
|
Loss on sale of property, plant and equipment |
7 |
39 |
41 |
|
Share based payments |
120 |
116 |
213 |
|
Increase in inventories |
(6,952) |
(1,950) |
(2,183) |
|
(Increase)/decrease in trade and other receivables |
(6,519) |
(914) |
(2,931) |
|
Increase/(decrease) in trade and other payables |
(363) |
(3,883) |
434 |
|
Increase/(decrease) in provisions |
795 |
(635) |
370 |
|
Contribution to defined benefit pension schemes |
- |
(446) |
(505) |
|
Movement in derivative financial instruments |
(1) |
- |
775 |
|
Cash generated from operations |
9,622 |
3,679 |
20,633 |
Condensed Statement of Recognised Income and Expense
|
Unaudited |
|||
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Currency variations |
14,272 |
(3,077) |
(805) |
|
Unrecoverable surplus on retirement benefit scheme |
- |
- |
(160) |
|
Actuarial gains/(losses) on retirement benefit scheme - gross |
- |
- |
(203) |
|
Deferred taxation related thereto |
- |
- |
102 |
|
Net gains/(losses) not recognised in income statement |
14,272 |
(3,077) |
(1,066) |
|
Profit for the financial period |
8,725 |
2,163 |
5,292 |
|
Total recognised income/(expense) for the period |
22,997 |
(914) |
4,226 |
|
Attributable to: |
|||
|
- Equity shareholders of the parent company |
22,997 |
(914) |
4,226 |
|
- Minority interests |
- |
- |
- |
|
22,997 |
(914) |
4,226 |
|
Notes to the Half Year Report
1. Basis of preparation
Basis of preparation
Hampson Industries PLC (the "Company") is a Company domiciled in the United Kingdom. The unaudited condensed consolidated half year financial statements for the six months ended 30 September 2008 comprise of the Company and its subsidiaries.
These half year condensed consolidated financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union. They do not include all information required for full annual financial statements, and should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 March 2008. The comparative figures for the year ended 31 March 2008 do not constitute statutory accounts for the purposes of section 240 of the Companies Act 1985. A copy of the statutory accounts for the year ended 31 March 2008 has been delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
Measurement and performance reporting
In addition to the "statutory" measures of profit, reference is made throughout to the impact on the Group's profit and earnings of excluding the following items; restructuring and rationalisation charges, impairment charges, amortisation of intangible assets arising on acquisition and changes in the net fair value of financial instruments. The Directors believe that exclusion of these items allows trends in the underlying performance of the Group's business to be more easily identified and understood. Reference is made throughout to the term "trading profit" which is defined as operating profit excluding all of the fore-going items.
Changes in accounting policies
Except as described below, the accounting policies and basis of consolidation applied by the Group in these unaudited half year condensed consolidated financial statements are the same as those applied by the Group in its audited consolidated financial statements for the year ended 31 March 2008.
Subject to endorsement by the European Union, IFRIC 14 "The limit on a defined benefit asset, minimum funding requirements and their interaction" will be adopted for the year ended 31 March 2009. This interpretation will not have a material impact on the reported income or net assets.
Critical accounting estimates and judgements
In the process of applying the Group's accounting policies, management has made a number of judgements. The process of preparing these unaudited half year condensed consolidated financial statements inevitably requires the Group to make estimates and assumptions concerning the future and the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and judgements that have the most significant effect on the amounts included with these unaudited half year condensed consolidated financial statements were the same as those that applied to the audited consolidated financial statements for the year ended 31 March 2008, along with the specific risks and uncertainty regarding the continued solvency of Eclipse Aviation Corporation as noted on page 4.
Seasonality
The Group does not have any revenue or results that are materially impacted by seasonality.
Approval of unaudited half year condensed consolidated financial statements
The unaudited half year condensed consolidated financial statements were approved for issue on behalf of the board of directors on 26 November 2008.
2. Exchange rates
The principal exchange rates used were as follows:
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
Sterling to US Dollar (GBP 1 = USD): |
|||
|
Average for period |
1.94 |
2.00 |
2.01 |
|
Period end |
1.82 |
2.04 |
2.00 |
|
Sterling to Indian Rupee (GBP 1 = INR): |
|||
|
Average for period |
82.50 |
81.62 |
80.87 |
|
Period end |
86.89 |
81.15 |
79.69 |
Assets and liabilities of overseas undertakings are translated at the rate of exchange ruling at the balance sheet date and the income statement is translated at the average rate of exchange.
3. Segmental analysis
By primary segment - business group
|
Half year to 30 September 2008 |
Aerospace Components & Structures |
Aerospace Composites & Transparencies |
Automotive Turbocharger |
Industrial |
Corporate & Unallocated |
Total |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Continuing operations: |
||||||
|
Segment revenue |
46,351 |
53,136 |
11,025 |
- |
- |
110,512 |
|
Segment trading profit/(loss) |
5,753 |
14,392 |
406 |
- |
(546) |
20,005 |
|
Restructuring and rationalisation charges |
(492) |
- |
(28) |
- |
(27) |
(547) |
|
Impairment charges |
- |
- |
- |
- |
- |
- |
|
Changes in fair value of derivative financial instruments |
- |
- |
- |
- |
1 |
1 |
|
Amortisation of intangible assets on acquisition |
(164) |
(1,935) |
- |
- |
- |
(2,099) |
|
Segment operating profit/(loss) |
5,097 |
12,457 |
378 |
- |
(572) |
17,360 |
|
Net financing costs |
- |
- |
- |
- |
(4,853) |
(4,853) |
|
Profit/(loss) before taxation |
5,097 |
12,457 |
378 |
- |
(5,425) |
12,507 |
|
Taxation |
- |
- |
- |
- |
(3,752) |
(3,752) |
|
Profit/(loss) for the period after taxation |
5,097 |
12,457 |
378 |
- |
(9,177) |
8,755 |
|
Discontinued operations: |
||||||
|
Post tax results from discontinued operations |
- |
- |
- |
- |
(30) |
(30) |
|
Profit attributable to minority interests |
- |
- |
- |
- |
- |
- |
|
Net profit/(loss) attributable to equity shareholders |
5,097 |
12,457 |
378 |
- |
(9,207) |
8,725 |
3. Segmental analysis
|
Half year to 30 September 2007 |
Aerospace Components & Structures |
