16th Jun 2011 07:00
16 June 2011 Umeco plc Results for the year to 31 March 2011 Focused on the futureUmeco plc ('Umeco') is an international provider of advanced compositematerials primarily to the aerospace & defence, wind energy, recreation andautomotive industries. 2011 2010 ChangeContinuing operations £m £m Per centRevenue 207.4 174.8 + 18.6Adjusted operating profit* 19.5 16.6 + 17.5Adjusted profit before tax* 16.4 13.0 + 26.2 Change Pence Pence Per centAdjusted earnings per 24.6 17.9 + 37.4share*Dividend per share 18.25 17.50 + 4.3 £m £mNet debt 74.3 79.6Including 2011 2010 Changediscontinued operations £m £m Per centRevenue 459.9 411.5 + 11.8Adjusted operating profit* 33.3 30.7 + 8.5Adjusted profit before tax* 27.5 24.0 + 14.6 Change Pence Pence Per centAdjusted earnings per 40.8 35.0 + 16.6share*
* a definition of adjusted measures is set out in note 1 to the press release.
Financial highlights
- Revenue from continuing operations increased by 18.6 per cent
- Adjusted operating profit from continuing operations of £19.5 million up 17.5 per cent, adjusted profit before tax from continuing operations up 26.2 per cent
- Dividend for the year increased by 4.3 per cent to 18.25p
Operational highlights
- Disposal of Supply Chain creates focused, advanced composites business with attractive growth opportunities - Shareholder approval obtained at the General Meeting held on 13 June 2011 - Proceeds from the disposal will strengthen the balance sheet and enable Umeco to build further scale and enhance its market position in advanced composites
Neil Johnson, Chairman, said:
"This has been a transformational year for Umeco. The sale of our Supply Chain business will enable Umeco to focus its resources on its composites business, which we believe has attractive long-term growth prospects. I am confident that our entrepreneurial and experienced management team is well placed to maximise our growth potential."
Andrew Moss, Chief Executive, said:
"Umeco performed strongly in the year, reflecting the gradual improvement in the global market conditions and the impact of the strategic decisions we have taken. We look forward to making further progress in 2011/12. The increasing use of advanced composite materials in our core markets of aerospace & defence, wind energy, recreation and automotive offers an exciting long-term growth opportunity for the Group."
There will be a meeting for analysts at 9.00am this morning at UBS, 1 Finsbury Avenue, London, EC2M 2PP. Should you wish to attend please contact Davina Marriott on 0207 567 4875.
Conference call details for those who cannot attend in person:
Dial in: +44 (0) 1452 568 051
Conference ID: 75983531
For further information please contact:
Umeco plc Tel: +44 (0) 1926 331 800
Andrew Moss, Chief Executive
Steve Bowers, Finance Director
www.umeco.com
Tulchan Communications Tel: +44 (0) 207 353 4200
Christian CowleyLucy LeghNotes to the press release
1. Adjusted profit and earnings per share measures
Umeco uses adjusted figures as key performance indicators. Adjustedfigures are stated before the results of discontinued operations, amortisationand impairment charges relating to intangible assets, significant items, therevaluation of financial instruments based on their market values andassociated tax effects. The differences between the total and adjustedmeasures of operating profit, profit before tax and profit attributable toowners of Umeco are reconciled in note 4 to the announcement of results. Thenarrative in this announcement is based on the adjusted measures of operatingprofit, profit before tax and earnings per share. These provide a moreconsistent measure of operating performance.
2. Discontinued operations
On 20 May 2011, Umeco announced the proposed disposal of the SupplyChain business to a company established by funds advised by Exponent PrivateEquity LLP, for an unadjusted cash and debt free value of approximately £145.8million. The net consideration in respect of the disposal is expected to beapproximately £109.3 million. The disposal is expected to be completed in July2011. The Supply Chain business was not a discontinued operation or classifiedas held for sale at 31 March 2010 and the results and cash flow for thecomparative period have been re-presented to show the discontinued operationseparately from continued operations. The Supply Chain business is treated asheld for sale at 31 March 2011 in line with IFRS5 as management consider thedisposal to be highly probable.
As at 31 March 2010, the Group held for sale the business and assets of Advanced Composites Group SA (Pty) Limited which is incorporated and operated in South Africa. Its results have accordingly been presented separately from continuing operations and are disclosed as a discontinued operation.
The values of selected key performance indicators for continuingoperations and, where indicated, including discontinued operations, are setout below: 2010 2011 Re-presented Change £m £m Per centRevenue 207.4 174.8 + 18.6
Revenue - including discontinued operations 459.9 411.5 + 11.8Adjusted operating profit 19.5 16.6 + 17.5Adjusted operating profit - including discontinued operations 33.3 30.7 + 8.5Operating profit 11.4 9.6 + 18.8Operating profit - including discontinued operations 25.0 23.1 + 8.2Adjusted profit before tax 16.4 13.0 + 26.2Adjusted profit before tax - including discontinued operations 27.5 24.0 + 14.6Profit before tax 8.6 6.3 + 36.5Profit before tax - including discontinued operations
19.9 16.7 + 19.2 2011 2010 Change Pence Pence Per cent
Adjusted earnings per share 24.6 17.9 + 37.4Adjusted earnings per share - including discontinued operations 40.8 35.0 + 16.6Earnings per share 13.9 8.4 + 65.5Earnings per share - including discontinued operations 4.5 23.6 - 80.9Dividend per share 18.25 17.50 + 4.3
3. Further information on Umeco plc
Umeco is managed through two continuing business streams:
- Structural Materials - development, manufacture and supply of advanced composite materials; and - Process Materials - development, manufacture and supply of vacuum bagging materials.
Chairman's StatementOverview
Umeco performed well in the year to 31 March 2011, with trading in the second half building upon the encouraging first half year. This reflects a gradual improvement in global market conditions and the actions we have taken.
On 20 May 2011, we announced the proposed sale of Umeco's Supply Chain business, which trades as Pattonair. This sale was approved by shareholders at the General Meeting held on 13 June 2011. Completion of the disposal, subject to all other conditions being satisfied, is expected to occur during July 2011. As a result of the disposal, Umeco will become a business focused on the advanced composites market which the Board considers has attractive growth prospects.
Results and dividend
As a consequence of the proposed disposal of Pattonair, the resultsfor this business are shown as a discontinued operation in the consolidatedfinancial statements. Excluding Pattonair, revenue from continuing operationsin the year to 31 March 2011 was £207.4 million (2010: £174.8 million), anincrease of 18.6 per cent. Adjusted operating profit increased by 17.5 percent to £19.5 million (2010: £16.6 million).
The Board is proposing a final dividend of 11.5 pence per ordinary share making a total dividend for the year of 18.25 pence per ordinary share (2010: 17.5 pence). The final dividend is payable on 7 October 2011 to shareholders on the register on 9 September 2011.
The Board's policy on dividends is to provide returns toshareholders that reflect both the underlying profitability and cash flow ofUmeco. This policy will not change as a result of the sale of Pattonair.However, the lower absolute level of profitability of Umeco post-disposal willmean that dividends will be rebased for the year ending 31 March 2012 in orderthat dividend cover remains comparable to current levels.
Strategy
Our strategy is to create a leading business focused on the global advanced composites market. We will seek to achieve this by investing in our products and market positioning.
