TIDMSNR
RNS Number : 0907U
Senior PLC
27 July 2015
Interim Results for the half-year ended 30 June 2015
FINANCIAL HIGHLIGHTS Half-year to 30 June
2015 2014 % change % change
(constant
currency)
--------------------------------- --------------- --------------- --------- -----------
REVENUE GBP434.5m GBP400.4m +9% +4%
--------------------------------- --------------- --------------- --------- -----------
OPERATING PROFIT GBP49.1m GBP49.6m -1% -6%
ADJUSTED OPERATING PROFIT (1) GBP56.2m GBP54.6m +3% -2%
ADJUSTED OPERATING MARGIN (1) 12.9% 13.6% -0.7ppts -0.9ppts
--------------------------------- --------------- --------------- --------- -----------
PROFIT BEFORE TAX GBP45.0m GBP45.1m -% -5%
ADJUSTED PROFIT BEFORE TAX (1) GBP52.1m GBP50.1m +4% -1%
--------------------------------- --------------- --------------- --------- -----------
BASIC EARNINGS PER SHARE 8.45p 8.66p -2%
ADJUSTED EARNINGS PER SHARE (1) 9.86p 9.65p +2%
--------------------------------- --------------- --------------- ---------
INTERIM DIVIDEND PER SHARE 1.84p 1.67p +10%
--------------------------------- --------------- --------------- ---------
FREE CASH FLOW (2) GBP24.7m GBP32.7m -24%
--------------------------------- --------------- --------------- ---------
NET DEBT (2) - JUNE GBP145.5m GBP114.3m + GBP31m
NET DEBT - DECEMBER 2014 GBP105.0m + GBP41m
--------------------------------- --------------- --------------- ---------
Headlines
-- Group revenue increased by 9% to GBP434.5m (4% increase at constant
currency)
-- Adjusted profit before tax(1) increased by 4% to GBP52.1m (1%
decrease at constant currency)
-- Adjusted earnings per share(1) up 2% to 9.86 pence
-- Continued investment in capital expenditure in support of organic
growth
-- Acquisition of Lymington Precision Engineering ("LPE") for GBP47.3m
-- Generated GBP24.7m free cash flow
-- Group outlook remains encouraging and interim dividend increased
by 10% to 1.84 pence per share
-- David Squires became Group Chief Executive on 1 June 2015
Commenting on the results, David Squires, Group Chief Executive
of Senior plc, said:
"Senior has delivered a solid set of results in the first half
of 2015. Revenue and adjusted profits have increased and free cash
flow remains healthy despite more challenging conditions in some of
our end markets. In response to these market headwinds, we are
taking appropriate mitigating actions and anticipate some
improvement in profitability in the second half of this year at
current exchange rates. The Group remains well positioned for the
future as new Aerospace and Flexonics programmes and products enter
production. In addition, Senior will continue to benefit from its
strong customer relationships, global footprint, excellent
technical and industrial capabilities, and highly skilled
workforce. The Board remains confident of progress in 2016 and
beyond."
For further information please contact:
Derek Harding, Group Finance Director, Senior
plc 01923 714722
Bindi Foyle, Head of Investor Relations & Leadership
Development, Senior plc 01923 714725
Philip Walters, Finsbury Group 020 7251 3801
This Release, together with other information on Senior plc, may
be found at: www.seniorplc.com
(1) Adjusted figures are stated before a GBP5.4m charge for amortisation
of intangible assets arising on acquisitions (H1 2014 - GBP3.1m),
acquisition costs of GBP0.9m (H1 2014 - GBP0.4m), a loss on
sale and write-down of fixed assets of GBP0.8m (H1 2014 - GBPnil)
and a pension curtailment charge of GBPnil (H1 2014 - GBP1.5m).
Adjusted earnings per share takes account of the tax impact
of these items.
(2) See Notes 11(b) and 11(c) for derivation of free cash flow and
of net debt, respectively.
The Group's principal exchange rates for the US dollar and the
Euro, applied in the translation of first-half revenue, profit and
cash flow items at average rates were $1.53 (H1 2014 - $1.67) and
EUR1.36 (H1 2014 - EUR1.22), respectively. The US dollar and Euro
rates applied to the Balance Sheet at 30 June 2015 were $1.57 (June
2014 - $1.70) and EUR1.41 (June 2014 - EUR1.25), respectively.
Note to Editors
Senior is an international manufacturing Group with operations
in 14 countries. It is listed on the main market of the London
Stock Exchange (symbol SNR). Senior designs, manufactures and
markets high technology components and systems for the principal
original equipment producers in the worldwide aerospace, defence,
land-vehicle and energy markets.
Cautionary Statement
This Interim Management Report ("IMR") has been prepared solely
to provide additional information to enable shareholders to assess
the Group's strategy and business objectives and the potential for
the strategy and objectives to be fulfilled. It should not be
relied upon by any other party or for any other purpose.
This IMR contains certain forward-looking statements. Such
statements have been made by the Directors in good faith based on
information available to them at the time of their approval of this
Report. These statements should therefore be treated with caution
due to the inherent uncertainties, including both economic and
business risk factors, underlying such forward-looking
information.
INTERIM MANAGEMENT REPORT 2015
Overview
Total Group revenue increased by 8.5% to GBP434.5m (H1 2014 -
GBP400.4m). This includes a favourable exchange impact of GBP17.6m
and a beneficial incremental impact from acquisitions of GBP16.4m.
If the effect of acquisitions and exchange are excluded, underlying
Group revenue from organic operations was in line with the first
half of 2014 as growth from the commercial aerospace market was
offset by weaker off-highway and power and energy markets.
Adjusted operating profit increased by GBP1.6m (2.9%) to
GBP56.2m (H1 2014 - GBP54.6m). This includes a favourable exchange
impact of GBP2.9m and the year-on-year contribution of profit from
acquisitions of GBP1.9m. If the effect of acquisitions and exchange
movements are excluded, adjusted operating profit from organic
operations decreased by 5.6% on a constant currency basis.
The Group has achieved a number of operational improvements
during the first half of 2015 and enjoyed a mix benefit from the
completion of the large petrochemical expansion joint project.
However as previously reported, challenges such as continued costs
associated with the industrialisation of new aerospace programmes,
volume reductions on established programmes such as the Airbus
A330, lower prices for machined waste aluminium, softening in the
market for agricultural and mining vehicles, as well as volume
reductions in Sikorsky commercial helicopters, Bombardier Global
5000/6000 and the Sukhoi Superjet 100 have resulted in adjusted
operating margin reducing by 0.7 percentage points to 12.9%.
Reported operating profit decreased by 1.0% to GBP49.1m (H1 2014
- GBP49.6m), mainly due: to the increased charge for the
amortisation of intangible assets from acquisitions; higher
acquisition costs; and the loss on sale and write-down of fixed
assets that were partly offset by the non-repeat of the H1 2014
exceptional pension charge, together totalling GBP7.1m (H1 2014 -
GBP5.0m). A reconciliation between reported and adjusted operating
profit is included in the Financial Review.
Adjusted profit before tax increased by GBP2.0m (4.0%) to
GBP52.1m (H1 2014 - GBP50.1m). On a constant currency basis,
adjusted profit before tax decreased by 1.1% (H1 2014 -
GBP52.7m).
The underlying tax rate increased to 21.0%, compared to 20.0% in
the first half of 2014, and adjusted earnings per share increased
by 2.2% to 9.86 pence (H1 2014 - 9.65 pence). Basic earnings per
share decreased by 2.4% to 8.45 pence (H1 2014 - 8.66 pence).
The Group continues to generate healthy cash flow and delivered
free cash inflow of GBP24.7m (H1 2014 - GBP32.7m) after net
investment in capital expenditure of GBP22.8m (H1 2014 - GBP11.9m).
The level of net debt at the end of June 2015 was GBP145.5m
(December 2014 - GBP105.0m) primarily due to the acquisition of
Lymington Precision Engineering (LPE) Limited ("LPE") for GBP47.3m
(including cash and debt acquired), which was completed at the end
of March 2015.
The ratio of net debt to EBITDA at the end of June 2015 was
1.0x, within the Group's normal target range of 0.5x to 1.5x and
comfortably below the Group's bank covenant level of 3.0x. The
Group is financially strong and is able to fund future organic and
acquisitive growth.
