1st Nov 2005 07:01
UMECO PLC01 November 2005 NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY IN OR INTO THEUNITED STATES, ANDORRA, AUSTRALIA, AUSTRIA, BELGIUM, CANADA, FRANCE, GERMANY,GREECE, HOLLAND, JAPAN, NEW ZEALAND, THE REPUBLIC OF IRELAND, SOUTH AFRICA,SPAIN AND SWITZERLAND. PRESS RELEASE 1 November 2005 UMECO plc Proposed 4 for 9 Rights Issue at 350p pence per share to raise £48.4 million (net) Acquisition of Provest Srl Interim results for the six months to 30 September 2005 UMECO plc ("UMECO" or the "Group"), a leading international provider ofvalue-added distribution services, components and composite materials primarilyto the aerospace & defence, automotive, motorsport and wind turbine industries,today announces a proposed 4 for 9 Rights Issue at 350 pence per share, theacquisition of Provest Srl ("Provest"), the leading Italian distributor ofaerospace fasteners and related products for a maximum cash consideration of€20.0 million (the "Acquisition"), and the Group's interim results for the sixmonth period to 30 September 2005. Highlights Rights Issue • Proposed 4 for 9 Rights Issue, at 350 pence per share, to raise approximately £48.4 million, net of expenses. • Proceeds will allow UMECO to pursue its stated growth strategy: - financing increased capacity to meet organic growth by the expansion of ACG's UK and US facilities and the proposed new warehouse facilities for Ulogistics in the UK (approximately £13.0 million); - financing working capital for organic growth and potential contract wins (approximately £7.0 million); - financing a number of identified acquisition opportunities in the UK, Europe, the US and the Far East. These opportunities include the acquisition, announced today, of Provest Srl for a maximum consideration of €20.0 million (£13.8 million); - generally strengthening the equity capital base of the Group. • Rights Issue expected to be earnings enhancing after taking into account potential contract wins and acquisitions. Acquisition of Provest Srl • Leading Italian distributor of aerospace fasteners and related products providing value-added distribution services to its OEM customers under long term contracts; • In the year to 31 December 2004, Provest recorded sales of €15.3 million; • Maximum consideration of €20.0 million, of which €13.5 million paid on completion; • Acquisition significantly broadens the geographic coverage of UMECO's Components division in the growing European aerospace & defence market; • Acquisition expected to be immediately earnings enhancing. Interim Results* • Very strong performance during the first half of the year; • Revenue increased by 22% to £132.7 million (2004: £108.7 million); • Adjusted operating profit increased by 38% to £8.4 million (2004: £6.1 million); • Adjusted earnings per share increased by 24% to 13.4 pence (2004: 10.8 pence); • Interim dividend increased by 11% to 5.0 pence per share (2004: 4.5 pence); • Recovery in civil aerospace now firmly under way, with forecast aircraft deliveries by Boeing and Airbus increasing for the first time since 2001; • Increasing demand for outsourcing services and advanced composites; • Recent acquisitions performing well, and adding strategically to Group's offering. * The results for the six months to 30 September 2005 represent the Group'sfirst interim financial statements prepared in accordance with IFRS. As aconsequence, the 2004 results have been restated. Adjusted results are statedbefore the amortisation of intangible assets, significant items, the revaluationof financial instruments based on their market values, associated taxationeffects and the taxation effects of goodwill amortisation in overseasjurisdictions. Clive Snowdon, Chief Executive of UMECO, commented: "The recovery in the civil aerospace market is now firmly under way, leading toincreased demand for our distribution and supply chain outsourcing services. Demand for our advanced composite materials is growing significantly across anumber of attractive market segments. "In such a positive market environment, the Rights Issue proceeds will allow usfully to capitalise on the growth projects and opportunities ahead of us, boththrough organic expansion and by acquisition. "The acquisition of Provest announced today is one such example, extending thereach of our Components Division into the increasingly important Italian andSouthern European aerospace markets. "UMECO has had an excellent first six months of the year and, with favourablemarket conditions and a clear strategy for growth in place, we can look forwardto a period of sustained progress." Arbuthnot is acting as sponsor, underwriter and broker to UMECO. For further information please contact: UMECO plc 01926 331800Clive Snowdon, Chief ExecutiveJohn Beaumont, Finance Director Arbuthnot 020 7012 2000Andrew Fullerton/James Steel Hogarth Partnership 020 7357 9477John Olsen/Barnaby Fry A meeting for analysts will be held at 9.30am GMT today, 1 November 2005. Forfurther information contact Barnaby Fry, Hogarth Partnership, on 020 7357 9477. This summary should be read in conjunction with the full text of the followingannouncement. An expected timetable of principal events in relation to theAcquisition and the Rights Issue is set out in Appendix I. Appendix II containsthe definitions of certain terms used in this summary and the full announcement. Notes to editors: UMECO plc is a leading international provider of value-added distributionservices, components and composite materials primarily to the aerospace &defence, automotive, motorsport and wind turbine industries. Listed on the London Stock Exchange, UMECO had revenue of £242.4 million in theyear to 31 March 2005. UMECO is managed through three divisions: UMECO Components: a leading international provider of value-added distributionand supply chain outsourcing services to customers in the aerospace & defencemarket. With its specialisation in the supply of small components andsophisticated IT systems, its growing global customer base can enjoy significantoperational, cost and working capital benefits. Customers include Rolls-Royce plc, BAE SYSTEMS, Snecma Groupe, Parker Aerospace,Goodrich Aerospace, Bombardier Aerospace, Lockheed Martin and the US Departmentof Defense. UMECO Composites: a provider of a complete range of advanced composite materialsand specialist chemical products principally to the aerospace, motorsport,automotive and wind energy markets. A growing range of value-added outsourcingservices is provided to major customers. Customers include Boeing, Airbus, BAE SYSTEMS, Goodrich Aerostructures, BritishAirways, Lufthansa Technik, a number of manufacturers of high performancesupercars and all the Formula 1 teams. UMECO Repair and Overhaul: a provider of a comprehensive accessory repair andinstallation service to operators of fixed and rotary wing aircraft ranging insize from executive jets through to a Boeing 747. Customers include British Airways, KLM, Swiss, Alitalia Express, BristowHelicopters, BAE SYSTEMS, Saab Aircraft and Pratt & Whitney. This announcement does not constitute, or form part of, an offer to sell, or thesolicitation of an offer to subscribe for or buy any of the New Ordinary Sharesto be issued or sold in connection with the Rights Issue. Any decision to investin the New Ordinary Shares should only be made on the basis of information inthe Prospectus which will contain further details relating to the Rights Issue,the Acquisition, the Interim Results and UMECO in general, as well as a summaryof the risk factors to which an investment in the New Ordinary Shares issubject. The Prospectus is expected to be issued shortly. In addition, theProspectus will contain a notice convening the EGM. This announcement is not an offer for sale of securities in or into the UnitedStates, Andorra, Australia, Austria, Belgium, Canada, France, Germany, Greece,Holland, Japan, New Zealand, the Republic of Ireland, South Africa, Spain andSwitzerland. Securities may not be offered or sold in the United States absentregistration under the Securities Act or an exemption therefrom. UMECO has notand does not intend to register any of the Provisional Allotment Letters, NilPaid Rights, Fully Paid Rights or New Ordinary Shares under the Securities Act,or to avail itself of any applicable exemption. The securities of UMECO have notbeen registered with, recommended, approved or disapproved by any US federal orstate securities commission or regulatory authority. There will be no publicoffer of securities in the United States or in any of the other ExcludedTerritories. Arbuthnot, which is regulated in the United Kingdom by The Financial ServicesAuthority, is acting exclusively for UMECO and for no one else in relation tothe Rights Issue and will not be responsible to anyone other than UMECO forproviding the protections afforded to customers of Arbuthnot or for providingadvice in relation to the Rights Issue or on any matter referred to herein. The contents of this announcement have been approved by Arbuthnot for thepurposes of section 21(2)(b) of FSMA. The release, publication or distributionof this announcement in certain jurisdictions may be restricted by law andtherefore persons in such jurisdictions into which this announcement isreleased, published or distributed should inform themselves about and observesuch restrictions. Prices and values of, and income from, Ordinary Shares may go down as well as upand an investor may not get back the amount invested. It should be noted thatpast performance is no guide to future performance. Persons needing adviceshould consult an independent financial adviser. Certain statements made in this announcement constitute 'forward lookingstatements'. These statements, which reflect the Company's beliefs andexpectations, are subject to issues and uncertainties that may cause actualresults or events to differ materially from those reflected or contemplated insuch forward looking statements. NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY IN OR INTO THEUNITED STATES, ANDORRA, AUSTRALIA, AUSTRIA, BELGIUM, CANADA, FRANCE, GERMANY,GREECE, HOLLAND, JAPAN, NEW ZEALAND, THE REPUBLIC OF IRELAND, SOUTH AFRICA,SPAIN AND SWITZERLAND. 