Interim Results

4th Nov 2008 07:00



4 November 2008

Interim results for the six months to 30 September 2008

Umeco plc, an international provider of supply chain and advanced composite materials primarily to the aerospace & defence industries, announces its interim results for the six months to 30 September 2008.

Financial highlights 

Revenue increased by 32.4 per cent to £197.2 million (2007: £148.9 million)

Adjusted operating profit increased by 49.5 per cent to £15.7 million (2007: £10.5 million)

Adjusted profit before tax increased by 60.5 per cent to £13.0 million (2007: £8.1 million)

Adjusted earnings per share up 25.7 per cent to 18.1 pence (2007: 14.4 pence)

Interim dividend of 6.5 pence per share, up 8.3 per cent (2007: 6.0 pence)

Operational highlights

Strong organic growth in Composites and Supply Chain, driven by rising demand in core markets 

ACG partnering with Airbus and other leading organisations in a major research programme for the Next Generation Composite Wing

ACG's out-of-autoclave pre-impregnated advanced composite material qualified for use in Airbus structural applications

Extended Supply Chain contract with Rolls-Royce is generating a high rate of growth and delivering exceptional customer service levels

Major new five year Supply Chain contract with ATK announced today by Pattonair North America 

  Clive Snowdon, Chief Executive of Umeco plc, said:

"Umeco has seen substantial growth during the first half year with strong organic development in both Composites and Supply Chain.

"Despite a number of adverse macro factors, including the global economic backdrop, issues facing airline operators and aircraft funding, we remain confident of continuing growth at Umeco.  The increasing order backlog at Airbus and Boeing is concentrated on new aircraft for which Umeco should enjoy a high level of incremental business.

"Umeco Composites has seen excellent growth in all its principal markets, in particular wind energy, marine and automotive. ACG continues to attract significant funded research and development programmes which enhance its already robust long term growth prospects.

"In Supply Chain, the new dedicated Pattonair facility in Derby is now operating very efficiently, enabling exceptional service levels to be delivered to Rolls-Royce under our extended long term contract.

"Trading conditions in the coming months may become more difficult and we will remain vigilant to changing circumstances, but overall we believe that Umeco will continue to grow and prosper."

- Ends -

For further information, please contact:-

Umeco plc	Tel: +44 (0) 1926 331 800
Clive Snowdon, Chief Executive Doug Robertson, Finance Director www.umeco.com
Hogarth Partnership	Tel: +44 (0) 20 7357 9477
John Olsen Barnaby Fry Vicky Watkins

Further Information on Umeco plc

Umeco is a leading innovator in distribution and supply chain management to the aerospace and defence industries, harnessing new methods for enhancing its customers' performance and profitability. Umeco also has significant manufacturing interests in advanced composite materials for a growing range of applications in its core aerospace and defence markets and in other high performance technology industries such as motor sport, automotive and wind energy.

Listed on the London Stock Exchange, Umeco had revenue from continuing operations of £335.2 million in the year to 31 March 2008. 

Umeco is managed through two business streams:

Umeco Composites - a provider of a complete range of advanced composite materials principally to the aerospace, motor sport, automotive and wind energy markets.

Customers include Boeing, Airbus, BAE Systems, manufacturers of wind turbines, a number of manufacturers of high performance super cars and Formula 1 teams including Team McLaren Mercedes.

Umeco Supply Chain - a leading international provider of value-added distribution and supply chain outsourcing services to customers in the aerospace & defence market. With its specialisation in the supply of small and medium value components and sophisticated IT systems, its growing global customer base can enjoy significant operational, cost and working capital benefits.

Customers include Rolls-Royce plc, BAE Systems, Safran Group, Parker Aerospace, Goodrich, Thales Aerospace, Turbomeca, Lockheed Martin and the US Department of Defense.

Note on adjusted profit and earnings per share measures:

Umeco uses adjusted figures as key performance indicators. Adjusted figures are stated before profits arising on the divestment of operations, amortisation and impairment charges relating to intangible assets, significant items, the revaluation of financial instruments based on their market values and associated tax effects. The differences between the adjusted and unadjusted measures of operating profit, profit before tax and profit attributable to equity holders of the parent are reconciled in note 4 to this announcement. 

The narrative in this announcement is based on the adjusted measures of operating profit, profit before tax and earnings per share. These provide a more consistent measure of operating performance.

The table below sets out a comparison of adjusted and unadjusted values, and also summarises key performance indicators:

		Six months to			Year to
		30 September			31 March
		2008	2007		2008
		Unaudited	Unaudited		Audited
			Restated
		£m	£m		£m
Revenue		197.2	148.9		335.2
Operating profit		13.9	10.2		24.1
Adjusted operating profit		15.7	10.5		27.1
Total profit before tax		11.6	7.2		17.1
Adjusted profit before tax		13.0	8.1		21.9
		Pence	Pence		Pence
Earnings per share		16.2	11.6		47.5
Adjusted earnings per share		18.1	14.4		36.7

Measures of revenue, operating profit and profit before tax are for continuing operations only.

  Chairman's Statement

Overview

I am delighted to report that Umeco has had an excellent start to the financial year with revenue from continuing operations increasing by 32.4 per cent and operating profits by 49.5 per cent. This robust performance reflects the strategic repositioning of the Group in the prior financial year and the strength of our principal end markets of aerospace & defence, motor sport & automotive, and wind energy.

