5th Aug 2008 07:00
5 August 2008
Interim Management Report for the six months ended 30 June 2008
"Further strong progress"
Meggitt PLC ("Meggitt" or "the Group"), a leading international company specialising in aerospace equipment, sensing and defence systems, today announces unaudited interim results for the six months ended 30 June 2008.
Highlights
2008 |
2007 |
||
Revenue |
£526.6m |
£358.0m |
+47% |
Pro forma 20071 |
£460.0m |
+14% |
|
Profit before tax - underlying2 |
£109.6m |
£69.0m |
+59% |
Pro forma 20071 |
£89.6m |
+22% |
|
Profit before tax |
£75.8m |
£64.9m |
+17% |
EPS - underlying2 |
12.0p |
9.8p |
+22% |
EPS |
8.7p |
8.4p |
+4% |
Dividend |
2.70p |
2.45p |
+10% |
Headline growth of 47% in revenue and 59% in underlying profit before tax.
Revenue up 14% and underlying profit before tax up 22% on a pro forma basis1.
Pro forma1 order intake up 18%.
Underlying earnings per share increased 22%.
Net debt reduced to £786.3m from £815.4m at 31 December 2007 (2.49x underlying EBITDA).
Meggitt's largest ever acquisition, K&F had an excellent first half and continues to trade very well. Synergies on track to meet the previously announced target.
Terry Twigger, Chief Executive, commented:
"This is another great set of results which demonstrate the strength of the Group and the excellent performance of the recently acquired K&F businesses.
Through organic growth and acquisition, Meggitt has developed a strong, broadly based portfolio of technologies and products. Although high oil prices and tight credit conditions are creating uncertainty for the airline industry generally, this strategy of serving balanced end markets with 50% of our sales going to military and energy/industrial markets combined with our wide installed base of products will enable the Group to continue to prosper going forward.
Based on this strong set of results, the Board have increased the interim dividend by 10% to 2.70 pence, and remain confident of maintaining progress in the second half."
Please contact
Terry Twigger, Chief Executive
Stephen Young, Group Finance Director
Andy Mann, Investor Relations
Meggitt PLC
Tel: +44 1202 597597
Charles Ryland or Jeremy Garcia
Buchanan Communications
Tel: +44 20 7466 5000
There will be an interim results presentation at 09:00, 5 August 2008, at the office of Buchanan Communications, 45 Moorfields, London, EC2Y 9AE.
In addition to this the audio webcast of the presentation will be available. To access the facility please visit the following link on:
http://mediaserve.buchanan.uk.com/webcasts/livegold/lrframes.htm
___________________________________________________________
1 "Pro forma" data includes the trading performance of the K&F businesses in 2007 prior to acquisition restated under the Group's accounting policies to provide a more meaningful measure of the organic growth of the enlarged Group.
2 Underlying profit and EPS are used by the Board to measure the trading performance of the Group and exclude certain items, principally amortisation of acquired intangibles, revaluation of inventory to selling price on acquisition, exceptional items and the marking to market of financial instruments as set out in notes 4 and 10.
Interim Management Report for the six months ended 30 June 2008
Results
Meggitt is pleased to report excellent progress in the first half of 2008.
Headline growth was an impressive 47% increase in revenue to £526.6 million (2007: £358.0 million) and 59% increase in underlying profit before tax to £109.6 million (2007: £69.0 million) in part reflecting the inclusion of K&F. Underlying profit is used by the Board to measure the underlying trading performance of the Group and excludes exceptional operating items, the amortisation of acquired intangibles and marking to market financial instruments amongst others, as detailed in note 4.
On a pro forma basis the Group delivered excellent organic growth in the first half. Revenue in total increased by 14% to £526.6 million (2007: £460.0 million).
Pro forma civil aerospace revenues increased by 17% to £264.4 million, military revenues rose by 9% to £191.3 million and revenues in energy and industrial/other markets grew by 19% to £70.9 million. With pro forma order intake up 18% year on year, Meggitt expects to make further progress in the second half of the year.
The Group is well balanced between civil and military markets and also between original equipment sales and the aftermarket. In total, civil aerospace markets accounted for 50% of Group revenue and military markets 37%. The aftermarket in aggregate (civil plus military) accounted for 48%.
Pro forma underlying operating profit increased by 18% to £135.5 million (2007: £114.6 million) and pro forma underlying profit before tax grew 22% to £109.6 million (2007: £89.6 million).
The underlying tax rate for the Group increased to 28% in line with previous guidance and underlying EPS increased by 22% to 12.0 pence (2007: 9.8 pence).
On a statutory basis, profit before tax increased by 17% to £75.8 million (2007: £64.9 million) and EPS increased by 4% to 8.7 pence (2007: 8.4 pence).
Cash inflow from underlying operations increased to £121.0 million (2007: £63.6 million).
The Group continues to make significant investments in expanding, consolidating and relocating manufacturing facilities in 2008, which drove total capital expenditure of £21.9 million in the first six months (2007: £14.0 million).
Internally funded expenditure on research and development (R&D) increased by 16% to £27.6 million (2007: £23.7 million). Total expenditure on R&D, including the customer funded element increased to £34.8 million (2007: £32.0 million) or 7% of sales.
In the first half the Group made £8.8 million of additional pension contributions as part of an agreed plan to reduce the pension deficit over a number of years (2007: £0.3 million).
After all investment activity, interest and taxation and a net £10.6 million from the sale of S-TEC and acquisition of Ferroperm, the Group generated net cash of £31.4 million.
Net debt has decreased from £815.4 million at December 2007 to £786.3 million, less than 2.5x underlying EBITDA. Underlying interest cover was 5.2x (2007: 5.8x). The Group had headroom within its committed bank facilities of £269 million at 30 June 2008.
As a result of this strong performance the Board is increasing the interim dividend by 10% to 2.70 pence (2007: 2.45 pence).
Strategy
Meggitt's strategy is to develop leading positions in markets with high technology content and where its products have long lives operating in extreme environments. A key objective is not only to sell the original equipment but also to share in a continuing stream of highly profitable aftermarket revenues over many years, providing long term stable and profitable returns, which are very cash generative. Participation in industries such as aerospace, where the life of an aircraft is often more than 30 years, defence and energy enable Meggitt to achieve these objectives. Furthermore, the complementary mix of both civil and military, and original equipment and aftermarket, enables Meggitt to balance effectively the business cycles in these markets.