Aerospace Composites & Transparencies |
Automotive Turbocharger |
Industrial |
Corporate & Unallocated |
Total |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Continuing operations: |
||||||
|
Segment revenue |
42,790 |
23,173 |
10,383 |
- |
- |
76,346 |
|
Segment trading profit/(loss) |
6,423 |
4,674 |
(955) |
- |
(103) |
10,039 |
|
Restructuring and rationalisation charges |
(1,132) |
- |
(182) |
- |
(70) |
(1,384) |
|
Impairment charges |
- |
- |
- |
- |
- |
- |
|
Changes in fair value of derivative financial instruments |
- |
- |
- |
- |
- |
- |
|
Amortisation of intangible assets on acquisition |
(82) |
(315) |
- |
- |
- |
(397) |
|
Segment operating profit/(loss) |
5,209 |
4,359 |
(1,137) |
- |
(173) |
8,258 |
|
Net financing costs |
- |
- |
- |
- |
(3,241) |
(3,241) |
|
Profit/(loss) before taxation |
5,209 |
4,359 |
(1,137) |
- |
(3,414) |
5,017 |
|
Taxation |
- |
- |
- |
- |
(1,806) |
(1,806) |
|
Profit/(loss) for the period after taxation |
5,209 |
4,359 |
(1,137) |
- |
(5,220) |
3,211 |
|
Discontinued operations: |
||||||
|
Post tax results from discontinued operations |
- |
- |
- |
(1,039) |
(9) |
(1,048) |
|
Profit attributable to minority interests |
- |
- |
- |
- |
- |
- |
|
Net profit/(loss) attributable to equity shareholders |
5,209 |
4,359 |
(1,137) |
(1,039) |
(5,229) |
2,163 |
|
For the year ended 31 March 2008 |
Aerospace Components & Structures |
Aerospace Composites & Transparencies |
Automotive Turbocharger |
Industrial |
Corporate & Unallocated |
Total |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Continuing operations: |
||||||
|
Segment revenue |
89,058 |
45,982 |
22,906 |
- |
- |
157,946 |
|
Segment trading profit/(loss) |
12,658 |
9,978 |
1,225 |
- |
(1,495) |
22,366 |
|
Restructuring and rationalisation charges |
(2,002) |
- |
(237) |
- |
(70) |
(2,309) |
|
Impairment charges |
- |
- |
- |
- |
(392) |
(392) |
|
Changes in fair value of derivative financial instruments |
- |
- |
- |
- |
(775) |
(775) |
|
Amortisation of intangible assets on acquisition |
(163) |
(555) |
- |
- |
- |
(718) |
|
Segment operating profit/(loss) |
10,493 |
9,423 |
988 |
- |
(2,732) |
18,172 |
|
Net financing costs |
- |
- |
- |
- |
(8,989) |
(8,989) |
|
Profit/(loss) before taxation |
10,493 |
9,423 |
988 |
- |
(11,721) |
9,183 |
|
Taxation |
- |
- |
- |
- |
(2,349) |
(2,349) |
|
Profit/(loss) for the year after taxation |
10,493 |
9,423 |
988 |
- |
(14,070) |
6,834 |
|
Discontinued operations: |
||||||
|
Post tax results from discontinued operations |
- |
- |
- |
(1,194) |
(348) |
(1,542) |
|
Profit attributable to minority interests |
- |
- |
- |
- |
- |
- |
|
Net profit/(loss) attributable to equity shareholders |
10,493 |
9,423 |
988 |
(1,194) |
(14,418) |
5,292 |
The results of Odyssey Industries Inc. and Global Tooling Systems Inc., which were acquired during the period to 30 September 2008, are included within the "Aerospace Composites & Transparencies" segment.
4. Operating profit
Reconciliation of revenue to total operating profit:
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Revenue |
110,512 |
76,346 |
157,946 |
|
Cost of sales |
(78,838) |
(55,275) |
(112,842) |
|
Gross profit |
31,674 |
21,071 |
45,104 |
|
Other income |
529 |
481 |
595 |
|
Distribution costs |
(1,850) |
(1,955) |
(2,589) |
|
Administrative expenses |
(12,993) |
(11,339) |
(24,938) |
|
Operating profit |
17,360 |
8,258 |
18,172 |
5. Exceptional items, re-measurements and amortisation of intangibles
Restructuring and rationalisation charges
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Charges/(credits) included within operating profit |
547 |
1,384 |
2,309 |
|
Charges/(credits) included within net financing costs |
586 |
- |
- |
|
1,133 |
1,384 |
2,309 |
Exceptional items within operating profit reflect the Group's restructuring and rationalisation costs primarily relating to employment termination and legal costs - £547,000 (half year to 30 September 2007: £1,384,000, year to 31 March 2008: £2,309,000).
Exceptional items within net financing costs reflect the write off of unamortised debt issuance costs in relation to the pre-paid and refinanced borrowing facilities of the Group - £586,000 (half year to 30 September 2007: £nil, year to 31 March 2008: £nil). For details of the new borrowing facilities of the Group, see note 13.
Impairment charges
During the year the Group undertook a review of the utilisation and carrying values of certain assets. As a result of this £nil (half year to 30 September 2007: £nil, year to 31 March 2008: £392,000) of impairment charges were incurred, as follows:
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Impairment of receivables through customer third party insolvency |
- |
- |
392 |
|
Total impairment charges |
- |
- |
392 |
The impairment of receivables related to an external sub-tenant at a property leased by the Group that went into liquidation during the prior year.
5. Exceptional items, re-measurements and amortisation of intangibles
Changes in net fair value of derivative financial instruments
IAS 39 requires derivative financial instruments to be valued at the balance sheet date and the fair value reflected in the balance sheet as an asset or liability. Any subsequent change in value is reflected in the Income Statement unless hedge accounting is achieved. Such movements do not affect cash flow or the economic substance of the underlying transaction, and thus to aid in year on year comparability, the change in value has been identified separately. As a result the changes in net fair value of derivative financial instruments were:
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Charges/(credits) included within operating profit |
(1) |
- |
775 |
|
Charges/(credits) included within net financing costs |
320 |
289 |
3,670 |
|
319 |
289 |
4,445 |
Amortisation of intangible assets on acquisition
As required under IFRS 3 'Business Combinations' and IAS 38 'Intangible Assets', intangible assets identified on acquisition have been amortised during the period - £2,099,000 (half year to 30 September 2007: £397,000, year to 31 March 2008: £718,000).
Exceptional items are included within cost of sales £2,579,000 (half year to 30 September 2007: £1,526,000, year to 31 March 2008: £2,470,000) and administrative expenses £66,000 (half year to 30 September 2007: £255,000, year to 31 March 2007: £1,724,000).
The net cash outflow from exceptional items charged during the period amounted to £547,000 (half year to 30 September 2007: £1,384,000, year to 31 March 2008: £2,309,000).
6. Share based payments
No new share based payment schemes were introduced during the half year to 30 September 2008 (half year to 30 September 2007: none, year to 31 March 2008: none).