Results and dividend

Revenue from continuing operations, Composites and Supply Chain, in the six months to 30 September 2008 increased by 32.4 per cent to £197.2 million (2007: £148.9 million). The increase in revenue, at constant exchange rates and adjusting for the effects of acquisitions (the 'underlying increase'), was 20.9 per cent. 

Operating profit from continuing operations rose by 49.5 per cent to £15.7 million (2007: £10.5 million) with margins showing a further improvement to 8.0 per cent (2007: 7.1 per cent). The underlying increase in operating profit was 24.8 per cent.

Net interest charges, excluding revaluations of financial instruments, were £2.7 million (2007: £2.4 million). 

Profit before tax from continuing activities was £13.0 million (2007: £8.1 million), an increase of 60.5 per cent. 

Earnings per share were 18.1 pence (2007: 14.4 pence), an increase of 25.7 per cent.

The Directors have declared an interim dividend of 6.5 pence (2007: 6.0 pence), an increase of 8.3 per cent. The dividend is payable on 12 December 2008 to shareholders registered on 14 November 2008.

Strategic developments

These results reflect the successful implementation of the strategic review undertaken in the prior financial year when the Board decided to focus Umeco on its larger and faster growing business activities of Composites and Supply Chain. This led to the divestment of the Group's smallest business activities, Repair & Overhaul and the aerospace chemical distribution businesses.

In August 2007, we completed the acquisition of J. D. Lincoln, Inc. ('Lincoln') and, in November 2007, we announced the acquisition of Primco, now trading under the Advanced Composites Group ('ACG') brand. Both companies are part of our Composites business segment and have been fully integrated into the Group.

In Supply Chain, a significant extension to the Group's long term contract with Rolls-Royce was signed in November 2007 and the Group is providing the customer with an increasingly broad range of services as the transfer of parts responsibility continues. This contract is managed from a new dedicated freehold facility in Derby.

In May 2008, we were very pleased to announce that ACG is to partner Airbus and other leading organisations in a major collaborative aviation research programme for the Next Generation Composite Wing ('NGCW'). Funding of £103 million for the project has been confirmed by the UK Government, and by industrial and regional partners. This funding will make a significant contribution to ACG's extended research and development budget for this and the next two years, and demonstrates ACG's leading position in the research and development of composite materials.

In addition, in July 2008, it was announced that Airbus has qualified ACG's out-of-autoclave pre-impregnated advanced composite material for use in structural applications. Use of this new material offers immediate benefits to manufacturers, like Airbus, and will add to the Group's revenue growth in the near future. 

Operations

Results for each of the Group's business segments are summarised below.

Umeco Composites

Revenue £92.8 million (2007: £64.4 million); operating profit £11.5 million (2007:  £6.9 million). Operating margin 12.4 per cent (2007: 10.7 per cent).

Umeco Composites provides a broad range of advanced composite materials principally to the aerospace, motor sport & automotive, marine and wind energy markets.

Revenue increased in the period by 44.1 per cent and the underlying increase was 22.2 per cent. Operating profit rose by 66.7 per cent and the underlying increase was 28.5 per cent, resulting in an improvement in margins from 10.7 per cent to 12.4 per cent.

ACG enjoyed considerable revenue growth in the period across all business units, including the recently acquired operation in Manchester, with high demand for its growing range of composite materials across the various markets it serves. I am pleased to report that ACG's US activities, which had a disappointing first half last year because of two customer issues outside our control, delivered excellent results. ACG's UK technology centre, which opened in September 2006, continues to attract significant funded development programmes which enhance its already robust long term growth prospects.

Aerovac and Richmond, as in prior years, continued to achieve high rates of growth from both of their key markets, aerospace and wind energy. Growth would have been higher still if the Boeing B787 programme had not slipped and our suppliers had been able to keep up with demand from our global wind energy customers. 

Lincoln had an excellent first half year and traded in line with expectations we had at the time of acquisition. We have invested in further production capacity for the business and plans are now being finalised to relocate Lincoln's main facility in Costa Mesa, California to a new single site operation nearby. This will enhance productivity and facilitate the additional capacity the business will require when the B787 aircraft enters production.

Both Richmond and Lincoln saw orders from Boeing being put on hold during September 2008 because of the industrial action in Boeing's civil aerospace facilities; sadly, this has led to a small reduction in our direct headcount.

GRPMS saw only modest revenue growth in the period due to weaker market conditions in both the UK and Scandinavia. The company is seeking to broaden its product range and has taken steps to reduce its UK cost base by outsourcing its transportation.

Med-Lab enjoyed significant revenue growth in the first half year particularly in its supply of specialist materials to the Rolls-Royce aerospace engine overhaul market.

  Umeco Supply Chain

Revenue £104.4 million (2007: £84.5 million); operating profit £4.2 million (2007:  £3.6 million). Operating margin 4.0 per cent (2007: 4.3 per cent).

Umeco Supply Chain is a leading international provider of distribution and supply chain outsourcing services primarily to OEM customers in the aerospace & defence markets. With its specialisation in the supply of small and medium value components and its sophisticated IT systems, it creates and delivers significant operational cost and working capital benefits for its growing global customer base. The Supply Chain businesses trade as Pattonair.