The Group continues to invest in developing its infrastructure to meet both the evolving nature of the industry and the expectations of its customers. By expanding the development of our senior account executives with major customers, Meggitt is positioned to provide larger and more integrated systems as its customers increasingly look to reduce their supplier base.
Operational excellence remains a key feature of this strategy, leveraged through a central function to cultivate best practice throughout the Group. Considerable success is being experienced in lowering the cost and complexity of procurement for the Group. Meggitt is also expanding its low cost manufacturing facilities with the approval of a third factory in Xiamen, China, and the construction of a second factory in Mexico.
Meggitt continues to evaluate opportunities across the Group to increase collaboration and to share services. For example, its information services function is focused on standardising systems and applications, and providing the base connectivity for the secure communication and informationߛsharing needed for customer opportunities that would benefit from a Group response.
Markets
First half revenue by end market (%)
OEM (%) |
Aftermarket (%) |
Total (%) |
|
Civil |
|||
Large Jet |
8 |
17 |
25 |
Regional |
2 |
9 |
11 |
Business Jet |
3 |
5 |
8 |
Other |
4 |
2 |
6 |
---- |
---- |
---- |
|
Sub-Total |
17 |
33 |
50 |
Military |
22 |
15 |
37 |
Other Markets |
13 |
- |
13 |
---- |
---- |
----- |
|
Total |
52 |
48 |
100 |
== |
== |
=== |
In the first half of 2008, 17% of Meggitt's revenues were from new civil aircraft. The outlook for deliveries looks robust. Despite the current high oil price and restricted credit markets, manufacturers' order books are at record levels. Airbus and Boeing for example, have order books amounting to approximately 6ߛ7 years of future deliveries, have experienced minimal cancellations and have taken just under 1,000 new orders in the first six months of 2008 compared with deliveries of just under 500 in the same period. Orders for regional aircraft continue to exceed deliveries and manufacturers have multi-year order backlogs. Demand for business jets also remains buoyant with waiting lists for some products out to 2012 and beyond.
Sales of spares and repairs for civil aircraft accounted for 33% of first half revenues. Meggitt products are on virtually every commercial aircraft in service today, from the largest wide-body transporters to very light business jets. Global air traffic has averaged 5% annual growth over the past 30 years and has quickly recovered from previous oil price shocks and economic downturns. However, we are watching airline announcements closely. As at the end of July, a number of mainly US airlines have announced retirements of existing aircraft, either for the winter season or permanently, covering circa 4% of our large jet fleet and circa 2% of our regional fleet. The impact of these retirements on Group revenues is not material.
A further 37% of revenue is generated from military products. The USA is the world's principal purchaser of military equipment and accounts for around 50% of expenditure. The US Department of Defense FY08 budget base request at $472 billion is up 8% year on year and increases a further 9% in FY09 to $515 billion. In addition, supplemental funding requests to cover current conflicts are on top of that and are approved in phases as the year progresses. $187 billion has been approved for FY08, together with an initial $67 billion out of an estimated $155 billion for FY09. Meggitt is very well placed to serve this market with high ship set values on new aircraft and helicopters such as F35, F22, Typhoon, BlackHawk, V22 Osprey and AH-64 Apache and content on virtually every military aircraft in service.
The remaining 13% of Meggitt's revenues come from energy and other markets. The global energy market is experiencing major growth in demand. The US Government's Energy Information Administration has forecast a doubling in demand worldwide for electricity before 2030, with the highest growth rates in China and India. New power generation facilities of all types are being commissioned, providing significant opportunities for our specialist monitoring, thermal management and fluid control technologies. This is the fastest growing area of Meggitt's specialist markets. Higher oil prices have also increased worldwide demand in the oil and gas production sector, where Meggitt saw unprecedented demand for its compact heat transfer engineering products in 2007. Our energy revenues in total have almost doubled between 2004 and 2007 and have increased 29% year on year in the first half.
Corporate activity
The Group has continued its strategy of making valueߛenhancing acquisitions and disposals which complement existing businesses.
On 3 January 2008, Meggitt completed the sale of its non-core company S-TEC Corporation to Cobham plc for $38 million, and on 7 January 2008, Meggitt acquired Ferroperm for £9.3 million (of which £7.8 million was paid in cash and £1.5 million was deferred).
Ferroperm has over 50 employees and is located in Kvistgaard, Denmark. It is a world leader in the manufacture of advanced piezo-electric ceramic materials for a range of specialist sensor applications, such as vibration, dynamic pressure, underwater acoustics and medical ultrasound.
Integration update
The K&F integration is progressing well with synergies on track to meet the March 2008 increased target of £22 million annual savings by 2010. We have already implemented or approved the specific actions which will deliver the £10 million targeted savings for 2008.
Operational highlights
AEROSPACE EQUIPMENT (67% of Group revenue)
Revenue increased 88% to £351.3 million (2007: £186.7 million). On a pro forma basis growth was 22%.
Underlying operating profit increased 107% to £104.5 million (2007: £50.5 million). On a pro forma basis growth was 21%.
Order intake was up 18% on a pro forma basis compared with the first half of last year.
Order intake at Engineered Fabrics Corporation (EFC), acquired with K&F, has reflected significant growth in demand for all its products including its crash resistant, self-seal fuel tanks which are used by almost all US helicopters. As a result of this continuing strong demand, EFC will, by the end of 2008, have increased the size of its facility almost 40% to over 600,000 square feet since acquisition.
Meggitt Safety Systems supplies fire detection equipment on all the Airbus fleet. It consolidated this position when it was awarded a major contract to design, develop, manufacture and support the fire protection system on the new A350 XWB aircraft.
Business aircraft are a critical part of our strategy for wheels and brakes. During the first half Gulfstream received firm orders for its newly launched long range business jet, the G650 which has an entry into service date of 2012. Meggitt Aircraft Braking Systems (MABS) will provide the complete braking system for the G650. Several other Meggitt companies have been selected to provide key components for the aircraft and its Rolls-Royce BR725 engines, for which we are the sensors and ignition integrator. This is potentially our biggest ever contract in business aviation which should provide a strong revenue stream over the life of the programme.
