5th Jun 2007 07:02
UMECO PLC05 June 2007 5th June 2007 Umeco plc Preliminary results for the year to 31 March 2007 FURTHER STRONG ORGANIC GROWTH AND EXPANSION THROUGH ACQUISITIONS AND INVESTMENT Umeco plc, an international provider of supply chain and repair & overhaulservices and advanced composite materials primarily to the aerospace & defenceand automotive industries, announces its preliminary results for the year to 31March 2007. Financial highlights - adjusted IFRS basis: • Revenue increased by 13.9 per cent to £333.9 million (2006: £293.2 million); • Operating profits increased by 19.5 per cent to £25.7 million (2006: £21.5 million) with margins improving to 7.7 per cent (2006: 7.3 per cent) • Profit before tax increased by 24.3 per cent to £22.5 million (2006: £18.1 million); • Earnings per share increased to 32.2 pence (2006: 30.9 pence); • Recommended increased final dividend of 10.0 pence per share (2006: 9.5 pence), resulting in a total dividend of 15.5 pence per share (2006: 14.5 pence), up 6.9 per cent. Operational highlights: • Continued strong growth in civil aerospace market; • Global demand for advanced composite materials increasing at a high rate; • Opening of enlarged UK advanced composites technology and manufacturing centre; • Implementation of major new Goodrich Actuation Systems contract; • Significant new supply chain contracts won with Thales and Turbomeca; • Site acquired for much enlarged Supply Chain facility in UK to support growing relationships with Rolls-Royce plc and Goodrich; • Acquisitions completed during the year were: - Aerodyne Advanced Composites, based in South Africa (June 2006); - Antavia, a French-based Repair & Overhaul company (October 2006); - US Airmotive, a distributor of aerospace chemicals (November 2006); • Current year has started with record order book of £168.1 million and healthy level of new business activity. Clive Snowdon, Chief Executive of Umeco plc, commented: "2007 has been another successful year for Umeco, with significant progressacross both the Composites and Supply Chain business streams. "Throughout the year we have continued to invest in our core infrastructure,opening the new technology centre and manufacturing facility at ACG, securingthe site for the new Supply Chain facility in Derby and expanding in China. Wehave also concentrated on finding and executing strategic acquisitions acrossthe Group. All of these investments and acquisitions will further strengthen ourmarket position and will help us to better serve existing and potentialcustomers. "We continue to see rising global demand for advanced composite materials, asbuild rates in the civil aircraft, wind energy and high end automotive marketscontinue to increase. The record order books of Airbus and Boeing in particularshould continue to generate demand for our value added supply chain services. "In summary, we are looking forward to another successful year. Our financialposition is strong and the markets in which we operate are buoyant. Ourmanagement team continues to drive for high rates of organic growth and to seekadditional acquisition opportunities which match our strict investment criteria." There will be a meeting for analysts at 09.00 this morning at UBS, 1 FinsburyAvenue, EC2M 2PP. Should you wish to attend please contact Barnaby Fry orCharlie Field on 020 7645 3970. For further information, please contact:- Umeco plc Tel: +44 (0) 1926 331 800Clive Snowdon, Chief ExecutiveJohn Beaumont, Group Finance Directorwww.umeco.comHogarth Partnership Tel: +44 (0) 20 7357 9477John OlsenBarnaby Fry Note on adjusted profit and earnings per share measures: Umeco uses adjusted figures as key performance indicators. Adjusted figures arestated before amortisation and impairment charges relating to intangible assets,significant items, the revaluation of financial instruments based on theirmarket values, associated taxation effects and the taxation effects of goodwillamortisation in overseas jurisdictions. The differences between the adjusted andunadjusted measures of operating profit, profit before tax and profitattributable to equity holders of the parent are reconciled in note 4 to thisannouncement. The narrative in this announcement is based on the adjustedmeasures of operating profit, profit before tax and earnings per share. Theseprovide a more consistent measure of operating performance. The table below setsout a comparison of adjusted and unadjusted values: ----------- ----------- 2007 2006 £ million £ million ----------- -----------Operating profit 22.0 19.2Adjusted operating profit 25.7 21.5Profit before tax 19.1 16.1Adjusted profit before tax 22.5 18.1 ----------- ----------- Pence Pence ----------- -----------Earnings per share 27.0 27.3Adjusted earnings per share 32.2 30.9 ----------- ----------- Preliminary results for the year to 31 March 2007 Results and dividend 2007 has been another successful year for Umeco, with significant progressacross both the Composites and Supply Chain business streams. Indeed, were itnot for certain external factors, including the delay in the launch of the A380and adverse exchange rate movements, our overall performance would have beenstronger still. Revenue in the year to 31 March 2007 was £333.9 million (2006: £293.2 million),an increase of £40.7 million of which £5.7 million relates to acquisitions. Theunderlying increase in revenue was 7.7 per cent or 8.9 per cent at constantexchange rates. Operating profits in the period rose by 19.5 per cent to £25.7 million (2006:£21.5 million) with margins improving to 7.7 per cent (2006: 7.3 per cent). Net financial expense, excluding revaluations of financial instruments, was £3.2million (2006: £3.4 million). Profit before tax was £22.5 million (2006: £18.1 million) an increase of 24.3per cent. Earnings per share were 32.2 pence (2006: 30.9 pence) and reflect thehigher number of shares in issue following the rights issue in