Recognising the underlying strength of the business and its
future prospects, the Board has approved an interim dividend of
1.84 pence per share, an increase of 10% over the prior year (H1
2014 - 1.67 pence).
Employees and the Board
As previously announced, David Squires joined Senior and the
Board on 1 May 2015, and took over from Mark Rollins as Group Chief
Executive on 1 June 2015. Senior now employs almost 7,500 people
across the world with over 1,200 located in Asia, demonstrating the
ever increasing global nature of the Group.
Market Conditions
The production ramp-up of new engine option single-aisle and
wide-body aircraft means the outlook for the large commercial
aerospace sector is both strong and visible.
The Group is a supplier to all of the major engine manufacturers
and will benefit in particular from additional content on the new
CFM International LEAP engines, the Pratt and Whitney Geared Turbo
Fan engines, as well as the Rolls-Royce Trent 1000, Trent 7000 and
XWB engines.
Senior's global footprint continues to provide opportunities for
growth, especially as the Group's new facilities in Thailand,
India, California and South Carolina enter into production over the
coming months.
In the Flexonics Division, progress continues with the
development of Senior's EGR cooler offering, with product on test
with a number of potential new customers. Overall volumes in
heavy-duty trucks and passenger vehicles have increased in the
first half of 2015, albeit at a slower rate than 2014.
As anticipated, in the first half the Group experienced lower
equipment sales to the off-highway, mining and agriculture markets,
from the indirect impacts of lower oil and commodity prices,
particularly in North America. The direct impact of lower oil
prices can be seen from the equipment de-stocking evident across
the sector, thus reducing activity at LPE and Upeca Flexonics.
Around 80% of the Group's profits are generated outside of the
UK and consequently, exchange rates can significantly affect the
Group's results. This has been the case particularly during the
first half of 2015, with recent movements offsetting the benefit
identified at the end of the first quarter.
Outlook
Senior has delivered a solid set of results in the first half of
2015. Revenue and adjusted profits have increased and free cash
flow remains healthy despite more challenging conditions in some of
our end markets. In response to these market headwinds, we are
taking appropriate mitigating actions and anticipate some
improvement in profitability in the second half of this year at
current exchange rates.
Looking further ahead, the Board believes Senior remains well
positioned to make good progress in 2016 and beyond. Senior has
established a global footprint which is providing opportunities to
increase market share and deliver strong organic growth; new
aerospace programmes are entering production, while build rates on
existing platforms are increasing, thus providing opportunities for
improvements in operational efficiency. Staying focused on customer
alignment, operational excellence and investing in organisational
capability and leadership talent will enable Senior to continue to
grow organically. Furthermore, Senior's cash-generative nature and
robust financial position provide a solid platform from which the
Group can continue to pursue growth opportunities to complement its
existing portfolio.
DIVISIONAL REVIEW
Aerospace Division
The Aerospace Division represents 66% (H1 2014 - 66%) of Group
revenue and consists of 19 operations. These are located in North
America (ten), the United Kingdom (four), continental Europe
(three), Thailand and Malaysia. The Division's operating results on
a constant currency basis are summarised below:
Half-year Half-year
ended ended
30 June 30 June
2015 2014 (1) Change
GBPm GBPm
Revenue 287.3 278.3 +3.2%
Adjusted operating profit 37.9 41.6 -8.9%
Adjusted operating margin 13.2% 14.9% -1.7ppts
(1) H1 2014 results translated using H1 2015 average exchange rates
- constant currency.
Divisional revenue increased by GBP9.0m (3.2%) to GBP287.3m (H1
2014 - GBP278.3m(1) ) whilst adjusted operating profit decreased by
GBP3.7m (8.9%) to GBP37.9m (H1 2014 - GBP41.6m(1) ). Excluding the
incremental contribution from the acquisition of Upeca Aerospace in
April 2014 (revenue of GBP3.3m; operating profit of GBP0.3m),
organic revenue for the Division increased by GBP5.7m (2.0%) whilst
adjusted operating profit decreased by GBP4.0m (9.6%) over the
first half of 2014.
The Division's most important market is large commercial
aircraft, now representing 60% of divisional sales (H1 2014 - 59%),
where Boeing and Airbus collectively delivered 685 aircraft in the
first half of 2015, 6.2% more than the prior year. They booked net
orders of 629 aircraft and their combined order book of 12,119
aircraft represents a very healthy nine years' production at
current build rates, meaning good growth can be expected in the
future.
Senior's sales in the large commercial aircraft sector increased
by 4.8%(1) during the six-month period to 30 June 2015, with
organic growth, excluding acquisitions, being 2.8%. The Group
benefited from higher deliveries of the B737 and B787 and increased
production of the A350; however, these increases were partly offset
by the impact of the announced decline in A330 build rates,
particularly in relation to the Trent 700 engine.
The Division's sales to the regional jet market were flat in the
period(1) . The Bombardier CSeries and Mitsubishi Regional Jet
programmes, on which Senior has significant content, are expected
to commence deliveries to customers in the first half of 2016 and
2017, respectively. On Embraer's new E2 regional jet, which is due
into service in 2018, the Group has more than doubled its content
compared to the current ERJ 170/175 and ERJ 190/195 aircraft.
Revenue derived from the business jet sector was also broadly flat
in the period(1) .
Revenue from the military and defence sector increased by 1.5%
during the period(1) , primarily due to increases in production of
the A400M, P-8 and Joint Strike Fighter, offset partially by the
anticipated build rate reductions for V-22 Osprey and CH-47
Chinook, coupled with the non-repeat of a Black Hawk spares order
from H1 2014.
Around 9% of the Aerospace Division's revenue was derived from
other markets such as space, non-military helicopters, power and
energy, medical and semi-conductor equipment, where the Group
manufactures products using very similar technology to that used
for certain aerospace products. Overall, revenue derived from these
markets increased by 1.7%(1) , mainly due to increased sales to the
semi-conductor equipment market, partly offset by reduced income
from machined waste metal as a result of lower prices of waste
aluminium.
The divisional adjusted operating margin declined by 1.7
percentage points to 13.2% (H1 2014 - 14.9%)(1) . During the first
half of 2015, the Group continued to incur costs associated with
the industrialisation of new programmes such as the A350, the
A320neo and the ramp-up of the Trent 1000 TEN engine. Volume
reductions for the Trent 700 engine for the A330; the full impact
of Bombardier's decision to suspend the Learjet 85 ("L85")
programme and its recently announced reduction in Global 5000/6000;
lower demand for Sikorsky's commercial helicopters; lower orders
for the Sukhoi Superjet 100; as well as lower aluminium revert
prices have also had an impact on the Division's operating margin.
As industrialisation transitions to series production and the
benefits of mitigation actions which have been implemented to
offset volume declines are realised, some improvement in
profitability is anticipated in the second half of this year.
Senior is investing significant capital to support customers and
grow market share. In Asia, construction work on the first phase of
the new 196,000 sq. ft. facility in Thailand has completed and is
scheduled to be operational in the second half of 2015. In
California, an additional 59,000 sq. ft. facility has been
constructed to meet the future A320neo and CSeries production
demands and will be operational in the second half of 2015. In
February, the Group opened a satellite factory adjacent to Boeing's
rapidly growing facility in South Carolina.
The aerospace industry is currently experiencing a period of
significant volume ramp-up in both the single aisle and wide-bodied
programmes. Senior has significant content on the A320neo, B737
MAX, B787 and A350, all of which are forecasting significant
increases in production over the coming years. Senior's on-time
delivery and quality record and its cost competitiveness are key to
the Group winning work on new programmes. The Group has greater
content on the new engine versions of the high volume single aisle
aircraft, with 27% more content on the B737 MAX and 44% more on the
A320neo than the current B737 and A320 aircraft, respectively. The
A320neo is scheduled to enter service towards the end of 2015 and
the B737 MAX is scheduled to enter service in 2017. The Group also
has meaningful content on the A330neo, which is due to enter
service towards the end of 2017.
Overall the future prospects for the Group's Aerospace Division
are visible and encouraging.
Flexonics Division
The Flexonics Division represents 34% (H1 2014 - 34%) of Group
revenue and consists of 14 operations which are located in North
America (four), continental Europe (three), the United Kingdom
(two), South Africa, India, Brazil, Malaysia and Tianjin, China.