Revenue increased during the period by 23.6 per cent, all of which was organic, and the underlying increase was 19.7 per cent. Operating profit increased by 16.7 per cent, with the underlying increase being 15.8 per cent. The modest reduction in operating margins reflects the higher level of activity with Rolls-Royce and the loss of the Bombardier contract in the prior year. 

Pattonair in Derby continued to deliver high rates of growth particularly from its extended contract with Rolls-Royce. Although the transfer of new parts responsibility from the customer was somewhat behind our initial expectations, the rate of transfer has accelerated significantly in recent months and further considerable growth is scheduled for the rest of this year. Pattonair Derby's new facility came on stream in December 2007 and is now operating very effectively, enabling exceptional service levels to be delivered to Rolls-Royce. We have decided to retain our existing freehold facility in Derby and this is now dedicated to our growing contract with Goodrich Actuation Systems.

Pattonair Woking continues to grow its business in a robust manner as a result of new contracts secured in prior periods and as a consequence of the general strength of the aerospace market. It is bidding on a number of new programmes at the current time, which if secured would add to its already high rate of growth.

Pattonair Italy had a solid first half year and is building on the expertise brought into the business by its new general manager who joined the company just over a year ago.

At Pattonair France considerable attention has been focused on improving the financial and operating performance of the business. Revised terms have been agreed with one of its major customers, where levels of new business did not meet our expectations. In addition, the cost base of the operation is being reduced. These actions are beginning to bear fruit and we expect Pattonair France to return to profitability in the second half of the current financial year.

Pattonair's North American operations, when compared with the first half of last year, saw revenue decline as a result of the contract with Bombardier in Canada being terminated during that period, as previously announced. The operating problems that held the company back last year are now being resolved and customer service levels are much improved, leading to increased levels of business with existing customers and a focus on winning new contracts, for which a number of bids are in the pipeline. 

In Asia a new general manager with a successful track record of growing aerospace distribution activities in the region has been recruited, with responsibility for both our Chinese and Singaporean facilities.

Finance

Including the benefit of proceeds received from the divestment programme, net interest charges excluding revaluations of financial instruments were £2.7 million (2007:  £2.4 million). The increase reflects interest on additional working capital, as a result of the very high level of revenue growth in the period, and rising interest rates particularly over recent months. Interest cover was 5.8 times compared to 5.2 times in the year to 31 March 2008.

Profit before tax from continuing operations was £13.0 million, an increase of 60.5 per cent. 

The tax charge on profit before tax from continuing operations was 33.1 per cent compared with 31.3 per cent in the year to 31 March 2008, the increase being primarily due to a higher proportion of earnings being generated in the USA.

Net debt at 30 September 2008 was £95.5 million compared with £57.6 million as at 31 March 2008, a rise of £37.9 million. Of this increase, £3.7 million is due to the final payment of deferred consideration in respect of the acquisition of Provest, now Pattonair Italy. Exchange rate movements, principally the recent strengthening of the US dollar, caused net debt to rise by £6.4 million. This increase in liabilities has been partially offset by a rise in our US dollar denominated net assets. Working capital increased significantly in the period as a result of the much higher level of revenue and because of the extended contract with Rolls-Royce. Much of this increase is short term and we expect working capital levels to normalise in the second half of the current financial year. Gross capital expenditure in the period was £2.9 million (2007: £7.8 million) with no new major projects arising in the period. Future capital projects are being carefully scrutinised in view of the current economic situation.

The Group's committed banking facilities comprise credit facilities of US$241.7 million and a £10.0 million overdraft, giving aggregate facilities of £145.6 million. This compares favourably with net debt at 30 September 2008 of £95.5 million.  Gearing was 59.3 per cent, compared with 35.5 per cent at 31 March 2008, and 63.4 per cent at 30 September 2007. 

Equity attributable to shareholders at 30 September 2008 was £161.1 million.

Directors

Andrew Moss was appointed to the Board in June 2008 in the new role of Chief Operating Officer. Andrew joined Umeco in 1999 and has been instrumental in the development of Umeco Composites. Andrew's prime task will be to drive forward our operational performance across both Composites and Supply Chain, and his appointment will allow our Chief Executive, Clive Snowdon, to focus on the Group's strategic development, ensuring we take full advantage of the many opportunities, including bolt-on acquisitions, that we see at the current time.

Prospects

Since my last report to shareholders in June 2008, the outlook for the global economy has significantly weakened and this has already resulted in falling civil aerospace passenger numbers. Coupled with the very high oil price over the summer, this led to the bankruptcy of a number of airlines. Oil prices have now substantially fallen back. To the end of September 2008, the adverse macro economic factors had not affected the demand for new civil aircraft. In the nine months to 30 September 2008, Airbus and Boeing recorded net orders for 1,360 aircraft which compares with deliveries in the period of 674 aircraft. The combined backlog of Airbus and Boeing at 30 September 2008 was 7,534 aircraft which at current estimated build rates represents approximately eight years of production.

Due to the major issues in the banking market, there are some concerns over the availability of funds for aircraft financing. However, both Airbus and Boeing have indicated that they will assist customers with this issue.

The strike at Boeing Commercial Aerospace that started on 6 September has had only a modest effect on the Group's performance. We are pleased to note the statement by Boeing on 2 November indicating that they have reached agreement with Union leaders to end the strike.  