On 13 June 2011, shareholders approved the sale of Pattonair to acompany established by funds advised by Exponent Private Equity LLP for a netconsideration of approximately £109.3 million before transaction costs, ofwhich £8.0 million is deferred. The net cash proceeds of the disposal will beused primarily to reduce the net indebtedness of the Group, providing astronger financial base to support the Group's growth strategy.The disposal allows Umeco to capitalise on its attractive marketpositions within the composites sector, where customers are increasingly usingcomposite materials due to factors such as rising energy costs and increasingenvironmental and safety concerns. Over time we will look to selectivelybroaden our technological capability and expand our geographic footprint.
Umeco's Composites business has higher margin characteristics and a broader customer base than Pattonair and the Board is confident it has superior long-term growth prospects.
Board changes
On 20 May 2011, we announced that Andrew Moss (formerly Chief Operating Officer) had been appointed as Chief Executive and Steve Bowers (formerly Group Financial Controller) had been appointed as Finance Director.
Andrew Moss joined Umeco in 1999. He joined the Board in June 2008 on his appointment as Chief Operating Officer, prior to which he was Chief Executive of Umeco Composites. Andrew has a broad industrial and aerospace background, and was previously Chief Executive of the Automotive and Building Products Group of Invensys plc.
Steve Bowers joined Umeco in 1998 having qualified as a chartered accountant with KPMG. He has been Company Secretary since 1999 and was appointed Group Financial Controller in 2004.
Clive Snowdon, formerly Chief Executive, and Doug Robertson, formerly FinanceDirector, resigned from the Board on 20 May 2011. The Board expresses itssincere thanks to Clive, who had been Chief Executive of Umeco for 14 years,and Doug, Finance Director for nearly 4 years, for their significantcontributions to the Group's development.On 30 April 2010, we announced the appointment of Adrian Auer as SeniorIndependent Director. Adrian's breadth of international corporate experience,both in Executive and Non-executive roles, is proving an invaluable additionto the Board.Management and employees
The management and employees of Umeco have done an outstanding job responding to the challenges and opportunities presented by ever changing global markets. In a period in which Umeco has been undergoing significant change, I am particularly appreciative of the support from all employees and thank them for their commitment to the business.
Summary
We are at a turning point in Umeco's long history as a specialist engineering group. We believe that the decision to focus on composite materials is in the best interests of the Company and its shareholders. We have an experienced management team who are energised and excited by the future growth prospects for the Group. We look forward to this new phase for Umeco with confidence.
This has been a transformational year for Umeco. The sale of our Supply Chain business will enable Umeco to focus its resources on its composites business, which we believe has attractive long-term growth prospects. I am confident that our entrepreneurial and experienced management team is well placed to maximise our growth potential.
Neil JohnsonChairman16 June 2011Chief Executive's Review
Following the completion of the disposal of our Supply Chain business we will be a focused composites business capable of delivering sustainable growth in profits, operating margins and return on capital. Our ability to innovate, react quickly and deliver bespoke solutions for our customers are critical factors in our success.
Our key end markets are: - aerospace & defence - wind energy - recreation - automotive - other industrial markets
We intend to build further scale through organic growth, supported by investment in our capability and product innovation, and potentially through acquisitions that will enhance our customer offering and our competitive positioning.
We anticipate further benefits from greater consistency in branding, improved technology transfer between our businesses, broader and deeper market coverage, and by developing our people and harnessing their talents.
Results
The markets we serve have all started the recovery process, somemore strongly than others, following the downturn that commenced in 2008. Thisturnaround had a marked effect on our Composites business which grew revenueby 18.6 per cent to £207.4 million and adjusted operating profit by 17.5 percent to £19.5 million.Our Supply Chain business also benefited from improving market conditions.Coupled with the benefits of new contract wins its revenue grew by 7.4 percent to £251.9 million. Adjusted operating profit reduced by £1.1 million to£13.9 million due principally to lower margins on the Rolls-Royce contract,now that the performance fee hurdle rate is set to the highest level, andweakness in our Italian Supply Chain business.Including the results of discontinued operations, revenue by sectorwas as follows: 2011 2010 Change £m £m Per centAerospace & defence 320.0 291.5 + 9.8Wind energy 29.6 21.9 + 35.2Recreation 37.4 33.7 + 11.0Automotive 15.4 15.6 - 1.3Other 57.5 48.8 + 17.8 459.9 411.5 + 11.8Structural Materials 2011 2010 Change £m £m Per centRevenue 120.0 101.7 + 18.0Adjusted operating profit 10.8 7.9 + 36.7 Per cent Per centAdjusted operating margin 9.0 7.8Working capital to sales 11.3 11.3Structural Materials develops, manufactures and supplies a broadrange of advanced composite materials. It also has a growing European presencein the distribution of composite resins, reinforcements and related products.Market review 2011 2010 ChangeRevenue by sector £m £m Per centAerospace & defence 45.1 37.8 + 19.3Wind energy 1.5 0.3 + 400.0Recreation 30.9 27.9 + 10.8Automotive 11.8 10.9 + 8.3Other 30.7 24.8 + 23.8 120.0 101.7 + 18.0
Structural Materials enjoyed good growth in its revenues in all market sectors:
Aerospace & defence
Structural Materials' aerospace & defence revenues grew by 19.3 per cent, ledby our USA business. This was largely driven by higher OEM demand formaterials for aircraft interiors. Boeing 787 activity was strong in the firsthalf year but slowed somewhat during the second half as a result of delays tothe aircraft programme. Demand is expected to increase following delivery ofthe first aircraft to the launch customer later this year.We are pleased with the progress we are making on materials,including our out-of-autoclave product range, for which we are the only sourcequalified by Airbus, and tooling for A350XWB applications. In March 2011, webooked orders for ballistic protection materials for the 200 vehicle LPPVcontract awarded to Force Protection Europe by the UK Ministry of Defence.This order will be shipped largely during the second half of the currentfinancial year.
Wind energy
Structural Materials' revenue in the wind energy sector, thoughsmall, grew significantly during the year as a result of increasing demand forour specialist materials used in the structure of moulding tools for turbineblades.RecreationRevenue in this market sector, which includes motorsport, marineand other sporting goods applications, grew by 10.8 per cent. During the year,we were successful in winning further market share in Formula 1 and this,coupled with improving underlying market conditions, contributed to revenuegrowth. While activity in the marine sector was relatively flat year on year,revenue in the high value recreational market improved, in particular arisingfrom supplying customised composite solutions to a market and technologyleader in sporting goods.
Automotive
Revenue in the automotive sector increased by 8.3 per cent, reflectingimproving market conditions and increased activity on new vehicle platforms.Our UK business enjoyed strong growth in this sector and is active on a numberof projects, including providing carbon fibre prepreg materials for theintegrated chassis and body for the Delta E 4 Coup©. This electric vehicle haswon a number of awards and demonstrates technology for cost effective mediumvolume vehicle production.Other industrial markets
Applications where the high strength, lightweight characteristics of advanced composite materials are attractive arise in a wide range of industries. Umeco's portfolio of composite materials has a diverse customer base including those in healthcare, electrical equipment and industrial machinery. Revenue grew by 23.8 per cent, as market conditions improved and we expanded our geographic coverage.