During the half year to 30 September 2008 365,120 (half year to 30 September 2007: nil, year to 31 March 2008: nil) shares were issued under the August 2005 LTIP scheme, out of a possible maximum of 700,000 shares if full vesting conditions had been met.
During the half year to 30 September 2008 20,000 (half year to 30 September 2007: nil, year to 31 March 2008: nil) share options were exercised under the March 2005 ESOS scheme at an exercise price of 127.5p per share, creating 20,000 new ordinary shares of 25p each with the remaining value being classified as share premium on each ordinary share.
7. Taxation
The taxation charge for the half year to 30 September 2008 is based on the estimated effective tax rate for the full year to 31 March 2009 of 30% (half year to 30 September 2007: 36%, year to 31 March 2008 26%).
8. Discontinued operations
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Discharge of liabilities associated with previously discontinued operations |
(30) |
(9) |
(348) |
|
Post tax results of disposed businesses |
- |
(28) |
(28) |
|
Post tax loss on disposal of discontinued operations |
- |
(1,011) |
(1,166) |
|
Post tax results from discontinued operations |
(30) |
(1,048) |
(1,542) |
Discharge of liabilities associated with previously discontinued operations
Costs in order to discharge liabilities in relation to companies previously classified as discontinued operations relate to legal and property costs. During the prior year to 31 March 2008 an external sub-tenant of a leasehold property that had been vacated by the Group in 1991, as part of a disposal of a subsidiary, went into liquidation, whereupon a provision of £323,000 was created for the estimated costs up to the first available break clause in the relevant lease in March 2010.
Disposal of Lattimer Limited and I.S. Parts International Inc.
On 27 June 2007 the Group disposed of its entire 100% shareholding in Lattimer Limited and I.S. Parts International Inc. to Lattimer Holdings Limited.
As part of the disposal of Lattimer Limited, Hampson Industries PLC disposed of the freehold interest in the property in Southport, UK occupied by the business to Lattimer Limited. The carrying value of the property as at date of disposal was £638,000, and was sold to Lattimer Limited for £620,000, creating a loss on disposal of £18,000.
Within the post tax loss on disposal of discontinued operations for the half year to 30 September 2008 is £nil (half year to 30 September 2007 £81,000, year to 31 March 2008 £136,000) in relation to legal and other professional costs associated with the disposal.
Disposal of Lattimer Limited
The results of the discontinued operations were as follows:
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
Total |
Total |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
Revenue |
- |
670 |
670 |
|
Operating loss |
- |
(103) |
(103) |
|
Analysed as: |
|||
|
Trading loss |
- |
(103) |
(103) |
|
Financial income |
- |
- |
- |
|
Financial expense |
- |
(2) |
(2) |
|
Loss before taxation |
- |
(105) |
(105) |
|
Taxation |
- |
31 |
31 |
|
Profit/(loss) after taxation |
- |
(74) |
(74) |
8. Discontinued operations
The consideration and profit on disposal of Lattimer Limited was as follows:
|
£'000 |
|
|
Consideration - satisfied by cash |
994 |
|
Consideration - deferred |
200 |
|
Consideration - total |
1,194 |
|
Goodwill |
61 |
|
Intangible fixed assets |
76 |
|
Property, plant and equipment |
512 |
|
Inventories |
1,311 |
|
Trade and other receivables |
1,031 |
|
Cash and cash equivalents |
(2,083) |
|
Trade and other payables |
(520) |
|
Net assets disposed |
388 |
|
Profit on disposal of discontinued operations |
806 |
The deferred consideration is payable in 20 instalments commencing in December 2007, and is not contingent on any future performance of the business.
The net cash flows in relation to Lattimer Limited were £nil outflow from operating activities (half year to 30 September 2007: outflow £382,000, year to 31 March 2008: outflow £382,000), £nil outflow from investing activities (half year to 30 September 2007: outflow £23,000, year to 31 March 2008: outflow £23,000) and £nil outflow from financing activities (half year to 30 September 2007: outflow £2,039,000, year to 31 March 2008: outflow £2,039,000).
Disposal of I.S. Parts International Inc.
The results of the discontinued operations were as follows:
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
Total |
Total |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
Revenue |
- |
1,039 |
1,039 |
|
Operating profit |
- |
74 |
74 |
|
Analysed as: |
|||
|
Trading profit |
- |
74 |
74 |
|
Financial income |
- |
1 |
1 |
|
Financial expense |
- |
(1) |
(1) |
|
Profit before taxation |
- |
74 |
74 |
|
Taxation |
- |
(28) |
(28) |
|
Profit after taxation |
- |
46 |
46 |
The consideration and loss on disposal of I.S Parts International Inc. was as follows:
|
£'000 |
|
|
Consideration - satisfied by cash |
994 |
|
Consideration - deferred |
200 |
|
Consideration - total |
1,194 |
|
Goodwill |
37 |
|
Intangible fixed assets |
14 |
|
Property, plant and equipment |
663 |
|
Inventories |
1,358 |
|
Trade and other receivables |
770 |
|
Cash and cash equivalents |
1,239 |
|
Trade and other payables |
(1,069) |
|
Net assets disposed |
3,012 |
|
Loss on disposal of discontinued operations |
(1,818) |
8. Discontinued operations continued
The deferred consideration is payable in 20 instalments commencing in December 2007, and is not contingent on any future performance of the business.
The net cash flows in relation to I.S. Parts International Inc. were £nil inflow from operating activities (half year to 30 September 2007: inflow £155,000, year to 31 March 2008: inflow £155,000), £nil outflow from investing activities (half year to 30 September 2007: outflow £21,000, year to 31 March 2008: outflow £21,000) and £nil inflow from financing activities (half year to 30 September 2007: inflow £1,084,000, year to 31 March 2007: inflow £1,084,000).
9. Dividends
|
Half year to 30 September 2008 |
Half year to 30 September 2007 |
Year to 31 March 2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
Equity dividends paid in the period: |
|||
|
Previous year final: 1.50p (2007: 0.90p) per 25p ordinary share |
2,379 |
857 |
857 |
|
Current year interim: 0.00p (2007: 0.50p) per 25p ordinary share |
- |
- |
476 |
|
2,379 |
857 |
1,333 |
In addition, the Directors propose that an interim dividend be paid in respect of the financial year ended 31 March 2009 of 0.80p per 25p ordinary share, at a cost of approximately £1,269,000.
10. Earnings per share
Basic Earnings per Share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.