The Group also has a 49% equity stake in a land vehicle joint
venture in Wuhan, China. The Division's operating results on a
constant currency basis are summarised below:
Half-year Half-year
ended ended
30 June 30 June
2015 2014 (1) Change
GBPm GBPm
Revenue 147.4 139.9 +5.4%
Adjusted operating profit 22.3 20.9 +6.7%
Adjusted operating margin 15.1% 14.9% +0.2ppts
(1) H1 2014 results translated using H1 2015 average exchange rates
- constant currency.
Divisional revenue grew by GBP7.5m (5.4%) to GBP147.4m (H1 2014
- GBP139.9m(1) ) and adjusted operating profit increased by GBP1.4m
(6.7%) to GBP22.3m (H1 2014 - GBP20.9m(1) ).
Excluding the incremental contribution from the acquisition of
Upeca Flexonics in April 2014 (revenue of GBP4.8m; operating profit
of GBP0.5m) and from the acquisition of LPE at the end of March
2015 (revenue of GBP8.3m; operating profit of GBP1.1m), organic
revenue for the Division declined by GBP5.6m (4.0%) and adjusted
operating profit decreased by GBP0.2m (1.0%). The adjusted
operating margin increased to 15.1% (H1 2014 - 14.9%), principally
due to favourable sales mix from the industrial businesses and
continued operational efficiencies offsetting the impact of volume
reductions in the off-highway, and power and energy markets.
Total Group sales to truck and off-highway markets decreased by
9.0%(1) . Senior's sales to the North American truck market grew by
GBP0.7m (2.3%), with higher sales of EGR coolers for new vehicles
partly offset, as anticipated, by lower spares sales as product
longevity improved following technological advances made by Senior.
Sales to the North American off-highway market decreased by GBP4.6m
(29.3%) due to weaker demand for agricultural and mining vehicles
and sales to European truck and off-highway markets declined by
GBP1.6m (19.8%) due to non-repeat of prior year prebuild by our
customers ahead of further tightening of Tier 4 emission
regulations.
Group sales to passenger vehicle markets were broadly flat in
the period(1) , with modest improvements in the Division's main
European market offsetting weaker market demand in Brazil and from
customers in India. In India, a new 26,000 sq. ft. leased facility
is being fitted-out to support a new EGR cooler contract for a
customer who has established a new production operation in India.
Production is anticipated to commence in early 2016.
In the Group's industrial markets, organic sales excluding the
benefit of Upeca Flexonics and LPE were down 2.5%(1) . Organic
sales to petrochemical markets were up GBP4.9m (29.5%) with the
incremental sales from the large industrial expansion joint orders
for North American and South Korean petrochemical projects that
started shipping in H2 2014. As anticipated, organic sales to power
and energy markets decreased by GBP5.8m (23.9%) due to weaker power
generation and nuclear activity, continued challenges in Brazil,
and lower revenue from fuel cell dielectrics due to lower volumes
and a reduction in price resulting from a design change. Elsewhere,
lower medical sales and weaker European solar and HVAC sales were
partly offset by slightly improved Canadian sales to HVAC and
cryogenic markets.
On 31 March 2015, the Group acquired LPE, based in Lymington,
Hampshire, UK. LPE is a leading manufacturer of precision-machined
components, fabrications, assemblies and kit sets for the oil and
gas, telecommunications, aerospace, defence, land and sea systems,
nuclear and marine industries. LPE strengthens Senior's precision
machining capabilities and provides access to its strong customer
relationships and adjacent markets. During its first three months
of ownership by Senior, LPE contributed GBP8.3m of revenue, GBP1.1m
of operating profit and GBP2.7m of operating cash flow. Whilst we
remain confident of the medium to longer term prospects of this
business, in the near term LPE has seen some weakness in its core
oil and gas related markets, compounded by de-stocking across the
industry and we expect this to continue into the second half of
2015. Once this equipment overhang is utilised, it is anticipated
that incremental orders will start to flow again, although the
precise timing of this is hard to predict. At this stage, we
anticipate LPE's profit performance in the second half of 2015 is
likely to be approximately GBP1.0m lower than expected at the time
of the acquisition. Accordingly, the GBP10.0m paid into escrow upon
acquisition to cover contingent earn-out consideration has been
recovered as it now appears unlikely that the earn-out will become
payable.
Looking further ahead, global environmental legislation
continues to tighten which will drive demand for many of the
Flexonics Division's products. As a result of its global footprint,
technical innovation and customer relationships, the Group remains
well positioned for the future as new Flexonics programmes and
products enter production.
FINANCIAL REVIEW
Financial Summary
A summary of the Group's operating results (at reported
currency) is set out in the table below. Further detail on the
performance of each Division is set out above in the Divisional
Review.
Adjusted
operating
Revenue profit (1) Margin
---------------------- ---------------------- ----------------------
Half-year Half-year Half-year Half-year Half-year Half-year
ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June
2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm % %
Aerospace 287.3 264.0 37.9 39.4 13.2 14.9
Flexonics 147.4 136.6 22.3 20.1 15.1 14.7
Share of results
of joint venture - - 0.2 (0.2) - -
Inter-segment revenue (0.2) (0.2) - - - -
Central costs - - (4.2) (4.7) - -
---------- ---------- ---------- ---------- ---------- ----------
Group total 434.5 400.4 56.2 54.6 12.9 13.6
========== ========== ========== ========== ========== ==========
(1) Adjusted operating profit is the profit before interest and tax
and before exceptional pension curtailment charge, amortisation
of intangible assets from acquisitions, acquisition costs and loss
on sale and write-down of fixed assets.
Adjusted operating profit may be reconciled to the operating
profit that is shown in the Condensed Consolidated Income Statement
as follows:
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Operating profit per Condensed Consolidated Income
Statement 49.1 49.6
Exceptional pension curtailment charge - 1.5
Amortisation of intangible assets from acquisitions 5.4 3.1
Acquisition costs 0.9 0.4
Loss on sale and write-down of fixed assets 0.8 -
---------- ----------
Adjusted operating profit 56.2 54.6
========== ==========
Financial Detail
Revenue
Group revenue increased by 8.5% to GBP434.5m (H1 2014 -
GBP400.4m). This included a favourable exchange impact of GBP17.6m
and the beneficial incremental impact from two acquisitions of
GBP16.4m (GBP8.3m from LPE acquired in March 2015 and GBP8.1m from
Upeca acquired in April 2014). If the year-on-year effect of
acquisitions and favourable exchange are excluded, Group revenue
from organic operations was up GBP0.1m on a constant currency
basis. In the first half of 2015, 63% of revenue originated from
North America, 16% from the UK, 11% from the Rest of Europe and 10%
from the Rest of the World.
Operating profit
Adjusted operating profit increased by GBP1.6m (2.9%) to
GBP56.2m (H1 2014 - GBP54.6m), with the Group achieving an adjusted
operating margin of 12.9% (H1 2014 - 13.6%). This included a
favourable exchange impact of GBP2.9m and the year-on-year
operating profit contributed by acquisitions of GBP1.9m (LPE
GBP1.1m and Upeca GBP0.8m). If the effect of acquisitions and
exchange movements are excluded, adjusted operating profit from
organic operations decreased by 5.6% on a constant currency
basis.
Adjusted operating profit is stated before finance costs (as
detailed below), an exceptional pension charge of GBPnil (H1 2014 -
GBP1.5m), amortisation of intangible assets from acquisitions of
GBP5.4m (H1 2014 - GBP3.1m), acquisition costs of GBP0.9m (H1 2014
- GBP0.4m) and loss on sale and write-down of fixed assets of
GBP0.8m (H1 2014 - GBPnil).
Group reported operating profit decreased by 1.0% to GBP49.1m
(H1 2014 - GBP49.6m), mainly due to the increased charge for the
amortisation of intangible assets from acquisitions, higher
acquisition costs and the loss on sale and write-down of fixed
assets that were only partly offset by the non-repeat of the H1
2014 exceptional pension charge, together totalling GBP7.1m (H1
2014 - GBP5.0m).