Business development
During the year, Structural Materials' distribution businesssuccessfully extended its agreement with Ashland to include Finland andFrance, with both these territories making a contribution to revenue.Structural Materials also entered into an agreement to distribute the Sigmatexproduct range in the UK, Eire, France, Scandinavia, Finland and the Balticstates. Sigmatex is a world leader in converting carbon fibre into innovativetechnical textiles for use in composites applications.The merits of our strategy to promote novel materials to enhancethe attractiveness of moulding tools constructed from composite materialsrather than metals were highlighted by winning the JEC 2011 CompositesInnovation Award - Equipment Category for Carbovar - Nanovate - compositetooling. This award is the result of a five year joint collaborative R&Dprogramme with our partner Integran Technologies, Inc., a world leader in`Nanovate' nanometal materials. The programme has led to the development ofnovel technologies to combine the hardness, durability and damage tolerance ofthe nanometal coating with the lightweight, low thermal mass of a carbon fibrecomposite mould tool, to deliver a durable and cost effective solution.
Our prepreg material is being used by VN Composites to manufacture composite connectors for a Thales Alenia Space satellite application. As part of a continuous programme of development, and increased composite materials uptake, Thales Alenia Space recently replaced metallic rod connectors to further reduce the structural weight of a satellite, thereby allowing an increased payload for the same launch weight.
R&D activity continues to be focused on developing material which can be processed at low cost and with short cycle times. These product and process developments are expected to increase the penetration of advanced composite materials in a wide range of industries, particularly those seeking to produce parts in high volume, such as automotive. We will continue to invest in R&D whilst anticipating a lower on-going level of grant funding.
On 8 June 2011, we joined the National Composites Centre with aplace on the board. We look forward to developing a close working relationshipwith world-leading manufacturers and UK academics to develop new technologiesand promote the application of composites.The restructuring of Structural Materials' North American salesorganisation was completed during the year. This included the termination of asales agency agreement relating to a significant number of customers at a costof £2.5 million. This has been treated as a significant item in the Group'sresults. The new organisation provides a more effective and lower cost salesstructure.The relocation of Structural Materials' Californian operations isproceeding to plan. Capital expenditure on this project was US$6.0 million inthe year to 31 March 2011 and is expected to be approximately US$12.0 millionfor the project in aggregate.Process Materials 2011 2010 Change £m £m Per centRevenue 87.4 73.1 + 19.6Adjusted operating profit 8.7 8.7 - Per cent Per centAdjusted operating margin 10.0 11.9Working capital to sales 16.5 16.6
Process Materials develops, manufactures and supplies vacuum bagging materials to the composites industry and other markets.
Market review 2011 2010 ChangeRevenue by sector £m £m Per centAerospace & defence 26.4 22.6 + 16.8Wind energy 28.2 21.5 + 31.2Recreation 3.4 2.3 + 47.8Automotive 3.4 3.1 + 9.7Other 26.0 23.6 + 10.2 87.4 73.1 + 19.6
Process Materials enjoyed strong growth in its revenues in all market sectors:
Aerospace & defence
Our aerospace & defence revenues grew by 16.8 per cent, maintainingthe good progress made in the first half year despite the slow down in Boeing787 activities later in the year. We are encouraged by renewed activity inEurope with Airbus' activity levels having risen following a prolonged periodof de-stocking.Wind energy
Our revenues in the wind energy market grew by 31.2 per cent, led by demand from China and closely followed by growth from European customers. Our business in the USA experienced modest growth but was restrained by our prudent approach to credit.
We are pleased by the progress made in this market, despite the somewhat mixed fortunes of the industry outside of China.
Recreation & automotive
Revenues in the recreation sector grew by 47.8 per cent followingmarket share gains in motorsport and recovery of demand in the marine sectorin continental Europe. Automotive sector demand was slightly higher than theprior year, with revenue growing by 9.7 per cent.
Other industrial markets
Process Materials grew its revenues in other industrial markets by 10.2 per cent. This increased demand arose in both Europe and the USA. Our manufacturing business in Italy made a significant contribution to this rate of growth due to demand for specialist films not directly related to composites applications.
Business development
In September 2010, we announced a joint venture agreement with ourChinese distributor, Shanghai Leadgo Technology Co., Ltd. The joint venturecompany has been approved by the Chinese authorities and work to fit out thefactory premises is nearing completion. The principal items of machinery areexpected to be installed during summer 2011 and the business is expected to beoperational by the end of 2011 as originally planned. The Group's totalinvestment in the joint venture is expected to be approximately US$4.1million.Process Materials' business in the USA successfully relocated itsmain California based operation in September 2010 to a larger, lower costfacility. This new facility has been key in the successful implementation of anew value added vacuum bagging contract for a major global wind energycustomer. A new distribution centre has been established in Seattle to serviceBoeing and other customers in this region.
Process Materials has made good progress in qualifying a new range of specialist bagging film for aerospace applications. These are being manufactured at our facility in Italy, for which new equipment has recently been ordered. This is expected to be operational in mid 2012 and will provide the capability to make a wider range of products.
Supply Chain disposal
We announced on 20 May 2011 the proposed sale of the Supply Chain business for a net consideration of approximately £109.3 million, of which £8.0 million will be deferred. After the deduction of costs incurred in relation to the disposal, the total net proceeds are expected to be approximately £101.9 million. This will be used primarily to reduce the indebtedness of Umeco, providing a stronger financial base in support of the growth strategies outlined above.
At the General Meeting held on 13 June 2011, shareholders passed an ordinary resolution to approve the disposal. If all other conditions are satisfied, completion of the disposal is expected to take place during July 2011.
The Board believes that the disposal, and the subsequent focus of resources on the Umeco Composites activities, is in the best interest of shareholders as a whole, principally for the following reasons:
- both Umeco Composites and Supply Chain are at a stage in their development whereby the Board considers they would benefit from separate management focus and access to additional funds. Moreover, there are no material synergies between the businesses; and
- Umeco Composites has higher margin characteristics and a broader customer base than Supply Chain. Furthermore, Supply Chain needs a significant level of working capital to support growth in its activities.
During the year to 31 March 2011, Supply Chain won a number ofimportant contracts in Europe, North America and Asia from both existing andnew customers. In August 2010, Supply Chain signed a new contract to providesupply chain services to Rolls-Royce's operations in North America. This newcontract, which went live in January 2011, is expected to generate annualrevenues in excess of US$20.0 million and has an initial term extending to 31December 2017. In addition, it has been agreed with Rolls-Royce that theexisting major supply chain contract in the UK will be extended by two yearsand will also run to 31 December 2017.Supply Chain's revenue in the second half of the year strengthenedas a result of new contract wins and improving demand levels, both from majorOEM customers and from the aftermarket. The business in Asia witnessedsignificant revenue growth during the year and is performing well. Business incontinental Europe was disappointing, largely due to difficult marketconditions in Italy where weak demand was compounded by customer de-stocking.Towards the end of the year there were encouraging signs that suggest theItalian market has started to improve and we expect it to slowly recover overthe current year. Supply Chain's business in France continued its recoverywith improved profitability despite minimal revenue growth.
Outlook
The increasing use of advanced composite materials in our core markets of aerospace & defence, wind energy, recreation and automotive offers an exciting long-term growth opportunity for the Group.
Umeco Composites performed strongly in the year to 31 March 2011, reflecting the gradual improvement in the global market conditions and the impact of the strategic decisions we have taken.
