2nd Aug 2007 07:01
Senior PLC02 August 2007 Thursday 2 August 2007 Senior plc========== Interim Results for the half-year ended 30 June 2007---------------------------------------------------- Aerospace and industrial markets underpin 95% increase in adjusted profit before tax FINANCIAL HIGHLIGHTS Half-year to 30 June--------------------- --------------------- 2007 2006-------------------------------------------------------------------------------- REVENUE £237.8m £195.6m +21.6%-------------------------------------------------------------------------------- OPERATING PROFIT £20.0m £11.6m +72.4%-------------------------------------------------------------------------------- PROFIT BEFORE TAXATION £16.3m £8.7m +87.4%-------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE 3.29p 2.13p(2) +54.5%-------------------------------------------------------------------------------- ADJUSTED PROFIT BEFORE TAXATION (1) £17.7m £9.1m +94.5%-------------------------------------------------------------------------------- ADJUSTED EARNINGS PER SHARE (1) 3.50p 2.22p(2) +57.7%-------------------------------------------------------------------------------- PROPOSED INTERIM DIVIDEND PER SHARE 0.700p 0.619p(2) +13.1%-------------------------------------------------------------------------------- FREE CASH FLOW (3) £6.8m (£2.4m)-------------------------------------------------------------------------------- NET BORROWINGS £92.8m £75.6m-------------------------------------------------------------------------------- (1) Adjusted profit before taxation and adjusted earnings per share arise before a £0.2m loss on disposal of fixed assets (2006 - £nil), a £1.7m charge for amortisation of intangible assets acquired on acquisitions (2006 - £0.4m) and the release of a provision set up on a previous acquisition of £0.5m (2006 - £nil). (2) 2006 earnings and dividends per share have been adjusted for the bonus element of the 2006 rights issue. Previously reported basic earnings per share was 2.24p, adjusted earnings per share was 2.33p and dividends per share was 0.650p. (3) See Note 10 (b) for derivation of free cash flow. Commenting on the results, Martin Clark, Chairman of Senior plc, said: "This is an outstanding set of results driven by excellent performances across both the Aerospace and Flexonics divisions. Strong revenue growth, combined with a significant increase in operating margins, has resulted in adjusted profit before taxation increasing by 95% over the first half of 2006. In aerospace, which now contributes two thirds of the Group's profits, build rates of current aircraft continue to increase and new aircraft, such as the Boeing 787 and Airbus 380, are due to be delivered to their first customers during the coming twelve months. This, together with an increasing contribution from the Group's new heavy duty diesel engine products and generally strong industrial markets, indicates that future prospects for the Group remain very encouraging. This is further reinforced with the announcement of a 13.1% increase in the interim dividend." For further information please contact:Graham Menzies, Group Chief Executive, Senior plc 01923 714702Mark Rollins, Group Finance Director, Senior plc 01923 714738Adrian Howard, Finsbury Group 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 eleven countries. Senior designs, manufactures and markets high technology components and systems for the principal original equipment producers in the worldwide civil aerospace, defence, diesel engine, exhaust system and energy markets. CHAIRMAN'S STATEMENT==================== The Group has delivered an outstanding set of interim results with adjustedprofit before tax 95% ahead of the first half of 2006. In aerospace, which nowcontributes two thirds of the Group's profits, build rates of current aircraftcontinue to increase and new aircraft, such as the Boeing 787 and Airbus 380,are due to be delivered to their first customers during the coming twelvemonths. This, together with an increasing contribution from the Group's newheavy duty diesel engine products and generally strong industrial markets, meansthat future prospects for the Group remain very encouraging. Consequently, theBoard is pleased to announce a 13.1% increase in the interim dividend. Financial Results----------------- Total Group revenue increased by 22% to £237.8m (H1 2006 - £195.6m) andoperating profit by 72% to £20.0m (H1 2006 - £11.6m) largely due to strongaerospace and industrial markets, much improved margins and excellentperformances from businesses acquired during 2006 . Adjusted profit before tax, the measure which the Board believes most accuratelyreflects the true underlying performance of the business, increased by 95% to£17.7m (H1 2006 - £9.1m). Adjusted profit before tax measures profit before theloss on sale of fixed assets, the charge for amortisation of intangibleassets arising on acquisitions and the benefit of the release of a provisionoriginally set up on a previous acquisition. Approximately 61% of Group revenue originates from operations located in NorthAmerica, with the Group's results being achieved despite the much weaker average£ : US$ exchange rate of 1.97 for the period (H1 2006 - 1.78). Collectively,exchange rate movements had the