7th Nov 2007 07:01
UMECO PLC07 November 2007 7 November 2007 Umeco plc Interim results for the six months to 30 September 2007 Umeco plc, an international provider of supply chain and advanced compositematerials primarily to the aerospace & defence and automotive industries,announces its interim results for the six months to 30 September 2007. Operational highlights •US$59.5 million acquisition of J D Lincoln, Inc. completed on 31 August 2007, significantly expanding composites business •Divestment of Repair & Overhaul division to AMETEK, Inc., for cash consideration of £36.0 million completed 1 November 2007 •Significant extension to long term supply chain contract with Rolls-Royce plc announced 1 November 2007 •New Derby facility for Pattonair on schedule for completion in December 2007 •Aerospace and composites markets remain buoyant Financial highlights Including discontinued operations (Umeco Repair & Overhaul) • Revenue increased by 11.6 per cent to £176.7 million (2006: £158.3 million) • Adjusted operating profit increased by 25.5 per cent to £12.8 million (2006: £10.2 million) • Adjusted profit before tax increased by 16.9 per cent to £10.4 million (2006: £8.9 million) • Adjusted earnings per share increased by 15.2% to 14.4 pence (2006: 12.5 pence) • Interim dividend of 6.0 pence per share, up 9.1 per cent (2006: 5.5 pence) Continuing operations • Revenue increased by 10.8 per cent to £163.4 million (2006: £147.5 million) • Adjusted operating profit increased by 20.7 per cent to £11.1 million (2006: £9.2 million) • Adjusted profit before tax increased by 10.1 per cent to £8.7 million (2006: £7.9 million) Clive Snowdon, Chief Executive of Umeco plc, said: "This has been another strong first half for Umeco both financially andoperationally. During the last six months we have concentrated on thedevelopment and growth of our two core activities, Supply Chain and Composites.In Composites we also acquired JD Lincoln, further adding to our strength in theUS and extending our ties with important aerospace customers such as Boeing andAirbus. "Umeco Composites is continuing to enjoy increased demand for its products andour new UK technology centre and increased production space at ACG is alreadyseeing greater utilisation. "In Supply Chain we have secured a very important extension of our relationshipwith Rolls-Royce. Through our dedicated new facility in Derby, we will beproviding Rolls-Royce with a much broader range of services. Under the revisedcontract, our volumes with Rolls-Royce have the potential to significantly growand broaden. "Having completed the divestment of our Repair & Overhaul activities, we willnow concentrate on our core activities, Composites and Supply Chain. Both haveexcellent long term growth characteristics and operate in buoyant markets." For further information, please contact:- Umeco plc Tel: +44 (0) 1926 331 800Clive Snowdon, Chief ExecutiveDouglas Robertson, Group Finance Directorwww.umeco.com Hogarth Partnership Tel: +44 (0) 20 7357 9477John OlsenBarnaby Fry Notes to editors: Umeco plc Umeco is a leading innovator in distribution and supply chain management to theaerospace and defence industries, harnessing new methods for enhancing itscustomers' performance and profitability. Umeco also has significant manufacturing interests in advanced compositematerials for a growing range of applications in its core aerospace and defencemarkets and in other high performance technology industries such as motor sport& automotive, marine and wind energy. Listed on the London Stock Exchange, Umeco had revenue, including discontinuedoperations, of £333.9 million in the year to 31 March 2007. Following completion of the recently announced divestment of its Repair &Overhaul business, Umeco will be managed through two divisions:- Umeco Supply Chain - a leading international provider of value-addeddistribution and supply chain outsourcing services to customers in the aerospace& defence market. With its specialisation in the supply of small components andsophisticated IT systems, its growing global customer base can enjoy significantoperational, cost and working capital benefits. Customers include Rolls-Royce plc, BAE SYSTEMS, Safran Group, Parker Aerospace,Goodrich, Lockheed Martin and the US Department of Defense. Umeco Composites - a provider of a complete range of advanced compositematerials and specialist chemical products principally to the aerospace, motorsport, automotive, marine and wind energy markets. A growing range ofvalue-added outsourcing services is provided to major customers. Customers include Boeing, Airbus, BAE SYSTEMS, Goodrich Aerostructures, BritishAirways, Lufthansa Technik, a number of manufacturers of high performance supercars and Formula 1 teams including Team McLaren Mercedes. Note on adjusted profit and earnings per share measures: Umeco uses adjusted figures as key performance indicators. Adjusted figuresexclude amortisation and impairment charges relating to intangible assets,significant items, the revaluation of financial instruments based on theirmarket values, associated taxation effects and the taxation effects of goodwillamortisation in overseas jurisdictions. The differences between the adjusted andunadjusted measures of operating profit, profit before tax and profitattributable to equity holders of the parent are reconciled in note 4 to thisannouncement. The narrative in this announcement is based on the adjustedmeasures of operating profit, profit before tax and earnings per share. Theseprovide a more consistent measure of operating performance. The table below setsout a comparison of adjusted and unadjusted values: Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited Restated Restated £m £m £mRevenue 163.4 147.5 309.8Revenue - including discontinuedoperations 176.7 158.3 333.9Operating profit 10.8 8.3 20.7Adjusted operating profit 11.1 9.2 23.0Adjusted operating profit - includingdiscontinued operations 12.8 10.2 25.7Total profit before tax 7.8 7.1 17.8Adjusted profit before tax 8.7 7.9 19.8Adjusted profit before tax- includingdiscontinued operations 10.4 8.9 22.5--------------------------- ---------- -------- -------- Pence Pence PenceBasic earnings per share 11.6 11.3 27.0Adjusted earnings per share 14.4 12.5 32.2--------------------------- ---------- -------- -------- Overview Umeco has had a good start to the financial year with revenue from continuingoperations increasing by 10.8 per cent and operating profits by 20.7 per cent.This performance has been achieved despite the weakening of the US dollar. Umecobelieves a combination of the