4th Aug 2005 07:00
Senior PLC04 August 2005 Thursday 4 August 2005 Senior plc Interim Results for the half-year ended 30 June 2005 FINANCIAL HIGHLIGHTS Notes Half-year to 30 June -------------------- 2005 2004------------------------------------------------------------------------------- REVENUE FROM CONTINUING OPERATIONS £166.9m £157.1m +6.2% ------------------------------------------------------------------------------- OPERATING PROFIT FROM CONTINUING OPERATIONS £9.5m £8.3m +14.5% ------------------------------------------------------------------------------- PROFIT BEFORE TAXATION FROM CONTINUING OPERATIONS £7.2m £6.2m +16.1% ------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE FROM CONTINUINGOPERATIONS 1.92p 1.73p +11.0% ------------------------------------------------------------------------------- ADJUSTED EARNINGS PER SHARE 7 1.99p 1.85p +7.6% ------------------------------------------------------------------------------- INTERIM DIVIDEND PER SHARE 0.65p 0.65p - ------------------------------------------------------------------------------- FREE CASH FLOW 9b £1.4m £7.1m ------------------------------------------------------------------------------- NET BORROWINGS £59.1m £57.9m ------------------------------------------------------------------------------- Commenting on the results, James Kerr-Muir, Chairman of Senior plc, said: "Senior has had a good first half. In Aerospace demand strengthened, inIndustrial the benefits of the rationalisations undertaken in 2004 came throughstrongly and in Automotive further enquiries were received for the Group's newhigh-pressure diesel products, which start production in late 2006. Group profitbefore tax from continuing operations grew 16% and prospects for healthy organicgrowth in the medium-term are encouraging." For further information please contact: Senior plc----------Graham Menzies, Group Chief Executive 01923 714702Mark Rollins, Group Finance Director 01923 714738 Finsbury Group--------------James Murgatroyd/Charlotte Hepburne-Scott 020 7251 3801 This announcement, together with other information on Senior plc may be foundat: www.seniorplc.com Note to Editors: Senior is an international manufacturing group with operations in 11 countries.Senior designs, manufactures and markets high technology components and systemsfor the principal original equipment producers in the worldwide aerospace,automotive and specialised industrial markets. Interim Statement----------------- Senior has had a good first half. In Aerospace demand strengthened, inIndustrial the benefits of the rationalisations undertaken in 2004 came throughstrongly and in Automotive further enquiries were received for the Group's newhigh-pressure diesel products, which start production in late 2006. Group profitbefore tax from continuing operations grew 16% and prospects for healthy organicgrowth in the medium-term are encouraging. Financial Results----------------- Companies listed on security exchanges within the European Union are required toadopt International Financial Reporting Standards (IFRS) for accounting periodsbeginning on or after 31 December 2004. Consequently, the Group's interimaccounts for 2005 are the first time the Group has reported under IFRS. Unlessotherwise stated, all figures included in this commentary and all amounts in the2005 Interim Accounts themselves, including comparatives, have been preparedusing accounting policies consistent with IFRS. Comparative figures included inthis commentary are for the first six months of 2004 unless otherwise stated. In the six months to 30 June 2005, Group revenues from continuing operations were£166.9m, an increase of 6.2% over the comparable period in 2004 (£157.1m).Operating profit from continuing operations was £9.5m and represented animprovement of 14.5% over the £8.3m reported for the first half of 2004.Compared to the first six months of 2004, currency effects on the translation ofoverseas revenues and earnings into sterling were not significant. Operating profit is reported after a loss on disposal of fixed assets of £0.2m(2004: £nil) and reorganisation and redundancy costs of £0.3m (2004: £1.1m). Finance costs, consisting of interest payable of £2.5m (2004: £2.4m) andinterest on defined benefit pension obligations of £0.5m (2004: £0.6m), remainedunchanged at £3.0m. Investment income reduced slightly to £0.7m (2004: £0.9m) asthe prior period benefited from a one-off recovery of interest from the USA taxauthorities. Profit before tax from continuing operations improved by 16.1% to £7.2m (2004: £6.2m) and, with an effective tax rate of 18.1% (2004: 14.5%), profit after tax from continuing operations was £5.9m (2004: £5.3m). Basic earnings per share from continuing operations of 1.92p was 11.0% ahead of the equivalent figure for 2004 (1.73p). In addition to the statutory information, the Group has consistently reported anadjusted earnings per share figure in order to reflect the underlyingperformance of the business. This is calculated before profit/loss on disposalof fixed assets and before profit/loss on disposal of operations but includesthe operating results of discontinued operations up to their point of disposal.Adjusted earnings per share for the first half of 2005 was 1.99p, 7.6% ahead ofthe comparative period in 2004 (1.85p). Cash Flow and Borrowings------------------------ Free cash flow (net cash flow from operating activities after net capitalexpenditure, interest and tax but before acquisitions, disposals, share issues and dividend payments) was £1.4m (2004: £7.1m). The reduced cash flow was largely due to supplementary pension payments of £1.2m (2004: £nil) and the higher level of gross capital expenditure. This amounted to £9.1m compared to £5.0m for the first half of 2004, as the Group began to invest in the plant and equipment required to manufacture the new heavy duty diesel products in North America. The US $ strengthened from $1.92 : £1 at the end of December 2004 to $1.77 : £1 at the end of June 2005. The Group has most of its borrowings in US $, as a matchagainst its US $ assets, and the strengthening US $ caused the reported sterlingnet debt to increase by £5.1m in the period. In total, net debt increased by £8.5m in the six month period to stand at £59.1mat the end of June 2005. The increase was due to the £5.1m adverse currencymovement discussed above, an additional £0.7m of debt being brought onto thebalance sheet in accordance with IAS 39 (the International Accounting Standarddealing with Financial Instruments), which was implemented by the Group witheffect from 1 January 2005, and dividend payments of £4.1m. These were partially offset by the free cash inflow of £1.4m. Dividend--------- The Board has declared an unchanged interim dividend of 0.65p. This will bepaid on 25 November 2005 to shareholders on the register on 28 October 2005. Aerospace--------- Sales in the Aerospace Division for the first six months of 2005 increased by 6.4% to £74.5m (2004: £70.0m) and operating profit, before the loss on disposal of fixed assets of £0.2m (2004: £nil), increased by 21.2% to £6.3m (2004:£5.2m). On the same basis, operating margins improved to 8.5% (2004: 7.4%). The civil aerospace industry increased build rates during the period, as demandfrom the airlines improved. The Airbus A380 recently flew for the first time andproduction is currently in the process of ramping up. Boeing and Airbuscollectively delivered 344 aircraft in the six months, up 10% from the 312aircraft delivered in the first half of 2004. Order intake was strong, with their combined order book at the end of June 2005 of 2,938 aircraft being21% ahead of June 2004. The engine builders saw similar increases. It is anticipated that the civil aerospace industry will remain strong for theforeseeable future, fuelled by recovering confidence and growing marketsparticularly in the Middle East and Far East, including India and China. Elsewhere, there was weakness in the regional jet market but a strengtheningdemand among the business jet builders. The defence and military sectorsremained solid. Revenue is now being generated from the pre-productiondevelopment phase of the Joint Strike Fighter programme although full productionvolumes remain a number of years away. A facility improvement programme commenced at Bird Bellows, UK, and new machining capability is being installed at Jet Products and Ketema, both in California. Overall, capital expenditure in the period amounted to 65% of depreciation. Automotive---------- Sales in the Automotive Division rose by 4.9% to £68.1m (2004: £64.9m) but operating profit, as anticipated, reduced to £3.7m (2004: £5.0m). The operating margin was 5.4% (2004: 7.7%). The Division improved its performance compared to the second half of 2004, when sales were £58.0m and operating profit, before profit on disposal of fixed assets of £0.5m, was £3.0m. The main reason for the improving trend was the fact that the Group's French automotive facility, which had operational problems in the second half of 2004, returned to profit during the second quarter of 2005. The principal automotive markets remained flat - North American passengervehicle sales were up year on year by 2% whilst those in Europe were down by1%. The "Big 3" continued to see their market share eroded in North Americaand diesel continued to gain market share in Europe. Capital investment was 2.4 times depreciation for the Division. This is mainlydue to the high level of plant and equipment currently being installed in NorthAmerica to manufacture the new heavy duty diesel engine products. These