Finance costs
Total finance costs, net of investment income of GBP0.1m (H1
2014 - GBP0.1m), decreased to GBP4.1m (H1 2014 - GBP4.5m). Net
interest costs on borrowings decreased to GBP3.9m (H1 2014 -
GBP4.1m) as the lower blended interest rate on committed facilities
following the repayment of $35.0m private placement loan notes
during H2 2014 offset the effects of the increased debt associated
with the acquisition of LPE and the adverse foreign exchange impact
on the translation of US dollar denominated borrowings. The net IAS
19 pension finance cost decreased to GBP0.2m (H1 2014 - GBP0.4m)
principally due to a reduction in the retirement benefit
obligations at 31 December 2014 compared to 31 December 2013.
Profit before tax
Adjusted profit before tax increased by GBP2.0m (4.0%) to
GBP52.1m (H1 2014 - GBP50.1m). On a constant currency basis,
adjusted profit before tax decreased by 1.1% (H1 2014 - GBP52.7m).
Reported profit before tax decreased 0.2% to GBP45.0m (H1 2014 -
GBP45.1m). The reconciling items between adjusted and reported
profit before tax are shown in Note 4 of the Interim Financial
Statements.
Tax charge
The total tax charge increased to GBP9.7m (H1 2014 - GBP9.1m).
Excluding the net tax benefits of GBP1.2m (H1 2014 - GBP0.9m)
arising from amortisation of intangible assets from acquisitions,
acquisition costs and loss on sale and write-down of fixed assets,
the adjusted tax charge is GBP10.9m (H1 2014 - GBP10.0m) resulting
in an adjusted tax rate of 21.0% (H1 2014 - 20.0%) on adjusted
profit before tax.
Earnings per share
The weighted average number of shares, for the purposes of
calculating undiluted earnings per share, increased to 417.8
million (H1 2014 - 415.7 million). The increase arose principally
from the vesting of shares awarded under the Group's Long-Term
Incentive Plan. Adjusted earnings per share increased by 2.2% to
9.86 pence (H1 2014 - 9.65 pence). Basic earnings per share
decreased by 2.4% to 8.45 pence (H1 2014 - 8.66 pence). See Note 7
of the Interim Financial Statements for details of the basis of
these calculations.
Dividend
The interim dividend has been increased by 10% to 1.84 pence per
share (2014 interim dividend - 1.67 pence), reflecting the Group's
encouraging future prospects and annual dividend cover of 3.5
times. It will be paid on 30 November 2015 to shareholders on the
register at the close of business on 23 October 2015.
Cash flow
The Group's free cash flow, the derivation of which is set out
in Note 11(b) of the Interim Financial Statements, remained strong
at GBP24.7m (H1 2014 - GBP32.7m). The main driver of the cash
performance was cash generated by operations of GBP55.8m (H1 2014 -
GBP55.1m), which is stated after taking into account pension
contributions in excess of service costs of GBP4.5m (H1 2014 -
GBP4.6m) and a working capital outflow of GBP9.2m (H1 2014 -
GBP9.0m).
The working capital outflow was mainly due to an increase in
receivables that arose as the implementation of previously
announced changes to payment terms were completed and due to the
timing of a small number of collection issues, which have since
been resolved. Inventory levels (before acquired inventory from
LPE) were broadly flat as increased operational focus offset the
upwards pressure of ongoing industrialisation. As anticipated, the
Group's level of working capital as a proportion of annualised
revenue in the six-month period increased to 13.7% or 13.4%
excluding acquisitions (December 2014 - 13.1%), remaining within
the Group's target range.
Capital expenditure of GBP23.3m (H1 2014 - GBP12.1m) was 1.7
times depreciation (H1 2014 - 1.0 times), with the majority of the
spend related to investment in growth programmes. Capital
expenditure of GBP18.3m was incurred in the Aerospace Division,
GBP4.7m in the Flexonics Division and GBP0.3m at the Group's
holding companies. Capital expenditure is expected to continue to
be significantly higher than depreciation in the second half of the
year, as major investments are being made to support future growth
programmes.
Acquisition
On 31 March 2015, the Group acquired LPE based in Lymington,
Hampshire, UK as set out in Note 13. The initial cash consideration
was GBP44.6m comprising a net consideration of GBP45.8m after
taking account of GBP2.7m of net debt in the business at
acquisition date and a payment of GBP1.5m for its working capital.
Under the terms of the acquisition, there is a potential deferred
contingent consideration (earn-out) of up to GBP31.7m that is
dependent on the performance of LPE against demanding operating
profit targets for the 12 month period ending 31 March 2016.
Performance of the LPE business has been lower than envisaged
during the first three months of Senior's ownership and it appears
unlikely that the earn-out will become payable.
Goodwill
The change in goodwill from GBP262.5m at 31 December 2014 to
GBP275.2m at 30 June 2015 reflects a reduction of GBP4.4m due to
foreign exchange differences and an increase of GBP17.1m due to the
goodwill recognised on the acquisition of LPE as set out in Note
13. The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired.
As noted for the year ended 31 December 2014, Thermal had been
impacted by operational and performance issues. During the first
half of 2015, Thermal has been trading in line with expectations
and, as at 30 June 2015, no indication of impairment for the
Thermal Cash Generating Unit has been noted. Its performance and
forecast will continue to be closely monitored.
As noted in the Annual Report & Accounts 2014, visibility of
"off-highway" land vehicles for use in agricultural markets and
mining operations was less clear as the slowing GDP growth rate in
China impacted commodity prices. During the first half of 2015,
this has led to lower activity levels than previously anticipated
at GA, our high precision machined component business based in
Wisconsin, USA. The current mid-term expectations suggest a
reversal to the current cyclical down trend for the markets and
prospects of GA which, alongside management's focus to develop its
aerospace product range and improve its operational performance,
indicate that, as at 30 June 2015, the GA Cash Generating Unit has
sufficient headroom over its carrying value. Its performance and
forecast will continue to be closely monitored.
Net debt
Net debt increased by GBP40.5m in the six-month period to
GBP145.5m at 30 June 2015 (31 December 2014 - GBP105.0m). This
increase was principally due to the acquisition of LPE (initial
cash consideration of GBP44.6m plus net debt acquired of GBP2.7m)
which was funded using the Group's existing borrowing facilities, a
new two-year GBP20.0m revolving credit facility and new one-year
term loans totalling GBP25.0m. Other movements included GBP16.6m of
dividend payments, GBP0.9m purchase of own shares, GBP0.4m of
unfavourable currency movements and a free cash inflow of
GBP24.7m.
The ratio of net debt to EBITDA at the end of June 2015 was
1.0x, within the Group's target range of 0.5x to 1.5x and
comfortably below the Group's bank covenant level of 3.0x.
Retirement benefit obligations
Aggregate retirement benefit liabilities at 30 June 2015 were
GBP15.1m in excess of the value of pension assets, representing a
decrease in the deficit of GBP4.7m from 31 December 2014. The
deficit in respect of the Group's UK defined benefit pension plan
decreased by GBP4.8m to GBP4.6m (31 December 2014 - GBP9.4m). The
deficit in North America and other territories increased by
GBP0.1m. The GBP4.7m net decrease over the first six months of 2015
is principally due to GBP4.5m contributions in excess of service
costs made by the Group and a reduction in liabilities due to
higher bond yields that determine the discount rate used in their
calculation that were partly offset by adverse return on assets
during the period.
Accounting policies
The accounting policies adopted in these Interim Financial
Statements are consistent with those followed in the preparation of
the Group's Annual Report & Accounts 2014.
Related party transactions
The Group's related party transactions are between the Company
and its subsidiaries, and have been eliminated on
consolidation.
Going concern basis
The Directors have made appropriate enquiries and consider that
the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the Directors
continue to adopt the going concern basis in preparing the
financial statements.
Risks and uncertainties
The principal risks and uncertainties faced by the Group have
not changed from those set out in detail on pages 17 to 19 of the
Annual Report & Accounts 2014, which is available at
www.seniorplc.com.
These can be summarised as:
-- New aircraft platform delays
-- Importance of emerging markets
-- Price-down pressures
-- Acquisitions
-- Strategy
-- Programme participation
-- Employee retention
-- Corporate governance breach
-- Financing and liquidity
-- Global cyclical downturn
Overall, the Board does not anticipate any significant change in
the likely impact of these risks.