strategic developments the Group has effected, asdetailed below, and the on-going robustness in its main market, civil aerospace,will drive a high level of future growth. Strategic developments On 31 August 2007, the acquisition of J D Lincoln, Inc. ('Lincoln') wascompleted for an initial cash consideration of US$59.5 million. Lincoln, aprivately owned business based at two sites in California, formulates andmanufactures a range of pre-preg materials primarily used by aerospace tier 2suppliers for the manufacture of composite interior structures of commercialaircraft. It is therefore highly complementary to Umeco's existing aerospacecomposites activities which are focused on the airframe. Lincoln has a widerange of qualifications, including those recently added for the Boeing 787 andthe Airbus A380. Following the period end, on 18 October 2007, Umeco announced the sale of itsRepair & Overhaul activities to AMETEK, Inc., for a cash consideration of £36.0million. The divestment was completed on 1 November 2007. The divestment willallow Umeco to focus on its larger and core composite materials and supply chainactivities. The proceeds of the divestment have been used by Umeco initially toreduce Group borrowings. Lastly, on 1 November 2007, a significant extension to the Group's long termsupply chain contract with Rolls-Royce was announced. Through a dedicated newfacility in Derby, Umeco will be providing Rolls-Royce with a much broader rangeof services, helping them to meet the growing demand for their aerospace enginerange and to enhance further their aftermarket customer service. As a part ofthe revised agreement, the contract timeframe has also been extended by afurther five years and will now run until December 2015. Results and dividend Revenue from continuing activities, Supply Chain and Composites, in the firstsix months of the year increased by 10.8 per cent to £163.4 million (2006:£147.5 million), a rise of £15.9 million of which £1.5 million relates to theacquisition of Lincoln. Revenue including Repair & Overhaul was £176.7 million(2006: £158.3 million), an increase of 11.6 per cent. Operating profits in the period from continuing activities rose by 20.7 per centto £11.1 million (2006: £9.2 million) with margins showing a further improvementto 6.8 per cent (2006: 6.2 per cent). Including Repair & Overhaul, operatingprofits were £12.8 million (2006: £10.2 million). Net interest charges in the period, excluding revaluations of financialinstruments, were £2.4 million (2006: £1.3 million). This increase reflects thesignificant capital investments, acquisitions and volume-related rise in workingcapital arising in the Group over the past twelve months. Profit before tax from continuing activities was £8.7 million (2006: £7.9million), an increase of 10.1 per cent. Including Repair & Overhaul, profitbefore tax was £10.4 million (2006: £8.9 million), an increase of 16.9 per cent.Earnings per share were 14.4 pence compared to 12.5 pence, an increase of 15.2per cent. The Directors have declared an increased interim dividend of 6.0 pence (2006:5.5 pence) payable on 14 December 2007 to shareholders registered on 16 November2007. Operations Results for each of the Group's operating activities are summarised below. Umeco Composites Revenue: £78.9 million (2006: £73.5 million); operating profit £7.3 million(2006: £6.4 million). Umeco Composites provides a complete range of advanced composite materials andspecialist chemical products principally to the aerospace, motor sport &automotive, wind energy and marine markets. These results include a one month contribution from Lincoln which was acquiredon 31 August 2007. Revenue in the first half year increased by 7.3 per cent or 9.4 per cent on aconstant currency basis; operating profits rose by 14.1 per cent with marginsincreasing to 9.3 per cent (2006: 8.7 per cent). ACG traded well in the UK and South Africa but its overall performance was heldback by a weaker performance in its US activities where issues with twocustomers, outside the control of ACG, resulted in the deferral of expecteddeliveries. ACG's UK technology centre, which was opened in September 2006,continues to be praised by customers. The centre has enabled additional businessto be gained and has attracted new funded development projects. ACG UK'senlarged manufacturing facility came on stream at the start of the year and isnow fully operational. Aerovac and Richmond continue to enjoy a high level of revenue growth from boththe aerospace and wind energy markets. Richmond benefited from the investmentmade in the prior year to extend its vacuum bag kitting production capabilityand saw a significant increase in activity levels with Boeing and its partnersas the 787 development ramped up. Lincoln, based in Costa Mesa, California, achieved in September the revenue andprofit contribution expected at the time of the acquisition. Umeco's acquisitionof the company has been received well by customers, suppliers and staff andUmeco is actively working with management to assist them in achieving theirambitious growth plans. GRP had a good first half year in both the UK and Scandinavia with revenue andprofits both rising. It expanded its Scandinavian operations in August throughthe purchase of Ashland's Estonian operations for a modest sum. R D Taylor continues to trade well and has been successful in reaching agreementin principle with its largest customer, Goodrich at Prestwick, to extend itscontract with them for a further three years. Aeropia has completed theintegration of US Airmotive, a Miami-based competitor acquired in November 2006,and is now focused on revenue growth. Med-Lab had a solid first half yearperformance. Umeco Supply Chain Revenue: £84.5 million (2006: £74.0 million); operating profit £3.8 million(2006: £2.8 million). Umeco Supply Chain is a leading international provider of distribution andsupply chain outsourcing services primarily to OEM customers in the aerospace &defence markets. With its specialisation in the supply of small and medium sizedcomponents and its sophisticated IT systems, it creates and delivers significantoperational, cost and working capital benefits for its growing internationalcustomer base. The business trades as Pattonair on a global basis. Revenue in the first half year increased by 14.2 per cent or 15.9 per cent on aconstant currency basis, all of which was organic. Operating profits rose by35.7 per cent with margins increasing to 4.5 per cent (2006: 3.8 per cent). Thisexcellent growth in revenue and profits reflects the strength of the civilaerospace market