effect of reducing the improvements over theprior year by £13.3m for revenue, £1.2m for adjusted operating profit and £1.0mfor adjusted profit before tax. Adjusted earnings per share increased by 57.7% to 3.50p (H1 2006 - 2.22prestated for the bonus element of the rights issue undertaken in late 2006 topartially fund the acquisition of AMT) despite an increased tax charge of 23.2%(H1 2006 - 17.6%) on adjusted profit before tax. Net debt for the Group decreased by £3.9m to £92.8m at the end of the first half(31 December 2006 - £96.7m) as investments in working capital and fixed assetswere more than offset by improved profit levels and the benefit the weakeningUS$ had on net debt when reported in Pounds Sterling. The Group's results were particularly pleasing as they illustrate the growingbenefit of the Group's strategy to increase its exposure to the aerospace andheavy duty diesel markets, whilst reducing its exposure to the more challengingpassenger vehicle market. The financial results are discussed in greater depthin the Interim Management Report which follows this Statement. Operations---------- In the Aerospace Division, revenue increased by 30% to £123.6m (H1 2006 - £95.3m)and adjusted operating profit by 99% to £16.1m (H1 2006 - £8.1m) such thatoperating margins improved significantly to 13.0% (H1 2006 - 8.5%). Theseresults mainly reflect the general strength of the commercial aerospace market,where Boeing and Airbus together delivered 451 aircraft (H1 2006 - 414), as wellas excellent performances from the two businesses, AMT and Sterling Machine,acquired during 2006. With Boeing and Airbus collectively receiving 1,162 netorders for new aircraft in the first half of 2007 (2.6 x the delivery rate), thefuture of the commercial aerospace market remains very strong. The Flexonics Division also had strong results with revenue increasing by 14% to£114.4m (H1 2006 - £100.6m), adjusted operating profits increasing by 33% to£8.1m (H1 2006 - £6.1m) and the operating margin improving to 7.1% (H1 2006 -6.1%). The main reason for the much improved results was the strength of anumber of industrial markets such as power generation, chemical processing andoil and gas. The first half of 2007 also saw the successful ramp up inproduction of the new North American heavy duty diesel engine products with anincreasing contribution across the period. Dividend-------- The interim dividend is being increased by 13.1% to 0.700 pence per share (H12006 - 0.619p as restated for the bonus element of the rights issue undertakenin late 2006 to partially fund the acquisition of AMT). The interim dividend will be paid on 30 November 2007 to shareholders on the register at the close ofbusiness on 2 November 2007. With encouraging prospects for the Group, the Boardanticipates continuing to follow a progressive dividend policy in the future. Employees and the Board----------------------- These results would not have been achieved without the dedication and hard workof Senior's employees and I would like to thank them for their endeavours onbehalf of the Group. In addition, on behalf of the Board and all of his colleagues, I would like toexpress thanks to James Kerr-Muir for his service to the Group over the past tenyears and, in particular, for the successful way he guided the Group during hissix years as Chairman. I am delighted to have been appointed as Chairman,following the retirement of James, and I look forward to continuing the strategythe Group has successfully developed and implemented in recent years. Finally, I am pleased to welcome David Best as a Non-Executive Director of theBoard. David, who joined the Board in May, brings with him a wealth of financialand international experience with other public companies which will be mostvaluable to Senior. Outlook------- The commercial aerospace industry continues to go from strength to strength withthe wide-bodied sector, including Boeing, Airbus and the engine manufacturers,being the key driver. In the first half of 2007, Boeing and Airbus both saworders running at around 2.6 x the level of deliveries such that theircollective order book increased by 14% to 5,699 aircraft with the new Boeing787, on which Senior has more sales content than on any previous aircraft,accounting for nearly 700 of the backlog. In the Flexonics Division, the newNorth American heavy duty diesel products are being produced in healthy volumes,many of the industrial markets in which the Group operates, such as power andoil and gas, are strong while automotive markets remain subdued. The buoyant state of the aerospace industry, which now accounts for two thirdsof the Group's profits, together with healthy industrial markets and continuedgrowth in the heavy duty diesel products, means that future prospects for theGroup remain very encouraging. Martin Clark, Chairman INTERIM MANAGEMENT REPORT========================= To the members of Senior plc----------------------------- This Interim Management Report ("IMR") has been prepared solely to provideadditional information to enable shareholders to assess the Company's strategiesand the potential for those strategies to be fulfilled. It should not be reliedupon by any other party or for any other purpose. This IMR contains certain