Despite this negative backdrop we remain confident of continuing growth at Umeco. This confidence is based on the high level of order backlog at Airbus and Boeing, particularly for their new aircraft the A350 XWB (458 aircraft) and B787 (895 aircraft) where Umeco will enjoy a high level of incremental business when these aircraft go into production. We of course hope that the industrial action at Boeing will not cause further delays to the B787 programme, under which the first aircraft deliveries are expected in late 2009.

In addition to the excellent overall state of the civil OEM aerospace market we continue to gain market share through securing contract extensions, winning new contracts and introducing new and innovative products and services into the markets we serve. We continue to see strong growth in the other main markets served by our composite activities, in particular defence, wind energy and automotive.

In conclusion, trading conditions in the coming months may become more difficult and we must remain vigilant to changing circumstances, but overall I believe Umeco will continue to grow and prosper.

Brian McGowan

Chairman

  Condensed Consolidated Income Statement

________________________________________________________________________________

For the six months to 30 September 2008

		Six months to			Year to
		30 September			31 March
		2008	2007		2008
		Unaudited	Unaudited		Audited
			Restated
	Note	£m	£m		£m
Continuing operations
Revenue	2	197.2	148.9		335.2
Cost of sales		(149.5)	(111.3)		(243.0)
Gross profit		47.7	37.6		92.2
Administrative expenses		(33.8)	(27.4)		(68.1)
Operating profit	2	13.9	10.2		24.1
Financial income	3	1.0	0.5		1.2
Financial expense	3	(3.3)	(3.5)		(8.2)
Profit before tax		11.6	7.2		17.1
Income tax - UK		(1.8)	(1.5)		(4.0)
Income tax - overseas		(2.0)	(1.3)		(2.0)
Profit from continuing operations		7.8	4.4		11.1
Discontinued operations
Profit from discontinued operations (net of tax)		-	1.1		11.7
Profit for the period		7.8	5.5		22.8
Attributable to:
Equity holders of the parent		7.8	5.5		22.7
Minority interest		-	-		0.1
		7.8	5.5		22.8
Earnings per share
		Pence	Pence		Pence
Total
Basic earnings per share	7	16.2	11.6		47.5
Diluted earnings per share	7	16.2	11.6		47.4
Continuing operations
Basic earnings per share	7	16.2	9.2		23.0
Diluted earnings per share	7	16.2	9.2		22.9
Discontinued operations
Basic earnings per share	7	-	2.4		24.5
Diluted earnings per share	7	-	2.4		24.5

  Condensed Consolidated Balance Sheet

_______________________________________________________________________________

As at 30 September 2008

		As at 30 September		As at 31
		2008	2007	March 2008
		Unaudited	Unaudited		Audited
	Note	£m	£m		£m
Assets
Non-current assets
Property, plant & equipment		39.2	34.4		37.8
Intangible assets		116.6	117.2		117.2
Deferred tax assets		3.7	2.9		3.5
		159.5	154.5		158.5
Current assets
Inventories		141.4	95.7		118.3
Trade & other receivables		98.4	75.9		92.4
Income tax receivable		3.1	1.2		2.6
Cash		7.5	12.0		33.4
Assets classified as held for sale	11	-	32.0		-
		250.4	216.8		246.7
Total assets		409.9	371.3		405.2
Liabilities
Current liabilities
Trade & other payables		(123.5)	(95.9)		(127.6)
Financial liabilities		(1.0)	(0.1)		(1.4)
Income tax payable		(6.4)	(4.2)		(6.7)
Loans & borrowings		(1.8)	(2.1)		(1.4)
Liabilities classified as held for sale	11	-	(5.4)		-
		(132.7)	(107.7)		(137.1)
Non-current liabilities
Other payables		-	-		(0.3)
Deferred tax liabilities		(8.8)	(9.0)		(9.1)
Retirement benefit obligation		(2.2)	(1.4)		(2.7)
Loans & borrowings		(101.2)	(104.7)		(89.6)
Provisions		(3.9)	-		(4.0)
		(116.1)	(115.1)		(105.7)
Total liabilities		(248.8)	(222.8)		(242.8)
Net assets		161.1	148.5		162.4
Equity
Share capital	9	12.0	11.9		12.0
Share premium	9	115.5	114.6		115.3
Translation reserve	9	(4.5)	(1.2)		(0.7)
Retained earnings	9	38.1	22.9		35.8
Equity attributable to equity holders of the parent		161.1	148.2		162.4
Minority interest		-	0.3		-
Total equity		161.1	148.5		162.4

  

 

 