Military aircraft are another important element of our wheels and brakes strategy, and within this there continues to be significant focus on developing technology to support unmanned air vehicles (UAVs). MABS has been selected to supply the wheels, electrically activated brakes and brake control systems on the latest European UAV demonstrator programme. The agreement will see them deliver equipment for the UK's Mantis UAS Advanced Concept Technology Demonstrator programme. This emphasises our position at the forefront of the European UAV marketplace, following similar wins on Barracuda and Taranis.
In line with the Group strategy of driving operational excellence we are currently transferring the production of some of our ground fuelling and polymer seals businesses to our expanded facility in Xiamen, China.
The quality of service and delivery performance provided by Meggitt continues to be recognised by its customers. Gulfstream awarded MABS, for the second year running, their prestigious "Supplier of the Year" award. MABS also won an award from Brazilian aircraft manufacturer Embraer for its 'outstanding performance' in the development of wheels, brakes and brake control for the Phenom 300, a new light category executive jet.
SENSING SYSTEMS (23% of Group revenue)
Revenue increased 7% to £122.2 million (2007: £114.2 million).
Underlying operating profit increased by 17% to £22.6 million (2007: £19.3 million).
Sensing Systems' order intake was up 20% compared with the first half of last year.
Sensing Systems benefits from our continued investment in R&D, totalling £12.9 million (11% of segment revenue). These investments focused on the development of condition monitoring and high performance sensors for recent programme wins as well as new opportunities. Developments in monitoring requirements for aerospace engines and the energy markets are the major beneficiaries of this R&D investment.
Recent milestones in aerospace include starting production of the advanced engine vibration monitoring systems for new Boeing 777 and 737 Next Generation aircraft. These continue to build on our position as the world leader in aircraft engine vibration monitoring.
In energy our condition monitoring systems continue to be an integral part of our customers' efforts to increase efficiency and reduce downtime. For example, Siemens have installed our VM600 protection and condition monitoring system on the world's most powerful gas turbine, Irsching 4, near Ingolstadt, Germany. Data from our system will, among other things, enable experts in Siemens' Diagnostic Centres to remotely calculate balancing for turbines without the need for an onߛsite visit, saving time and cost. We are also pursuing opportunities in emerging markets such as Brazil, China and India. For example, we are the leading supplier of condition monitoring equipment to the Brazilian bioߛfuel industry which converts byߛproducts from the sugar cane harvest into bioߛfuels. We have completed over 60 installations in Brazil in the last three years.
These inߛhouse developments are complemented by acquiring or licensing technology where applicable; the acquisition of Ferroperm in Denmark is a good example of this, as is joining international research projects. An example of this is Meggitt's commitment to Integrated Vehicle Health Management (IVHM) research, offered as part of the new IVHM Centre of Excellence (CoE), jointly launched by Cranfield University and Boeing in late 2007. We have made a five-year commitment to this growing area of IVHM, which advances existing concepts of vehicle maintenance, repair and overhaul, with the intent to develop a condition based maintenance management capability, for high-tech, high-value vehicles.
Meggitt Avionics has been selected by Korea Aerospace Industries Ltd (KAI) to supply integrated standby instruments for the new Korean utility helicopter, the primary rotary transport for the Korean armed forces. The programme is the first collaboration between Meggitt Avionics and KAI on a rotary platform and will extend to a planned 200+ rotorcraft over the next ten years. Meggitt Avionics has also benefited from recent Eurofighter orders for its air data sensors.
Sensing Systems is well positioned for continued growth going forward.
DEFENCE SYSTEMS (10% of Group revenue)
As expected, revenue declined 7% to £53.1 million (2007: £57.1 million) and underlying operating profit reduced 3% to £8.4 million (2007: £8.7 million).
Defence Systems' order book was up 12% compared with December 2007.
With the benefit of the improved order book and lower costs from the new integrated Atlanta facility, we expect a resumption in growth in the second half.
Combat Systems is enjoying strong order intake. Recent orders include an extension to our Thermal Management System (TMS) contract for the M1A2 Main Battle Tank from General Dynamics Land Systems. This extension is a $64.9 million multiߛyear contract for vapour system compression units and air handling units which are to be delivered between April 2009
and April 2013 in support of the US Army's fleet modernisation effort. To date we have delivered over 1,100 TMS units with a further 647 units covered by the new contract. In addition to OE production we have received an additional $17 million contract for reset TMS units and spare parts, an activity which is expected to continue across the service life of these tanks.
Ammunition Handling Systems continues to grow with the Future Combat System 120mm Autoloader successfully entering the integration stage into the Mounted Combat System vehicle. This programme is expected to provide revenues of $500 million once it enters production.
The Minneapolis live fire operation is now consolidated into the Atlanta facility and will benefit our customers by providing live fire and virtual simulation products in one location, as well as providing cost savings.
Since its launch at the Paris air show in 2007, 50 GT-400 glide targets have been sold to customers in the US, Australia, the Middle East and Europe. The target has been certified by the European Aviation Safety Agency for carriage on the Falcon 20 aircraft and is carried by the Learjet. Meggitt continues to certify the product on the entire range of target towing aircraft.
Outlook
Meggitt has delivered another excellent set of results in the first half of 2008 and the strong order intake gives confidence that the Group will continue to perform in the second half.
Beyond 2008, the outlook for our military and other markets which account for 50% of our sales remains good. Energy markets are buoyant and military budgets look set to continue to rise. Production of new civil aircraft is expected to continue at least at current rates underpinned by record order books. Sales of spares and repairs to the civil market have less visibility and will be affected by economic conditions and oil price levels. However, historically growth in air travel has been resilient in the face of oil price spikes and economic downturns and the capacity reductions announced so far will not have a material effect on the Group.
K&F is proving to be an excellent acquisition. It is trading very well and the integration is on schedule, with synergies in line with previously increased targets.
The Group remains on track to deliver further growth in the second half of this year. In recognition of this continued strong performance, the Board has increased the interim dividend by 10%.