forward-looking statements. Such statements are madeby the Directors in good faith based on the information available to them at thetime of their approval of this report, and they should be treated with cautiondue to the inherent uncertainties underlying such forward-looking information. This IMR has been prepared for the Group as a whole and therefore gives greatestemphasis to those matters which are significant to Senior plc and its subsidiaryundertakings when viewed as a whole. The IMR discusses the following aspects ofthe business: operations; long-term strategy and business objectives; theresults for the six months ended 30 June 2007; risks and uncertainties facingthe Group during the second half of the 2007 financial year; and the futureoutlook for the Group. Operations---------- Senior is an international manufacturing group with operations in elevencountries. Senior designs, manufactures and markets high technology componentsand systems for the principal original equipment producers in the worldwidecivil aerospace, defence, diesel engine, exhaust system and energy markets.Major customers include Boeing, Airbus, UTC, GE, Rolls-Royce, General Motors,Ford, PSA and Cummins. The Group is split into two Divisions, Aerospace andFlexonics. The Aerospace Division consists of twelve operating companies (sevenin North America and five in Europe) and the Flexonics Division has elevenoperating companies (three in North America, five in Europe and three in theRest of the World). The commercial aerospace market, representing 64% of the Aerospace Division'ssales, continued to grow during the period with Airbus and Boeing collectivelydelivering 451 aircraft, 9% up on the first half of 2006. In the FlexonicsDivision, the power and petro-chemical markets were particularly strong whilstthe market for passenger vehicles was subdued. Also helping revenue growth inthe Flexonics Division was the ramp up in production of the Group's new NorthAmerican heavy duty diesel products. Long-term strategy and business objectives------------------------------------------ In the Group's most recent Annual Report, there was a report on Senior'sstrategy for accelerating growth and creating real shareholder value as well asthe five financial, and two non-financial, measures by which the Groupimplements and monitors its performance against its strategy. In the first six months of the current financial year, the Group madesignificant progress in achieving its stated strategy. This may be demonstratedby considering the outcome of its key performance measures, namely: (i) revenue,on a constant currency basis and excluding the effect of AMT which was acquiredduring the second half of 2006, was up 17.2% (well ahead of the "better thaninflation" target); (ii) adjusted earnings per share grew 57.7% (well ahead ofinflation); (iii) the return on revenue margin increased to 9.0% (well ahead ofthe 6.1% achieved in the first half of 2006 and the 6.8% reported for all of2006); (iv) free cash flow improved to a £6.8m inflow (well ahead of the £2.4moutflow in the first half of 2006); and (v) the annualised return on averagecapital employed was 18.5% (well ahead of the Group's cost of capital and thestated 15.0% target). Progress was also made in both of the Group'snon-financial measures with CO2 emissions / £m revenue and lost time injuryfrequency rate both showing declines over the ratios reported for 2006. Results for the six months ended 30 June 2007--------------------------------------------- A summary of the Group's operating results, on a constant currency basis (i.e.H1 2007 and 2006 results both translated at 2007 first half average exchangerates), are set out below. Adjusted Revenue OP Profit (1) Margin 2007 2006 2007 2006 2007 2006 £m £m £m £m % %-------------------------------------------------------------------------------- Aerospace 123.6 88.6 16.1 7.6 13.0 8.6Flexonics 114.4 94.0 8.1 5.4 7.1 5.7Inter-segment sales (0.2) (0.3) - - - -Central costs - - (2.8) (2.2) - ---------------------------------------------------------------------------------Total - constant currency 237.8 182.3 21.4 10.8 9.0 5.9Exchange - 13.3 - 1.2 - ---------------------------------------------------------------------------------Total - as reported 237.8 195.6 21.4 12.0 9.0 6.1-------------------------------------------------------------------------------- Adjusted operating profit (1) is the profit before the loss on sale of fixedassets, amortisation of intangible assets arising on acquisitions, release of a provision set up on acquisition undertaken in 1998, and before interest and tax charges. It may be reconciled to the operating profit shown in the Condensed Consolidated Income Statement as follows: 2007 2006 £m £m-------------------------------------------------------------------------------- Operating profit per financial statements 20.0 11.6Loss on sale of fixed assets 0.2 -Amortisation of intangible assets from acquisitions 1.7 0.4Release of provision set up on acquisition (0.5) ---------------------------------------------------------------------------------Adjusted operating profit 21.4 12.0-------------------------------------------------------------------------------- Revenue------- Total Group revenue increased by 21.6% over the