The disposal of the Supply Chain business will provide the Groupwith a strong, debt free balance sheet which can be used to provide focusedinvestment in support of our growth strategy both organically and,potentially, by way of acquisitions. We look forward to making furtherprogress in 2011/12.Andrew MossChief Executive16 June 2011Finance Director's ReviewOperating results 2011 2010Continuing operations £m £mRevenue 207.4 174.8Adjusted operating profit 19.5 16.6 Per cent Per centAdjusted operating margin 9.4 9.5
Revenue from continuing operations was 18.6 per cent higher than last year. The growth in revenue reflects improvements in market conditions for both Structural Materials and Process Materials.
Adjusted operating profit was £19.5 million, £2.9 million higherthan the previous year. The reclassification of the Supply Chain business as adiscontinued operation has led to a revised basis of allocating corporateoverheads. As a result of this change, Composites has borne £1.0 million moreof these overheads in the year to 31 March 2011 than would have been the caseunder the previous method of allocation. This has reduced the adjustedoperating margin of continuing operations by 0.5 percentage points. Despitethese additional costs, the overall adjusted operating margin remained broadlyconsistent with the prior year.Structural Materials' operating margin increased to 9.0 per cent(2010: 7.8 per cent), due to operational gearing in our manufacturingbusinesses which more than offset the effects of additional distributionrevenues which attract lower margins. The operating margin of ProcessMaterials reduced to 10.0 per cent (2010: 11.9 per cent), due to delays in rawmaterial price rises being passed on to customers, primarily during the firsthalf of the year.The combined performance of the Group, including discontinuedoperations, led to revenue in the year to 31 March 2011 increasing by 11.8 percent to £459.9 million (2010: £411.5 million), and adjusted operating profitincreasing by 8.5 per cent to £33.3 million (2010: £30.7 million).Exchange ratesAverage rates 2011 2010US dollar 1.556 1.596Euro 1.177 1.130Closing ratesUS dollar 1.603 1.517Euro 1.130 1.121The majority of Group revenue from continuing operations isgenerated by overseas subsidiaries and a significant proportion of UK businessis transacted in foreign currencies, principally the US dollar and the Euro.At constant exchange rates, the increase in revenue from continuing operationsfor the year would have been 18.5 per cent, with revenue being £0.2 millionlower than the reported figure.
Net financial expense
Net financial expense, excluding revaluations of financialinstruments, was £5.8 million in aggregate (2010: £6.7 million), of which £3.1million (2010: £3.6 million) related to continuing operations with theremainder being attributable to discontinued operations. Financial income andexpense have been allocated between continuing and discontinued operations,with central interest costs being apportioned based upon funding provided tobusiness units and consideration paid for acquisitions. For the year to 31March 2012, interest costs will be allocated on a similar basis up to the dateof completion of the disposal of the Supply Chain business. Thereafter,interest costs are expected to reduce substantially and will relate wholly tocontinuing operations.
The average interest rate payable in the year to 31 March 2011 on debt balances was 6.3 per cent (2010: 5.0 per cent). Average net debt was £92.4 million (2010: £118.9 million), higher than reported debt at 30 September 2010 and 31 March 2011 due to seasonal and other phasing effects. Following completion of the disposal of the Supply Chain business, variations in the Group's net debt levels are expected to reduce significantly.
Intangible amortisation
The amortisation charge for continuing operations is £5.3 million(2010: £6.3 million). This relates to the amortisation of intangible assetsarising on acquisitions, principally the benefit of product approvals, orderbooks and customer relationships on hand at the dates of acquisition. Noimpairment charges have been made in the year in relation to continuingoperations.
Significant items
Significant items of £2.8 million were incurred by continuing operations (2010: £0.7 million), principally relating to the restructuring of Structural Materials' North American sales organisation, including the termination of a sales agency agreement relating to a significant number of customers, at a cost of £2.5 million.
Profit before tax
Adjusted profit before tax from continuing operations was £16.4 million (2010: £13.0 million), a rise of 26.2 per cent. Total profit before tax from continuing operations was £8.6 million (2010: £6.3 million).
Adjusted profit before tax, including discontinued operations, was £27.5 million (2010: £24.0 million), an increase of 14.6 per cent.
Tax
The effective tax rate on adjusted profit before tax fromcontinuing operations was 27.6 per cent (2010: 34.1 per cent). The effectivetax rate on adjusted profit before tax, including discontinued operations, was28.7 per cent (2010: 29.7 per cent).
For the year to 31 March 2012, the tax rate on adjusted profit before tax of continuing operations is expected to be approximately 33 per cent, reflecting a greater weighting of profits towards the USA, where effective tax rates are higher.
The effective tax rate on profit before tax from continuing operations was 22.4 per cent (2010: 34.9 per cent).
Discontinued operations
On 13 June 2011, shareholders approved the sale of the Supply Chainbusiness to a company established by funds advised by Exponent Private EquityLLP. As announced on 20 May 2011, the principal terms of the disposal are anunadjusted cash and debt free value of approximately £145.8 million. Netconsideration is expected to be approximately £109.3 million, beforetransaction costs, of which £8.0 million is deferred and will be received infour equal quarterly instalments between 29 June 2012 and 29 March 2013.A goodwill impairment charge of £12.5 million has been recognisedin the year to 31 March 2011 to reflect the anticipated terms of the SupplyChain disposal and Supply Chain's balance sheet at that date. Supply Chain hasbeen classified as a discontinued operation in the consolidated financialstatements, along with Advanced Composites Group SA (Pty) Limited ("ACG SouthAfrica") which was classified as a discontinued operation in the prior year.
In the year to 31 March 2011, revenue from discontinued operations was £252.5 million (2010: £236.7 million) and adjusted operating profit was £13.8 million (2010: £14.1 million).
Earnings per share
Adjusted earnings per share from continuing operations were 24.6 pence, 37.4 per cent higher than last year (2010: 17.9 pence). Total earnings per share from continuing operations were 13.9 pence (2010: 8.4 pence).
Adjusted earnings per share including discontinued operations were 40.8 pence (2010: 35.0 pence).
Dividends
An interim dividend of 6.75 pence was paid in February 2011 and afinal dividend of 11.50 pence is proposed, making a total dividend of 18.25pence for the year (2010: 17.50 pence). The value of the interim dividend was£3.2 million and the value of the proposed final dividend is £5.5 million.Operating cash flow 2011 2010Continuing operations £m £mOperating profit 19.5 16.6Significant items (2.8) (0.7)Depreciation 3.7 3.8Share based payments and ownshares held 0.4 0.3Increase in inventories (5.6) (0.4)(Increase)/decrease in (10.0) 1.9debtorsIncrease in creditors,provisions & retirementbenefit obligations 10.4 1.1 Operating cash flow 15.6 22.6 2011 2010 Per cent Per centOperating cash flow 80.0 136.1conversion Working capital ratio 11.4 11.3Operating profit conversion to cash for continuing operations of80.0 per cent compares to 136.1 per cent last year. This principally reflectedpayments of £2.8 million (2010: £0.7 million) in respect of significant items,and a net outflow in respect of working capital, provisions and retirementbenefit obligations of £5.2 million (2010: £2.6 million inflow).A tight credit control environment has been maintained andshipments to certain customers, in the wind energy sector in particular, havecontinued to be held back where appropriate to ensure the Group's exposure tocredit risk remains at an acceptable level. The ratio of working capital torevenue for continuing operations increased from 11.3 per cent to 11.4 percent.
Capital expenditure
Gross capital expenditure for continuing operations of £6.5 million(2010: £3.0 million) was £2.8 million higher than depreciation and primarilycomprises expenditure at Structural Materials' new Delta Lane premises inCalifornia, and investment in production equipment at Structural Materials' UKoperations and in our Chinese joint venture.