1 November 2005 UMECO plc Proposed 4 for 9 Rights Issue at 350p pence per share to raise £48.4 million (net) Acquisition of Provest Srl Interim results for the six months to 30 September 2005 1. INTRODUCTION The Board announced today that it has entered into an agreement to acquire theentire issued share capital of Provest for a maximum cash consideration of €20.0million. Provest is a distributor of aerospace fasteners and related productsand is based near Milan, Italy. The Board also announced today a proposed Rights Issue of up to 14,462,770 NewOrdinary Shares at a price of 350 pence per share to raise approximately £48.4million, net of expenses. The net proceeds of the Rights Issue will be usedimmediately to reduce the Group's indebtedness in the short term, which hasincreased following the payment of the initial consideration of €13.5 millionunder the Acquisition on 31 October 2005, until such time as the net proceeds ofthe Rights Issue are required to be applied as set out in Section 2. The Rights Issue is being made to Qualifying Shareholders, other than those withregistered addresses in the United States or in any of the Excluded Territories,on the basis of 4 New Ordinary Shares for every 9 Ordinary Shares held on theRecord Date. The Rights Issue has been fully underwritten by Arbuthnot, otherthan in respect of 24,524 New Ordinary Shares for which irrevocable undertakingsto take up entitlements have been received from Directors and their respectiveconnected parties. The Rights Issue is conditional upon, amongst other things,the approval of Shareholders which is to be sought at the Extraordinary GeneralMeeting, notice of which will be set out at the end of the Prospectus. The Board also announced today the Group's Interim Results for the six months to30 September 2005, details of which are set out in Section 4. Set out below are the background to and the reasons for the Rights Issue,details of the Acquisition, and an explanation as to why the Directors believethe Rights Issue and the Resolution to be voted on at the Extraordinary GeneralMeeting are in the best interests of the Company and Shareholders as a whole. 2. BACKGROUND TO AND REASONS FOR THE RIGHTS ISSUE Since 1997, the Board's strategy has been to develop UMECO into a leadinginternational provider of value-added services and materials to the aerospace &defence industries in UMECO's chosen product segments of components, advancedcomposite materials and repair and overhaul services. This strategy has been effected through the acquisition of complementarybusinesses to provide either access to new geographic markets and/or productsources, and through winning major long term contracts with, for example,Rolls-Royce plc, BAE SYSTEMS, British Airways, Bombardier Aerospace andLufthansa Technik. The Group also continues to invest heavily in its existingoperations to ensure they have modern facilities, sufficient capacity andappropriate systems in place to ensure the highest level of customer service isachieved. From 1997 to March 2001, the Group had achieved double-digit annual growth inearnings per share as a result of this strategy. As a consequence of the eventsof 11 September 2001, the Group faced significant challenges in its corebusiness of providing products and services to civil aerospace OEMs andaftermarket customers. During the period after 11 September 2001, the Groupfocused on growing its market share, maximising its cash generation and reducingthe Group's cost base in line with the lower sales volumes being experienced. Inthe year to 31 March 2005, the Group returned to achieving double-digit growthin earnings per share (20%) reflecting the success of the Board's strategy andthe start of the recovery in the civil aerospace market. As reported above, the Group has maintained its trend in growing earnings pershare in the first half of the current financial year with an increase of 24%. The acquisition of ACG in May 2004 for a total consideration of £46.5 million(including costs) was partially funded by the £20.7 million rights issue at 270pence per share which was announced on 19 March 2004, 96.7% of which was takenup by existing investors. Since then the Group has acquired AMS, thedistribution activities of Ashland in Scandinavia and AW, and the remaining 8%of the issued share capital of Aerovac Systemes France Sarl which it did notalready own. The contribution from each of these businesses has either met orexceeded the Board's expectations since acquisition with the performance of ACGproving particularly encouraging. The combination of these projects, further capital investment and the increasein UMECO's working capital as a result of higher revenue has, however, led to asignificant rise in the net indebtedness of the Group, which at 30 September2005 amounted to £66.6 million. The Group's indebtedness has increased since 30 September 2005 and will increasefurther with the acquisition of Provest announced today for a maximumconsideration of €20.0 million. Furthermore, as a result of growing demand, theGroup has commenced a major capital expenditure programme to extend thefacilities and capacity of ACG's operations in both the UK and in the US for anestimated £7.0 million. Therefore the Directors, after careful consideration, believe now to be theappropriate time to strengthen the equity capital base of the Group to enableUMECO to reduce its indebtedness and to allow the Group to fund the expansion ofits operations through the ongoing improvement and development of itsfacilities, to finance working capital in relation to organic growth andpotential contract wins and to take advantage of new acquisition opportunitiesthat present themselves to the Group. The Group continues to enjoy strong support from its bankers, Lloyds TSB Bankplc, who have committed to a further increase in the Group's long termfacilities from USD 120.0 million to USD 150.0 million. Use of net proceeds The net proceeds of the Rights Issue (which amount to £48.4 million) will beused as follows: (a) immediately to reduce the Group's indebtedness in the short term, whichhas increased following the payment of the initial consideration of €13.5million (the equivalent of approximately £9.2 million) under the Acquisition on31 October 2005, until such time as the net proceeds of the Rights Issue arerequired to be applied as set out below; (b) up to €6.5 million (the equivalent of approximately £4.4 million) willbe used to finance deferred consideration in relation to the Acquisition; (c) approximately £7.0 million will be used to finance the capitalexpenditure programmes at ACG's UK and US facilities. Work is currently underway to provide significantly enhanced production capability and a new technicalcentre at ACG's facilities in Heanor, Derbyshire. Total expenditure on thisproject is expected to be £6.4 million and £0.6 million will be used to purchaseadditional manufacturing equipment at ACG's facilities in Tulsa, Oklahoma, inthe US; (d) approximately £7.0 million will be used to finance working capital inrelation to funding organic growth and potential contract wins; (e) approximately £6.0 million may be used in 2006/2007 in relation to theproposed new warehouse facilities for Ulogistics in the UK; and (f) the balance, of approximately £14.8 million, will be used to finance anumber of acquisition opportunities in the UK, Europe, the US and the Far Eastand other projects that are currently being considered by the Group andgenerally to strengthen the equity capital base of the Group. It is notcurrently possible to provide a further breakdown of these uses of the netproceeds of the Rights Issue. Acquisition opportunities, which are wholly in line with the Group's strategy,include possible acquisitions for each of UMECO's divisional operations. UMECOis also actively working towards securing new, long term contracts in UMECO'sComponents division. These acquisitions and contracts, if successfullyconcluded, will broaden UMECO's geographic and product coverage. Due to theconfidential nature of such projects it is not possible to provide furtherdetails at this stage and there is a risk that these matters may not complete orthat time scales become extended. However, the Board is confident of making goodprogress in the coming months and Shareholders will be kept fully informed. If the Rights Issue does not proceed then the Acquisition will be fundedentirely under the Debt Facilities and the Board will need to consider