Condensed Consolidated Statement of Cash Flows

_______________________________________________________________________________

For the six months to 30 September 2008

		Six months to			Year to
		30 September			31 March
		2008	2007		2008
	Note	Unaudited	Unaudited		Audited
			Restated
		£m	£m		£m
Cash flows from operating activities - continuing operations
Profit for the period		7.8	4.4		11.1
Depreciation		2.3	1.8		3.8
Amortisation		1.8	0.3		2.3
Financial income		(1.0)	(0.5)		(1.2)
Financial expense		3.3	3.5		8.2
Share based payments expense		0.1	0.1		0.4
Income tax expense		3.8	2.8		6.0
		18.1	12.4		30.6
Increase in inventories		(20.7)	(9.6)		(32.1)
(Increase)/decrease in trade & other receivables		(5.1)	1.8		(16.2)
(Decrease)/increase in trade & other payables		(4.6)	(1.7)		33.4
Decrease in provisions		(0.1)	-		-
Decrease in retirement benefit obligation		(0.5)	(0.6)		(1.3)
Cash (consumed by)/generated from operations		(12.9)	2.3		14.4
Net financial expense paid		(2.1)	(2.7)		(5.3)
Tax paid		(4.8)	(2.8)		(5.5)
Net cash flow from operating activities - continuing operations		(19.8)	(3.2)		3.6
Cash flows from investing activities - continuing operations
Acquisition of property, plant & equipment	8	(2.8)	(7.6)		(12.4)
Proceeds from sale of property, plant & equipment		-	0.3		0.5
Acquisition of subsidiaries, net of cash balances acquired	10	(3.7)	(30.3)		(34.5)
Disposal of subsidiaries, net of cash balances disposed	11	-	-		45.8
Net cash flow from investing activities - continuing operations		(6.5)	(37.6)		(0.6)

  Condensed Consolidated Statement of Cash Flows (continued)

_______________________________________________________________________________

For the six months to 30 September 2008

		Six months to			Year to
		30 September			31 March
		2008	2007		2008
	Note	Unaudited	Unaudited		Audited
			Restated
		£m	£m		£m
Cash flows from financing activities - continuing operations
Proceeds from the issue of share capital		0.2	0.7		1.5
Drawdown of bank loans		15.0	47.1		67.2
Repayment of bank loans		(10.2)	-		(36.5)
Repayment of lease finance liabilities		(0.1)	(0.3)		(0.4)
Dividends paid to equity holders of the parent		(5.3)	(4.8)		(7.7)
Net cash flow from financing activities - continuing operations		(0.4)	42.7		24.1
Discontinued operations
Net cash flow from operating activities		-	2.4		2.9
Net cash flow from investing activities		-	(0.5)		(3.6)
Net cash flow from financing activities		-	-		(0.1)
Net cash flow from discontinued operations		-	1.9		(0.8)
Net (decrease)/increase in cash	12	(26.7)	3.8		26.3
Cash at start of period		32.4	7.4		7.4
Effect of exchange rate fluctuations		0.3	(0.1)		(1.3)
Net cash at end of period		6.0	11.1		32.4

   

 

Condensed Consolidated Statement of Recognised Income and Expense

_____________________________________________________________________________

For the six months to 30 September 2008

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
	£m	£m		£m
Foreign exchange translation differences	(3.8)	(0.2)		0.3
Actuarial loss in pension schemes	-	-		(2.0)
Tax in respect of the above	-	-		0.3
Income and expense recognised directly in equity	(3.8)	(0.2)		(1.4)
Profit for the period	7.8	5.5		22.8
Total recognised income and expense for the period	4.0	5.3		21.4
Attributable to:
Equity holders of the parent	4.0	5.3		21.3
Minority interest	-	-		0.1
Total recognised income and expense for the period	4.0	5.3		21.4

  Notes to the Interim Results

_______________________________________________________________________________

For the six months to 30 September 2008

1 Basis of preparation & accounting policies

Umeco plc (the 'Company') is domiciled in the UK. The condensed consolidated interim financial statements of the Company as at and for the six months to 30 September 2008 comprise the Company and its subsidiaries (together referred to as the 'Group').  

The condensed consolidated interim financial statements for the six months to 30 September 2008 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS34 'Interim Financial Reporting' as adopted by the European Union. They should be read in conjunction with the annual financial statements for the year to 31 March 2008, which have been prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial statements are unaudited and were approved by the Board of Directors on 4 November 2008. 

The results for the year to 31 March 2008 are based on full audited accounts prepared in accordance with IFRSs as adopted by the European Union. These accounts were filed with the Registrar of Companies and contain a report of the auditors under section 240 of the Companies Act 1985, which does not contain a statement under sections 237 (2) or (3) of the Companies Act 1985 and is unqualified. The consolidated financial statements of the Group as at and for the year to 31 March 2008 are available upon request from the Company's registered office or on its website.

In the process of applying the Group's accounting policies, management has made a number of judgements. The process of preparing these interim consolidated financial statements inevitably requires the Group to make estimates and assumptions concerning the future and the resulting accounting estimates may not equal the related actual results. The estimates and judgements that have the most significant effect on the amounts included within these interim consolidated financial statements were the same as those that applied to the audited consolidated financial statements for the year to 31 March 2008.

The accounting policies and basis of consolidation applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its audited consolidated financial statements for the year to 31 March 2008.

Following the divestment of the Chemicals business operation on 31 March 2008, the results of the Chemicals undertakings have been classified as discontinued operations. This has led to comparatives in the condensed consolidated income statement and condensed consolidated statement of cash flows for the six months to 30 September 2007 being amended accordingly.

  Notes to the Interim Results_______________________________________________________________________________

For the six months to 30 September 2008

2 Segmental reporting

The primary basis of segmental reporting is in respect of the Group's business segments. This format reflects the Group's management and internal reporting structures. Inter segment revenue is insignificant. Analysis by geographic segments and revenue by destination are also presented.