Free cash flow
Operating cash flow less interest, tax and capital expenditure fromcontinuing operations generated £2.5 million (2010: £14.6 million). Tax paidby continuing operations was £1.6 million lower than the current charge in thefinancial statements, as a result of the receipt of refunds in respect ofprior years.
Net debt and banking facilities
2011 2010 £m £mNet debt 74.3 79.6
Net debt, including values related to discontinued operations, reduced to £74.3 million (2010: £79.6 million), after funding capital investment in our Composites business and the working capital demands of Supply Chain's activities. Foreign exchange effects caused the sterling value of debt to fall by £4.3 million.
The Group's current bank facilities with Lloyds Banking Group amount to £159.1 million, and comprise a US$150.0 million committed revolving facility which extends to June 2014, a US$89.0 million term loan facility, which in September 2010 was extended until August 2012, and an overdraft of £10.0 million.
The Group has entered into an agreement for a new five yearcommitted multi currency revolving credit bank facilities with HSBC Bank plcand Santander UK plc, comprising £15.0 million and US$25.0 million facilities.Utilisation of the facilities is conditional on, inter alia, completion of thedisposal of the Supply Chain business and notices of prepayment beingdelivered in respect of the committed facilities with Lloyds Banking Group inrespect of the term loan and the revolving credit facility.
Equity
Equity attributable to shareholders reduced from £178.4 million to£171.6 million. This principally results from the retained profit for the yearof £2.2 million and an actuarial gain arising in retirement benefitobligations of £0.8 million net of tax, less a loss debited to the translationreserve of £1.7 million and dividends paid of £8.5 million. An expenserelating to share based payments of £0.4 million was credited directly toreserves.
Pensions
The Group operates a number of defined contribution pension schemesand two defined benefit plans. The defined benefit plans are closed to newentrants and the latest actuarial valuations of these plans show a deficit of£3.7 million (2010: £3.7 million). The Board has agreed with the plans'trustees that the deficits will be funded over a five year period and,accordingly, special payments were paid to the plans during the year of £1.2million (2010: £1.3 million). A one-off lump sum contribution of £0.7 millionis payable by the Group following completion of the disposal of the SupplyChain business. Under the terms of the disposal agreement, Umeco retainsfunding responsibility for the defined benefit plans; however the Supply Chainbusiness' employees will cease to accrue further benefits under the plans fromcompletion of the disposal.
The deficits of the defined benefit plans have been recognised on the balance sheet, with the IAS19 valuation of the plans at 31 March 2011 showing a shortfall in assets to liabilities of £2.0 million (2010: £4.4 million).
Currency exchange risk
The Group seeks to hedge currency exchange risks by matching purchases and revenues that are denominated in foreign currencies. Where this is not possible, forward currency contracts may be taken out to protect exposures. Group policy prohibits speculation in currency management.
The sterling funds that will be received as consideration for theSupply Chain business will be used to repay existing debt, a proportion ofwhich is US dollar denominated. A strengthening of the US dollar in the periodprior to completion of the disposal would result in a higher sterlingequivalent of debt to be repaid and, as partial mitigation against this risk,a currency option has been entered into.
The retranslation of the Group's net investment in overseas businesses led to the net loss of £1.7 million being debited to the translation reserve.
Interest rate risk
While the Group does not hedge the currency value of interest charges, it has partly mitigated interest rate risk by the use of interest rate swaps. During the year to 31 March 2011, these financial instruments fixed the base rate on 52.2 per cent of the Group's average debt at 1.5 per cent.
Changes in the market value of interest rate swaps, together with the change in value of forward foreign exchange contracts, led to financial income for continuing operations of £0.3 million (2010: £0.3 million).
Summary
The proceeds from the disposal of the Supply Chain business will provide Umeco with a strong, debt-free balance sheet. Post completion, we will have banking facilities in place which give us the financial flexibility to implement both organic and acquisitive growth strategies. We believe that Umeco is well placed to deliver profitable growth in the current financial year and beyond.
Steve BowersFinance Director16 June 2011Consolidated Statement of Comprehensive Income_________________________________________________________________________For the year to 31 March 2011 2010 2011 Re-presented Note £m £mContinuing operationsRevenue 2 207.4 174.8 Cost of sales (143.9) (120.8) Gross profit 63.5 54.0 Administrative expenses (52.1) (44.4) Operating profit 11.4 9.6 Financial income 3 1.5 1.0Financial expense 3 (4.3) (4.3) Profit before tax 8.6 6.3 Income tax - UK 5 (2.2) (2.0)Income tax - overseas 5 0.3 (0.2) Income tax - total (1.9) (2.2)
Profit from continuing operations 6.7 4.1Discontinued operations(Loss)/profit from discontinued operations (net of income tax) 11 (4.5) 7.3 Profit attributable to owners of the Company 2.2 11.4 Other comprehensive (expense)/incomeForeign exchange translation differences on foreign operations (1.7) (2.8)Actuarial gain/(loss) in pension schemes 1.2 (1.0) (0.5) (3.8)Income tax on other comprehensive (expense)/income (0.4) 0.3 Other comprehensive expense (0.9) (3.5)Total comprehensive income attributable to owners of the Company
1.3 7.9 2010 2011 Re-presentedEarnings per share Note Pence PenceTotalBasic earnings per share 7 4.5 23.6Diluted earnings per share 7 4.4 23.5 Continuing operationsBasic earnings per share 7 13.9 8.4Diluted earnings per share 7 13.7 8.4 Discontinued operationsBasic earnings per share 7 (9.4) 15.2Diluted earnings per share 7 (9.3) 15.1Consolidated Balance Sheet_________________________________________________________________________As at 31 March 2011 2011 2010 Note £m £mAssetsNon-current assetsProperty, plant & equipment 33.3 46.5Intangible assets 9 111.5 144.1Deferred tax assets 2.6 2.4 147.4 193.0Current assetsInventories 25.6 167.8Trade & other receivables 53.5 79.9Income tax receivable 1.4 4.9Cash 5.6 56.5
Assets classified as held for sale
11 281.6 0.8 367.7 309.9 Total assets 515.1 502.9LiabilitiesCurrent liabilitiesTrade & other payables (53.3) (160.7)Financial liabilities (0.2) (0.9)Income tax payable (7.6) (7.8)Loans & borrowings (25.6) (1.4)
Liabilities classified as held for sale
11 (130.1) - (216.8) (170.8)Non-current liabilitiesOther payables (0.4) (0.7)Deferred tax liabilities (9.4) (10.4)
Retirement benefit obligation
(2.0) (4.4)Loans & borrowings (111.4) (134.7)Provisions (3.5) (3.5) (126.7) (153.7) Total liabilities (343.5) (324.5) Net assets 171.6 178.4 EquityShare capital 12.0 12.0Share premium 115.5 115.5Translation reserve 6.9 8.6Retained earnings 37.2 42.3