otherfunding options to finance the remaining proposed uses of net proceeds referredto above. The Board may also need to consider whether or not to pursue theseproposals. Principal terms of the Rights Issue The Company is offering up to 14,462,770 New Ordinary Shares by way of rights toQualifying Shareholders, other than those with registered addresses in theUnited States or in any of the Excluded Territories, at 350 pence per share,payable in full on acceptance by not later than 11.00 a.m. on 13 December 2005.The Company proposes to raise approximately £48.4 million, net of expenses,pursuant to the Rights Issue. The issue price of 350 pence per New OrdinaryShare represents approximately a 29.2% discount to the closing middle marketprice of 494.5 pence per Ordinary Share on 31 October 2005, the last BusinessDay before the announcement of the Rights Issue. The Rights Issue is being made on the basis of: 4 New Ordinary Share for every 9 Existing Ordinary Shares held by Qualifying Shareholders, other than those with registered addresses inthe United States or in any of the Excluded Territories, on the Record Date. Entitlements to New Ordinary Shares will be rounded down to the nearest wholenumber and the aggregated fractions will not be allotted. Accordingly,Shareholders with fewer than 3 Ordinary Shares will not be entitled to subscribefor any New Ordinary Shares. The Rights Issue has been fully underwritten by Arbuthnot, other than in respectof 24,524 New Ordinary Shares for which irrevocable undertakings to take upentitlements have been received from Directors and their connected parties. The Rights Issue is conditional upon: (a) the Resolution being passed at the Extraordinary General Meeting; (b) Admission becoming effective by not later than 8.00 a.m. on 21November 2005 (or such later time and date as Arbuthnot may determine (being notlater than 8.00 a.m. on 28 November 2005); and (c) the Underwriting Agreement otherwise having become unconditional in allrespects and not having been terminated in accordance with its provisions priorto Admission. The New Ordinary Shares will not rank for the interim dividend declared todaybut, when issued and fully paid, will rank pari passu in all other respects withthe Existing Ordinary Shares including the right to receive all other dividendsor distributions declared thereafter. The Rights Issue will result in the issueof up to 14,462,770 New Ordinary Shares representing approximately 30.8% of theenlarged share capital of UMECO. Further information on the Rights Issue, including the procedure for acceptanceand payment, will be set out in the Prospectus and, in the case of Qualifyingnon-CREST Shareholders, in the Provisional Allotment Letter. Extraordinary General Meeting Set out at the end of the Prospectus will be a notice convening the EGM to beheld at 10.00 a.m. on 18 November 2005 at Concorde House, 24 Warwick New Road,Leamington Spa, Warwickshire, CV32 5JG at which the Resolution set out in thenotice of EGM will be proposed to: (a) increase the authorised share capital of the Company from £11,500,000to £20,000,000 (an increase of approximately 74% of the authorised share capitalof the Company as at the date of this announcement) by the creation of34,000,000 Ordinary Shares of 25 pence each; and (b) authorise the Directors, generally and unconditionally (in addition toall subsisting authorities conferred upon the Directors for the purposes ofsection 80 of the Act) to exercise all the powers of the Company to allotrelevant securities (as defined in that section of the Act) up to an aggregatenominal amount of £3,615,692.50 (14,462,770 Ordinary Shares) (representingapproximately 30.8% of the enlarged share capital and approximately 44.4% of theissued share capital at the date of this announcement). The increase referred to in paragraph (a) is required in order to enable theRights Issue to proceed. The authority and power referred to in paragraph (b)shall expire at the conclusion of the next annual general meeting of the Companyafter the passing of the Resolution (unless varied or revoked by the Company ingeneral meeting), save that the Company may at any time before such expiry makean offer or agreement which would or might require relevant securities to beallotted after such expiry and, notwithstanding such expiry, the Directors mayallot relevant securities in pursuance of such an offer or agreement as if theauthority conferred by this Resolution had not expired. The Directors intend toexercise this authority in order to issue shares under the Rights Issue. Save for the New Ordinary Shares to be issued pursuant to the Rights Issue andthe Ordinary Shares to be issued pursuant to the Share Option Schemes, theDirectors have no present intention of issuing any of the authorised butunissued share capital. Intentions of the Directors Brian McGowan and his connected parties are entitled to subscribe for a maximumof 477,777 New Ordinary Shares under the Rights Issue and intend to sell suchnumber of the entitlement as will allow them to subscribe for the balance, afterproviding for estimated costs and taxation. Clive Snowdon and his connected parties are entitled to subscribe for a maximumof 95,267 New Ordinary Shares under the Rights Issue and have irrevocablyundertaken to subscribe for 10,167 New Ordinary Shares. It is intended that suchnumber of the remaining entitlement will be sold as will allow them to subscribefor the balance, after providing for estimated costs and taxation. John Beaumont and his connected parties are entitled to subscribe for a maximumof 55,224 New Ordinary Shares under the Rights Issue and have irrevocablyundertaken to subscribe for 4,285 New Ordinary Shares. It is intended that suchnumber of the remaining entitlement will be sold as will allow them to subscribefor the balance, after providing for estimated costs and taxation. Michael Harper and his connected parties are entitled to subscribe for a maximumof 8,888 New Ordinary Shares under the Rights Issue and have irrevocablyundertaken to subscribe for their full entitlement totalling 8,888 New OrdinaryShares under the Rights Issue. John Harper and his connected parties are entitled to subscribe for a maximum of4,948 New Ordinary Shares under the Rights Issue and intend to sell such numberof the entitlement as will allow them to subscribe for the balance, afterproviding for estimated costs and taxation. David Porter and his connected parties are entitled to subscribe for a maximumof 1,184 New Ordinary Shares under the Rights Issue and have irrevocablyundertaken to subscribe for their full entitlement totalling 1,184 New OrdinaryShares under the Rights Issue. Graham Zacharias does not hold any Ordinary Shares and is, as such, not entitledto any New Ordinary Shares under the Rights Issue. Following the Rights Issue and taking into account the irrevocable undertakingsprovided by Clive Snowdon (and his connected parties), John Beaumont (and hisconnected parties), Michael Harper (and his connected parties) and David Porter(and his connected parties), totalling 24,524 New Ordinary Shares (representing0.2% of the total number of New Ordinary Shares to be issued pursuant to theRights Issue), and the intentions of the Directors (and their connected parties)in relation to those New Ordinary Shares which are not the subject ofirrevocable undertakings set out above, the Directors and their respectiveconnected parties will beneficially own, in aggregate, approximately 3.4% of theenlarged issued ordinary share capital of the Company following the RightsIssue. New Ordinary Shares for which the Directors have irrevocably undertakento subscribe will represent £85,834 of the proceeds of the Rights Issue. The irrevocable undertakings signed by each of Clive Snowdon, John Beaumont,Michael Harper and David Porter are conditional on Admission and theUnderwriting Agreement otherwise becoming unconditional in all respects and notbeing terminated on or before 28 November 2005. Subject to the satisfaction ofthese conditions, the irrevocable undertakings cannot be withdrawn. General The Prospectus providing further details of the Rights Issue and the conveningof the Extraordinary General Meeting will be published and posted toShareholders as soon as practicable. Copies of the Prospectus (once it ispublished) can be obtained from the Company, Concorde House, 24 Warwick NewRoad, Leamington Spa, Warwickshire, CV32 5JG. Copies of this announcement are not being, and must not be, mailed, or otherwiseforwarded, distributed or sent in, into or from the United States or any of theExcluded Territories or to publications with a general circulation in thosejurisdictions, and persons receiving this announcement (including custodians,nominees and trustees) must not mail or otherwise forward, distribute or send itin, or into or from the United States or any of the Excluded Territories or topublications with a general circulation in those jurisdictions. Recommendation The Board considers that the Rights Issue and the Resolution is in the bestinterests of the Company and the Shareholders as a whole. Accordingly, the Board unanimously recommends Shareholders vote in favour of theResolution to be proposed at the Extraordinary General Meeting, as the Directorsintend to do in respect of their respective beneficial holdings of 1,447,419Existing Ordinary Shares in aggregate, representing approximately 4.4% of theissued share capital of UMECO. 