CONSOLIDATED UNAUDITED INCOME STATEMENT
For the six months ended 30 June 2008
|
Notes
|
Six months
ended
30 June
2008
£m
|
Six months
ended
30 June
2007
£m
|
Continuing operations
|
|
|
|
|
|
|
|
Revenue
|
3
|
526.6
|
358.0
|
|
|
|
|
Cost of sales
|
|
(288.1)
|
(197.4)
|
|
|
|
|
Gross profit
|
|
238.5
|
160.6
|
|
|
|
|
Net operating costs
|
|
(136.8)
|
(88.9)
|
|
|
|
|
Operating profit*
|
3
|
101.7
|
71.7
|
|
|
|
|
Finance income
|
7
|
15.9
|
15.6
|
Finance costs
|
8
|
(41.8)
|
(22.4)
|
Net finance costs
|
|
(25.9)
|
(6.8)
|
|
|
|
|
Profit before tax from continuing operations**
|
|
75.8
|
64.9
|
|
|
|
|
Tax
|
9
|
(18.3)
|
(16.9)
|
|
|
|
|
Profit for the period from continuing operations
attributable to equity shareholders
|
|
57.5
|
48.0
|
|
|
|
|
|
|
|
|
Earnings per share (pence):
|
|
|
|
Basic
|
10
|
8.7p
|
8.4p
|
Diluted
|
10
|
8.7p
|
8.3p
|
|
|
|
|
|
|
|
|
|
|
|
|
* Underlying operating profit
|
4
|
135.5
|
78.5
|
** Underlying profit before tax
|
4
|
109.6
|
69.0
|
|
|
|
|
CONSOLIDATED UNAUDITED BALANCE SHEET
As at 30 June 2008
|
Notes
|
30 June
2008
£m
|
31 December
2007
Restated
£m
|
30 June
2007
Restated
£m
|
Non-current assets
|
|
|
|
|
Goodwill
|
15
|
1,075.5
|
1,067.8
|
1,071.8
|
Development costs
|
15
|
68.3
|
57.7
|
47.0
|
Programme participation costs
|
15
|
130.2
|
121.8
|
110.8
|
Other intangible assets
|
15
|
718.6
|
741.7
|
766.2
|
Property, plant and equipment
|
16
|
201.3
|
191.2
|
174.6
|
Trade and other receivables
|
|
15.0
|
14.4
|
21.0
|
Derivative financial instruments
|
|
0.7
|
-
|
3.4
|
Deferred tax assets
|
|
48.7
|
41.4
|
22.4
|
Assets held for sale
|
|
-
|
14.5
|
-
|
|
|
2,258.3
|
2,250.5
|
2,217.2
|
Current assets
|
|
|
|
|
Inventories
|
|
224.3
|
204.6
|
231.2
|
Trade and other receivables
|
|
226.0
|
214.6
|
194.9
|
Derivative financial instruments
|
|
3.7
|
3.6
|
6.9
|
Current tax recoverable
|
|
8.4
|
7.8
|
0.3
|
Cash and cash equivalents
|
18
|
64.0
|
64.9
|
113.9
|
|
|
526.4
|
495.5
|
547.2
|
|
|
|
|
|
Total assets
|
|
2,784.7
|
2,746.0
|
2,764.4
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
|
(230.9)
|
(227.1)
|
(245.9)
|
External dividend payable
|
|
(37.9)
|
-
|
(26.2)
|
Derivative financial instruments
|
|
(2.2)
|
(0.9)
|
-
|
Current tax liabilities
|
|
(57.9)
|
(44.2)
|
(40.2)
|
Obligations under finance leases
|
18
|
(0.7)
|
(0.5)
|
(0.4)
|
Bank and other borrowings
|
17
|
(11.0)
|
(16.7)
|
(164.6)
|
Provisions
|
19
|
(14.3)
|
(18.0)
|
(13.5)
|
|
|
(354.9)
|
(307.4)
|
(490.8)
|
|
|
|
|
|
Net current assets
|
|
171.5
|
188.1
|
56.4
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Trade and other payables
|
|
(8.6)
|
(7.0)
|
(5.0)
|
Derivative financial instruments
|
|
(13.3)
|
(10.7)
|
(1.2)
|
Deferred tax liabilities
|
|
(259.4)
|
(265.5)
|
(266.5)
|
Obligations under finance leases
|
18
|
(4.8)
|
(5.0)
|
(5.0)
|
Bank and other borrowings
|
17
|
(833.8)
|
(858.1)
|
(753.8)
|
Provisions
|
19
|
(65.3)
|
(74.0)
|
(69.8)
|
Retirement benefit obligations
|
20
|
(188.5)
|
(153.3)
|
(146.1)
|
Liabilities directly associated with assets classified as held for sale
|
|
-
|
(1.6)
|
-
|
|
|
(1,373.7)
|
(1,375.2)
|
(1,247.4)
|
|
|
|
|
|
Total liabilities
|
|
(1,728.6)
|
(1,682.6)
|
(1,738.2)
|
|
|
|
|
|
Net assets
|
|
1,056.1
|
1,063.4
|
1,026.2
|
|
|
|
|
|
Equity
|
|
|
|
|
Share capital
|
|
33.0
|
32.9
|
32.8
|
Share premium
|
|
783.3
|
781.6
|
773.1
|
Other reserves
|
|
14.1
|
14.1
|
14.1
|
Hedging and translation reserves
|
|
(4.5)
|
(6.8)
|
(13.6)
|
Retained earnings
|
|
230.2
|
241.6
|
219.8
|
Total equity attributable to equity shareholders
|
23
|
1,056.1
|
1,063.4
|
1,026.2
|
CONSOLIDATED UNAUDITED CASH FLOW STATEMENT
For the six months ended 30 June 2008
Notes |
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Cash inflow from underlying operations |
121.0 |
63.6 |
|
Retirement benefit obligation deficit payments |
24 |
(8.8) |
(0.3) |
Cash outflow from exceptional operating costs |
5 |
(9.2) |
(0.8) |
Cash inflow from operations |
24 |
103.0 |
62.5 |
Interest received |
1.1 |
2.7 |
|
Interest paid |
(25.5) |
(9.7) |
|
Tax paid |
(12.1) |
(11.6) |
|
Cash inflow from operating activities |
66.5 |
43.9 |
|
Purchase of subsidiaries |
14 |
(8.1) |
(554.5) |
Net cash acquired with subsidiaries |
- |
11.5 |
|
Capitalised internal development costs |
15 |
(10.1) |
(9.4) |
Capitalised programme participation costs |
15 |
(14.6) |
(4.0) |
Purchase of other intangible assets |
15 |
(1.9) |
(1.5) |
Purchase of property, plant and equipment |
(21.3) |
(13.0) |
|
Proceeds from disposal of property, plant and equipment |
0.4 |
0.3 |
|
Proceeds from disposal of subsidiaries |
18.7 |
- |
|
Cash outflow from investing activities |
(36.9) |
(570.6) |
|
Issue of equity share capital |
23 |
1.8 |
437.8 |
Expenses of issue of equity share capital |
- |
(9.8) |
|
Proceeds from borrowings |
17 |
13.0 |
574.7 |
Debt issue costs paid |
17 |
- |
(0.9) |
Repayments of borrowings |
17 |
(46.2) |
(402.5) |
Cash (outflow)/inflow from financing activities |
(31.4) |
599.3 |
|
Net (decrease)/increase in cash and cash equivalents |
(1.8) |
72.6 |
|
Cash and cash equivalents at start of period |
64.9 |
43.6 |
|
Exchange gains/(losses) on cash and cash equivalents |
0.9 |
(2.3) |
|
Cash and cash equivalents at end of period |
64.0 |
113.9 |
CONSOLIDATED UNAUDITED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the six months ended 30 June 2008
Notes |
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Currency translation gains/(losses) |
2.1 |
(7.9) |
|
Current tax (charge)/credit on currency translation movements |
(0.6) |
0.5 |
|
Currency translation loss transferred to profit on sale of business |
13 |
1.0 |
- |
Actuarial (losses)/gains |
(41.4) |
31.6 |
|
Deferred tax credit/(charge) on actuarial movements |
11.6 |
(9.5) |
|
Losses on cash flow hedges |
(0.3) |
(0.5) |
|
Deferred tax credit on cash flow hedge movements |
0.1 |
0.2 |
|
Net (expense)/income recorded directly in equity |
(27.5) |
14.4 |
|
Profit for the period |
57.5 |
48.0 |
|
Total recognised income for the period |
23 |
30.0 |
62.4 |
NOTES TO THE INTERIM MANAGEMENT REPORT