arerequired as a result of the industry converting to "common rail" dieseltechnology to meet more stringent emission standards from 1 January 2007. In addition to this booked volume for heavy duty vehicles, the North American passenger car assemblers have started to develop diesel engine options for their larger vehicles. If a market for medium size diesel engines materialises, volume production would commence between 2008 and 2010. This offers Senior Automotive a potentially significant additional opportunity for its diesel products. Consequently, the engineering resource necessary to service the many enquiries being received is currently being enhanced. Industrial---------- Sales in the Industrial Division grew by 10.7% to £24.9m (2004: £22.5m) with asignificantly improved operating profit of £1.8m being reported (2004: £0.2m). The reason for the dramatic profit increase was the turnaround at Pathway,Texas, a world leader in the design and manufacture of metal and fabricexpansion joints. There were two major factors - a significantly lower costbase as a result of the factory rationalisation carried out during 2004 andimproved markets, principally for oil and gas. Outlook------- The aerospace industry is expected to continue its recovery. Airlines, whilstnot universally profitable, are reporting increased passenger numbers and areordering new aircraft at a faster rate than a year ago. The Group's aerospaceorder book, following that of its customers, continues to strengthen as aresult. Automotive markets are expected to be stable, both in North America and Europe. The future growth of Senior Automotive, however, will come from supplying the growing market for high specification diesel engine products. Revenues are already resulting from the pre-production and prototype phase of the new heavy duty diesel products and full production is scheduled to commence in late 2006. In the meantime, capital expenditure is at a high level and the Division's engineering resource is being expanded to meet the growth expectations. Having completed the rationalisations last year, the improved performance of the Industrial Division is expected to be maintained, with the high oil price and tougher power generation emission standards contributing to a healthy market place. Senior remains committed to its strategy of improving the value of the Groupthrough product and process design and development in conjunction withoperational improvement and cost control. The results of this strategy, particularly the new business now being won by the Group, allow the directors toview the medium-term prospects with confidence. James Kerr-Muir Graham MenziesChairman Chief Executive 3 August 2005Senior plc Consolidated income statement----------------------------- For the half-year ended 30 June 2005 (unaudited) Notes Half-year Half-year Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 (restated) (restated) ------- ------- -------- £m £m £mContinuing operations Revenue 3 166.9 157.1 306.8 ------- ------- -------- Trading profit 9.7 8.3 16.3 (Loss)/profit on sale of fixed assets (0.2) - 0.5 ------- ------- -------- Operating profit 3 9.5 8.3 16.8 Investment income 0.7 0.9 2.1 Finance costs (3.0) (3.0) (6.2) ------- ------- -------- Profit before tax 7.2 6.2 12.7 Tax 4 (1.3) (0.9) (1.6) ------- ------- -------- Profit for the periodfrom continuing operations 5.9 5.3 11.1 Discontinued operations Profit/(loss) for the period from discontinued operations 5 - 0.4 (4.4) ------- ------- -------- Profit for the period 5.9 5.7 6.7 ======= ======= ======== Attributable to: Equity holders of the parent 5.9 5.7 6.7 ======= ======= ======== Earnings per share From continuing operations Basic 7 1.92p 1.73p 3.62p ======= ======= ======== Diluted 7 1.89p 1.70p 3.57p ======= ======= ======== From continuing anddiscontinued operations Basic 7 1.92p 1.85p 2.19p ======= ======= ======== Diluted 7 1.89p 1.83p 2.16p ======= ======= ======== The comparative figures for the half-year ended 30 June 2004 have been restatedto reflect the adoption of International Financial Reporting Standards. See Note11 for details. The comparative figures for the year ended 31 December 2004 have been restatedto reflect the proposed amendment to International Accounting Standard 21 "TheEffects of Changes in Foreign Exchange Rates". See Note 2 for details. Consolidated statement of recognised income and expense------------------------------------------------------- For the half-year ended 30 June 2005 (unaudited) Half-year Half-year Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 (restated) (restated) ------- ------- -------- £m £m £mInitial recognition offinancial instruments (0.2) - - Losses on cash flow hedges (0.7) - - Exchange differences ontranslation of foreignoperations 0.9 0.2 (0.3) Actuarial (losses)/gainson retirement benefitobligations (0.3) 2.6 (0.3) Tax on items taken directlyto equity (0.9) 0.4 1.0 ------- ------- -------- Net (loss)/income recogniseddirectly in equity (1.2) 3.2 0.4 Amounts transferred toprofit or loss on cash flowhedges (0.1) - - Profit for the period 5.9 5.7 6.7 ------- ------- -------- Total recognised income andexpense for the period 4.6 8.9 7.1 ======= ======= ======== Attributable to: Equity holders of the parent 4.6 8.9 7.1 ======= ======= ======== The net liability of £0.2m shown on the initial recognition of financialinstruments comprises a £0.5m asset related to forward contracts taken out ascash flow hedges of future transactions and a £0.7m liability related to aninterest rate instrument. The comparative figures for the half-year ended 30 June 2004 have been restatedto reflect the adoption of International Financial Reporting Standards. See Note11 for details. The comparative figures for the year ended 31 December 2004 have been restatedto reflect the proposed amendment to International Accounting Standard 21 "TheEffects of Changes in Foreign Exchange Rates". See Note 2 for details. Consolidated balance sheet--------------------------- For the half-year ended 30 June 2005 (unaudited) Notes 30 June 2005 30 June 2004 31 Dec 2004 (restated) (restated) ------- ------- ------- £m £m £m Non-current assets Goodwill 76.1 75.8 73.1Other intangible assets 1.1 1.4 1.2Property, plant and equipment 72.7 73.4 68.8Deferred tax assets 0.1 0.1 0.1Trade and other receivables 3.9 0.9 3.8 ------- ------- ------- Total non-current assets 153.9 151.6 147.0 ------- ------- ------- Current assets Inventories 44.9 41.8 38.4Construction contracts 5.1 5.4 4.5Trade and other receivables 62.9 62.1 55.5Cash and cash equivalents 8.2 12.4 7.4 ------- ------- ------- Total current assets 121.1 121.7 105.8 ------- ------- ------- Total assets 275.0 273.3 252.8 ======= ======= ======= Current liabilities Trade and other payables 70.8 64.5 59.6Tax liabilities 10.0 6.4 9.5Obligations under finance leases 0.2 0.2 0.3Bank overdrafts and loans 2.3 3.0 2.6 ------- ------- ------- Total current liabilities 83.3 74.1 72.0 ------- ------- ------- Non-current liabilities Bank and other loans 62.1 65.8 52.6Retirement benefit obligations 10 41.2 42.0 41.4Deferred tax liabilities 1.9 1.3 0.9Obligations under finance leases 1.7 1.9 1.8Others 0.2 0.6 0.3 ------- ------- ------- Total non-current liabilities 107.1 111.6 97.0 ------- ------- ------- Total liabilities 190.4 185.7 169.0 ======= ======= ======= Net assets 84.6 87.6 83.8 ======= ======= ======= 30 June 2005 30 June 2004 31 Dec 2004 (restated) (restated) ------- ------- ------- £m £m £mEquity Issued share capital 30.8 30.7 30.7Share premium account 3.5 3.5 3.5Equity reserve 0.3 0.1 0.1Other reserve 17.0 17.0 17.0Hedging and translation reserve (0.3) 0.6 0.7Retained earnings 34.6 37.0 33.1Own shares (1.3) (1.3) (1.3) ------- ------- ------- Equity attributable to equity holders of the parent 84.6 87.6 83.8 ------- ------- ------- Total equity 84.6 87.6 83.8 ======= ======= ======= The comparative figures for the half-year ended 30 June 2004 have been restatedto reflect the adoption of International Financial Reporting Standards. See Note11 for details. The comparative figures for the year ended 31 December 2004 have been restatedto reflect the proposed amendment to International Accounting Standard 21 "TheEffects of Changes in Foreign Exchange Rates". See Note 2 for details. Consolidated cash flow statement-------------------------------- For the half-year ended 30 June 2005 (unaudited) Notes Half-year Half-year Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 ------- ------- ------- £m £m £m Net cash from operatingactivities 9a) 9.0 10.7 17.7 ------- ------- ------- Investing activities Interest received 0.8 1.3 2.5Disposal of subsidiary - - 4.7Proceeds on disposal of property, plant and equipment 0.7 0.1 0.7Purchases of property, plant and equipment (9.0) (4.6) (9.8)Purchases of intangible assets (0.1) (0.1) (0.2)Acquisition of subsidiary (0.1) (0.1) (0.2) ------- ------- ------- Net cash used in investing activities (7.7) (3.4) (2.3) ------- ------- ------- Financing activities Dividends paid (4.1) (4.1) (6.1)Repayment of borrowings (0.1) (6.2) (18.9)Repayments of obligations under finance leases (0.1) (0.1) (0.3)Share issues 0.1 - -New loans raised 5.4 - -Net cash (outflow)/inflow on forward contracts (0.4) 4.3 4.5 ------- ------- -------Net cash from/(used in)financing activities 0.8 (6.1) (20.8) ------- ------- ------- Net increase/(decrease) incash and cash equivalents 2.1 1.2 (5.4) Cash and cash equivalentsat beginning of period 5.9 11.5 11.5 Effect of foreign exchange rate changes - (0.4) (0.2) ------- ------- ------- Cash and cash equivalentsat end of period 9c) 8.0 12.3 5.9 ======= ======= ======= Notes to the interim financial statements----------------------------------------- For the half-year ended 30 June 2005 (unaudited) 1. General Information---------------------- The information for the year ended 31 December 2004 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts (reported under UK GAAP) for that year has beendelivered to the Registrar of Companies. The Auditors' report on those accountswas unqualified. These interim financial statements, which were approved by the Board ofDirectors on 3 August 2005, have not been audited or reviewed by the Auditors. 