Diluted Earnings per Share
Diluted earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, adjusted for any dilutive potential ordinary shares.
|
Half year to 30 September 2008 |
Half year to 30 September 2008 |
Half year to 30 September 2008 |
|
|
Earnings |
Weighted average number of shares |
Earnings per 25 pence share |
|
|
£'000 |
number |
pence |
|
|
Continuing Operations: |
|||
|
Basic EPS |
8,755 |
135,449,184 |
6.46 |
|
Dilutive potential ordinary shares |
- |
477,359 |
(0.02) |
|
Diluted EPS |
8,755 |
135,926,543 |
6.44 |
|
Discontinued Operations: |
|||
|
Basic EPS |
(30) |
135,449,184 |
(0.02) |
|
Dilutive potential ordinary shares |
- |
477,359 |
0.00 |
|
Diluted EPS |
(30) |
135,926,543 |
(0.02) |
|
Total Operations: |
|||
|
Basic EPS |
8,725 |
135,449,184 |
6.44 |
|
Dilutive potential ordinary shares |
- |
477,359 |
(0.02) |
|
Diluted EPS |
8,725 |
135,926,543 |
6.42 |
10. Earnings per share
|
Half year to 30 September 2007 |
Half year to 30 September 2007 |
Half year to 30 September 2007 |
|
|
Earnings |
Weighted average number of shares |
Earnings per 25 pence share |
|
|
£'000 |
number |
pence |
|
|
Continuing Operations: |
|||
|
Basic EPS |
3,211 |
95,227,416 |
3.37 |
|
Dilutive potential ordinary shares |
- |
491,623 |
(0.01) |
|
Diluted EPS |
3,211 |
95,719,039 |
3.36 |
|
Discontinued Operations: |
|||
|
Basic EPS |
(1,048) |
95,227,416 |
(1.10) |
|
Dilutive potential ordinary shares |
- |
491,623 |
0.00 |
|
Diluted EPS |
(1,048) |
95,719,039 |
(1.10) |
|
Total Operations: |
|||
|
Basic EPS |
2,163 |
95,227,416 |
2.27 |
|
Dilutive potential ordinary shares |
- |
491,623 |
(0.01) |
|
Diluted EPS |
2,163 |
95,719,039 |
2.26 |
|
Year to 31 March 2008 |
Year to 31 March 2008 |
Year to 31 March 2008 |
|
|
Earnings |
Weighted average number of shares |
Earnings per 25 pence share |
|
|
£'000 |
number |
pence |
|
|
Continuing Operations: |
|||
|
Basic EPS |
6,834 |
95,227,416 |
7.18 |
|
Dilutive potential ordinary shares |
- |
482,578 |
(0.04) |
|
Diluted EPS |
6,834 |
95,709,994 |
7.14 |
|
Discontinued Operations: |
|||
|
Basic EPS |
(1,542) |
95,227,416 |
(1.62) |
|
Dilutive potential ordinary shares |
- |
482,578 |
0.01 |
|
Diluted EPS |
(1,542) |
95,709,994 |
(1.61) |
|
Total Operations: |
|||
|
Basic EPS |
5,292 |
95,227,416 |
5.56 |
|
Dilutive potential ordinary shares |
- |
482,578 |
(0.03) |
|
Diluted EPS |
5,292 |
95,709,994 |
5.53 |
Earnings per share based on continuing activities before exceptional items, re-measurements and amortisation of intangibles, which the Directors consider gives a useful additional indication of the underlying performance of the Group, is calculated on the earnings adjusted as follows:
|
Half year to 30 September 2008 |
Half year to 30 September 2008 |
|
|
Earnings |
Earnings per 25 pence share |
|
|
£'000 |
pence |
|
|
Continuing operations: |
||
|
Profit attributable to ordinary shareholders |
8,755 |
6.46 |
|
Restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition. |
3,551 |
2.62 |
|
Taxation on restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition. |
(1,065) |
(0.78) |
|
11,241 |
8.30 |
10. Earnings per share
|
Half year to 30 September 2007 |
Half year to 30 September 2007 |
|
|
Earnings |
Earnings per 25 pence share |
|
|
£'000 |
pence |
|
|
Continuing operations: |
||
|
Profit attributable to ordinary shareholders |
3,211 |
3.37 |
|
Restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition. |
2,070 |
2.17 |
|
Taxation on restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition. |
(621) |
(0.65) |
|
4,660 |
4.89 |
|
Year to 31 March 2008 |
Year to 31 March 2008 |
|
|
Earnings |
Earnings per 25 pence share |
|
|
£'000 |
pence |
|
|
Continuing operations: |
||
|
Profit attributable to ordinary shareholders |
6,834 |
7.18 |
|
Restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition. |
7,864 |
8.26 |
|
Taxation on restructuring and rationalisation charges, impairment charges, changes in the net fair value of financial instruments and amortisation of intangible assets on acquisition. |
(2,359) |
(2.48) |
|
12,339 |
12.96 |
11. Intangible assets
During the six months ended 30 September 2008 the Group acquired assets with a cost of £1,021,000 (half year to 30 September 2007: £519,000, year ended 31 March 2008: £2,516,000). £10,987,000 of assets were acquired through acquisition of subsidiary undertakings (half year to 30 September 2007: £nil, year ended 31 March 2008: £nil). Details of goodwill acquired as part of the acquisition of Odyssey and GTS is included in note 16.
Assets with a net book value of £3,000 were disposed during the six months ended 30 September 2008 (half year to 30 September 2007: £3,000, year ended 31 March 2008: £nil). In addition, assets with a net book value of £nil were disposed through the process of disposal of subsidiary undertakings (half year to 30 September 2007: £188,000, year ended 31 March 2008: £188,000).
During the six months ended 30 September 2008, no assets were subject to impairment (half year to 30 September 2007: £nil, year ended 31 March 2008: £nil).
12. Property, plant and equipment
During the six months ended 30 September 2008 the Group acquired assets with a cost of £2,707,000 (half year to 30 September 2007: £2,843,000, year ended 31 March 2008: £5,674,000). £2,660,000 of assets were acquired through acquisition of subsidiary undertakings (half year to 30 September 2007: £nil, year ended 31 March 2008: £nil).
Assets with a net book value of £67,000 were disposed during the six months ended 30 September 2008 (half year to 30 September 2007 £722,000, year ended 31 March 2008 £763,000). In addition, assets with a net book value of £nil were disposed through the process of disposal of subsidiary undertakings (half year to 30 September 2007: £1,075,000, year ended 31 March 2008: £1,175,000).
During the six months ended 30 September 2008, no assets were subject to impairment (half year to 30 September 2007: £nil, year ended 31 March 2008: £nil).
As at 30 September 2008 the Group had entered into contractual commitments to purchase assets with a cost of £3,415,000 (30 September 2007: £607,000, 31 March 2008: £841,000).