Directors' Responsibility Statement
We confirm to the best of our knowledge that:
1. the condensed set of Interim Financial Statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting" as adopted
by the European Union;
2. the Interim Management Report herein includes a fair review of
the important events during the first six months and description
of the principal risks and uncertainties for the remaining six
months of the year, as required by Rule 4.2.7R of the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct
Authority; and
3. the Interim Management Report includes as applicable, a fair review
of disclosure of related party transactions and changes therein,
as required by Rule 4.2.8R of the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
By Order of the Board
David Squires Derek Harding
Group Chief Executive Group Finance Director
24 July 2015 24 July 2015
INDEPENDENT REVIEW REPORT TO SENIOR PLC
We have been engaged by Senior plc ("the Company") to review the
condensed set of Financial Statements in the half-yearly financial
report for the six months ended 30 June 2015 which comprises the
Condensed Consolidated Income Statement, the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated
Balance Sheet, the Condensed Consolidated Statement of Changes in
Equity, the Condensed Consolidated Cash Flow Statement and related
Notes 1 to 14. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of Financial Statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 2, the annual Financial Statements of the
Group are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of Financial Statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of Financial Statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of Financial Statements
in the half-yearly financial report for the six months ended 30
June 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Reading, United Kingdom
24 July 2015
Condensed Consolidated Income Statement
For the half-year ended 30 June 2015
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2015 2014 2014
GBPm GBPm GBPm
Revenue 3 434.5 400.4 820.8
---------- ---------- --------
Trading profit before one-off items 49.7 49.8 102.6
Goodwill impairment - - (9.4)
Write-down of L85 inventory - - (1.8)
Restructuring costs - - (1.5)
-------------------------------------- ------ ---------- ---------- --------
Trading profit 49.7 49.8 89.9
Loss on sale and write-down of
fixed assets (0.8) - -
Share of joint venture profit/(loss) 3 0.2 (0.2) (0.3)
Operating profit (1) 49.1 49.6 89.6
Investment income 0.1 0.1 0.1
Finance costs (4.2) (4.6) (9.1)
---------- ---------- --------
Profit before tax (2) 45.0 45.1 80.6
Tax 5 (9.7) (9.1) (17.1)
---------- ---------- --------
Profit for the period 35.3 36.0 63.5
---------- ---------- --------
Attributable to:
Equity holders of the parent 35.3 36.0 63.5
---------- ---------- --------
Earnings per share
Basic (3) 7 8.45p 8.66p 15.25p
---------- ---------- --------
Diluted (4) 7 8.35p 8.55p 15.06p
---------- ---------- --------
(1) Adjusted operating profit 4 56.2 54.6 111.6
(2) Adjusted profit before tax 4 52.1 50.1 102.6
(3) Adjusted earnings per share 7 9.86p 9.65p 19.84p
(4) Adjusted and diluted earnings
per share 7 9.75p 9.52p 19.59p
Condensed Consolidated Statement of Comprehensive Income
For the half-year ended 30 June 2015
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
Profit for the period 35.3 36.0 63.5
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss:
(Losses) / gains on cash flow hedges
during the period (0.9) 0.5 (2.3)
Reclassification adjustments for
losses included in profit or loss 1.2 - 0.6
---------- ---------- --------
Gains / (losses) on cash flow hedges 0.3 0.5 (1.7)
Exchange differences on translation
of foreign operations (12.8) (5.9) 7.9
Tax relating to items that may
be reclassified - - 0.2
---------- ---------- --------
(12.5) (5.4) 6.4
Items that will not be reclassified
subsequently to profit or loss:
Actuarial losses on defined benefit
pension schemes - (2.2) (0.9)
Tax relating to items that will
not be reclassified 0.4 0.1 0.4
---------- ---------- --------
0.4 (2.1) (0.5)
Other comprehensive income for
the period, net of tax (12.1) (7.5) 5.9
---------- ---------- --------
Total comprehensive income for
the period 23.2 28.5 69.4
---------- ---------- --------
Attributable to:
Equity holders of the parent 23.2 28.5 69.4
---------- ---------- --------
Condensed Consolidated Balance Sheet
As at 30 June 2015 30 June 30 June
Notes 2015 2014 31 Dec 2014
GBPm GBPm GBPm
Non-current assets
Goodwill 8 275.2 258.3 262.5
Other intangible assets 50.3 31.2 28.3
Investment in joint venture 0.9 0.8 0.7
Property, plant and equipment 9 175.7 154.7 167.6
Deferred tax assets 1.1 6.7 6.5
Loan to joint venture 0.7 - 0.4
Trade and other receivables 0.4 0.4 0.4
-------- -------- ------------
Total non-current assets 504.3 452.1 466.4
-------- -------- ------------
Current assets
Inventories 120.7 111.2 119.3
Loan to joint venture 0.4 - 0.7
Trade and other receivables 148.0 133.5 137.7
Cash and cash equivalents 11a) 22.0 31.8 13.2
-------- -------- ------------
Total current assets 291.1 276.5 270.9
-------- -------- ------------
Total assets 795.4 728.6 737.3
-------- -------- ------------
Current liabilities
Trade and other payables 149.9 145.6 146.8
Current tax liabilities 15.8 16.1 13.3
Obligations under finance leases 11c) 0.7 0.4 0.3
Bank overdrafts and loans 11c) 41.6 29.2 24.1
Provisions 1.7 1.2 2.0
-------- -------- ------------
Total current liabilities 209.7 192.5 186.5
-------- -------- ------------
Non-current liabilities
Bank and other loans 11c) 123.7 115.7 93.4
Retirement benefit obligations 12 15.1 24.8 19.8
Deferred tax liabilities 26.7 18.8 24.8
Obligations under finance leases 11c) 1.5 0.8 0.4
Others 0.5 0.2 0.8
-------- -------- ------------
Total non-current liabilities 167.5 160.3 139.2
-------- -------- ------------
Total liabilities 377.2 352.8 325.7
-------- -------- ------------
Net assets 418.2 375.8 411.6
-------- -------- ------------
Equity
Issued share capital 10 41.9 41.7 41.8
Share premium account 14.8 13.9 14.8
Equity reserve 3.2 5.5 5.7
Hedging and translation reserve (19.7) (19.0) (7.2)
Retained earnings 380.2 336.3 359.0
Own Shares (2.2) (2.6) (2.5)
-------- -------- ------------
Equity attributable to equity holders
of the parent 418.2 375.8 411.6
-------- -------- ------------
Total equity 418.2 375.8 411.6
-------- -------- ------------
Condensed Consolidated Statement of Changes in Equity
For the half-year ended 30 June 2015
All equity is attributable to equity holders of
the parent
Hedging
Issued Share and
share premium Equity translation Retained Own Total
capital account reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2014 41.6 13.8 5.2 (13.6) 316.4 (1.9) 361.5
-------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - 63.5 - 63.5
Losses on cash flow
hedges - - - (1.7) - - (1.7)
Exchange differences
on translation of
foreign operations - - - 7.9 - - 7.9
Actuarial losses on
defined benefit pension
schemes - - - - (0.9) - (0.9)
Tax relating to components
of other comprehensive
income - - - 0.2 0.4 - 0.6
-------- -------- -------- ------------ --------- -------- -------
Total comprehensive
income for the period - - - 6.4 63.0 - 69.4
Issue of share capital 0.2 1.0 (0.1) - - - 1.1
Share-based payment
charge - - 2.3 - - - 2.3
Tax relating to share-based
payments - - - - (0.1) - (0.1)
Purchase of shares
held by employee benefit
trust - - - - - (0.7) (0.7)
Use of shares held
by employee benefit
trust - - - - (0.1) 0.1 -
Transfer to retained
earnings - - (1.7) - 1.7 - -
Dividends paid - - - - (21.9) - (21.9)
-------- -------- -------- ------------ --------- -------- -------
Balance at 31 December
2014 41.8 14.8 5.7 (7.2) 359.0 (2.5) 411.6
-------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - 35.3 - 35.3
Gains on cash flow
hedges - - - 0.3 - - 0.3
Exchange differences
on translation of
foreign operations - - - (12.8) - - (12.8)
Tax relating to components
of other comprehensive
income - - - - 0.4 - 0.4
-------- -------- -------- ------------ --------- -------- -------
Total comprehensive
income for the period - - - (12.5) 35.7 - 23.2
Issue of share capital 0.1 - (0.1) - - - -
Share-based payment
charge - - 0.9 - - - 0.9
Purchase of shares
held by employee benefit
trust - - - - - (0.9) (0.9)
Use of shares held
by employee benefit
trust - - - - (1.2) 1.2 -
Transfer to retained
earnings - - (3.3) - 3.3 - -
Dividends paid - - - - (16.6) - (16.6)
-------- -------- -------- ------------ --------- -------- -------
Balance at 30 June
2015 41.9 14.8 3.2 (19.7) 380.2 (2.2) 418.2