2. Accounting policies---------------------- The Company issued an announcement on 17 June 2005 entitled "Adoption ofInternational Financial Reporting Standards (IFRS), Restatement of 2004Financial Information". This document can be viewed on the Company's website, www.seniorplc.com. The document includes a description of the significant accounting polices to beadopted under IFRS. These interim financial statements have been prepared usingthose accounting policies and methods of computation. When the restated figures for 2004 were prepared, an unrealised gain of £0.2marising on long-term intercompany loans was credited to the income statement inorder to comply with IAS 21. However, it should be noted that on 30 June 2005the International Accounting Standards Board published an update following itsJune meeting. This indicated that IAS 21 "The Effects of Changes in ForeignExchange Rates" will be amended. The suggested amendment will result in thisitem being credited directly to the Statement of Recognised Income and Expense,which is consistent with the previous treatment under UK GAAP. These interimfinancial statements have been prepared in accordance with the proposedamendment to IAS 21 and the December 2004 comparatives have been adjustedaccordingly. 3. Business segments-------------------- For management purposes, the Group is organised into three operating divisions according to the market segments that they serve. These divisions are the basis on which the Group reports its primary segment information. The three divisions are Aerospace, Automotive and Industrial. The Industrial Hose operations, previously reported within Industrial, were sold in August 2004. Note 5 provides further information on the discontinued operations. Segment information for revenue, operating profit and a reconciliation to entitynet profit is presented below. Inter Inter External segment Total Segment External segment Total Segment revenue revenue revenue result revenue revenue revenue result Half-year Half-year Half-year Half-year Half-year Half-year Half-year Half-year ended ended ended ended ended ended ended ended June June June June June June June June 2005 2005 2005 2005 2004 2004 2004 2004 ------ ------ ------ ------ ------- ------ ------- ------ £m £m £m £m £m £m £m £mAerospace 74.3 0.2 74.5 6.1 70.0 - 70.0 5.2Automotive 67.8 0.3 68.1 3.7 64.7 0.2 64.9 5.0Industrial 24.8 0.1 24.9 1.8 22.4 0.1 22.5 0.2 ------ ------ ------ ------ ------- ------ ------- ------Sub total 166.9 0.6 167.5 11.6 157.1 0.3 157.4 10.4 Eliminations (0.6) (0.6) (0.3) (0.3)Central costs (2.1) (2.1) ------ ------ ------ ------ ------- ------ ------- ------Total continuingoperations 166.9 - 166.9 9.5 157.1 - 157.1 8.3 ====== ====== ====== ======= ====== =======Investment income 0.7 0.9Finance costs (3.0) (3.0) ------ ------Profit before tax 7.2 6.2Tax (1.3) (0.9)Profit for the period from discontinued operations - 0.4 ------ ------ Profit after tax and discontinued operations 5.9 5.7 ====== ====== Segment results shown above are stated after charging £0.2m (2004: £ nil) losson sale of fixed assets, attributed wholly to the Aerospace segment. The total group revenue was £166.9m (2004: £173.7m), with discontinuedoperations contributing £ nil (2004: £16.6m). Details of the profit for the 2004half-year from discontinued operations are shown in note 5. 4. Tax charge------------- Half-year Half-year ended ended 30 June 2005 30 June 2004 ------- ------- £m £mCurrent tax:UK corporation tax - -Foreign tax 1.2 1.0 ------- ------- 1.2 1.0Deferred tax:Current year 0.1 - ------- ------- 1.3 1.0 ======= =======Continuing operations 1.3 0.9Discontinued operations - 0.1 ------- ------- 1.3 1.0 ======= ======= Corporation tax for the interim period is charged at 18.1% (2004: 14.9%),representing the best estimate of the weighted average annual corporation taxrate expected for the full financial year. 5. Discontinued operations-------------------------- There have been no disposals in 2005. In August 2004, the Group's five Industrial Hose operations, comprising theshare capitals of Senior Flexonics Limited, Flexonics SAS, Senior FlexonicsB.V., Teknofluor