first half of 2006 to £237.8m(H1 2006 - £195.6m). On a constant currency basis the Aerospace Division'srevenue grew by 39.5% to £123.6m, largely due to the underlying strength of thecommercial aerospace market, new programme wins and the acquisition of AMT whichtook place at the end of October 2006. Excluding AMT, the Division's revenuegrew by 17.2%. Buoyed by the start of production of the new heavy duty dieselproducts and the strength of a number of industrial markets, revenue in theFlexonics Division increased by 21.7%, on a constant currency basis. Operating profit---------------- Group operating profit increased by 72.4%, to £20.0m (H1 2006 - £11.6m).Adjusted operating profit increased by £9.4m (78.3%) despite a £1.2m adversecurrency effect. On a constant currency basis, the adjusted operating profit ofthe Aerospace Division increased by 111.8% (50.0% excluding AMT), to £16.1m, andthat of the Flexonics Division by 50.0%, to £8.1m, when compared to the firsthalf of 2006. The significant improvement in profitability was due to both revenue growth andthe much improved operating margins, from 8.6% to 13.0% for the AerospaceDivision and from 5.7% to 7.1% for the Flexonics Division. Finance costs------------- Finance costs, net of investment income, increased to £3.7m (H1 2006 - £2.9m),largely as a result of the increased level of Group net debt following theacquisition of AMT towards the end of 2006. Profit before tax----------------- Adjusted profit before tax increased by 94.5% to £17.7m (H1 2006 - £9.1m).Reported profit before tax improved by 87.4% to £16.3m (H1 2006 - £8.7m). Tax charge---------- The total tax charge increased to £3.5m (H1 2006 - £1.5m). If the net taxbenefits, arising from the loss on sale of fixed assets, amortisation ofintangible assets arising on acquisitions and release of the provision set-up onacquisition, totalling £0.6m (H1 2006 - £0.1m) are added back, then theunderlying tax charge of £4.1m (H1 2006 - £1.6m) represents an underlying rateof 23.2% (H1 2006 - 17.6%) on the adjusted profit before tax. The increase inthe underlying rate is principally due to the higher level of Group taxableprofits arising from the USA, where the tax rate is approximately 40%. Earnings per share------------------ Largely due to the rights issue undertaken to partially fund the acquisition of AMT in October 2006, the weighted average number of shares, for the purposes ofcalculating undiluted earnings per share for the first half of 2007, increasedto 388.9 million (H1 2006 - 337.5 million as restated to reflect the bonuselement of the rights issue). Adjusted earnings per share increased by 57.7% to 3.50p (H1 2006 - 2.22p restated for the bonus element of the rights issue). Undiluted basic earnings per share increased to 3.29p (H1 2006 - 2.13p restated) and diluted basic earnings per share increased to 3.22p (H1 2006 - 2.09p restated). Dividends--------- An interim dividend of 0.700 pence per share, up 13.1% on the prior year'sinterim dividend (0.619p restated for the bonus element of the rights issue) isproposed. Given the increase in the number of shares in issue, the total cost of£2.7m (2006 interim - £2.1m) represents an increase of 28.6%. Cash flow--------- The Group's free cash flow, the derivation of which is set out in note 10 (b) ofthe Condensed Consolidated Interim Financial Statements, improved by £9.2m, to a£6.8m inflow (H1 2006 - £2.4m outflow). The improvement was mainly due to theincreased level of profitability. Net capital expenditure was £7.8m (H1 2006 -£11.4m) after £1.8m (H1 2006 - £nil) of proceeds from the sale of fixed assets.As anticipated, the emphasis switched to the Aerospace Division, with capacitybeing expanded to meet the growing demands of the industry. As a consequence, 55%of the £9.6m gross capital expenditure related to the Aerospace Division,compared to only 28% for the first half of 2006 when capital was principallyspent to put the heavy duty diesel engine products into production. Net cashflow was an inflow of £0.2m (H1 2006 - £19.3m outflow). Net debt-------- Net debt reduced by £3.9m over the six month period to £92.8m at 30 June 2007(31 December 2006 - £96.7m), principally because of a £3.7m foreign exchangebenefit. Almost 90% of the Group's gross borrowings are denominated in US$,which weakened from $1.96 : £1 at the beginning of the year to $2.01 : £1 at 30June 2007, causing a reduction in the reported net debt . Change in accounting policies----------------------------- In the current financial year, the Group will adopt International FinancialReporting Standard 7 "Financial Instruments: Disclosures" (IFRS7) for the firsttime. As IFRS7 is a disclosure standard, there is no impact of a change inaccounting policy on these interim financial statements for the first half of2007. Full details of the change will be disclosed in the Group's Annual Reportfor the year ended 31 December 2007. Risks and uncertainties----------------------- There are a number of potential risks and uncertainties which may have amaterial impact on the Group's performance over the remaining six months of thisfinancial year and which could cause the actual results to differ materiallyfrom the expected and historical results. These were discussed in some depth in