13. Financial risk management
On 22 April 2008 the Group entered into a new, secured, floating rate, multi-currency committed revolving credit facility and term loan facility. The new revolving credit facility is for a term of five years and for an initial amount of £90.0 million. The new term loan is for a term of five years and for an initial amount of £95.0 million with repayments starting after 18 months and amortising over the five year period to £54.5 million after 54 months.
On 28 May 2008 the Group issued US$50.0 million of fixed rate notes that were privately placed in the US debt market. Under this note issuance, the Group is required to pay quarterly in US Dollars a fixed rate of interest, equivalent to 6.94% per annum with the principal being repaid at the end of the seven year term, on 28 May 2015. As a result of the note issuance the outstanding balance of the term loan facility was reduced to £70.0 million.
During the six months to 30 September 2008, the Group took out two floating interest rate swaps in a notional principal amount of US$25.0 million each. Each swap has a cancellable option, callable at the option of the counterparty bank, quarterly from August 2009. Under the swaps the Group will receive a fixed interest rate of 6.94% on a quarterly basis from November 2008 and will pay a floating rate of US LIBOR plus a margin of between 179 and 187 basis points.
As a result of the refinancing of the senior debt facilities the Group had committed bank, loan note and lease facilities of £211.5 million (£160.0 million bank facilities, £25.0 million loan note facilities, £26.5 million lease facilities) which mature between April 2013 and May 2015. As at 30 September 2008, the Group had undrawn committed borrowing facilities, on a floating rate basis, of £83.6 million which expire in more than two years time.
14. Called up share capital
|
As at 30 September 2008 |
||
|
Number |
£'000 |
|
|
Authorised: |
||
|
Ordinary shares of 25p each - equity |
220,000,000 |
55,000 |
|
Allotted, called up and fully paid: |
||
|
Ordinary shares of 25p each - equity |
158,634,996 |
39,659 |
|
As at 30 September 2007 & 31 March 2008 |
||
|
Number |
£'000 |
|
|
Authorised: |
||
|
Ordinary shares of 25p each - equity |
130,000,000 |
32,500 |
|
Allotted, called up and fully paid: |
||
|
Ordinary shares of 25p each - equity |
95,227,416 |
23,806 |
14. Called up share capital
|
Number |
£'000 |
|
|
Authorised: |
||
|
As at 30 September 2007 & 31 March 2008 Ordinary shares of 25p each - equity |
130,000,000 |
32,500 |
|
Additional share authorisation - June 2008 |
90,000,000 |
22,500 |
|
As at 30 September 2008 Ordinary shares of 25p each - equity |
220,000,000 |
55,000 |
|
Number |
£'000 |
|
|
Allotted, called up and fully paid: |
||
|
As at 30 September 2007 & 31 March 2008 Ordinary shares of 25p each - equity |
95,227,416 |
23,806 |
|
Placing and open offer - June 2008 |
48,148,148 |
12,037 |
|
Consideration shares - June 2008 |
14,874,312 |
3,719 |
|
Shares issued under LTIP scheme - August 2008 |
365,120 |
92 |
|
Shares issued under ESOS scheme - September 2008 |
20,000 |
5 |
|
As at 30 September 2008 Ordinary shares of 25p each - equity |
158,634,996 |
39,659 |
Consideration shares relate to shares issued to the Vendors as part consideration for the acquisition of Odyssey Industries Inc. and Global Tooling Systems Inc. For further details on the acquisition of these businesses, see note 16.
An analysis of the net inflow of cash in respect of proceeds from issue of ordinary share capital is as follows:
|
£'000 |
|
|
Placing and open offer shares - 48,148,148 Ordinary shares of 25p each at 135p per share |
65,000 |
|
Directly attributable costs in relation to issuance of placing and open offer shares |
(2,445) |
|
Cash received in relation to exercise of share options |
26 |
|
Net inflow of cash in respect of proceeds from issue of ordinary share capital |
62,581 |
15. Changes in shareholders' equity
|
Reserves |
|||||||||
|
Share capital |
Share premium |
Share based payment reserve |
Exchange reserve |
Other reserves |
Retained earnings |
Equity share-holder's funds |
Minority interest |
Total equity |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
At 1 April 2008 |
23,806 |
56,337 |
534 |
(8,411) |
2,062 |
6,572 |
80,900 |
79 |
80,979 |
|
Issue of ordinary share capital |
15,853 |
66,900 |
- |
- |
- |
- |
82,753 |
- |
82,753 |
|
Transfer from income statement |
- |
- |
- |
- |
- |
8,725 |
8,725 |
- |
8,725 |
|
Dividends |
- |
- |
- |
- |
- |
(2,379) |
(2,379) |
- |
(2,379) |
|
Actuarial gain on retirement benefit liabilities net of deferred tax related thereto |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Share based payments |
- |
- |
20 |
- |
- |
9 |
29 |
- |
29 |
|
Changes in minority interests |
- |
- |
- |
- |
- |
- |
- |
(79) |
(79) |
|
Exchange adjustment |
- |
- |
- |
14,272 |
- |
- |
14,272 |
- |
14,272 |
|
At 30 September 2008 |
39,659 |
123,237 |
554 |
5,861 |
2,062 |
12,927 |
184,300 |
- |
184,300 |
15. Changes in shareholders' equity
|
Reserves |
|||||||||
|
Share capital |
Share premium |
Share based payment reserve |
Exchange reserve |
Other reserves |
Retained earnings |
Equity share-holder's funds |
Minority interest |
Total equity |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
At 1 April 2007 |
23,806 |
56,337 |
321 |
(7,606) |
2,062 |
2,874 |
77,794 |
75 |
77,869 |
|
Issue of ordinary share capital |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Transfer from income statement |
- |
- |
- |
- |
- |
2,163 |
2,163 |
- |
2,163 |
|
Dividends |
- |
- |
- |
- |
- |
(857) |
(857) |
- |
(857) |
|
Actuarial gain on retirement benefit liabilities net of deferred tax related thereto |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Share based payments |
- |
- |
116 |
- |
- |
- |
116 |
- |
116 |
|
Changes in minority interests |
- |
- |
- |
- |
- |
- |
- |
3 |
3 |
|
Exchange adjustment |
- |
- |
- |
(3,077) |
- |
- |
(3,077) |
- |
(3,077) |
|
At 30 September 2007 |
23,806 |
56,337 |
437 |
(10,683) |
2,062 |
4,180 |
76,139 |
78 |
76,217 |
|
Reserves |
|||||||||
|
Share capital |
Share premium |
Share based payment reserve |
Exchange reserve |
Other reserves |
Retained earnings |
Equity share-holder's funds |
Minority interest |
Total equity |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
At 1 April 2007 |
23,806 |
56,337 |
321 |
(7,606) |
2,062 |
2,874 |
77,794 |
75 |
77,869 |
|
Issue of ordinary share capital |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
Transfer from income statement |
- |
- |
- |
- |
- |
5,292 |
5,292 |
- |
5,292 |
|
Dividends |
- |
- |
- |
- |
- |
(1,333) |
(1,333) |
- |
(1,333) |
|
Actuarial gain on retirement benefit liabilities net of deferred tax related thereto |
- |
- |
- |
- |
- |
(261) |
(261) |
- |
(261) |
|
Share based payments |
- |
- |
213 |
- |
- |
- |
213 |
- |
213 |
|
Changes in minority interests |
- |
- |
- |
- |
- |
- |
- |
4 |
4 |
|
Exchange adjustment |
- |
- |
- |
(805) |
- |
- |
(805) |
- |
(805) |
|
At 31 March 2008 |
23,806 |
56,337 |
534 |
(8,411) |
2,062 |
6,572 |
80,900 |
79 |
80,979 |
16. Acquisitions
Acquisition of Odyssey Industries Inc.