December 2005. The Directors are proposing an increased final dividend of 10.0 pence (2006: 9.5pence), making a total for the year of 15.5 pence per ordinary share (2006: 14.5pence) an increase of 6.9 per cent. The final dividend is payable on 3 August2007 to shareholders on the register on 6 July 2007. Strategic developments in the year Contracts Umeco Components, now renamed Umeco Supply Chain, was successful in winning twomajor new contracts in the second half of the year, with Thales Aerospace andTurbomeca. Management are now fully engaged in the implementation of bothprogrammes following the recent opening of a new facility close to Paris Charlesde Gaulle airport. Acquisitions During the year the Group made three bolt-on acquisitions. In June 2006,Advanced Composites Group ('ACG') acquired Aerodyne Advanced Composites, basedin Cape Town, South Africa. Aerodyne, which now trades under the ACG brand, hasa long term contract to manufacture chassis parts for the Mercedes McLaren SLRsuper car, utilising composite materials exclusively supplied by Umeco. In October 2006, Antavia, a Toulouse based repair & overhaul company, wasacquired and has been successfully integrated into the Group's Repair & Overhauldivision. In November 2006, Aeropia, a Umeco Composites company, acquired the assets andbusiness of US Airmotive, a Miami-based distributor of aerospace chemicals, andhas subsequently merged it with its US subsidiary. Capital investments In September 2006, ACG opened its new UK technology centre, manufacturing andwarehousing facility to much acclaim by customers, suppliers and employees. At acapital cost of £7.0 million this investment places ACG at the forefront of itsindustry and adds much needed capacity for the medium term. Later in the year, Umeco Supply Chain signed contracts to acquire a freeholdsite and build a new, much larger facility in Derby to further support theGroup's long term contracts and in particular our growing relationships withRolls-Royce plc and Goodrich Actuation Systems. This new facility is scheduledto come on stream in the autumn of 2007. Operations Revenue for the year was £333.9 million (2006: £293.2 million) an increase of13.9 per cent. Excluding the impact of acquisitions completed during the year,the underlying rate of growth was 7.7 per cent (2006: 14.2 per cent). Theseacquisitions accounted for additional revenue of £5.7 million. At constantexchange rates, underlying growth was 8.9 per cent. Growth has again been achieved across all of our business streams. This reflectsthe strong civil aerospace market, additional volumes on existing and new supplychain contracts, and the on-going high level of demand for our compositematerials. Operating profit of £25.7 million increased by 19.5 per cent (2006: £21.5million), and by 5.6 per cent on an underlying basis (2006: 22.6 per cent). Ouroperating margin rose to 7.7 per cent (2006: 7.3 per cent). This reflects thegood margins of the businesses recently acquired and the operational gearingeffect of increased volumes. As was the case last year, there have been somesignificant increases in certain raw material prices, but these have largelybeen passed on to customers. Umeco Composites ----------- ----------- 2007 2006 £ million £ million ----------- -----------Revenue 152.2 131.4Operating profit 14.6 11.9 ----------- ----------- Per cent Per cent ----------- -----------Operating margin 9.6 9.1 ----------- ----------- Umeco Composites provides a broad range of advanced composite materials andspecialist chemical products principally to the aerospace, motor sport &automotive and wind energy markets. A full range of value-added outsourcingservices is provided to major customers. Revenues increased in the year by 15.8 per cent, or by 13.0 per cent on anunderlying basis. Operating profits rose by 17.4 per cent on an underlying basis, resulting in animprovement in margin from 9.1 per cent to 9.6 per cent. This further significant rise in revenue and profits reflects the growing use ofadvanced composite materials in a number of markets and the acquisition ofAerodyne in June 2006. In particular, revenue from the wind energy industry roseby 95 per cent compared with the prior year. ACG continues to trade successfully and quickly integrated the newly acquiredbusiness in South Africa into its operating structure. This new business is theexclusive supplier of composite chassis parts for the Mercedes McLaren SLR supercar and made a good contribution to profits in the year. ACG in the UK openedits new state-of-the-art technology centre and enlarged composite materialsmanufacturing facility in September 2006 and should greatly benefit from thissignificant investment in the coming years. Aerovac and Richmond had a tremendous year delivering significant growth inrevenue and profits, despite the impact of the delay in the A380 programme.Richmond is working closely with Boeing and its partners on the B787 programmeand leased a further two bays in its Los Angeles facility to extend its vacuumbag kitting production capability. The global wind energy market, which isgrowing at a massive rate, is now a key market segment for the business andcapital investments are planned in the current year to provide additionalcapacity and new products. GRP gained market share in Europe following its successful acquisition ofAshland's Scandinavian distribution businesses in the prior year. Thisadditional revenue and more favourable market conditions produced a further liftto profits in the year. Aeropia, Umeco Composites' largest aerospace chemical distribution business,acquired the assets of US Airmotive in December 2006 and has already integratedthe operation into its existing subsidiary in Miami. The business moved intolarger, more suitable premises by the year end. RD Taylor and Med-Lab bothcontinued to trade well. Umeco Supply Chain ----------- ----------- 2007 2006 £ million £ million ----------- -----------Revenue 157.6 141.4Operating profit 8.4 7.2 ----------- ----------- Per cent Per cent ----------- -----------Operating margin 5.3 5.1 ----------- ----------- Umeco Components was renamed Umeco Supply Chain at the start of the newfinancial year to reflect the broader range of services now provided to ourcustomer base. As part of this process all Umeco Supply Chain companies willtrade globally under the well recognised Pattonair brand. Umeco Supply Chain is a leading international provider of distribution andsupply chain outsourcing services primarily to OEM customers in the aerospace &defence markets. With its specialisation in the supply of small and medium sizedcomponents and its sophisticated IT systems, it creates and deliversopportunities for significant operational, cost and working capital benefits toits growing global customer base. Revenue increased in the year by 11.5 per cent, or by 5.3 per cent on anunderlying basis. The rise in revenue was held back by a slower than expectedbuild-up on the new contract with Goodrich Actuation Systems and by the impactof delays in US defence spending on our distribution businesses in North America. Operating profits increased in the period by 16.7 per cent, or 1.9 per cent onan underlying basis. Overall profitability was enhanced by a full yearcontribution from Pattonair Italy, formerly Provest, and robust performances inthe majority of our businesses. The rate of profit growth, however, was heldback by losses within the UK electronic components activity, which was closed inDecember 2006, and by a disappointing performance at Pattonair USA. In Europe, the business units in the UK, France and Italy delivered a high levelof growth in revenue and profitability reflecting positive market conditions andnew contract wins. The impact of the unexpected and high level of raw materialprice increases in the early part of the year was largely mitigated by the yearend. Pattonair France was successful in securing major new contracts with ThalesAerospace and Turbomeca and these, together with a strong order book, bode wellfor the current financial year. Ulogistics, now Pattonair Derby, had another very successful year despite thedelayed implementation of the contract with Goodrich Actuation Systems.Pattonair Derby's long term contract with Rolls-Royce plc goes from strength tostrength with additional products and services being supplied to a broaderinternal and external customer base. In November 2006, contracts were signed toacquire a five acre freehold plot in Derby for a major new facility to housePattonair Derby's rapidly growing operations. The total cost of this project isexpected to be £7.5 million, the majority of which falls in the currentfinancial year; this will be partially offset by the subsequent sale of theexisting premises. Pattonair in Canada has recently signed a new contract with Rolls-Royce Canada,and continues actively to pursue new customer opportunities. BombardierAerospace has recently served notice of its intention to terminate itsrelationship with Pattonair. The timing and basis of termination has yet to befinalised but, based on historic levels of profit generated by the contract andon the likely costs associated with the exit, the impact is not expected to bematerial. Trading levels at Pattonair USA were impacted by delays in American defencespending on certain projects. Order intake considerably improved during thesecond half, but this came too late to have a major impact on the results forthe year. Paul Fanelli joined the business as President in January 2007 and hasalready strengthened the senior management team. Umeco Supply Chain opened a new facility in Xi'an, China during the year and hasstarted to generate incremental business for both Pattonair and Aeropia.Additional sales staff are to be recruited in the current financial year. Umeco Repair & Overhaul ----------- ----------- 2007 2006 £ million £ million ----------- -----------Revenue 24.1 20.4Operating profit 2.7 2.4 ----------- ----------- Per cent Per cent ----------- -----------Operating margin 11.2 11.8 ----------- ----------- Umeco Repair & Overhaul now comprises three businesses; AEM, one of the largestindependent component repair & overhaul facilities in Europe, Avionics MobileServices ('AMS'), which installs and overhauls avionic equipment, and Antaviawhich was acquired in October 2006. Antavia, based in Toulouse, is a provider ofsimilar services to those of AEM, but has a complementary capability andcustomer base. Aviation Windings and Aeromedic Innovations, businesses acquiredin the previous financial year, were fully integrated into AEM during the yearand were both moved to a new freehold facility at Luton airport. Revenue increased in the year by 18.1 per cent, but fell by 7.7 per cent on anunderlying basis. Operating profits rose by 12.5 per cent but fell by 31.1 percent on an underlying basis. The fall in underlying revenue and profits reflects a decision made by AEMduring the year to reduce business levels with one significant overseas customerfor commercial reasons. In addition AMS had a disappointing first half year but,following a senior management change, enjoyed a better second half. AEM was successful in broadening its customer base and won a number of newcontracts during the year including the supply of first aid kits to BritishAirways. The business goes into the new financial year with a record order book. AMS also secured some larger contracts late in the financial year, positioningit well for a better start to the 2008 financial year. With a reduced cost base,a much higher level of profitability is now expected. Antavia achieved the profit contribution expected at the time of the acquisitionand is now working closely with the other businesses in the division to achievesome identified revenue synergies. Directors At the AGM in July 2006 John Harper retired as a