and the implementation of the new contracts secured in theprior year. Pattonair in Derby enjoyed a high level of growth from both of its long termcontracts with Rolls-Royce and Goodrich Actuation Systems. As detailed above,the business recently signed an extension to its long term supply chain contractwith Rolls-Royce. The new contract is already effective and will be managed fromPattonair's new £7.1 million facility being built in Derby, which is expected tocome on stream in December 2007. This facility complements Pattonair's existingoperations in Derby, which will be retained to service the company's growingbusiness with Goodrich Actuation Systems. As a part of the revised agreement,the contract timeframe has been extended by a further five years. Originallysigned for an eleven year term ending in December 2010, it will now run untilDecember 2015. Pattonair Woking had an excellent first half year, with revenue and profitsconsiderably ahead of the same period last year and a number of new contractswere secured which will further enhance its prospects. Business in Italy remainsin line with expectations and a new general manager has recently joined thecompany with the objective of securing a higher level of new revenue generation.The French business unit has been very busy implementing the contracts won inthe prior year from Thales and Turbomeca and moved into new, larger leasedpremises in Paris during the summer. In Canada, as previously announced, during the period Pattonair ended itsrelationship with Bombardier Aerospace with minimal negative impact on itsperformance. During the second half of the year the slimmed down organisationwill relocate to new premises and focus on a number of active businessdevelopment opportunities. Trading levels at Pattonair USA have now stabilised following recent managementchanges and with a more robust operating platform it is now well positioned inboth its civil and defence markets. The business enjoyed additional revenue fromthe Turbomeca operations in Texas, secured as a result of the contract win inEurope, and further expansion of this and a number of other programmes isexpected during the current half year. The Chinese business is now fully operational and moved into profitabilityduring the period under review; an experienced general manager has beenrecruited to further the development of this exciting opportunity. In Singapore,Umeco Asia, formed last year, moved into its new warehouse and office facilityin September 2007 and is now engaged in contract negotiations with a number ofimportant prospective customers. Umeco Repair & Overhaul Revenue: £13.3 million (2006: £10.8 million); operating profit £1.7 million(2006: £1.0 million). The increase in revenue and profits reflects the inclusion of Antavia, acquiredin October 2006. Revenue in the first half year increased by 23.1 per cent or 24.1 per cent on aconstant currency basis; operating profits rose by 70.0 per cent with marginsincreasing to 12.8 per cent (2006: 9.3 per cent). Umeco Repair & Overhaul comprises three businesses: AEM, one of the largestindependent component repair & overhaul facilities in Europe, Avionics MobileServices ('AMS'), which installs and overhauls avionic equipment, and Antavia,based in Toulouse, a provider of similar services to those of AEM. AEM had a good first half year, with the actions taken last year to broaden thecustomer and product base proving successful. AMS had a quiet first half yearand continued to focus on major opportunities in the Middle East. Antavia had anexcellent first half year and exceeded expectations at the time of theacquisition. Finance Revenue at £163.4 million was 10.8 per cent above that for the first half oflast year and was 0.7 per cent above the second half of last year reflecting thenormal seasonality in Group trading performance. The weakening of the US dollarhad the effect of reducing reported revenue. At constant exchange rates, revenuewould have been £166.2 million, an increase of 12.7 per cent over thecomparative period. Operating profit in the period was £11.1 million comparedwith £9.2 million in the first half of last year. Operating margins continued torise, with the Group achieving margins of 6.8 per cent compared to 6.2 per centin the comparative period. Including the results of discontinued operations, interest cover was 5.3 timescompared to 8.0 times in the year to 31 March 2007. The reduction reflectsinterest on additional working capital and the Group's investment in Lincoln,together with higher average interest rates. Profit before tax was £8.7 million (2006: £7.9 million) an increase of 10.1 percent. The tax charge on adjusted profit before tax, including the adjustedprofit before tax of discontinued operations, was 33.7 per cent (year to 31March 2007: 31.9 per cent). Net debt at 30 September 2007 was £94.0 million compared with £51.8 million asat 31 March 2007, a rise of £42.2 million. Of this increase, £30.2 million isdue to the acquisition of Lincoln in August 2007. In addition £10.4 million isdue to higher working capital required as a result of the increased revenue inthe period. Gross capital expenditure in the period was £8.3 million (2006: £6.0million) including £4.8 million in respect of the new Pattonair facility inDerby. The Group's banking facilities comprise a US$250.0 million revolving creditfacility and a £10.0 million overdraft. Gearing was 63.4 per cent, compared with35.2 per cent at 31 March 2007. The £36.0 million proceeds from the divestmentof the Group's Repair & Overhaul activities, received after the period end, haveinitially been applied to reduce net debt. Shareholders' funds at 30 September 2007 were £148.2 million. Directors On 20 July 2007, John Beaumont retired as Group Finance Director and wasreplaced by Doug Robertson, who until April 2007 was Finance Director of SetonHouse Group Limited. At the Annual General Meeting held on 25 July 2007, Michael Harper retired fromthe Board as a non-executive Director due to his other business commitments. Onthe same day, Chris Hole, who was Director of Procurement at Rolls-Royce plc andretired in December 2006, joined the Board as a non-executive Director. Prospects The divestment of the Repair & Overhaul business will allow Umeco to focus onits larger and core composite materials and supply chain activities. Both ofthese business streams are delivering a high level of organic growth and theGroup's composite materials activity will benefit substantially from theacquisition of Lincoln. The recently announced significant extension of Umeco'slong term supply chain