3. ACQUISITION OF PROVEST Provest is the leading Italian distributor of aerospace fasteners and relatedproducts and in the year to 31 December 2004 had recorded sales of €15.3million. All financial information provided in this announcement in relation toProvest has been sourced from Provest's management accounts for the two yearperiod ended 31 December 2004 and has not been audited (there is no requirementunder Italian law for private companies to produce audited accounts). The vendors are the founding family, and the son of the founder, LorenzoGhiglino, has agreed to remain with Provest following Completion as managingdirector. The other key individual who is important to Provest and who willremain with Provest following Completion is Donatella Largo (operationsmanager). Provest carries on a similar business to that of Pattonair, UMECO's UK andFrance based distributor of aerospace fasteners and related products in that itsells primarily to OEMs and sources its products from broadly the same supplierbase. Like Pattonair, Provest started out as a stockist of aerospace fastenersand related products and has subsequently moved into the business of providingvalue-added distribution services to its larger customers under longer termcontracts. Its largest customer is Agusta-Westland. Italy is playing an increasing role in numerous European and US collaborativeprogrammes and recent acquisitions have led to the emergence of Finmeccanica asa global player in the aerospace industry. Provest holds the required supplierapprovals to sell to all of the principal OEMs in this market and with thecommercial and procurement strength of UMECO Components, the Board expects thatit should be capable of significant growth in the coming years. The maximum consideration payable under the terms of the Acquisition is €20.0million, of which €13.5 million, drawn from the Debt Facilities, was paid onCompletion. A further €1.5 million will become payable in June 2006 if the EBITof Provest in the six months to 31 March 2006 is equal to or greater than €1.3million. The final payment of €5.0 million will become payable in June 2008 ifaverage annual EBIT of Provest in the 30 month period to 31 March 2008 is equalto or greater than €2.7 million. At this stage it is not possible to predictwhether these thresholds will be met. The acquisition of Provest significantly broadens the geographic coverage ofUMECO Components in the growing European aerospace & defence market and theDirectors believe that it should lead to further long term relationships withkey OEM customers of the business. The operating profits attributable to the assets of Provest were €2.8 millionand €1.8 million for the years to 31 December 2004 and 31 December 2003respectively. The Company has undertaken extensive independent due diligence,and as a result the Directors believe that the operating profit for the year to31 December 2004 was overstated and the operating profit for the year to 31December 2003 was understated, primarily because the closing stock figures as at31 December 2003 were understated. The value of the gross assets of Provest is €12.8 million. The Directors believe that this amount is also understatedbecause the valuation of stock as at 31 December 2004 remains understated, butto a lesser extent than was the case as at 31 December 2003. It has not beenpossible to quantify the exact amount by which stock was understated as at 31December 2003 and 31 December 2004. The Acquisition is not conditional on the Rights Issue proceeding or on theResolution being passed. If the Rights Issue does not proceed for any reason,the entire consideration under the Acquisition will be financed under the DebtFacilities. 4. INTERIM RESULTS FOR THE 6 MONTH PERIOD TO 30 SEPTEMBER 2005 Highlights Six months to Six months to Change 30 September 30 September 2005 2004 £ million £ millionRevenue 132.7 108.7 +22%Adjusted operating profit* 8.4 6.1 +38%Operating profit 8.4 5.5 +53%Adjusted profit before tax* 6.6 5.2 +27%Profit before tax 6.7 4.6 +46% Pence PenceAdjusted earnings per share* 13.4 10.8 +24%Basic earnings per share 13.9 9.2 +51%Dividend per share 5.0 4.5 +11% * See explanatory notes below. Explanatory notes (i) The results for the six months to 30 September 2005 represent theGroup's first interim financial statements prepared in accordance with IFRS. Asa consequence, the 2004 results have been restated. (ii) UMECO uses adjusted figures as key performance indicators. Adjustedfigures are stated before amortisation of intangible assets, significant items,the revaluation of financial instruments based on their market values,associated taxation effects and the taxation effects of goodwill amortisation inoverseas jurisdictions. The differences between the adjusted and unadjustedmeasures of profit attributable to Shareholders are reconciled in note 5. (iii) The narrative that follows is based on the adjusted measures ofoperating profit, profit before tax and earnings per share. These provide a moreconsistent measure of operating performance. (iv) The Interim Results have not been audited and are sourced from themanagement accounts of UMECO for the six month period to 30 September 2005. Results and dividend It is very pleasing to be able to report that UMECO has had an excellent firsthalf year with revenue increasing by 22% leading to a rise in operating profitsof 38%. UMECO's principal market, civil aerospace, is now recovering stronglywith forecast aircraft deliveries by Airbus and Boeing showing an aggregateincrease for the first time since 2001. Revenue in the first six months of the year increased to £132.7 million (2004:£108.7 million) an increase of £24.0 million of which £1.5 million relates toacquisitions and the balance, £22.5 million, to existing activities. Operating profits in the period rose by 38% to £8.4 million (2004: £6.1 million)with margins improving to 6.3% (2004: 5.6%) reflecting the benefits of theGroup's operational gearing. Interest charges in the period were £1.8 million (2004: £0.9 million); theincrease primarily reflects the considerably higher debt the Group has carriedsince the acquisition of ACG in May 2004, in respect of which only £20.7 millionof the £46.5 million total acquisition consideration was funded by the rightsissue. Profit before tax was £6.6 million (2004: £5.2 million), an increase of 27%.Earnings per share were 13.4 pence compared to 10.8 pence, an increase of 24%. The Directors have declared an increased interim dividend of 5.0 pence (2004:4.5 pence) payable on 16 December 2005 to Shareholders registered on 18 November2005. The New Ordinary Shares will not qualify for the interim dividend. Strategic developments On 8 July 2005, the acquisition by GRP of property and other assets related tothe Scandinavian distribution activities of Ashland that was announced on 4 Maywas completed. The integration has gone well and trading is in line with theBoard's expectations. On 25 August 2005, AEM acquired AW for £1.6 million in cash and also assumed theindebtedness of this company. Additional consideration of up to £0.5 million ispayable based on the performance of AW in the 12 months following completion. Nointegration issues have arisen and, again, post acquisition trading is in linewith UMECO's expectations. Directors At the annual general meeting held on 28 July 2005, Osman Abdullah retired fromthe board as a non-executive Director having been a Director since 1993. On 27September 2005, Graham Zacharias, formerly the group financial director ofSpectris plc, was appointed as a non-executive Director. Operations Results for each division are summarised below. UMECO Components Revenue: £63.5 million (2004: £55.1 million); operating profit: £2.2 million(2004: £1.8 million). UMECO Components is a leading international provider of value-added distributionand supply chain outsourcing services primarily to OEM customers in theaerospace & defence markets. Through its specialisation in the supply of smallcomponents and its sophisticated systems, significant cost and working capitalbenefits can be facilitated for its expanding international customer base. Revenue in the first half year increased by 15% and operating profits by 22%.The division continues to benefit from the recovery in the civil aerospacemarket with good revenue growth across most business units. The significantincrease in operating profits reflects action taken to improve margins throughmore focused procurement, cost control and much reduced losses at Pattonair SAS.The overall result was adversely impacted by a poor result from Compstock, adistributor of electronic components, and steps are being taken to restructurethis operation. Pattonair and Pattonair SAS in the UK and France respectively, have performedstrongly since the management changes made twelve months ago and are activelybidding on a number of new projects. Ulogistics continues to enjoy a positive and growing relationship withRolls-Royce plc whose aerospace business goes from strength to strength.Ulogistics' forward order book is excellent and stock levels have been increasedduring the period to meet the expected increase in demand during UMECO's secondhalf year. Ulogistics Canada, who manage UMECO's