Business segments

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
	£m	£m		£m
Revenue
Composites	92.8	78.9		179.0
Supply Chain	104.4	84.5		186.0
Repair & Overhaul	-	13.3		15.7
Revenue from operating activities	197.2	176.7		380.7
Less discontinued operations	-	(27.8)		(45.5)
Revenue from continuing operations	197.2	148.9		335.2
Adjusted operating profit (see note 4)
Composites	11.5	7.3		18.9
Supply Chain	4.2	3.6		9.4
Repair & Overhaul	-	1.9		2.4
Adjusted operating profit from operating activities	15.7	12.8		30.7
Less discontinued operations	-	(2.3)		(3.6)
Adjusted operating profit from continuing operations	15.7	10.5		27.1
Operating profit
Composites	9.7	7.0		16.5
Supply Chain	4.2	3.6		8.8
Repair & Overhaul	-	1.1		1.4
Operating profit from operating activities	13.9	11.7		26.7
Less discontinued operations	-	(1.5)		(2.6)
Operating profit from continuing operations	13.9	10.2		24.1

  Notes to the Interim Results 

_______________________________________________________________________________

For the six months to 30 September 2008

2 Segmental reporting (continued)

Geographic segments

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
	£m	£m		£m
Revenue by origin
UK	124.6	108.7		234.6
Rest of Europe	26.4	32.6		65.6
North America	43.5	33.6		76.3
Rest of world	2.7	1.8		4.2
Revenue from operating activities	197.2	176.7		380.7
Less discontinued operations	-	(27.8)		(45.5)
Revenue from continuing operations	197.2	148.9		335.2
Revenue by destination
UK	89.7	85.2		187.9
Rest of Europe	55.3	48.3		102.5
North America	38.7	28.7		66.6
Rest of world	13.5	14.5		23.7
Revenue from operating activities	197.2	176.7		380.7
Less discontinued operations	-	(27.8)		(45.5)
Revenue from continuing operations	197.2	148.9		335.2

3 Financial income and expense

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
	£m	£m		£m
Financial income
Revaluation of financial instruments	0.4	-		-
Interest income	0.1	-		0.1
Expected return on pension scheme assets	0.5	0.5		1.1
	1.0	0.5		1.2
Financial expense
Revaluation of financial instruments	-	0.6		1.8
Interest on bank loans and overdrafts	2.7	2.5		5.4
Interest payable in respect of lease finance	-	-		0.1
Interest cost on pension scheme liabilities	0.6	0.4		0.9
	3.3	3.5		8.2

  Notes to the Interim Results 

_______________________________________________________________________________

For the six months to 30 September 2008

4 Reconciliation of adjusted profit measures

Umeco uses adjusted figures as key performance indicators. Adjusted figures are stated before profits arising on the divestment of operations, amortisation and impairment charges relating to intangible assets, significant items, the revaluation of financial instruments based on their market values and associated tax effects. The differences between the total and adjusted profit measures are reconciled below. 

The narrative in this interim announcement is based on the adjusted measures of operating profit, profit before tax and earnings per share. These provide a more consistent measure of operating performance.

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
		Restated
	£m	£m		£m
Operating profit
Total operating profit	13.9	10.2		24.1
Exclude:
- significant items	-	-		0.7
- amortisation of intangible assets	1.8	0.3		2.3
Adjusted operating profit	15.7	10.5		27.1
Profit before tax
Total profit before tax	11.6	7.2		17.1
Exclude:
- significant items	-	-		0.7
- amortisation of intangible assets	1.8	0.3		2.3
- revaluation of financial instruments	(0.4)	0.6		1.8
Adjusted profit before tax	13.0	8.1		21.9

  Notes to the Interim Results 

_______________________________________________________________________________

For the six months to 30 September 2008

4 Reconciliation of adjusted profit measures (continued)

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
	£m	£m		£m
Profit attributable to equity holders of the parent
Total profit attributable to equity holders of the parent	7.8	5.5		22.7
Exclude:
- significant items	-	-		0.7
- amortisation of intangible assets	1.8	1.1		3.3
- revaluation of financial instruments	(0.4)	0.6		1.8
- associated tax effects	(0.5)	(0.3)		(0.9)
- profit on disposal of discontinued operations	-	-		(9.9)
Adjusted profit attributable to
equity holders of the parent	8.7	6.9		17.7
	Pence	Pence		Pence
Adjusted earnings per share	18.1	14.4		36.7

Significant items in the year to 31 March 2008 comprised re-organisation costs of £0.7 million.

5 Tax expense

The effective tax rate on profit before tax for the period is 32.7 per cent (2007: 37.0 per cent, year to 31 March 2008: 35.1 per cent). The effective rate of tax on adjusted profit before tax for the period is 33.1 per cent (2007: 34.1 per cent, year to 31 March 2008: 31.3 per cent).

The effective rates for the period have been calculated by applying the Directors' best estimates of the annual ratio of taxation to taxable profits.

  Notes to the Interim Results

_______________________________________________________________________________

For the six months to 30 September 2008

6 Dividends

The Directors have declared an interim dividend of 6.5 pence per share, payable on 12 December 2008 to shareholders on the register at 14 November 2008. In accordance with IAS10, this dividend has not been reflected in the interim results. The amount of this interim dividend is  £3.1 million. 