non-executive Director afterover nine years' valuable service to Umeco. To replace John, Stephen Bird, adivisional director of the Weir Group, was appointed in November 2006. Michael Harper is standing down as a non-executive Director at the 2007 AnnualGeneral Meeting due to his other business commitments. The Board thanks Michaelfor his contribution since becoming a non-executive Director in 2002. The Board is very pleased that Chris Hole, who was Director of Procurement atRolls-Royce plc and retired in December 2006, will be joining the Board as anon-executive Director on 25 July 2007. Group strategy Over the past ten years, since Brian McGowan and Clive Snowdon were appointedChairman and Chief Executive respectively, the Board has developed andimplemented a focussed strategy. This has established Umeco as a leadinginternational provider of supply chain and repair & overhaul services andadvanced composite materials primarily to the aerospace, automotive and windenergy markets. Evidence of the successful execution of this strategy can beseen in the: • winning of major long term supply chain contracts, principally with leading aerospace OEMs and airlines, and the subsequent extension of these relationships through the addition of a broader range of products and services; • carefully targeted acquisitions which have extended both our geographic coverage and our product and service offerings; • investment in our businesses to ensure they have the capacity and operating efficiency to provide the highest levels of customer service; and • focus on product and service innovation so that, within our selected market segments, we retain a clear competitive edge. Over the last decade Umeco has achieved compound annual growth in revenue of23.8 per cent, 21.3 per cent in operating profits and 11.9 per cent in earningsper share. The Board strongly believes that, by continuing with this strategy,Umeco is capable of delivering further sustained value for shareholders. Prospects In the year under review the Group enjoyed a high level of underlying growth inrevenue and profits, despite the impact of a number of external factorsincluding the production delay of the A380 and a weakening US dollar. Looking forward, the principal market in which Umeco operates, civil aerospace,looks robust with Airbus and Boeing entering 2007 with record order books.Airbus has indicated that A380 production will restart during our second halfyear and Boeing's development of the B787 appears to be on schedule, with afirst flight expected this Autumn and initial deliveries due in mid-2008. Bothof these significant programmes are anticipated to generate a high level ofincremental revenue for the Group, and Umeco expects the civil market to bestrong for the foreseeable future. With ever-rising energy prices and industry's increasing appetite for moreenvironmentally sustainable solutions, demand for the Group's advanced compositematerials, from a growing number of industries, is expected to continue toincrease at a high rate in the coming years. Umeco Composites continues to workclosely with major customers to ensure that the on-going development of ourproducts and services meets their requirements and obtain the necessary productapprovals. In the current year, the Group is planning to expand further its geographicfootprint and has now established Umeco Asia as a trading company in Singapore,replacing a representative office in that important region. These factors, coupled with recent acquisitions and contract wins, place Umecoon track for another year of strong performance. Umeco has the management teamand financial resources in place to support the Group's ambitious plans and theresolve to work through the external factors that arise from time to time. In summary, Umeco goes into in the new financial year with a record order book,rising demand from the markets in which it operates and a much enhancedinfrastructure, following the major investments made over the last three years.The Board is therefore looking forward to another successful year for the Group. Financial review Operating results 2007 2006 £ million £ millionRevenue ----------- ----------- - total 333.9 293.2 - acquisitions 5.7 - Operating profit - total 25.7 21.5 - acquisitions 1.2 - ----------- ----------- Operating margins per cent per cent ----------- ----------- - total 7.7 7.3 - acquisitions 21.1 - ----------- ----------- Revenue for the year was 13.9 per cent higher than last year, with acquisitionsaccounting for 1.9 per cent of the increase. Operating profits were £25.7million, £4.2 million higher than the previous year, of which acquisitionscontributed £1.2 million. The increase in the existing businesses is primarilydue to the strong growth in the civil aerospace industry coupled with anincrease in demand for advanced composite materials from the aerospace and otherindustries, most notably from the growing wind energy market. Operating marginsrose to 7.7 per cent from 7.3 per cent helped by the impact of recentacquisitions and by the operational gearing effect of increased volumes. Exchange rates Average rates 2007 2006 ----------- -----------US dollar 1.893 1.785Euro 1.476 1.466 ----------- ----------- Over one third of Group revenues are generated by overseas subsidiaries and anincreasing amount of UK business is transacted in foreign currencies,principally the US dollar and, to a lesser extent, the Euro. At constantexchange rates, the increase in revenues for the year would have been 15.1 percent, £3.6 million higher than the reported figure. Net financial expense Net financial expense, excluding revaluations of financial instruments, fellfrom £3.4 million in 2006 to £3.2 million. Average interest rates payable in theyear were 6.1 per cent and average net debt was £53.6 million compared with 5.8per cent and £58.6 million last year. Interest was covered 8.0 times by adjustedoperating profit (2006: 6.3 