contract with Rolls-Royce will enhance further theGroup's excellent growth prospects. Umeco's principal market, civil aerospace, is robust with new orders this yearexpected to significantly exceed deliveries for the third consecutive year. Atthe end of September 2007, Airbus and Boeing had a backlog of over 6,000aircraft; they collectively have stated that they expect to deliver 900 aircraftthis year compared to 831 in 2006. Airbus has now delivered the first A380 toSingapore Airlines and has restarted its production line after a delay of twelvemonths. The prospects for this exciting new aircraft were much improved by therecent order placed by British Airways. Boeing has secured over 700 orders forthe 787 but has recently announced a six month delay in the programme due toissues in its supply chain. Despite these short term frustrations the long termprospects for the civil aerospace market remain strong as a result of the highlevel of economic growth in the Middle East, Far East and China, and thereplacement programmes being announced by Western carriers as their financialpositions strengthen. Advanced composite materials continue to increase their penetration in ourprincipal growth markets of aerospace, automotive & motor sport, marine and windenergy. The expected returns from the major capital investment in ACG's new UKfacilities that were opened in September 2006 are being realised and Umeco looksforward to completing the building project to house its rapidly expanding SupplyChain business in Derby in the near future. Umeco continues to seek bolt-on acquisitions for its two core business streamsand believes the recent turmoil in the financial markets provides the Group witha competitive advantage because of its financial strength and access to debtfacilities. Umeco has enjoyed another good start to the financial year and following thedivestment of its Repair & Overhaul activities will be focused on two businessstreams that both have excellent long term growth characteristics and operate inbuoyant markets. Umeco's future prospects remain very encouraging. Condensed Consolidated Income Statement________________________________________________________________________________ For the six months to 30 September 2007 Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited Restated Restated Note £m £m £mContinuing operations Revenue 2 163.4 147.5 309.8 Cost of sales (122.7) (111.7) (228.0)-------------------------- --------- --------- -------- Gross profit 40.7 35.8 81.8 Administrative expenses (29.9) (27.5) (61.1)-------------------------- --------- --------- -------- Operating profit 2 10.8 8.3 20.7 Financial income 3 0.5 0.5 1.5Financial expense 3 (3.5) (1.7) (4.4)-------------------------- --------- --------- -------- Profit before tax 7.8 7.1 17.8 Income tax - UK (1.6) (1.6) (3.8)Income tax - overseas (1.3) (0.8) (2.0)-------------------------- --------- --------- -------- Profit from continuing operations 4.9 4.7 12.0 Discontinued operationsProfit from discontinuedoperations 0.6 0.6 0.9(net of tax) --------- --------- ---------------------------------- Profit for the period 5.5 5.3 12.9-------------------------- --------- --------- -------- Attributable to:Equity holders of the parent 5.5 5.3 12.8Minority interest - - 0.1-------------------------- --------- --------- -------- 5.5 5.3 12.9 --------- --------- -------- Earnings per share Pence Pence Pence TotalBasic earnings per share 7 11.6 11.3 27.0Diluted earnings per share 7 11.6 11.3 26.8-------------------------- --------- --------- -------- Continuing operationsBasic earnings per share 7 10.3 10.0 25.1Diluted earnings per share 7 10.3 9.9 24.9-------------------------- --------- --------- -------- Condensed Consolidated Balance Sheet_______________________________________________________________________________ As at 30 September 2007 As at 30 As at 31 September 2007 2006 March 2007 Unaudited Unaudited Audited Note £m £m £mAssetsNon-current assetsProperty, plant & equipment 34.4 29.3 32.5Intangible assets 117.2 94.5 100.0Deferred tax assets 2.9 3.4 2.8---------------------------- --------- -------- -------- 154.5 127.2 135.3 --------- -------- -------- Current assetsInventories 95.7 82.7 88.8Trade & other receivables 75.9 72.5 81.7Financial assets - 0.2 0.5Income tax receivable 1.2 1.1 1.2Cash 12.0 3.0 7.9Assets classified as held for sale 11 32.0 - ----------------------------- --------- -------- -------- 216.8 159.5 180.1 --------- -------- -------- Total assets 371.3 286.7 315.4---------------------------- --------- -------- --------LiabilitiesCurrent liabilitiesTrade & other payables (95.9) (79.9) (94.7)Financial liabilities (0.1) - -Income tax payable (4.2) (4.9) (4.2)Loans & borrowings (2.1) (0.4) (1.0)Liabilities classified as held forsale 11 (5.4) - ----------------------------- --------- -------- -------- (107.7) (85.2) (99.9) --------- -------- -------- Non-current liabilitiesOther payables - (3.5) (3.7)Deferred tax liabilities (9.0) (2.8) (3.9)Retirement benefit obligation (1.4) (3.2) (2.0)Loans & borrowings (104.7) (48.8) (58.7)---------------------------- --------- -------- -------- (115.1) (58.3) (68.3) --------- -------- -------- Total liabilities (222.8) (143.5) (168.2)---------------------------- --------- -------- -------- --------- -------- -------- Net assets 148.5 143.2 147.2---------------------------- --------- -------- -------- EquityShare capital 9 11.9 11.9 11.9Share premium 9 114.6 113.9 113.9Translation reserve 9 (1.2) 0.1 (1.0)Retained earnings 9 22.9 17.0 22.1---------------------------- --------- -------- -------- Equity attributable to equityholders 148.2 142.9 146.9of the parentMinority interest 0.3 0.3 0.3---------------------------- --------- -------- -------- Total equity 148.5 143.2 147.2---------------------------- --------- -------- -------- Condensed Consolidated Cash Flow Statement_______________________________________________________________________________ For the six months to 30 September 2007 Six months to Year to 30 September 31 March 2007 2006 2007 Note Unaudited Unaudited Audited Restated Restated £m £m £mCash flows from operating activities - continuing operationsProfit for the period 4.9 4.7 12.0Depreciation 1.9 1.5 3.1Amortisation & impairment charges 0.3 0.9 1.6Financial income (0.5) (0.5) (1.5)Financial expense 3.5 1.7 4.4Share based payments expense 0.1 0.2 0.2Income tax expense 2.9 2.4 5.8--------------------------- -------- -------- -------- 13.1 10.9 25.6Increase in inventories (10.1) (10.1) (16.2)Decrease/(increase) in trade &other receivables 1.8 (1.3) (10.2)(Decrease)/increase