Holding A.B. and the trade and assets of the US Hose Divisionof Senior Operations Inc, were sold. The results of the discontinued operations which have been included in theconsolidated income statement, were as follows: Half-year ended 30 June 2004 ------- £m Revenue 16.6Expenses (16.1) -------Profit before tax 0.5Attributable tax expense (0.1) -------Profit after tax 0.4Loss on disposal of discontinued operations - -------Net profit attributable to discontinued operations 0.4 ======= During the half-year ended 30 June 2005, discontinued operations used £nil(2004: £1.0m) of the Group's net operating cash flows, paid £nil (2004: £0.2m)in respect of investing activities and paid £nil (2004: £nil) in respect offinancing activities. 6. Dividends------------ Half-year Half-year ended ended 30 June 2005 30 June 2004 ------- ------- £m £mAmounts recognised as distributions to equityholders in the period: Final dividend for the year ended 31 December 2004 of 1.35p (2003: 1.35p) per share 4.1 4.1 ======= ======= A proposed interim dividend, as follows, was approved by the Board of Directorson 3 August 2005. This proposed dividend has not been included as a liability inthese financial statements. Proposed interim dividend for the year ended 31 December 2005 of 0.65p (2004: 0.65p) per share 2.0 2.0 ======= ======= 7. Earnings per share--------------------- The calculation of the basic and diluted earnings per share is based on thefollowing data: Number of shares Half-year Half-year ended ended 30 June 2005 30 June 2004 ------- ------- 000's 000's Weighted average number of ordinary sharesfor the purposes of basic earnings per share 306,700 306,500 Effect of dilutive potential ordinary shares:Share options 4,800 4,400 ------- ------- Weighted average number of ordinary sharesfor the purposes of diluted earnings per share 311,500 310,900 ======= ======= Earnings and earnings per share Half-year ended Half-year ended 30 June 2005 30 June 2004 Earnings EPS Earnings EPS ------- ------- ------- ------- £m pence £m pence Profit for the period fromcontinuing operations 5.9 1.92 5.3 1.73Profit for the period fromdiscontinued operations - - 0.4 0.12 ------- ------- ------- -------Profit for the period fromcontinuing and discontinuedoperations 5.9 1.92 5.7 1.85Adjust:Loss on sale of fixed assets net oftax of £nil (2004: £nil) 0.2 0.07 - - ------- ------- ------- ------- Adjusted earnings after tax 6.1 1.99 5.7 1.85 ======= ======= ======= ======= Earnings per share- basic continuing 1.92p 1.73p- basic discontinued - 0.12p ------- ------- - basic 1.92p 1.85p ======= =======- diluted 1.89p 1.83p - adjusted 1.99p 1.85p- adjusted and diluted 1.96p 1.83p The effect of dilutive shares on the earnings for the purposes of dilutedearnings per share is £nil (2004: £nil). The denominators used for all basic, diluted and adjusted earnings per share areas detailed in the "Number of shares" table above. The provision of an adjusted earnings per share, derived in accordance with thetable above, has been included to identify the performance of operations, fromthe time of acquisition or until the time of disposal, prior to the impact ofthe following items: - gains or losses arising from the disposal of fixed assets - gains or losses arising from the disposal of discontinued operations - charges for the impairment of goodwill 8. Acquisitions--------------- The amount of £0.1m (2004: £0.1m) shown in the consolidated cash flowstatement relates to deferred consideration payable in respect of previousacquisitions. 9. Notes to the cash flow statement----------------------------------- a) Reconciliation of operating profit to net cash from operating activities Half-year Half-year ended ended 30 June 2005 30 June 2004 ------- ------- £m £m Operating profit from continuing operations 9.5 8.3Discontinued operations profit before tax - 0.5 Adjustments for:Depreciation of property, plant and equipment 5.7 7.0Amortisation of intangible assets 0.3 0.2Share options 0.2 -Loss on disposal of property, plant and equipment 0.2 -Pension payments in excess of service cost (1.2) - ------- ------- Operating cash flows before movements in working capital 14.7 16.0 Increase in working capital (3.5) (3.5) ------- ------- Cash generated by operations 11.2 12.5 Income taxes (paid)/received (0.1) 0.7Interest paid (2.1) (2.5) ------- ------- Net cash from operating activities 9.0 10.7 ======= ======= b) Free cash flow Free cash flow, a non statutory item, highlights the total net cash generated bythe Group prior to corporate activity such as acquisitions and disposals andtransactions with shareholders. It is derived as follows: Half-year Half-year Year ended ended ended 30 June 30 June 31 Dec 2005 2004 2004 ------- ------- ------- £m £m £mNet cash from operating activities 9.0 10.7 