contract with Bombardier Aerospace, hassuccessfully implemented the contract at the customer's principal facility inMontreal, and is now in detailed discussions with the customer on the nextstages of the contract roll-out. Abscoa and TLC, UMECO Components' US trading businesses, have now beenintegrated and traded well during the first half year. UMECO Composites Revenue: £60.3 million (2004: £45.7 million); operating profit: £5.3 million(2004: £3.5 million). These results include a full contribution from ACG,compared to a five months' contribution in the prior period, and a three months'contribution from the Ashland Scandinavian business acquired in July 2005. UMECO Composites provides a complete range of advanced composite materials andspecialist chemical products principally to the aerospace, motorsport &automotive markets. Other markets served include wind energy and the plasticstructures industry. A full range of value-added outsourcing services isprovided to major customers. Revenue in the first half year increased by 32% and operating profits by 51%. This significant level of growth in revenue and profits has been led by ACGwhich had an excellent first half year. Order intake in the period wasexceptionally strong and their closing order book increased by 24%. Raw materialprices continue to rise but have been passed on to customers where possible. Inaddition, inventories have been increased to minimise the impact of global rawmaterial shortages and to ensure a high level of customer service can bemaintained. The major capital expenditure project to increase ACG's facilitiesand capacity is now underway and is expected to come on-stream during mid 2006. UMECO Composites' other composite based businesses, Aerovac and Richmond, alsoachieved a high level of growth in revenue and profits during the period. Thisreflects the continued use of advanced composite materials in a number of marketsegments with strong demand from aerospace and wind turbine customers. Richmondin particular enjoyed a higher level of business with Boeing, a relationshipthat should continue to expand as the 787 enters into production in the next twoyears. The impact of the now-settled industrial action at Boeing duringSeptember is expected to be minimal. UMECO Composites' aerospace chemical distribution businesses continued to growon the back of the recovery in their principal market and through a number ofcontract wins and extensions. UMECO Repair and overhaul Revenue: £8.9 million (2004: £7.9 million); operating profit: £0.9 million(2004: £0.8 million). These results include a full contribution from AMS,compared to a three months' contribution in the prior period and a one monthcontribution from AW acquired in late August 2005. UMECO Repair and overhaul now comprises two businesses; AEM, which is one of thelargest independent component repair and overhaul facilities in Europe and AMS,which installs and overhauls avionic equipment. AW has been integrated with AEMbut will remain as a stand-alone business unit in Luton. Revenue and operating profit in the first half year increased by 13%. AEM had a solid first half year though market conditions in the first quarterwere somewhat poorer than expected. With the promotion in April of AEM'smanaging director, John Smith, to the position of Divisional Chief Executive anumber of internal management changes have been made in order to focus onwinning new business and reducing operating costs. The acquisition of AWincreases the capability of the company and this additional service is alreadybeing marketed to its international customer base with some success. AMS had a slow start to the year as much of its business is dependant on theavailability of customers' aircraft and the timing of major orders. New businessactivity is very high and the level of forward projects is encouraging. Duringthe period AMS acquired for £0.7 million the freehold property from which itoperates in St. Albans. Finance Revenue at £132.7 million was 22% above that for the first half of last year,and just 1% below the second half. Gross margins improved to 25.7% (2004: 25.3%). Of the increase in operatingexpenses of £4.3 million over the first half of last year, £0.8 million relatesto the acquisitions of ACG, AMS, GRP Scandinavia and AW and the balance is dueto inflationary cost rises. Operating profit in the period was £8.4 millioncompared with £6.1 million in the first half of last year with existingactivities up £1.9 million and acquired businesses £0.4 million. The increase in the interest charge to £1.8 million (2004: £0.9 million)directly reflects the higher level of net debt arising from the funding of theacquisition programme and the rise in working capital. Profit before tax was £6.6 million, an increase of £1.4 million compared withthe first half of last year. Acquisitions accounted for £0.2 million of theincrease. The tax charge on profit before tax was 33.3% (2005 full year: 33.3%). There were no significant items in the period compared with a charge of £0.4million in the prior period primarily relating to the restructuring of PattonairSAS. Net debt at 30 September 2005 was £66.6 million compared with £51.3 million asat 31 March 2005. Of the increase, £2.0 million relates to the net funding costof the acquisitions whilst the balance is due to additional working capital.Gross capital expenditure in the period was £4.0 million (2004: £4.6 million).Gearing was 76%. Shareholders' funds at that date were £87.5 million. Since theperiod end, Group banking facilities have been increased to £94.8 million. Prospects The civil aerospace market started to recover strongly during the period underreview with substantial orders for new aircraft being placed for delivery in thecoming years; this is leading to an increase in build rates. Further rises areexpected in the medium term as new aircraft such as the Boeing 787 and theAirbus 380 and 350 go into production. UMECO's major investment in the advanced composites market was well timed withdemand for UMECO's growing range of products and services growing significantlyacross a number of attractive market segments. We are investing in additionalcapacity to ensure output can keep up with demand in the coming years. New business development for UMECO's outsourcing services continues at a highlevel with both existing and new customers; this is leading to an assessment ofUMECO's future capacity requirements particularly in Europe. The Group, in line with its stated strategy, is also reviewing a number of bolton acquisition opportunities that would, if successfully concluded, broadenUMECO's geographic and product coverage. In the first half year UMECO's order intake continued to rise over the rate ofrevenue by 7% and at the end of September 2005 UMECO's order book stood at £130.4 million; this is based on customer requirements over the following twelvemonths. The combination of the strong recovery in UMECO's core market and the growinginternational requirement for UMECO's products and services gives considerableconfidence in UMECO's prospects for the second half year and for the longerterm. Unaudited Consolidated Income Statement Six months to Six months to Year to 30 September 2005 30 September 2004 31 March 2005 ----------------- ----------------- ------------- Gain on financial Adjusted instruments Total Adjusted Total Adjusted Total Note £ million £ million £ million £ million £ million £ million £ million Revenue 2 132.7 - 132.7 108.7 108.7 242.4 242.4 ======= ======== ======= == ======= ======= ======= ======== Operatingprofit 2 8.4 - 8.4 6.1 5.5 16.0 15.1 Financialincome 3 - 0.1 0.1 - - - -Financialexpense 4 (1.8) - (1.8) (0.9) (0.9) (2.5) (2.5) ------- -------- ------- ------ ------- ------- -------- Profit beforetaxation 6.6 0.1 6.7 5.2 4.6 13.5 12.6 Taxationexpense 6 (2.2) - (2.2) (1.8) (1.7) (4.5) (4.4) ------- -------- ------- ------ ------- ------- -------- Profit for theperiod 4.4 0.1 4.5 3.4 2.9 9.0 8.2 ======= ======== ======= ====== ======= ======= ======== Attributableto:Shareholders 4.5 2.9 8.1Minorityinterest - - 0.1 ------- ------- -------- Profit for theperiod 4.5 2.9 8.2 ======= ======= ======== Pence Pence Pence Basic earningsper share 8 13.9 9.2 25.3 ======= ======= ======== Adjustedearnings pershare 8 13.4 10.8 27.8 ======= ======= ======== Dilutedearnings pershare 8 13.6 9.1 25.0 ======= ======= ========Dividend pershare 7 5.0 4.5 13.25 ======= ======= ======== Adjusted results are stated before the amortisation of 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 profit attributable to Shareholders are reconciled innote 5. Unaudited Consolidated Balance Sheet As at As at As at 30 September 30 September 31 March 2005 2004 2005 Note £ million £ million £ million Non-current assetsProperty, plant & equipment 21.5 17.5 18.8Intangible assets 83.5 75.2 77.8Deferred taxation assets 3.3 3.7 3.2 --------- ---------- --------- 108.3 96.4 99.8 --------- ---------- ---------Current assetsInventories 67.3 58.9 56.6Trade & other receivables 58.8 46.7 54.7Current taxation assets 0.5 0.2 0.5Cash 3.3 2.9 6.9 --------- --------- --------- 129.9 108.7 118.7 --------- --------- --------- Total assets 238.2 205.1 218.5 --------- --------- --------- Current liabilitiesTrade & other payables (70.7) (55.6) (61.2)Current taxation (2.9) (1.8) (2.7)liabilitiesLoans & borrowings (43.2) (29.4) (30.8) --------- --------- --------- (116.8) (86.8) (94.7) --------- --------- --------- Non-current liabilitiesDeferred taxation (2.3) (2.0) (2.1)liabilitiesRetirement benefit (4.9) (4.3) (4.8)obligationLoans & borrowings (26.7) (29.7) (27.4)Other creditors - - (3.4) --------- --------- --------- (33.9) (36.0) (37.7) --------- --------- --------- Total liabilities (150.7) (122.8) (132.4) --------- --------- --------- Net assets 2 87.5 82.3 86.1 ========= ========= ========= Share capital 8.1 8.1 8.1Share premium 68.3 68.3 68.3Translation reserve 0.1 (0.1) 0.2Retained earnings 10.7 5.6 9.1 --------- --------- --------- 87.2 81.9 85.7Minority interest 0.3 0.4 0.4 --------- --------- --------- Total equity 87.5 82.3 86.1 ========= ========= ========= Unaudited Consolidated Cash Flow Statement Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 Note £ million £ million £ millionCash flows from operatingactivitiesCash flow from operations 9 (0.2) 3.7 13.8Interest paid (1.7) (0.6) (2.1)Income taxes paid (1.8) (2.3) (3.7) --------- --------- --------- Net cash flow from operatingactivities (3.7) 0.8 8.0 --------- --------- --------- Cash flows from investingactivitiesAcquisition of property, plant &equipment (3.7) (4.2) (7.0)Proceeds from sale of property,plant & equipment 0.3 0.1 0.2Acquisition of subsidiaries, netof cash balances (2.0) (47.1) (47.1)acquired --------- --------- --------- Net cash flow from investingactivities (5.4) (51.2) (53.9) --------- --------- --------- Cash flows from financingactivitiesProceeds from the issue of sharecapital - 20.7 20.7Drawdown of borrowings 4.9 28.3 33.5Dividends paid (2.8) (2.8) (4.3) --------- --------- --------- Net cash flow from financingactivities 2.1 46.2 49.9 --------- --------- --------- Net (decrease)/increase in cash (7.0) (4.2) 4.0Cash at start of period 6.9 3.4 3.4Effect of exchange ratefluctuations on cash held 0.9 - (0.5) --------- --------- --------- Net cash at end of period 0.8 (0.8) 6.9 ========= ========= ========= Reconciliation of net cash tomovements innet borrowingsNet (decrease)/increase in cash (7.0) (4.2) 4.0Borrowings taken on withacquisition - (1.3) (1.3)Drawdown of borrowings (5.2) (28.7) (34.0) --------- --------- --------- (12.2) (34.2) (31.3)Currency translation differences (3.1) (0.3) 1.7 --------- --------- --------- Movement in net borrowings (15.3) (34.5) (29.6)Net borrowings at start ofperiod (51.3) (21.7) (21.7) --------- --------- --------- Net borrowings at end of period (66.6) (56.2) (51.3) ========= ========= ========= Unaudited Statement of Recognised Income and Expense Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 £ million £ million £ million Foreign exchange translationdifferences (0.1) (0.1) 0.2Value of financialinstruments at 1 April 2005on implementation of IAS39 (0.1) - -Change in value of financialinstruments (0.1) - -Actuarial loss in pensionschemes - - (0.3)Actuarial loss in ACGpension scheme - (0.8) (0.8) --------- --------- --------- Income and expense directlyrecognised in equity (0.3) (0.9) (0.9)Profit for the period 4.5 2.9 8.2 --------- --------- --------- Total recognised income andexpenses for the period 4.2 2.0 7.3 ========= ========= ========= --------- --------- --------- Attributable to:Shareholders 4.2 2.0 7.2Minority interest - - 0.1 --------- --------- --------- Total recognised income andexpenses for the period 4.2 2.0 7.3 ========= ========= ========= Unaudited Reconciliation of Movements in Shareholders' Equity Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 £ million £ million £ million Shareholders' equity at start ofperiod 85.7 61.9 61.9Total recognised income and expensesfor 4.2 2.0 7.2the periodDividends (2.8) (2.8) (4.3)Share based payments 0.1 0.1 0.2Share capital issued - 20.7 20.7 --------- --------- --------- Shareholders' equity at end of 87.2 81.9 85.7period ========= ========= ========= Notes to the Interim Results 1. Basis of preparation European Union law (IAS Regulation EC 1606/2002) requires that the next annualconsolidated financial statements of the Group, for the year to 31 March 2006,be prepared in accordance with IFRS adopted for use in the European Union("adopted IFRS"). This interim financial information has been prepared on thebasis of the recognition and measurement requirements of IFRS in issue thateither are endorsed by the European Union and effective (or available for earlyadoption) or are expected to be endorsed and effective (or available for earlyadoption) at 31 March 2006, the Group's first annual reporting date at which itis required to use adopted IFRS. Based on these requirements the Directors have made assumptions about theaccounting policies expected to be applied when the first annual IFRS financialstatements are prepared for the year to 31 March 2006. In particular, theDirectors have assumed that the European Union will endorse the amendment toIAS19 'Employee Benefits - Actuarial Gains and Losses, Group Plans andDisclosures' issued in December 2004 electing to present actuarial gains andlosses arising on defined benefit pension schemes in the Statement of RecognisedIncome and Expense. However, the adopted IFRS that will be effective (or available for earlyadoption) in the annual financial statements for the year to 31 March 2006 arestill subject to change and to additional interpretations and therefore cannotbe determined with certainty. Accordingly, the accounting policies for that yearwill be determined finally only when the annual financial statements areprepared for the year to 31 March 2006. The Group's transition date for the application of IFRS is 1 April 2004. Thecomparative figures for 30 September 2004 and 31 March 2005 have been restatedto reflect the transition to IFRS and reconciliations of profit and equity fromUK GAAP to IFRS were presented in the statement published on 29 September 2005,along with a reconciliation of equity at 31 March 2004. The accounting policies used in the preparation of these financial statementsunder IFRS were also set out in the paper published on 29 September 2005. Aspermitted, these interim financial statements have been prepared in accordancewith the Listing Rules and not in accordance with IAS34 'Interim FinancialReporting'. The comparative figures for the year to 31 March 2005 are not UMECO's accountsfor that financial year. Those accounts, which were prepared under UK GAAP, havebeen reported on by the Company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was unqualified and did not containstatements under section 237(2) or (3) of the Act. The consolidated interim financial statements were authorised by the Board forrelease on 1 November 2005. 2. Segmental analysis Segmental information is presented in this interim statement in respect of theGroup's business segments, which are the primary basis of segment reporting. Thebusiness segment reporting format reflects the Group's management and internalreporting structure. Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 £ million £ million £ millionRevenue by activityComponents 63.5 55.1 122.7Composites 60.3 45.7 101.9Repair andoverhaul 8.9 7.9 17.8 ---------- -------- --------- 132.7 108.7 242.4 ========== ======== =========Revenue by destinationUK 71.6 61.8 134.6Rest of Europe 25.1 18.9 45.0North America 28.5 21.4 47.9Rest of world 7.5 6.6 14.9 ---------- -------- --------- 132.7 108.7 242.4 ========== ======== =========Revenue by originUK 92.9 78.9 175.2Rest of Europe 9.6 6.7 15.9North America 30.2 23.1 51.3 ---------- -------- --------- 132.7 108.7 242.4 ========== ======== =========Operating profit by activity -adjustedComponents 2.2 1.8 5.2Composites 5.3 3.5 9.0Repair andoverhaul 0.9 0.8 1.8 ---------- -------- --------- 8.4 6.1 16.0 ========== ======== =========Operating profit by activity -totalComponents 2.2 1.4 4.7Composites 5.3 3.5 8.9Repair andoverhaul 0.9 0.6 1.5 ---------- -------- --------- 8.4 5.5 15.1 ========== ======== =========Operating profit by origin -totalUK 5.2 3.8 10.9Rest of Europe 0.4 (0.5) (0.3)North America 2.8 2.2 4.5 ---------- -------- --------- 8.4 5.5 15.1 ========== ======== =========Net assets by activityComponents 54.4 50.4 50.8Composites 85.9 80.9 81.7Repair andoverhaul 11.5 7.2 6.9Holdingcompany (64.3) (56.2) (53.3) ---------- -------- --------- 87.5 82.3 86.1 ========== ======== =========Net assets by originUK 32.7 32.8 27.1Rest of Europe 7.4 5.7 7.6North America 47.4 43.8 51.4 ---------- -------- --------- 87.5 82.3 86.1 ========== ======== ========= 3. Financial income Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 £ million £ million £ million Revaluation offinancialinstruments 0.1 - - ========= ======== ========= ========= ======== ========= 4. Financial expense Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 £ million £ million £ million Interestexpense 1.8 0.9 2.4Interestchargeresultingfrom - - 0.1IAS19 --------- -------- --------- 1.8 0.9 2.5 ========= ======== ========= 5. Reconciliation of adjusted profit attributable to Shareholders Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 £ million £ million £ million ProfitattributabletoShareholders 4.5 2.9 8.1 Exclude:Revaluation offinancialinstruments (0.1) - -Amortisationof intangibleassets - 0.2 0.3Significantitems - 0.4 0.6Associatedtaxationcredit - (0.1) (0.1) --------- -------- --------- AdjustedprofitattributabletoShareholders 4.4 3.4 8.9 ========= ======== ========= Significant items in the six months to 30 September 2004 comprisedreorganisation costs. Significant items in the year to 31 March 2005 comprisedreorganisation costs of £0.5 million and aborted acquisition costs of £0.1million. 