times). Intangible amortisation & goodwill impairment The amortisation charge in the income statement of £2.4 million (2006: £0.8million) relates to the amortisation of intangible assets arising onacquisitions, principally the benefit of order books and customer relationshipson hand at the dates of acquisition. An impairment charge of £0.8 million hasbeen made to fully write down goodwill relating to the electronic componentdistribution activity that was closed during the year. Significant items Restructuring costs of £0.7 million were incurred during the year, principallyin relation to the closure of the electronic component distribution activity. Profit before tax The strong performance in the year lifted adjusted profit before tax to £22.5million (2006: £18.1 million), an increase of 24.3 per cent over the previousyear. Total profit before tax was £19.1 million (2006: £16.1 million). Tax The effective tax charge on adjusted profit was 31.9 per cent (2006: 32.8 percent). The rate is attributed to the increased proportion of UK profits whichare taxed at lower rates than those from overseas subsidiaries. Earnings per share Adjusted earnings per share were 32.2 pence, 4.2 per cent higher than last yearreflecting the increased number of shares in issue as a result of the rightsissue in December 2005. Earnings per share were 27.0 pence (2006: 27.3 pence). Dividends An interim dividend of 5.5 pence was paid in December 2006 and a final dividendof 10.0 pence is proposed, making a total of 15.5 pence, a 6.9 per cent increaseover the previous year's 14.5 pence. The value of the interim dividend was £2.6million and the value of the proposed final dividend is £4.7 million. Operating cash flow ----------- ----------- 2007 2006 £ million £ million ----------- -----------Operating profit 25.7 21.5Significant items (0.7) (1.5)Depreciation 3.5 3.1Share based payments 0.2 0.3Working capital & retirementbenefit obligation movement (18.8) (9.9) ----------- -----------Operating cash flow 9.9 13.5 ----------- ----------- per cent per cent ----------- -----------Operating cash flow conversion 38.5 62.8Working capital ratio 22.7 19.8 ----------- ----------- Operating profit conversion to cash of 38.5 per cent fell from 62.8 per centlast year following an increase of £18.8 million in working capital andretirement benefit obligations. This principally comprised increases of £16.3million in inventories and £10.3 million in debtors, partially offset by a riseof £9.1 million in creditors. The additional investment in inventories islargely driven by increasing demand and included higher stocks to support ourcontracts with Rolls-Royce plc and Goodrich Actuation Systems, and investment byACG in carbon fibre which continued to be in short supply until easing towardthe end of the year. The ratio of working capital to revenue increased from 19.8per cent to 22.7 per cent. Capital expenditure Gross capital expenditure of £11.0 million (2006: £9.0 million) was £7.5 millionhigher than depreciation. Major investments in the year included £3.3 million atACG for the balance of the cost of new facilities in Heanor and additionalcapacity in Tulsa, initial payments of £2.3 million in respect of the newPattonair Derby facility and £1.4 million for the acquisition of new premises inLuton to house AEM's Aviation Windings and Aeromedic businesses. Free cash flow Following the major increase in working capital and the capital expenditureprogramme in the year, operating cash flow less interest, tax and capitalexpenditure consumed £9.7 million (2006: £2.0 million). Tax paid was £0.5million above the charge in the financial statements due to timing differences. Acquisitions Expenditure on acquisitions in the year, as set out in the Strategicdevelopments section, was £11.7 million (2006: £14.0 million) net of cashbalances acquired. This expenditure included £2.4 million in respect of deferredconsideration, principally relating to the acquisition of Pattonair Italy. Net indebtedness and gearing ----------- ----------- 2007 2006 £ million £ million ----------- -----------Net debt 51.8 26.7 ----------- ----------- per cent per cent ----------- -----------Gearing 35.2 18.8 ----------- ----------- Net debt increased by £25.1 million during the year due mainly to additionalworking capital investment and the acquisition of Antavia. Group banking facilities comprise a US$150.0 million revolving credit facilityand a £10.0 million overdraft. Gearing increased from 18.8 per cent last year to35.2 per cent; debt and interest cover levels remain well within bankingcovenant limits. Changes in exchange rates, principally the weakening of the USdollar, resulted in a reduction in the sterling value of net debt of £3.7million. Equity and shares issued Equity attributable to equity holders of Umeco increased from £141.9 million to£146.9 million. The increase includes the profit for the year of £12.8 million,less dividends paid of £7.1 million. In addition, 194,000 shares were issued toemployees under the Group's share option schemes, raising £0.4 million. Pensions The Group operates a number of defined contribution pension schemes togetherwith two defined benefit plans, both of which are closed to new members. Thelatest actuarial valuations of these two plans, conducted in 2005, show adeficit of £5.5 million compared with a deficit of £1.5 million in the previousvaluations in 2002. The increase was due to changes in inflation and mortalityassumptions and to a lower rate of return used in the valuation of schemeassets. The Board has agreed with the pension plans' trustees that the deficitwill be funded over five years and accordingly, special payments totalling £1.4million were made to the plans during the year. Under IFRS, the deficits under the plans are now recognised in the balancesheet. The IAS 19 valuation of the plans at 31 March 2007 showed a reduction inthe shortfall in assets to liabilities