17.7Interest received 0.8 1.3 2.5Proceeds on disposal of property, plant and equipment 0.7 0.1 0.7Purchases of property, plantand equipment - cash (9.0) (4.6) (9.8) - finance leases - (0.3) (0.4)Purchases of intangible assets (0.1) (0.1) (0.2) ------- ------- -------Free cash flow 1.4 7.1 10.5 ======= ======= ======= c) Analysis of net debt At Cashflow Non cash Exchange At 1 January Items movement 30 June 2005 2005 ------- ------- ------- ------- ------- £m £m £m £m £mCash 7.4 0.8 - - 8.2Overdrafts (1.5) 1.3 - - (0.2) ------- ------- ------- ------- ------- Cash and cash equivalents 5.9 2.1 - - 8.0Debt due within one year (1.1) (0.8) (0.2) - (2.1)Debt due after one year (52.6) (4.5) (0.5) (4.5) (62.1)Finance leases (2.1) 0.1 - 0.1 (1.9)Forward exchange contract losses (0.7) 0.4 - (0.7) (1.0) ------- ------- ------- ------- -------Total (50.6) (2.7) (0.7) (5.1) (59.1) ------- ------- ------- ------- ------- Debt due within one year shown above includes short-term bank borrowings of£1.9m (1 January 2005: £1.1m). The forward exchange contract losses shown above are included in currentliabilities within trade and other payables. Non cash items shown above relate to the recognition of financial instrumentsunder IAS 39. Additions to property, plant and equipment during the period of £nil (2004 half-year: £0.3m) were financed by new finance leases. 10. Retirement benefit schemes------------------------------ Defined Benefit Schemes Aggregate post-retirement benefit liabilities are £41.2m (31 December 2004:£41.4m, 30 June 2004: £42.0m). The primary components of this liability are theGroup's UK pension plan and US pension plans, with deficits of £32.9m and £5.0mrespectively. These values have been assessed by an independent actuary using current market values and discount rates. 11. Explanation of transition to IFRS-------------------------------------- The reconciliations of equity at 1 January 2004 (date of transition to IFRS) andat 31 December 2004 (date of last UK GAAP financial statements) and thereconciliation of income statement for 2004, as required by IFRS 1, includingthe significant accounting policies and notes to 31 December 2004, were includedin an announcement on 17 June 2005. A copy of the announcement may be found onthe Company's website www.seniorplc.com. a) Reconciliation of equity at 30 June 2004 Notes UK GAAP Adjustment IFRS (restated) -------- -------- -------- £m £m £m Non-current assetsGoodwill (i) 73.2 2.6 75.8Intangible assets (ii) - 1.4 1.4Property, plant and equipment (ii) 74.8 (1.4) 73.4Deferred tax assets 0.1 0.1Trade and other receivables 0.9 0.9 -------- -------- -------- Total non-current assets 149.0 2.6 151.6 -------- -------- --------Current assetsInventories 41.8 41.8Construction contracts 5.4 5.4Trade and other receivables 62.1 62.1Cash and cash equivalents 12.4 12.4 -------- -------- -------- Total current assets 121.7 - 121.7 -------- -------- -------- Total assets 270.7 2.6 273.3 -------- -------- -------- LiabilitiesTrade and other payables (iii) 66.5 (2.0) 64.5Current tax liabilities 6.4 6.4Obligations under finance leases 2.1 2.1Interest bearing loans 68.8 68.8Retirement benefit obligations (iv) 41.8 0.2 42.0Deferred tax liabilities (v) 0.7 0.6 1.3Others 0.6 0.6 -------- -------- -------- Total liabilities 186.9 (1.2) 185.7 -------- -------- -------- Total assets less total liabilities 83.8 3.8 87.6 ======== ======== ======== EquityIssued share capital 30.7 30.7Share premium account 3.5 3.5Equity reserve (vi) - 0.1 0.1Other reserve (vii) 17.7 (0.7) 17.0Hedging and translation reserve (vii) - 0.6 0.6Retained earnings 33.2 3.8 37.0Own shares (1.3) (1.3) -------- -------- --------Total equity 83.8 3.8 87.6 ======== ======== ======== The Group equity under UK GAAP as at 30 June 2004 has been restated to reflectthe adoption of Financial Reporting Standard No 17 "Retirement Benefits". Notes to the reconciliation of equity at 30 June 2004 (i) Goodwill amortisation Under UK GAAP, goodwill arising on acquisitions subsequent to 1 January 1998 wascapitalised and amortised over a period of up to 20 years. Under IFRS, goodwillis held at its carrying value (the UK GAAP net book value as at 31 December2003) and subjected to annual impairment testing. Hence the goodwillamortisation charge of £2.6m has been reversed, leading to an equivalentincrease in the goodwill value on the balance sheet at 30 June 2004 under IFRS. (ii) Intangible assets IFRS requires computer software to be recorded as an intangible asset andamortised over its useful life. Accordingly, £1.4m of net book value has beentransferred from within plant and equipment to intangible assets. (iii) Dividends Under UK GAAP, any dividend proposed in respect of a period is recognised in theprofit and loss account and provided for in the closing