For the six months ended 30 June 2008
1. General information
The condensed consolidated financial information presented in this document has not been audited or reviewed and does not constitute Group statutory accounts as defined in section 240 of the Companies Act 1985. Group statutory accounts for the year ended 31 December 2007 were approved by the Board of Directors on 3 March 2008 and delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under Section 237 of the Companies Act 1985.
2. Basis of preparation
The condensed consolidated financial information for the six months ended 30 June 2008 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim financial reporting" as adopted by the European Union. The condensed consolidated financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2007.
Except as disclosed below the condensed consolidated financial statements have been prepared using the same accounting policies adopted in the annual financial statements for the year ended 31 December 2007.
The tax charge for the interim period has been calculated using the expected effective tax rates for each tax jurisdiction for the year ended 31 December 2008. These rates have been applied to the preߛtax profits made in each jurisdiction for the six months ended 30 June 2008.
The following amendments to existing standards, new standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2008 but are not currently relevant for the Group:
IFRIC 12, "Service Concession arrangements".
IFRIC 14, "IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction".
The following amendments to existing standards, new standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2008 and have not been early adopted:
IFRS 2 (amendment), "Share-based payment" effective for annual periods beginning on or after 1 January 2009. This amendment is not expected to have a significant effect on the Group.
IFRS 3 (amendment), "Business combinations" and consequential amendments to IAS 27, "Consolidated and separate financial statements", IAS 28, "Investments in associates" and IAS 31, "Interests in joint ventures", effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 July 2009. The amendment to IFRS 3 will impact the Group when adopted, requiring changes for instance, to the way the Group accounts for contingent consideration and acquisition expenses. The expected impact is still being assessed in detail by management. The Group does not have any associates or significant joint ventures.
IFRS 8, "Operating segments", effective for annual periods beginning on or after 1 January 2009. IFRS 8 replaces IAS 14 "Segment reporting" and requires a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes. The expected impact is still being assessed in detail by management.
2. Basis of preparation (continued)
IAS 1 (amendment), "Presentation of financial statements", effective for annual periods beginning on or after 1 January 2009. This amendment is not expected to have a significant effect on the Group.
IAS 23 (amendment), "Borrowing costs", effective for annual periods beginning on or after 1 January 2009. This amendment is not expected to have a significant effect on the Group.
IAS 27, (revised), "Consolidated and separate financial statements", effective for annual periods beginning on or after 1 July 2009. This amendment is not expected to have a significant effect on the Group.
IAS 32 (amendment), "Financial instruments: presentation", effective for annual periods beginning on or after 1 January 2009. This amendment is not expected to have a significant effect on the Group.
IFRIC 13, "Customer loyalty programmes", effective for annual periods beginning on or after 1 July 2008. This amendment is not expected to have a significant effect on the Group.
IFRIC 15, "Agreements for construction of real estates", effective for annual periods beginning on or after 1 January 2009. This amendment is not expected to have a significant effect on the Group.
IFRIC 16, "Hedges of a net investment in a foreign operation" effective for annual periods beginning on or after 1 October 2008. This amendment is not expected to have a significant effect on the Group.
3. Segmental analysis
The Group's primary segments are its business segments.
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Revenue |
||
Aerospace Equipment |
351.3 |
186.7 |
Sensing Systems |
122.2 |
114.2 |
Defence Systems |
53.1 |
57.1 |
526.6 |
358.0 |
|
Underlying operating profit (note 4) |
||
Aerospace Equipment |
104.5 |
50.5 |
Sensing Systems |
22.6 |
19.3 |
Defence Systems |
8.4 |
8.7 |
135.5 |
78.5 |
|
Operating profit |
||
Aerospace Equipment |
76.1 |
47.8 |
Sensing Systems |
23.4 |
18.6 |
Defence Systems |
2.2 |
5.3 |
101.7 |
71.7 |
4. Reconciliations between profit and underlying profit
Underlying profit is used by the Board to measure and monitor the underlying trading performance of the Group. It excludes certain items as shown below:
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Operating profit |
101.7 |
71.7 |
Exceptional operating items (note 5) |
6.0 |
0.5 |
Amortisation of intangibles acquired in business combinations (note 15) |
28.7 |
9.2 |
Disposal of inventory revalued in business combinations |
0.3 |
- |
Financial instruments (note 6) |
(1.2) |
(2.9) |
Adjustments to operating profit |
33.8 |
6.8 |
Underlying operating profit |
135.5 |
78.5 |
Profit before tax |
75.8 |
64.9 |
Adjustments to operating profit per above |
33.8 |
6.8 |
Exceptional finance income (note 5) |
- |
(2.0) |
Exceptional finance costs (note 5) |
- |
(0.7) |
Adjustments to profit before tax |
33.8 |
4.1 |
Underlying profit before tax |
109.6 |
69.0 |
Profit for the period |
57.5 |
48.0 |
Adjustments to profit before tax per above |
33.8 |
4.1 |
Tax effect of adjustments to profit before tax |
(12.4) |
(1.7) |
21.4 |
2.4 |
|
Underlying profit for the period |
78.9 |
50.4 |
5. Exceptional items
Items which are significant by virtue of their size or nature and which are considered non-recurring are classified as exceptional items.