Equity attributable to owners of the Company 171.6 178.4
Consolidated Statement of Cash Flows _________________________________________________________________________ For the year to 31 March 2011
2010 2011 Re-presented Note £m £m
Cash flows from operating activities - continuing operations Profit for the year - continuing operations
6.7 4.1Depreciation 3.7 3.8Amortisation & impairment charges
5.3 6.3Financial income 3 (1.5) (1.0)Financial expense 3 4.3 4.3
Share based payments expense
0.2 0.2Own shares held 0.2 0.1Income tax expense 5 1.9 2.2 20.8 20.0Increase in inventories (5.6) (0.4)
(Increase)/decrease in trade & other receivables (10.0) 1.9Increase in trade & other payables 11.6 2.3Decrease in provisions - (0.2)Decrease in retirement benefit obligation (1.2) (1.0) Cash generated from operations
15.6 22.6Net financial expense paid (3.8) (4.1)Tax paid (2.9) (1.0)
Net cash flow from operating activities - continuing operations 8.9 17.5
Cash flows from investing activities - continuing operations Acquisition of property, plant & equipment
(6.5) (3.0)Proceeds from sale of property, plant & equipment 0.1 0.1Disposal of subsidiaries (1.9) -Acquisition of subsidiaries, net of cash acquired (0.1) (0.2)Net cash flow from investing activities - continuing operations (8.4) (3.1)
Cash flows from financing activities - continuing operations Drawdown of bank loans
17.9 8.6Repayment of bank loans (37.0) (37.1)Repayment of lease finance liabilities (0.2) (0.3)Dividends paid to owners of the Company (8.5) (8.4)Net cash flow from financing activities - continuing operations (27.8) (37.2)Discontinued operationsNet cash flow from operating activities 9.7 29.8Net cash flow from investing activities (0.7) (0.8) Net cash flow from discontinued operations 9.0 29.0 Net (decrease)/increase in cash 10 (18.3) 6.2Cash at start of year 56.5 49.0Effect of exchange rate fluctuations
0.2 1.3 Net cash at end of year 38.4 56.5
Consolidated Statement of Changes in Equity _________________________________________________________________________ For the year to 31 March 2011
Share Share Translation Retained capital premium reserve earnings Total £m £m £m £m £mAt 1 April 2010 12.0 115.5 8.6 42.3 178.4Total comprehensive income/(expense)Profit attributable to owners of the Company - - - 2.2 2.2Other comprehensive (expense)/incomeForeign exchange translation differences onforeign operations - - (1.7) - (1.7)Actuarial gain in pension schemes - - - 1.2 1.2Income tax on other comprehensive income - - - (0.4) (0.4)Total other comprehensive (expense)/income - - (1.7) 0.8 (0.9)Total comprehensive (expense)/income - - (1.7) 3.0 1.3Transactions with owners, recorded directly inequityCost of share based payments - - - 0.4 0.4Dividends paid - - - (8.5) (8.5) Total transactions with owners - - - (8.1) (8.1) At 31 March 2011 12.0 115.5 6.9 37.2 171.6 Share Share Translation Retained capital premium reserve earnings Total £m £m £m £m £mAt 1 April 2009 12.0 115.5 11.4 39.8 178.7Total comprehensive income/(expense)Profit attributable to owners of the Company - - - 11.4 11.4Other comprehensive (expense)/incomeForeign exchange translation differences onforeign operations - - (2.8) - (2.8)Actuarial loss in pension schemes - - - (1.0) (1.0)Income tax on other comprehensive income - - - 0.3 0.3Total other comprehensive expense - - (2.8) (0.7) (3.5)Total comprehensive (expense)/income - - (2.8) 10.7 7.9Transactions with owners, recorded directly inequityCost of share based payments - - - 0.2 0.2Dividends paid - - - (8.4) (8.4) Total transactions with owners - - - (8.2) (8.2) At 31 March 2010 12.0 115.5 8.6 42.3 178.4
Notes to the announcement of results ____________________________________________________________________________ For the year to 31 March 2011
1 Basis of preparation
Umeco plc (the `Company') is domiciled in the UK. The consolidated financialstatements of the Company as at and for the year to 31 March 2011 comprise theCompany and its subsidiaries (together referred to as the `Group') and havebeen prepared in accordance with IFRS adopted for use in the EU (`AdoptedIFRS').The financial information set out in this announcement, which was approved bythe Board on 16 June 2011, does not constitute the Company's statutoryaccounts for the years to 31 March 2011 and 31 March 2010 but is derived fromthe 2011 statutory accounts. The statutory accounts for the year to 31 March2010 have been reported on by the Company's auditors and delivered to theRegistrar of Companies. The statutory accounts for the year to 31 March 2011will be delivered to the Registrar of Companies following the Company's AnnualGeneral Meeting. The auditors have reported on the statutory accounts for theyears to 31 March 2011 and 31 March 2010, their reports were unqualified, didnot include references to any matter which the auditors drew attention to byway of emphasis without qualifying their report and did not contain astatement under section 498(2) or (3) of the Companies Act 2006.In the process of applying the Group's accounting policies, management hasmade a number of judgements. The process of preparing these consolidatedfinancial statements inevitably requires the Group to make estimates andassumptions concerning the future and the resulting accounting estimates maynot equal the related actual results. The estimates and judgements that havethe most significant effect on the amounts included within these consolidatedfinancial statements were the same as those that applied to the auditedconsolidated financial statements for the year to 31 March 2010.The comparative figures for the year to 31 March 2010 have been re-presentedto reflect the planned disposal of the Supply Chain business, and the disposalof ACG South Africa. Segmental information has also been restated followingthe adoption of IFRS8.
Following the decisions to dispose of the Supply Chain and ACG South Africa businesses, the results of these undertakings have been classified as discontinued operations.
2 Segmental reporting
The Group has two continuing reportable segments, as described below, whichare the Group's strategic business units. The strategic business units offerdifferent products and services, and are managed separately as they requiredifferent technology and marketing strategies. For each of the strategicbusiness units, the Chief Executive reviews internal management reports on amonthly basis. The following summary describes the operations of each of theGroup's reportable segments.Details of the calculation of adjusted operating profit and a reconciliationof reportable segment adjusted operating profit to total operating profit areset out in note 4.
There are no material transactions between the Group's two reportable segments.
The continuing operations' biggest customer accounts for 3.3 per cent (2010: 1.7 per cent) of net revenue from continuing operations.
Umeco Composites
- Structural Materials - development, manufacture and supply of advanced composite materials; and
- Process Materials - development, manufacture and supply of vacuum bagging materials.