6. Taxation The interim taxation rate of 32.8% (2004: 37.0%) of profits before taxation hasbeen calculated by applying the Directors' best estimate of the annual rate oftaxation to taxable profits for the period. The rate of taxation on adjustedprofits for the period is 33.3% (2004: 34.6%). 7. Dividends The Directors have declared an interim dividend of 5.0 pence (2004: 4.5 pence)which will be paid on 16 December 2005 to Shareholders registered on 18 November2005. In accordance with IAS10 'Events after the balance sheet date', thisinterim dividend has not been reflected in the interim accounts. The total valueof the interim dividend is £1.6 million (2004: £1.5 million). 8. Earnings per share The weighted average number of Ordinary Shares in issue during the period was32.5 million (2004: 31.5 million). The weighted average number of OrdinaryShares on a diluted basis was 33.1 million (2004: 32.0 million) after anadjustment for dilutive share options of 0.6 million (2004: 0.5 million). Basicearnings per share have been calculated on profit attributable to Shareholdersof £4.5 million (2004: £2.9 million). The Directors consider that adjusted earnings per share values provide a moreconsistent measure of operating performance. These values are based on adjustedprofits attributable to Shareholders as set out in note 5. 9. Reconciliation of cash flow from operations Six months to Six months to Year to 30 September 30 September 31 March 2005 2004 2005 £ million £ million £ million Profit for the period 4.5 2.9 8.2Depreciation 1.4 1.2 2.7Intangible amortisation - 0.2 0.3Financial expense 1.8 0.9 2.5Employee benefits expense 0.1 0.1 0.2Share based paymentsexpense 0.1 0.1 0.2Income tax expense 2.2 1.7 4.4 --------- -------- --------- Operating profit beforechanges in workingcapital 10.1 7.1 18.5Increase in inventory (9.5) (7.0) (5.7)(Increase)/decrease intrade & other receivables (2.4) 1.3 (7.0)Increase in trade & otherpayables 1.6 2.3 8.0 --------- -------- --------- Cash flow from operations (0.2) 3.7 13.8 ========= ======== ========= 10. Analysis of changes in net debt As at Foreign As at 31 March exchange Other Cash 30 September 2005 translation changes flows 2005 £ million £ million £ million £ million £ million Cash at bank andin hand 6.9 0.8 - (4.4) 3.3Bank overdrafts - 0.1 - (2.6) (2.5) ------- ------- ------- ------- --------- 6.9 0.9 - (7.0) 0.8Bank loans duewithin one year (30.5) (2.2) (2.5) (5.2) (40.4)Bank loans dueafter more than (26.5) (1.8) 2.5 - (25.8)one yearLease financedue (0.3) - (0.3) 0.3 (0.3)within one year ------- ------- ------- ------- ---------Lease financedue (0.9) - - - (0.9)after more thanone year ------- ------- ------- ------- --------- Net debt (51.3) (3.1) (0.3) (11.9) (66.6) ======= ======= ======= ======= ========= Other changes represent the draw down of lease finance and reclassifications ofbank loans based on their due dates. Bank overdrafts are repayable on demand.Bank loans and overdrafts are unsecured. Lease finance creditors are secured bycharges over specific assets of certain Group companies. 11. Financial instruments The currency and interest rate exposure of net debt was: Weighted Weighted Floating average average rate net Fixed fixed time of Net (debt)/ rate interest fixed debt funds debt rate rate in £ million £ million £ million % years As at 30 September2005Sterling (10.4) (10.0) (0.4) 10.9 2.1US dollar (49.2) 16.9 (66.1) 4.9 0.2Euro (7.0) (6.1) (0.9) 5.2 4.6 ------- ------- ------- ------- ------- (66.6) 0.8 (67.4) 4.9 0.2 ======= ======= ======= ======= ======= As at 30 September2004Sterling (3.0) (2.5) (0.5) 9.4 1.6US dollar (47.1) 6.5 (53.6) 3.4 0.2Euro (6.1) (5.0) (1.1) 5.1 5.2 ------- ------- ------- ------- ------- (56.2) (1.0) (55.2) 3.4 0.2 ======= ======= ======= ======= ======= As at 31 March 2005Sterling - 0.5 (0.5) 10.9 2.1US dollar (42.7) 14.0 (56.7) 4.3 0.1Euro (8.6) (7.6) (1.0) 5.2 5.1 ------- ------- ------- ------- ------- (51.3) 6.9 (58.2) 4.4 0.2 ======= ======= ======= ======= ======= 12. Acquisitions GRP Scandinavia AW Total £ million £ million £ million Fair values of net liabilitiesacquired - (1.3) (1.3)Intangible assets identified - - -Goodwill acquired 0.4 3.6 4.0 --------- -------- --------- Consideration 0.4 2.3 2.7 ========= ======== ========= In addition to the acquisitions shown above, during the six months to 30September 2005 the Group purchased the remaining 8% shareholding in AerovacSystemes France Sarl which it did not already own. Consideration of £0.2 millionwas paid, with £0.2 million of goodwill arising. APPENDIX I EXPECTED TIMETABLE OF PRINCIPAL EVENTS IN RELATION TO THE ACQUISITION AND THE RIGHTS ISSUE +-------------------------------------------------+---------------------+ | | 2005 | +-------------------------------------------------+---------------------+ |Completion of the Acquisition |31 October | +-------------------------------------------------+---------------------+ |Record Date for the Rights Issue and the |close of business on | |Extraordinary General Meeting |16 November | +-------------------------------------------------+---------------------+ |Latest time and date for receipt of Forms of |10.00 a.m. on 16 | |Proxy in respect of the Extraordinary General |November | |Meeting | | +-------------------------------------------------+---------------------+ |Extraordinary General Meeting (Note 1) |10.00 a.m. on 18 | | |November | +-------------------------------------------------+---------------------+ |Despatch of Provisional Allotment Letters (to |18 November | |Qualifying non-CREST Shareholders only) | | +-------------------------------------------------+---------------------+ |Nil Paid Rights credited to stock accounts of |as soon as | |Qualifying CREST Shareholders |practicable after | | |8.00 a.m. on 21 | | |November | +-------------------------------------------------+---------------------+ |Dealings in New Ordinary Shares, nil paid, |8.00 a.m. on 21 | |commence on the London Stock Exchange |November | +-------------------------------------------------+---------------------+ |Existing Ordinary Shares marked 'ex' by the |8.00 a.m. on 21 | |London Stock Exchange |November | +-------------------------------------------------+---------------------+ |Nil Paid Rights and Fully Paid Rights enabled in |as soon as | |CREST |practicable after | | |8.00 a.m. on 21 | | |November | +-------------------------------------------------+---------------------+ |Recommended latest time and date for requesting |3.00 p.m. on 5 | |withdrawal of Nil Paid Rights or Fully Paid |December | |Rights from CREST (Note 2) | | +-------------------------------------------------+---------------------+ |Recommended latest time for depositing renounced |3.00 p.m. on 8 | |Provisional Allotment Letters, nil paid, into |December | |CREST or for dematerialising Nil Paid Rights or | | |Fully Paid Rights into a CREST stock account | | |(Note 3) | | +-------------------------------------------------+---------------------+ |Latest time and date for splitting Provisional |3.00 p.m. on 9 | |Allotment Letters, nil paid or fully paid |December | +-------------------------------------------------+---------------------+ |Latest time and date for acceptance and payment |11.00 a.m. on 13 | |in full and registration of renounced Provisional|December | |Allotment Letters | | +-------------------------------------------------+---------------------+ |Announcement of the results of the Rights Issue |by 8.00 a.m. on 14 | | |December | +-------------------------------------------------+---------------------+ |Dealings in New Ordinary Shares, fully paid, |8.00 a.m. on 14 | |commence on the London Stock Exchange |December | +-------------------------------------------------+---------------------+ |New Ordinary Shares credited to CREST stock |8.00 a.m. on 14 | |accounts |December | +-------------------------------------------------+---------------------+ |Despatch of definitive share certificates for New|20 December | |Ordinary Shares in certificated form | | +-------------------------------------------------+---------------------+ Notes: (1) At this Extraordinary General Meeting, Shareholders will consider, and ifthought fit, pass the Resolution required in connection with the Rights Issue. (2) If Nil Paid Rights or Fully Paid Rights are in CREST and Shareholders wishto convert them into certificated form. (3) If Nil Paid Rights or Fully Paid Rights are represented by a ProvisionalAllotment Letter and Shareholders wish to convert them into uncertificated formin CREST. APPENDIX II DEFINITIONS "Abscoa" Abscoa, Inc. "ACG" Advanced Composite Group Holdings Limited "Acquisition" acquisition of the entire issued share capital of Provest Srl "Act" the Companies Act 1985, as amended "Admission" the admission of the New Ordinary Shares, nil paid, to the Official List and to trading on the London Stock Exchange's main market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission and Disclosure Standards "AEM" AEM Limited "Aeropia" Aeropia Limited, Aeropia Inc. and