Exceptional net operating costs
Exceptional net operating costs includes a charge of £7.4 million (2007: £0.5 million) which principally relates to the onߛgoing integration of the recently acquired K&F Industries Holdings Inc ("K&F") and Firearms Training Systems Inc ("FATS"). Total cash spend in the period was £9.2 million (2007: £0.8 million).
In January 2008 the Group completed the disposal of S-TEC Corporation and recorded a profit of £1.4 million which has been treated as an exceptional item.
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Integration of businesses |
7.4 |
0.5 |
Profit on sale of S-TEC Corporation (note 13) |
(1.4) |
- |
Total |
6.0 |
0.5 |
Exceptional net finance income
In connection with the acquisition of K&F, finance income on cash raised by the rights issue and finance costs associated with new debt facilities were treated as exceptional net finance income for the period from completion of the rights issue on 18 April 2007 to completion of the acquisition on 22 June 2007.
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Rights issue - Interest on bank deposits |
- |
(2.0) |
Rights issue - Reduced interest payable net of costs of new facilities |
- |
(0.7) |
Total |
- |
(2.7) |
Analysed as: |
||
Exceptional finance income (note 4) |
- |
(2.0) |
Exceptional finance costs (note 4) |
- |
(0.7) |
Total |
- |
(2.7) |
6. Financial instruments
Although the Group uses foreign currency forward contracts to hedge against foreign currency exposures it has decided that the costs of meeting the extensive documentation required to be able to apply hedge accounting under IAS 39 ("Financial Instruments: Recognition and Measurement") are not merited. The Group's underlying profit figures exclude amounts which would not have been recorded if hedge accounting had been applied.
Where interest rate derivatives do not qualify to be hedge accounted, movements in the fair value of these derivatives are excluded from underlying profit. Where interest rate derivatives do qualify to be accounted for as fair value hedges, any difference between the movement in the fair values of the derivatives and in the fair value of fixed rate borrowings is excluded from underlying profit. Any gains or losses arising from the requirement to continue to measure fixed rate borrowings at fair value after the associated interest rate derivatives have matured or have been cancelled are also excluded from underlying profit.
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Movement in the fair value of foreign currency forward contracts |
1.2 |
(2.2) |
Retranslation of net foreign currency assets and liabilities at spot rate |
(0.8) |
1.1 |
Movement in the fair value of interest rate derivatives |
- |
3.5 |
Movement in the fair value of associated fixed interest rate borrowings |
0.8 |
0.5 |
Total gain |
1.2 |
2.9 |
7. Finance income
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Interest on bank deposits |
0.3 |
2.3 |
Unwinding of interest on other receivables |
0.5 |
0.5 |
Expected return on retirement benefit scheme assets |
15.0 |
12.4 |
Other finance income |
0.1 |
0.4 |
Total |
15.9 |
15.6 |
8. Finance costs
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Interest on bank borrowings |
19.1 |
6.2 |
Interest on USD 250 million senior notes |
3.4 |
3.4 |
Interest on finance lease obligations |
0.2 |
- |
Unwinding of interest on retirement benefit scheme liabilities |
17.6 |
12.0 |
Unwinding of interest on provisions (note 19) |
0.8 |
0.5 |
Other finance costs |
0.7 |
0.3 |
Total |
41.8 |
22.4 |
9. Tax
The tax charge for the period has been calculated using the expected tax rate for the year for each tax jurisdiction. These rates have been applied to the preߛtax profits made in each jurisdiction for the six months to 30 June 2008.
10. Earnings per share
The calculation of earnings per ordinary share is based on profits of £57.5 million (2007: £48.0 million) and on the weighted average 658.7 million (2007: 568.3 million) ordinary shares in issue during the six months to 30 June 2008.
The calculation of diluted earnings per ordinary share is based on the same profits as used in the calculation of basic earnings per ordinary share. The weighted average number of ordinary shares of 660.3 million (2007: 571.8 million) used in the calculation is based on the weighted average number used in the calculation of basic earnings per share adjusted for the effect of options.
Underlying earnings per share is based on underlying profit (see note 4) and is calculated below:
Six months ended 30 June 2008 pence |
Six months ended 30 June 2007 pence |
|
Basic earnings per share |
8.7 |
8.4 |
Add back effects of: |
||
Exceptional net operating costs |
0.6 |
- |
Amortisation of intangibles acquired in business combinations |
2.8 |
1.1 |
Financial instruments |
(0.1) |
(0.3) |
Exceptional finance income |
- |
(0.2) |
Exceptional finance costs |
- |
(0.1) |
Rights issue * |
- |
0.9 |
Underlying earnings per share |
12.0 |
9.8 |
* As referred to in note 5 the Group excluded exceptional net finance income arising from the rights issue for the period from when the rights issue proceeds were received on 18 April 2007 to 22 June 2007, the date when the acquisition of K&F was completed. For the purposes of underlying EPS for 2007 the Group adjusted the weighted average number of shares used to exclude the effect of the new shares for this same period. The weighted average number of shares used for underlying EPS for the six months ended 30 June 2007 was 516.3 million.
11. Dividends
The Directors have declared an interim net dividend of 2.70 pence per ordinary share (2007: 2.45 pence) which will be paid on 3 October 2008 to shareholders on the register on 15 August 2008. A scrip dividend will be available for shareholders who wish to take the dividend in the form of shares rather than cash. As the dividend was approved by the Directors after 30 June 2008 the dividend cost of £18.0 million (2007: £16.1 million) is not recorded as a liability at 30 June 2008.
12. Related party transactions
The remuneration of the key management personnel of the Group including executive directors is set out below:
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Wages and salaries |
1.9 |
1.6 |
Social security costs |
0.3 |
0.2 |
Pension costs |
0.1 |
0.1 |
Share based payments |
1.0 |
1.0 |
Total |
3.3 |
2.9 |
13. Disposal of business
On 3 January 2008 the Group completed the disposal of S-TEC Corporation for a net consideration of £15.6 million.