The following dividends were paid and declared by the Company:

	Six months to 30 September						Year to 31 March
	2008	2008	2007	2007		2008		2008
	Unaudited	Unaudited	Unaudited	Unaudited		Audited		Audited
	Pence per share	£m	Pence per share	£m		Pence per share		£m
Dividends paid
Previous year final	11.0	5.3	10.0	4.8		10.0		4.8
Current year interim	-	-	-	-		6.0		2.9
	11.0	5.3	10.0	4.8		16.0		7.7
Dividends declared
Interim	6.5	3.1	6.0	2.9		6.0		2.9
Final	-	-	-	-		11.0		5.3
	6.5	3.1	6.0	2.9		17.0		8.2

7 Earnings per share

The weighted average number of shares in issue during the period was 48.1 million (2007: 47.7 million, year to 31 March 2008: 47.9 million). The weighted average number of shares on a fully diluted basis, was 48.1 million (2007: 47.9 million, year to 31 March 2008: 48.0 million), after an adjustment for dilutive share options of nil (2007: 0.2 million, year to 31 March 2008: 0.1 million).

Basic earnings per share have been calculated on profit attributable to equity holders of the parent of £7.8 million (2007: £5.5 million, year to 31 March 2008: £22.7 million). The Directors consider that adjusted earnings per share provide a more consistent measure of operating performance. Adjusted earnings per share are calculated based on adjusted profit attributable to equity holders of the parent, calculated as set out in note 4.

8 Acquisition of property, plant & equipment

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
	£m	£m		£m
Continuing operations
Funded by cash	2.8	7.6		12.4
Funded by lease finance	0.1	0.2		0.2
Discontinued operations
Funded by cash	-	0.5		0.6
	2.9	8.3		13.2

  Notes to the Interim Results

_______________________________________________________________________________

For the six months to 30 September 2008

9 Equity attributable to equity holders of the parent

During the period to 30 September 2008, 45,924 shares were issued under the terms of the Umeco SAYE Share Option Scheme at prices ranging from 370.4 pence per share to 462.3 pence per share.

  Notes to the Interim Results

_______________________________________________________________________________

For the six months to 30 September 2008

10 Acquisitions

During the six months to 30 September 2008, £3.7 million was paid in respect of deferred consideration due under the terms of the acquisition of Pattonair Srl, formerly Provest Srl. Details of acquisitions made in the year to 31 March 2008 and the fair value of net assets acquired are set out below.

On 31 August 2007, the Group acquired the entire issued share capital of J. D. Lincoln, Inc. ('Lincoln') for an initial cash consideration of US$59.5 million. Additional cash consideration of up to US$15.0 million is payable based on the earnings before interest, tax, depreciation and amortisation of Lincoln in the twelve months after completion. Lincoln formulates and manufactures a range of pre-impregnated materials primarily used by aerospace tier 2 suppliers for the manufacture of composite interior structures of commercial aircraft. In the period from acquisition to 31 March 2008, Lincoln achieved a profit before tax of £0.2 million, after a charge of £2.0 million in respect of the amortisation of acquired intangible assets. Had the acquisition completed on 1 April 2007, it is estimated that Lincoln would have contributed a further £7.6 million to revenue and £0.1 million to profit before tax, after making certain non-recurring payments to the vendors. Other than the recognition of intangible assets of £20.6 million and a related deferred tax liability, the only fair value adjustments made were the recognition of additional trade & other payables of £0.2 million.

On 21 November 2007, Advanced Composites Group Limited acquired the entire issued share capital of George Cole Technologies Limited which traded as Primco ('Primco') for a cash consideration of £3.0 million. Primco's operations are based in Manchester, and the business develops and manufactures a range of phenolic resin based pre-impregnated materials used in aerospace, defence, industrial, medical and sporting applications.

On 31 August 2007, GRPMS Limited acquired from the Estonian distribution business of Ashland Composite Polymers, part of Ashland Inc., the inventory and fixed assets related to their distribution business. The consideration paid was £0.2 million and there was no goodwill arising.

	Lincoln	Primco	GRPMS Estonia	Total
	£m	£m	£m	£m
Property, plant & equipment	0.8	1.0	0.1	1.9
Intangible assets	20.6	0.4	-	21.0
Inventory	1.4	0.5	0.1	2.0
Trade & other receivables	2.3	1.2	-	3.5
Cash	-	0.2	-	0.2
Trade & other payables	(1.4)	(1.2)	-	(2.6)
Loans & borrowings	(0.2)	-	-	(0.2)
Income tax payable	(0.6)	(0.1)	-	(0.7)
Deferred tax liabilities	(5.8)	(0.1)	-	(5.9)
Net identifiable assets and liabilities	17.1	1.9	0.2	19.2
Goodwill	16.8	1.4	-	18.2
Consideration	33.9	3.3	0.2	37.4
Satisfied by:
Cash consideration paid	29.6	3.0	0.2	32.8
Expenses paid	1.1	0.3	-	1.4
Consideration and expenses accrued	3.2	-	-	3.2
	33.9	3.3	0.2	37.4

  Notes to the preliminary announcement of results

_________________________________________________________________________

For the six months to 30 September 2008

10 Acquisitions (continued)

The goodwill recognised on the acquisitions of Lincoln and Primco is attributable to the skills and technical capabilities of the employees of these companies, and synergies expected to be generated from establishing links between these companies and the Group's existing composites activities. 

Amounts recognised for intangible assets and goodwill are provisional and subject to change for the period of one year from the date of acquisition. Intangible assets have been recognised in respect of customer relationships, product qualifications & approvals, and order books on hand at acquisition.