Aeropia Logistik GmbH "Aerovac" Aerovac Systems Limited, Aerovac Systemes France Sarl and Aerovac Systems Italia S.r.L "AMS" Avionics Mobile Services Limited "Arbuthnot" Arbuthnot Securities Limited "Ashland" Ashland Sweden AB, Ashland Danmark ApS and Ashland Norge AS "AW" Aviation Windings Limited "Business Day" a day on which the London Stock Exchange is open for transaction of business "Canada" Canada, its provinces, possessions and territories "certificated an Ordinary Share or other security which is not held inform" uncertificated form (that is, not in CREST) "Completion" completion of the Acquisition pursuant to and in accordance with the terms of the Acquisition Agreement "Compstock" Compstock Electronics Limited "CREST" the relevant system (as defined in the Regulations) in respect of which CRESTCo Limited is the operator (as defined in the Regulations) "Debt Facilities" the debt facilities which Lloyds TSB Bank plc has agreed to provide to the Company under a facilities agreement dated 26 October 2005 "Directors" or the board of directors of UMECO as constituted from time to"Board" time "EBIT" earnings before interest and tax "Excluded Andorra, Australia, Austria, Belgium, Canada, France,Territories" Germany, Greece, Holland, Japan, New Zealand, the Republic of Ireland, South Africa, Spain and Switzerland "Existing Ordinary the 32,541,234 Ordinary Shares in issue prior to the RightsShares" Issue "Extraordinary the extraordinary general meeting of UMECO convened forGeneral Meeting" or 10.00 a.m. on 18 November 2005"EGM" "FSMA" the Financial Services and Markets Act 2000 "Fully Paid rights to acquire New Ordinary Shares, fully paidRights" "GRP" G.R.P. Material Supplies Limited "IFRS" International Financial Reporting Standards "Interim Results" the unaudited results of the Group for the six months ended 30 September 2005 "Listing Rules" the listing rules of the UK Listing Authority made in accordance with section 74 of FSMA "London Stock London Stock Exchange plcExchange" "New Ordinary up to 14,462,770 New Ordinary Shares to be issued pursuantShares" to the Rights Issue "Nil Paid Rights" New Ordinary Shares in nil paid form provisionally allotted to Qualifying Shareholders pursuant to the Rights Issue "North America" USA and Canada "OEM" original equipment manufacturer "Official List" the Official List of the UK Listing Authority "Ordinary Shares" ordinary shares of 25 pence each in the capital of the Company "Pattonair" Pattonair Limited "Prospectus" the prospectus to be sent to Shareholders of UMECO as soon as reasonably practicable after this announcement "Provisional the renounceable provisional allotment letters issued toAllotment Letters" Qualifying non-CREST Shareholders in respect of New Ordinary Shares in relation to the Rights Issue "Qualifying CREST Qualifying Shareholders holding Ordinary Shares inShareholders" uncertificated form "Qualifying Qualifying Shareholders holding Ordinary Shares innon-CREST certificated formShareholders" "Qualifying Shareholders on the register of members of the Company onShareholders" the Record Date "Record Date" the close of business on 16 November 2005 "Regulatory An information service that is approved by the FinancialInformation Services Authority as meeting the primary informationService" provider criteria and that is on the list of regulatory information services maintained by the Financial Services Authority. "Regulations" the Uncertificated Securities Regulations 2001 (SI 2001/ 3755) "Resolution" the ordinary resolution to be proposed at the Extraordinary General Meeting increasing the authorised share capital of the Company and granting the Directors authority to allot relevant securities (within the meaning of section 80 of the Act) "Richmond" Richmond Aircraft Products, Inc. "Rights Issue" the proposed offer by way of rights to Qualifying Shareholders to subscribe for up to 14,462,770 New Ordinary Shares on the terms and subject to the conditions to be set out in the Prospectus and, in the case of Qualifying non-CREST Shareholders only, the Provisional Allotment Letter "Securities Act" the United States Securities Act of 1933, as amended "Shareholders" holders of Ordinary Shares "stock account" an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited "TLC" Tailored Logistics Corporation, Inc. "Ulogistics" Ulogistics Limited "Ulogistics Ulogistics Canada, Inc.Canada" "UK Listing the Financial Services Authority, in its capacity as theAuthority" competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 and in the exercise of its functions in respect of the admission of securities to the Official List other than in accordance with Part VI of the Financial Services and Markets Act 2000 "uncertificated" or recorded on the relevant register of the share or security"in uncertificated concerned as being held in uncertificated form in CREST andform" title to which, by virtue of the Regulations, may be transferred by means of CREST "Underwriting the agreement dated 1 November 2005 relating to theAgreement" underwriting of the Rights Issue between UMECO and Arbuthnot Securities "UK" or "United the United Kingdom of Great Britain and Northern IrelandKingdom" and its dependent areas "UK GAAP" generally accepted accounting principles in the United Kingdom "US", or "United the United States of America, its territories andStates" possessions, any state of the United States of America and the district of Columbia and all other areas subject to its jurisdiction "UMECO" or the UMECO plc"Company" "UMECO Group" or UMECO and its subsidiaries (as defined in the Act)"Group" The times and dates set out in the expected timetable of principal events inAppendix I and mentioned throughout this announcement may be adjusted by theCompany, with the consent of Arbuthnot, in which event details of the new dateswill be announced via a Regulatory Information Service, notified to the UKListing Authority (or the FSA, as appropriate), the London Stock Exchange and,where appropriate, to Shareholders. References to times in this announcement areto London time. This announcement does not constitute, or form part of, an offer to sell, or thesolicitation of an offer to subscribe for or buy any of the New Ordinary Sharesto be issued or sold in connection with the Rights Issue. Any decision to investin the New Ordinary Shares should only be made on the basis of information inthe Prospectus which will contain further details relating to the Rights Issue,the Acquisition, the Interim Results and UMECO in general, as well as a summaryof the risk factors to which an investment in the New Ordinary Shares issubject. The Prospectus is expected to be issued shortly. In addition, theProspectus will contain a notice convening the EGM. This announcement is not an offer for sale of securities in or into the UnitedStates, Andorra, Australia, Austria, Belgium, Canada, France, Germany, Greece,Holland, Japan, New Zealand, the Republic of Ireland, South Africa, Spain andSwitzerland. Securities may not be offered or sold in the United States absentregistration under the Securities Act or an exemption therefrom. UMECO has notand does not intend to register any of the Provisional Allotment Letters, NilPaid Rights, Fully Paid Rights or New Ordinary Shares under the Securities Act,or to avail itself of any applicable exemption. The securities of UMECO have notbeen registered with, recommended, approved or disapproved by any US federal orstate securities commission or regulatory authority. There will be no publicoffer of securities in the United States or in any of the other ExcludedTerritories. Arbuthnot, which is regulated in the United Kingdom by The Financial ServicesAuthority, is acting exclusively for UMECO and for no one else in relation tothe Rights Issue and will not be responsible to anyone other than UMECO forproviding the protections afforded to customers of Arbuthnot or for providingadvice in relation to the Rights Issue or on any matter referred to herein. The contents of this announcement have been approved by Arbuthnot for thepurposes of section 21(2)(b) of FSMA. The release, publication or distributionof this announcement in certain jurisdictions may be restricted by law andtherefore persons in such jurisdictions into which this announcement isreleased, published or distributed should inform themselves about and observesuch restrictions. Prices and values of, and income from, Ordinary Shares may go down as well as upand an investor may not get back the amount invested. It should be noted thatpast performance is no guide to future performance. Persons needing adviceshould consult an independent financial adviser. Certain statements made in this announcement constitute 'forward lookingstatements'. These statements, which reflect the Company's beliefs andexpectations, are subject to issues and uncertainties that may cause actualresults or events to differ materially from those reflected or contemplated insuch forward looking statements. NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY IN OR INTO THEUNITED STATES, ANDORRA, AUSTRALIA, AUSTRIA, BELGIUM, CANADA, FRANCE, GERMANY,GREECE, HOLLAND, JAPAN, NEW ZEALAND, THE REPUBLIC OF IRELAND, SOUTH AFRICA,SPAIN AND SWITZERLAND. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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