to £1.4 million, after associated taxrelief, from £2.7 million in the previous year. The reduction is principally theresult of the special contributions made during the year. Currency exchange risk The Group seeks to hedge currency exchange risks by matching purchases andrevenues that are denominated in foreign currencies. Where this is not possible,forward currency contracts may be taken out to protect exposures. Group policyprohibits speculation in currency management. The retranslation of the Group's net investment in overseas businesses led tothe net deficit of £1.5 million being debited to the translation reserve. Interest rate risk Following the Euro funded acquisition of Antavia, a smaller proportion of theGroup's interest charge is now US dollar based. The weakening of the US dollarhad the effect of reducing interest costs by £0.1 million compared with theprevious year. Whilst the Group does not hedge the currency value of interestcharges, it has partly protected the interest rate risk by the use of interestrate swaps. These instruments have fixed the base rate on 51.9 per cent of theGroup's year end debt at below 5 per cent and will provide cover onapproximately 40 per cent of the Group's anticipated debt during the currentfinancial year. Consolidated income statement___________________________________________________________________________ For the year to 31 March 2007 2007 2006 Note £ million £ million Revenue 2 333.9 293.2 Cost of sales (241.8) (215.6)------------------- --------- --------- -------- Gross profit 92.1 77.6 Administrative expenses (70.1) (58.4)------------------- --------- --------- -------- Operating profit 2 22.0 19.2 Financial income 3 1.5 1.0Financial expense 3 (4.4) (4.1)------------------- --------- --------- -------- Profit before tax 19.1 16.1 Income tax - UK (4.4) (3.5)Income tax - overseas (1.8) (1.9)------------------- --------- --------- -------- Profit for the year 12.9 10.7------------------- --------- --------- -------- Attributable to:Equity holders of the parent 12.8 10.7Minority interest 0.1 -------------------- --------- --------- -------- 12.9 10.7 ------------------- --------- --------- -------- Pence Pence Basic earnings per share 7 27.0 27.3------------------- --------- --------- -------- Diluted earnings per share 7 26.8 27.0------------------- --------- --------- -------- Consolidated balance sheet_________________________________________________________________________ As at 31 March 2007 2007 2006 £ million £ millionAssetsNon-current assetsProperty, plant & equipment 32.5 25.1Intangible assets 100.0 96.4Deferred tax assets 2.8 3.4--------------------------------- -------- ------- 135.3 124.9 --------------------------------- -------- -------Current assetsInventories 88.8 73.0Trade & other receivables 81.7 71.0Financial assets 0.5 0.2Income tax receivable 1.2 1.2Cash 7.9 9.5--------------------------------- -------- ------- 180.1 154.9 --------------------------------- -------- ------- Total assets 315.4 279.8--------------------------------- -------- -------LiabilitiesCurrent liabilitiesTrade & other payables (94.7) (85.8)Income tax payable (4.2) (5.2)Loans & borrowings (1.0) (0.3)--------------------------------- -------- ------- (99.9) (91.3) --------------------------------- -------- -------Non-current liabilitiesOther payables (3.7) (3.7)Deferred tax liabilities (3.9) (2.9)Retirement benefit obligation (2.0) (3.8)Loans & borrowings (58.7) (35.9)--------------------------------- -------- ------- (68.3) (46.3) --------------------------------- -------- ------- Total liabilities (168.2) (137.6)--------------------------------- -------- ------- --------------------------------- -------- ------- Net assets 147.2 142.2--------------------------------- -------- ------- EquityShare capital 11.9 11.8Share premium 113.9 113.6Translation reserve (1.0) 0.5Retained earnings 22.1 16.0--------------------------------- -------- ------- Equity attributable to equity holders of the parent 146.9 141.9Minority interest 0.3 0.3--------------------------------- -------- ------- Total equity 147.2 142.2--------------------------------- -------- ------- Consolidated cash flow statement_________________________________________________________________________ For the year to 31 March 2007 2007 2006 Note £ million £ million Profit for the year 12.9 10.7Depreciation 3.5 3.1Amortisation and impairment charges 3.0 0.8Financial income (1.5) (1.0)Financial expense 4.4 4.1Share based payments expense 0.2 0.3Income tax expense 6.2 5.4---------------------------- ------ --------- -------- 28.7 23.4Increase in inventories (16.3) (12.3)Increase in trade & other receivables (10.3) (10.3)Increase in trade & other payables 9.1 13.7Decrease in retirement benefit obligation (1.3) (1.0)---------------------------- ------ --------- -------- Cash generated from operations 9.9 13.5Net financial expense paid (2.6) (3.3)Tax paid (6.7) (4.1)---------------------------- ------ --------- -------- Net cash flow from operating activities 0.6 6.1---------------------------- ------ --------- -------- Cash flows from investing activitiesAcquisition of property, plant & equipment (10.5) (8.5)Proceeds from sale of property, plant &equipment 0.2 0.4Acquisition of subsidiaries, net of cashbalances acquired (11.7) (14.0)---------------------------- ------ --------- -------- Net cash flow from investing activities (22.0) (22.1)---------------------------- ------ --------- -------- Cash flows from financing activitiesProceeds from issue of share capital 0.4 49.0Drawdown of bank loans 31.4 24.1Repayment of bank loans (5.0) (50.9)Repayment of lease finance liabilities (0.5) (0.5)Dividends paid to equity holders of the parent (7.1) (4.5)Dividends paid to minority interest (0.1) ----------------------------- ------ --------- -------- Net cash flow from financing activities 19.1 17.2---------------------------- ------ --------- -------- Net (decrease)/increase in cash 8 (2.3) 1.2Cash at start of year 9.5 6.9Effect of exchange rate fluctuations 0.2 1.4---------------------------- ------ --------- -------- Net cash at end of year 7.4 9.5---------------------------- ------ --------- -------- Consolidated statement of recognised income and expense________________________________________________________________________ For the year to 31 March 2007 2007 2006 £ million £ million Foreign exchange translation differences (1.5) 0.3Actuarial gain in pension schemes 0.5 0.3Tax in respect of the above 0.2 ------------------------------- -------- -------- Income and expense recognised directly in equity (0.8) 0.6Profit for the year 12.9 10.7------------------------------ -------- -------- Total recognised income and expense for the year 12.1 11.3------------------------------ -------- -------- Total recognised income and expense for the yearAttributable to:Equity holders of the parent 12.0 11.3Minority interest 0.1 ------------------------------- -------- -------- Total recognised income and expense for the year 12.1 11.3------------------------------ -------- -------- Notes to the preliminary announcement of results____________________________________________________________________________ For the year to 31 March 2007 1 Basis of preparation EU law (IAS Regulation EC 1606/2002) requires that the annual consolidatedfinancial statements of the Group, for the year to 31 March 2007, be prepared inaccordance with IFRS adopted for use in the EU ('Adopted IFRS'). 2 Segmental reporting ------------- ------------- -------------- Revenue Adjusted operating profit (see note 4) Total operating profit ------------- ------------- -------------- ------- -------- -------- -------- 2007 2006 2007 2006 2007 2006 £ million £ million £ million £ million £ million £ million Continuing beforeacquisitions*Composites 150.2 131.4 14.0 11.9 13.9 11.9Supply Chain 157.6 141.4 8.4 7.2 6.0 5.2Repair & Overhaul 20.4 20.4 2.1 2.4 1.9 2.1------------ -------- ------- -------- -------- -------- -------- 328.2 293.2 24.5 21.5 21.8 19.2 ------------ -------- ------- -------- -------- -------- -------- Acquisitions*Composites 2.0 - 0.6 - 0.8 -Supply Chain - - - - - -Repair & Overhaul 3.7 - 0.6 - (0.6) ------------- -------- ------- -------- -------- -------- -------- 5.7 - 1.2 - 0.2 - ------------ -------- ------- -------- -------- -------- -------- TotalComposites 152.2 131.4 14.6 11.9 14.7 11.9Supply Chain 157.6 141.4 8.4 7.2 6.0 5.2Repair & Overhaul 24.1 20.4 2.7 2.4 1.3 2.1------------ -------- ------- -------- -------- -------- -------- 333.9 293.2 25.7 21.5 22.0 19.2 ------------ -------- ------- -------- -------- -------- -------- ------------------------------------------------* Acquisitions are defined as those that occurred during the year to 31 March2007. Total operating profit (as 22.0 19.2above) Financial income 1.5 1.0Financial expense (4.4) (4.1)----------------- ------- --- -------- -------- --- -------- -------- -------- Profit before tax 19.1 16.1 Income tax - UK (4.4) (3.5)Income tax - overseas (1.8) (1.9)----------------- ------- --- -------- -------- --- -------- -------- -------- Profit for the year 12.9 10.7----------------- ------- --- -------- -------- --- -------- -------- 2007 2006 £ million £ millionRevenue by geographical marketUK 168.7 152.1Rest of Europe 86.6 65.0North America 57.8 58.1Rest of world 20.8 18.0----------------------- --------- -------- 333.9 293.2 ----------------------- --------- -------- 2007 2006 £ million £ millionSegment assetsComposites 135.5 123.1Supply Chain 141.6 126.5Repair & Overhaul 33.1 23.4Unallocated assets 5.2 6.8-------------------- -------- -------- Total assets 315.4 279.8-------------------- -------- -------- Segment liabilitiesComposites (37.1) (35.8)Supply Chain (66.9) (57.2)Repair & Overhaul (11.1) (9.1)Unallocated liabilities (53.1) (35.5)-------------------- -------- -------- Total liabilities (168.2) (137.6)-------------------- -------- -------- Net assets 147.2 142.2-------------------- -------- -------- 2007 2006 £ million £ millionCapital expenditureComposites 5.0 5.8Supply Chain 3.8 1.2Repair & Overhaul 2.0 1.0Unallocated 0.2 1.0---------------------- --------- -------- 11.0 9.0 ---------------------- --------- -------- DepreciationComposites 1.8 1.6Supply Chain 1.1 1.1Repair & Overhaul 0.4 0.3Unallocated 0.2 0.1---------------------- --------- -------- 3.5 3.1 ---------------------- --------- -------- Amortisation of intangible assets and impairment ofgoodwillComposites - -Supply Chain* 1.8 0.6Repair & Overhaul 1.4 0.2---------------------- --------- -------- 3.2 0.8 ---------------------- --------- -------- * Includes £0.8 million in respect of goodwill impairment (2006: £Nil). In addition, £0.2 million of negative goodwill was credited to the incomestatement (2006: £Nil). 3 Financial income and expense 2007 2006 £ million £ millionFinancial incomeRevaluation of financial instruments 0.3 0.3Interest income 0.3 0.1Expected return on pension scheme assets 0.9 0.6------------------------- -------- -------- 1.5 1.0 ------------------------- -------- -------- Financial expenseInterest on bank loans and overdrafts 3.5 3.3Interest payable in respect of lease finance 0.1 0.1Interest cost on pension scheme liabilities 0.8 0.7------------------------- -------- -------- 4.4 4.1 ------------------------- -------- -------- 4 Reconciliation of adjusted profit measures Umeco uses adjusted figures as key performance indicators. Adjusted figures arestated before amortisation and impairment charges relating to intangible assets,significant items, the revaluation of financial instruments based on theirmarket values, associated taxation effects and the taxation effects of goodwillamortisation in overseas jurisdictions. The differences between the total andadjusted profit measures are reconciled below. The narrative in this preliminaryannouncement is based on the adjusted measures of operating profit, profitbefore tax and earnings per share. These provide a more consistent measure ofoperating performance. 