On 9 June 2008 the Group purchased 100% of the voting shares of Odyssey Industries Inc "Odyssey". The purchase has been accounted for as a business combination. The carrying values pre acquisition and provisional fair values of assets acquired and total consideration payable for Odyssey are set out below:
|
Carrying values pre acquisition |
Fair value adjustments |
Provisional fair values |
|
|
£'000 |
£'000 |
£'000 |
|
|
Intangible assets |
50 |
8,319 |
8,369 |
|
Property, plant and equipment |
2,461 |
(190) |
2,271 |
|
Inventories |
5,812 |
(581) |
5,231 |
|
Trade and other receivables |
5,454 |
(1,339) |
4,115 |
|
Cash and cash equivalent |
44 |
- |
44 |
|
Trade and other payables |
(5,322) |
(3,071) |
(8,393) |
|
Provisions |
- |
(1,418) |
(1,418) |
|
Net assets acquired |
8,499 |
1,720 |
10,219 |
|
Goodwill |
97,386 |
||
|
Consideration including costs |
107,605 |
||
|
Contingent consideration - to be satisfied by cash |
(12,322) |
||
|
Provision for outstanding costs |
(380) |
||
|
94,903 |
|||
|
Consideration excluding future costs - satisfied by cash |
80,847 |
||
|
Consideration excluding future costs - satisfied by equity - 10,412,018 ordinary shares of 25p each at a price of 135p per ordinary share |
14,056 |
||
|
Total consideration excluding future costs |
94,903 |
As part of the acquisition of Odyssey additional consideration may be payable dependent on the future financial performance of the business. The contingent consideration within the table above is measured on an estimate of the probable position after taking into account all relevant information as at 30 September 2008. However, dependent on the future performance of Odyssey a higher level of consideration may in the event be payable.
Contingent consideration is payable by the Group within ten days of the earn-out calculations being agreed by both parties, which is expected to be before 31 March 2009. The Vendors are entitled to receive this contingent consideration if the combined EBITDA of Odyssey and GTS for the year ending 31 December 2008 is greater than US$37.8 million and less than or equal to US$43.0 million, then the Vendors will receive an amount equal to 6.67 times the difference between the actual combined EBITDA and US$37.8 million. If the actual combined EBITDA exceeds US$43.0 million the Vendors will receive an amount equal to 6.5 times the difference between the actual combined EBITDA and US$43.0 million, subject to a total maximum contingent consideration of US$60.7 million.
Provision for outstanding costs relates to an accrual for directly attributable costs that have been incurred as part of the acquisition, that have yet to be invoiced to the Group.
The carrying values pre acquisition of the assets and liabilities have been extracted from the accounting records of Odyssey, which were maintained in accordance with US GAAP, as at 9 June 2008 and translated at actual exchange rates on that date. No adjustments have been required to these carrying values in order to comply with IFRS as adopted by the European Union. Fair values of the assets and liabilities remain provisional as the review of operations and recoverability of assets remains ongoing, and will be finalised in the Group's financial statements for the year ended 31 March 2009.
Fair value adjustments on intangible assets represent the separately identifiable intangible assets acquired as part of the acquisition such as order backlog and customer relationship. Other fair value adjustments relate to reductions in the carrying value of assets to align provisioning policies to those of the Group, or where specific issues e.g. saleability of inventory, were identified at the time of acquisition.
16. Acquisitions
Acquisition of Odyssey Industries Inc. continued
Goodwill represents the value of the synergies arising from cross-selling existing products to new customers introduced by the acquisition and the value of the assembled workforce and management team which are continuing within the business and have significant knowledge of the production process.
The separately identifiable intangible assets acquired as part of the acquisition can be analysed as follows:
|
£'000 |
|
|
Computer software |
50 |
|
Order backlog at date of acquisition |
5,534 |
|
Customer relationships |
2,785 |
|
8,369 |
The results of Odyssey (excluding any adjustments relating to remuneration and costs of the previous owners) for the 6 months to 30 September 2008, if it had been acquired at the beginning of the year, would have been as follows:
|
£'000 |
|
|
Revenue |
23,113 |
|
Operating profit |
5,351 |
The results of the Group (excluding any adjustments relating to remuneration and costs of the previous owners) for the 6 months to 30 September 2008, if Odyssey had been acquired at the beginning of the year would have been as follows:
|
£'000 |
|
|
Revenue |
117,062 |
|
Operating profit |
16,943 |
This information is not necessarily indicative of the results of operations that would have occurred under the management of the Group had the purchase been made at the beginning of the year or the future results of the combined operations, and only includes amortisation of intangible assets on acquisition since the date of acquisition.
The results of the Odyssey, between the date of acquisition and 30 September 2008 are as follows:
|
£'000 |
|
|
Revenue |
16,563 |
|
Operating profit |
4,324 |
|
Analysed as: |
|
|
Trading profit |
5,768 |
|
Amortisation of intangible assets on acquisition |
(1,444) |
|
Financial income |
7 |
|
Financial expense |
- |
|
Profit before taxation |
4,331 |
Included within the results are £266,000 of cost of sales with GTS, that would be eliminated on a consolidated basis for the Group's financial statements.
From the date of acquisition to 30 September 2008, Odyssey contributed £2,349,000 to the group's net operating cashflows, received £7,000 in respect of interest, £nil in respect of taxation and utilised £395,000 for capital expenditure. All intangible assets were recognised at their respective fair values. The residual excess over the net assets acquired is recognised as goodwill in the accounts.
16. Acquisitions
Acquisition of Global Tooling Systems Inc.