the Group's Annual Report for the 2006financial year, where the subject areas of competitors, markets and customers,manufacturing, environmental, foreign exchange, interest rates and definedbenefit pension plans were covered. It is considered that these still remain themost likely areas of potential risk and uncertainty with the position largelyunchanged from that set out in the 2006 Annual Report. The most meaningful changes during the first half of 2007 relate to the Group'sincreased exposure to the commercial aerospace market, the North American marketand also to a single customer. Following the acquisition of AMT, and because ofthe continuing strength of the aerospace industry, sales to the commercialaerospace market (wide-bodied, regional and business jets) represented 33% ofthe Group's first half sales. These markets are expected to remain buoyant for anumber of years, on the back of record order books for Boeing and Airbus, butshould this not be the case then the Group's financial performance may beadversely affected. 88% of the Group's first half revenue was derived from businesses locatedoutside the United Kingdom, with 61% related to operations in North America.Fluctuations in the value of foreign currencies, particularly the US Dollar, inrelation to the UK Pound have had, and may continue to have, a significantimpact on the results of the Group's operations when reported in PoundsSterling. However, with the Group's external debt being mainly US$ denominatedand its cost base being generally denominated in the same currency as its sales,the effect of currency fluctuations on operating profit is mitigated to areasonable extent. Hence, despite the £ : US$ exchange rate moving from anaverage of 1.78 for the first half of 2006 to 1.97 for the first half of 2007, a9.6% decline, the Group still produced a very healthy set of interim results. The Group's largest customer, now an aerospace customer, accounted for 7% offirst half sales. This customer is financially strong and has a very healthyorder book. The immediate and total loss of such a customer is considered to behighly improbable given that many parts are supplied from a number of Senior'soperations to a range of customer locations and many products are sold underlong-term agreements. Future Outlook-------------- The commercial aerospace industry for wide-bodied, regional and business jetscontinues to go from strength to strength. It currently accounts for nearlytwo-thirds of the Group's Aerospace Divisional sales with the wide-bodiedmarket, including Boeing, Airbus and the engine manufacturers, being the keydriver. In the first half of 2007, Boeing and Airbus both saw orders running ataround 2.6 x the level of deliveries such that their collective order bookincreased from 4,988 to 5,699 aircraft (up 14%) over the six month period. Consequently, both manufacturers continue to increase their build rates.The new Boeing 787 is due to fly for the first time in the autumn of this yearand to be delivered to its first customer in the middle of 2008. Boeing alreadyhas almost 700 orders for the aircraft and Senior has more sales content on the787 than on any previous aircraft. Launches of other new aircraft, such as theAirbus A380, and the military A400M and JSF platforms, will also help drivefuture growth of the Group's Aerospace Division. The business jet sector is alsoseeing similar buoyant market conditions whilst the regional jet market(typically 30 to 90 seat aircraft) is showing signs of modest growth after aperiod of challenging conditions. The military/defence sector, which accountsfor 21% of first half Aerospace Divisional sales, remains healthy but stable. In the Flexonics Division, the Group is producing its new North American heavyduty diesel products in healthy volumes with operational efficiencies improvingas the ramp up period comes to an end. Heavy duty diesel products representnearly 10% of the Flexonics Division's sales and are expected to grow furtherover the coming year. The industrial markets in which the Group operates - powergeneration, oil and gas, chemical processing and HVAC - are strong, particularlyin Asia where the weaker US$ has made the Division's Pathway operation increasinglycompetitive. The one area of market weakness has been in automotive, where salesof passenger vehicles for the first half of 2007 declined by between one and twopercent in both North America and Europe compared to the first half of 2006.However, the decline was largest in the SUV and light truck market, where theGroup has less exposure, and the Division's sales remained at satisfactory levels. In summary, the aerospace industry is in a healthy state, with build rates ofaircraft continuing to increase, new aircraft such as the B787 and A380 soon tobe launched, order books of the aircraft manufacturers generally at recordlevels and passenger growth in Asia and the Middle East accelerating. The strongaerospace market, together with healthy industrial markets and an increasingcontribution from heavy duty diesel products, indicate that future prospects forthe Group are very encouraging. Graham Menzies, Group Chief Executive Mark Rollins, Group Finance Director Condensed Consolidated Income Statement=======================================For