2007 2006 £ million £ millionOperating profitTotal operating profit 22.0 19.2Exclude: - significant items 0.7 1.5 - impairment of goodwill 0.8 - - negative goodwill recognised (0.2) - - amortisation of intangible assets 2.4 0.8 --------------------- ------- --------- -------- ---- -------- Adjusted operating profit 25.7 21.5--------------------- ------- --------- -------- ---- -------- Profit before taxTotal profit before tax 19.1 16.1Exclude: - significant items 0.7 1.5 - impairment of goodwill 0.8 - - negative goodwill recognised (0.2) - - amortisation of intangible assets 2.4 0.8 - revaluation of financial instruments (0.3) (0.3) --------------------- ------- --------- -------- ---- -------- Adjusted profit before tax 22.5 18.1--------------------- ------- --------- -------- ---- -------- Profit attributable to equity holders of the parentTotal profit attributable to equity holdersof the parent 12.8 10.7Exclude: - significant items 0.7 1.5 - impairment of goodwill 0.8 - - negative goodwill recognised (0.2) - - amortisation of intangible assets 2.4 0.8 - revaluation of financial instruments (0.3) (0.3) - associated tax effects (1.0) (0.5) --------------------- ------- --------- -------- ---- --------Adjusted profit attributable toequity holders of the parent 15.2 12.2--------------------- ------- --------- -------- ---- -------- Pence Pence Adjusted earnings per share 32.2 30.9--------------------- ------- --------- -------- ---- -------- Significant items in the year to 31 March 2007 comprised re-organisation costs,principally in relation to the closure of Umeco Supply Chain's electronicscomponent distribution activity. Significant items in the year to 31 March 2006comprised re-organisation costs of £0.6 million and a loss on disposal of theindustrial element of the Compstock business of £0.9 million. 5 Tax expense The effective tax rate on profit before tax is 32.5 per cent (2006: 33.5 percent). The effective rate of tax on adjusted profit before tax is 31.9 per cent(2006: 32.8 per cent). 6 Dividends The Directors have proposed a final dividend of 10.0 pence per share, payable on3 August 2007 to shareholders on the register on 6 July 2007. In accordance withIAS10, this dividend has not been reflected in the balance sheet as at 31 March2007. The amount of this final dividend is £4.7 million. An interim dividend of5.5 pence per share was paid in December 2006 and the cost of this dividend was£2.6 million. 7 Earnings per share The weighted average number of shares in issue during the year was 47.5 million(2006: 39.2 million). The weighted average number of shares on a fully dilutedbasis was 47.8 million (2006: 39.6 million) after an adjustment for dilutiveshare options of 0.3 million (2006: 0.4 million). In the comparative period, the weighted average number of shares in issue wasadjusted to reflect the bonus element of the rights issue held in December 2005.This resulted in the weighted average number of shares in issue for periodsprior to the rights issue being increased by 10.4 per cent. Basic earnings per share have been calculated on profit attributable to equityholders of the parent of £12.8 million (2006: £10.7 million). The Directorsconsider that adjusted earnings per share provide a more consistent measure ofoperating performance. Adjusted earnings per share are calculated based onadjusted profit attributable to equity holders of the parent, calculated as setout in note 4. 8 Reconciliation of net cash to movement in net debt 2007 2006 £ million £ million Net (decrease)/increase in cash (2.3) 1.2Borrowings taken on with acquisition (0.1) -Drawdown of bank loans (31.4) (24.1)Drawdown of lease finance (0.5) (0.5)Repayment of bank loans 5.0 50.9Repayment of lease finance liabilities 0.5 0.5----------------------------- --------- ------- (28.8) 28.0 Effect of exchange rate fluctuations 3.7 (3.4)----------------------------- --------- ------- Movement in net debt (25.1) 24.6Net debt at start of year (26.7) (51.3)----------------------------- --------- ------- Net debt at end of year (51.8) (26.7)----------------------------- --------- ------- Net debt comprises cash balances, bank loans and lease finance obligations. 9 Acquisitions Intangible Other net Consideration assets & assets acquired & expenses goodwill £ million £ million £ millionAerodyne AdvancedComposites (0.2) 0.3 0.1US Airmotive 0.3 0.3 0.6Antavia 8.9 (0.3) 8.6--------------------- ---------- ----------- ----------- 9.0 0.3 9.3 --------------------- ---------- ----------- ----------- In addition, £2.4 million of deferred consideration was paid in respect ofacquisitions made in prior years. 10 Status of information and details of Annual General Meeting The financial information in this preliminary announcement does not constitutethe Company's statutory accounts for the years to 31 March 2006 or 31 March 2007but is derived from those accounts. Statutory accounts for the year to 31 March2006 have been delivered to the Registrar of Companies and those for the year to31 March 2007 will be delivered following the Company's Annual General Meeting.The Auditors have reported on those accounts; their reports were unqualified anddid not include references to matters which the auditors drew attention by wayof emphasis without qualifying their reports, nor did they include anystatements under sub-sections 237 (2) or (3) of the Companies Act 1985. Thispreliminary announcement of results for the year to 31 March 2007 was approvedby the Directors on 5 June 2007. The Annual General Meeting of the Company willbe held at The Falstaff Hotel, 16-20 Warwick New Road, Leamington Spa, CV32 5JQon Wednesday 25 July 2007 at 12 noon. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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