On 9 June 2008 the Group purchased 100% of the voting shares of Global Tooling Systems Inc "GTS". The purchase has been accounted for as a business combination. The carrying values pre acquisition and provisional fair values of assets acquired and total consideration payable for GTS are set out below:
|
Carrying values pre acquisition |
Fair value adjustments |
Provisional fair values |
|
|
£'000 |
£'000 |
£'000 |
|
|
Intangible assets |
256 |
2,362 |
2,618 |
|
Property, plant and equipment |
389 |
- |
389 |
|
Inventories |
6,303 |
(630) |
5,673 |
|
Trade and other receivables |
2,609 |
(148) |
2,461 |
|
Cash and cash equivalent |
19 |
- |
19 |
|
Trade and other payables |
(4,748) |
(3,067) |
(7,815) |
|
Provisions |
- |
(2,014) |
(2,014) |
|
Net assets acquired |
4,828 |
(3,497) |
1,331 |
|
Goodwill |
39,249 |
||
|
Consideration including costs |
40,580 |
||
|
Contingent consideration - to be satisfied by cash |
(5,282) |
||
|
Provision for outstanding costs |
(380) |
||
|
34,918 |
|||
|
Consideration excluding future costs - satisfied by cash |
28,894 |
||
|
Consideration excluding future costs - satisfied by equity - 4,462,294 ordinary shares of 25p each at a price of 135p per ordinary share |
6,024 |
||
|
Total consideration excluding future costs |
34,918 |
As part of the acquisition of GTS additional consideration may be payable dependent on the future financial performance of the business. The contingent consideration within the table above is measured on an estimate of the probable position after taking into account all relevant information as at 30 September 2008. However, dependent on the future performance of GTS a higher level of consideration may in the event be payable.
Contingent consideration is payable by the Group within ten days of the earn-out calculations being agreed by both parties, which is expected to be before 31 March 2009. The Vendors are entitled to receive this contingent consideration if the combined EBITDA of Odyssey and GTS for the year ending 31 December 2008 is greater than US$37.8 million and less than or equal to US$43.0 million, then the Vendors will receive an amount equal to 6.67 times the difference between the actual combined EBITDA and US$37.8 million. If the actual combined EBITDA exceeds US$43.0 million the Vendors will receive an amount equal to 6.5 times the difference between the actual combined EBITDA and US$43.0 million, subject to a total maximum contingent consideration of US$60.7 million.
Provision for outstanding costs relates to an accrual for directly attributable costs that have been incurred as part of the acquisition, that have yet to be invoiced to the Group.
The carrying values pre acquisition of the assets and liabilities have been extracted from the accounting records of GTS, which were maintained in accordance with US GAAP, as at 9 June 2008 and translated at actual exchange rates on that date. No adjustments have been required to these carrying values in order to comply with IFRS as adopted by the European Union. Fair values of the assets and liabilities remain provisional as the review of operations and recoverability of assets remains ongoing, and will be finalised in the Group's financial statements for the year ended 31 March 2009.
Fair value adjustments on intangible assets represent the separately identifiable intangible assets acquired as part of the acquisition such as order backlog and customer relationship. Other fair value adjustments relate to reductions in the carrying value of assets to align provisioning policies to those of the Group, or where specific issues e.g. saleability of inventory, were identified at the time of acquisition.
16. Acquisitions
Acquisition of Global Tooling Systems Inc. continued
Goodwill represents the value of the synergies arising from cross-selling existing products to new customers introduced by the acquisition and the value of the assembled workforce and management team which are continuing within the business and have significant knowledge of the production process.
The separately identifiable intangible assets acquired as part of the acquisition can be analysed as follows:
|
£'000 |
|
|
Computer software |
1 |
|
Order backlog at date of acquisition |
1,501 |
|
Customer relationships |
1,116 |
|
2,618 |
The results of GTS (excluding any adjustments relating to remuneration and costs of the previous owners) for the 6 months to 30 September 2008, if it had been acquired at the beginning of the year would have been as follows:
|
£'000 |
|
|
Revenue |
17,842 |
|
Operating profit |
4,721 |
The results of the Group (excluding any adjustments relating to remuneration and costs of the previous owners) for the 6 months to 30 September 2008, if GTS had been acquired at the beginning of the year would have been as follows:
|
£'000 |
|
|
Revenue |
114,396 |
|
Operating profit |
17,822 |
This information is not necessarily indicative of the results of operations that would have occurred under the management of the Group had the purchase been made at the beginning of the year or the future results of the combined operations, and only includes amortisation of intangible assets on acquisition since the date of acquisition.
The results of the GTS, between the date of acquisition and 30 September 2008 are as follows:
|
£'000 |
|
|
Revenue |
13,959 |
|
Operating profit |
3,863 |
|
Analysed as: |
|
|
Trading profit |
4,259 |
|
Amortisation of intangible assets on acquisition |
(396) |
|
Financial income |
1 |
|
Financial expense |
- |
|
Profit before taxation |
3,864 |
Included within the results are £266,000 of revenues with Odyssey, that would be eliminated on a consolidated basis for the Group's financial statements.
From the date of acquisition to 30 September 2008, GTS contributed £48,000 to the group's net operating cashflows, received £1,000 in respect of interest, £nil in respect of taxation and utilised £19,000 for capital expenditure. All intangible assets were recognised at their respective fair values. The residual excess over the net assets acquired is recognised as goodwill in the accounts.
16. Acquisitions
The combined results of Odyssey and GTS (excluding any adjustments relating to remuneration and costs of the previous owners, but including intercompany adjustments) for the 6 months to 30 September 2008, if they had been acquired at the beginning of the year would have been as follows:
|
£'000 |
|
|
Revenue |
40,689 |
|
Operating profit |
10,072 |
The results of the Group (excluding any adjustments relating to remuneration and costs of the previous owners, but including intercompany adjustments) for the 6 months to 30 September 2008, if Odyssey and GTS had been acquired at the beginning of the year would have been as follows:
|
£'000 |
|
|
Revenue |
120,946 |
|
Operating profit |
17,405 |
This information is not necessarily indicative of the results of operations that would have occurred under the management of the Group had the purchases been made at the beginning of the year or the future results of the combined operations, and only includes amortisation of intangible assets on acquisition since the date of acquisition.
Acquisition of remaining minority interest in Hampson Precision Automotive India Private Limited
On 27 May 2008 the Group purchased the remaining 2% voting rights of Hampson Precision Automotive India Private Limited from Maini Precision Products Private Limited for £96,000, resulting in the Group owning 100% of the voting rights of the company. The purchase has been accounted for as a business combination.