In addition to payments in respect of acquisitions made in the year to 31 March 2008, £3.6 million was paid in respect of deferred consideration due under the terms of the acquisition of Avionics Mobile Services Limited and the purchase of the minority interest shareholding in Tailored Logistics Corporation, Inc.

11 Discontinued operations

On 1 November 2007, the Group completed the divestment of its Repair & Overhaul business segment to AMETEK, Inc. for a cash consideration of £36.0 million. The divestment was effected by way of the sale of the entire issued share capital of AEM Limited and Antavia SAS to Ametek Holdings B.V., a wholly owned subsidiary of AMETEK, Inc. 

On 31 March 2008, the Group divested its chemicals distribution businesses ('Chemicals'). This was effected by the sale of the entire issued share capital of Aeropia Limited, Aeropia, Inc., and RD Taylor & Company Limited to Haas TCM of the UK Limited, a wholly owned subsidiary of Haas TCM Group, Inc. for a cash consideration of £13.0 million.

The Chemicals operations were not discontinued or classified as held for sale as at 30 September 2007 and the comparative income statement and statement of cash flows have been restated to show these activities as a discontinued operation. Results of these activities have been disclosed separately from continuing operations.

In the year to 31 March 2008, the results of discontinued operations were as follows:

		Repair & Overhaul	Chemicals	Total
		£m	£m	£m
Revenue		15.7	29.8	45.5
Expenses		(14.3)	(28.6)	(42.9)
Profit before tax		1.4	1.2	2.6
Income tax expense		(0.4)	(0.4)	(0.8)
Profit after tax		1.0	0.8	1.8
Profit arising on disposal		2.6	7.3	9.9
Net profit attributable to discontinued operations		3.6	8.1	11.7

  Notes to the preliminary announcement of results

_________________________________________________________________________

For the six months to 30 September 2008

11 Discontinued operations (continued)

In the six months to 30 September 2007, the profit from discontinued operations was as follows:

		Repair & Overhaul	Chemicals	Total
		£m	£m	£m
Revenue		13.3	14.5	27.8
Expenses		(12.2)	(14.1)	(26.3)
Profit before tax		1.1	0.4	1.5
Income tax expense		(0.3)	(0.1)	(0.4)
Net profit attributable to discontinued operations		0.8	0.3	1.1

The divestments had the following effect on the financial position of the Group:

				£m
Property, plant & equipment				5.1
Intangible assets				18.8
Inventories				6.5
Trade & other receivables				11.6
Income tax receivable				0.2
Cash				3.3
Trade & other payables				(9.9)
Loans & borrowings				(2.9)
Income tax payable				(0.6)
Deferred tax liabilities				(0.6)
Net assets disposed of				31.5
Consideration received (£49.0 million, net of disposal costs of £7.6  million which includes a disposal provision of £4.0 million)				(41.4)
Profit arising on disposal				(9.9)

  Notes to the Interim Results

_______________________________________________________________________________

For the six months to 30 September 2008

12 Reconciliation of net cash to movement in net debt

	Six months to			Year to
	30 September			31 March
	2008	2007		2008
	Unaudited	Unaudited		Audited
		Restated
	£m	£m		£m
Net (decrease)/increase in cash	(26.7)	3.8		26.3
Drawdown of bank loans	(15.0)	(47.1)		(67.2)
Drawdown of lease finance	(0.1)	(0.2)		(0.2)
Repayment of bank loans	10.2	-		36.5
Repayment of lease finance liabilities	0.1	0.3		0.4
	(31.5)	(43.2)		(4.2)
Effect of exchange rate fluctuations	(6.4)	1.0		(1.6)
Movement in net debt	(37.9)	(42.2)		(5.8)
Net debt at start of period	(57.6)	(51.8)		(51.8)
Net debt at end of period	(95.5)	(94.0)		(57.6)

Net debt comprises cash balances, bank overdrafts, bank loans and lease finance obligations.

13 Exchange rates

The profit and loss accounts of overseas subsidiaries are translated into sterling at average rates of exchange for the period, balance sheets are translated at period end rates. The main currencies are the US dollar and the Euro. Details of the exchange rates used as follows:

	Six months to 30 September						Year to 31 March
	2008	2008	2007	2007		2008		2008
	Closing rate	Average rate	Closing rate	Average rate		Closing rate		Average rate
US dollar	1.783	1.932	2.037	2.004		1.988		2.007
Euro	1.269	1.260	1.433	1.472		1.254		1.419

  Interim Results

_______________________________________________________________________________

For the six months to 30 September 2008

STATEMENT OF DIRECTORS' RESPONSIBILITIES

This interim report complies with the Disclosure and Transparency Rules (DTR) of the United Kingdom's Financial Services Authority in respect of the requirements to produce a half yearly financial report.  This interim report is the responsibility of, and has been approved by, the Directors of Umeco plc.

The Directors confirm that to the best of their knowledge:

the condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union;

the interim report includes a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months of the financial year and a description of the principal risks and uncertainties for the second six months of the financial year); and

the interim report includes a fair review of the information required by DTR 4.2.8 (disclosure of any material related party transactions and changes therein).

By order of the Board

BD McGowan

Chairman

4 November 2008

FORWARD LOOKING STATEMENTS

This report may contain certain statements about the future outlook for Umeco plc. Although we believe our expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

ENDIR ILFIALVLVIIT

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