in trade &other payables (1.5) (4.4) 10.4Decrease in retirement benefitobligation (0.6) (0.6) (1.3)------------------------------- -------- -------- -------- Cash generated from operations 2.7 (5.5) 8.3Net financial expense paid (2.7) (1.0) (2.6)Tax paid (2.9) (2.7) (5.8)--------------------------- -------- -------- -------- Net cash flow from operatingactivities - continuing operations (2.9) (9.2) (0.1)--------------------------- -------- -------- -------- Cash flows from investing activities -continuing operationsAcquisition of property, plant &equipment 8 (7.9) (3.9) (8.5)Proceeds from sale of property,plant & equipment 0.3 0.1 0.2Acquisition of subsidiaries, netof cash balances acquired 10 (30.3) (1.7) (11.7)--------------------------- -------- -------- -------- Net cash flow from investingactivities - continuing operations (37.9) (5.5) (20.0)--------------------------- -------- -------- -------- Condensed Consolidated Cash Flow Statement (continued)_______________________________________________________________________________ For the six months to 30 September 2007 Six months to Year to 30 September 31 March 2007 2006 2007 Note Unaudited Unaudited Audited Restated Restated £m £m £mCash flows from financingactivities - continuing operationsProceeds from the issue of sharecapital 0.7 0.4 0.4Drawdown of bank loans 47.1 15.0 31.4Repayment of bank loans - - (5.0)Repayment of lease financeliabilities (0.3) (0.3) (0.5)Dividends paid to equity holdersof the parent (4.8) (4.5) (7.1)Dividends paid to minorityinterest - - (0.1)--------------------------- -------- -------- -------- Net cash flow from financingactivities - continuing operations 42.7 10.6 19.1--------------------------- -------- -------- -------- Discontinued operationNet cash from operating activities 2.1 (0.7) 0.7Net cash from investing activities (0.2) (1.6) (2.0)Net cash from financing activities - - ---------------------------- -------- -------- -------- Net cash flow from discontinuedoperation 1.9 (2.3) (1.3)--------------------------- -------- -------- -------- Net increase/(decrease) in cash 12 3.8 (6.4) (2.3)Cash at start of period 7.4 9.5 9.5Effect of exchange ratefluctuations (0.1) (0.1) 0.2--------------------------- -------- -------- -------- Net cash at end of period 12 11.1 3.0 7.4--------------------------- -------- -------- -------- Condensed Consolidated Statement of Recognised Income and Expense_____________________________________________________________________________ For the six months to 30 September 2007 Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £m £m £m Foreign exchange translation differences (0.2) (0.4) (1.5)Actuarial gain in pension schemes - - 0.5Tax in respect of the above - - (0.1)---------------------------- -------- --------- --------- Income and expense recognised directly inequity (0.2) (0.4) (1.1)Profit for the period 5.5 5.3 12.9---------------------------- -------- --------- --------- Total recognised income and expensefor the period 5.3 4.9 11.8---------------------------- -------- --------- --------- Attributable to:Equity holders of the parent 5.3 4.9 11.7Minority interest - - 0.1---------------------------- -------- --------- --------- Total recognised income and expensefor the period 5.3 4.9 11.8---------------------------- -------- --------- --------- Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 1 Basis of preparation & accounting policies Umeco plc (the 'Company') is domiciled in the UK. The condensed consolidatedinterim financial statements of the Company as at and for the six months to 30September 2007 comprise the Company and its subsidiaries (together referred toas the 'Group'). The condensed consolidated interim financial statements for the six months to 30September 2007 have been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS34 InterimFinancial Reporting as adopted by the European Union. They should be read inconjunction with the annual financial statements for the year to 31 March 2007,which have been prepared in accordance with IFRSs as adopted by the EuropeanUnion. The condensed consolidated interim financial statements are unaudited andwere approved by the Board of Directors on 7 November 2007. The results for the year to 31 March 2007 are based on full audited accountsprepared in accordance with IFRSs as adopted by the European Union. Theseaccounts were filed with the Registrar of Companies and contain a report of theauditors under section 240 of the Companies Act 1985, which does not contain astatement under sections 237 (2) or (3) of the Companies Act 1985 and isunqualified. The consolidated financial statements of the Group as at and forthe year to 31 March 2007 are available upon request from the Company'sregistered office or on its website. In the process of applying the Group's accounting policies, management has madea number of judgements. The process of preparing these interim consolidatedfinancial statements inevitably requires the Group to make estimates andassumptions concerning the future and the resulting accounting estimates may notequal the related actual results. The estimates and judgements that have themost significant effect on the amounts included within these interimconsolidated financial statements were the same as those that applied to theaudited consolidated financial statements for the year to 31 March 2007. Except as described below, the accounting policies and basis of consolidationapplied by the Group in these condensed consolidated interim financialstatements are the same as those applied by the Group in its auditedconsolidated financial statements for the year to 31 March 2007: • Amendments to IAS1 'Presentation of Financial Statements: Capital Disclosures' and IFRS7 'Financial Instruments: Disclosures' are effective for the Group for the year to 31 March 2008. These require the Group to provide disclosure of the significance of financial instruments on its financial position and performance and additional qualitative and quantitative information about exposure to risks arising from financial instruments. There will be no effect on reported income or net assets; • IFRIC8 'Scope of IFRS', IFRIC9 'Reassessment of embedded derivatives', IFRIC10 'Interim financial reporting and impairment' and IFRIC11 'IFRS2 - Group and Treasury Share Transactions' are effective for the Group for the year to 31 March 2008. There will be no effect on reported income or net assets. Following the announced divestment of the Repair & Overhaul business segment theresults of the undertakings have been classified as discontinued operations, andthe comparatives for the six months to 30 September 2006 and the year to 31March 2007 amended accordingly. The assets and liabilities of the Repair &Overhaul division are presented as being held for sale in the balance sheet asat 30 September 2007. Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 2 Segmental reporting The primary basis of segmental reporting is in respect of the Group's businesssegments. This format reflects the Group's management and internal reportingstructures. Inter segment revenue is insignificant. Analysis by geographicsegments and revenue by destination are also presented. Business segments Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £m £m £mRevenueComposites 78.9 73.5 152.2Supply Chain 84.5 74.0 157.6Repair & Overhaul 13.3 10.8 24.1------------------------------ -------- --------- ---------Revenue from operating activities 176.7 158.3 333.9 Less revenue from discontinued operations (13.3) (10.8) (24.1)------------------------------ -------- --------- --------- Revenue from continuing operations 163.4 147.5 309.8------------------------------ -------- --------- --------- Adjusted operating profit (see note 4)Composites 7.3 6.4 14.6Supply Chain 3.8 2.8 8.4Repair & Overhaul 1.7 1.0 2.7------------------------------ -------- --------- ---------Adjusted operating profit from operatingactivities 12.8 10.2 25.7 Adjusted operating profit fromdiscontinued operations (1.7) (1.0) (2.7)------------------------------ -------- --------- --------- Adjusted operating profit from continuingoperations 11.1 9.2 23.0------------------------------ -------- --------- --------- Operating profitComposites 7.1 6.3 14.7Supply Chain 3.7 2.0 6.0Repair & Overhaul 0.9 0.9 1.3------------------------------ -------- --------- ---------Operating profit from operatingactivities 11.7 9.2 22.0 Operating profit from discontinuedoperations (0.9) (0.9) (1.3)------------------------------ -------- --------- --------- Operating profit from continuingoperations 10.8 8.3 20.7------------------------------ -------- --------- --------- Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 2 Segmental reporting (continued) Geographic segments Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £m £m £mRevenue by originUK 108.7 103.1 215.8Rest of Europe 32.6 21.0 50.9North America 33.6 33.3 65.2Rest of world 1.8 0.9 2.0------------------------------ -------- --------- ---------Revenue from operating activities 176.7 158.3 333.9 Less revenue from discontinued operations (13.3) (10.8) (24.1)------------------------------ -------- --------- --------- Revenue from continuing operations 163.4 147.5 309.8------------------------------ -------- --------- --------- Revenue by destinationUK 85.2 78.7 168.7Rest of Europe 48.3 39.5 86.6North America 28.7 31.5 57.8Rest of world 14.5 8.6 20.8------------------------------ -------- --------- ---------Revenue from operating activities 176.7 158.3 333.9 Less revenue from discontinued operations (13.3) (10.8) (24.1)------------------------------ -------- --------- --------- Revenue from continuing operations 163.4 147.5 309.8------------------------------ -------- --------- --------- 3 Financial income and expense Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £m £m £mFinancial incomeRevaluation of financial instruments - 0.1 0.3Interest income - - 0.3Expected return on pension scheme assets 0.5 0.4 0.9------------------------------ -------- --------- --------- 0.5 0.5 1.5 -------- --------- --------- Financial expenseRevaluation of financial instruments (0.6) - -Interest on bank loans and overdrafts (2.5) (1.3) (3.5)Interest payable in respect of leasefinance - - (0.1)Interest cost on pension schemeliabilities (0.4) (0.4) (0.8)------------------------------ -------- --------- --------- (3.5) (1.7) (4.4) -------- --------- --------- Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 4 Reconciliation of adjusted profit measures Umeco uses adjusted figures as key performance indicators. Adjusted figuresexclude amortisation and impairment charges relating to intangible assets,significant items, the revaluation of financial instruments based on theirmarket values, associated taxation effects and the taxation effects of goodwillamortisation in overseas jurisdictions. The differences between the total andadjusted profit measures are reconciled below. The narrative in this interim announcement is based on the adjusted measures ofoperating profit, profit before tax and earnings per share. These provide a moreconsistent measure of operating performance. Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited Restated Restated £m £m £mOperating profitTotal operating profit 10.8 8.3 20.7Exclude: - significant items - - 0.7 - impairment of goodwill - - 0.8 - negative goodwill - excess of fair value of assets acquired above the consideration paid for an acquisition - - (0.2) - amortisation of intangible assets 0.3 0.9 1.0 -------- --------- --------- Adjusted operating profit 11.1 9.2 23.0------------------------------ -------- --------- --------- Profit before taxTotal profit before tax 7.8 7.1 17.8Exclude: - significant items - - 0.7 - impairment of goodwill - - 0.8 - negative goodwill - excess of fair value of assets acquired above the consideration paid for an acquisition - - (0.2) - amortisation of intangible assets 0.3 0.9 1.0- revaluation of financial instruments 0.6 (0.1) (0.3) -------- --------- --------- Adjusted profit before tax 8.7 7.9 19.8------------------------------ -------- --------- --------- Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 4 Reconciliation of adjusted profit measures (continued) Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £m £m £m Profit attributable to equity holders ofthe parentTotal profit attributable to equityholders of the parent 5.5 5.3 12.8Exclude: - significant items - - 0.7 - impairment of goodwill - - 0.8 - negative goodwill - excess of fair value of assets acquired above the consideration paid for an acquisition - - (0.2) - amortisation of intangible assets 1.1 1.0 2.4 - revaluation of financial instruments 0.6 (0.1) (0.3) - associated tax effects (0.3) (0.3) (1.0) -------- --------- ---------Adjusted profit attributable toequity holders of the parent 6.9 5.9 15.2------------------------------ -------- --------- --------- Pence Pence Pence Adjusted earnings per share 14.4 12.5 32.2------------------------------ -------- --------- --------- Significant items in the year to 31 March 2007 comprised re-organisation costsof £0.7 million. 