An analysis of the net outflow of cash in respect of acquisitions is as follows:
|
£'000 |
|
|
Cash consideration - Odyssey |
80,847 |
|
Cash consideration - GTS |
28,894 |
|
Directly attributable costs in relation to the acquisitions of Odyssey & GTS |
5,361 |
|
Cash consideration - Hampson Precision Automotive India |
96 |
|
115,198 |
|
|
Less net cash acquired with subsidiary undertakings - Odyssey & GTS |
(63) |
|
Net outflow of cash and cash equivalents for acquisitions |
115,135 |
17. Related party transactions
Definition of key management personnel
Key management personnel is defined as the main Board of Directors of Hampson Industries PLC and the Executive Committee of the Board of Directors of Hampson Industries PLC, which include, in addition to the Executive Directors, a number of other senior managers with operational or functional responsibility within the Group.
Related party transactions with key management personnel
As part of the acquisition of Odyssey Industries Inc. "Odyssey" and Global Tooling Systems Inc. "GTS", the Group entered into operating lease arrangements with the vendor to lease the facilities that both companies occupy. This is considered to be a related party transaction as the vendor, Mr. Randal Bellestri, who joined the Group as part of the acquisition, owns approximately a 9% shareholding in the Company and is a member of the Executive Committee of the Board of Directors of Hampson Industries PLC.
17. Related party transactions
Related party transactions with key management personnel continued
Odyssey leases its facilities from RDB Industries Inc and RSS Holdings LLC. Mr. Bellestri is the owner of both companies. Under the terms of the five year lease, Odyssey is required to make monthly rental payments of US$100,000 plus the payment of property taxes, maintenance and insurance, which was externally assessed as market value at the date of the acquisition. Within trade creditors are amounts due to RDB Industries Inc. at 30 September 2008 of US$nil (31 March 2008: Not applicable, 30 September 2007: Not applicable) and to RSS Holdings LLC at 30 September 2008 of US$nil (31 March 2008: Not applicable, 30 September 2007: Not applicable).
GTS leases its facilities from C & Sons Inc., of which Mr. Bellestri is a 50% shareholder. Under the terms of the five year lease, GTS is required to make monthly rental payments of US$50,000 plus the payment of property taxes, maintenance and insurance, which was externally assessed as market value at the date of the acquisition. Within trade creditors are amounts due to C & Sons Inc. at 30 September 2008 of US$nil (31 March 2008: Not applicable, 30 September 2007: Not applicable)
Other than transactions noted above and the remuneration of each individual, there have been no other transactions with key management personnel.
Other related party transactions
During the six months ended 30 September 2008, the Company entered into transactions with its subsidiary undertakings in respect of internal funding loans and provision of normal group services (including IT, accounting and procurement services). Recharges are made for group services based on the utilisation of those services on arms-length terms.
Annual management recharges are levied by the Company to subsidiary undertakings to cover services provided, which for the six months ended 30 September 2008 amounted to £nil (half year to 30 September 2007: £nil, year ended 31 March 2008: £5,553,000). In addition to these services the Company acts as a buying agent for certain group purchases e.g. insurance, which are recharged on an arms-length basis based on utilisation by the subsidiary undertaking.
Recharges are made to subsidiary undertakings for Group loans based on funding provided at an interest rate linked to the prevailing base rate of the country in whose currency the loan is denominated. No recharges are made in respect of balances due to or from otherwise dormant companies. Total interest received by the Company from subsidiary undertakings for the six months ended 30 September 2008 amounted to £1,991,000 (half year to 30 September 2007: £4,588,000, year ended 31 March 2008: £9,129,000) and total interest paid by the Company to subsidiary undertakings for the six months ended 30 September 2008 amounted to £178,000 (half year to 30 September 2007: £65,000, year ended 31 March 2008: £236,000).
No dividends were received by the Company from subsidiary undertakings during the six months ended 30 September 2008 (half year to 30 September 2007: £nil, year ended 31 March 2008: £1,000,000).
The amount outstanding from subsidiary undertakings to the Company at 30 September 2008 totalled £44,469,000 (30 September 2007: £112,435,000, 31 March 2008: £127,159,000). Amounts owed to subsidiary undertakings by the Company at 30 September 2008 totalled £9,063,000 (30 September 2007: £9,929,000, 31 March 2008: £9,426,000). The Company had no expense in respect of bad or doubtful debts of subsidiary undertakings during the six months to 30 September 2008 (half year to 30 September 2007: £nil, year to 31 March 2008: £nil).
The Company provides the Group's defined benefit pension schemes, which are closed to accrual of further benefit. At 30 September 2008 both schemes were the responsibility of Hampson Industries PLC.
18. Contingent liabilities
Multi-lateral cross-guarantees have been given by the Company and certain subsidiaries in respect of financial indebtedness under bank borrowing facilities. Contingent liabilities exist in respect of performance bonds, forward exchange commitments and other guarantees which arise in the normal course of business and are not expected to give rise to any loss.
A subsidiary of the Group is pursuing a commercial claim against a third party for wasted costs arising as a result of alleged repudiatory breach of contract and is defending a counterclaim alleging similar breach. As of 30 September 2008, confidential arbitration proceedings have been undertaken although adjudication has not yet been made known to the parties. Since the outcome of these proceedings remains uncertain at the date of approval of these financial statements it is not practical to estimate their financial effect. Any financial impact will be dealt with in the financial statements relating to the financial period in which the outcome is notified.
19. Post-balance sheet events
On 25 November 2008 Eclipse Aviation Corporation filed for Chapter 11 bankruptcy protection under the US Bankruptcy Code, and also announced an agreement for the sale of its assets for a combination of cash, debt and equity to an affiliate of ETIRC Aviation S.a.r.l., the largest shareholder of Eclipse Aviation Corporation, subject to higher and better offers. Due to the timing of this announcement, and the considerable uncertainty now surrounding the Eclipse 500 programme, an assessment of the ongoing recoverability of assets held by the Group in relation to this programme will be considered by management upon receipt of further information regarding the filing, the results of which will be reported in the financial statements for the year ended 31 March 2009.
20. Other information
This statement will be posted to shareholders on or around 26 November 2008 and will be available for review at the Group's website shown below. Copies are also available from the Company's registered office, at the address shown below:
Group Headquarters and Registered Office
Hampson Industries PLC,
7 Harbour Buildings,
Waterfront West,
Dudley Road,
Brierley Hill,
West Midlands,
DY5 1LN.
Tel: +44 (0)1384 485345
Fax: +44 (0)1384 472962
Website: www.hampsongroup.com
Registrars and Transfer Office
Equiniti,
Aspect House,
Spencer Road, Lancing, West Sussex, BN99 6DA.
Tel: +44 (0)871 384 2030
Related Shares:
HAMP.L