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Net assets disposed of |
13.2 |
- |
Currency translation differences transferred from equity |
1.0 |
- |
14.2 |
- |
|
Net consideration |
15.6 |
- |
Profit on disposal (note 5) |
1.4 |
- |
14. Business combinations
On 7 January the Group acquired 100% of the share capital of Ferroperm Piezoceramics A/S ("Ferroperm"), a business that manufactures advanced piezo-electric ceramic materials for specialist sensor applications, for a cash consideration of £9.3 million. The impact of Ferroperm on the income statement for the period ended 30 June 2008 was not significant.
The book value and provisional fair value of net assets acquired are as follows:
Book value £m |
Fair value £m |
|
Non-current assets |
||
Goodwill (note 15) |
- |
5.1 |
Other intangible assets (note 15) |
0.3 |
4.3 |
Property, plant and equipment (note 16) |
0.7 |
0.7 |
1.0 |
10.1 |
|
Current assets |
||
Inventories |
0.9 |
1.1 |
Trade and other receivables |
0.6 |
0.7 |
1.5 |
1.8 |
|
Total assets |
2.5 |
11.9 |
Current liabilities |
||
Trade and other payables |
(0.3) |
(0.4) |
Current tax liabilities |
(0.2) |
(0.2) |
Bank and other borrowings (note 17) |
(0.8) |
(0.8) |
Provisions (note 19) |
(0.1) |
(0.1) |
(1.4) |
(1.5) |
|
Net current assets |
0.1 |
0.3 |
Non-current liabilities |
||
Deferred tax liabilities |
- |
(1.1) |
- |
(1.1) |
|
Total liabilities |
(1.4) |
(2.6) |
Net assets acquired |
1.1 |
9.3 |
£m |
|
Consideration satisfied in cash (including costs) |
7.8 |
Deferred consideration |
1.5 |
Total consideration |
9.3 |
Total cash consideration paid in respect of acquisitions totalled £8.1 million of which £7.8 million was paid in respect of Ferroperm and £0.3 million in respect of acquisitions completed in earlier periods.
15. Intangible assets
Goodwill |
Development costs |
Programme participation costs |
Other intangible assets |
|
£m |
£m |
£m |
£m |
|
At 1 January 2007 |
564.0 |
31.9 |
33.8 |
219.1 |
Exchange rate adjustments |
(8.6) |
(0.6) |
(0.3) |
(3.1) |
Businesses acquired |
516.4 |
7.0 |
75.2 |
559.4 |
Additions |
- |
9.4 |
4.0 |
1.5 |
Amortisation charge |
- |
(0.7) |
(1.9) |
(10.7)* |
At 30 June 2007 as restated |
1,071.8 |
47.0 |
110.8 |
766.2 |
At 1 January 2008 : |
||||
As previously reported |
1,071.2 |
57.7 |
121.8 |
742.2 |
Restatement (note 25) |
(3.4) |
- |
- |
(0.5) |
As restated |
1,067.8 |
57.7 |
121.8 |
741.7 |
Exchange rate adjustments |
2.6 |
2.0 |
(0.1) |
0.7 |
Businesses acquired (note 14) |
5.1 |
- |
- |
4.3 |
Additions |
- |
10.1 |
14.6 |
1.9 |
Amortisation charge (note 24) |
- |
(1.5) |
(6.1) |
(30.0)* |
At 30 June 2008 |
1,075.5 |
68.3 |
130.2 |
718.6 |
* Of the £30.0 million (2007: £10.7 million) amortisation of other intangible assets, £28.7 million (2007: £9.2 million) relates to the amortisation of intangible assets arising in business combinations and has been excluded from underlying profit (note 4).
16. Property, plant and equipment
30 June 2008 £m |
30 June 2007 Restated £m |
|
At 1 January as previously reported |
195.4 |
127.6 |
Restatement (note 25) |
(4.2) |
- |
As restated |
191.2 |
127.6 |
Exchange rate adjustments |
1.9 |
(1.1) |
Businesses acquired (note 14) |
0.7 |
43.1 |
Additions |
20.0 |
12.5 |
Disposals |
(0.4) |
(0.2) |
Depreciation charge (note 24) |
(12.1) |
(7.3) |
At 30 June |
201.3 |
174.6 |
17. Bank and other borrowings
30 June 2008 £m |
30 June 2007 Restated £m |
|
At 1 January |
874.8 |
397.3 |
Exchange rate adjustments |
8.7 |
(9.6) |
Businesses acquired (note 14) |
0.8 |
362.6 |
Proceeds from borrowings |
13.0 |
574.7 |
Debt issue costs paid |
- |
(0.9) |
Repayment of borrowings |
(46.2) |
(402.5) |
Other non-cash movements |
(6.3) |
(3.2) |
At 30 June |
844.8 |
918.4 |
Disclosed as: |
||
Current |
11.0 |
164.6 |
Non-current |
833.8 |
753.8 |
At 30 June |
844.8 |
918.4 |
18. Net debt
30 June 2008 £m |
30 June 2007 Restated £m |
|
Bank and other borrowings (note 17) |
844.8 |
918.4 |
Obligations under finance leases - current |
0.7 |
0.4 |
Obligations under finance leases - non-current |
4.8 |
5.0 |
Less: Cash and cash equivalents |
(64.0) |
(113.9) |
At 30 June |
786.3 |
809.9 |
19. Provisions
30 June 2008 £m |
30 June 2007 Restated £m |
|
At 1 January as previously reported |
90.5 |
62.4 |
Restatement (note 25) |
1.5 |
- |
As restated |
92.0 |
62.4 |
Exchange rate adjustments |
0.1 |
(1.2) |
Businesses acquired (note 14) |
0.1 |
32.7 |
Charge/(credit) to income statement - net operating costs |
0.9 |
(0.6) |
Charge to income statement - finance costs (note 8) |
0.8 |
0.5 |
Utilised |
(14.3) |
(10.5) |
At 30 June |
79.6 |
83.3 |
Disclosed as: |
||
Current |
14.3 |
13.5 |
Non-current |
65.3 |
69.8 |
At 30 June |
79.6 |
83.3 |
20. Retirement benefit obligations
30 June 2008 £m |
30 June 2007 Restated £m |
|
The amounts recognised in the balance sheet are as follows: |
||
Fair value of scheme assets |
441.0 |
466.4 |
Fair value of scheme liabilities |
(629.5) |
(612.5) |
At 30 June |
(188.5) |
(146.1) |
Analysis of retirement benefit obligations: |
||
Pension schemes |
(138.5) |
(95.6) |
Healthcare schemes |
(50.0) |
(50.5) |
At 30 June |
(188.5) |
(146.1) |
Key financial assumptions: |
||
UK Schemes: |
||
Discount rate |
6.20% |
5.70% |
Salary inflation rate |
4.90% |
4.20% |
Current life expectancy - Male aged 65 (years) |
20.1 to 21.5 |
20.1 |
US Schemes: |
||
Discount rate |
6.75% |
6.25% |
Salary inflation rate |
4.00% |
4.00% |
Current life expectancy - Male aged 65 (years) |
18.8 |
18.8 |
Healthcare cost increases for US schemes are assumed to be 9.5% for 2008 (10.3% for 2007) trending down to 5.0% by 2013. There have been no changes to mortality or healthcare assumptions from those used at 31 December 2007.