-------- -------- -------- ------------ --------- -------- -------
All equity is attributable to equity holders of
the parent
Hedging
Issued Share and
share premium Equity translation Retained Own Total
capital account reserve reserve earnings shares equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2014 41.6 13.8 5.2 (13.6) 316.4 (1.9) 361.5
-------- -------- -------- ------------ --------- -------- -------
Profit for the period - - - - 36.0 - 36.0
Gains on cash flow
hedges - - - 0.5 - - 0.5
Exchange differences
on translation of
foreign operations - - - (5.9) - - (5.9)
Actuarial losses on
defined benefit pension
schemes - - - - (2.2) - (2.2)
Tax relating to components
of other comprehensive
income - - - - 0.1 - 0.1
-------- -------- -------- ------------ --------- -------- -------
Total comprehensive
income for the period - - - (5.4) 33.9 - 28.5
Issue of share capital 0.1 0.1 (0.1) - - - 0.1
Share-based payment
charge - - 1.6 - - - 1.6
Tax relating to share-based
payments - - - - (0.2) - (0.2)
Purchase of shares
held by employee benefit
trust - - - - - (0.7) (0.7)
Transfer to retained
earnings - - (1.2) - 1.2 - -
Dividends paid - - - - (15.0) - (15.0)
-------- -------- -------- ------------ --------- -------- -------
Balance at 30 June
2014 41.7 13.9 5.5 (19.0) 336.3 (2.6) 375.8
-------- -------- -------- ------------ --------- -------- -------
Condensed Consolidated Cash Flow Statement
For the half-year ended 30 June 2015
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
Notes 2015 2014 2014
GBPm GBPm GBPm
Net cash from operating activities 11a) 47.4 44.5 88.6
---------- ---------- --------
Investing activities
Interest received 0.1 0.1 0.1
Proceeds on disposal of property,
plant and equipment 0.5 0.2 0.2
Purchases of property, plant and
equipment (22.3) (11.6) (29.6)
Purchases of intangible assets (1.0) (0.5) (1.5)
Acquisition of LPE 13 (43.6) - -
Acquisition of Upeca - (60.1) (60.1)
Loan to joint venture - - (1.1)
Net cash used in investing activities (66.3) (71.9) (92.0)
---------- ---------- --------
Financing activities
Dividends paid (16.6) (15.0) (21.9)
New loans 78.4 27.8 16.1
Repayment of borrowings (27.2) (4.5) (34.5)
Repayments of obligations under
finance leases (0.3) (0.9) (1.4)
Share issues - 0.1 1.1
Purchase of shares held by employee
benefit trust (0.9) (0.7) (0.7)
Net cash from / (used in) financing
activities 33.4 6.8 (41.3)
---------- ---------- --------
Net increase / (decrease) in cash
and cash equivalents 14.5 (20.6) (44.7)
Cash and cash equivalents at beginning
of period 8.5 53.1 53.1
Effect of foreign exchange rate
changes (1.0) (0.7) 0.1
---------- ---------- --------
Cash and cash equivalents at end
of period 11a) 22.0 31.8 8.5
---------- ---------- --------
Notes to the Condensed Consolidated Interim Financial
Statements
1. General information
These Condensed Consolidated Interim Financial Statements, which
were approved by the Board of Directors on 24 July 2015, have been
reviewed by the auditor, whose report is set out after the
Directors' Responsibility Statement.
The comparative figures for the year ended 31 December 2014 do
not constitute the Group's statutory accounts for 2014 as defined
in Section 434 of the Companies Act 2006. Statutory accounts for
2014 have been delivered to the Registrar of Companies. The
auditor's report on those accounts was unqualified, did not draw
attention to any matters by way of emphasis and did not contain
statements under Sections 498(2) or (3) of the Companies Act
2006.
2. Accounting policies
These Condensed Consolidated Interim Financial Statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with IAS 34 "Interim
Financial Reporting" as adopted by the European Union. They have
also been prepared on the going concern basis as set out in this
Interim Management Review. The Directors have, at the time of
approving these Condensed Consolidated Interim Financial
Statements, a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future, a period of not less than 12 months from this reporting
date. Accordingly, they continue to adopt the going concern basis
of accounting in preparing these Condensed Consolidated Interim
Financial Statements.
The accounting policies, presentation and methods of computation
adopted in the preparation of these Condensed Consolidated Interim
Financial Statements are consistent with those followed in the
preparation of the Group's Annual Financial Statements for the year
ended 31 December 2014 which were prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. They do not include all the information
required for full annual financial statements and should be read in
conjunction with the Consolidated Financial Statements of the Group
as at and for the year ended 31 December 2014. No material new
standards, amendments to standards or interpretations are effective
for the half-year ended 30 June 2015.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. The
resulting accounting estimates will, by definition, seldom equal
the related actual results. In preparing these Condensed
Consolidated Interim Financial Statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the Consolidated Financial Statements
as at and for the year ended 31 December 2014.
3. Segmental analysis
The Group reports its segment information as two operating
Divisions according to the market segments they serve, Aerospace
and Flexonics. For management purposes, the Aerospace Division is
managed as two sub-divisions, Aerostructures and Fluid Systems, in
order to enhance management oversight; however, these are
aggregated as one reporting segment in accordance with IFRS 8. The
Flexonics Division is managed as a single division.
There has been no change in the basis of segmentation or in the
basis of measurement of segment profit or loss in the period.
Adjusted operating profit, as described in Note 4, is the key
measure reported to the Group's Executive Committee for the purpose
of resource allocation and assessment of segment performance.
Investment income, finance costs and tax are not allocated to
segments, as this type of activity is driven by the central tax and
treasury function.
Segment assets include directly attributable computer software
assets, property, plant and equipment, and working capital assets.
Goodwill, intangible assets from acquisitions, cash, deferred and
current tax, and other financial assets (except for working
capital) are not allocated to segments for the purposes of
reporting financial performance to the Group's Executive
Committee.
Segment liabilities include directly attributable trade payables
and accruals. Debt, finance lease obligations, deferred and current
tax and retirement benefit obligations are not allocated to
segments for the purposes of reporting financial performance to the
Group's Executive Committee.
Business Segments
Segment information for revenue, operating profit and a
reconciliation to entity net profit is presented below.
Eliminations Eliminations
/ central / central
Aerospace Flexonics costs Total Aerospace Flexonics costs Total
Half-year Half-year Half-year Half-year Half-year Half-year Half-year Half-year
ended ended ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2015 2015 2015 2015 2014 2014 2014 2014
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
External revenue 287.2 147.3 - 434.5 263.9 136.5 - 400.4
Inter-segment
revenue 0.1 0.1 (0.2) - 0.1 0.1 (0.2) -
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Total revenue 287.3 147.4 (0.2) 434.5 264.0 136.6 (0.2) 400.4
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted trading
profit 37.9 22.3 (4.2) 56.0 39.4 20.1 (4.7) 54.8
Share of joint
venture profit
/(loss) - 0.2 - 0.2 - (0.2) - (0.2)
---------- ---------- ------------ ---------- ---------- ---------- ------------ ----------
Adjusted
operating
profit 37.9 22.5 (4.2) 56.2 39.4 19.9 (4.7) 54.6
Loss on sale
and write-down
of fixed assets (0.8) - - (0.8) - - - -
Exceptional
pension charge - - - - - - (1.5) (1.5)
Amortisation
of intangible
assets from
acquisitions (2.6) (2.8) - (5.4) (2.1) (1.0) - (3.1)
Acquisition
costs - (0.9) - (0.9) (0.2) (0.2) - (0.4)
----------
Operating profit 34.5 18.8 (4.2) 49.1 37.1 18.7 (6.2) 49.6
---------- ---------- ------------ ---------- ---------- ------------
Investment income 0.1 0.1
Finance costs (4.2) (4.6)
---------- ----------
Profit before
tax 45.0 45.1
Tax (9.7) (9.1)
---------- ----------
Profit after
tax 35.3 36.0
---------- ----------
Segment information for assets and a reconciliation to total
assets and for liabilities and a reconciliation to total
liabilities is presented below.