Information regarding reportable segments
Continuing operations Structural Process Total Materials Materials 2011 2010 2011 2010 2011 2010 £m £m £m £m £m £mExternal revenue 120.0 101.7 87.4 73.1 207.4 174.8Inter-segment revenue 0.3 0.2 0.1 0.1 0.4 0.3 Adjusted operating profit 10.8 7.9 8.7 8.7 19.5 16.6 Depreciation 2.1 2.3 1.5 1.4 3.6 3.7Amortisation 3.8 4.2 1.5 2.1 5.3 6.3 Trading assets 33.3 28.8 25.9 23.8 59.2 52.6 Capital expenditure 5.1 1.4 1.4 1.8 6.5 3.2 Discontinued operations ACG South Africa Supply Total Chain 2011 2010 2011 2010 2011 2010 £m £m £m £m £m £mExternal revenue 0.6 2.1 251.9 234.6 252.5 236.7Inter-segment revenue - - - - - - Adjusted operating (loss)/ profit (0.1) (0.9)
13.9 15.0 13.8 14.1 Depreciation - 0.2 1.8 2.0 1.8 2.2Amortisation - - - - - - Trading assets - 0.9 81.3 82.6 81.3 83.5 Capital expenditure - 0.1 1.1 0.8 1.1 0.9 Total 2011 2010 £m £mExternal revenue 459.9 411.5Inter-segment revenue 0.4 0.3
Adjusted operating profit
33.3 30.7 Depreciation 5.4 5.9Amortisation 5.3 6.3 Trading assets 140.5 136.1 Capital expenditure 7.6 4.1
Reconciliations of reportable segment information
2010 2011 Re-presented £m £mRevenue
Total revenue for reportable segments 207.8 175.1Elimination of inter-segment revenue
(0.4) (0.3) Group revenue 207.4 174.8 2010 2011 Re-presented £m £mDepreciation
Total depreciation for reportable segments
3.6 3.7Corporate depreciation 0.1 0.1 Group depreciation 3.7 3.8 2011 2010 £m £mNet assets
Total trading assets for reportable segments 59.2 136.1Corporate net assets and unallocated items - (1.8)Goodwill and intangible assets
111.5 144.1Income tax and deferred tax (13.0) (10.9)Financial liabilities (0.2) (0.9)
Provisions and retirement benefit obligations (5.9) (8.6)Net debt (74.3) (79.6)Assets held for sale - excluding net debt
94.3 - Group net assets 171.6 178.4Geographical segmentsIn presenting information on the basis of geographical segments,segment revenue is provided based on the geographical location of the customerand the geographical location of the business unit. Segment assets are basedon the geographical location of the assets. Continuing Discontinued 2011 Continuing Discontinued 2010 £m £m £m £m £m £mRevenue by location ofcustomerUK 43.3 146.8 190.1 40.7 140.4 181.1France 11.5 19.8 31.3 10.2 22.5 32.7Italy 21.5 14.1 35.6 18.5 17.3 35.8Rest of Europe 40.9 21.6 62.5 29.3 17.7 47.0USA 59.3 34.8 94.1 48.7 28.7 77.4Rest of World 30.9 15.4 46.3 27.4 10.1 37.5 Total 207.4 252.5 459.9 174.8 236.7 411.5 Continuing Discontinued 2011 Continuing Discontinued 2010 £m £m £m £m £m £mNon-current assets bylocation of business unitUK 62.0 11.8 73.8 63.0 12.0 75.0France 2.4 2.1 4.5 2.6 2.3 4.9Italy 22.3 12.5 34.8 24.0 12.5 36.5Rest of Europe 0.4 - 0.4 0.4 - 0.4USA 59.8 12.7 72.5 61.6 14.1 75.7Rest of World 0.5 0.6 1.1 - 1.0 1.0 Total 147.4 39.7 187.1 151.6 41.9 193.5 Continuing Discontinued 2011 Continuing Discontinued 2010 £m £m £m £m £m £mRevenue by location ofbusiness unitUK 82.0 160.9 242.9 74.1 151.8 225.9France 22.7 23.6 46.3 17.0 24.3 41.3Italy 19.4 15.6 35.0 16.5 18.6 35.1Rest of Europe 9.1 14.2 23.3 5.8 10.7 16.5USA 74.2 34.5 108.7 61.4 28.1 89.5Rest of World - 3.7 3.7 - 3.2 3.2 Total 207.4 252.5 459.9 174.8 236.7 411.5
3 Financial income and expense
2010 2011 Re-presented £m £mFinancial income - continuing operationsRevaluation of financial instruments 0.3 0.3Interest income 0.1 -Expected return on pension scheme assets
1.1 0.7 1.5 1.0 2010 2011 Re-presented £m £mFinancial expense - continuing operationsInterest on bank loans and overdrafts 3.2 3.5Interest cost on retirement benefit obligation
1.1 0.8 4.3 4.3
4 Reconciliation of adjusted profit measures
Umeco uses adjusted figures as key performance indicators, as these areconsidered to provide a more consistent measure of operating performance.Adjusted figures are stated before the results of discontinued operations,amortisation and impairment charges relating to intangible assets, significantitems, the revaluation of financial instruments based on their market valuesand associated tax effects. The differences between the total and adjustedprofit measures are reconciled below. 2010 2011 Re-presented £m £mOperating profit - continuing operationsTotal operating profit 11.4 9.6Exclude- significant items 2.8 0.7
- amortisation of intangible assets 5.3 6.3 Adjusted operating profit - continuing operations 19.5 16.6Profit before tax - continuing operationsTotal profit before tax 8.6 6.3Exclude- significant items 2.8 0.7
- amortisation of intangible assets 5.3 6.3- revaluation of financial instruments (0.3) (0.3) Adjusted profit before tax - continuing operations 16.4 13.0Profit attributable to owners of the CompanyTotal profit attributable to owners of the Company 2.2 11.4
Exclude
- significant items 2.8 0.7- amortisation of intangible assets 5.3 6.3- revaluation of financial instruments (0.3) (0.3)- loss/(profit) after tax of discontinued operations 4.5 (7.8)- loss on disposal of discontinued operation - 0.5- associated tax effects (2.6) (2.2)Adjusted profit attributable to owners of the Company - continuing operations 11.9 8.6 Pence Pence Re-presented
Adjusted earnings per share - continuing operations
24.6 17.95 Income tax
The effective tax rate on adjusted profit before tax from continuing operations was 27.6 per cent (2010: 34.1 per cent).
6 Dividends 2011 2010 Pence Pence per share £m per share £mDividends paidPrevious year final 11.00 5.3 11.00 5.3Current year interim 6.75 3.2 6.50 3.1 17.75 8.5 17.50 8.4 2011 2010 Pence Pence per share £m per share £mDividends proposedInterim 6.75 3.2 6.50 3.1Final 11.50 5.5 11.00 5.3 18.25 8.7 17.50 8.4The final dividend for 2011 of 11.50 pence per share was proposed by the Boardon 16 June 2011 and has not been included as a liability as at 31 March 2011as it is subject to approval by shareholders. The amount expected to be paidin respect of this dividend is £5.5 million. The dividend is payable on 7October 2011 to shareholders registered on 9 September 2011.The terms of the Umeco Bonus Plan require that dividends are waived byparticipants in respect of deferred shares. Consequently, the final dividenddeclared in respect of the year to 31 March 2010 and the interim dividenddeclared in respect of the year to 31 March 2011 were each waived in relationto 183,597 shares.7 Earnings per share
Earnings per share is calculated on profit attributable to owners of the Company of £2.2 million (2010: £11.4 million). Adjusted profit attributable to owners of the Company, which provides a consistent measure of operating performance, was £11.9 million (2010: £8.6 million) as shown in note 4.
Earnings per share from continuing operations is calculated on profit from continuing operations of £6.6 million (2010: £4.1 million). Earnings per share from discontinued operations is calculated on the loss from discontinued operations of £4.5 million (2010: £7.3 million profit).
2011
2010
Million
Million
Weighted average number of shares in issueBasic 48.1
48.1
Dilutive effect of share options 0.8
0.4 Diluted 48.9 48.5
8 Acquisition of property, plant & equipment
Additions of £6.5 million (2010: £4.1 million) comprised £6.5million (2010: £3.8 million) funded by cash and £nil (2010: £0.3 million)funded by lease finance.9 Intangible assets Customer relationships, contracts & orders Goodwill Total £m £m £mCostAt 1 April 2010 125.2 36.2 161.4Additions 0.1 - 0.1Foreign exchange translation (2.7) (1.6) (4.3)Transfer to assets held for sale (23.7) (1.6) (25.3) At 31 March 2011 98.9 33.0 131.9Amortisation & impairment lossesAt 1 April 2010 0.8 16.5 17.3Amortisation charge - 5.3 5.3Foreign exchange translation - (0.6) (0.6)Transfer to assets held for sale - (1.6) (1.6) At 31 March 2011 0.8 19.6 20.4Net book valueAt 31 March 2011 98.1 13.4 111.5 At 1 April 2010 124.4 19.7 144.1
The Group made no acquisitions in the years to 31 March 2011 or 31 March 2010.