the half-year ended 30 June 2007 (unaudited) Notes Half-year Half-year Year ended ended ended 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mContinuing operations ------- ------- --------Revenue 3 237.8 195.6 387.9 ======= ======= ========Trading profit 20.2 11.6 24.9Loss on sale of fixed assets (0.2) - (0.4) ------- ------- --------Operating profit (1) 3 20.0 11.6 24.5Investment income 0.4 0.5 0.9Finance costs (4.1) (3.4) (7.3) ------- ------- --------Profit before tax (2) 16.3 8.7 18.1Tax 5 (3.5) (1.5) (2.9) ------- ------- --------Profit for the period 12.8 7.2 15.2 ======= ======= ======== Attributable to:Equity holders of the parent 12.8 7.2 15.2 ======= ======= ========Earnings per share Basic 7 3.29p 2.13p 4.35p ======= ======= ======== Diluted 7 3.22p 2.09p 4.25p ======= ======= ======== (1) Adjusted operating profit 4 21.4 12.0 26.2(2) Adjusted profit before tax 4 17.7 9.1 19.8 Condensed Consolidated Statement of Recognised Income and Expense=================================================================For the half-year ended 30 June 2007 (unaudited) Half-year Half-year Year ended ended ended 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m ------- ------- --------Gains/(losses)on cash flow hedges 0.2 (1.4) (0.4)Gains on revaluation of financial instruments 1.2 1.9 3.5Exchange differences on translation of foreign operations (1.7) (5.3) (10.5)Actuarial gains/(losses) on defined benefit pension schemes 10.7 1.6 (1.0)Tax on items taken directly to equity - 0.5 (0.7) ------- ------- --------Net income/(loss) recognised directly in equity 10.4 (2.7) (9.1)Amounts transferred to profit or loss on cash flow hedges 0.2 (0.1) -Profit for the period 12.8 7.2 15.2 ------- ------- --------Total recognised income and expense for the period 23.4 4.4 6.1 ======= ======= ========Attributable to:Equity holders of the parent 23.4 4.4 6.1 ======= ======= ======== Condensed Consolidated Balance Sheet====================================As at 30 June 2007 (unaudited) Notes 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m ------- ------- -------Non-current assetsGoodwill 109.4 85.6 111.0Other intangible assets 13.1 3.1 15.1Property, plant and equipment 8 86.3 80.1 87.6Deferred tax assets 0.2 0.1 0.1Trade and other receivables 3.3 3.4 3.7 ------- ------- -------Total non-current assets 212.3 172.3 217.5 ------- ------- -------Current assetsInventories 73.2 53.9 69.8Construction contracts 3.0 4.3 3.5Trade and other receivables 83.6 65.7 67.5Cash and cash equivalents 12.1 6.5 7.2 ------- ------- -------Total current assets 171.9 130.4 148.0 ------- ------- -------Total assets 384.2 302.7 365.5 ======= ======= =======Current liabilitiesTrade and other payables 90.3 70.1 82.1Tax liabilities 10.7 10.3 10.2Obligations under finance leases 0.2 0.2 0.2Bank overdrafts and loans 0.1 13.7 13.1 ------- ------- -------Total current liabilities 101.3 94.3 105.6 ------- ------- -------Non-current liabilitiesBank and other loans 104.9 66.7 90.2Retirement benefit obligations 9 26.0 37.0 37.5Deferred tax liabilities 4.7 1.4 3.3Obligations under finance leases 1.3 1.5 1.4Others 0.6 0.3 0.4 ------- ------- -------Total non-current liabilities 137.5 106.9 132.8 ------- ------- -------Total liabilities 238.8 201.2 238.4 ======= ======= =======Net assets 145.4 101.5 127.1 ======= ======= =======EquityIssued share capital 39.0 32.5 39.0Share premium account 11.2 11.1 11.2Equity reserve 1.1 0.6 0.8Distributable reserve 19.4 - 19.4Hedging and translation reserve (6.2) (1.9) (5.9)Retained earnings 82.3 60.5 64.0Own shares (1.4) (1.3) (1.4) ------- ------- -------Equity attributable to equity holders of the parent 145.4 101.5 127.1 ------- ------- -------Total equity 145.4 101.5 127.1 ======= ======= ======= Condensed Consolidated Cash Flow Statement==========================================For the half-year ended 30 June 2007 (unaudited) Notes Half-year Half-year Year ended ended ended 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m ------- ------- -------Net cash from operating activities 10a) 14.4 8.4 22.3 ------- ------- -------Investing activitiesInterest received 0.2 0.6 1.3Disposal of subsidiary - - 0.1Proceeds on disposal of property, plant and equipment 1.8 - 2.2Purchases of property, plant and equipment (9.3) (11.3) (20.1)Purchases of intangible assets (0.3) (0.1) (0.6)Acquisition of Sterling Machine - (21.4) (21.5)Acquisition of AMT (1.2) - (58.3) ------- ------- -------Net cash used in investing activities (8.8) (32.2) (96.9) ------- ------- -------Financing activitiesDividends paid (5.4) (4.4) (6.5)Repayment of borrowings (12.6) (1.7) (7.1)Repayments of obligations under finance leases (0.1) (0.1) (0.2)Share issues - 8.9 34.8New loans raised 17.1 20.5 53.1Net cash inflow/(outflow) on forward contracts 0.5 (0.9) (0.2) ------- ------- ------- Net cash (used in)/from financing activities (0.5) 22.3 73.9 ------- ------- -------Net increase/(decrease) in cash and cash equivalents 5.1 (1.5) (0.7) Cash and cash equivalents at beginning of period 7.0 8.5 8.5 Effect of foreign exchange rate changes - (0.5) (0.8) ------- ------- ------- Cash and cash equivalents at end of period 10c) 12.1 6.5 7.0 ======= ======= ======= Notes to the Condensed Consolidated Interim Financial Statements================================================================For the half-year ended 30 June 2007 (unaudited) 1. General information----------------------The information for the year ended 31 December 2006 does not constitute theGroup's statutory accounts for 2006 as defined in Section 240 of the CompaniesAct 1985. Statutory accounts for 2006 have been delivered to the Registrar ofCompanies. The Auditors' report on those accounts was unqualified and did notcontain statements under Sections 237(2) or (3) of the Companies Act 1985. These interim Financial Statements, which were approved by the Board ofDirectors on 31 July 2007, have not been audited or reviewed by the Auditors. 