5 Tax expense The effective tax rate on profit before tax for the period is 37.2 per cent(2006: 33.8 per cent, year to 31 March 2007: 32.6 per cent). The effective rateof tax on adjusted profit before tax for the period is 34.5 per cent (2006: 34.2per cent, year to 31 March 2007: 31.8 per cent). The effective rate of tax on adjusted profit before tax, including the adjustedprofit before tax of discontinued operations for the period is 33.7 per cent(2006: 33.0 per cent, year to 31 March 2007: 31.9 per cent). The effective rates for the period have been calculated by applying theDirectors' best estimates of the annual ratio of taxation to taxable profits. Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 6 Dividends The Directors have declared an interim dividend of 6.0 pence per share, payableon 14 December 2007 to shareholders on the register at 16 November 2007. Inaccordance with IAS10, this dividend has not been reflected in the interimresults. The amount of this interim dividend is £2.9 million. The following dividends were paid and declared by the Company: Six months to 30 September Year to 31 March 2007 2007 2006 2006 2007 2007 Unaudited Unaudited Unaudited Unaudited Audited Audited Pence per share £m Pence per share £m Pence per share £mDividends paidPrevious yearfinal 10.0 4.8 9.5 4.5 9.5 4.5Current yearinterim - - - - 5.5 2.6------------- -------- --------- -------- -------- -------- ------- 10.0 4.8 9.5 4.5 15.0 7.1------------- -------- --------- -------- -------- -------- ------- DividendsdeclaredInterim 6.0 2.9 5.5 2.6 5.5 2.6Final - - - - 10.0 4.7------------- -------- --------- -------- -------- -------- ------- 6.0 2.9 5.5 2.6 15.5 7.3------------- -------- --------- -------- -------- -------- ------- 7 Earnings per share The weighted average number of shares in issue during the period was 47.7million (2006: 47.5 million, year to 31 March 2007: 47.5 million). The weightedaverage number of shares on a fully diluted basis, was 47.9 million (2006: 47.7million, year to 31 March 2007: 47.8 million), after an adjustment for dilutiveshare options of 0.2 million (2006: 0.2 million, year to 31 March 2007: 0.3million). Basic earnings per share have been calculated on profit attributable to equityholders of the parent of £5.5 million (2006: £5.3 million, year to 31 March2007: £12.8 million). The Directors consider that adjusted earnings per shareprovide a more consistent measure of operating performance. Adjusted earningsper share are calculated based on adjusted profit attributable to equity holdersof the parent, calculated as set out in note 4. 8 Acquisition of property, plant & equipment During the period to 30 September 2007, acquisitions of property plant &equipment of £8.3 million were made. This comprised acquisitions withincontinuing operations funded by cash and lease finance of £7.9 million and £0.2million respectively, and acquisitions funded by cash within discontinuedoperations of £0.2 million. Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 9 Capital and reserves Share Share Translation Retained capital premium reserve earnings Total £m £m £m £m £m At 1 April 2007 11.9 113.9 (1.0) 22.1 146.9Total recognised incomeand - - (0.2) 5.5 5.3expenseShare capital issued - 0.7 - - 0.7Cost of share based - - - 0.1 0.1paymentsDividends paid - - - (4.8) (4.8)------------------- -------- --------- --------- -------- --------- At 30 September 2007 11.9 114.6 (1.2) 22.9 148.2------------------- -------- --------- --------- -------- --------- At 1 April 2006 11.8 113.6 0.5 16.0 141.9Total recognised incomeand - - (0.4) 5.3 4.9expenseShare capital issued 0.1 0.3 - - 0.4Cost of share based - - - 0.2 0.2paymentsDividends paid - - - (4.5) (4.5)------------------- -------- --------- --------- -------- --------- At 30 September 2006 11.9 113.9 0.1 17.0 142.9------------------- -------- --------- --------- -------- --------- At 1 April 2006 11.8 113.6 0.5 16.0 141.9Total recognised incomeand - - (1.5) 13.2 11.7expenseShare capital issued 0.1 0.3 - - 0.4Cost of share based - - - 0.2 0.2paymentsShares awarded undershare - - - (0.2) (0.2)schemesDividends paid - - - (7.1) (7.1)------------------- -------- --------- --------- -------- --------- At 31 March 2007 11.9 113.9 (1.0) 22.1 146.9------------------- -------- --------- --------- -------- --------- During the period to 30 September 2007, 217,009 shares were issued under theterms of Umeco 2001 Share Option Plan at a price of 319.1p per share. Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 10 Acquisitions On 31 August 2007, the Group acquired the entire issued share capital of J DLincoln, Inc. ('Lincoln') for an initial cash consideration of US$59.5 millionon a cash and debt free basis. Additional cash consideration of up to US$15.0million is payable based on the EBITDA of Lincoln in the twelve months aftercompletion. Lincoln formulates and manufactures a range of pre-preg materialsprimarily used by aerospace tier 2 suppliers for the manufacture of compositeinterior structures of commercial aircraft. In the month to 30 September 2007,Lincoln contributed an operating profit of £0.1 million after the amortisationof intangible assets. Had the acquisition completed on 1 April 2007, it isestimated that Lincoln would have contributed a further £7.2 million to revenueand £0.5 million to profit before tax, after making certain non-recurringpayments to the vendors. Other than the recognition of intangible assets of £19.0 million and a relateddeferred tax liability, no fair value adjustments have been made. Details of thefair value of net assets acquired were as follows: £mProperty, plant & equipment 0.8Intangible assets 19.0Inventory 1.1Trade & other receivables 2.2Trade & other payables (1.3)Income tax expense (0.5)Deferred tax liabilities (5.8)------------------------------ ---------Net identifiable assets and liabilities 15.5Goodwill 16.7------------------------------ --------- Consideration 32.2------------------------------ ---------Satisfied by:Cash consideration paid 29.2Expenses paid 1.0Consideration accrued at 30 September 2007 2.0------------------------------ --------- 32.2 --------- The goodwill recognised on the acquisition is attributable to the skills andtechnical capabilities of the employees of Lincoln, and synergies expected to begenerated from establishing links between Lincoln and the Group's existingcomposites activities. Amounts recognised for intangible assets and goodwill areprovisional and subject to change as a result of completion of the fair valueexercise. On 31 August 2007, the Group acquired the Estonian subsidiary of AshlandComposite Polymers, a business group of Ashland Performance Materials, adivision of Ashland Inc., and the inventory and fixed assets related toAshland's Estonian distribution business. Consideration paid was £0.1 million,all of which was represented by goodwill. Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 10 Acquisitions (continued) In October 2006, the Group acquired the entire issued share capital of Antavia,a Toulouse-based provider of repair & overhaul services to the aerospaceindustry, for a cash consideration of €12.3 million. In the period fromacquisition to 31 March 2007, Antavia contributed £0.6 million to the Group'sadjusted profit before tax including discontinued operations. After a charge foramortisation of intangible assets of £1.2 million, Antavia's contribution tototal profit before tax was a loss of £0.6 million. Had the acquisitioncompleted on 1 April 2006, it is estimated that Antavia would have made afurther equal contribution to adjusted profit before tax and total profit beforetax. In June 2006, the Group acquired the entire issued share capital of Aerodyne for£0.1 million in cash. Aerodyne is based in Cape Town, South Africa, andmanufactures advanced composites component parts for the upper end automotivemarket. In November 2006, the Group acquired the entire issued share capital ofUS Airmotive for £0.5 million. This business distributes a wide range ofaerospace chemicals. The table below sets out the fair values of assets acquired as a result of theseacquisitions. The only adjustments made to book values in order to arrive at thefair value recognised in the Group's financial statements relate to therecognition of intangible assets. An asset of £3.9 million has been recognisedin relation to Antavia's customer relationships and orders. Antavia Aerodyne US Airmotive Total £m £m £m £mProperty, plant & equipment 0.2 0.7 - 0.9Intangible assets 3.9 - - 3.9Inventories 0.8 0.3 - 1.1Trade & other receivables 1.9 0.2 0.3 2.4Bank loans (0.1) - - (0.1)Trade & other payables (1.8) (0.9) - (2.7)Deferred tax liabilities (1.3) - - (1.3)----------------------- -------- ---------- ---------- --------Net identifiable assets andliabilities 3.6 0.3 0.3 4.2Goodwill 5.0 (0.2) 0.3 5.1----------------------- -------- ---------- ---------- -------- Consideration 8.6 0.1 0.6 9.3----------------------- -------- ---------- ---------- --------Satisfied by:Cash consideration paid 8.3 0.1 0.5 8.9Expenses paid 0.3 - 0.1 0.4----------------------- -------- ---------- ---------- -------- 8.6 0.1 0.6 9.3 -------- ---------- ---------- -------- Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 11 Discontinued operation On 18 October 2007, the Group announced the proposed divestment of its Repair &Overhaul business segment, to AMETEK, Inc. for a cash consideration of £36.0million. Completion of this transaction was announced on 1 November 2007. Thedivestment has been effected by way of the sale of the entire issued sharecapital of AEM Limited and Antavia SAS to Ametek Holdings B.V., a wholly ownedsubsidiary of AMETEK, Inc. The Repair & Overhaul business segment was not adiscontinued operation or classified as held for sale as at 31 March 2007 andthe comparative income statement and statement of cash flows have been restatedto show the segment as a discontinued operation. Results of the segment havebeen disclosed separately from continuing operations. Profits attributable to the discontinued operation were as follows: Six months to Year to 30 September 31 March 2007 2006 2007 Unaudited Unaudited Audited £m £m £mRevenue 13.3 10.8 24.1Expenses (12.4) (9.9) (22.8)------------------------------ -------- --------- ---------Results from operating activities 0.9 0.9 1.3Income tax expense (0.3) (0.3) (0.4)------------------------------ -------- --------- --------- Profit for the period 0.6 0.6 0.9------------------------------ -------- --------- --------- As at 30 September 2007, the Repair & Overhaul business segment comprised assetsof £32.0 million and liabilities of £5.4 million. Net assets of £26.6 millionwere comprised as follows: Unaudited £mProperty, plant & equipment 4.2Intangible assets 17.8Inventories 3.5Trade & other receivables 5.7Cash 0.8Trade & other payables (4.3)Income tax payable (0.5)Deferred tax liabilities (0.6)------------------------------ --------- 26.6 --------- Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 12 Analysis of changes in net debt At 31 March Foreign Other changes Cash At 30 September 2007 exchange 2007 translation flows £m £m £m £m £m Cash 7.9 (0.1) - 5.0 12.8Bank overdrafts (0.5) - - (1.2) (1.7)------------------- -------- --------- -------- -------- --------- 7.4 (0.1) - 3.8 11.1Bank loans dueafter one year (58.0) 1.1 - (47.1) (104.0)Lease financeobligations (1.2) - (0.2) 0.3 (1.1)------------------- -------- --------- -------- -------- --------- (51.8) 1.0 (0.2) (43.0) (94.0) -------- --------- -------- -------- --------- At 31 March Foreign Other changes Cash At 30 September 2006 exchange 2006 translation flows £m £m £m £m £m Cash 9.5 (0.1) - (6.4) 3.0Bank loans dueafter one year (35.0) 2.2 - (15.0) (47.8)Lease financeobligations (1.2) - (0.5) 0.3 (1.4)------------------- -------- --------- -------- -------- --------- (26.7) 2.1 (0.5) (21.1) (46.2) -------- --------- -------- -------- --------- At 31 March Foreign Other changes Cash At 31 2006 exchange translation flows March 2007 £m £m £m £m £m Cash 9.5 0.2 - (1.8) 7.9Bank overdrafts - - - (0.5) (0.5)------------------- -------- --------- -------- -------- --------- 9.5 0.2 - (2.3) 7.4Bank loans dueafter one year (35.0) 3.5 (0.1) (26.4) (58.0)Lease financeobligations (1.2) - (0.5) 0.5 (1.2)------------------- -------- --------- -------- -------- --------- (26.7) 3.7 (0.6) (28.2) (51.8) -------- --------- -------- -------- --------- Net debt comprises cash balances, bank loans and lease finance obligations, andincludes cash held within the Repair & Overhaul business segment. Other changesrepresent the drawdown of lease finance arrangements entered into and bank loansheld on acquisitions. Notes to the Interim Results_______________________________________________________________________________ For the six months to 30 September 2007 STATEMENT OF DIRECTORS' RESPONSIBILITIES The Directors confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 as adopted by the European Union, and thatthe condensed consolidated interim financial statements herein includes a fairreview of the information required by DTR 4.2.7 and DTR 4.2.8. By order of the Board BD McGowan Chairman 7 November 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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