The current service cost recognised in the income statement for the period was £6.8 million (2007: £4.9 million). Employer cash contributions paid during the period were £15.6 million (2007: £5.2 million).
21. Contingent liabilities
The Company has given guarantees in respect of uncommitted facilities for certain of its subsidiaries, some property leases, other leasing arrangements and the performance by some current and former subsidiaries of certain contracts. Also, there are similar guarantees given by certain of the management companies. The fair value of these guarantees is not considered to be significant.
The Company and various of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The directors do not anticipate that the outcome of these proceedings, actions and claims, either individually or in aggregate, will have a material adverse effect upon the Group's financial position.
22. Share capital
30 June 2008 No. m |
30 June 2007 No. m |
|
Number of shares outstanding at 1 January |
658.3 |
436.1 |
Issued in respect of rights issue |
- |
218.2 |
Issued on exercise of executive and SAYE share options |
1.1 |
0.9 |
Number of shares outstanding at 30 June |
659.4 |
655.2 |
23. Summary of movements in equity
30 June 2008 £m |
30 June 2007 £m |
|
At 1 January |
1,063.4 |
559.4 |
Total recognised income for the period |
30.0 |
62.4 |
Rights issue |
- |
426.6 |
Employee share schemes: |
||
Value of services provided (net of tax) |
(1.2) |
2.6 |
Shares issued |
1.8 |
1.4 |
Dividends |
(37.9) |
(26.2) |
At 30 June |
1,056.1 |
1,026.2 |
24. Cash inflow from operations
Six months ended 30 June 2008 £m |
Six months ended 30 June 2007 £m |
|
Profit for the period |
57.5 |
48.0 |
Adjustments for: |
||
Tax |
18.3 |
16.9 |
Depreciation (note 16) |
12.1 |
7.3 |
Amortisation (note 15) |
37.6 |
13.3 |
Profit on disposal of property, plant & equipment |
- |
(0.1) |
Profit on disposal of subsidiaries (note 13) |
(1.4) |
- |
Finance income (note 7) |
(15.9) |
(15.6) |
Finance costs (note 8) |
41.8 |
22.4 |
Financial instruments (note 6) |
(1.2) |
(2.9) |
Retirement benefit obligation deficit payments |
(8.8) |
(0.3) |
Changes in working capital |
(37.0) |
(26.5) |
Total |
103.0 |
62.5 |
25. Restatement of prior periods
Finalisation of fair values of prior year acquisitions
IFRS requires fair values to be finalised within 12 months of the acquisition date. All fair value adjustments are required to be recorded with effect from the date of acquisition and consequently result in the restatement of previously reported financial results. In 2008 the Group finalised the fair values of the assets and liabilities arising from the acquisition of K&F on 22 June 2007 and this resulted in adjustments to the balance sheet at that date. The impact of the adjustments is shown below:
31 December 2007 £m |
30 June 2007 £m |
|
Goodwill as previously reported (note 15) |
1,071.2 |
1,347.8 |
Fair value adjustments reflected in Group statutory accounts for year ended 31 December 2007 |
- |
(272.6) |
1,071.2 |
1,075.2 |
|
Finalisation in 2008 of fair values in respect of: |
||
Other intangibles (note 15) |
0.5 |
0.5 |
Property, plant and equipment (note 16) |
4.2 |
4.2 |
Trade and other payables - current |
0.3 |
0.3 |
Current tax liabilities |
1.1 |
1.1 |
Deferred tax liability - non-current |
(11.0) |
(11.0) |
Provisions - non-current (note 19) |
1.5 |
1.5 |
Goodwill as restated (note 15) |
1,067.8 |
1,071.8 |
26. Approval of interim management report
The interim management report was approved by the Board of Directors on 4 August 2008.
27. Availability of interim management report
The interim management report will be made available to all shareholders from 29 August 2008 and will be available to the public at the Company's registered office at Atlantic House, Aviation Park West, Bournemouth International Airport, Christchurch, Dorset, BH23 6EW from that date.
Risks and uncertainties
The Group disclosed in its 2007 Annual Report the principal risks and uncertainties the Group is exposed to and these are expected to continue to be relevant for the remaining six months of the year.
The risks include those arising from reduced demand for the Group's products, market competition, legal, export, environmental or other regulatory matters, equipment fault, fixed price contracts, retirement benefit plan funding, supply chain management and acquisitions together with credit risk, interest rate and exchange rate risk. Further details can be found in the "Risks and Uncertainties" section of the Annual Report 2007 together with details of certain strategies adopted to mitigate any exposures.
In light of the economic climate and increases in oil prices, a number of airlines have, since the end of 2007, announced plans to park up a number of aircraft within their fleet. To date announcements of potential aircraft to be parked are not expected to be material to Meggitt's results.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that to the best of their knowledge:
this condensed consolidated interim financial information has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union;
the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
An indication of important events that have occurred during the six months ended 30 June 2008 and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
Material related party transactions in the six months ended 30 June 2008 and any material changes in the related party transactions described in the last annual report.
By order of the Board:
T Twigger S Young
Chief Executive Group Finance Director
4 August 2008 4 August 2008
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Related Shares:
MGGT.L