10 Reconciliation of net cash to movement in net debt
2011
2010
£m
£m
Net (decrease)/increase in cash (18.3)
6.2Drawdown of bank loans (17.9) (8.6)Drawdown of lease finance - (0.3)Repayment of bank loans 37.0 37.1
Repayment of lease finance liabilities 0.2
0.2
1.0
34.6
Effect of exchange rate fluctuations 4.3
6.0Movement in net debt 5.3 40.6Net debt at start of year (79.6) (120.2) Net debt at end of year (74.3) (79.6)
Net debt comprises cash balances, bank overdrafts, bank loans and lease finance obligations.
11 Discontinued operations
On 20 May 2011, the Group announced the proposed disposal of the Supply Chainbusiness to, a company established by funds advised by Exponent Private EquityLLP, for a cash consideration of £145.8 million. The net consideration inrespect of the disposal is expected to be approximately £109.3 million. Thedisposal is expected to be completed in July 2011. The Supply Chain businesswas not a discontinued operation or classified as held for sale at 31 March2010 and the results and cash flow for the comparative period have beenre-presented to show the discontinued operation separately from continuedoperations. The Supply Chain business is treated as held for sale at 31 March2011 in line with IFRS5 as management considered that the disposal is highlyprobable.
The following subsidiaries of Umeco plc, together with their place of operation and country of incorporation, form the Supply Chain business and have been treated as discontinued.
Incorporated and operated in Great Britain and registered in England andWales:Pattonair (Derby) Limited;Pattonair Limited;Pattonair Properties Limited;
Pattonair (Wolverhampton) Limited;
Orchard House Limited - a non trading company; and
Aviation Supplies Co. Limited - a non trading company.
Incorporated and operated elsewhere:
Pattonair (Berlin) GmbH, which is incorporated and operated in Germany;
Ulogistics Canada, Inc., which is incorporated and operated in Canada;
Pattonair USA, Inc., and Uniseal, Inc., which are incorporated and operated in the United States of America;
Pattonair SAS, which is incorporated and operated in France;
Pattonair S.R.L, which is incorporated and operated in Italy;
Pattonair Asia Pte. Limited, which is incorporated and operated in Singapore;
Pattonair do Brasil Servi§os E Logstica Ltda which is incorporated and operated in Brazil; and
Pattonair (Xi'an) Trading Limited, which is incorporated and operated in China.
As at 31 March 2010, the Group held for sale the business and assets ofAdvanced Composites Group SA (Pty) Limited which is incorporated and operatedin South Africa. Its results have accordingly been presented separately fromcontinuing operations and are disclosed as a discontinued operation.
The results of the discontinued operations included in the Consolidated Statement of Comprehensive Income were as follows:
2011 2011 2011 2010 2010 2010 Supply ACG South Total Re-presented ACG South Re-presented Chain Africa Supply Chain Africa Total £m £m £m £m £m £mRevenue 251.9 0.6 252.5 234.6 2.1 236.7Cost of sales (203.4) (0.7) (204.1) (187.0) (2.2) (189.2)Gross 48.5 (0.1) 48.4 47.6 (0.1) 47.5profit/(loss)Administrationexpenses (34.8) - (34.8) (33.2) (0.8) (34.0)Operating profit 13.7 (0.1) 13.6 14.4 (0.9) 13.5Net financial (2.3) - (2.3) (3.1) - (3.1)incomeProfit/(loss)before tax 11.4 (0.1) 11.3 11.3 (0.9) 10.4Income tax - total (3.1) (0.2) (3.3) (2.7) 0.1 (2.6)Profit/(loss)after tax 8.3 (0.3) 8.0 8.6 (0.8) 7.8Loss on disposal - - - - (0.5) (0.5)Write down ofassets held forsale (12.5) - (12.5) - - -(Loss)/ profitattributable toowners of theCompany (4.2) (0.3) (4.5) 8.6 (1.3) 7.3
Cash flows from discontinued operations were as follows:
2011 2011 2011 2010 2010 2010 Supply ACG South Total Re-presented ACG South Re-presented Chain Africa Supply Chain Africa Total £m £m £m £m £m £mNet cash flow fromoperatingactivities 9.6 0.1 9.7 30.6 (0.8) 29.8Net cash flow frominvestingactivities (1.2) 0.5 (0.7) (0.8) - (0.8)Net cash flow fromdiscontinuedoperations 8.4 0.6 9.0 29.8 (0.8) 29.0 The major classes of assets and liabilities comprising the operations held forsale are as follows: 2011 2011 2011 2010 Supply Chain ACG South Africa Total ACG South Africa £m £m £m £mAssetsNon-current assetsProperty, plant & equipment 14.5 - 14.5 0.5Intangible assets 23.8 - 23.8 -Deferred tax assets 1.4 - 1.4 - 39.7 - 39.7 0.5Current assetsInventories 151.5 - 151.5 0.3Trade & other receivables 40.2 - 40.2 -Income tax receivable 3.2 - 3.2 -Cash 59.5 - 59.5 - 254.4 - 254.4 0.3 Total assets 294.1 - 294.1 0.8Write down of assets held for sale (12.5) - (12.5) - Total assets classified as held for sale 281.6 - 281.6 0.8LiabilitiesCurrent liabilitiesTrade & other payables (125.0) - (125.0) -Income tax payable (2.4) - (2.4) -Loans & borrowings (2.3) - (2.3) - (129.7) - (129.7) -Non-current liabilitiesOther payables (0.2) - (0.2) -Provisions (0.2) - (0.2) - (0.4) - (0.4) - Total liabilities (130.1) - (130.1) - Net assets held for sale 151.5 - 151.5 0.8 2010 2011 Re-presented £m £m
Operating profit - discontinued operations 13.6 13.0 Total operating profit - discontinued operationsExclude- significant items 0.2 1.1 Adjusted operating profit - discontinued operations 13.8 14.1Profit before tax - discontinued operationsTotal profit before tax - discontinued operations 11.3 9.9
Exclude
- significant items 0.2 1.1- revaluation of financial instruments (0.4) - Adjusted profit before tax - discontinued operations 11.1 11.0Profit attributable to owners of the CompanyTotal (loss)/profit attributable to owners of the Company - discontinued operations (4.5) 7.3Exclude- significant items 0.2 1.1
- write down of assets held for sale 12.5 -- revaluation of financial instruments (0.4) -- associated tax effects (0.1) (0.1)Adjusted profit attributable to owners of the Company - discontinued operations 7.7 8.3 Pence Pence Re-presented
Adjusted earnings per share - discontinued operations 16.2 17.1
Included in the operating profit and profit before tax numbers for 2010 is a £0.5 million loss on disposal relating to ACG South Africa.
12 Details of Annual General Meeting
The Annual General Meeting of the Company will be held at The Falstaff Hotel,16-20 Warwick New Road, Leamington Spa, Warwickshire, CV32 5JQ at 1.00pm on 2August 2011.
vendorRelated Shares:
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