2. Accounting policies----------------------These interim Financial Statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS). The accounting policies adopted are consistent with those followed in thepreparation of the Group's annual Financial Statements for the year ended 31December 2006. In the current financial year, the Group will adopt International FinancialReporting Standard 7 "Financial Instruments: Disclosures" (IFRS7) for the firsttime. As IFRS7 is a disclosure standard, there is no impact of a change inaccounting policy on these interim Financial Statements. Full details of thechange will be disclosed in the Group's Annual Report for the year ended 31December 2007. 3. Business segments--------------------For management purposes, the Group is organised into two operating divisionsaccording to the market segments that they serve. These divisions are the basison which the Group reports its primary segment information. The two divisionsare Aerospace and Flexonics. Segment information for revenue, operating profit and a reconciliation to entitynet profit is presented below. Eliminations/ Eliminations/ Central Central Aerospace Flexonics costs Total Aerospace Flexonics costs Total Half-year Half-year Half-year Half-year Half-year Half-year Half-year Half-year ended ended ended ended ended ended ended ended 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 2007 2007 2007 2007 2006 2006 2006 2006 £m £m £m £m £m £m £m £m ------ ------ ------ ------ ------ ------ ------ ------External revenue 123.5 114.3 - 237.8 95.2 100.4 - 195.6Inter segment revenue 0.1 0.1 (0.2) - 0.1 0.2 (0.3) - ------ ------ ------ ------ ------ ------ ------ ------Total revenue 123.6 114.4 (0.2) 237.8 95.3 100.6 (0.3) 195.6 ====== ====== ====== ====== ====== ====== ====== ======Adjusted operating profit (see note 4) 16.1 8.1 (2.8) 21.4 8.1 6.1 (2.2) 12.0Loss on sale of fixed assets - (0.2) - (0.2) - - - -Release of provisionfrom previous acquisition - 0.5 - 0.5 - - - - Amortisation of intangible assets from acquisitions (1.7) - - (1.7) (0.4) - - (0.4) ------ ------ ------ ------ ------ ------ ------ ------Operating profit 14.4 8.4 (2.8) 20.0 7.7 6.1 (2.2) 11.6 ====== ====== ====== ====== ======= ====== Investment income 0.4 0.5Finance costs (4.1) (3.4) ------ ------Profit before tax 16.3 8.7Tax (3.5) (1.5) ------ ------Profit after tax 12.8 7.2 ====== ====== 4. Adjusted operating profit and profit before tax--------------------------------------------------The provision of adjusted operating profit and profit before tax, derived inaccordance with the table below, has been included to identify the performanceof operations, from the time of acquisition or until the time of disposal, priorto the impact of gains or losses arising from the disposal of fixed assets,release of a provision from a previous acquisition and amortisation ofintangible assets acquired on acquisitions. Half-year Half-year Year ended ended ended 30 June 30 June 31 Dec 2007 2006 2006 £m £m £m ------- ------- -------Operating profit 20.0 11.6 24.5 ------- ------- -------Loss on sale of fixed assets 0.2 - 0.4Release of provision from previous acquisition (0.5) - -Amortisation of intangible assets from acquisitions 1.7 0.4 1.3 ------- ------- -------Adjustments to operating profit 1.4 0.4 1.7 ------- ------- -------Adjusted operating profit 21.4 12.0 26.2 ======= ======= =======Profit before tax 16.3 8.7 18.1Adjustments to profit as above before tax 1.4 0.4 1.7 ------- ------- -------Adjusted profit before tax 17.7 9.1 19.8 ======= ======= ======= 5. Tax charge------------- Half-year Half-year ended ended 30 June 2007 30 June 2006 £m £m ------- -------Current tax:UK corporation tax - -Foreign tax 2.2 1.5 ------- ------- 2.2 1.5Deferred tax:Current year 1.3 - ------- ------- 3.5 1.5 ======= ======= Corporation tax for the interim period is charged at 21.5% (2006: 17.2%),representing the best estimate of the weighted average annual corporation taxrate expected for the full financial year. In March 2007, the UK Government announced that they would introduce legislationto reduce the UK corporation tax rate to 28% with effect from 1 April 2008. Thislegislation, which has been substantively enacted by 30 June 2007, has had nosignificant impact upon these interim financial statements nor is it expected toaffect the Group's effective tax rate in the foreseeable future. 