30 June 30 June 31 Dec
2015 2014 2014
Assets GBPm GBPm GBPm
Aerospace 303.1 269.3 293.0
Flexonics 140.0 127.3 130.7
Corporate 3.6 3.7 3.0
-------- -------- -------
Segment assets for reportable segments 446.7 400.3 426.7
Unallocated
Goodwill 275.2 258.3 262.5
Intangible assets from acquisitions 46.5 28.8 25.1
Cash 22.0 31.8 13.2
Deferred and current tax 1.4 7.1 7.1
Others 3.6 2.3 2.7
-------- -------- -------
Total assets per Balance Sheet 795.4 728.6 737.3
-------- -------- -------
30 June 30 June 31 Dec
2015 2014 2014
Liabilities GBPm GBPm GBPm
Aerospace 88.9 82.8 84.7
Flexonics 51.0 50.4 51.2
Corporate 9.5 10.8 11.2
-------- -------- -------
Segment liabilities for reportable segments 149.4 144.0 147.1
Unallocated
Debt 165.3 144.9 117.5
Finance leases 2.2 1.2 0.7
Deferred and current tax 42.5 34.9 38.1
Retirement benefit obligations 15.1 24.8 19.8
Others 2.7 3.0 2.5
-------- -------- -------
Total liabilities per Balance Sheet 377.2 352.8 325.7
-------- -------- -------
4. Adjusted operating profit and adjusted profit before tax
Adjusted operating profit and adjusted profit before tax,
derived in accordance with the table below, have been provided to
identify the performance of operations, from the time of
acquisition or until the time of disposal, prior to the impact of
exceptional pension charges, amortisation of intangible assets
acquired on acquisitions, impairment charges, write-down of L85
inventory, loss on sale and write-down of fixed assets,
restructuring costs and acquisition costs.
Half-year Half-year Year
ended ended ended
30 June 30 June 31 Dec
2015 2014 2014
GBPm GBPm GBPm
Operating profit 49.1 49.6 89.6
---------- ---------- --------
Exceptional pension charge - 1.5 1.5
Amortisation of intangible assets from
acquisitions 5.4 3.1 7.2
Impairment of goodwill - - 9.4
Write-down of L85 inventory - - 1.8
Restructuring costs - - 1.5
Acquisition costs 0.9 0.4 0.6
Loss on sale and write-down of fixed
assets 0.8 - -
---------- ---------- --------
Adjustments to operating profit 7.1 5.0 22.0
---------- ---------- --------
Adjusted operating profit 56.2 54.6 111.6
---------- ---------- --------
Profit before tax 45.0 45.1 80.6
Adjustments to profit before tax as above 7.1 5.0 22.0
Adjusted profit before tax 52.1 50.1 102.6
---------- ---------- --------
5. Tax charge
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Current tax:
Current year 7.7 8.1
Deferred tax:
Current year 2.0 1.0
---------- ----------
9.7 9.1
---------- ----------
Corporation tax for the interim period is charged at 21.6% (H1
2014 - 20.2%) on profit before tax. On adjusted profit before tax,
an underlying tax rate of 21.0% (H1 2014 - 20.0%) is charged,
representing the best estimate of the weighted average annual
corporation tax rate expected for the full financial year.
6. Dividends
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Amounts recognised as distributions to equity
holders in the period:
Final dividend for the year ended 31 December
2014 of 3.96p (2013 - 3.60p) per share 16.6 15.0
---------- ----------
Interim dividend for the year ending 31 December
2015 of 1.84p (2014 - 1.67p) per share 7.7 7.0
---------- ----------
The interim dividend was approved by the Board of Directors on
24 July 2015 and has not been included as a liability in these
Interim Financial Statements.
7. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Half-year Half-year
ended ended
30 June 30 June
2015 2014
Number of shares million million
Weighted average number of ordinary shares for
the purposes of basic earnings per share 417.8 415.7
Effect of dilutive potential ordinary shares:
Share options 4.8 5.4
---------- ----------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 422.6 421.1
---------- ----------
Half-year Half-year Half-year Half-year
ended ended ended ended
30 June 30 June 30 June 30 June
2015 2015 2014 2014
Earnings EPS Earnings EPS
Earnings and earnings per share
("EPS") GBPm pence GBPm pence
Profit for the period 35.3 8.45 36.0 8.66
Adjust:
Amortisation of intangible
assets from acquisitions net
of tax of GBP0.9m (H1 2014
- GBP0.6m) 4.5 1.07 2.5 0.60
Acquisition costs net of tax
of GBPnil (H1 2014 - GBPnil) 0.9 0.22 0.4 0.10
Exceptional pension charge
net of tax of GBPnil (H1 2014
- GBP0.3m) - - 1.2 0.29
Loss on sale and write-down
of fixed assets net of tax
of GBP0.3m (H1 2014 - GBPnil) 0.5 0.12 - -
Adjusted earnings after tax 41.2 9.86 40.1 9.65
---------- ---------- ---------- ----------
Earnings per share
- basic 8.45p 8.66p
- diluted 8.35p 8.55p
- adjusted 9.86p 9.65p
- adjusted and diluted 9.75p 9.52p
The earnings figures used to calculate both the basic earnings
per share and the diluted earnings per share are the same.
The denominators used for all basic, diluted and adjusted
earnings per share are as detailed in the "Number of shares" table
above.
Adjusted earnings per share, derived in accordance with the
table above, has been provided to identify the performance of
operations, from the time of acquisition or until the time of
disposal, prior to the impact of the following items:
- amortisation of intangible assets acquired on acquisitions;
- acquisition costs;
- exceptional pension charges; and
- loss on sale and write-down of fixed assets.
8. Goodwill
The change in goodwill from GBP262.5m at 31 December 2014 to
GBP275.2m at 30 June 2015 reflects foreign exchange differences of
GBP4.4m, and a GBP17.1m increase in goodwill recognised on the
acquisition of LPE.
9. Property, plant and equipment
During the period, the Group spent GBP22.3m (H1 2014 - GBP11.6m)
on the acquisition of property, plant and equipment. The Group also
disposed of machinery with a carrying value of GBP0.6m (H1 2014 -
GBP0.2m) for proceeds of GBP0.5m (H1 2014 - GBP0.2m). In addition,
the Group wrote down assets with a carrying value of GBP0.7m.
10. Share capital
Share capital as at 30 June 2015 amounted to GBP41.9m. During
the period, the Group issued 1,332,508 shares under the Group's
Long-Term Incentive Plan. No shares were issued under other share
option plans.
11. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash from operating
activities
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Operating profit 49.1 49.6
Adjustments for:
Depreciation of property, plant and equipment 13.2 11.8
Amortisation of intangible assets from acquisitions 5.4 3.1
Amortisation of other intangible assets 0.4 0.3
Loss on sale and write-down of fixed assets 0.8 -
Share of joint venture (0.2) 0.2
Share-based payment charges 0.9 1.7
Pension payments in excess of service cost (4.5) (4.6)
Exceptional pension charge - 1.5
---------- ----------
Operating cash flows before movements in working
capital 65.1 63.6
Decrease / (increase) in inventories 0.4 (8.7)
Increase in receivables (8.0) (14.3)
(Decrease) / increase in payables (1.6) 14.0
Working capital currency movements (0.1) 0.5
Cash generated by operations 55.8 55.1
Income taxes paid (4.4) (6.5)
Interest paid (4.0) (4.1)
---------- ----------
Net cash from operating activities 47.4 44.5
---------- ----------
Cash and cash equivalents comprise:
Cash 22.0 31.8
Total 22.0 31.8
---------- ----------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Balance Sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less.