balance sheet. UnderIFRS, a declared dividend does not constitute an adjusting post balance sheetevent. Hence, the provision for the interim dividend of £2.0m at 30 June 2004under UK GAAP has been reversed under IFRS. (iv) Retirement benefit obligations IFRS requires that invested assets be valued at bid price, rather than atmid-price as required by FRS17, under UK GAAP. This revaluation causes theassets held by the funded plans to reduce in value by £0.2m, and consequentlythe net balance sheet pension deficit to increase by the same amount. (v) Deferred tax IFRS changes the focus of deferred tax from the income statement to the balancesheet and to the differences between the book value and tax base of assets andliabilities. Under IFRS, deferred tax is provided on all temporary differences,albeit that deferred tax assets are only recognised to the extent that they maybe regarded as recoverable. The Group has recognised a net increase in deferredtax liabilities of £0.6m relating to the taxation of deferred foreign exchangegains arising in overseas territories. (vi) Share based payments Under IFRS, there is an aggregate provision of £nil in respect of cash settledshare option plans, and a provision of £0.1m in respect of equity settled shareoption plans. (vii) Share capital and reserves In line with the available exemptions in IFRS 1, the cumulative translationdifferences were set to zero at the transition date. An amount of £0.6m hasarisen in the period. Also, as allowed under IFRS 1 exemptions, the existing UKGAAP value of property, plant and equipment was taken as the deemed cost forIFRS. Hence, the revaluation reserve has been reset to zero, with the previousbalance of £0.7m having been transferred to the profit and loss reserve. b) Reconciliation of income statement for the half-year ended 30 June 2004 Notes UK GAAP Adjustment IFRS (restated and reformatted) --------- -------- -------- £m £m £mContinuing operationsRevenue 157.1 157.1 --------- -------- -------- Trading profit (i),(ii) 8.4 (0.1) 8.3Amortisation of goodwill (iii) (2.6) 2.6 - --------- -------- -------- Operating profit 5.8 2.5 8.3 Interest receivable (iv) 1.0 (0.1) 0.9Interest payable and similar charges (iv) (2.5) 0.1 (2.4)Finance cost of net pension liability (0.6) (0.6) --------- -------- -------- Profit before tax 3.7 2.5 6.2 Tax (v) (1.0) 0.1 (0.9) --------- -------- -------- Profit for the period from continuing operations 2.7 2.6 5.3 --------- -------- -------- Discontinued operationsProfit from operations before tax (i) 0.4 0.1 0.5Tax (v) - (0.1) (0.1) --------- -------- -------- Profit for the period from discontinued operations 0.4 - 0.4 --------- -------- -------- Profit for the period 3.1 2.6 5.7 ========= ======== ======== The Group income statement under UK GAAP for the half-year ended 30 June 2004has been restated to reflect the adoption of Financial Reporting Standard No. 17"Retirement Benefits". Notes to the reconciliation of income statement for the half-year ended 30 June 2004 (i) Trading profit Trading profit of continuing businesses is reduced by £0.1m, which is offset bythe equivalent improvement in discontinued businesses. This relates to £0.1m ofcentral cost previously allocated to discontinued operations. Central costs willnow be disclosed separately within the segmental analysis, rather than being allocated to segments as occurred previously under UK GAAP. (ii) Share based payments Share based payment arrangements exist in relation to share and share optionschemes offered to senior management. Share options were issued in March 2003and it is considered that these may ultimately vest. No cost was included in UKGAAP accounts as the intrinsic value was £nil. A small cost (less than £0.1m)has been included in the IFRS accounts. This expense has been based on the fairvalue at the date of the award, as calculated according to the Black-Scholespricing model. (iii) Goodwill amortisation Under UK GAAP, goodwill arising on acquisitions subsequent to 1 January 1998 wascapitalised and amortised over a period of up to 20 years. Under IFRS, goodwillis held at its carrying value (the UK GAAP net book value as at 31 December2003) and subjected to annual impairment testing. Hence the goodwillamortisation charge of £2.6m for 2004 under UK GAAP has been reversed for IFRSpurposes. iv) Interest receivable and interest payable A benefit of £0.1m arising from interest rate swap agreements was previouslyshown as interest receivable. This has now been offset against the relatedinterest payable amount. (v) Tax charge The tax charge has been analysed between that attributable to continuing operations and that attributable to discontinued operations. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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