6. Dividends------------ Half-year Half-year ended ended 30 June 2007 30 June 2006 £m £m ------- -------Amounts recognised as distributions to equityholders in the period: Final dividend for the year ended 31 December 2006 of 1.381p (2005: 1.286p) per share 5.4 4.4 ======= ======= Proposed interim dividend for the year ended 31 December 2007 of 0.700p (2006: 0.619p) per share 2.7 2.1 ======= ======= The proposed interim dividend was approved by the Board of Directors on 1 August2007. This proposed dividend has not been included as a liability in theseinterim financial statements. The dividend per share figures for the interim 2006 dividends and the final 2005dividends paid have been adjusted to take account of the bonus element of the2006 rights issue. 7. Earnings per share---------------------The calculation of the basic and diluted earnings per share is based on thefollowing data: Half-year Half-year ended ended 30 June 2007 30 June 2006 m m ------- -------Number of shares Weighted average number of ordinary sharesfor the purposes of basic earnings per share 388.9 337.5 Effect of dilutive potential ordinary shares:Share options 8.6 7.1 ------- -------Weighted average number of ordinary sharesfor the purposes of diluted earnings per share 397.5 344.6 ======= ======= The weighted average number of shares for 2006 has been adjusted to take accountof the bonus element of the 2006 rights issue. Half-year ended Half-year ended 30 June 2007 30 June 2006 Earnings EPS Earnings EPS £m pence £m pence ------- ------- ------- -------Earnings and earnings per share Profit for the period 12.8 3.29 7.2 2.13 Adjust:Loss on sale of fixed assets netof tax of £0.1m(2006: £nil) 0.1 0.02 - - Release of provision fromprevious acquisition net of tax of £0.2m (2006: £nil) (0.3) (0.07) - - Amortisation of intangible assetsfrom acquisitions net of tax of£0.7m (2006: £0.1m) 1.0 0.26 0.3 0.09 ------- ------- ------- ------- Adjusted earnings after tax 13.6 3.50 7.5 2.22 ======= ======= ======= ======= Earnings per share - basic 3.29p 2.13p - diluted 3.22p 2.09p - adjusted 3.50p 2.22p - adjusted and diluted 3.42p 2.18p 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 • release of provision from previous acquisition • amortisation of intangible assets acquired on acquisitions 8. Property, plant and equipment--------------------------------During the period, the Group spent £9.3m on the acquisition of property, plantand equipment. The Group also disposed of machinery with a carrying value of £2.0m for proceedsof £1.8m. 9. Retirement benefit schemes----------------------------- Defined benefit schemes Aggregate post-retirement benefit liabilities are £26.0m (30 June 2006: £37.0m;31 December 2006: £37.5m). The primary components of this liability are theGroup's UK pension plan and US pension plans, with deficits of £20.5m (30 June2006: £28.8m; 31 December 2006: £30.8m) and £1.8m (30 June 2006: £4.5m; 31December 2006: £3.2m) respectively. These values have been assessed byindependent actuaries using current market values and discount rates. Thereduction in the liability from £37.5m at 31 December 2006 to £26.0m at 30 June2007 is primarily due to increasing the UK plan discount rate assumption to 5.9%(31 December 2006: 5.3%), in line with market conditions. 10. 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 2007 30 June 2006 £m £m ------- -------Operating profit 20.0 11.6 Adjustments for:Depreciation of property, plant and equipment 7.2 6.0Amortisation of intangible assets from acquisitions 1.7 0.4Amortisation of other intangible assets 0.2 0.3Share options 0.3 0.2Loss on disposal of property, plant and equipment 0.2 -Release of provision from previous acquisition (0.5) -Pension payments in excess of service cost (1.1) (1.4) ------- -------Operating cash flows before movements in working capital 28.0 17.1Increase in inventories (3.4) (2.7)Increase in receivables (14.3) (1.1)Increase in payables 10.2 2.3Working capital currency movements (1.2) (3.0) ------- -------Cash generated by operations 19.3 12.6Income taxes paid (1.7) (1.1)Interest paid (3.2) (3.1) ------- -------Net cash from operating activities 14.4 8.4 ======= ======= 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 ended ended 30 June 30 June 2007 2006 £m £m ------- ------- Net cash from operating activities 14.4 8.4Interest received 0.2 0.6Proceeds on disposal of property, plant and equipment 1.8 -Purchases of property, plant and equipment (9.3) (11.3)Purchases of intangible assets (0.3) (0.1) ------- ------- Free cash flow 6.8 (2.4) ======= ======= c) Analysis of net debt At Non cash Exchange At 1 January Cash flow items movement 30 June 2007 2007 £m £m £m £m £m ------- ------- ------- ------- -------Cash and cash equivalents 7.0 5.1 - - 12.1Debt due within one year (12.9) 12.6 - 0.2 (0.1)Debt due after one year (90.2) (17.1) - 2.4 (104.9)Finance leases (1.6) 0.1 - - (1.5)Forward exchange contract gains 1.0 (0.5) - 1.1 1.6 ------- ------- ------- ------- -------Total (96.7) 0.2 - 3.7 (92.8) ======= ======= ======= ======= ======= The forward exchange contract gains shown above are reported as £1.6m (1 January2007: £1.0m) in current assets within trade and other receivables. On 31 January 2007 new loan notes of $30m (£14.9m) were issued with a maturityof 10 years, carrying interest at the rate of 5.85% to refinance the $25m(£12.6m) loan notes which were repaid on 29 June 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Senior