b) Free cash flow
Free cash flow, a non-IFRS item, highlights the total net cash
generated by the Group prior to corporate activity such as
acquisitions, disposals, financing and transactions with
shareholders. It is derived as follows:
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Net cash from operating activities 47.4 44.5
Interest received 0.1 0.1
Proceeds on disposal of property, plant and equipment 0.5 0.2
Purchases of property, plant and equipment (22.3) (11.6)
Purchase of intangible assets (1.0) (0.5)
---------- ----------
Free cash flow 24.7 32.7
---------- ----------
c) Analysis of net debt
At Assumed At
1 January on acquisition Exchange 30 June
2015 Cash flow movement 2015
GBPm GBPm GBPm GBPm GBPm
Cash 13.2 9.8 - (1.0) 22.0
Overdrafts (4.7) 4.7 - - -
----------- ---------- ---------------- ---------- -----------
Cash and cash equivalents 8.5 14.5 - (1.0) 22.0
Debt due within one year (19.4) (22.3) - 0.1 (41.6)
Debt due after one year (93.4) (28.9) (1.9) 0.5 (123.7)
Finance leases (0.7) 0.3 (1.8) - (2.2)
Total (105.0) (36.4) (3.7) (0.4) (145.5)
----------- ---------- ---------------- ---------- -----------
12. Retirement benefit schemes
Aggregate post-retirement benefit obligations are GBP15.1m (30
June 2014 - GBP24.8m; 31 December 2014 - GBP19.8m). This liability
is made up of net deficits in the Group's UK and US defined benefit
pension schemes, with deficits of GBP4.6m (30 June 2014 - GBP16.1m;
31 December 2014 - GBP9.4m) and GBP5.3m (30 June 2014 - GBP3.7m; 31
December 2014 - GBP4.7m) respectively, and a liability on unfunded
schemes of GBP5.2m (30 June 2014 - GBP5.0m; 31 December 2014 -
GBP5.7m). These values have been assessed by independent actuaries
using current market values and discount rates. The decrease in the
liability from GBP19.8m at 31 December 2014 to GBP15.1m at 30 June
2015 is mainly due to the positive effect of total cash
contributions in excess of service costs of GBP4.5m.
13. Acquisitions
Lymington Precision Engineering (LPE) Limited
On 31 March 2015, the Group acquired 100% of the issued share
capital of Lymington Precision Engineering (LPE) Limited, and its
100%-owned subsidiary Lymington Precision Engineers Co. Limited
(collectively "LPE") through a business combination. LPE is based
in Lymington, Hampshire, UK and manufactures precision-machined
components, fabrications, assemblies and kit sets for the oil and
gas, telecommunications, aerospace, defence, land and sea systems,
nuclear and marine industries. LPE strengthens the Group's
precision machining capabilities and provides access to LPE's
strong customer relationships and adjacent markets.
The initial consideration was GBP44.6m comprising a net
consideration of GBP45.8m after taking account of GBP2.7m of net
debt in the business at acquisition date and a payment of GBP1.5m
for working capital. Under the terms of the acquisition, there is a
potential deferred contingent consideration (earn-out) of up to
GBP31.7m that is dependent on the performance of LPE against
demanding operating profit targets for the 12 month period ending
31 March 2016. The acquisition was funded using the Group's
existing borrowing facilities, a new two-year GBP20.0m revolving
credit facility and new one-year term loans totalling GBP25.0m.
Performance of the LPE business has been lower than envisaged
during the first three months of Senior's ownership. It appears
unlikely that the earn-out (provided for in the share purchase
agreement) will become payable and as a result the GBP10.0m
previously held in escrow has been returned to Senior approximately
10 months earlier than originally planned (and provided for in the
transaction documents) thus reducing our half year debt position
and interest cost. Over the medium to long term, prospects for LPE
remain encouraging.
Set out below is a provisional summary of the net assets
acquired:
Recognised amounts of identified assets acquired and liabilities
assumed GBPm
------------------------------------------------------------------ ------
Identifiable intangible assets 27.9
Property, plant and equipment 5.0
Inventories 4.5
Financial assets, excluding cash and cash equivalents 6.2
Cash and cash equivalents 1.0
Financial liabilities, excluding borrowings (7.7)
Borrowings (3.7)
Deferred tax liability (5.7)
------------------------------------------------------------------ ------
Net Assets Acquired 27.5
Goodwill 17.1
------------------------------------------------------------------ ------
Total Consideration 44.6
------------------------------------------------------------------ ------
Consideration satisfied by:
Cash paid 44.6
Deferred consideration payable -
------------------------------------------------------------------ ------
Total Consideration 44.6
------------------------------------------------------------------ ------
Net cash outflow arising on acquisition:
Cash consideration 44.6
Less: Cash and cash equivalents acquired (1.0)
------------------------------------------------------------------ ------
Net cash outflow arising on acquisition 43.6
------------------------------------------------------------------ ------
The goodwill of GBP17.1m represents the premium paid in
anticipation of future profitability from assets that are not
capable of being separately identified and separately recognised
such as the assembled workforce as well as the expectation that the
Group will be able to leverage its wider market access and strong
financial position to generate sustainable financial growth beyond
what LPE would have potentially achieved as a stand-alone company.
None of the goodwill is expected to be deductible for tax
purposes.
The intangible assets acquired as part of the acquisition relate
mainly to customer contracts and relationships, the fair value of
which is dependent on estimates of attributable future revenues,
profitability and cash flows, and are being amortised over five
years. Fair value has also been assigned to the order book and
trade name which are both being amortised over five years.
The financial assets acquired include trade receivables with a
provisional fair value of GBP5.8m and a gross contractual value of
GBP5.8m, all of which is currently expected to be collectible.
Acquisition-related costs of GBP0.9m are included in
administrative expenses within trading profit in the Group's
Condensed Consolidated Income Statement for the 6 months ended 30
June 2015.
The fair value of the acquired identifiable assets and
liabilities is provisional pending finalisation of the fair value
exercise.
From the date of acquisition to 30 June 2015, LPE contributed
GBP8.3m of external revenue and GBP1.1m to the Group's operating
profit before amortisation of intangible assets from the
acquisition of GBP1.4m. If the acquisition had been completed on 1
January 2015, Group revenue for the 6 months ended 30 June 2015
would have been GBP447.9m, Group adjusted operating profit would
have been GBP58.2m and Group operating profit would have been
GBP49.7m.
14. Financial Instruments
Categories of financial instruments
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Carrying value of financial assets:
Cash and cash equivalents 22.0 31.8
Trade receivables 134.0 121.4
Other receivables 2.0 2.0
Loans and receivables at amortised cost 158.0 155.2
---------- ----------
Currency derivatives used for hedging 1.0 1.9
Total financial assets 159.0 157.1
---------- ----------
Carrying value of financial liabilities:
Bank overdrafts and loans 165.3 144.9
Obligations under finance leases 2.2 1.2
Trade payables 84.2 81.1
Other payables 59.0 57.2
Other financial liabilities at amortised cost 310.7 284.4
---------- ----------
Currency derivatives used for hedging 3.0 1.3
Fair value of interest rate swaps - 0.1
---------- ----------
Total financial liabilities 313.7 285.8
---------- ----------
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Undiscounted contractual maturity of other financial
liabilities:
Amounts payable:
On demand or within one year 192.1 202.0
In the second to fifth years inclusive 124.7 93.1
After five years 13.2 13.0
---------- ----------
330.0 308.1
Less: future finance charges (19.3) (23.7)
---------- ----------
Other financial liabilities at amortised cost 310.7 284.4
---------- ----------
Any amounts drawn under the committed syndicated multi-currency
facility, which matures in 2019, are drawn on a short-term basis
and are therefore shown as payable within one year in the above
contractual maturity analysis. The carrying amount is a reasonable
approximation of fair value for the financial assets and
liabilities noted above except for bank overdrafts and loans, where
the Directors estimate the fair value to be GBP174.4m (30 June 2014
- GBP157.4m). The fair value has been determined by applying a
make-whole calculation using prevailing treasury bill yields plus
the applicable credit spread for the Group.
Fair values
The following table presents an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value. All financial instruments are measured at level 2, i.e.
those fair values derived from inputs other than quoted prices that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices). There has not
been any transfer of assets or liabilities between levels. There
are no non-recurring fair value measurements.
Half-year Half-year
ended ended
30 June 30 June
2015 2014
GBPm GBPm
Assets:
Foreign exchange contracts - cash flow hedges 1.0 1.9
--------- ---------
Total assets 1.0 1.9
--------- ---------
Liabilities:
Foreign exchange contracts - cash flow hedges 3.0 1.3
Interest rate swap - 0.1
--------- ---------
Total liabilities 3.0 1.4
--------- ---------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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